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25 June 2015
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Inside 4 Feedback Letter from the Editor
6 In Brief News nuggets
Rebuilding Liberia 12 Letter from Nigeria House of Cards: Nigeria edition
14 Context Social expenditure in SA
16 Cover SA economy: The centre cannot hold
20 In The News Anglos Cutifani intent on cost-cutting spree
21 AngloGold now in better position
22 Myriad hurdles diminish junior miners chances
24 Agoa renewal: Local poultry industry loses out
28 Rebuilding Liberia
30 Spotlight The Cape is proudly African
32 Insight Going legal
35 Medical aid schemes: How they stack up
38 Five ways to be resilient in the workplace
39 House View Renergen, MTN Group Limited
P32
40 Fund Focus Old Mutual Global Equity Fund
41 Invest DIY How to analyse company debt
Going legal 42 K iller Trade PPC donning a contrarian hat
43 Simons Stock Tips Telkom, AngloGold Ashanti,
Murray & Roberts, Anglo American Platinum, P30
The Cape is
Peregrine, African Bank
44 Pro Pick Over a century old, JSE boasts solid track
proudly African
P16
record
45 M oney Investing offshore: Why less is more at current
rand levels
46 Why you should never cash in your retirements savings
48 Money 101 Top tips to help you save SA ECONOMY:
50 The great savings debate: Retirement vs education
52 Selling your home: What will it cost?
THE CENTRE
54 Entrepreneur Living in the material world CANNOT HOLD
57 Technology Vodacom to expand niche offerings
58 D irectors & Dividends Dealings and payouts Cover story: Tina Weavind
59 Last Word How the Navy SEALs train for leadership Cover layout: Zandri van Zyl
60 Life Quiz, Crossword Cover story layout:
62 Piker Funny business Tshebetso Ditabo
INQUIRIES
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A LOOMING CRISIS? declining manufacturing output, warnings of load-

FINWEEK EDITOR JANA MARAIS WRITES: shedding for the next two years according to Eskom, credit
An expat emailed from Germany this week, saying he is ratings that hover just above junk status (and a rand that
busy reading RW Johnsons new book How long will SA seems there already), the prospect of rising interest rates
survive? The looming crisis, describing it as the first book No wonder investors are increasingly looking to take their
that comprehensively describes what the ANC government money offshore (see page 45).
is doing to the country. And it is shocking. The ANC Perhaps we can all do with a bit of perspective, as Wayne
government is set on nothing other than to enrich itself. McCurrie points out in the cover story. Sure, the economy
He continues: To be honest, I see no future anymore for is barely growing, but at least were not Brazil, which is
the rainbow nation. on the brink of its worst recession since 1990. Were not
Now, I havent read Johnsons book, but recently sentencing political dissidents to death (anymore), like
finished Michael Lewiss brilliant Flash Boys, which looks Egypt is doing on an almost daily basis. Corruption is a
at the rise of high-frequency trading in US equity markets. problem, but not nearly as big as it is in China, India and
For what its worth, when it comes to rigging the system Nigeria. We may not all like President Jacob Zuma, but
and screwing over Joe Public for personal enrichment, the arent you glad youre not dealing with Vladimir Putin?
ANC is nowhere near the big leagues. Yes, South Africa isnt the wonderful country it could
Looking at the state of the economy, as Tina Weavind be, but to say that it has no future? I think history has
does in this weeks cover story (page 16), it is easy to see no shown were much more resilient than Johnson is giving
future. We face serious challenges high unemployment, us credit for.
Double take
4 FINWEEK 25 JUNE 2015

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IN BRIEF
7
The number of people
who have died to
date due to exploding
airbags. Tokyo-based
airbag supplier Takata
agreed in May to double
its US recall to a record
of nearly 34m vehicles to
fix its defective airbags.
While Honda has
been the most heavily
affected by the recall,
other manufacturers
including Toyota,
Ford, General Motors,
In
Brief
R10.9M
Vodacom CEO Shameel
Joosubs total remuneration
in the year to end March,
more than R2m less than his
earnings the previous year. The
decline was mainly due to a
39% cut in his bonus to R3.7m,
according to Vodacoms
annual report. Chief financial
officer Ivan Dittrich saw his
pay decline 17% to R6.2m,
while chief technology officer
Nissan and BMW have
Andries Delports package fell
also been impacted.
from R6.3m to R6m.
The defect can cause
35 000 000 000 000 000

airbags to deploy with
explosive force, sending
metal shrapnel hurtling
towards drivers and
The number of Zimbabwean dollars you need to receive one US dollar as the Zimbabwean
passengers,
government phases out its national currency. Zimbabwe switched to the US dollar and rand in
AFP reported.
2009 after the Zim dollar was ruined by hyperinflation, which hit 500bn percent in 2008, the UKs
The Guardian reported. Customers who held Zimbabwean dollar accounts before March 2009 can
now ask their banks to convert their balances into US dollars at the above exchange rate.
$1.5BN
The amount (R18.6bn) Chinas top taxi-hailing app, which
is backed by Alibaba and Tencent, is expected to raise in a
new funding round as it battles increased competition from
private car-booking companies such as Uber. The funding
round values Xiaoju Kuaizhi, which runs the Didi and Kuadi
apps, at up to $15bn (R186bn), Bloomberg reported.
$40BN
The amount (R495bn) of damages claimed by Maurice Greenberg, former CEO of
AIG, in a class-action suit brought against the US government. Greenberg argued
that the Federal Reserve overstepped its legal powers when it bailed out AIG at
the height of the financial crisis in 2008. A judge ruled on 15 June that the Fed had
crossed the legal line when it demanded a 79.9% stake in AIG as a bailout condition,
but declined to award any damages. Without the bailout, which eventually totalled
$185bn (R2.3tr), AIG would have gone bankrupt, the judge said.

IN BRIEF
35%
The expected decline in
$388M
The amount (R4.8bn) billionaire investor Warren
Buffett will pay for a 3.7% stake in Insurance
this years maize harvest Australia Group (IAG) as he targets the growing
in Zimbabwe compared Asian insurance market, The Guardian reported.
to 2014, according In terms of the deal, Buffetts Berkshire Hathaway
to the UN Food and will receive 20% of IAGs gross written premium
Agriculture Organisation, and pay 20% of its claims for the next decade.
as drought and a decline
$17-$19
in free fertilizer and
seed distribution from
government hurt harvests.
The country will need
to import about half the
maize it requires this year. The expected price per Fitbit share (R210-R235)
in its initial public offering (IPO), an increase from
THE GOOD
its previous guidance, according to filings with
the Securities and Exchange Commission. At the
midpoint of the new price range, Fitbit would be
valued at nearly $3.7bn (R45.8bn), The New York
Musician, anthropologist and former anti-apartheid activist Times reported. Fitbit, which was founded in 2007,
Johnny Clegg (61), internationally known as the White Zulu, sells wearable devices that allow consumers to track
is to be awarded the Office of the Order of the British Empire their physical activity, heart rate and calories burned.
(OBE) by Queen Elizabeth later this year. Clegg, who was born
in the UK but moved to what is now Zambia when he was only
six months old, described the award as a career highlight.
THE BAD
Industry and civil society groups are slamming an application
by embattled power utility Eskom for a 25.3% hike in the
price of electricity for the 2015/16 financial year, including
the 12.69% increase that has already been approved by
regulator Nersa. The additional increase is sought to pay for
its open-cycle gas turbines and short-term power purchase
programme while it battles to complete new power stations
Medupi and Kusile.
Our troops in Darfur are already vulnerable. Theyve
been led into traps numerous times and had their
THE UGLY
weapons confiscated. If there was a confrontation,
I have no doubt that the South Africans would have
returned in body bags. They have been deployed
as peacekeepers, not as combat troops. If the
threatening situation is confirmed, South Africa has no
Sudanese president Omar Al-Bashir, who is sought by the other option than to withdraw its troops from such an
International Criminal Court (ICC), was allowed to leave South impossible situation. Military expert Helmoed-Rmer
Africa following the AU Summit, despite a court order to have Heitman comments on a report in Beeld that South
him arrested. The ICC is seeking to hold him responsible for African peacekeepers were held hostage in Sudan to
genocide, war crimes and crimes against humanity. He oversaw ensure the safe departure of Sudanese President Omar
a civil war that led to the deaths of an estimated 300 000 Al-Bashir from the AU Summit in Johannesburg.
people and the displacement of 2.5m.
FINWEEK 25 JUNE 2015 7

IN BRIEF
PRISTINE
ALASKAN
WATERS FOR NOW
Pawn Patel from Minnesota prepares to take a
midnight swim in the Arctic at Barrow, the USAs
northernmost city. Barrow, in Alaska, has become
the new frontier in the fight against climate change,
with activists opposing Shells plans to do offshore
exploration drilling in Alaskas Chukchi Sea, about
160km from Barrow. Despite the protests, Shells
drilling rig, the Polar Pioneer, left Seattles harbour
for the Arctic on 15 June. The Arctic holds about
27bn barrels of recoverable oil, according to US
government estimates.
Picture: David L. Ryan/The Boston Globe via Getty Images

IN BRIEF

IN BRIEF
The future of retail loyalty BY LAMEEZ OMARJEE
S
ay goodbye to loyalty cards consumers addresses, which often just you can get information on the user base
because mobile applications are end up in the dustbin, adds Shadab as a whole, says Daniel.
set to replace traditional loyalty Rahil, director of Paradigm Group. Depending on the capabilities of the
programmes. Additionally mobile applications save businesss IT systems, it is possible to use
Businesses can set up loya lt y businesses the cost of producing and geo-tracking to engage with consumers
programmes on mobile applications in distributing cards and promotional in real time. This way, consumers can be
the same way as cards, offering cash material, says Rahil. notified of discounts and other special
rewards, coupons or discounts. This There is also a more secure component offers at nearby stores. Their movements
offers convenience to consumers who to mobile applications in that points in stores can be tracked to identify areas
wont have to carry cards anymore, says earned are linked to the consumers where they spend a lot of time and
Nolan Daniel, director at Paradigm number. Your phone might get stolen, deduce what they like, explains Daniel.
Group. but no one can steal your cellphone Two types of tracking technology
Consumers get more benef its number, which means points wont be can be used. Geo-fencing can track
in that customised marketing and lost, says Rahil. Consumers can block consumers within 20km of a store.
relevant information is sent to them loyalty programmes online and respond Bluetooth low energy is used in stores,
through notifications and messages in real time, adds Daniel. tracking consumers from 50cm to 50
from organisations. This also benefits Businesses can also collect data on metres away, says Daniel. Consumers
businesses in building customer relations consumers, such as their buying patterns. are informed of tracking technology
with real-time consumer engagement, You [businesses] can really decide how in the terms and conditions of mobile
says Daniel. Card loyalty programmes much data you want to use You can applications. They have a choice to opt
often send promotional materials to get specific information on individuals or out and simply use their phones to earn
reward points, he says.
If communication tools are not used
correctly, consumers could become
IT COULD TAKE irritated with spam messages and
notifications and opt out, warns Rahil.
THREE TO FOUR YEARS Marketing intelligence is needed
TO HAVE A BIG PENETRATION OF MOBILE to tap into the use of mobile loyalty
LOYALTY AND PAYMENT SOLUTIONS programmes. You need to be relevant
and offer them useful information that
IN SOUTH AFRICA AS SMARTPHONES
will save them extra money and be
BECOME MORE AVAILABLE. beneficial to them, he advises.
A lot of businesses have been finalising
and testing these mobile applications. It
is not likely that cards will disappear in
the near future. South African markets
are heavily banked and consumers use
cards. Getting consumers to migrate to
mobile-based solutions could be slower,
says Rahil. It could take three to four
years to have a sizeable penetration of
mobile loyalty and payment solutions
in South Africa as smartphones become
more available. The opposite is true for
Gallo Images/iStock
the rest of Africa, where mobile solutions

are prevalent, he says.
editorial@finweek.co.za

IN BRIEF
4m
The number of dollar millionaires in China in 2014, an
increase of 1m from 2013, according to the latest Global
17m
The total number of millionaire households last year, an
increase of 13%. Global private wealth grew by about 12% last
Wealth report by Boston Consulting Group (BCG). China has year to $164tr, the BCG report found. In the Asia-Pacific region,
the worlds second-largest population of dollar millionaires, private wealth grew by 29% last year to $47tr to make it the
with the US in first place with 7m, it said. The rise in Chinese worlds second-wealthiest region, replacing Europe. North
private wealth was largely driven by a surging stock market, America, with $51tr in private wealth, remains the richest
which was up 38% last year, according to BCG. Japan made region in 2014. Asia-Pacific is expected to overtake North
up third place, with 1m millionaire households last year. America next year as the richest region in the word, BCG said.
O
n 16 June, an Egyptian court upheld a death sentence
against ousted president Mohamed Morsi and other
Muslim Brotherhood leaders in a case that relates to
their escape from prison during the 2011 revolution. At the time,
Morsi was detained without charge. He fled the prison after it
was stormed and guards overpowered during the uprisings that
eventually ended President Hosni Mubaraks 30-year reign. Morsi,
Gallo Images/iStock
who subsequently became Egypts first democratically elected
president, was removed from power by the Egyptian military in
July 2013 following days of mass protests. The Muslim Brotherhood
has since been declared a terrorist organisation in Egypt.
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T ER FRO
IN BRIEF
ET M
NI
G E RI A.
GE RI A.
NI
House of Cards:
L
ET
M
TER FRO
Nigeria edition
J
ust when you think you have
the lie of the land in Nigeria,
t heres a not her p ol it ic a l
tremor. And just when you IT MIGHT BE FUN TO WRITE
think youre used to life with tremors, AND ARGUE ABOUT IN
Nigeria w ill give you a politica l THEORY, BUT IN PRACTICE
earthquake.
THERE ARE
The simu ltaneous beaut y and
discomfort of this is that no one can
ever quite settle to something. Youre
170M
always looking over your shoulder NIGERIANS WAITING FOR
at the younger guy or the person in THEIR POLITICIANS TO DO
the chair next to you who is more BETTER BY THEM.
ambitious. You cannot ever assume
you have sussed the systems ability to
shock and therefore you cannot ever a clear mandate by the population
know what will happen tomorrow, in Marchs election, with a tough
much less the next day. legislative job on his hands.
As I am writing, Nigeria is reeling, All this in a country that is crying
giggling, gasping and rubbing its hands out for stability, for predictability and
together following the goings on at for the enforcement of the radical
the countrys National Assembly on legislative agenda Buhari promised
9 June that saw Bukola Saraki elected during his campaign. It might be fun
senate president, a role perceived as less to write and argue about in theory, but
powerful only than the president and in practice there are 170m Nigerians
vice-president. waiting for their politicians to do better
Saraki, a senator of the incumbent Bukola by them.
Saraki
All Progressives Congress (APC), but The goings-on at the Senate are
notably not the APCs first choice for thought to be as much to do with
senate president, won the leadership of positioning for the 2019 Nigerian
Nigerias upper chamber after finding joining your party, but imagine tens of general election as they are to do with
support from within the opposition defections. How much trust can there disrupting the law-making process of
Peoples Democratic Party (PDP), who be in the upper echelons of Nigerian the next few months and years.
left government last month. politics when theres little clarity day Knowing how fast and dramatically
Nigeria watchers have noted that to day about whether youre on the the Nigerian political arena changes,
President Muhammadu Buharis APC same side or opposing sides, briefing I wouldnt be so nave as to draw
comprises many former members of against one another or in favour of one predictions for 2019 on the basis of
the PDP, following mass defections another? these latest developments. But I would
over the past two years of the PDP It would take more space than this advise investors and observers to keep
administ rat ion. Notably, Sa ra k i page affords to describe the agendas a close eye on Bukola Saraki.
himself is a former PDP man. that led to these results, but if youre Right now, all I can say for sure is
One defection might have left you watching House of Cards, you can that we need to hold on tight: its going
suspicious of that mans intentions imagine the sort of scene. The goings- to be (another) bumpy ride.
either for leaving your party or for on have left Buhari, who was given editorial@finweek.co.za

IN BRIEF
25M
Challenges for a youthful continent
Africa will have the youngest population in the world by the end of the century. Policies of
each African country should be geared towards making the continent more youth-friendly
and address issues such as rapid population growth and urbanisation, according to the Unicef
Generation 2030 report.
Cairo, currently the city on
Other issues that should be addressed include the high rates of adolescent pregnancies
the continent with the biggest
expected over the next 15 years. In countries such as Niger, where child marriage of girls under
population, will see its populace
the age of 18 is at 76%, it is important that womens rights are central to change and growth
grow from 19m to 25m, while the
in the region.
population of Lagos will boom
It is also imperative to pay special attention to Nigeria as it is expected to have the highest
from about 13m currently to 24m
number of births on the continent. By 2050, one in every 11 of the worlds babies will be born
in 2030. It is projected that by
in Nigeria, which will experience more than 360m births in the next 35 years.
the late 2030s, 60% of Africas
population will be living in urban
TOTAL FERTILITY IN COUNTRIES IN AFRICA, 2015 areas, compared to a current
40%. Other countries that will
CHILDREN PER WOMAN experience rapid urban growth
include Gabon, Libya, Algeria,
2
Tunisia and Morocco. Some
countries such as Burundi and
2.7 Malawi will remain very rural.
2.7
2.7
1BN
2.3
4.5 6.8
7.5 4.5
2.2 4.8 6
There will be 1bn under-18s in
5.4 4.3
5.7 4.7 3.3 Africa by 2050. This will equate
4.8 4.7 5.9 to almost 40% of the worlds
4.6 4.8 4.3 total population. Currently,
4.2 4.7
4.5 4.6 Africa has more child-
4.6 dependent households than
3.7 4.6 5.7 6.4 the rest of the world and 73
3.9 4 4.9 4.2 of every 100 working persons
5.7 4.3 2.1 in Africa are children under
5.9 the age of 15. This is double
5.1 the world average. By 2035,
4.6 Africa will have first generation
of children that will reach the
Note: This map is stylised and 5.7 5.2 pensionable age of 65.
not to scale. It does not reflect
a position by Unicef on the 5.6
legal status of any country or
3.3
48%
area or the delineation of any 5 1.5
4.4
frontiers. The final boundary
between the Republic of the 2.9 2.5
Sudan and the Republic of
South Sudan has not yet been 3.2
determined. The final status
2.9 The proportion of sub-Saharan
of the Abyei area has not yet
been determined. 2.3 Africas population who live in
extreme poverty, or on less than
$1.25 (R15.53) per day. About
SOURCE: UNICEF analysis based on UN WPP 2012 revision
70% of the regions population
live on less than $2 (R24.78) a
1.8bn
In 2015-2050, 1.8bn babies will be born in Africa, day. Around a quarter of the
700m more than in 1980-2015, according to Unicef. continents population resides
On average each woman will have 4.7 children, in 20 African countries deemed
which is high compared to about 2.5 in the rest fragile and conflict-affected,
of the world. Niger has the highest number of which continues to undermine
children born to one woman at 7.5. Ninety-eight human rights as well as social
per 1 000 births in Africa are from teenage girls and economic progress.
aged 15-19.

CONTEXT
Social expend
EXPENDITURE ON SOCIAL services
has gone up by 15 percentage
HOW BIG IS THE PIE?
TWENTY-YEAR OVERVIEW OF ALL GOVERNMENT EXPENDITURE
points since 1994/95 from 45% Consolidated national and provincial government expenditure by type, 1994/95 and 2014/15 (actual numbers) Rbn.
of government spending to 60% in
General and General and unallocable
2014/15 and today there are more unallocable government expenditure
people in receipt of social grants than government 188.6
expenditure
there are people employed, according
10.9 Other4 Economic services
to a new report by the South African 24.6 130
Institute of Race Relations (SAIRR). Economic services3
16.4
It is projected that there will be more
Protection services
than 17m social grant beneficiaries by Protection
services1 Social 158.3
2016/17, from 13.7m in 2013. Social 25.4 services
services2
While educations share of the 711.7
63.1
social services pie (which also includes
health, social security, housing and TOTAL
TOTAL
140.3
community amenities and recreation 1 188.6
and culture) has dropped from 49% 1994/95 2014/15
in 1994/95 to 35% in 2014/15, social
security spending (such as social 1 Includes defence, police, prisons and courts of law
2 Includes education, health, social protection, housing and community amenities, and recreation and culture
grants) has increased from 21% to 3 Includes general economic, commercial and labour affairs; agriculture, forestry, fishing and hunting; fuel and energy; mining,
26% and spending on housing grew manufacturing and construction; transport; communication; other industries; and economic affairs not classified elsewhere
4 Includes interest, government enterprises and other expenditure that cannot be allocated in the main budget
from 7% to 17% over the same period. 5 Numbers should add up vertically but may not, owing to rounding
The increased spending has achieved
SOURCE: National Treasury
mixed outcomes, with improvements
in e.g. the proportion of the population 30
with tertiary qualifications, but

worsening household food security. SOCIAL
Rather than social services SERVICES 1994/95 2014/15
Social services
expenditure shrinking as our
expenditure by
democracy matures, it seems that type as a proportion % 15
many South Africans still need a leg of consolidated
up, the SAIRRs Lerato Moloi said. national and
A paradigm shift is needed in the provincial
government
governments developmental policy
expenditure,
model, so that employment and 1994/95 and
higher growth are prioritised, she said. 2014/15
0
Education Health Social Housing and Recreation Total
security community and culture
amenities
www.finweek.com

CONTEXT
nditure in SA
SEVERE MALNUTRITION* AMONG UNDER-FIVES, 2000-12
SOCIAL GRANT
DEPENDENCY RATIO,
12
20012013
8
YEAR EMPLOYED SOCIAL GRANT DEPENDENCY

PEOPLE BENEFICIARIES RATIO
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
*The percentage of children who weigh below 60% of expected weight for 2001 12 494 000 3 993 133 310 to 100
their age per 1 000 children under the age of five.
SOCIAL GRANT BENEFICIARIES AS A PROPORTION OF 2002 11 995 000 4 925 900 240 to 100
TOTAL NATIONAL POPULATION, 1996-2014/15
30
2003 11 666 000 6 494 115 180 to 100
2004 11 823 000 7 894 810 150 to 100
% 15 2005 12 503 000 10 974 076 110 to 100
2006 13 237 000 12 015 059 110 to 100
2007 13 236 000 12 423 739 110 to 100

0
1996 2001 2009/10 2011/12 2013/14 2014/15
2008 13 729 000 13 072 173 110 to 100

PROPORTION OF HOUSEHOLDS WITH INADEQUATE
FOOD ACCESS BY PROVINCE, 2009 AND 2013
2009 13 369 000 14 057 365 100 to 100
20
2010 13 061 000 14 935 832 90 to 100
% 10 2011 13 125 000 15 595 705 80 to 100
2012 13 447 000 16 106 110 80 to 100

0
Free State KwaZulu-Natal Mpumalanga Northern Cape South Africa
Eastern Cape Gauteng Limpopo North West Western Cape 2013 13 721 000 15 932 473 90 to 100
2009 2013

COVER
The increase in Investors fear more

electricity tariffs could strikes in the mining
push up inflation. sector this year.
SA ECONOMY:
THE CENTRE CANNOT HOLD
BY TINA WEAVIND

COVER
W
ith unemployment A SLOW PUNCTURE
at its highest level With growth collapsing and inflation
since 2003, soaring, unemployment figures are
economic growth at predictably depressing. Headline
a ble a k 1.9 % , unemployment people who dont
manufacturing output now 10% below have a job but are looking for work
2008 levels, a credit rating just a notch rose to 26.4% from 24.3%, the highest
above junk status and regular load- level since 2003. And according to
shedding expected to further hurt analysis by Japanese investment bank
activity, there is little to cheer about in Nomura, the percentage of those no
the South African economy. longer actively looking for work had
And nobody believes it can get also ticked up from to 34.9% to 36%.
anything but worse: Two things that Eskom is a glaring red light both
are set to affect South Africans on a to growth and the inf lation rate.
daily basis are food price increases after Wayne McCurrie, portfolio manager
the recent drought shrank agricultural at Momentum Wealth, said in the light
output and soaring fuel prices on the of how long it is taking to get the first
back of rising oil prices. In Gauteng, unit going at Medupi, Eskom will be
e-tolls can be added to the mix. trouble for the next 10 years.
South Africans should also brace The rosy glow that has shone on
themselves for further interest rate hikes, growth figures since the five-month
with Reserve Bank Governor Lesetja long mining strike last year has also
Kganyago warning that rates would be faded. Growth appeared to be soaring
increased for the first time since July immediately after mining output
2014, albeit moderately without unduly resumed, but it was coming off a
sacrificing economic growth. Growth low base. According to Peter Attard
has been slowing: it measured 1.9% in Montalto, emerging markets economist
the first quarter of the year, compared at Nomura, growth is now ref lecting
with 4.1% in the final quarter of 2014. the fading impact of the post-mining
The monetary policy committees strike recovery.
(MPC) decision not to hike rates at its But despite the gloom, McCurrie
21 May meeting was not unanimous. was pragmatic. He sa id that,
The economic outlook was rocky enough comparatively speaking, economic
to warrant two of the six members of g ro w t h i s not a n u n m it i g at e d
the committee voting for a 25 basis- disaster. Its not good, but we arent
point rate hike at the bodys bimonthly in a recession. We arent Brazil, or
meeting. Inflation accelerated to 4.5% in Zimbabwe or Russia, he said.
April and is expected to peak at 6.8% in However, McCurrie described the
the first quarter of 2016, above the target economy as having a slow puncture.
band of 3% to 6%. The wheels are turning, but we cant
go above 80. Regulatory uncertainty
USD/ZAR EXCHANGE RATE in issues such as empower ment
legislation in mining, aff irmative
12
action, visa regulations, land reform
and strikes was going to st y mie
8
growth because no one knows whats
coming next.
4
THE POWER DILEMMA

0 K ga nyago sa id t he comm it tees
Lesetja 1980 1996 2014 headline inflation forecast of 4.9% in
Kganyago SOURCE: INET BFA and Investment Solutions 2015 assumes the electricity tariffs will

COVER
see only 12.69% increases in July this risk [to inf lation] and predicted will escape a rate hike next month.
year and next year as was stipulated t hat it cou ld inc rease average The committee expected inf lation
by the multiyear price determination inf lation by around 0.5 percentage to move between 6.8% and 6% next
process drawn up by the National points over a year. Few analysts year.
Energy Regulator (Nersa). and economists believe the country But it is not just what is said at
But when Nersa decided on this
long-term series of increases its KEY ECONOMIC INDICATORS AND FORECASTS
members had not been apprised of (annual averages)
the extent of the decay in the power
grid. Eskom in March asked the 2011 2012 2013 2014 2015 2016
South African Local Government Global GDP
Association (Salga) and Nersa to USA 1.7% 2.2% 1.9% 2.4% 3.2% 2.5%
divert from the long-term plan Euro area 1.5% 0.1% -0.4% 0.9% 1.5% 2.2%
and bump up power costs by an Japan -0.9% 2.1% 1.6% -0.1% 1.4% 1.5%
China 9.2% 7.8% 7.7% 7.4% 7% 7%
additional 12.6% at the beginning
SA GDP 3.6% 2.5% 1.9% 1.5% 2.1% 2.5%
of next month making the total
SA headline CPI 5% 5.6% 5.8% 6.1% 5% 5.4%
increase 25.3%. SA current -2.3% -5.2% -5.8% -5.4% -4% -4%
K g a ny a go sa id t he possible account (% of GDP)
increase poses a significant upside SOURCE: Old Mutual Investment Group May 2015
POSITIVES EVEN AS RATINGS

AGENCIES DOWNGRADE SA
At the World Economic Forum (WEF) these levels given the energy crisis is growth to resume from 2020 onwards.
held in Cape Town earlier this month, to blame; the growth percentages Montalto said Nomura didnt find this
there was no hiding the state of the were coming off a higher base than the positive at all, and that the apartheid
South African economy. Government rest of Africa; and the country was still comments which seemed much
spin excusing the horrible figures and battling with the legacy of apartheid. more widespread among policy
bleak outlook was swallowed whole by The sense was that the government makers than ever before would not
few of the jaded economists present. was happy to sit it out and wait for wash with investors.
Peter Attard Montalto, economist at With the right policy choices and
Nomura, described the three main a reliable power supply Nomura
lines of rhetoric with regard to the SA MADE IT CLEAR AT estimated that growth to be at 5% to
countrys growth as a little irritating. 6%.
THE WEF THAT A HIGHLY
According to Montalto, cabinet A report released at the Forum SA
ministers tended to infer that the ENTREPRENEURIAL noted that South Africa had fallen in
country should be very happy with MILLENNIAL GENERATION global competitiveness rankings
because of weak education system
IS EMERGING FROM and labour market uncertainties,
TOWNSHIPS. according to the World Economic
Forum in Cape Town.
The report compiled by the WEF in
conjunction with the International Bank
for Reconstruction and Development
(IBRD), the African Development Bank
(AfDB) and the Organisation for
Economic Co-operation and
Development (OECD) said Mauritius
had streaked past SA as having the
most competitive economy in Africa.

COVER
the announcements; it is how it is employees agreed on a three-year

said and the rhetoric used that gives deal in which workers would get a 7%
analysts an indication of how the ITS NOT GOOD, BUT WE increase backdated to April and then
members really feel about the state inflation +1% for the next two years.
ARENT IN A RECESSION.
of the economy. Magnus Heystek, director at
George Herman, head of South WE ARENT BRAZIL, Brenthurst Wealth, put a different
African Portfolios at Citadel, said OR ZIMBABWE OR spin on the public sector agreement,
after the announcement that the saying it will cost about R66bn
vigour of MPC statements becomes
RUSSIA. per year. South Africas entire tax
stronger at every meeting and now base consists of around a paltry 5m
borders on panic. According to taxpayers, and it is they who will pay
Hermans analysis of the rhetoric, THE IMPACT OF WAGE for this increase.
it is as if the MPC is pleading NEGOTIATIONS A two-year wage agreement in the
with government and state-owned While wage negotiations in the gold sector expires this month and
enterprises to be sensible. public sector went relatively well strike-prone unions are demanding
Kganyago was also concerned according to some analysts, a difficult increases of bet ween 84% and
about the effect the exchange rate and protracted series of discussions 100%. This comes in the face of a
and the looming wage settlements are imminent in the gold sector. plummeting gold price down 30%
would have on the inf lation rate. Last month, the state and its 1.3m since 2011 to $1 204 as well as low
productivity and increasing input
costs such as power and fuel.
Increasingly foreign investment has Standard & Poors anticipated a slight
gone directly into other African improvement in GDP growth from INCREASED PRESSURE
countries instead of via SA as before. 2015-18. The agency referred to the ON THE MIDDLE CLASS
Judging by the tone of the country at countrys deep financial markets, and The rands weakness against the
the WEF, this situation doesnt look set assumptions that broad political and
dollar is set to increase as the US
to change any time soon: according to institutional stability would remain in
Federal Reserve looks likely to hike
Montalto, while South Africa bemoans place, as would economic policy. Fairly
its past and a sense of indolence strong and transparent institutions
interest rates in September after it
prevails other countries are would also be sustained. normalises its monetary policy. This
aggressively selling growth stories and Fitch didnt gush about SAs will pull money out of emerging
narratives of policy choice to support prospec ts either, maintaining a markets, including SA, and will hit
growth. negative outlook at BBB for foreign foreign investment and equities.
Ratings agency Standard & Poors currency loans and BBB+ for local According to Heystek, the net
last week kept SAs investment-grade currency bonds. The rating agency effect of the perilous state of the
rating intact at BBB-, just one notch said its decision was based on the economy is an immense crush[ing]
above junk. Standard & Poors last year weak economic growth potential of [the] middle class. He said this
dropped the countrys ratings, and it because of power-supply constraints
week car sales and sizes are shrinking
still gives the country a lower rating and external financing vulnerabilities.
as are home sales and sizes. While
than Fitch Ratings and Moodys In its response, Treasury said these
Investors Service. issues were getting governments
the tax base is around 5m people,
The agency said it expected real attention at the highest level. Plans to around 10m people have an impaired
GDP growth in SA to be limited to 2.1% implement governments package to credit record. As credit is now harder
this year, owing largely to electricity support Eskom was progressing and to get, people are going to shadow
supply shortages. plans to allocate R23bn into the lenders or loan sharks. The centre
The future isnt entirely bleak company and convert a R60bn loan cannot hold, he said.
though. SA made it clear at the WEF into equity are firmly on track. McCurries assessment of the
that a highly entrepreneurial millennial The National Development Plan, situation was that if you have a job,
generation is emerging from aimed at stimulating growth, also you will be okay. However, tax hikes
townships. Small and medium-sized remained a key objec tive. With
are on the way and wage increases are
businesses were steadily emerging, regard to the fisc al position ,
almost certainly going to be below
although Nomura noted that they were government will broadly stick to its
being at least partially stymied by the expenditure ceiling budget deficit
inflation. The economy will stagnate
current business and labour plans set out in the February 2015 for at least three years.
regulations. Budget. editorial@finweek.co.za

IN THE NEWS
Anglos Cutifani intent

on cost-cutting spree BY DAVID MCKAY
O
ne of the first steps taken by costs will also have to be cut back as it mining operations, so an element of
Mark Cutifani on joining will have hundreds of people employed right-sizing will be required, he said.
Anglo American as its for only about nine mines in the country. Of course, any changes to the shape
CEO in 2012 was to sell Said Cutifani in a recent interview of the organisation will be undertaken
the groups fancy $64m corporate jet a with Miningmx: We are rebuilding our in full consultation with all relevant
trademark Cutifani move, as it focused business and its competitive position. stakeholders.
attention to the kind of strategy he Our tough reality is SA has a very high The ability of Cutifani to take costs
wanted to run at the company. inflation and so to compete we have to out of the system at Anglo is becoming
Two years down the line, and with continue to reduce our overheads and more crucial than ever because net debt is
Anglos share price still underperforming other costs. challengingly high at $13bn. The sale of
its peers BHP Billiton, Rio Tinto and Yes, as we do reshape the portfolio, the groups 50% stake in industrial firm
Glencore, Cutifani has embarked on a there will be implications for the support Lafarge Tarmac is intended to take some
new wave of cost-cutting with the groups structures required to support those pressure off the debt pile, but it looks
offices, described by UK newspaper The increasingly likely that it wont be able to
Sunday Times as sumptuous, earmarked divest of 100% of its Rustenburg mines
for rationalisation. OUR TOUGH REALITY IS and that a listing for the mines is being
Actually, whats intended according to prepared.
the paper is for Anglo to prematurely end SA HAS A VERY But a listing is somewhat problematic
the lease on its St James premises 20
Carlton House Terrace a property near
HIGH INFLATION because Anglo will have to retain a
stake in the company, exposing itself
Buckingham Palace designed by Regency AND SO TO COMPETE WE to potential short-term losses, while
architect John Nash. The lease for the HAVE TO CONTINUE TO its also possible government could
offices runs until 2020. request the entity be debt-free as it did
REDUCE OUR OVERHEADS
There is no planned return of Anglos when AngloGold Ashanti attempted
head office to South Africa, however a AND OTHERS COSTS. to demerge local mines into a separate
development that would no doubt delight company. This would require Amplats
government, which has been critical of retaining signif icant debt, another
its wantaway firms (Anglo was founded headwind for the stock, said Goldman
in SA with UK and US money 98 years Sachs in a report.
ago). This is notwithstanding the fact Cutifani said: Were still in our dual
that Cutifani has had himself elected to track process of evaluating the best way
the chairmanship of Anglo American forward for Rustenburg and Union.
South Africa. Mark
Theres a lot of work we have put in to
It is clear that Anglo is pursuing Cutifani restructure these mines into a sustainable
all options to cut costs, said Investec standalone business profitable and cash-
Securities, while a source told The Sunday generative.
Times: The message is that the civil Weve received expressions of interest
service-style days of Anglo are over. and as I said earlier were only interested
Relocating the UK head office is but in selling for value. We are still evaluating
the tip of the iceberg for the cost-cutting which route to take and will make an
at Anglo. announcement by mid-year.
Should Anglo American divest of its editorial@finweek.co.za
non-core Rustenburg platinum mines, as
planned, and dispense with many of its Cutifani was speaking to Miningmx in an
Eskom-dedicated coal mines, as stated interview that will appear in The Mining
by Cutifani, the groups SA corporate Yearbook in Finweeks 2 July edition.

IN THE NEWS
AngloGold
Ashantis Mponeng
mine south-west of
Johannesburg
AngloGold now anglogoldashanti.com
in better position BY DAVID MCKAY
I
t may have been a slip of the tongue, We view the announcement as positive anticipation of increased costs following
but AngloGold Ashanti CEO, and a significant step in the right direction wage negotiations, it said. However, as
Sr inivasan Venk ata k r ishnan, to de-leveraging the companys balance AngloGold has less than 20% exposure to
dismissed raising funds through sheet, said James Oberholzer, analyst for SA, we believe this underperformance is
shares as a dumb idea, even though thats Macquarie Research in Johannesburg. unwarranted.
exactly what was required of Newmont So with analysts agreeing that Of Harmony and Sibanye, however,
Mining in its $820m (R10.2bn) capture of selling CC&V makes good sense, there was less sanguinity.
AngloGolds US mine. Venkatakrishnan can confidently look to Even a 10% increase in the wage
The market agreed with closing out debt, starting with the $1.25bn bill would see Harmony Golds pretax
Venkatakrishnan by penalising Newmont (R15.5bn) bond that carries an expensive earnings fall by 19%, while the overall
shares roughly 10% in the first two days 8% coupon rate. health of SAs gold industry would be in
after the 9 June transaction. Pressure off the balance sheet also question since roughly 40% of all operating
Venkatakrishnan can call on his own loosens the shirt collar in respect of gold mines were losing money.
experience of trying to tap shareholders approaching wage talks with South We believe that in an environment of
for funds in the current downturn, when African unions. One of the potentially declining gold prices, substantial increases
AngloGold shares fell 12% as investors negative consequences of selling the US in labour costs may result in further
recoiled at a $2.1bn (R26bn) rights offer mine equal to 5% of AngloGolds total deterioration in the profitability of SA
intended to clear out debt. production is that it increases the firms gold mining and impact its long-term
Long-term investors dont favour the overall exposure to SAs flammable labour scope and sustainability, said Goldman
idea of being made to pay for past balance relations. Sachs. It also observed that the industrys
sheet excesses, nor of being diluted Wage talks may well be a difficult average operating profit margin in 2014
while the share price is under pressure. affair with both the National Union of was 25% versus 45% for gold miners in
The only alternative for AngloGold and Mineworkers (NUM) and the Association other countries.
Venkatakrishnan was the sale of assets, of Mineworkers and Construction Union Set against this is a current of disbelief
hence the divestment from Cripple Creek (Amcu) demanding an increase of between among government and unions, which
& Victor (CC&V) to Newmont cutting 80% and 150% for entry-level workers. have warned mining companies that they
the firms debt by a third to about $2bn, However, according to Goldman Sachs, will not accept retrenchments as a direct
removing the need for further asset sales. AngloGold still has far less exposure to consequence of higher wages.
Analysts liked the transaction. Leon SA (20% of total production) than either There was a threat a few years ago in
Esterhuizen, precious metals analyst for Harmony (90%) or Sibanye Gold (100%) the platinum sector that some 10 000 jobs
CIBC Markets, called it a coup while and is therefore the banks preferred stock would be lost and that hasnt happened
Andrew Byrne, analyst for Barclays, said through the wage talks. because of government intervention, said
AngloGolds 33% discount to its peer We b e l i e v e t h e r e c e nt Advocate Mahlodi Muofhe, spokesperson
group was now unjustified. He saw a 46% underperformance [of AngloGold] for the department of mineral resources.
upside to the share price. versus global gold peers is due to editorial@finweek.co.za

IN THE NEWS
Myriad hurdles diminish

junior miners chances BY DAVID MCKAY
O
w ing to the highly required urgent recapitalisation: Coal capitalised big players that either conduct
speculative and risky nature of Africa, Waterberg Coal Company, their own exploration, or buy up juniors
of the search for tomorrows Miranda Minerals, all in coal. Others, with good prospects.
minerals, investing in South such as Tawana Resources and Bauba Paul Miller, a resources banker at
Africas junior mining sector is best left to Exploration, had changed management Nedbank Capital, says its also worth
the professionals. Theres a number of or focus, or both. noting that more exploration companies
reasons for that. So why bother? sit outside the Chamber of Mines than
Mineral exploration is never quick or Well, when exploration companies do within it, while the South African
easy; it is riddled with unknowns, and the find something, in the right market, the Mining Development Association
companies that are involved in it are always returns can be stratospheric. (SAMDA), an organisation established
a bad winter away from insolvency. Even Eland Platinum sold its prospect specifically for junior mining, has fallen
companies with good projects can end up to Xstrata for $1bn. Australian-listed into disrepair.
victim to a bad market such as now when Riversdale sold its coking coal prospect to Worst, though, are the regulatory
the world is long on metals, and demand Rio Tinto and Indian conglomerate Tata headwinds. According to Otsile Matlou,
and capital have fallen badly away. for $4bn, while the worlds best-known a director at law firm ENSafrica, the
And if any further evidence is mining entrepreneur, Robert Friedland, current regulatory framework has been
required, not even the professionals fancy discovered the Voiseys Bay nickel deposit designed for existing mining companies,
South African exploration shares much. in Canada and sold it to Inco for $3.1bn. not for mines that will exist in the future.
According to Peter Major, a mining There are also good reasons why an Exploration companies have to deal
policy consultant for Cadiz Corporate economy needs junior mining, especially with 203 different statutes which, for
Solutions, exploration companies arent in SA where theres a strong history them, is like starting at technical non-
to be trusted in the main. of mineral activity and a need for job compliance even before you start, said
He responded to a question at creation. Matlou. There would be benefit from
the recent Junior Indaba conference According to industry commentators, the development of bespoke rules that
in Johannesburg as to why start-up however, there are too many historical, only speaks to that industry.
exploration firms always did so badly by regulator y and industr y obstacles R e g u l ator y u nc er t a i nt y w it h
making the facetious remark: Juniors preventing the take-off of junior empowerment rules in SA isnt helping.
havent failed. Juniors milk the suckers. exploration firms. The risk profile of SA has increased
The evidence in terms of JSE SAs history of conglomeration because of everything that has happened,
performance is not overwhelming either. Anglo American and Gencor for instance said Sacha Beukes, a senior investment
A quick scan of the JSE stocks pages means investors dont really have much officer at the IFC, the finance arm of the
shows that in the current market, a slew of of a track record with exploration firms; World Bank.
exploration and development firms have theyre more familiar with strongly Perhaps the most damning of all
statements was uttered by Miller, who
commented on the sinister side of
THE CURRENT REGULATORY government relations. You have to take
your battery out your cellphone because
FRAMEWORK HAS BEEN theyre suspicious you might record
DESIGNED FOR EXISTING meetings with your own company.
MINING COMPANIES, NOT You have to meet people in hotels
in Midrand to resolve prospecting right
FOR MINES THAT WILL disputes. You have to go to Middelburg
EXIST IN THE to speak to people in coffee shops because
FUTURE.
Gallo Images/iStock
theres a back door to the department,

he added.

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IN THE NEWS
Agoa renewal: Local

poultry industry loses out BY TINA WEAVIND
T
housands of jobs and around 70% of Agoas (non-fuel) products. which bases its business primarily on
R900m in revenue in the Agoas benefit to SA last year clocked in chicken, warned the imports were likely
poultry industry have been put at $3.5bn (R43.5bn) in foreign exchange to negatively impact local farmers. But
on the line so that South Africa earnings. Indirectly through job creation having bargained the US down from its
can remain a beneficiary of Americas and numerous downstream businesses, initial quota demand of 110 tons a year to
African Growth and Opportunity Act the agreement is worth billions more. 65 tons a year, the company said the deal,
(Agoa). Industries such as citrus fruit, wine which was integral to the extension of the
The 15-year-old trade agreement and, importantly, vehicle manufacturing Agoa agreement, was acceptable.
allows 39 sub-Saharan countries to are at least partially powered by the Since 1999, SA has had in place
export duty-free more than 7 000 largesse of the USs trade policy. an antidumping duty of R9.40/kg on
products to the worlds biggest economy. But from next year, at least 65 000 chicken coming in from the US. This is
Its non-reciprocal too, so the beneficiary tons of US chicken pieces will be sold in in addition to the 37% tax on all chicken
countries are under no obligation to local supermarkets. The bone-in brown imports, most of which come from the
provide duty- or quota-free access to meat pieces primarily leg and thigh EU. America has demanded that this
their own domestic markets for US are expected to undercut local prices and antidumping duty be pulled and that the
goods. scythe the profits of producers. country be allowed to compete on the
South African exports account for Last month, JSE-listed Astral Foods, same basis as other importers.

SWAZILAND FEELS THE PINCH IN THE NEWS
AS AGOA IS NO MORE
Tens of thousands of job losses in Swaziland are a taste of what it could be like
American poultry, Isakson said before
the deal was struck.
The Paris agreement doesnt ensure
for SA to lose Agoa. The government of Swaziland, with a population of just that SAs preferential export status will be
over 1m people, didnt implement a number of US demands on workers rights extended though, but its an important
and was excluded from Agoa last year. The textile industry, which was built step forward, according to the USAs
largely on the back of the Agoa agreement, has been hardest hit. minister counselor for economic affairs,
This week, a subcontractor to a textile producer, who asked not to be named, Laird Treiber.
said she had cut almost 10% of her workforce as US demand fell for Swazi
He said that health certification
textiles.
Jim Wang, an administrator at Tex Ray, a Taiwan-based textile and garment
requirements still needed to be finalised
factory operating in Swaziland, said earlier this year that his company had for the import of beef and pork as well
retrenched 1 500 people from factories that were operating solely to supply as poultry, but that this was due to be
the US market. He said some of these workers had been lucky enough to find tied up by the end of June. He said the
jobs elsewhere, but others had returned to do agriculture at home, in other blistering pace of the decision-making
words subsistence farming. He said the company was currently trying to indicated just how seriously the two
increase its sales into the much smaller South African market also a duty-free governments viewed the extension of
zone but at the moment we cant increase enough to recover. the agreement.
Billionaire Natie Kirsh has been lobbying hard to get the US to reinstate Agoa While the rationale for the sacrifice is
Gallo Images/iStock
in Swaziland. Kirsh, 82, whose fortune far exceeds that of the controversial King not in doubt, the South African Poultry
Mswati III, kicked off his astounding career in property and retail in Swaziland.
Association (Sapa) is less than charmed.
He has a deep attachment to the country and a great deal of influence around
the world. However despite his efforts, the US has thus far stood firm.
Sapa CEO Kevin Lovell said that while
the agreement had brought vital certainty
to the industry, enabling producers and
buyers to plan ahead, it was potentially
destructive to the poultry industry.
Lovell said the eligibility of US
chicken in SA would be similar to a
grey import a product brought into
the country without the proper import
duties being paid. Theres no difference
to typical grey imports like microwaves
and hi-fi equipment, he said: Consumers
pay a lower price for the same goods.
Not so, said Treiber. Far from
destroying jobs and turnover, the
imports would grow the market. By
allowing more choice and lower prices,
new consumers would be attracted and
Threatening the loss of Agoa unless the consumption would increase.
antidumping duties on chicken were ASTRAL FOODS WARNED At an estimated 36.4kg per capita
dropped was driven by two senators IN MAY THAT IF A QUOTA consumed in 2013, according to Sapa
with major interests in accessing Africas data, SA is Africas top chicken consumer
biggest and growing chicken ON US POULTRY IMPORTS
and number four in the world, making
consumer market. WAS AGREED ON THE BACK it a lucrative target for global producers.
Delawares Democratic senator, Chris OF THE AGOA RENEWAL, IT Speaking from the US embassy in
Coons, and Georgia Republican Johnny Pretoria, Treiber this week highlighted
Isakson both represent states with vast WAS LIKELY TO
NEGATIVELY
SAs growing demand for chicken.
poultry industries. They described South Africa has moved from being in
as iniquitous SAs continued benefit the top 20 to the top 10 global consumer
of Americas largesse while imposing
IMPACT
of the meat, and is the ninth-biggest
almost 100% duties on US-bred chicken. importer in the world.
I believe it unfair and inappropriate Poultry industry leader Astral Foods
that the country that benefits from the warned in May that if a quota on US
law the most South Africa continues LOCAL PRODUCERS. poultry imports was agreed on the back
to maintain unreasonable tariffs on

IN THE NEWS
of the Agoa renewal, it was likely to

negatively impact local producers.
Daan Ferreira, CFO of Astral foods,
US-SOUTH AFRICA TRADE
(000 US DOLLARS)
said this week the company was still
unsure of what the outcome of the deal 2012 2013 2014
would be. He said the soaring price of
US exports 7 078 557 6 699 656 5 560 413
chicken feed, driven up by maize price
increases over the past 18 months, had US imports 8 695 457 8 392 134 8 269 567
seen smaller farmers unable to compete AGOA
and about 1m birds a week being pulled (including GSP*
3 677 563 3 668 361 3 103 881
provisions)
out of the market. The US imports would imports
refill the gaps, but at the same time this
GSP* imports 1 294 211 1 089 865 1 356 248
means the small guys wont be able to
come back. AGOA imports 2 383 352 2 578 496 1 747 633
Astral Foods fell 4.05% to R172.44
*GSP = Generalised System of Preferences. Indicates trade
on the news of the new chicken import under preferential terms
leg islat ion and Quant um Foods SOURCE: agoa.info
Holdings fell 3.3% to R3.52. However

Ferreira said he doubted the drop was
linked to the deal, especially as RCL this was wholly rejected by the US Meat Importers and Exporters of South
Foods, formerly Rainbow Chicken, rose since it would cut into profits of the US Africa, said no indication had been made
1.49% to R17.76. poultry producers. They dont want to on who would qualify to be an importer
One of the options SA put to the US deal fairly, said Lovell. As far as they are and on what basis. Also, the import
was to import whole chickens which concerned its a terrible idea. quotas of 65 000 tons per annum would
are more expensive by weight than bone- The imports are due to begin in be increased annually, but no decisions
in brown meat. This would have meant around six to eight months, but vital had been made about how this increase
local meat would be sold close to equal decisions still need to be made. David would be calculated.
in price to the imported birds. However, Wolpert, CEO of the Association of editorial@finweek.co.za
THEY DONT WANT TO
DEAL FAIRLY. Kevin

Lovell

IN THE NEWS
Rebuilding Liberia BY LAMEEZ OMARJEE
D
espite the past challenges strength of our natural resources and a middle-income country. This would
facing the war-torn state, the that endowment is still there. include addressing its long-standing
impact of lower commodity Liberias geography supports its infrastructural problems, says Sirleaf.
prices and the loss of attractiveness for investment. The In the past, the country did not have
development gains by the deadly Ebola f low of goods across international the diversity to withstand economic
outbreak, President Ellen Johnson Sirleaf markets is made easy via seaports shocks and the largest constraint to
describes Liberia as a well-endowed along its 579km shoreline, explains achieving diversity has been the lack of
country. George Wisner, executive director of infrastructural development, she says.
Speak ing at the Johannesburg the National Investment Commission One of the issues that will be addressed
Chamber of Commerce and Industry (NIC). Opportunities to develop within the next 18 to 22 months is the
on 11 June, Sirleaf, who became the infrastructure of airport facilities gives need for energy resources including
first female democratically elected Liberia a comparative advantage over renewable energy such as solar and
head of state on the continent in 2006, neighbouring countries as it is in close hydroelectricity.
promoted Liberias natural resources as proximity to Latin and North America, We believe that we are now on the
investment opportunities. The mining, and Europe and the Middle East, says road to recovery and we can use the
agriculture, forestry and marine sectors Wisner. experience of the past to achieve the
all have potential for growth, she says. The long-term Vision 2030 plan for diversity and transformation goals, says
Weve been trying to build on the transformation will see Liberia become Sirleaf. Through the effective use of

IN THE NEWS
Gallo Images/Thinkstock
THE IMPACT OF EBOLA
Liberia, which was declared Ebola-free in says Konneh. The economy is expected to
May, is still counting the economic cost of grow 3% this year, according to the latest
the outbreak, which slowed investment World Bank estimates. Besides relying on
and cut economic growth. The outbreak, external support, such as debt relief and
the largest in history, killed more than trade facilitation from the World Bank, the
11 000 people in West Africa since it started rebuilding of Liberia starts from within, he
in February last year. New cases continue to says.
be reported in neighbouring Sierra Leone The Ebola outbreak served as a reminder
and Guinea. for the continuous investment in institutions
The children were not in school, we for human development such as education,
almost lost an entire year because of Ebola, health and social protection, says Konneh.
says Konneh. Economic growth for 2014 is Since its eradication, the country
estimated at 0.7%, down from 8.9% in 2013, has started to re-engage the investor
according to the International Monetary community and investors confidence is
Fund (IMF). Estimated GDP losses in 2015 picking up again, says Wisner.
are $240m (R3bn) for Liberia, a major When there is a common threat, a nation
impact if considered that GDP in 2013 was puts aside all of its differences political,
estimated at just under $2bn (R24.9bn). religion, ideological and can come and
In addition, the steep decline in iron ore confront that threat and win, says Sirleaf.
prices curtailed planned investment in the The silver lining in the situation is that the
mining sector, the IMF said. Other industries, international community recognises the
such as the services and agricultural importance of forming partnerships to
A woman stands in front
of her market stall selling sectors, also declined. Restaurants were prevent any global catastrophe, she says.
various grains in the virtually empty, says Konneh. Of her legacy, Sirleaf says: I met a
Liberian capital Monrovia. However, the disease brought together ravished country and we kept it peaceful
members of parliament, the private sector and had it develop and we left it better than
and civil society to work on a solution, we found it.
resources and partnerships for financing, is the stability in the country, which
the country can address poverty and
ensure sustainable economic growth,
she adds.
SNAPSHOT we have demonstrated in the past two
election cycles. Our country is on an
irreversible path to sustain growth and
If investors take advantage of the POPULATION: 4.3M development, says Konneh.
huge potential that exists in Liberia, It will be ideal if investors set up
it will benefit job creation, says the GDP PER CAPITA: $454.34 (2013) shop in Liberia, adds Konneh. We
countrys f inance minister Amara want to make our economy a three-ship
Konneh. LIFE EXPECTANCY: 60.2 YEARS economy. Right now we are only one
Liberia has incentivised investors by ship.
% OF POPULATION IN POVERTY:
making the environment conducive for 63.8%
Liberias major trade partners are
business, he says. The efficiency of the Europe and China. There is a trade
environment ensures that it takes 10 ECONOMIC GROWTH: 3% deficit between Liberia and South
days to register a business, he explains. (ESTIMATED FOR 2015) Africa. Past efforts to establish trade
We also have an attractive percentage partnerships between the two countries
in our revenue growth for investors, he WORLD BANKS EASE OF DOING failed, but there are still hopes to establish
BUSINESS RANKING: 174TH OUT OF
adds. The NIC allows easy repatriation business partnerships with South African
189 COUNTRIES
of profit, making it easy for investment to entities, says Sirleaf. MTN is the best-
grow, says Wisner. Investors find it easy KEY ECONOMIC SECTORS: known local company with operations in
to invest and find it easy to get profits. FORESTRY, MINING (IRON ORE AND Liberia.
The biggest guarantee we have DIAMONDS), AGRICULTURE editorial@finweek.co.za

SPOTLIGHT
The Cape is
proudly African BY LIESL PEYPER
I
ntracontinental trade received a table in the form of R7bn worth of
major boost on 10 June when 26 foreign direct investment (FDI). And
A frican leaders signed a THERES NO its not only tourism, wine and asset
comprehensive free-trade agreement
connecting three existing trade blocs to
form the Tripartite Free Trade Area
ISOLATIONIST
STRATEGY WHEN IT COMES
management, says Harris, a former DA
shadow minister of finance. Its actually
incredibly diversified.
(TFTA), which will stretch from Cairo The Cape Peninsula boasts a number
to Cape Town. TO THE PROVINCE. of heavy industrial manufacturing
The deal, which has the potential facilities, such as in Atlantis where
to integrate the continent like never engine blocks for Mercedes-Benz are
before, also comes at a time when the the biggest global mining conferences in built and where Hisense puts together
Western Cape is repositioning itself as Cape Town a region where very little TVs and fridges for export to the rest
the preferred headquarter for existing mining activity is taking place shows of Africa, while Kimberly-Clark, which
and prospective investors into Africa. that companies around the world are manufactures fast-moving consumer
If theres one thing he wants to achieve coming to Cape Town to think about goods, is based in Epping.
during his tenure as chief executive of their Africa mining strategies. The more These industries show the Western
Wesgro, the Western Capes official we can replicate that, the brighter our Cape is not only about the service
trade and investment promotion agency, future will be. industry its also possible to run heavy
it is to change the view that Cape Town and light manufacturing operations.
is not part of Africa, says Tim Harris, IN SYMBIOSIS WITH SA
who was appointed to the position three Harriss counter-isolationist strategy for UNCERTAINTIES
months ago. the Western Cape also shines through Selling Cape Town and the Western
Theres no isolationist strategy when in his plans for the relationship he would Cape sometimes has its difficulties too.
it comes to the province, he says. On like to foster with the department of We recognise decisions are sometimes
the contrary, the only way we can really trade and industry (dti). made at a national level that dont make it
sell an economic future for the Western When were offering a package to easy to sell our region, says Harris.
Cape is through being incredibly South African investors, a substantial South Africas decision to cancel
integrated with the rest of the country part of the incentives come from the bilateral investment treaties (BITs)
and as importantly the rest of the dti, says Harris. The dtis incentives with the EU and the release of the draft
continent. impact the bottom line of investments, Promotion and Protection of Investment
In a way, Harris says, the Western so the Western Capes relationship with Bill in its place are cause for concern
Cape and Cape Town are already dti is very important and I intend to among investors.
achieving this. The annual Mining strengthen that relationship. The cancellation of the BITs, says
Indaba is a case in point. The Western Cape, in turn, is Harris, was unfortunate timing.
The fact that were hosting one of bringing an important element to the Internationally theres a move away

SPOTLIGHT
Cape Town and the Western Cape are a part of South Africa and the rest
of the continent, and therein lies the regions economic future, says Tim
Harris, CEO of Wesgro.
Gallo Images/Getty Images/Hougaard Malan Photography

from ad hoc bilateral treaties towards an national average of 1.5%. build on those links that are there like the
overarching treaties framework. But the But despite this, there are still huge three direct flights between Cape Town
Bloubergstrand, Cape Town
problem is we scrapped the BITs before challenges, says Harris. I have to stress: and the Angolan capital Luanda.
weve had the overarching investment we cannot make an incredible economic This came about thanks to the
framework in place and that creates a lot offer without positioning ourselves as part collaboration between a team comprising
of uncertainty. of South Africa and Africa. Our future is the City of Cape Town, the Western
The Investment Bill, which was as an African city. Cape and the Airports Company of
gazetted by the dti in November last Wesgro has established a unit South Africa (Acsa). Three spheres of
year for public comment, has elicited dedicated to increase Cape Towns government worked together to achieve
considerable criticism in the business connectivity to the rest of Africa and to this and thats incredibly encouraging.
community for the way in which it
proposes government should screen EMBRACING COMPETITION
investments and deal with expropriation. As for the future, he hopes to see more
Investment decisions are made mainly healthy competition among the various
on the basis of certainty, says Harris. provinces in SA, says Harris. Im
I hope we can reach a solution soon. extremely motivated by the competition
The problem is if you have uncertainty Tim
the Western Cape gets from KwaZulu-
in combination with statements about Harris Natal and Gauteng, but that is often
private security regulations and foreign misrepresented. In South Africa we dont
ownership of land, were not doing embrace internal competition strongly
ourselves any favours. enough. It makes us all better and if you
marry it with increased collaboration, you
THE ANGOLA LESSON have a very powerful combination.
The Western Cape is not immune to the The strong competition among the
economic realities the rest of SA faces, various jurisdictions in the US is a model
but the province certainly performs better to strive towards, he says.
in all of the major metrics, says Harris. All the different states are in fierce
According to the latest quarterly labour competition with one another. Yet no
force survey, the Western Cape has the one doubts that Americans are incredibly
lowest expanded unemployment rate at patriotic and proud to be US citizens.
24.5%, followed by Gauteng at 29.6%. We need to promote the same attitude
Unemployment is still high, but it is the in South Africa and I hope the Western
lowest of all the provinces, says Harris. Cape can serve as an example to the other
The Western Capes GDP growth at provinces.
2.3% last year, was also higher than the editorial@finweek.co.za

INSIGHT
Going legal BY CIARAN RYAN
LEGAL SERVICES IS ONE SECTOR OF THE ECONOMY THAT IS BOOMING. THE BIG 6 LEGAL FIRMS ARE ROLLING OUT
NEW OFFICES AND ALLIANCES ACROSS AFRICA WHILE BEEFING UP THEIR TEAMS IN SOUTH AFRICA. DRIVING THIS
GROWTH IS AN INCREASINGLY COMPLEX REGULATORY ENVIRONMENT, BOTH AT HOME AND ABROAD.
An architectural
impression of the
Werksmans building
I
ts a sign of the times that legal
services firms are booming while
the rest of the economy limps
along.
Werksmans recently announced it
would relocate its Johannesburg head
office to the new Central development
opposite the Gautrain station in
Sandton, where it will be the anchor
tenant, occupying 12 500m of space.

INSIGHT
ENSafrica (Edward Nathan pave the way for its expansion across
Sonnenbergs) recently took up more the continent. Christo Els, senior
space in its Cape Town and Durban partner at Webber Wentzel, says
off ices and is look ing to acquire the real growth opportunity going
bigger off ices in Johannesburg. It forward is in sub-Saharan Africa,
currently has 14 off ices in seven which like SA is beset w ith
countries across Africa. increasingly complex commercial and
Bowman Gilfillan Africa Group legal obstacles.
has grown its number of attorneys by It is no longer sufficient to offer
15% to 476 and doubled the size of clients vanilla legal advice. Most of
its Kenya office in the past two years. the big groups have added non-legal
Over the same period it added three services such as risk management,
new offices in Durban, Botswana and forensic investigations, accounting
Madagascar bringing its total office and other disciplines, blurring the
count in Africa to eight. lines between traditional accounting
Webber Wentzel in Johannesburg and legal services firms. In the era
currently occupies three buildings of globalisation, a vaguely worded
in Illovo, but plans to consolidate contract or a miscalculation on pricing
all its staff in one building now Marilise van der can be catastrophic. No South African
under development at 90 Rivonia Road Westhuizen company would venture into Central
in Sandton. or West Africa without an ace legal
THE REAL GROWTH expert at its side. The risks are simply
EXCITING DEVELOPMENTS too great.
NORTH OF THE BORDER OPPORTUNITY GOING Norton Rose Fulbrights head of the
All of the Big 6 legal f irms report FORWARD IS IN SUB- regulatory and investigations practice,
substantial growth in the last two SAHARAN AFRICA, WHICH Marelise van der Westhuizen says the
years. The biggest growth appears to LIKE SA IS BESET WITH intensified regulatory regime in SAs
be in Africa, ref lecting the migration stringent and complex regulator y
of S A c omp a n ie s nor t h of t he INCREASINGLY COMPLEX environment is at the forefront of the
Limpopo in search of new markets. COMMERCIAL AND LEGAL issues facing businesses today. South
If SA has become a regulator y OBSTACLES. Africas regulatory environment is
minef ield, the rest of Africa is no the most complex and stringent on
d if ferent. W h i le Sout h A f r ica n the African continent and corporate
companies have to negotiate stiffer their own under the rubric of resource compliance has become particularly
m i n i n g a nd a f f i r m at i v e a c t ion nationalism and indigenisation. important as South Africa adapts its
regulations at home, other countries Webber Wentzel has teamed up legislative regime to meet external and
in Africa have adopted similar laws of with global law f irm Linklaters to internal economic forces.
WHAT SECTORS ARE DRIVING THE DEMAND FOR LEGAL SERVICES?

Energy and infrastructure, financial services, private facing global businesses, according to recent research by
equity, retail, transport and technology, media and Acritas, an international legal market research firm. This
telecommunications sectors, says Els. We are seeing an motivated Norton Rose Fulbright to launch a specialised
increase in demand for specialist project finance services global regulation and investigations practice, with the aim
in both South Africa and sub-Saharan Africa. The demand of assisting clients to overcome regulatory hurdles.
for legal services, particularly in South Africa, is also driven The firm with the widest representation is ENSafrica,
by the increased complexity of the legal environment, for with seven offices in SA and a total of 14 offices in seven
example increased regulation in areas like broad-based black countries.
economic empowerment, competition and tax. Says ENSafrica spokesperson Kim Hawkey: Our main
Norton Rose Fulbright recently expanded its footprint in growth areas in terms of practitioners over the past two
Africa by forming strategic alliances with leading law firms years have largely been in our new offices we have offices in
in Uganda and Zimbabwe, giving it extensive coverage of Burundi, Mauritius, Namibia, Rwanda, South Africa, Tanzania
southern and Central Africa. and Uganda as well as in the practice areas of construction,
Regulation and red tape are the primary obstacles employment, the China practice group and private clients.

INSIGHT
A THRIVING CONTINENT Driving a lot of legal advisory work

OFFERS OPPORTUNITIES at present is the interest in investment
NO SOUTH AFRICAN COMPANY
Building a pan-African network of in Africa, driven in part by a search
off ices doesnt come cheap, but is for returns that disappeared from WOULD VENTURE INTO
essential in the race to stay ahead of developed markets, post the global CENTRAL OR WEST AFRICA
the game. Those law firms that choose financial crisis. There are two aspects WITHOUT AN ACE LEGAL
to focus on the SA market are likely to to the search for returns. The one is the
EXPERT AT ITS SIDE. THE RISKS
lose clients that are looking beyond SAs renewed effort to capitalise on Africas
borders for opportunities. Hence all the mineral resources and the other is to ARE SIMPLY TOO GREAT.
Big 6 law firms have established alliances capitalise on particular oil and gas
or opened offices in other jurisdictions discoveries in the past few years that
where they can offer their clients a level were made off both the east and west WHAT ABOUT THE
of local legal intelligence that would not coasts of the continent. In addition, SMALLER LAW FIRMS?
be possible from Johannesburg. Africas burgeoning middle class is Anyone driving along the N 1 to
African states run on a timeframe driving demand for consumption, such Pretoria would be hard-pressed not
and language of their own, quite unlike as retail and also utility outputs such to notice the shiny new offices of
most other countries, and it is almost as telecommunications, electricity and Adams & Adams. The firm occupies a
impossible to enter as an outsider and water, says Williams. unique niche in the legal firmament,
immediately know where to go, what to Africas vast infrastructural needs specialising in intellectual property law
do and, even more importantly, how it is a re a lso at t rac t ing i nvest ment, and general commercial legal services.
done, says Collins. particularly rail, roads and ports. For decades it has been the go-to firm
for copyright and trademark issues,
The scramble for opportunities in Many infrastructural service providers
though it has expanded into other areas
Africa was in the past driven by natural are multinational and as such attract
of law. Founded in 1908, today it has 68
resources and infrastructure, but the last global lenders both from a development partners and more than 130 attorneys
decade new markets have opened up in finance perspective, and also from a and 385 support staff. It, too, is making
fast moving consumer goods, financial retail banking perspective, who are keen its way into Africa, with four offices
services and telecommunications. to supply the needs in the market and to in SA and satellites in Mozambique,
Brent Williams, CEO of Cliffe reap the benefits, adds Williams. Angola, Tanzania, Burundi, Lesotho,
Dekker Hofmeyr, says much of the Bowman Gilfillan Africa Group Swaziland, Botswana, Namibia and
firms growth in the past two years has has offices in SA, Botswana, Kenya, Cameroon.
come from clients in SA and from the Madagascar, Uganda and Tanzania, and There is no question that regulations
rest of Africa. The key growth areas are has an alliance with Nigerian firm, Udo and laws have tightened immeasurably
since the financial collapse of 2008,
mergers and acquisitions, capital markets, Udoma & Bela-Osagie. Our growth in
particularly when it comes to cross-
commercial real estate, commercial Africa is expected to continue with the
border transactions. Hence the need
dispute resolution and arbitration and group looking to expand our offering for a multi-disciplinary approach
tax. Clients are also turning to law while remaining focused on delivering to advisory services. Norton Rose
firms to help them navigate increasingly seamless cross-border legal services Fulbrights Van der Westhuizen says
tortuous employment laws, finance and in Africa. This is in keeping with the the firms regulation and investigations
banking codes and competition law, groups strategic vision of becoming team represents corporates,
while projects and infrastructure and Africas pre-eminent law firm, says a financial institutions, mining houses
technology law are other areas of growth. spokesperson for the firm. a n d i n d i v i d u a l s i n i n te r n a l a n d
regulatory compliance hearings and
THE BIG 6 LEGAL SERVICES FIRMS investigations, as well as enforcement
proceedings brought by domestic and
NO. OF NO. OF NO. OF
FOUNDED OFFICES ATTORNEYS EMPLOYEES international regulatory bodies.
Its no longer a question of simply
Bowman Gilfillan Africa 1885 8 476 343
understanding the law. Its a question
Cliffe Dekker Hofmeyr 1853 2 300+ 600+ of understanding the world of business
ENSafrica 1905 14 600+ 1 100+ and all its risks. That explains why
Norton Rose Fulbright SA 1922 3 200+ 500+
contracts are longer and more verbose,
and why the courts are backlogged
Webber Wentzel 1868 2 450+ * 800+
(in alliance with Linklaters)
with cases. And why law firms are
having to find bigger offices.
Werksmans 1921 4 195 (incl. 390
35 CAs) editorial@finweek.co.za
*Fee-earning attorneys (including candidates)

INSIGHT
Medical aid schemes:

How they stack up BY BUHLE NDWENI
C
hoosi ng a med ica l a id for their employees, GTC (formerly comprehensive options), net work
scheme is often a daunting Grant Thornton Capital) released its or non-net work plans (a net work
task and consumers fifth GTC Medical Aid Survey earlier option may be cheaper, but will have
typically go with whatever this month, enabling users to compare limitations regarding the hospitals and
suits their pocket, hoping it will cover apples with apples as they weigh the doctors, for example, you can visit) and
Gallo Images/iStock
their medical expenses when they need costs and level of coverage offered by the costs involved.
it most. the different medical aid schemes. The B a s e d on t h i s y e a r s r e p or t ,
In an attempt to help employers medical aids were ranked according CompCare Wellnesss Mumed NN
choose the right medical aid scheme to the types of plans (for example medical aid option, at a risk premium

INSIGHT
of R24 408 for a family with two adults

and two children, is the best option for THE VARIOUS MEDICAL AID SCHEME PLANS
a family who is on a saver and network
plan (see table). In the same category, The network and non-network medical does not fall under your hospital cover.
but a non-network plan, Profmeds schemes were categorised into five SAVER: This is the next step up
ProActive plan at a risk premium of groups: from beginner/blue-collar from the core plan. It allows for a small
R19 404 came out tops. (Note that plans to core, saver, comprehensive savings account and has both hospital
and the traditional plan. Members have and chronic-illness benefits.
income restrictions are in place to
to understand what is included and not COMPREHENSIVE: There are
qualify for these plans.)
included in the medical aid plan they few of these, says Larkan. They have a
The risk premiums are taken from are choosing to belong to. small savings, self-payment gap cover
the overall premiums that the schemes BEGINNER: Most of these are the and an unlimited additional savings
release to the public. GTC looked salary-banded groups. They are the account. She says for the research
at the premiums and removed any least expensive and provide entry into they only grouped those with an
allocation which the scheme made the medical aid schemes arena, says unlimited additional savings account
towards any savings account element Larkan. Most of them are capitation as comprehensive plans, although
that their plan might offer. or fee-per-service kind of schemes other plans without this also considered
When it comes to comprehensive and easy to join. They are grouped in themselves comprehensive.
coverage for a family of four, Fedhealth themselves into four separate plans you TRADITIONAL: Traditional plans
Maxima Standard Net was the top- can belong to. Some are state where were not given a rating under the
you have to use state facilities if you limited time frame of the survey, since
ranked medical plan, at a total cost of
want to go to hospital. There are those specific rand-and-cent value would
R74 188 for the complete option. On
with no out-of-hospital cover, others have to be given for each individual
the non-networked option, Fedhealths restrict you to a network of hospitals plan, says Larkan. Traditional plans
Maxima Basis (at a cost of R74 266) and there are others that say you can go are the hardest to compare, because
came out tops. to a hospital of your choice, she says. one traditional plan might offer six
In the survey, Complete Cost refers CORE: This is the new generation dentist visits, unlimited maternity
to a total of the premium charged by plan that provides the very basic benefits [for one person], three GP
each plan range for the year and also medical aid needs, which will cover visits and two physiotherapy visits and
includes any allocation which a member prescribed minimum benefits (PMB), another might offer no maternity visits
may be asked to make, to cover the Self chronic illness and in-hospital cover but unlimited dentistry and 12 doctor
Payment Gap for each plan. and theres no savings plan. This means visits and R40 000 for medicine,
that you have to pay for anything that says Larkan.
Effectively it is a combination of the Consulting.

Total Premium PLUS Self Payment Gap. However, GTC cautions that only
This is a theoretical number, to enable us 21 open medical aid schemes, which
to compare plans. There is the smallest are comprised of the 178 different plans
of possibilities that this would actually be available in the country, are included
the only costs which members could be in the survey. Larkan says not all open
Gary
Mockler
asked to pay on medical expenses for the plans were included because some
GTC year, even on a comprehensive Plan, says service providers didnt release their

Group
CEO
Jillian Larkan, head of GTC Healthcare information in time to be included in
the survey, while others chose not to be
included.
The survey looked at 12 different
hospital cover plans, but comparing
these was a challenge since their
benefits range vastly from one plan to
YOU GET WHAT YOU PAY another. One may only provide 100%
FOR. MEDICAL SCHEMES ARE in-hospital cover, compared to another
NON-PROFIT: IF YOU PUT X which may provide 200% in-hospital
AMOUNT IN, YOU CAN ONLY cover, says Larkan. When you identify
that the in-hospital cover is doubled
SPEND X AMOUNT. on one plan compared to another, you

INSIGHT
GTC MEDICAL AID

Jillian
SURVEY RANKING
Larkan WE GIVE YOU THE TOP-RANKED OPEN MEDICAL AID PLANS FOR FAMILIES
MADE UP OF A MEMBER, ONE DEPENDENT ADULT AND TWO CHILDREN
SAVER (NETWORK, FAMILY)

RATING PLAN NAME RISK PREMIUMS
1 CompCare Mumed NN (R501R7 900*) R24 408
2 CompCare Mumed N (R0R6 000*) R26 544
3 CompCare Mumed NN (R7 901R15 000*) R27 444
would expect to see vast differences in 4 BestMed Beat 2 N R29 856

premiums, she says.
5 CompCare Mumed N (R6 001R7 900*) R30 408
If the basis of the medical aid is
100% and your plan covers you at
*Consumers have to fall within a specific income band to qualify for these plans.
100%, it covers you at a rate which is
approximately equal to 100% public COMPREHENSIVE (NETWORK, FAMILY, COMPLETE)
admission rate to be seen by a public RATING PLAN NAME RISK PREMIUMS
specialist in a public hospital, says
Larkan. 1 Fedhealth Maxima Standard Net R74 188
But this is where the greatest 2 Discovery Essential Delta Comprehensive R96 864
mistake that medical aid members
make is to make assumptions about 3 Momentum Extender Assoc State R97 332
what this means. Mathematically we 4 Discovery Classic Delta Comprehensive R100 176
may understand 100% as everything,
but in healthcare terms 100% is not 5 Momentum Extender Assoc Assoc R107 664
everything. It doesnt mean that all
your specialists who charge 200%, specific categories and also takes into look at his bottom line first. So we start
300% or maybe even 400% will be account their salary bands. Ultimately, from there and work backwards, to say
covered by your medical scheme. Your though, it will be impossible to receive this is the range of premiums that we
medical scheme will only pay up to the comprehensive cover on a basic plan. can help you with and what benefits do
percentage to which theyve agreed. You get what you pay for. Medical you need to look for. From there you
The fact that the 100% plan may schemes are non-profit: if you put X look at the different healthcare plans
not cover a member at 100% has seen amount in you can only spend X amount. and find some that fit within the clients
the entry of gap cover, which makes up You cant possibly expect comprehensive requirements, explains Larkan.
the difference between what a specialist cover if you are only choosing to pay a Your medical aid may be right for
will charge in hospital and what the basic premium, says Larkan. In this you at the moment, but two years down
medical aid is prepared to pay. But this way, the healthy members subsidise the the line it may be outdated because you
is provided a member can get onto a gap sick and and would not indicate that you have two more children and one of
cover, which is short-term insurance could only expect cover to be limited to them has a medical condition such as
that tends to have waiting periods what you paid in for the year, she adds. attention deficit hyperactivity disorder
and other terms and conditions, states With the survey, the researchers (ADHD). So your medical needs
Larkan. first looked at the cost of the medical have to be reviewed constantly this
aid plan and then the coverage received, can be done by talking to a healthcare
A STARTING POINT ON THE the macro considerations and then the consultant and discussing the benefits
ROAD TO A BETTER CHOICE actual needs of the client. We start by of the various plans and changes that
For consumers, the survey makes identifying what the client is going to have occured in your life, says Larkan.
it easier to compare medical aids in look at first, and hes always going to editorial@finweek.co.za

INSIGHT
Five ways
to be
resilient
in the RESILIENCE IS THE
workplace
ABILITY TO
OVERCOME
CRISES OR BOUNCE BACK
BY WILLIE VISSER
FROM DIFFICULT TIMES
AND STRESSES.
T
he workplace of today is often and positive people have a positive and off from a potential protective factor,
inf used w it h fast-paced hopeful view of the future and they namely finding some form of social
c h a n g e , u n c e r t a i n t y, expect that things will work out well in support. They rather listen to other
complexity and stress. There the end. peoples perspectives on what can
2
are the pressures of work backlogs, possibly be done to resolve their
demanding clients and lingering threats Face your hardships. Do not problems. Remember the expression:
of restructuring that bring job insecurity shy away from your problems, Misery likes company, but company
and the accompany ing f inancia l but rather face up to them even does not like misery.
implications of losing an income. though they seem unpleasant at the
Welcome to the modern workplace. time. Make a deliberate choice to do THE NEXT TIME YOU ARE IN A
All these kinds of situations ask for something about your difficult situation, TIGHT SPOT, ASK YOURSELF THE
some kind of adaptive response, which while at the same time ensuring that your FOLLOWING:
might if the blows all come at the emotions do not become negative. Am I staying positive and optimistic
3
same time reduce your ability to deal about this situation what can I do to
with them. Be determined. Refuse to accept stay positive and optimistic?
How do you keep confident and failure as an option and persevere What small step can I take to solve this
motivated without being overwhelmed even when you experience some problem right now? Doing something,
and being unable to perform? setbacks. Face and deal with the obstacles however small, will give hope and
This is where resilience comes that come your way, one by one. motivation to carry on.
4
into play. Resilience is the ability to Do I believe that things will work out
overcome crises or bounce back from One of the most important well in the end?
difficult times and stresses. It is about skills of resilient people is Am I determined to overcome this
responding with inner strength to the that they do not get involved problem?
demands; an ability to absorb turmoil, in negative thinking patterns about Do I complain about my current
to stay competent while at the same themselves and the problems that problems?
time renewing yourself. they face. Do not ruminate about your Do I have a good friend to talk to
problems. Make an active choice to stop about the situation that I am facing?
THINGS THAT WILL HELP TO moaning and groaning about them. editorial@finweek.co.za
Gallo Images/iStock
5
THRIVE DURING DIFFICULT
1
CIRCUMSTANCES ARE: Seek out the support of your Dr Willie Visser is the director of the Centre
Stay positive and optimistic even friends and family. If people for Positive People @ Work, providing
though things are not going as you complain too much about their thought leadership, research and practical
would like them to go. Optimistic problems, they will cut themselves implementation in employee engagement.

HOUSE VIEW
RENERGEN
A great start Simon Brown
THE NEWEST JSE listing is a special The issue for me is multifold: firstly the
Last trade
purpose acquisition company (SPAC), hef ty premium, but also the hype ideas
essentially a listed cash shell that will around the renewable-energy tag. This
find businesses to buy. In the case of is a hot space and will be massive in Clover
Renergen it has some R74m, which decades to come, but right now it is an
equates to R10 a share, and the shares a re a of exp e rim e ntin g with lit tl e
have traded up at R18, a fairly chunky profitable substance and it is the
Choppies
premium. profitable part of the equation that is of
The plan is to invest in renewable- most importance. RMBMID
energy companies. The rules of a listed The share has run already since listing
SPAC require that an acquisition be and an announcement of an acquisition South32
made within two years and I suspect will send it soaring higher. Then it will be
well see a deal announced sooner time to sell as the real, and hard, work
rather than later. of making profits will start.
MTN GROUP LTD

Strike woes
STILL BESET WITH labour disputes, postponed its annual half-marathon
MTN Group, which is experiencing its charity run (planned for 13 June), citing
first strike in South Africa since its security risks posed by the strike, and
launch in 1994, has bared the brunt of a expanded its Rush Hour bundles (access Moxima Gama
disgruntled workforce. Its share price to 100MB of data for one hour at R10). Last trade
has plunged and customers are being
turned away due to a shor tage of
Although negotiations are ongoing,
MTN has lost a significant amount of its ideas
mobile phones. Low pay, insufficient share value and, frankly, this strike saga
weekend remuneration and a lack of is now old news. Which means the result Brait SE
transport money are key reasons why should be priced in.
hundreds of MTN staff from the call A new buying opportunity is waiting
Pan African
centres and service branches hit the above 22 300c/share, with a potential
streets. 100% retracement to the 25 000c/share Resources*
The initial demand was for a 10% pay prior high. Positions could be increased
raise, a bonus of 16% of their annual above 23 800c/share if resistance is not
Afrimat*
salaries, and the termination of unfair encountered, or else a stop loss must be
labour practices and the use of labour carefully monitored. The secondary
brokers. Workers also demanded a task target would be situated at 27 000c/ Petmin*
team be appointed to determine which share. A reversal below 21 100c/share,
employees have been short-changed by from current levels, would negate this *Selected by Warren Dick
salary adjustments. MTN has offered an near-term bullish call.

8 % p e r fo rm a n ce - re late d pay rise , editorial@finweek.co.za

MORNING
AWARDS STAR
2014:
BEST
FUND IN FOCUS
GLOBAL
EQUITY
FUND
Ideal for offshore exposure

OLD MUTUAL GLOBAL EQUITY FUND
T he fund invests in shares from around the world and aims
to deliver superior returns over the medium to longer
term in the process. It is suited to investors who want to
component or investors who are taking a specific view on the
performance of global equity relative to other asset classes,
Old Mutual says. The recommended investment term is five
diversify their portfolios by adding an international equity years and longer.
TOP 10
FUND INFORMATION HOLDINGS
Benchmark: MSCI World Index (AS AT END-MARCH)
Portfolio managers: Ian Heslop, Amadeo Alentorn and 1 Apple Inc. 2.3%
Mike Servent
Minimum lump sum/monthly R10 000/R500 2 Johnson & Johnson 1.2%
contribution:
Total expense ratio (TER): 2.07%* 3 Exxon Mobil Corporation 0.9%
Fund size (Rbn): 6.8 4 Intel Corporation 0.9%
Contact information: 0860 234 234 / www.omut.co.za /
unittrusts@oldmutual.com 5 Novo Nordisk AS 0.8%
*The TER is for the Class A category of the fund, and includes the annual service fee. 6 Gilead Sciences 0.8%
7 Amgeen Inc 0.8%

FUND PERFORMANCE
(PER YEAR, AS AT 31 MARCH) 8 Biogen Inc 0.8%
1-Yr 3-Yr 5-Yr 7-Yr 10-Yr
9 Altria Group Inc 0.7%
Old Mutual Global Equity 24.1 35.8 26.3 12.9 14.6
Fund (Class A) 10 Union Pacific Corporation 0.7%
Benchmark 22.8 31.4 22.3 11.8 14.3
TOTAL 9.9%
Source: Old Mutual Investment Group
Fund manager insights

WHY FINWEEK
WOULD CONSIDER
Despite the heightened levels of volatility, the Old Mutual Global Equity Fund offered
ADDING IT
With little in the local economy to cheer
positive returns in the first quarter relative to the benchmark. Stock selection within
about and the JSE trading at historically
sectors, particularly in healthcare and IT (its two top holdings are in Apple Inc. and
high levels, it is only natural that investors
Johnson & Johnson), added the most value to the fund during the first quarter.
will increasingly be looking for opportunities
One of the funds criteria is to select high-quality companies with sustainable growth
to increase their offshore exposure. But with
prospects. Over the quarter, the fund reduced its underweight position in the energy
the rand trading at levels of around R12.42
and financial sectors while remaining overweight on IT and healthcare, it said.
against the US dollar, now may not be the
The fund is heavily exposed to developed markets, with 56% of its exposure in equity
wisest time to move substantial amounts of
in the US and Canada, followed by Europe (17.6%), the UK (8%) and Japan (7.7%).
capital overseas (also see p. 45).
Exposure to Australasia was 4.1%, while 6.6% of the fund was held in liquid assets.
However, any balanced portfolio should
A number of factors will continue to impact on the volatility in global equity markets,
include global equities. Taking a long-term
including the possibility of a Greek default and exit from the eurozone, depressed oil
view, as this funds managers recommend,
prices and the divergent monetary policies in the US (where the Federal Reserve is
would remove some of the concerns around
expected to tighten its policy and start raising rates) and the EU (where a 60bn-a-
current volatility and uncertainty in global
month quantitative easing programme was started in March), and its impact on global
equity markets. Besides, there are certainly
currencies.
worse companies to be invested in than the
The dollar, for example, has been trading at multiyear highs against a number of
likes of Apple and Gilead Sciences.
currencies around the globe, driven in part in anticipation of higher borrowing costs
in the US, where rates have been near zero for more than six years. The only certainty
is that were in for a bumpy ride.

INVEST DIY
How to analyse
company debt BY SIMON BROWN
I
write a lot about debt and am
consistently checking company debt
levels for a simple reason debt is a
classic two-edged sword. Used
correctly, it can help a company grow but
on the flip side, if its abused or managed
poorly, it can hurt growth or even lead to
the bankruptcy of a company.
The key point of debt is that if a
company is borrowing money that it can
afford to pay back and the loan ultimately
adds extra revenue and profit ahead of
Gallo Images/iStock
the cost of the debt, it is a good deal.
So, as an example, it would be great if
a company borrowed money at say 10%
that led to an increase of 15% in profits.
Debt is also the preferred way to raise IT WOULD BE GREAT IF one would remove any cash the company
money; other options such as rights issues holds from the debt on the assumption
A COMPANY BORROWED
are problematic as new shares are issued that this gives a clearer picture. While
10%
and essentially youre paying for that new MONEY AT SAY in theory cash can be used for paying off
money forever by way of the new shares debt, it may have other uses. That said,
that have a permanent claim on future typically I look at both.
profits and dividends. In other words, the I then compare a companys ratios to
extra shares exist forever whereas debt THAT LED TO AN INCREASE industry peers and the own companys
can be paid back. previous levels. This now tells you how
So given that debt is a useful but
OF 15% IN PROFITS. its current debt situation stacks up.
potentially dangerous tool, how do we The annua l repor t is another
monitor it and ensure a companys debt problem with this type of debt is why it important document as it will give a
is not life-threatening? was taken out in the first place. Overdraft lot more detail on the debt a company
Firstly, we would check the balance debt suggests the company needed has. Payment dates and interest rates
sheet. Debt will be listed on the liability some cash in a hurry and rather than will be provided and the former is very
side either as current (due within the next (or perhaps unable to) borrow money, it important. If a company has a lot of debt
12 months) or non-current (due after the simply ran up an overdraft. This suggests expiring in say two years time, what is
next 12 months). either a crisis or lack of planning. the plan? Will it roll the debt over into
The f igure for current debt is a new loan or is the company planning
important as the company will have to SO NOW THAT WE KNOW to pay it off?
pay it back or roll it over via a new loan WHERE THE DEBT IS, HOW DO As a last point, debt should ideally
and the question is whether the company WE LOOK AT IT AND WHAT be project-specific. I prefer when debt
can manage one or the other. RATIOS SHOULD WE USE? is raised specifically for a project or
We will also sometimes see some Certainly the preferred ratio for debt is acquisition rather than when a company
debt sitting in an overdraft facility. This the debt-to-equity (D/E) ratio or the net- just borrows a large sum for no specific
I dont like one bit. Firstly, an overdraft is debt-to-equity ratio. This is simple the purpose. This makes it easier for
expensive debt in that it will be at a high equity on the balance sheet (remember shareholders to see if going into debt in
interest rate; secondly it can be called equity is all assets less all liabilities) into that specific case was ultimately worth
at any stage (in other words the lender which we divide debt. it or not.
can request immediate repayment). The The second version is net debt here editorial@finweek.co.za

KILLER TRADE
CATCH
MOXIMA GAMA
PPC donning a
ON FINWEEK:
MONEY MATTERS
ON CNBC AFRICA
EVERY FRIDAY
contrarian hat
AT 1PM.
BY MOXIMA GAMA
W
it h i n f ra st r uc t u re to non-payment of contractors and sub-
spending under contractors in the building and civil
pressure, the engineering industries were published
construction industry earlier this month. Similar payment
and its related sectors such as steel and regulations have been introduced in
cement have been under pressure. the UK, Singapore, Hong Kong, New
Private sector spending on infrastructure, Zealand, Australia and most recently
for example, halved last year to R95.4bn. Malaysia, and are said to have made a
In addition, construction companies have positive impact.
been hit by fines for collusion and price- With the construction industry in the companies have paid dearly in terms of
fixing on tenders, notably related to doldrums, its inevitable that suppliers share value. How far can these shares
World Cup stadiums. to the sector will suffer the same fate. still fall? Wearing my contrarian hat,
Profitability has plunged for most PPC, which has been hurt by its own to me, current levels make good buying
major South African construction boardroom squabbles last year leading levels a call thats purely based on the
groups, and stock prices for the main to the high-profile departure of former fact that PPC, in particular, could be
JSE-listed construction companies have CEO Ketso Gordhan, has plunged to bottoming up.
plummeted between 42% and 72% in the levels last tested in 2004.
past year. Most construction companies Despite PPCs efforts to diversify, POSSIBLE SCENARIO:
have felt massive pressure from a expand and acquire businesses in PPC has broken out of its steeper bear
decline in mining investment and the Zimbabwe and Botswana, investors are trend (within its major bear trend)
almost non-existent roll-out of large less than convinced. A proposed merger and ended the consolidation phase
state infrastructure projects in South with AfriSam, which would have seen of a potential bottoming-up pattern.
Africa, while they are also facing labour the combined group control about 60% Support retained at 1 760c/share would
disruptions and problems with legacy of the local cement market, was called increase the chances of the group
contracts. off in March. embarking on the ascending phase of
On the plus side, draft regulations But look at it this way: construction the bullish reversal pattern towards the
that aim to overcome problems related in SA has suffered a big blow and the 2 840c/share prior high in the short
term (one to six months). However, stop
PPC LTD losses should be carefully monitored
with this call. A 100% retracement to
the 3 475c/share level would even be
possible above 2 840c/share.
ALTERNATIVE SCENARIO:
A reversal below 1 620c/share could
trigger another sell-off to the 1 215c/
share support mark PPC would then
test its 2003 lows.
52-week range: R16.20 - R34.71

1-year total return: -34.6%
Current P/E ratio: 13.94
Market capitalisation: R12.1bn
Earnings per share: R1.43
Dividend yield: 5.02%
Average volume
2 613 163
over 30 days:
SOURCE: Bloomberg.com

SIMON SAYS
Simons stock tips BY SIMON BROWN
NOW THE REAL WORK BEGINS SELLING ASSETS SHOULD NEVER

BE A GOOD THING
We got good results from Telkom*; the stock is over 40% up in the last Another struggling sector is mining and in
even better, the parastatal paid out its year. The turnaround appears to particular gold mining. This is illustrated by
first dividend in four years. Then it be well on track and management AngloGold Ashantis announcement that it is
followed up with an announcement seems to have a good grasp of the selling one of its US mines for $820m and
of a staff retrenchment programme. various operational units. However, the share price surged on this news. Selling off
With government as the majority the first stages of a turnaround are assets (in this case gold mines) should not be
shareholder, that will not be easy to relatively easier than the really hard great news, but in this struggling industry it
implement. But all said, the results work involved in the final stages is certainly viewed as such. The deal is clever
did nothing to the share price as of any turnaround. Management in that the company gets an uncapped royalty
improved results were already priced seems well up to the task but, as on future underground production as well as
in with the stock up over 200% in mentioned, the share price has pretty reduced debt and capital expenditure costs.
the last couple of years and, even much already priced this all in. Now But ultimately the reality is that it is selling
with recent share price weakness, it is time for Telkom to deliver. assets to keep going thats never good.
NO THANKS
NOT WITH A 10-FOOT
POLE There have been reports that
The construction sector remains Anglo American Platinum
a sector best avoided and this is looking to separately list
was once again illustrated by two its Rustenburg platinum
recent announcements. Firstly mines as it cant find a buyer
Murray & Roberts announced a at an acceptable price. The
R4.8bn contract that adds some usual rules apply here: if
12% to the order book. Nice, nobody else wants these
but considering we have no idea mines, why would I?
of margins or anything else, it is
hardly worth the excitement we BEGGING TO DIFFER
saw when the deal was announced.
More than anything, it shows how Peregrine results were absolutely normalised earnings are a better
desperate shareholders are for any top notch and here is a local sector ref lection of how the business is
good news. We then saw a trading that is doing well (Anchor Capital doing as they exclude share-based
update from Aveng indicating and Coronation in particular). payments. So are they saying that
HEPS will be at least 50% lower. Pereg r ine saw HEPS up 28% these free shares have no cost to
This sent the stock plunging, while the dividend was up 50% shareholder or the company? I totally
although it had run on the Murray and it is on a very good trajectory, disagree, hence I use the real HEPS
& Roberts announcement. This with more upside very likely. I do increase of 28% rather than its
sector remains extremely tough however disagree with members normalised HEPS increase of 36%
and I am leaving it well alone. of management who stated that that management prefers to parade.
LONG WAIT AHEAD

African Bank finally released results by October. That said, shareholders of years trading history will be needed
and they were horrid. The institution the collapsed African Bank wont be before the bank can be listed.
also announced that the good bank part getting new shares anytime soon the editorial@finweek.co.za
of African Bank should be trading again curator has suggested that a couple *The writer owns shares in Telkom.

PRO PICK
Over a century old, JSE

boasts solid track record BY SHAUN MURISON
Market Analyst at IG
T
he JSE came into existence
following the South African EXCLUDING THE
gold rush almost 130 years
CONTRIBUTION FROM
ago. In the early 1990s the
stock exchange upgraded to an electronic MEMBERSHIP FEES, ALL THE
trading system. In the 2000s it launched DIVISIONS HAVE SEEN A
the AltX and YieldX exchanges and GOOD GROWTH IN REVENUE.
acquired the South African Futures
Exchange (SAFEX) as well as the Bond
Exchange of South Africa (BESA). The cash equity operations make up the
The JSE now remains South Africas bulk of the groups revenue. This consists
only full-service and licensed securities of fees relating to the equity market, the
exchange facilitating transactions in the primary market, membership, back-
equities, bond/interest rate, financial, office services and post-trade services
commodity and currency derivatives and amounts to almost 70% of group
markets. This makes for a Warren revenue. Excluding the contribution from
Buffett-style monopoly investment case, membership fees, all the divisions have
especially when we consider the extensive seen a good growth in revenue. Strong
barriers to entry for competitors and in annuity growth in 2014 was largely as a
turn the inherent pricing power of the result of 24 listings in the most recent
operator, which manages the largest financial year, showing an improving
equity exchange in Africa, in terms of interest in the capital markets at present. terms of dividend of around 3.3% has
value traded. The JSE (Ltd, not the exchange been returned to investors in the past.
As the provider of both primary as a whole) has historically produced a This makes a total return of 13% to 15%
and secondary markets as well as the healthy return on equity at around 28%. a feasible expectation going forward
technology services to facilitate trades, Headline earnings growth remains in based on historical performance. Trading
the JSE also operates as the regulator double-digit territory (14% in the 2014 on a forward price-to-earnings (P/E)
thereof and sells market data. financial year), while a decent yield in multiple of 15.5 times, the JSE trades at
a marginal discount to the average P/E
Revenue breakdown * multiple of the Alsis constituents, as well
as a number of its major US, European
Back-office services (BDA)
and Asian peers.
Commodity derivatives fees
18%
16% The JSE remains relevant in the
Currency derivatives fees
1% functioning of our domestic economy,
3% Equity derivatives fees
1% providing both local and foreign access
Equity market fees
not only to local capital markets, but
Funds under management
12% 9% also serves as a gateway into the African
Interest market fees
continent. The regulator, which is highly
Primary market fees
8%
regarded in terms of global securities
Market data fees
25%
regulation, has had a solid track record
Membership fees
5%
since its listing, suggesting a strong
Post-trade services
3%
addition to an investment portfolio with
a long-term time horizon.
*Based on total revenue of R1.8bn for the year to end December 2014.
SOURCE: JSE Ltd, IG
44 FINWEEK 25 JUNIE 2015

MONEY
Investing offshore: Why less

is more at current rand levels BY SCHALK LOUW
PORTFOLIO MANAGER AT PSG WEALTH
I
always enjoy the story of how the Decisions were made in fear of further on three prior occasions since 1981: in
Springboks played a test match devaluation and a large number of 1985 (Rubicon speech), 2001 (rand
against Scotland at Murrayfield foreign investment opportunities were manipulation) and 2008 (global financial
Stadium in Edinburgh in 1951 and taken up, only for investors to discover crisis).
how they beat them with a record score that, until recently, they should have been Furthermore, we will see that the
of 44-0. The Scottish commentator, Bill happy with 0% growth on their capital rand traded at an average premium of
McLaren, famously told his listeners that in rand terms. 36% over the past 22 years (since the
the Scots were lucky to have scored zero Back to the present. For nearly build-up to the first democratic election).
points. a decade, no one cared for foreign Unfortunately, our currency has become
We heard the same words from many invest ments, but I m becom ing a global speculative toy, and I urge
investors 50 years later after they were increasingly worried about the number readers and investors to act with extreme
pulled down along with a rand that lost of readers and clients who recently caution when it comes to new offshore
more than 50% of its value against the approached me for the first time since investments right now.
US dollar in a three-year period up to 2001/02 asking about the best possible Although historical figures bear no
the end of 2001 (R6/$ down to R12/$). foreign investment opportunities. Why? promise for future performance, it is
Lets look at the value of the rand. The still unlikely that I would get rid of my
easiest way to determine its value is first own rands, regardless of all the bad news
THE RAND, THEREFORE, IS
and foremost to establish why it weakens about SA that is currently filling up the
TRADING AT A PREMIUM OF and strengthens. Our general benchmark worldwide press. My reason is simply
NEARLY 66% COMPARED is the US dollar. The rand should weaken because I wont be told that as soon as
TO ITS PPP VALUE. WE WILL with the difference in South African and the dust settles again, the rand wont be
American inflation rates. able to strengthen to levels of between
ALSO NOTE THAT THE RAND
In December 1981 the rand was R1/$. R9-R10/$ (closer to the 36% premium
ONLY TRADED AT SUCH If the rand weakened yearly with the compared to its fair value).
HIGH PREMIUMS difference in inflation between South Short term, I would recommend
Africa and the USA since 1981, we will to keep in mind the golden rule of
ON THREE PRIOR note that it is not currently trading at its applying make-up less is more
OCCASIONS SINCE 1981: indicated purchasing power parity (PPP) when approaching any new offshore
IN 1985 (RUBICON SPEECH), of R7.55/$, but rather at R12.50/$. investment transaction. Rather focus on
The rand, therefore, is trading at a personal debt levels, because if the rand
2001 (RAND MANIPULATION)
premium of nearly 66% compared to its does weaken further, interest rates will be
AND 2008 (GLOBAL PPP value. We will also note that the in danger of rising.
FINANCIAL CRISIS). rand only traded at such high premiums editorial@finweek.co.za

MONEY
Why you should never cash

in your retirements savings BY BUHLE NDWENI
A
recent survey conducted by now regret their decision to cash in their
San lam found many savings, says Maharaj.
employees are unaware of He says assuming a young person
the effects of cashing out changes jobs every five years and opts to
their retirement savings when they THE FIRST SEVEN YEARS withdraw their retirement savings each
change employers, and many pensioners time they switch employers, the research
said they now regret doing so, says OF YOUR RETIREMENT shows that had they preserved these
Viresh Maharaj, chief marketing actuary SAVINGS WILL savings from the start of employment,
at Sanlam Employee Benefits. CONTRIBUTE MORE THAN they would have close on 16 times more
HALF
The research included responses from wealth at retirement compared to the
100 stand-alone funds, 100 employers amount they would have built had they
participating in umbrella funds, 503 cashed it in.
active members and 250 pensioners. OF YOUR TOTAL PACKAGE Better communication is required of
Almost half of all active members [WHEN YOU RETIRE] AT employers to equip employees to make
and more than half of all pensioners THE END. better decisions when they change jobs.
indicated that they did not understand 63% of respondents who cashed in their
how this seemingly innocuous decision savings reported that they used the cash
would negatively affect their ability to to settle debt ranging from credit cards
create lifetime wealth. With the benefit through to mortgage bonds, Maharaj
of hindsight, they indicated that they explains.
Ian
Anderson
Viresh
Maharaj

MONEY
RETIREMENT
SAVINGS
HOW MUCH Government has a hefty tax penalty
IS ENOUGH? of 18% for people who choose to
THE FIRST FEW YEARS
Nowadays retirees are living healthier
withdraw their retirement savings
and longer lives, but will their retirement before retirement. But Maharaj says ARE CRITICAL AS A
savings last them over the decades half of the people they surveyed did not YOUNG PERSON IS ABLE
after they retire? For many retirees, it understand the tax implications of early
TO BENEFIT FROM THE
becomes a race towards death or withdrawals.
poverty will you die first, or be When young people cash in their POWER OF
destitute first? retirement savings, they often think COMPOUND
INTEREST
Anderson says this is why the asset that time is on their side and that they
management industry should not focus still have plenty of time to save towards
on the wrong objective, which is the a comfortable retirement.
size of the retirement pot or net worth, THAT HAS AN
Grindrod Asset Managements
but on how much income the pot will
chief investment officer Ian Anderson
EXPONENTIAL IMPACT ON
produce. The amount of income the
says this is the biggest mistake younger THEIR WEALTH AS TIME
pot can provide might be significantly
lower because annuity rates, interest employees can make regarding their PROGRESSES.
rates, bond yields or dividend yields are retirement savings, since the first five
too low. to eight years of a members contribution
He says although retirement play a v ita l role in grow ing the
annuities (RAs) are seen as the vehicle retirement nest egg.
to save towards retirement, the industry Those are the contributions that not invest at all for the first 10 years,
should reconsider if this is the best spend the most time in the market, but starts investing R10 000 each year
option. For instance, 15 years ago RA says Anderson. They may not be thereafter for the remaining 35 years.
rates were 12.5%, says Anderson, but
your biggest contributions, but if you For the purposes of this exercise, we
they are currently less than 6% because
interest rates are low, and since bonds
contribute as a 22-year-old and you assume a flat return of 10%. (See the
and cash are not risky assets, RAs are retire at 65, that first contribution table below for their respective situations
invested in those types of portfolios. spends 40 plus years in the market. Your at age 65.)
Asset managers focus on the capital last contribution spends no time in the By investing for the first 10 years,
value - the price appreciation that they market; you make your contribution even after stopping completely, Bongani
can achieve - instead of focusing on the and they give it straight back to you. used 71% less money to create 65% more
income they are providing, he says. But The first seven years of your retirement wealth than Derek. Says Maharaj: This
is this going to be enough to provide a savings will contribute more than half is due to the power of compound interest
significant income to maintain a of your total package [when you retire] that works hardest for younger people as
members current standard of living at the end. they have more time to benefit from it.
even after they retire?
Maharaj il lustrates the power If you are a chronic resignee and this
We look at the system and say its
flawed at the moment, not because
compounding has on retirement savings article is the wake-up call you need,
people are not saving enough people by comparing two friends, Bongani rest assured that its not too late to start
are saving enough. [Its] not because and Derek, who both started working your journey to a lifetime of wealth
the markets arent generating the right at the age of 20 and will both retire creation. Treat today as Day One of
returns they are. But the problem is at age 65. Bongani invests R10 000 at your new retirement planning journey
people [members, asset managers, and the start of each year for the first 10 read widely, obtain a holistic financial
financial advisers] are not focusing on years of employment, but stops adding snapshot of your assets and liabilities,
the right outcome. The outcome they additional money to his investment. and seriously consider seeking financial
should be focused on is: Will I have He decides to let his investment grow advice from a respected adviser, says
enough income?, not Will I have for the remainder of his 35 working Maharaj.
enough capital?.
years. Derek, on the other hand, does editorial@finweek.co.za
He says the flaw is that some asset
managers invest members retirement
savings into growth assets before
retirement and then in income assets CASHING IN VS STAYING IN
when members are in retirement.
Bongani Derek Difference
Instead, a combination of growth and
income assets would be a better option, Amount invested R100 000 R350 000 71%
such as dividend-paying and growing Wealth accumulated R4 926 000 R2 981 000 65%
equities and listed property, Anderson
says.

MONEY
MONEY 101
Top tips to help you save
BY KRISTIA VAN HEERDEN
W
hen we kicked off this series, we
prom i s e d to g et you f rom
financially flustered to investing
with conf idence. Until now,
however, weve spoken very little about saving and
investing and rather a lot about how to get your
financial life in order.
If youve been following this series, you should
have or should be in the process of creating an
emergency fund equal to three months income. You
should also be actively paying off your debt and have
an income replacement and disability product to
protect your income. Once all of these things are in
place, you are ready to save and invest.
Nitesh Patel, head of personal banking at Standard
Bank, says its often our mindset, rather than our
income, that stands in the way of saving. Creating
room in your budget for discretionary savings starts
with an understanding of your current spending
habits. Patel advises you start this process by recording
what you spent your money on at the end of each day.
Lezanne Human, CEO of FNB Savings,
Investments and Fiduciary, says while many South
Africans believe they cant afford to save, its
important to create room in the household budget
for savings sooner rather than later.
Those who start saving early will reap the rewards
in the long term. Time plays a huge factor in how
your savings will grow, so the earlier you start to save,
the more you earn because of compound interest,
she says.
THERES NO SUCH THING AS TOO

LITTLE
An analysis of your daily spending will help
you identify areas where you could save. Small
Gallo Images/iStock
changes, like starting a lift club at work or

packing lunch instead of buying it, could save
you a few rand every day. Over time small
amounts saved daily turn into large amounts.

MONEY
For example, says Patel, saving R40 per saved R3 000, go out and purchase that Lezanne
work day about the price of a takeaway R500 outfit that you had your eye on. Human
lunch would result in massive savings Saving can be addictive: the more you
over a 10-year period. If you worked 260 save the more you will want to save.
days per year and saved R40 per day, you
would save R10 400 by the end of just DONT BE A PAY DAY
one year. The benefits of a packed lunch MILLIONAIRE
today could be worth the price of a small According to Patel, many people spend
car in 10 years, he says. 80% of their salary in the first week
of receiving it. This leads to financial
KNOW WHAT YOU WANT pressure towards the end of the month.
Saving for its own sake is harder than Create a culture where you stretch your
saving towards something. Building a money until the end of the month so you
savings or investment portfolio takes go into the new month with money from
time and discipline. the previous month. Apply this thinking
Create stretched but realistic goals to everything you earn. If you get a
and commit to the steps and sacrifices promotion, put the extra money aside
required to achieve them, says Human. for savings and building up your wealth,
Temptations will creep up, but if your rather than increasing your spending,
savings or investment goal is significant Patel advises.
or worth-while, it will help to keep you
focused. She adds that its important KEEP A CLOSE EYE ON YOUR
to set interim milestones to ensure you ACCOUNTS
remain on track. While its a good idea to forget about
spending your savings and investments
PAY YOURSELF FIRST to give them time to grow, Patel says
If your savings or investment strategy you should still keep an eye on your
depends on what is left at the end of the accounts. You may be paying a debit
month, you may be setting yourself up order for a service you no longer use. If IT IS OFTEN OUR
for failure, Human says. Its important you havent used that gym membership
to save and invest first, and then ensure in four months, consider cancelling it. MINDSET, RATHER
the money you have left can cover the rest You could use the money to pay off debt THAN OUR INCOME,
of your expenses. She says setting up a and being debt free will help you get your THAT STANDS IN THE
scheduled monthly transfer to a dedicated mojo back. You could also save money by WAY OF SAVING
savings or investment account is an easy, using the online services offered by your
free and automatic way to build a healthy bank. Instead of going into a branch, its
balance. worthwhile considering doing most of to fully understand the savings and
your payments via internet banking and investment products you use. Knowing
SAVINGS HACK: If youve recently paid debit orders, he says. the type of savings or investment product
off debt, putting the amount you used If youre using the same bank account you are depositing money into will be
to service your debt monthly into a you opened as a teenager, it might be empowering, as youll be able to ensure
savings account is an easy way to foster time for a change. According to Patel, that your product matches your risk,
the discipline of paying yourself first. evaluating your bank accounts is often return and access needs.
a good way to save money. You could She says its good to buy products that
TREAT YOURSELF save some cash by speaking to your bank match your circumstances or goals. If
The best part about saving is that you consultant to get the correct account you arent willing to take risks with your
get to reward yourself for your good for your needs. Check your insurance money, for example, you might need an
behaviour. Rewarding ourselves for hard and investment policies, they could be inflation-linked product, while those
work or a tough month is a great tool to inefficient and not delivering what you with a greater appetite for risk might
keep us motivated and inspired, says need. Checking them regularly will prefer to invest in shares.
Patel. Instead of spending money on an enable you to see if youre overpaying Keeping your spending in check and
item that you might like but do not need, in any areas and make adjustments that setting money aside to work for you is as
consider rewarding yourself for reaching could save you some cash. important as earning an income.
a savings goal. For example, when youve Human agrees, adding its important editorial@finweek.co.za

MONEY
The great savings debate:

Retirement vs education
BY JUSTINE OLIVIER
T
he retirement landscape in worst things you can do as a parent is to
South Africa is not a positive GIVEN THE COST OF depend on your child during retirement,
one. Living in a country he says.
known for its poor saving
LIVING, SAVING FOR Your own financial future remains
habits, South Africans often leave RETIREMENT AND SAVING paramount, says King. Paying for
retirement on the backburner in favour FOR EDUCATION, THERE everything does not teach your child the
of immediate gratification. Treasury ARE FEW WHO CAN necessary financial hardship lessons
reports that only 6% of South Africans that is an important part of education.
will be able to maintain their current
COMFORTABLY AFFORD Overwhelmed with the cost of living,
lifestyle come retirement age. Putting ALL THREE. including the rising cost of education, the
away enough for an emergency fund is a majority of South Africans are opting to
huge challenge for many, let alone saving save for retirement over saving for the
enough money for retirement. This is there are few who can comfortably afford educational needs of their children, a
further compounded by the need to put all three. Studies are important, but trend that has emerged globally.
enough money away for the education of spend the minimum amount possible However, as a parent, you cannot
ones children and the rising cost to achieve studies [if battling to afford underestimate the importance of
thereof. saving for retirement simultaneously], providing your child with a good
Given the cost of living, saving for says Ronald King, head of technical education. So, how can one find the
retirement and saving for education, support at PSG Wealth. One of the right balance and be able to save for

MONEY
both retirement and a childs education?
RETIREMENT
VS
There are no quick-fix tips to solve this
problem, says Lizl Budhram, head of advice at
EDUCATION:
Old Mutual. The only way to tackle this is with
a detailed financial plan that will highlight any
potential financial shortfalls. Then the adviser
and investor can discuss possible strategies to
address the identified shortfalls. SAVING FOR BOTH
This will give a clear indication of how
much needs to be saved per month for each
goal and whether there will be enough money How you can save for both, according to the educational
or not. If not, it will also show exactly how big website 360 Degrees of Financial Literacy:
the expected shortfall will be.
If even after seeking out an adviser you 1. DEFER RETIREMENT OR WORK PART-TIME DURING
are still unsure how you can meet both goals, RETIREMENT
perhaps a change in your lifestyle is required (see The longer you work, the more money youll earn and the later
box for further tips). youll need to dip into your retirement savings. Alternatively,
When asked whether taking out a student working part-time during retirement would also mean that
loan to pay for your childs education was a good you wont need to dip into your retirement savings as heavily
idea, Budhram says: It could be a good idea, as you would still be earning your own income.
depending on many factors, such as access to
credit, the surety requirements, the interest rate 2. REDUCE YOUR STANDARD OF LIVING NOW
and terms of the loan, the appetite for risk that Adjusting your spending habits now will ensure that you will
the parent and child would like to take with be able to retire comfortably while being able to provide your
borrowing/investing funds and the timeline child with a good education.
available before commencing studies.
Each case needs to be considered based on its 3. INVEST MORE AGGRESSIVELY
own facts, she says, reiterating the importance If you have several years until retirement, you might be able to
of seeking financial advice from an adviser. earn more money by investing aggressively but remember
However, she further says that this cannot that aggressive investments also bring a greater risk of loss.
be regarded as a general rule of thumb that will
be an appropriate strategy for most clients. For 4. SEND YOUR CHILD TO A LESS EXPENSIVE SCHOOL
example, it may be a much better strategy for a You may have dreamt that your child would follow your
specific investor to postpone their retirement by footsteps and attend a private school, however, you may
a year or two if this will allow you to fund your need to lower your expectations. Sending your child to a
childs education without taking out a loan. public school with a similarly high standard of education at
What parents should essentially do is open up a far lower cost could save you thousands of rand come the
an educational savings fund for their child when end of your childs school career.
they are born. Unfortunately, for most, this is
not the case and alternate measures need to be 5. INCREASE YOUR EARNINGS NOW
taken. What needs to be kept in mind is that You might consider increasing your hours at your current job
all hope is not lost. Saving for both is possible. (if it pays overtime), finding another high-paying job, taking
Saving for the future means making choices a second job or having a previously stay-at-home spouse
and creating a balance between competing return to the workforce.
financial demands, says Danelle van Heerde,
head of advice processes at Sanlam Personal
Finance. A professional adviser will be able to
work out how much you will need in retirement
and structure an investment plan accordingly.
Gallo Images/Thinkstock
At the end of the day, only the investor can

decide which one is the main priority. Saving
for both is possible, but requires a well thought
out plan.

MONEY
Neville
Berkowitz
Selling your home:

What will it cost? BY GLENDA WILLIAMS
U
ppermost in the mind of the homeowner when in 2014 for R1 194 200 would have been R556 900 over that
selling their home is capital profit. Likely to be a time. Little wonder then that many homeowners, basking in
secondary consideration is how much that sale is the glow of a healthy profit, pay less attention to the cost of the
Image/Rhodes Photographic
going to cost. But cost it will. The question is, how sale or to how much will it erode that capital profit.
much? Yet, selling your home requires giving away a sizeable chunk
On average, homeowners reside in their homes for eight of that profit. In South Africa, unless you are attempting a
years before selling, so the capital gain after this time is likely DIY project, that generally means money paid to either an
to be considerably more than chump change. estate agent or an auction house. But there is also a new kid
According to Absa figures, the capital profit of an average on the block, a low-cost online estate agency looking to buck
medium-sized home purchased in 2006 for R637 300 and sold traditional trends.

MONEY
3 DIY
1 ESTATE AGENT
Homeowners predominantly concerned with the cost of the sale are
The estate agent platform has a long and proven record and
more likely to consider selling their home themselves. While there
is the method of choice in the country. Bound by the rules and
may be savings to be had, attempting to go it alone could end up
regulations of the Estate Agency Affairs Board, estate agents
costing as much as a traditional platform. Sellers should also bear
have the expertise and knowledge to manage the selling and
in mind that buyers of properties sold by owners may look to split
purchasing requirements on behalf of a homeowner. The
the savings that would normally be incurred on agents commission,
platform requires little effort from the seller. Estate agents
so there is the potential that they would not walk away with the full
manage the entire process from marketing, viewings and show
proceeds of those savings.
days to negotiating with both buyer and seller.
WHAT DIYERS CAN EXPECT TO PAY

WHAT YOU CAN EXPECT TO PAY (BASED ON SALE PRICE OF R1 194 200 AND CAPITAL
(BASED ON SALE PRICE OF R1 194 200 PROFIT OF R556 900)
AND CAPITAL PROFIT OF R556 900) Valuer and legal fees: Average approx. R10 000-R20 000
Average estate agents commission: 8.55% (7.5% plus VAT) Net profit after fees: R536 900
Cost of commission: R102 104 (excludes online marketing fees)
Net profit after commission: R454 796 Cost on capital profit after fees: 1.8%-3.6%.
Percentage of commission on capital profit: 18.3% Around 5% if also marketing online.
OR
REASONS FOR USING AN ESTATE AGENT: No sale, no Split saving on agents commission:
commission. And commissions are not set in stone; lower rates R51 052 (50% of R102 104)
can be negotiated. Net profit after buyer split: R505 848
Cost on capital profit after split: 9.2%
2 AUCTION REASONS FOR DIY: Potential savings can be derived if the

Less common is the selling of homes by auction. Locally there is homeowner is contract savvy, is not averse to showing strangers
still somewhat of a stigma attached to the selling of homes by around the property and has the time and expertise to market the
auction as this is the platform typically used to sell repossessed property both on the ground and online. DIY could be a draw card
residences. Contrast this with countries like Australia where the when a neighbour, friend or family is interested in purchasing the
auctioning of homes is the norm. But the auction image may be property.
changing. Joff van Reenen of High Street Auctions tells Finweek
that 95% of their residential properties are private sales and
very few are legal sales (e.g. reposessions). But for High Street LOW-COMMISSION
4
Auctions, the auctionability of the property is what counts. ONLINE ESTATE AGENCY
And it is one of the reasons why around 50% of properties are Costs count and this is something the online estate agency aims
not accepted for auction, having not met their ratings criteria. to address. Neville Berkowitz, a pioneer of property economics in
South Africa and founder of recently launched online estate agency
WHAT YOU CAN EXPECT TO PAY HomeBid, believes the low-commission agency has created a cost-
(BASED ON SALE PRICE OF R1 194 200 effective solution for many homeowners, especially private sellers.
AND CAPITAL PROFIT OF R556 900) Unlike a traditional estate agent, an online estate agency only provides
Auction commission fee: 11.4% (10% plus VAT). Paid by buyer* its services online. But, says Berkowitz, it comes with the professional
Marketing costs: Approx. R13 680-R22 800 (incl. VAT) services that a seller requires. This includes a registered valuer,
and upward internet marketing specialists, private bankers and property attorneys.
Net profit after marketing costs: R544 900R536 900 By the end of 2016 we want to be doing 1 000 homes a month and
Percentage of sellers costs on capital profit: 2.5%-4% and in five years, be the market leader, says Berkowitz.
upwards depending on property and marketing requirements.
*If seller refuses a sale that meets the reserve price (minimum
WHAT YOU CAN EXPECT TO PAY
price required by the seller) then seller is also liable for the
(BASED ON SALE PRICE OF R1 194 200
commission fee.
AND CAPITAL PROFIT OF R556 900)
Average commission: 1.95% (currently includes VAT but
expect this figure to exclude VAT in the not-too-distant future)
REASONS FOR USING AN AUCTION HOUSE: On average,
Cost of commission: R23 287
properties stay on the market for 12 weeks before selling. For
Net profit after commission: R533 613
sellers requiring a quicker process, auctions, which occur
Percentage of commission on capital profit: 4.2%
monthly or even weekly, may be the solution. Sales are non-
conditional and immediate as the platform requires cash or REASONS FOR USING AN ONLINE ESTATE AGENCY: Low
pre-approved finance buyers. Buyers pay the commission fee commission. As well as offering pre-qualified buyers, this platform
and auctions also present the opportunity of securing a sale in offers the necessary professional services required to conclude the
excess of the reserve price. But sellers do incur marketing costs sale agreement between successful bidders/buyers and sellers.
whether or not the property sells.

ENTREPRENEUR
Anne
Anne Richardson brings acquired knowledge and passion
Richardson
for fabric design to the world of interior decorating.
Living in the material world BY JON PIENAAR
I
t has been a year since Anne specialises in home dcor and textiles, fabric design elements.
Richardson of Annapatat f irst Richardson began her career by studying For some 15 years, R ichardson
flung open the doors of her textile clothing design at a technikon and consulted to the wealthy elite in London.
shop in a restaurant-studded road working in the South African garment She met her partner, Andrew Berki, a
in Muizenberg, in Cape Towns False industry, before moving to London to try dealer in rare books, at a market in the
Bay. Richardsons partner owns a book to get into the fashion industry. UK. The couple eventually decided to
dea lership in the tow n, which is But Londons trendy clothes sector make the move to Cape Town. Berki set
considered the home of South African proved to be a closed shop for a fresh- up shop in Muizenberg, and Richardson
surfing. Before that, on the days that faced girl from South Africa, so she continued her interior decorating
shed be asked to keep an eye on the reinvented herself and found a new business, making curtains and doing
book dealership, Richardson would career path interior home furnishing. whatever she could with fabric.
often stare out across the road and Today Richardson through her brand Im passionate about textiles, says
wonder what it would be like to own her Annapatat Home Decor works with Richardson. The moment I picked up
own shop. homeowners and interior designers to a sewing machine I was hooked, at the
A s a c r e ator a nd m a k e r w ho create curtains, cushions, linen and other age of 18, I just loved it. I loved the fact

ENTREPRENEUR
Anapatat stocks a select range of South African designed fabrics. Owner Anne
Richardson has a passion for the new wave coming from designers like Design
Team and Skinny laMinx.
that I could cut something out, zip-zip- about Drum magazine covers from the
zip and in a few hours, have a beautiful 1950s? But the minute you see these
thing that I can wear or use. fabrics you just understand why they
work and are reinventing local textile
NEW BEGINNINGS design.
When the shop across the road from When I opened my shop, I wanted
Berki s Rattlesnake Books became to do local textiles and the sort of textiles
available, Richardson decided to take you dont see in London. Because
the plunge and make it her own. An I think we have some very special
Afrikaans friend had given her the designers, doing very unique work that
nickname Annapatat, and she loved you seldom see, says Richardson.
the quirky ring to this moniker, so that Ever crafting and trying new things,
became the name of the store. Richardson also makes her own designs,
R ichardson stocks fabrics from using lino-printing, fabric painting and
lines that she feels passionate about, stitching.
like Skinny laMinx and Design Team. At first, opening a shop was scary,
These are South African designs that Richardson admits, but now she knows
Images/ Jon Pienaar
draw inspiration from recognisable it was worth it, saying: I have never had
South African motifs that are a part of my own retail space before I worked
our popular culture. These range from from home and did market stalls before. I
the elegant to the quirky a Karoo have learned that having your own retail
windmill as a curtain design? Or how space is great because it opens you up.

ENTREPRENEUR
One passer-by who looked into her

w indow and saw her interesting South African motifs inspire modern designs that evoke a love of our natural heritage.
range of fabrics was a buyer for the
Woolworths Artisan Collection. The
buyer picked up a cushion that sported
one of Richardsons own lino-print
designs, asking her if she could buy
the fabric by the metre. I ended up
getting an order from Woolworths
for these cushions that I print. Which
is fantastic I mean, to get in with
Woolworths is a dream. I cant believe
it, Im still pinching myself, says
Richardson.
Woolworths Artisan Collection is
a range of handcrafted products that
have been created by local designers,
artists and makers, which the retailer
says is a strong trend that will be
amplified this winter.
Artisan Collection is only available
in selected Woolworths stores, as this
type of product, by its very nature,

cannot be mass produced. A giant
retailer like Woolworths assists small
makers like Richardson, not only
by buying their products, but also
generating exposure for them.
WHEN I OPENED MY
SPREADING THE WORD SHOP, I WANTED TO DO
LOCAL
Richardsons passion is infectious, and
now she is using her space on weekends
to teach sewing and lino printing. This
provides an added source of income TEXTILES AND THE SORT
to offset the more long-term projects OF TEXTILES YOU DONT
that only pay at the end. Ever since SEE IN LONDON.
Ive worked for myself, in London and
here, Ive never relied on one thing. window is a big advertising space and
Because I think youve got to try and really draws people in.
diversify. Even in London I did a R icha rdson says that word of
market stall, and I did the curtains and mouth has been her greatest ally she
blinds. So I used to go to India, buy has attracted more business through
beautiful textiles, have a market stall recommendations than anything else.
that brought in cash every Saturday, This she puts down to always doing
says Richardson. every job to the best of her ability. I
As for marketing, Richardson says will not leave a job until Im happy with
that she has tried taking out ads in it. And I think people appreciate that,
magazines, but they didnt work for she says.
her. Now I just do Facebook and put Creative excellence is always a
Quirky, fun and inventive
fabric designs reassert South
my sandwich board outside my shop, sustainable business model, something
African culture and find new because I can pull lots of people from that Annapatats growth and success
meaning in old motifs. the nearby restaurants. The fabrics are proves.
striking so people see the fabrics. My editorial@finweek.co.za

TECHNOLOGY
Vodacom to expand
niche offerings BY GUGU LOURIE
V
odacom, South A fricas rates the rates one network operator insurance portfolio as a noteworthy
bi g g e s t m o bi l e ph on e pays another to put through calls to its business. It generates about R441m in
operator in terms of network shaving R2bn off Vodacoms revenue. The mobile operator says its
subscribers, plans to scale up revenue line and another R1.2bn off its insurance business portfolio has been
its niche funeral and life insurance EBITDA line in the 2015 financial year, growing steadily at 36% a year.
business. the company has had to think of ways On average the device insurance
The mobile phone operator, which to support growth as its home market business processes approximately R1m
is 65%-owned by British mobile giant matures. in claims per working day. The number
Vodafone, provides life and funeral To build resilient revenue streams of policies in our long-term assurance
insurance. It also provides device and secure future growth opportunities, business grew more than 100% off a small
insurance services to both contract and Vodacom is investing in diversifying its but fast-growing base, the cellphone
prepaid customers in SA. business in a number of focused ways. operator said.
Vodacom, which is valued at more These include selling financial services The number of active smart data
than R 200bn, has more than 32m products such as insurance, providing devices on Vodacom network rose 29.7%
customers in SA. The company has content, connectivity for machine-to- to 11.6m (of which 9.3m are smartphones,
27.2m prepaid users and 4.9m contracted machine services, fibre-to-the-home and 1.1m tablets and 1.2m modems) in the
subscribers. Presently Vodacom provides ecommerce. year to end March, fuelled by more
device insurance to only 7% of its contract Vodacom a l ready rega rds t he affordable devices.
subscribers a situation that leaves Vodacom has sold more than 3m low-
significant room for growth in this cost smart devices, including Vodacom-
THE COMPANYS
offering. The total insurance market in branded Smart Kicka and Smart Tab,
SA is worth approximately R61bn. INSURANCE BUSINESS CAN which sold more than 1m units since
Our focus has mainly been on device GROW EXPONENTIALLY BY launching in the third quarter of 2015
insurance, but we intend to scale up our SIGNING UP THE fiscal year.
93%
funeral and life insurance business, the The companys insurance business can
company said in its latest annual report. grow exponentially by signing up the 93%
The move by Vodacom is part of its of its contract customers that are not yet
strategy to diversify its revenue streams. using its device insurance offering.
OF ITS CONTRACT
With mobile voice declining 4.6% and We will continue to use our customer
the impact of lower mobile termination CUSTOMERS THAT ARE value management system to market
NOT YET USING ITS DEVICE insurance products to our existing
The Vodacom Groups headquarters INSURANCE OFFERING. customer base. Customer demand for
in Johannesburg life and device insurance is growing, said
Shameel Joosub, Vodacoms CEO.
Despite the macroeconomic pressures
in our market, its really important that
we invest effectively in each of our
Dean Hutton/Bloomberg via Getty Images
growth pillars to ensure we diversify our

revenue streams.
With 93% of its contract customers
not covered by its handset insurance,
Vodacom is set to be a big player in this
space and will continue to receive more
revenues from this financial services
product.

DIRECTORS & DIVIDENDS
Directors Dealings
Company Director Transaction Date Transaction Type Volume Price (c) Value (R) Date Modified
DATATEC JP Montanana 10 June Purchase 82,118 6074 4,987,847 12 June

DATATEC JP Montanana 11 June Purchase 130,000 6775 8,807,500 17 June
DATATEC JP Montanana 11 June Sell 232,118 6775 15,725,994 17 June
DATATEC CS Seabrooke 10 June Sell 200,000 6675 13,350,000 17 June
ESOR EG Dube 8 June Sell 7,305,182 30 2,191,554 12 June
FAIRVEST DM Wilder 10 June Purchase 239,000 174 415,860 12 June
FAMBRANDS P Halamandaris 10 June Sell 21,828 11320 2,470,929 17 June
FAMBRANDS P Halamandaris 11 June Sell 6,612 11336 749,536 17 June
FAMBRANDS P Halamandaris 12 June Sell 18,242 11308 2,062,805 17 June
GROWPNT HS Herman 12 June Purchase 2,159 2532 54,665 17 June
GROWPNT HS Herman 12 June Sell 80,000 2509 2,007,200 17 June
HCI JA Copelyn 10 June Exercise Options 83,601 15773 13,186,385 17 June
HCI TG Govender 10 June Exercise Options 31,987 15773 5,045,309 17 June
HOMECHOICE S Maltz 8 June Exercise Options 25,000 747 186,750 10 June
HOMECHOICE S Maltz 8 June Sell 25,000 3800 950,000 10 June
IMPLATS TP Goodlace 12 June Purchase 5,000 5915 295,750 17 June
IMPLATS B Swanepoel 8 June Purchase 10,000 5899 589,900 10 June
KAP G Chaplin 8 June Purchase 40,205 554 222,735 11 June
KAP G Chaplin 9 June Purchase 659,795 560 3,694,852 11 June
MMG RB Dick 11 June Exercise Options 800,000 800 6,400,000 12 June
NAMPAK AM de Ruyter 10 June Purchase 29,500 3328 981,760 12 June
NAMPAK PA de Weerdt 9 June Sell 73,533 3357 2,468,502 10 June
NEDBANK MA Matooane 11 June Purchase 2,085 23757 495,333 12 June
OASIS N Ebrahim 10 June Purchase 1,189 396 4,708 10 June
OCTODEC MZ Pollack 10 June Purchase 108,773 2170 2,360,374 11 June
SACOIL D Matroos 10 June Exercise Options 4,833,333 2331 112,664,992 12 June
SANLAM S Bray 4 June Sell 12,359 6788 838,928 11 June
SANLAM JP Mller 4 June Sell 100,694 6788 6,835,108 11 June
SANLAM TI Mvusi 4 June Sell 51,975 6788 3,528,063 11 June
SANLAM Y Ramiah 5 June Sell 22,838 6900 1,575,822 11 June
SANLAM J Van Zyl 4 June Sell 105,871 6788 7,186,523 11 June
SPAR K OBrien 12 June Sell 6,600 18103 1,194,798 17 June
SHARE FORECAST DPS (c) FORECAST DY (%) SHARE FORECAST DPS (c) FORECAST DY (%)
REBOSIS 109 9.2 PAN AFRICAN 15 7.5

VUKILE 148 8.4 ASTRAL 1200 7.3
Dividend ranking OCTODEC 192 8.2 EQSTRA 24 7.1
REDEFINE 80 7.9 GROWTHPOINT 174 6.8
ACCPROP 49 7.8 A V I 525 6.6

LAST WORD
How the Navy SEALs

train for leadership BY MICHAEL SCHRAGE
A
lmost every world-class organisation takes explicitly acknowledge and promote excellence. And,
training and education seriously. But the says Webb, they also need the courage and integrity to
US Navys special operations forces, the replace those who cant or wont step up.
SEALs, go far beyond. Their dedication Should training overwhelmingly focus on skills
to relentless training and intensive preparation, however, enhancement? Or must it be managed to build better
is alien to the majority of businesses worldwide. Thats bonds and relationships throughout the enterprise?
important because excellence requires more than Webb unambiguously champions both. The training
commitment to educational achievement. transformation made the SEALs culture more open
As an educator, I fear that business schools and to innovation and exchange. Incentives that facilitated
businesses overinvest in education and dramatically accountability improved the entire organisation, not just
underinvest in training. Leaders and managers get the trainees.
knowledge and education, while training and skills go to
those who do the work. That business bias is dangerous. Incorporate new ideas from the ground
The SEALs cant afford it. Under pressure, according Successful training must be dynamic, open and
to the SEALs, you dont rise to the occasion; you sink innovative. Ongoing transformation not just
to the level of your training. Thats why we train so incremental improvement is as important for trainers
hard. Many talented organisations find it difficult to as trainees. Its every teachers job to be rigorous about
innovate and adapt under pressure. A factor may be constantly being open to new ideas and innovation,
people who are overeducated and undertrained. Webb says. Its a huge edge, sometimes life-saving, to
Brandon Webb, an innovative SEAL trainer/ adopt a good idea early and put it into practice. As an
educator and now CEO of Force12 Media, served in instructor I learnt that you are never done learning, and
the US Navy from 1993 to 2006 and redesigned the your students can be a wealth of information.
SEAL training course curriculum.
Lead by example
HE EMPHASISES FOUR TRAINING THEMES: Arguably Webbs most passionate training theme
reflects his battlefield experiences. The most important
Produce excellence, not above average training behaviour a leader can demonstrate, he asserts,
Training programmes shouldnt be designed to deliver is leading by example. Leading by example means never
competence; they must be dedicated to producing asking your team to do something you arent willing to
excellence, Webb said. Serious organisations dont do yourself, Webb writes. This cant be faked; do it
aspire to be comfortably above average. right and your team will respect you and follow you.
Tr a i n i ng d ivorce d f rom e xcel lence is mere The level of motivation, dedication and self-sacrifice
compliance. It is more box-ticking than human the SEALs demand from themselves and one another
capital investment. Is above average training really goes far beyond what most businesses and business
worth the time, energy and expense? Webbs perspective schools should ever ask, let alone expect, from their
poses a challenge to most organisations views of human people. No one doubts the role that education plays
resources. Do they really want training to bring out the in creating and sustaining economic competitiveness
best in their people? Or does everyone train with the worldwide. But its long past time that CEOs, boards,
expectation that excellence matters less than being a business schools and universities revisit what world-class
bit better? training should mean.
Gallo Images/iStock
Reward excellence, not competence
Organisations need recognition and reward systems that 2015 Harvard Business School Publishing Corp

LIFE
TEST YOUR KNOWLEDGE

Welcome to this weeks quiz! Heres your chance to test your general
knowledge and to check whether youre on top of the past few days
happenings. Complete the quiz on Finweek.com to find out the answers.
True or false? Which billionaire businessman

1 South Africa has missed the deadline to 7 recently announced his candidacy
migrate from analogue to digital broadcasting. for president of the US?
What is Lesetja
True or false? 8 Kganyagos title?
2 Robert Mugabe is the chair of the African Union.
Which South African musician
True or false? was recently awarded an Order
3 Cell C has been embroiled in a damaging of the British Empire (OBE)?
strike as employees demand higher wages. 9 Johnny Clegg
Hugh Masekela
Yvonne Chaka Chaka
4 Who is Angela Merkel?
5 Name the capital of Sudan. In last weeks edition, dated 18 June, we featured
the worlds largest credit card company youve
probably never heard of. Which is the
Who is Rachel Dolezal? 10 company concerned?
A UK singer SBI Credit
6 A human rights activist GoldCard
Miss South Africa 2015 UnionPay
CRYPTIC CROSSWORD NO 587 JD ACROSS DOWN

Compiled by Jack Dunwoody (dunwoody_j@intekom.co.za)
1 I can drag out the winter 2 Head band? (7)
woolly (8) 3 Cruel not being in
5 Along with a famous band (4) charge of game (7)
9 Independent to the end, a 4 Contentious debate
knight on a personal whim (5) about Evita (13)
10 Commander having no 6 Rock singer role playing
alternative, issues final orders on the French island (7)
(7) 7 Female Conservative in
11 Dominant old part of London a pickle over seafood
(4) (7)
12 A leading market magazine 8 No longer down? (4,2)
features sour cherry (8) 13 Conventional person
13 Whip ten antisocial members not first to toe the line
into shape (3-1-4-5) (7)
18 Groan! Man puts on a little 14 Paddy, not having a
weight (8) drink, meets lady at full
19 Little woman with a new gallop (7)
gripe (4) 15 Railwaymen backing a
20 Originally French friend horse into cargo boat
completed the paperwork (7) (6)
21 Familiar French in France is 16 High-sounding alarm
mostly hard to follow (5) adapted for wardrobe
22 Dressing in Ireland (4) (7)
23 Writer companion to soldier, 17 Worry about one sons
say, showing partiality (8) secret romance (7)
Solution to Crossword NO 586 JD

ACROSS: 1 Right-winger; 9 Admirer; 10; Curse; 11 Attic;
12 Atelier; 13 Agnate; 15 Target; 18 Aerator; 20 Sprig;
22 Alien; 23 Enliven; 24 Pretty smart
DOWN: 2 Immit; 3 Haricot; 4 Warsaw; 5 Nacre; 6 Earring;
7 Panama canal; 8 Secret agent; 14 Narkier; 16 Absalom;
17 Artery; 19 Tenet; 21 River

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Supported by cat photo* Tickets available at Computicket
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Email Ilani Jansen van Vuuren
the you travel club can assist *Not included at iceage@megatrav.co.za
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with family holiday packages.
Contact us on 011-886-9545 or email
iceage@megatrav.co.za to book yours now.
www.theiceage.co.za
Sandton Convention Centre | 20 June to 8 auguSt 2015
PIKER
ON MARGIN
DRAMA IN Two guys have just robbed a jewellery
store. They burst out the door running as
VERBATIM
THE THEATRE they hear the sirens of police cars coming
A man lay sprawled across three entire closer. The thieves dive into two separate
seats in the posh theatre. When the bushes, hoping they wont get caught.
usher came by and noticed this, he Soon the police car stops near the bushes
whispered to the man, Sorry, sir, but and the two robbers, hearing footsteps,
youre only allowed one seat. grow more nervous.
The man groaned but didnt budge. A cop then grabs one of the guys, Brandon Els @TheOldCootBiker
The usher became impatient. Sir, if you pulling him out of the bush. Gotcha! @TraderPetri @gerhardparkin from
dont get up from there Im going to As the policeman drags the robber 12:00 have a tequila every time you
have to call the manager. off, he looks back, shaking his head in see Greece in your timeline. At 16:00 if
Again, the man just groaned, which shame... Come on, John! he shouts. youre sober, go long the Alsi.
infuriated the usher, who turned and They got us!
marched briskly back up the aisle in Teacher Dude @teacherdude
Remember kids, tomorrow is #Grexit
search of his manager.
Monday. Just like last Monday, and the
In a few moments, both the usher A woman dropped her handbag in Monday before that and the Monday
and the manager returned and stood the bustle of a busy shopping mall. An before that and the Monday...
over the man. Together the two of them honest little boy noticed her dropping the
tried repeatedly to move him, but with handbag, so he picked it up and returned Holger Zschaepitz @Schuldensuehner
no success. Finally, they summoned the it to her. Nielsen on #Grexit: Arranging new
police. The cop surveyed the situation The lady looked into her handbag banknotes wouldnt be an easy task for
briefly then asked, All right, man, and commented, Hmm... Thats funny. a government that cannot organise a
barbecue, frankly speaking.
whats your name? When I lost my bag there was a R50
Sam, the man moaned. note in my purse. Now there are five R10
Where are you from, Sam? notes. Jennifer Wright @JenAshleyWright
With pain in his voice, Sam replied: The boy replied, Thats right, lady. If #Trump won there is at least a 90%
The balcony. The last time I found a purse, the owner chance he would rename the country
didnt have any change for a reward. after himself.
Phil Plait @BadAstronomer

Havent we already had two in the
Bush? #Jeb
Michael Moore @MMFlint

You know what it looks like when you
make a copy of a copy of a copy on a
copy machine? Its even worse when u
split a gene a 3rd time. #JEB!
Tom Eaton @TomEatonSA

Waterkloof is our Platform Nine and
Three-Quarters, where wizards with
names like Bashir and Gupta pop in and
out of our reality.
Ranjeni Munusamy @RanjeniM

We should have given #Bashir a baby
to look after. Then he wouldve needed
an unabridged birth certificate to leave.
Peter de Villiers @Coachdivvy (Parody

account)
Even Adriaan Strauss could have
caught this #AlBashir guy before
fleeing and Adriaan is very slow.

OGILVY CAPE TOWN 73325/E
Y ou can learn something from the worlds best

musicians. When they step on stage, they tune
out everything. Their technical crew, the rowdy
lads in the back, the screaming girls in the front
and their manager standing off stage, wringing
his hands wondering if they really sound that
good live. They have absolute focus and its the
kind of focus you need when planning for your
retirement. It pays to tune out all distractions
and focus on a single goal. And the goal should
be starting as soon as possible. Because the
more time your money has to grow, the more
peace of mind youll have when you eventually
stop working.
Call Allan Gray on 0860 000 654 or your

financial adviser, or visit www.allangray.co.za
Allan Gray Proprietary Limited is an authorised financial services provider.

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A LOOMING CRISIS? declining manufacturing output, warnings of load-

4 FINWEEK 25 JUNE 2015

35 000 000 000 000 000

6 FINWEEK 25 JUNE 2015

FINWEEK 25 JUNE 2015 7

8 FINWEEK 25 JUNE 2015

FINWEEK 25 JUNE 2015 9

The future of retail loyalty BY LAMEEZ OMARJEE

the rest of Africa, where mobile solutions

10 FINWEEK 25 JUNE 2015

Wonderboom Airport (Pretoria) to Cape Town.

12 FINWEEK 25 JUNE 2015

FINWEEK 25 JUNE 2015 13

with tertiary qualifications, but

14 FINWEEK 25 JUNE 2015

YEAR EMPLOYED SOCIAL GRANT DEPENDENCY

2004 11 823 000 7 894 810 150 to 100

% 15 2005 12 503 000 10 974 076 110 to 100

2006 13 237 000 12 015 059 110 to 100

2007 13 236 000 12 423 739 110 to 100

2008 13 729 000 13 072 173 110 to 100

2010 13 061 000 14 935 832 90 to 100

% 10 2011 13 125 000 15 595 705 80 to 100

2012 13 447 000 16 106 110 80 to 100

FINWEEK 25 JUNE 2015 15

The increase in Investors fear more

16 FINWEEK 25 JUNE 2015

THE POWER DILEMMA

FINWEEK 25 JUNE 2015 17

POSITIVES EVEN AS RATINGS

18 FINWEEK 25 JUNE 2015

the announcements; it is how it is employees agreed on a three-year

FINWEEK 25 JUNE 2015 19

Anglos Cutifani intent

20 FINWEEK 25 JUNE 2015

AngloGold now anglogoldashanti.com

in better position BY DAVID MCKAY

FINWEEK 25 JUNE 2015 21

Myriad hurdles diminish

theres a back door to the department,

22 FINWEEK 25 JUNE 2015

LOAD-SHEDDING then Checkout.

Agoa renewal: Local

24 FINWEEK 25 JUNE 2015

FINWEEK 25 JUNE 2015 25

of the Agoa renewal, it was likely to

Holdings fell 3.3% to R3.52. However

THEY DONT WANT TO

DEAL FAIRLY. Kevin

26 FINWEEK 25 JUNE 2015

Rebuilding Liberia BY LAMEEZ OMARJEE

28 FINWEEK 25 JUNE 2015

FINWEEK 25 JUNE 2015 29

30 FINWEEK 25 JUNE 2015

Gallo Images/Getty Images/Hougaard Malan Photography

FINWEEK 25 JUNE 2015 31

Going legal BY CIARAN RYAN

32 FINWEEK 25 JUNE 2015