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• Third Quarter, 2017
SA’S CEOS FIND THEIR VOICE
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contents Issue 21 • Third Quarter, 2017
Issue 21 • Third Quarter, 2017
SPEAK OUT! SA’s CEOs find their voice
SPEAK OUT! SA’S CEOS FIND THEIR VOICE
• Third Quarter, 2017
A SENSE OF HOPE? RAMAPHOSA AT GIBS LEADING THE WORLD SA’S 3D PRINTING NICHESTREEM BUT CAN IT PAY?
R39.95 incl vat
A SENSE OF HOPE? Ramaphosa at GIBS
ON THE COVER Photo: Various
LEADING THE WORLD SA’s 3D printing
Colin Coleman, MD, Goldman Sachs, sub-Saharan Africa
Cas Coovadia, MD, Banking Assoc. of SA
Mark Cutifani, Chief Executive, Anglo American plc
NICHESTREEM But can it pay?
GORDON INSTITUTE OF BUSINESS SCIENCE
Adrian Enthoven, Chairman, Hollard
Bonang Mohale, CEO, Business Leadership SA
Ben Kruger, Co-CEO, Standard Bank Group
Phutuma Nhleko, Executive Chairman, MTN Grou
Sipho Maseko, CEO, Telkom SA
Maria Ramos, CEO, Barclays Africa Group
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p.02 Contents p.04 Contributors p.08 From the Editor p.10 Network
The Ethical Core
GIBS Dean Prof. Nicola Kleyn argues that successful strategy is built on ethical foundations.
p.16 Winter Blues Columnist Trudi Makhaya analyses SA's current problems. p.17 Can the ANC Lead Society? Dan Moyane examines the ANC's claim to leadership.
p.18 Bigger than the Internet Monica Singer tells Chris Gibbons about the explosive growth of blockchain.
p.26 Time for Politically Savvy Business Leaders GIBS faculty Abdullah Verachia argues that leadership needs finely tuned political antennae. p.32
Making Africa Work
Former Nigerian president Olusegun Obasanjo tells a GIBS audience that Africa needs leadership and good governance.
P.35 p.38 A Bean's Journey Marc Shoul & Cara Bouwer document the journey of a Rwandan coffee bean from tree to cup. p.44 China's Changing Markets Kate Whitehead reports on opportunities in China for SA exporters.
p.48 The Business of Cruising Eugene Yiga packs his bags to understand MSC Cruises' phenomenal growth.
dynamic markets p.54 The Business of Africa Prof. Lyal White talks about his new book, Africa-to-Africa Internationalization. p.56 Corporate Leadership:
Navigating African Markets
Dianna Games charts a course through the sometimes tricky waters of African business.
p.60 Doing Business in Chile Tom Hennigan examines South America's great success story, Chile. p.64 Top Eight Things to See & Do...
...and then kick back in one of the world's top tourist destinations.
strategy p.70 Connecting for Growth,
Economic Inclusion and Prosperity
Prof. Adrian Saville outlines the key factors that drive a nation's prosperity.
future p.72 The Great Displacement
a.k.a Coming Face-to-Screen with Automation
Top trendspotter Dion Chang wonders about the machine that's about to take his job.
p.74 Dubrovnik! Acumen's top globetrotter, Caroline Hurry, visits Dubrovnik... p.75 Adriatic Escapes ...and then heads down the Adriatic coast. p.76 The Finer Things Cheska Stark recommends Thebe Magugu and Chanel for Her, Ted Baker chinos and Persol sunnies for Him. p.78 Forward Motion Jacques Marais and Stephen Smith try out a new trail shoe, the latest rain jacket and the Lexus IS200 T. p.80 Techno Techno wiz Aki Anastasiou plays with a new pointer and one of the best smartphones for photography. p.82 Books Chris Gibbons looks at South Africa in 2030 and also The Republic of Gupta. p.84 Wine Wine expert John Maytham visits the Old Mutual Trophy Wine Show. p.86 Elo Zar's Electric Universe Victor Dlamini meets electro-pop sensation Elo Zar.
p.88 Pooch Power, or Paws
Sam Cowen says puppies belong at home, not in the office.
TOM HENNIGAN was born and raised in Dublin and has lived in South America since 2003. Currently based in São Paulo, he covers the region for The Irish Times among other publications.
DAN MOYANE is a seasoned broadcaster with 35 years of experience under his belt, having worked as a news reporter, editor and presenter. His broadcasting credentials include Radio Mozambique’s English Service, BBC, Talk Radio 702, SABC and eNCA. Currently he anchors Morning News Today on eNCA on weekdays from 6 to 9am. He has been responsible for corporate communication and corporate social investment at MMI Holdings since 2009.
DION CHANG is an
GORDON INSTITUTE OF BUSINESS SCIENCE
innovator, creative thinker and visionary. He is a soughtafter trend analyst and, while his feet remain firmly planted on African soil, he uses a global perspective to source new ideas, gauge the zeitgeist and identify cuttingedge trends. He contributes to various print publications and online portals as a freelance journalist and social commentator.
is a writer, columnist, communicator and portrait photographer with a deep interest in social issues. He collects art and music, especially jazz. He graduated cum laude in English at the University of Natal in Pietermaritzburg.
SARAH WILD is a
JAMES VAN DEN HEEVER writes for a
TRUDI MAKHAYA is
CEO of Makhaya Advisory, an economic and competition policy consultancy. She also writes regularly for Business Day, was previously deputy competition commissioner and a Rhodes Scholar at Oxford where she earned an MBA and a Master’s degree in development economics.
freelance science journalist, specialising in South African science, technology and innovation. She has worked as science editor at Business Day and the Mail & Guardian, and in 2015, she won the CNN-MultiChoice African Journalist of the Year Award for innovation.
PROF. ADRIAN SAVILLE is Professor of
Economics and Competitive Strategy at GIBS, and Founder and Chief Executive at Cannon Asset Managers. He has lectured and taught widely in both South Africa and around the world, has received the Excellence in Teaching Award at GIBS on nine occasions since 2007, and in 2012 was nominated for the Economist Intelligence Unit’s Business Professor of the Year Award. While completing his doctorate in economics, he formed an investment vehicle which became the forerunner to the investment business Cannon Asset Managers, now part of the Peregrine/ Citadel stable.
range of clients, including the Institute of Directors in Southern Africa, the Ethics Institute of South Africa, the South African Institute of Professional Accountants and Ernst & Young. He was formerly editor-in-chief of Systems Relationship Marketing, a custom publisher with blue-chip clients and editor of Computerweek. He also worked as a media liaison in the corporate world.
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editor Chris Gibbons Gibbonsc@gibs.co.za cover photography Various layout and production Contact Media and Communications (Pty) Ltd designer Quinten Tolken
ABDULLAH VERACHIA serves
proofreader Angie Snyman
as faculty in the areas of strategy and competitiveness and is also the Director of the GIBS Centre for Leadership and Dialogue. He has significant expertise in strategy, competitiveness and sector trends and facilitates a number of high-level strategy sessions and breakaways for companies and governments, and also speaks globally in this area.
publisher Donna Verrydt Donna@contactmedia.co.za Contact Media and Communications (Pty) Ltd 011 789 6339 advertising sales Sean Press Pressman@contactmedia.co.za 082 888 1137
GORDON INSTITUTE OF BUSINESS SCIENCE
EUGENE YIGA graduated with distinctions in financial accounting and classical piano but his career then took an interesting turn when he spent two-and-half years working in branding and communications at two of South Africa’s top market research companies. He also spent over three-and-a-half years working at an eLearning start-up before dedicating himself to his business as a full-time award-winning writer. Eugeneyiga.com
contributors Aki Anastasiou Cara Bouwer Dion Chang Sam Cowen Gaye Crossley Victor Dlamini Dianna Games Tom Hennigan Caroline Hurry Prof. Nicola Kleyn Trudi Makhaya Jacques Marais John Maytham Dan Moyane Prof. Adrian Saville Stephen Smith Marc Shoul Cheska Stark James van den Heever Abdullah Verachia Prof. Lyal White Kate Whitehead Sarah Wild Eugene Yiga commercial director Howard Fox Foxh@gibs.co.za contact Acumen 26 Melville Road, Illovo, Johannesburg P O Box 787602, Sandton, South Africa, 2146 011 771 4000 Acumen@gibs.co.za
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Disclaimer: Acumen is the official publication of the University of Pretoria’s
PROF. LYAL WHITE is the
founding director of the Centre for Dynamic Markets (CDM) at GIBS, where he is an Associate Professor in International Business focusing on political economy and strategy in Africa, Asia and Latin America. Prof. White has lived and worked in South Africa, Rwanda, Argentina, Colombia, Morocco and the US, and is associated with a number of institutions across the globe.
Gordon Institute of Business Science (GIBS). All material is strictly copyright and all rights are reserved. No portion of this magazine may be reproduced externally, wholly or in part, in any form without the written consent of GIBS. The views and opinions expressed by the contributors to this publication are not necessarily the views and opinions of the publishers, GIBS or its associates. While every effort has been taken to ensure the completeness or accuracy of the published information, errors and omissions may occur. The publishers, GIBS and its associates cannot accept responsibility for any loss, damage or inconvenience that may arise from the unauthorised use of this publication.
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THANK YOU, MR. ZUMA Words Chris Gibbons
Business, civil society, political parties and ordinary individuals are being drawn together....
GORDON INSTITUTE OF BUSINESS SCIENCE
Like many of his generation, my late father fought in World War II. He was on the British side, part of the victorious Allies who defeated Nazi Germany. He didn’t talk about it much. Well, that’s not strictly true: he’d spend many a happy hour nursing a brandy-and-coke while recounting hair-raising escapades and madcap encounters of the kind which only seem to happen to young men and women in the armed forces. The dark side of war – the horrors, the devastation, the loss of comrades, even his own injuries – all that stayed locked inside his memory. I’ve spoken to many people of my own generation whose parents also fought in that war and they tell similar tales. But one thing is very apparent: for these men and women, the war was the central event in their lives, a defining six-year long moment that changed everything. In particular, they all said the war united the British nation. I’m sure that many other countries had similar experiences. The Russians especially, having lost some 27 million people in what they call the Great Patriotic War. But I can’t say for certain. Although I was born in South Africa, I went to school and university in Britain in the 60s and 70s, which means that I’m talking from first-hand experience. The war was still
very recent and for a schoolboy in those days to encounter a grown-up that had not been in uniform was quite unusual. We heard repeated tales of ‘derringdo’ and ‘the wartime spirit’ which had brought the ‘tiny island nation’ together, winning the Battle of Britain along the way. Even the inglorious retreat from Dunkirk early in the conflict was somehow painted in shades of glory. Rule Britannia, with the script written and performed by Winston Churchill. All in the name of seeing off Adolf Hitler and the beastly ‘Gerries’. Something similar is happening at the moment in South Africa. Business, civil society, political parties and ordinary individuals are being drawn together to see off Jacob Zuma and the equally beastly Guptas. For the first time, business is attempting to speak with a single voice. That it did not do so during the apartheid era is to its eternal shame, but better late than never. Leaders of industry, investors, ratings agencies and many others are saying “Enough!” I hear similar sentiments from ordinary, blue-collar South Africans like cab drivers, waiters and domestic workers. They are also saying “Enough!”
South Africans look back with great pride at the transition to democracy which culminated in the 1994 election. Don’t forget that at one stage, very late in that game, we were extraordinarily close to civil war. Yet somehow we pulled through. Would it be too much of a stretch to argue that the threat posed to our young nation by the ‘State of Capture’ is at least as great, or even greater? In her Dean’s Note in this edition of Acumen, Professor Nicola Kleyn warns that waiting until the 2019 elections may be too late – the coffers could be completely empty by then. We know how World War II ended, but the outcome of this particular clash is still far from certain. In times of conflict, it’s often said that “God is on the side of the big battalions” and President Zuma controls a formidable array of state machinery, most of which he has deployed to his advantage and with considerable skill. But either way, thank you, Mr. Zuma, for uniting the nation. Just like the small Austrian with toothbrush moustache who united Britain in the 1940s
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Calling all groundbreakers,
NETWORK Words Acumen Contributors
Recent guests and events at GIBS
ALL THE FAKE NEWS
GORDON INSTITUTE OF BUSINESS SCIENCE
More than 100 delegates packed into GIBS auditorium for two days at the end of May to hear a series of experts deliver their insights into strategic corporate communications, reputation management and stakeholder engagement. Dominating the agenda: social media, fake news and how to recover from a crisis. “…social media can be a lynch mob. Sometimes the backlash is ill-informed.” – Songezo Zibi, former newspaper editor and Head of Communications, Barclays Africa Group
“If you work with stakeholders, words count, but grammar is out!” – Thabisile Phumo, Senior VP: Corporate Communication and Stakeholder Engagement, Sibanye Gold
“It has not only changed the news, but changed the way we behave. Ethical standards are improving.” – Dr. Marietjie Theron-Wepener, Head of the Small Business Academy and Senior Lecturer: Strategic Marketing, University of Stellenbosch Business School
“Have you crisis-proofed your business?... Successful crisis management equals emerging stronger.” – Chris Maroleng, Group Executive: Corporate Affairs, MTN Group
(As a communications professional): “You must have access. Include me in on strategy.” – Jacqui O’Sullivan, Group Executive: Communication and Brand Marketing, Telkom
“You will always be judged by what happens after the crisis. You will always be judged by how quickly you remove the victim.” – Alan Hilburg, President & Chief Executive, HilburgMalan
“Your employees have become mini-spokespeople…” – Emma Sadleir, Social Media Law expert
“The role of the CEO has changed dramatically…the CEO is the chief storyteller of memorable stories that enhance the brand.” – Kevin Wellman, Director, ByDesign Communications
AFRICAN MILLENNIALS SPEAK OUT Chief Olusegun Obasanjo
HOW TO MAKE AFRICA WORK
Effectual leadership and governance are fundamental to grow the economy of the African continent, says former Nigerian president Chief Olusegun Obasanjo. Speaking at the GIBS launch of his book Making Africa Work, co-authored with Greg Mills, Jeffrey Herbst and Dickie Davis, Obasanjo argued: “Unless we get leadership and governance right, we will never get the economy of Africa right.” These two factors, along with peace, security and economic integration have the potential to transform the fortunes of Africa and those who live in it: “If we can get these right, I believe that the story of Africa by the end of this century will be a different story than it has been before.” Making Africa Work provides an analysis of the continent’s economic fault lines and how to address them, discusses the structural developments facing Africa and policy choices which could lead it in diametrically opposed directions.
“The vision of a non-racist and non-sexist society has failed. Our parents fought for freedom, but were given democracy instead. Millennials must fight for the freedoms that our parents were denied.” A trenchant call from Nomatter Ndebele, a journalist at social justice group Section27, responding to President of the Institute of Directors of South Africa, author and businessman, Dr. Reuel Khoza. Khoza had opened the GIBS Forum at the end of May by stating South Africa’s hard-earned democracy was unravelling and the new generation of Africans must rise to the challenge. “African leadership is imperative. If not us, then who? Let Africa rise to this challenge,” exhorted Khoza, noting that “amidst the gloom, occasioned by the lack of a compelling national vision, politics of patronage, crippling kleptocracy and a leadership devoid of moral authority and compunction, I believe it is possible to regenerate a sense of purpose, meaning and direction.” Among the millennials on the panel, and watched by her celebrity mother, was human rights activist and law student Wenzile Madonsela, who argued that for those in our society who had been left behind: “…dreaming is a privilege. Our reality doesn’t match our constitutional ideals. A large part of our society has been left out.” Lovelyn Nwadeyi, former student activist and Head of Research for Public Policy and Regulatory Affairs at MTN agreed with this view: “We have created systems that have allowed poverty to flourish, while what we need is to approach things from a different perspective.”
“AN AFRICAN JOURNEY STILL UNFOLDING…”
Madonsela concluded that South Africans were indeed having an identity crisis. “We are not sure who we are and where we are going. The Constitution should act as a reflection of our identity but there is a definite disconnect with our society.” Her advice to millennials was to immerse themselves in their communities: “Identify a problem that needs to be fixed. This simple challenge will enable us to get back to the South Africa that we dreamed of.”
The words of Standard Bank Group’s Co-CEO Ben Kruger at a recent GIBS Forum, describing his company’s re-focused strategic vision. The goal is “to be the leading financial services organisation in, for, and across Africa,” said Kruger, “…we really need to be able to deliver an exceptional experience for our clients. “If you set a strategy, you have to ensure that there is some legitimacy as to why you can expect to deliver on that strategy. As far as looking at where we find ourselves in Africa, we are an organisation that has operated on the African continent for more than 130 years, we had businesses up to the 1980s in most of the markets when we were part of the Standard Chartered Group, and we went back into those markets in the early 1990s, building our own businesses and expanding on the African continent. If you operate on the African continent, it is quite important for all of us to really have a passion for what is happening in Africa,” explained Kruger. Asked later during the Forum by GIBS Dean, Professor Nicola Kleyn, what was making him bullish about Africa, Kruger replied
that “Africa has a very youthful population – look at Nigeria, average age 18, Kenya, 26 – these are fairly big populations growing very fast. There is the potential for these countries to turn into mini-Chinas on the back of industrialisation. Secondly, there is a high level of digitalisation happening in Africa which makes people far more productive. What’s happening in digital in Africa is really quite remarkable.” Kruger added that while growth rates were currently quite low, he expected them to pick up quite quickly, so that by 2019, they would be around 4%-5%.
A FIRST AS GIBS GRADUATE CELEBRATES PHD IN HER MOTHER TONGUE
African languages have long played second fiddle to the likes of English and Afrikaans in academic and educational circles in South Africa. But increasingly academics and graduates alike are recognising the role they play in promoting all South Africa’s 11 official languages. This was indeed the case during a recent GIBS graduation ceremony at the University of Pretoria, during which PhD graduate Anastacia Mamabolo’s abstract was read out in Sepedi. This marked the first time that UP and GIBS had an abstract read in Sepedi, one of the university’s official languages. Adding a personal touch, the newly capped PhD’s mother tongue is Sepedi.
JOHANNESBURG GROWTH ESSENTIAL, SAYS MASHABA
President Zuma’s “careless and self-serving” cabinet reshuffle shows that he and the ANC have lost touch with reality and with South African citizens, Executive Mayor of Johannesburg Herman Mashaba told a GIBS Forum. “Instead of leading us to prosperity, they have led us to junk status and into further economic turmoil. “We must have the strength to stand up say enough is enough,” Mashaba continued. He added that the right to trade, work and have human dignity is enshrined in our Constitution. “This cannot happen if we are denied economic opportunities.”
Mamabolo enrolled and graduated from the University of Limpopo with an MBA in 2012, winning the best MBA student award and the best MBA research report award. The MBA ignited her passion for entrepreneurship and inspired the subject of her PhD thesis which investigated the human capital investments and skills specific to the different entrepreneurship phases, namely the nascent, new business and established phases. Since enrolling in her full-time doctoral studies in 2013 Mamabolo has been an active research faculty member at GIBS. She is currently working on the GIBS Orbit Research Project, which aims to understand how business is conducted in emerging markets with a specific focus on Africa. She has also taught on the doctoral programme and managed the Association to Advance Collegiate Schools of Business (AACSB) accreditation project for GIBS. In October 2016 GIBS earned the prestigious AACSB International accreditation.
“An advocate of hard work and achievement, Anastacia is both a role model for her contemporaries and for up-and-coming women in academia,” says GIBS Dean Prof. Nicola Kleyn
SPATIAL TRANSFORMATION AND A NEW VISION FOR JOHANNESBURG
GORDON INSTITUTE OF BUSINESS SCIENCE
Mashaba, appointed Mayor of Johannesburg last August, said the city had stagnant economic growth and unemployment that was spiralling out of control, whereas it should “be a city of golden opportunity for all our residents.” Economic growth to create jobs and protect the dignity of residents was essential, Mashaba said. He has set a 5% growth target for the city by 2021, as he believes “employment and entrepreneurship are the greatest liberators.” Mashaba said his first proposed budget represents his deep desire to get Johannesburg working. “Our city is plagued by massive inequality which we have to confront head on.” As spatial and income inequality divide the city, a minimum of 60% of capital expenditure would be directed to traditionally poor and underserviced communities. “We must create diverse communities, connected to economic opportunities,” Mashaba said.
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THE ETHICAL CORE Words Professor Nicola Kleyn
Successful strategy is built on ethical foundations. I recently had the privilege of engaging with a global philanthropist who was taking a gap year to travel around Africa with his family. One of our discussions centred on failing states. The recent spate of injurious blows to the South African economy, whether self-inflicted or perpetrated by external parties (including providers of foreign capital and ratings agencies), coupled with endemic corruption including state capture, means we can no longer deny that we are failing. Whether the rate of our demise, or our learning about this rate has accelerated, is incidental. The crucial question centres on how to foster health.
GORDON INSTITUTE OF BUSINESS SCIENCE
Reflective practice lies at the heart of learning. Whilst this is no substitute for action, an assessment of why we find ourselves at this juncture is required to inform our future path. It’s not as if collective stocktaking has not occurred. The formation of the National Development Plan rested on extensive engagement with multiple parties to produce a course of action that was widely accepted. At a recent Forum at GIBS, the deputy president reiterated his commitment to the NDP but emphasised the importance of accelerating certain of its provisions. Therein lies the rub. Ineffective execution lies at the heart of our failure. Specifically, how we put decisions into effect. This is not to suggest that there has been widespread failure of execution across the board. The recent Gupta emails show that some parties, including current members of government, have been working hard to make things happen. The problem is that it certainly wasn’t the NDP that was their key area of focus. The importance of execution has been a cornerstone of the management literature for many years. Whilst no academic or practitioner worth their salt would deny
the role of strategy, it’s the development of systems, processes and people in a way that enables an organisation to communicate clear goals and markers of success and to hold individuals to account that ultimately determines the success of any organisation, whether it’s the Mafia, a multinational corporation, government or a start-up. Execution success however is also dependent on securing mandates to operate in the first place. Globally, businesses are finding it increasingly hard to secure their social licenses to operate. The recent “stepping down” of Travis Kalanick shows that even with a disruptive strategy, coupled with a strong focus on execution, ignoring ethics creates problems. According to Times Live, a report written by a former US attorney general said that Uber should reformulate its cultural values to reflect more inclusive and positive behaviours. The only way we can ever execute strategy is through behaviours. And to be effective, they ultimately need to be ethical. Our Constitution sets the scene for the well-functioning democracy that needs to go hand-in-hand with a vision of a vibrant, inclusive economy. What this requires however is not more rhetoric but a focus on execution and accountability across stakeholders. Our failing has not been about our inability to develop a vision or the lack of a strategy to achieve the vision. A lack of ethical execution is at the heart of the breakdown of trust between and within core stakeholders. Our task going forward is two-fold. Firstly, the power of individuals and organisations that have led to the unethical rot that underpins state capture and corruption must be removed. Ethics without execution may be principled, but it won’t move us forward. Secondly, in order to progress we need to hold
all parties to account for their progress in executing against the values of the Constitution, including the creation of inclusive economic growth. Some commentators have recently stated that little may change before the 2019 elections. My deep fear is that this would be too late. Ethical execution is impossible when there are no resources left to harness. We cannot spend the next two years exploring the narratives of sliding signifiers like radical economic transformation and state capture. We need to commit ourselves and our organisations to action and account for ethical execution, not only in our own echo chambers but to the broader citizenry. At the same time, we need to protect all those, most importantly in our judiciary and our free press, who collectively play a significant role in demanding ethical execution from the state
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WINTER BLUES Words Trudi Makhaya
There is a line from a speech delivered by Bonang Mohale at The Directors Event, a gathering of business leaders held this June, that speaks to the trouble we’re in. “For business, defending our Constitution and eliminating the scourge of state capture is now core business”.
GORDON INSTITUTE OF BUSINESS SCIENCE
A very bleak winter has descended upon South Africa – with the country’s debt assigned junk status by two credit rating agencies, the economy in recession and revelations of the mechanics behind state capture following what is dubbed the “Gupta Leaks” dominating the headlines. Business has struggled to find its voice and place in the post-apartheid era public square. In the early years of our democracy, the established ‘business community’ confined itself to addressing business and economic issues, staying well within its comfort zone. It is not difficult to understand business’s reticence to adopt a more vigorous engagement style in the early years of democracy given the benefits it derived from apartheid, and its accommodation of that regime. But this engagement tended to be narrow and did not account properly for the socioeconomic context faced by the new government nor did it interest itself much in the institutional underpinnings of the state. The standard business response to the task of growing the economy was to advocate for privatisation or public-private partnerships. Many businesspeople thought that if government just got out of the way, or turned to private sector for ideas and for execution, the economy would soar. Privatisation was vigorously challenged by the unions, NGOs and by key figures in the ruling party. But even within business circles, there came a realisation that some functions are best provided as public goods, such as education, especially in a country with such deep deficits in basic
services for much of the population. Of course, private providers have a role to play even in education, but this can never replace the government’s responsibility to provide quality basic services for all, irrespective of ability to pay. In recent years, business has been pushed to widen its domain of engagement as it became apparent that the state was increasingly failing in matters that can only be delivered by the state. These include areas such as the rule of law and oversight of the executive by the legislative arm. Here, business can only urge the state to do better, it cannot provide a parallel service for those who can afford to pay. It has been interesting to observe business’s reaction to the most recent political developments, especially the revolving door at National Treasury and the unfolding state capture saga. There was a time when the preferred mode for business was quiet diplomacy. The noises got louder with the removal of Nhlanhla Nene, but the mode of engagement emphasised collaboration, with the CEO Initiative putting together some projects intended to reverse the damage inflicted on the economy. The door at Treasury continued to spin. Now business has had it. There is a set of demands on the table, as espoused by Business Leadership South Africa. The business advocacy would like to see action on six fronts, namely a judicial inquiry into state capture, a twoyear hold on the nuclear programme, the creation of a professional, depoliticised public service, restoration of the independence and capability of key
. . . SOME FUNCTIONS ARE BEST PROVIDED AS PUBLIC GOODS . . . ” institutions of justice, best practice procurement and the disclosure of party political funding. That’s all very well. But if we play this picture forward, once the state has restored its institutions, the demons of economic exclusion, poverty and unemployment remain. Business needs to help answer the question of how to lower the barriers of entry into the economy and enable meaningful mass participation. Black Economic Empowerment is one attempt, but it has so far only managed to get black businesspeople to buy into incumbents. It has not created new national champions led by black people, nor has it generated significant levels of new employment. Business has a lot to offer beyond protecting the gains of the constitutional order ushered in by a ruling party that has lost its way. It can show the way towards creating the next generation of new businesses in the quest towards an inclusive economy
CAN THE ANC LEAD SOCIETY? Words Dan Moyane
Our 23-year old democracy shows clear signs of a fundamental shift in the political landscape. Five Acumen editions ago I wrote about how students through their #FeesMustFall campaign had introduced a new dynamic but I questioned whether the overall political texture and flavour in the country was sustainable or not. Looking back, it is clear that the shift has continued dramatically, as more voices beyond the youth and students have found expression against the moral decay and depravity that has beset our country since the Zuma administration assumed office in 2009. As governing party and as it prepares for its much-awaited elective conference in December 2017, the ANC has never in recent history been faced with the levels of factionalism it grapples with now. From its top echelons to the branches at grass roots levels, squabbles over who, what, how and why have intensified to a point where it is not surprising that outsiders and observers wonder if the oldest liberation movement in Africa faces a possible split. ANC Deputy President Cyril Ramaphosa, himself in the succession race, publicly denies a split is likely, but it is very difficult to see how this once-revered organisation will recover to reclaim high ground. Its own veterans and stalwarts, whose request for a special, standalone, consultative conference has been rejected, state openly that the ANC is no longer a “leader of society”. It is not easy to become a societal leader and maintain that position. But it is possible. For the ANC stalwarts to have stated that their organisation is no longer a leader of society means that they believe that it used to be but has now lost that leadership position It is worth exploring what it takes to become a societal leader. One definition that resonated with me is The New Leadership Paradigm by the Barrett Values Centre. It outlines four conditions The New Leadership Paradigm by the Barrett Values Centre – tnlp.valuescentre.com
that societal leaders must have to attract and retain followers: clarity of purpose, exemplary self-leadership skills, the ability to inspire others, and the ability to leverage your ideas. Let’s take a look at the first: clarity of purpose. Clarity of purpose is about having a simple message, being focused and being true to your purpose. People know what you stand for. So what is the ANC’s big idea today? Pre-1994, the whole world knew what the ANC’s purpose was. Slogans are not a purpose. Thus, if you have lost your clarity of purpose, you can no longer lead society. Secondly, exemplary self-leadership skills. This means that as a societal leader you are expected to lead a blemish-free life and operate with the highest levels of personal integrity. Followers expect you to act with authenticity and integrity. The ANC’s current top leadership has been beset with blemishes of all kinds, hurtling from one crisis to another. Thirdly, societal leadership is about inspiring others. Part of the job of getting people behind your message is being a good public speaker. Do you connect with people emotionally? I guess one would have to think long and hard to find any ANC leader today who genuinely inspires. It is not only about singing popular struggle songs but about getting followers to believe in a vision of a better life. Finally, it is important to know how to leverage your impact in the world. If you want to leverage your ideas, you will need to become a co-creative, servant leader.
. . . IF YOU HAVE LOST YOUR CLARITY OF PURPOSE, YOU CAN NO LONGER LEAD SOCIETY” You will need to be able to work with others in strategic alliances. At this stage we know that the ANC’s own historic Tripartite Alliance with COSATU and the SACP is in dire straits. The organisation is also failing dismally to be in opposition in the three urban metros governed by opposition coalitions since August 2016. So it is fair to conclude that they would struggle to form strategic partnerships with others, if they were required to do so in a rapidly changing political landscape. From the literature referred to above, it is very clear that leading society means you have to be highly skilled in leading yourself and also in attracting followers and leading them. It is a road of integrity, authenticity, inspiration, servant leadership and strategic alliances. Can the ANC reclaim it?
It is possible but it will require radical change from within
BIGGER THAN THE INTERNET Monica Singer, in conversation with Chris Gibbons
Strate CEO and founder Monica Singer explains to Acumen editor Chris Gibbons why she is so excited about the explosive growth of blockchain and its subsequent refinement into distributed ledger. To understand where we are now requires going back to the 2008 financial crisis. In the wake of the crisis, a lot of people were extremely upset that no-one had seen it coming. One such person or persons was called Satoshi Nakamoto – believe it or not, we still don’t know who he/she/they really is or are – who published a paper at the end of that year in which blame for the crisis was attributed to all the intermediaries like the central banks, but also the likes of JPMorgan, Goldman Sachs and so on. Nakamoto’s solution was to invent a currency that would be beyond the control of any kind of bank or intermediary and that’s how Bitcoin was born, with its underlying technological innovation, called blockchain.
GORDON INSTITUTE OF BUSINESS SCIENCE
BLOCKCHAIN’S GENESIS WAS IN BITCOIN, BUT IT HAS BECOME SOMETHING MUCH BROADER?
Correct. Remember that when I created Strate, I couldn’t use the Internet to transfer shares and cash digitally, because the Internet is not secure. Back then, we had to use SWIFT, because it was, at that time, the only secure system in the world. What Satoshi did, using algorithms, consensus and having the ledger in so many places, was to eliminate the single point of failure. Strate, for example, is a single point of failure. We keep the record of the ownership of transactions in the financial markets. So,
if we get hacked, there is a risk that the record of ownership of investments could be manipulated. Clearly, we have appropriate controls and security, but we are still a single point of failure. A central bank is single point of failure; so, too, are ordinary banks, because they keep the record of ownership of their clients’ transactions and nobody else has a copy. But within the blockchain, all the computers linked to the technology have got a copy. So even if 50% of those computers are hacked and the records deleted, you’ve got the other 50% recording the transactions and you have a complete audit trail.
. . . IT WILL BRING TRUST WHERE NO TRUST EXISTS”
YOU TRAINED AS AN AUDITOR, DIDN’T YOU?
I did and that’s why I love the concept of an audit trail. Blockchain technology is very transparent and it enables security, immutability and provenance. Provenance – that’s another word I love, where you can see the origin of a transaction. This technology talks to me in terms of all the things we hoped to
improve in terms of risk management in the financial markets when we started Strate. This technology has achieved it. BUT WHERE IS THE GOVERNANCE?
That’s the question everyone asks: “Who controls it?” But it’s an old paradigm. The technology was built not to be controlled. When Satoshi created it, he created what is called a permissionless ecosystem. When you buy and sell Bitcoins, you don’t have to ask anyone’s permission. You just download the App, choose which exchange you’re going to use and transact. No permission required, no “Know Your Client” forms, no FICA forms, nobody needs to audit me, I do it of my own free will, from my own finances at my own risk. It’s one of the reasons why Bitcoin has, on occasion, traded higher than the price of gold! It’s also why Bitcoin is so popular in countries that have no trust in financial markets. The countries that are trading the most Bitcoins are those where there is insecurity – China, Venezuela, Argentina, for example – even in Britain, pre-Brexit. I don’t know why people have this need to oversee it. GIVE ME SOME EXAMPLES OF THE APPLICATION OF DISTRIBUTED LEDGER? HOW IT’S BEING USED BEYOND BITCOIN, AS IT WERE?
Going back to my training as an auditor, one of the most boring jobs we had to do was control testing. This means selecting various transactions and seeing if they comply with the controls the company claims to have. Or checking invoices against the ledger. Or doing bank reconciliations. Or checking physical assets against a register. Do you know how boring these are? But auditors spend a lot of hours doing this type of work. In future, however, we won’t really need auditors, as we know them today, because the distributed ledger is real time, complete, safe, immutable and doesn’t need reconciliation. As you make the entry or transaction, it happens instantaneously in all the ledgers at the same time. And this applies to any assets, not just cash or cryptocurrencies. Any assets – securities, diamonds, anything. So that means you can give access to the auditors or the regulator in real time to the distributed ledger. Staying with banks, the financial markets have become very inefficient in a way, because the Registrar of Banks requires a swathe of information from each individual bank on a monthly, quarterly and annual basis. This is to enable the Registrar to monitor the banks. But imagine being able to give all that information to the Registrar in real time and without the need for
. . . I LOVE THE CONCEPT OF AN AUDIT TRAIL” it be audited. That’s because the cryptography, the algorithms, ensures that the information is absolutely accurate. So, can you see why this has created the ability for people to imagine a different world? Is this the future? Yes. Will it be bigger than the Internet? Yes. We’re already seeing a massive investment by fintechs all around the world trying to play with this technology and saying, “What if…” WHICH COMPANIES ARE FEELING THE PRESSURE?
SWIFT is one. More and more, we are asking why we should use SWIFT? It is antiquated, it uses mainframes, has very expensive infrastructure and is old thinking. One of the areas in which SWIFT makes a lot of money – and the banks, too – is in the transfer of funds between different countries. You know, if I send money to my family back home in Uruguay, it takes longer for the money to reach my Uruguayan bank account than it would if I flew to Uruguay and physically carried the money there! That’s how inefficient the financial market can be. But now there’s a company called Ripple, which executes the transfer in seconds, using blockchain. And Ripple tells you upfront how much it’s going to cost you. Santander, the big Spanish bank, is already using this technology and Ripple is gaining huge traction. IS THIS GOING TO BE LIMITED TO FINANCIAL MARKETS?
Far from it. The technology is already exploding in healthcare. Imagine that every time you visit a doctor – any doctor – anything you have done, any X-rays, MRIs, blood tests, any kind of record – is all entered into the distributed ledger which is on your phone or tablet. You will have a complete database of your medical history, so that any time you change doctors, you would just have to give access to that distributed ledger. No more filling in of forms or having to remember when the last time was that you had an operation or what medicines you take. It will all be in your digital wallet. Another fascinating one is called Everledger, which is an app that records the official evaluation and origin of diamonds. In this way, it can also be used to track blood diamonds.
Combatting corruption is another use. I used to work for the World Bank and it killed me to see that money given to countries for specific objectives often failed to reach the intended projects. Instead, it would end up in the bank accounts of the officials concerned. Distributed ledger technology can track exactly where the money goes, without any shadow of a doubt. While Strate was testing this technology, we were approached by UNICEF, which has a programme that gives money to Nigeria for vaccinations. But the vaccinations were not arriving at the intended destinations. Strate created a blockchain whereby UNICEF could track the money leaving its account and arriving at the various towns and nursing homes where the vaccinations were being provided. It cut the middleman out completely and with that, the fact that he was siphoning a lot of it off for his own account.
WHAT IS A BLOCKCHAIN?
A blockchain is a public ledger of all Bitcoin transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order. Each node (computer connected to the Bitcoin network using a client that performs the task of validating and relaying transactions) gets a copy of the blockchain, which gets downloaded automatically upon joining the Bitcoin network. The blockchain has complete information about the addresses and their balances right from the genesis block to the most recently completed block. – Investopedia
WHAT IS A DISTRIBUTED LEDGER?
HOW DO YOU SEE DISTRIBUTED LEDGER AFFECTING STRATE ITSELF?
The roles will change and we are positioning Strate for the disruption. We could then become the Warden to the private, permission distributed ledger for the financial markets. The technology speeds up the recording and transfers, no need for reconciliations between counter parties and therefore it saves costs, reduces human intervention, reduces risks, and enables many other functionalities, in particular when combined with artificial intelligence, robotics and the Internet of Things. This new technology is going to connect and enable the exchange of value and assets between parties that don’t know each other, so it will bring trust where no trust exists.
A distributed ledger is essentially an asset database that can be shared across a network of multiple sites, geographies or institutions. All participants within a network can have their own identical copy of the ledger. Any changes to the ledger are reflected in all copies in minutes, or in some cases, seconds. The assets can be financial, legal, physical or electronic. The security and accuracy of the assets stored in the ledger are maintained cryptographically through the use of ‘keys’ and signatures to control who can do what within the shared ledger. Entries can be updated by one, some or all of the participants, according to rules agreed by the network. – Distributed Ledger Technology: beyond block chain. A report by the UK Government Chief Scientific Adviser
GORDON INSTITUTE OF BUSINESS SCIENCE
Once you begin to understand it, you also realise why I and many others think that it’s going to be bigger than the Internet!
WE’RE ALREADY SEEING A MASSIVE INVESTMENT BY FINTECHS ALL AROUND THE WORLD . . . ”
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BUSINESS SPEAKS OUT Words James van den Heever
The threat of a downgrade at the end of 2015 sparked the formation of the CEO Initiative. Has business finally found its voice and, if so, what is it saying?
Speaking at a GIBS Forum on the downgrade of South Africa’s foreign and local currency debt by Fitch, and foreign currency debt by Standard & Poor’s, Cas Coovadia, MD of the Banking Association of South Africa, said that how civil society responds over the coming 18 months will be crucial in determining how well South Africa weathers the current moral, political and economic crisis. Coovadia himself is deeply involved in what could be seen as one of the most significant manifestations of civil society activism in recent times: the CEO Initiative. The Initiative was formed towards the end of 2015, when the possibility of a ratings downgrade began to seem possible, with “Nenegate” providing the main plot element. Officially, the president and deputy president jointly requested business and labour to work alongside the government to identify and implement actions that would help the country avoid a downgrade, and that would also put the economy onto a path of sustainable and inclusive growth. Unofficially, says Coovadia, it seems as though the presidential request overlapped with discussions he was already having with then-Minister of Finance, Pravin Gordhan, to enlist the support of the CEOs of the five leading South African banks. Gordhan was then leading the fight to avoid a downgrade, but was also under pressure from what we could now probably call the state capture cabal. As is so often the case in South Africa, the interaction between Coovadia and Gordhan was founded on their longstanding relationship, forged in the struggle years. During the World Economic Forum at Davos in early 2016, it was decided to broaden the group to include CEOs outside of banking. One question is why the CEO Initiative was necessary, given that business organisations already exist. Business Leadership South Africa (BLSA) is the established representative of corporate South Africa, while Business Unity South Africa (BUSA) speaks for business as a whole, and is business’s official representative on NEDLAC. Both BLSA and BUSA are headed up by Jabu Mabuza, the Chairman of Telkom, who is also the Convenor of the CEO Initiative. The National Business Initiative is a voluntary coalition of local and multinational companies, “working towards sustainable growth and development in South Africa and the shaping of a sustainable future through responsible business action”.1 It is a global network partner of the World Business Council for Sustainable Development and other global business initiatives; it also provides secretarial services to the CEO Initiative. While these organisations are influential and long-established, they are also to a great degree hamstrung by the need to be scrupulously apolitical and non-racial. In recent years, BLSA and BUSA have become much more united, and thus effective, perhaps in response to the worsening economic and political climate. Nonetheless, by their very nature they are somewhat constrained by the need to represent their whole memberships. Race-based breakaways such as the Black Business Council further complicate the picture and make it hard for organised business to speak clearly and act decisively. (Indeed, some see 1
In the words of its website, www.nbi.org.za.
. . . SOME SORT OF ACTION WOULD BE NECESSARY, PERMISSION OR NOT” the Black Business Council rather as a vehicle for those who use the vocabulary of decolonisation and white monopoly capital to justify state capture.) In this context, the rationale for a more informal and flexible grouping is clear. Comprised of CEOs themselves, the CEO Initiative can tap into the expertise and energy of the real captains of industry outside the deadening effect of corporate or organisational bureaucracy. These are individuals whose stock in trade is decisiveness and clarity of thought – and who have direct access to substantial corporate resources. Adrian Enthoven, Chairman of Hollard but part of the CEO Initiative primarily as a BLSA representative, confirms that one of its strengths is its ability to sidestep the politics inherent in more structured organisations. “It’s a very useful initiative because it is able to get things done,” adds Coovadia. He sees the CEO Initiative as part of the resurgence of civil society provoked by the sacking of the finance minister and subsequent downgrade. “People don’t want to be part of organisations, it introduces a bureaucracy that people don’t want to be involved in,” he says. He likens the CEO Initiative to the spontaneous “groups” of individuals that came together on 7 April 2017, spurred to concerted action by the powerful exigencies of the moment.
A NEW ROLE FOR BUSINESS?
At this point, we need to take a step back to appreciate fully the extent to which the CEO Initiative, and the greater outspokenness of BLSA and BUSA, breaks new ground. The fact is that while it is clearly impossible to separate business and politics, business has typically paid lip service to the notion, especially here where politics is so fraught and complex. It was not always so. In the colonial past, business aligned itself with competing political interests much more openly than it would now. For example, Sammy Marks used his business interests to support Kruger’s republic, while Rhodes totally elided his commercial and political interests. The rise of Afrikaner and then black influence post-1948 and -1994, however, heralded a more nuanced approach as business struggled to build constructive relationships with regimes that, in their different ways, saw business essentially as an outpost of politics. The extremely high moral ground initially occupied by government following the 1994 democratic elections, further dampened business’s ability – and desire – to express criticism.
Its new willingness to make itself heard and to take on something of a leadership role thus represents a significant departure. Ironically, the fact that the CEO Initiative was formally brought into being at the request of the president and his deputy seems to have provided business leaders with the “permission” to act more decisively. In any event, it seems clear that the crisis had built up to the point where some sort of action would be necessary, permission or not. Colin Coleman, head of Goldman Sachs’ South African office and a leading light of the CEO Initiative, quips that the business of business is to stay in business. “Business’s role is to continue to be the economic engine of South Africa, and it has to stay in business if South Africa is to stay in business,” he says. “Business is dependent on a functional society; the rule of law, the Constitution, all the other institutions, are necessary to provide a solid platform for growth. It thus has to act to protect them.” Enthoven agrees that business’s need to protect key institutions is a primary motivation for action, but he references another important driver: patriotism. It is an unfashionable virtue, and hence seldom explicitly acknowledged. “Business leaders are also South Africans, and most of the business community is patriotic,” he says. “The democratic project is also ours, and as a key sector of civil society, we can’t allow the Constitution to be subverted.” In other words, and this gives an organisation of individuals like the CEO Initiative much of its zing, there are powerful human emotions at play here, in addition to the more rational imperative for action that Coovadia calls the “business case for economic reconstruction”. Still, one needs to be clear that business in general, and CEOs individually, are not revolutionaries, and are consistent in their view that they have to act in concert with government and labour. While the CEO Initiative does provide a focus for a more direct approach, it is clear that the primary leadership must come from government.
DANCING TO THE MUSIC OF THE TIMES
GORDON INSTITUTE OF BUSINESS SCIENCE
When it was originally formed at the end of 2015/early 2016, the CEO Initiative by all accounts made good progress in building a working relationship with government and labour to engage with investors and ratings agencies. It also put in place three work streams aimed at addressing key economic challenges, and to make the economy more inclusive – and thus more sustainable (see box). Indeed, many felt that the possible ratings downgrade in December 2016 was avoided largely thanks to this concerted effort by these three sectors of society. However, apparently the president’s personal/factional agenda overrode his official one in the new year. As we all know, on 27 March 2017, the recently reappointed Pravin Gordhan and his team, including members of the CEO Initiative, were summarily recalled from an investor roadshow that was supposed to have been the next step in the process of Operation Counter-
Downgrade. The infamous midnight cabinet reshuffle, or “Night of the Long Knives”, followed soon after, late on 30 March. “The end of March was a line in the sand,” says Coovadia forthrightly. “Business will not be complicit in the looting that is going on. Business is one of the voices of civil society, and ordinary people are now getting involved too.”
A WAY FORWARD
All of this places the CEO Initiative in a somewhat delicate position. Given its genesis at the request of the president, there is room for the view that by continuing with its work streams, and generally collaborating with government, it does in fact risk seeming complicit. At present, the view seems to be that it is necessary to proceed, but with some caution. The grouping did take the unusual step of issuing a sternly worded statement in which it characterised the move as “ill-timed and irrational”2 and reportedly refused to interact with the new minister, Malusi Gigaba, before his first trip to Washington as Minister of Finance.3 However, as Coleman says, “We cannot afford to think on a shortterm basis. Yes, the next six months are likely to be something of a stalemate, but we must have an eye to the future. What will bring about a recovery, and what will it look like? We need to prepare the ground.” This broad view is echoed by Enthoven, but while business will have to continue to engage with government and specifically the new minister of finance, it will be necessary for government to take some decisive steps to demonstrate its commitment to rebuilding the trust relationship with business. These steps were spelled out at an extraordinary meeting held with President Zuma on 28 April at Sefako Makgatho Presidential Guest House in Pretoria. In a speech in which the velvet glove is as evident as the iron fist, Jabu Mabuza spoke with startling
2 Statement issued by the CEO Initiative in response to the dismissal of Minister of Finance, 31 March 2017, available at https://oldmutual.co.za/docs/default-source/about-us-document-library/media-centre/statement-issued-by-the-ceo-initiative_dismissalof-minister-of-finance7fdbc84c03656002bb9dff0600361e55.pdf?sfvrsn=0. 3 Asha Speckman, CEO Initiative snubs talks with new finance minister, Business Live, 23 April 2017, available at https://www.businesslive.co.za/bt/business-and-economy/2017-04-23-ceo-initiative-snubs-talks-with-new-finance-minister.
frankness to the president. (While Mr. Mabuza said that he was speaking on behalf of all the business organisations he represents, it is significant that the invitations to the gathering were to individuals rather than organisations or companies – the very basis of the CEO Initiative, in fact.) To restore trust and get the partnership between business and government working again, Mabuza said that the president should publicly confirm his government’s commitment to the fiscal targets stated in the 2017 Budget and 2017-20 MediumTerm Expenditure Framework, with special reference to the proposed nuclear energy programme. Other requests included strong action on resolving the mess at the state-owned enterprises, with the Eskom board to be replaced en masse, and the appointment of a competent director general to the National Treasury. “…[W]e will NOT be able to Commit DISCRETIONARY TIME and RESOURCES to restoring Growth and Speeding up TRANSFORMATION, as we have been doing in the CE[O] Initiative, unless the president and the cabinet take several of the steps we have suggested,” Mabuza warned.4 In its statement after the event, the presidency did address some of these points, and the president made a commitment to convene a follow-up session.5 While this has not yet happened, Coleman and Enthoven both say they are expecting a date to be set soon. In the meantime, be it noted that at least one requirement seems to have been met with the appointment of Dondo Mogajane as Director General of Treasury. This is very much an ongoing story. It seems clear that business has been galvanised by the scale of the unfolding crisis, and is more willing to speak out and act in the interests not only of its own sustainability but the country as a whole. More than that, the CEO Initiative’s work streams, in particular, are providing the engine for beginning to show what an alternative economic scenario might achieve. These actions should be seen as the
. . . IT IS CLEARLY IMPOSSIBLE TO SEPARATE BUSINESS AND POLITICS. . . ” opening gambits in the all-important end game: what will the economy, and thus the society, look like in 20-30 years’ time? An important battle in this war will be how we define what is meant by ‘radical economic transformation’, which looks set to dominate political discourse for the foreseeable future. “Radical economic transformation is a problematic term because it is clearly being used to justify state capture,” says Enthoven. “The country needs a clear definition of the path that will lead to an economy that works for all.” In short, given the growing lack of credibility of the current rhetoric around radical economic transformation, business has been presented with a golden opportunity to lead or at least substantially influence this debate, and to sketch its vision of inclusive growth in a manner that captures the national imagination. This is exciting stuff at a time when capitalism is globally struggling to reinvent itself, and much will depend not only on the coherence and persuasiveness of the arguments, but the impact of the work streams. It will not be easy. As Coovadia makes clear, business must move beyond reliance on codes, charters and the like, to question fundamentally how it actually works, how it incentivises people and how it pulls black firms into the mainstream. It will also need to learn how to engage with politicians better, particularly as the ANC itself fractures and other players across both politics and civil society gain prominence (see Time for Politically Savvy Business Leaders on p.26 for additional discussion). This is a process that will, he says, require taking a long-term view that has short-term trade-offs, but the opportunity to influence the country’s trajectory for the better has, arguably, never been more open nor more pressing
CEO INITIATIVE WORK STREAMS •
Youth Employment Scheme. Aims to provide opportunities for 1 million youth to gain work experience in the private sector over a three-year period. Government and private sector share costs equally. Investment in projects. This work stream aims to identify new investment projects in eight highpotential and/or vulnerable sectors that could be implemented relatively quickly. SME Fund, to stimulate entrepreneurship and drive inclusive growth. R1.5 billion has been committed.
Typescript of speech delivered by Jabu Mabuza. President Zuma meets with senior business leaders, media statement from the presidency, 29 April 2017.
TIME FOR POLITICALLY SAVVY BUSINESS LEADERS Words Abdullah Verachia
The events of the past year have galvanised business out of its self-imposed civic slumber and put corporate leaders firmly at the forefront of initiatives to turn around South Africa’s failing economy and political stalemate. From the CEO Initiative to Save SA and Business Leadership SA, business leaders are waking up to their responsibilities to society at large. But this is not enough. They also need to speak the language of politics. Without a doubt these CEOs must come together, but this engagement must be underscored by listening more, by understanding more, and by utilising this elevated position to open up a channel for discussion. We need leaders to dig deeper than these business-facing collective lobby groups, and this requires these central players to interrogate their own role in society.
GORDON INSTITUTE OF BUSINESS SCIENCE
American economist John Galbraith once said, “All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership.” I love this quote because it talks to how leaders manage the anxiety points of society, of their stakeholders and of their staff. But it is impossible to address challenges unless you recognise them first. That requires business leaders with fine-tuned political and social acumen, with a deeper understanding of social capital and how to build relationships, and with an ability to listen to multiple voices. Only then can we look at businesses that grow, are profitable and still have a societal impact. These days this approach is widely understood by the term shared value, and I was fortunate to spend two-and-a-half weeks at Harvard Business School last year for a programme with the doyens of this approach, Michael Porter and Mark Kramer. During the programme there was much discussion around South Africa’s Discovery and its Vitality programme; an approach which positively impacts the lives of people while ensuring a healthy bottom line for Discovery and keeping the rest of the industry on its toes. We need more examples of corporations and leaders who are able to navigate the political-social-business divide and speak all the languages required to influence change. This is a debate which every leader should be having within his or her own organisation.
AN INWARD FOCUS
Five years ago, if you spoke to business leaders about how politics affected them in South Africa, there would have been much umming and ahhing. But, in the past six months, we’ve begun to see business leaders worrying and trying to understand how politics has an impact on them. We are seeing business leaders wanting to understand what the political terrain will look like in the next 6, 12 or 18 months. This is largely because, all of a sudden, politics has become front and centre in their world. Politics is having an impact in terms of their growth, sustainability and their investment flows. This is why political engagement has moved up the ladder. It is no longer the purview of a government relations person; it’s now an agenda item for the board, the executive and the CEO. Two questions spring out of this shift. First, we have to ask if South African business leadership has the requisite political insight to tackle the task at hand? Second, in the light of the allegations of state capture, are all interactions being done transparently, openly and honestly? Getting this delicate balance between engagement and influence right requires that business becomes extremely clear about its broader responsibilities to society, as well as to all stakeholders. Only once this internal check is completed can we expect businesses – many of which are seasoned and internationally savvy – to work with our young democracy to create the change we need.
WELCOME ALTERNATIVE VOICES
Given the anti-business rhetoric from many areas of society, it is likely that greater business influence will truck criticism from some quarters. But this cannot hold back the discussion. It is not about business leading and everyone else following, although business needs to be an active player within a multirepresentative conversation. That means inviting alternative voices to the conversation, voices we often don’t like or agree with. It means business engaging with proponents of radical economic transformation to understand what it means in the context of business and, in turn, helping others to appreciate the role of business in society.
If business lives in an ivory tower, insulated from the challenges of the majority of the country’s population, then how can its leaders honestly expect to appreciate the societal challenges facing South Africa and respond to those in a way in which takes a much more shared value approach? Discussions like those I enjoyed during my time at Harvard tell us that many global businesses and commentators believe companies can achieve both profit and a deeper societal impact. The two are not mutually exclusive.
TAKE OFF THE BLINKERS
There are countless social issues in South Africa which would benefit from this win-win approach. But, make no mistake, a shared value drive will not be enough. Nor will the outcome of the ANC’s elective conference in December solve deep systemic issues around race, identity, gender, the role of business in society and inclusive economic growth. These issues will not magically disappear. Instead, we must begin to understand one another and learn to engage with more empathy. This applies across the board, but for leaders it is of pivotal importance. Only when you experience challenges first hand can you begin to engage with compassion. For example, to understand the challenges in education, we need to leave the fancy grounds of a private school and go to a poorly performing government school to appreciate how to add value and contribute in creative ways. When I am lecturing I deliberately leave the classroom and go into areas where my students might not necessarily venture. This brings about heightened education through multiple senses of hearing, seeing, smelling, appreciating, conversing and understanding. In many respects it’s a more powerful way of learning and it ultimately gives greater meaning to numbers and statistics.
This asks business leaders to break out of their enclaves, to stop speaking among themselves alone and open up to divergent views. At GIBS we know exactly how challenging this approach is for the individual because, since 2001, we’ve been on this journey through our Nexus Leadership Programme. Vulnerability is at the core of this award-winning transformative programme, which aims to strip away comfort zones and expose individuals to deeply uncomfortable conversations as part of a dialogue-based
. . . IT IS IMPOSSIBLE TO ADDRESS CHALLENGES UNLESS YOU RECOGNISE THEM FIRST” programme. Nexus challenges assumptions and forces participants to open up to the realities of South Africa, as well as their personal prejudices. The end result is a more empathetic approach to engagement. Now is the time for this level of dialogue and understanding. Business, collectively or individually, must reach out and be prepared to be uncomfortable with the conversation. This brings us back to political quotient. If this experiment in cooperation is to work, then the biggest requirement of business is to develop a deeper understanding of how politics works in South Africa, and the role and impact of politics on business and on society. To appreciate the nuances of our country’s different and divergent political parties and to engage with them robustly and, in some cases, publicly. This would create a much more politically aware leadership within business, leaders who are able to talk about issues plaguing society from a first-hand vantage point. One would also hope for a similar appreciation from the other side of the fence that one cannot talk about politics without understanding business’s role. Business remains the largest contributor towards the fiscus in terms of PAYE, employment and GDP. This is no small contribution, but South Africa needs more from these institutions and leaders. We need them not only to navigate the world of business but become in-tune and knowledgeable social players and political observers. Only then can South Africa’s leadership have the sort of critical conversations we so desperately need. Our future depends upon it
GORDON INSTITUTE OF BUSINESS SCIENCE
28 south africa
RET: THE TALE OF A HIJACK Words James van den Heever
Radical economic transformation (RET) is nothing more than the intensification of existing ANC policy, so there’s nothing to be scared of, Deputy President Cyril Ramaphosa told a receptive audience at GIBS. Right? Speaking at a recent GIBS Forum, Cyril Ramaphosa, Deputy President of South Africa, showed why he is the candidate for the ANC presidency that business tends to favour, and why Nelson Mandela’s failure to anoint him as his successor is often seen as disastrous. Ramaphosa’s aim was a bold one: to assert that RET is, in fact, the logical extension of existing ANC policy, and does not signal a new approach. He argued that the term, RET, was first coined in the MediumTerm Strategic Framework (MTSF) 2014-19, which in turn was derived from the National Development Plan (NDP) endorsed at the ANC’s Mangaung Conference two years before. It was this same conference that voted Ramaphosa in as deputy president. Ramaphosa’s role as the political sponsor of the NDP is well known, as was his role as chief ANC negotiator in the constitutional settlement of 1994. The inference was clear: there is a progression from the Constitution to the NDP, via the RDP, to the MTSF and RET – and Ramaphosa is central to it. He reinforced the connection by several times referring to our need to show the same enthusiasm to RET as we once showed towards the political/ constitutional settlement. If we did, he said, we would be able to overcome the challenges and pull off the impossible again. Unfortunately, RET has been hijacked by various interests, from “some highly paid PR specialists” to those who use it to mask or justify state capture, or as a way of proclaiming radical credentials without the tiresome necessity of having actually to achieve meaningful improvement in the lives of the poor.
These words from his speech aptly summarise his main message: “[I]f we are to progress as a democratic nation, we need to ensure that we are not distracted or sidetracked by the misuse of the term. Rather, we must focus on the real substance of radical economic transformation and the steps we need to take, together, to achieve it. Radical economic transformation is, in essence, about building a more equal society through sustained inclusive growth.” Like the former minister of finance, Pravin Gordhan, and his erstwhile deputy, Mcebisi Jonas (see Acumen 20, Calling Civil Society and Business), Ramaphosa links economic transformation and inclusive growth, again a message that resonates with business, as does the keyword “together”.
FRUIT OF A POISONED TREE?
So far, so inspirational, even presidential. There is no doubt that Professor Kleyn spoke for the audience when, thanking him, she praised the Deputy President for the sense of hope that he had managed to communicate. But it would be foolish not to acknowledge that, upon reflection, there are grounds for doubting either the Deputy President’s absolute sincerity or, if he is sincere, whether it is possible truly to argue that RET really does envisage “sustained economic growth” as the engine for economic transformation. Basically, the battle lines are between those who advocate inclusive growth, the Ramaphosa/Gordhan/Jonas axis, and those who argue that the extent of the dispossession of blacks was so far-reaching, and the damage to their psyche and culture so devastating, that justice demands the assets of whites should first of all be seized.
WHO’S YOUR PILOT?
The motif of air travel was frequently used to communicate the sense that we should have faith that everything is basically under control. We do not get onto a plane expecting it to crash – we expect to get where we are going, even if there is turbulence on the way. Patience, and trust in the pilot, was what was needed. GIBS Dean Professor Nicola Kleyn took up the point about the pilot, allowing Ramaphosa to quip that the quality of the co-pilot was extremely important, provoking a roar of laughter, applause and a golden opportunity for the cameras.
SOUTH AFRICA’S CREED OF DISPOSSESSION HAS AS ITS FOUNDATION THE FREEDOM CHARTER. . . ”
The latter view, of course, assumes that, once seized, those assets will continue to be productive and thus able to contribute to the fiscus directly via tax, and indirectly via supporting economic activity. Attempts to argue that this is unlikely to be the case, based on the experience of countries that have tried such an approach (Venezuela, Mozambique and Zimbabwe, Russia and China come to mind), fall on deaf ears because the extent of the dispossession and damage have become the fundamental tenet of a creed about which debate is simply not tolerated, as Helen Zille found to her cost. South Africa’s creed of dispossession has as its foundation the Freedom Charter itself, which is why the RET narrative typically begins here. Mr. Ramaphosa’s speech was no exception. In many ways, the Charter is an admirable document, preaching non-racialism, equality, a common humanity and the right of all South Africans to their place in the sun. But it also provides the founding text for the view that blacks were unjustly deprived of everything (“our people have been robbed of their birthright to land, liberty and peace by a form of government founded on injustice and inequality”) – which is only partly true in terms of the historical record.
GORDON INSTITUTE OF BUSINESS SCIENCE
The Charter goes on to describe, admittedly in very general terms, the nature of the ideal South Africa its signatories propose. A few extracts give something of the flavour: • The mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole; • All other industry and trade shall be controlled to assist the well-being of the people; • …All shall have the right to occupy land wherever they choose; • …All people shall have the right to live where they choose, to be decently housed, and to bring up their families in comfort and security; • Unused housing space to be made available to the people; • Rent and prices shall be lowered, food plentiful and no-one shall go hungry… It is unclear how any of this could be achieved within the paradigms of a market economy, no matter how inclusive or sustained its growth. There is some logic behind the view that in order to achieve anything like this communist utopia, it would be necessary to abandon notions of private ownership and market economics. In this view, the RDP, and what came after it, are the
SO FAR, SO INSPIRATIONAL, EVEN PRESIDENTIAL” aberrations, and a different type of policy altogether is required to achieve the goals of the Freedom Charter. The EFF, for one, believes this, as do many others in the ANC itself – it does not really matter whether these views are sincere or cynical smokescreens for state capture and elite enrichment. In other words, RET is what it says on the tin: a departure and not an intensification.
WHAT’S THE GAME?
Perhaps, as a senior ANC leader, Ramaphosa simply has no choice but to pay at least lip service to the Charter? Also worrying is the noticeable way in which, since RET became a rallying cry, the government has found itself in the unique position of having to downplay its considerable successes in achieving a transfer of economic power. It is now opposition voices that are more likely to be raised to argue that, in fact, the ANC’s economic transformation policies have been more effective than it seems willing to acknowledge. This curious unwillingness to own up to success is, of course, necessary in order to justify a profound change of course when it comes to enabling economic transformation. It would not be necessary, surely, if Ramaphosa is right about what RET actually does mean. Bottom line? What Ramaphosa had to say was what business, and most South Africans who support genuine transformation, can get behind. The question is whether he is pursuing the Machiavellian strategy of one who remains at heart a communist revolutionary above all, despite his billions, buffalo stud and close ties with business – or whether we are simply witnessing the manoeuvring of a skilful politician who has no choice but to operate within certain ideological confines.
And, of course, if one takes the latter view, can he pull it off when the ANC meets to elect its new leaders and set its policy trajectory in 2019?
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MAKING AFRICA WORK Words Gaye Crossley
Creating a vibrant, working and successful Africa need not be a complicated affair, believes former Nigerian president Olusegun Obasanjo. It just takes a solid plan of action and some continuity. Speaking at GIBS, during the launch of his new book Making Africa Work: A Handbook for Economic Success, Obasanjo shared his thoughts and ideas for propelling Africa on an upward economic growth trajectory. Many of the ideas are contained in Making Africa Work, which he co-authored with Greg Mills, Director of the Brenthurst Foundation, American political scientist Jeffrey Herbst, and Dickie Davis, former director general personnel in the British Army and an Associate of the Brenthurst Foundation. But the anecdotes were vintage Obasanjo. The former Nigerian leader took to the podium with the certain knowledge that he boasts a unique understanding of Africa’s particular challenges. After all he has two terms as Nigerian president under his belt: from 1976 to 1979, as a military leader, and then as a civilian leader from 1999 to 2007. Heading up Africa’s largest country by population was no easy feat; the country battled – and continues to tackle – security and infrastructure challenges, rapid population growth and urbanisation, and the often destabilising impact of ethnic diversity. Finding solutions to this cornucopia of challenges has given Obasanjo the requisite stature to advise future leaders.
LEADERSHIP AND GOVERNANCE
GORDON INSTITUTE OF BUSINESS SCIENCE
According to Making Africa Work, ensuring Africa takes its rightful place in benefitting from the world’s so-called Fourth Industrial Revolution requires a change in the continent’s narrative. Obasanjo stressed that this change need not be overly complicated. In fact, he called for a simplification of policies and a return to a solid continent-wide foundation of good leadership and governance: “A Nigerian who read the book said to me: ‘You have written a good book, but you have got it wrong. You are talking about the economy, but you are not talking about leadership and governance’.” Make no mistake, Obasanjo told delegates, economic success implies good leadership and governance. He stressed: “The point is that unless we get governance and leadership right, we will not get economies right.”
. . . ECONOMIC SUCCESS IMPLIES GOOD LEADERSHIP AND GOVERNANCE ”
Certainly Obasanjo holds himself up as a beacon of good governance on the continent. In 1979, he was, after all, the first Nigerian military dictator to honour his commitment to hold democratic elections. Having said that he also stands accused of trying to change the Nigerian Constitution during his second term in office, in an attempt to secure a third term. Although Obasanjo has denied ever trying to run for a third term, he could almost be seen as defending such a move during an interview with the Mail & Guardian newspaper, conducted on the same day as the GIBS event, when he was quizzed about de facto one-party states in Rwanda and Ethiopia. “I don’t know whether you would call them benevolent dictators. I would call them strong leaders,” he responded. “I believe that you need strong institutions which can now only be established by strong leaders and sustained by strong leadership. The talk is you need only strong institutions and no strong men. I don’t share that. Especially for a country that is still building up.”
THE SINGAPORE BLUEPRINT
In Obasanjo’s view Singapore’s founding prime minister, Lee Kuan Yew, was certainly one of these strong leaders. In fact, Lee remains Obasanjo’s inspiration when it came to sustainable long-term policies. During the book launch, Obasanjo related how he’d once taken a number of young African leaders to Singapore to meet Lee. During the discussions a simple question was asked of Lee: “What is the magic?” Obasanjo expected Lee to talk about deeply complex policies, instead the Singaporean leader answered: “There is no magic. We did a few things right and we continued to do them right.” This simple insight resonated profoundly with Obasanjo. Lee got a number of things right when building the Singapore we know today, said Obasanjo, including education, housing, ensuring continuity of policy, ensuring an ease of doing business and opening up the economy. Lee was also hands on. “He told me a story of a cheap manufacturing company from Japan. Singapore called them and asked them to come to Singapore. That was the beginning of high-tech development in the country,” related Obasanjo. Obasanjo also praised Lee for having a laser-sharp determination to ensure Singapore’s growth trajectory and says he ignored the “extraneous shouts and cries” in his efforts to make this happen. “When I first went to Singapore in 1966 it was just a patch of sand. I went again in 1974 and Singapore had started getting it right. By the time I took the African leaders in 1993, Singapore had gone from being a heavily criticised patch of sand, to being highly praised.”
SOUTH AFRICA AND NIGERIA HAVE EXTRA RESPONSIBILITIES . . . ” Obasanjo stressed that Africa should take heed of Lee’s successes and adopt a similar long-term view of policymaking. He said Africa needed to address a few key areas, do them right, and then ensure policy continuity; especially during regime changes.
NIGERIA’S WINS AND LOSSES
Accepting that sometimes efforts fall short of the original intention was also a point he raised. Looking back to his first term as president of Nigeria, Obasanjo highlighted an instance where Nigeria dropped the ball: “I thought we got education right, but did we continue with it? No. I established that as head of military state, [but] the next regime did not continue with it. I believe there is no country in Africa that cannot supply free and compulsory education for youth.” He then added that for Africans to have access to basic education would require commitment from governments to ensure the continuity of such education policies.
GORDON INSTITUTE OF BUSINESS SCIENCE
Another key focus point for Obasanjo – this time during his second term – was to create an economy that encouraged entrepreneurship and growth. He shared the following interaction with Aliko Dangote, Africa’s richest man and the biggest supplier of African-produced cement: “I looked into the issue of cement; there was no decent cement in Nigeria. From 1956 to 1999 we imported cement. So I called Aliko at 5am one morning and said: ‘Can I see you at 7am?’” Although Dangote did not arrive two hours later for that meeting, he did sit down with Obasanjo. “I said: ‘Aliko, why are you importing cement, why are you not producing cement in Nigeria? We have tons of limestone?’ Dangote responded by saying: ‘I am importing because it is more profitable than producing it.’” This inspired Obasanjo to delve into Dangote’s obstacles. He asked how the country could facilitate local production, and then worked with Dangote to ensure this happened. The company now produces 60 million tons of cement, across Africa, per annum. “Business and government have to work together,” stressed Obasanjo, who then highlighted a case of policy doomed for failure. “At one time we were self-sufficient with rice, and then the government set up a presidential committee, not for the production of rice, but for importation of rice, and that cannot be right,” he noted. Obasanjo was also upfront about his criticism of Nigeria over-complicating its politics and having created a top-heavy administration complete with assistants and advisors, all of whom require fleets of cars and hefty expense accounts. “We don’t need that,” he said. Due to pressure from himself, Obasanjo noted that, for the first time, the Nigerian National Assembly had published its budget in 2017. “So we are getting there,” he said. Such moves fall under the scope of political education, something Obasanjo touted as essential for success of the continent.
TAKING AFRICA FORWARD
Between the anecdotes and the observations, Obasanjo was also vocal about what Africa should be prioritising in order to create a successful and vibrant economy. “I believe we will make Africa work when we do a few things right in all walks of life, including the issue of governance and leadership,” he said. “I believe that for all of those in Africa the issue of peace and security are fundamental, and it is one thing that we must do right. I believe the issue of economic integration is another thing we must do right. If we do those two right and we get leadership at all levels, even at home, right, I believe the story of Africa will be fixed from what it has been before.” A final thought from Obasanjo focused on relations between leading African economies and the importance of showing the way forward for the rest of the continent. “South Africa and Nigeria have extra responsibilities, and we have not being playing it as we should,” he said. “We have the responsibility to get it right in African as well as in our [own] countries. And South Africa is not taking responsibility like it should. South Africa must live up to its responsibility in Africa, and [to] SADC.” Reflecting on his time as president, when his South African counterpart was Thabo Mbeki, Obasanjo said: “We took not only South Africa and Nigeria, but the whole of Africa as our responsibility. Our successors have not. I believe we should tell ourselves some home truths, because if these two countries do not assume this role, then who else will? Our leaders need to see that.”
The largest 3D printer in the world, National Laser Centre, CSIR, Pretoria campus.
ADDITIVE MANUFACTURING Words Sarah Wild
It has been hailed as the cornerstone of the next industrial revolution, the technology that will save developing economies from China, with its cheap labour and low prices. But is 3D printing really the saviour that its proponents have painted it? 3D printing, also known as additive layer manufacturing, can build an object – up to a certain size – one layer at a time. First you create a computer model of whatever it is you want to build, and send this information to the specialised printer. A laser in the printer melts a dusting of plastic or metal into a single thin layer; another layer of granules forms the next layer, which is melted together and to the layer below. Using this technology, you can create any shape, no matter how complex or intricate, and even ones with moving parts – something which is beyond the ability of other manufacturing technologies such as milling or tooling, which sculpt the shape out of a hunk of material.
According to an Oxford University report into the economics of additive manufacturing, “Additive manufacturing processes are generally associated with two advantages over conventional manufacturing techniques. Firstly, they avoid many of the tooling-related constraints on the geometries that can be achieved through conventional manufacturing processes. “Secondly, additive manufacturing allows the efficient creation of products in very low volumes, down to a single unit, enabling the manufacture of customised or highly differentiated products,” the report says. Consulting company Wohlers, in their 2016 report into the global state of additive manufacturing, found that the industry – which
includes all additive manufacturing products and services worldwide – was worth $5.165 billion, and growing.
Manufacturing in South Africa, which contributed 12% to the country’s gross domestic product last year, has taken a hammering in recent years, beleaguered by international competition, comparatively high labour costs and declining demand. Additive manufacturing offers the industry a way to compete with countries like China. “It’s the next industrial revolution, says Beeuwen Gerryts, the Chief Director for Technology Localisation, Beneficiation and Advanced Manufacturing at the Department of Science and Technology. “But the big difference between this and the last industrial revolution is that it is not geographically constrained.” South Africa has been eyeing additive manufacturing as a growth area for a number of years. Its additive manufacturing roadmap, published last year, details the niches where the country could compete. This roadmap – developed through collaboration with the Rapid Product Development Association of South Africa, which expressed a need for a framework to guide developments in the field – lays out five areas of technology development: advanced tooling, footwear, medical implants and devices, aerostructures, and direct end use with a focus on SMMEs.
make a once-off prototype quickly to demonstrate an idea, part or product. This remains one of the major uses of this technology, although its applications have grown beyond simple prototyping. Back then, it was all about plastics. Metal additive manufacturing is about a decade behind plastics in terms of development, Booysen says. “There’s a big hype around 3D printing, now we need to prove what is beyond this, what are the applications? We must prove the technology through successful case studies and identify the right markets for it. “You can’t just print anything. You need to understand the technology. That’s the one thing I’ve learned in 20 years,” Booysen says.
“We have a fairly high population of 3D printers in SA, both high- and low-end,” says Gerryts. “There’s a lot of technology developed, but we’re not quite over the hump.”
That is what the additive manufacturing strategy aims to do – highlight the areas where South Africa could be a player in this industry.
The hump of technology has taken on almost mystical significance in innovation circles. According to the “Hype Cycle”, there are five distinct phases of technology development: innovation trigger; peak of inflated expectations; trough of disillusionment; the slope of enlightenment; and the plateau of productivity. Developed by US research group Gartner, this mapping of technology development measures the time taken for a technology to mature, against the expectations of what it will do.
SPEED TO MARKET
Gerrie Booysen, Director of the Centre for Rapid Prototyping and Manufacturing based at the Central University of Technology in Bloemfontein, has been working in the field of 3D printing for 20 years. GORDON INSTITUTE OF BUSINESS SCIENCE
. . .YOU CAN CREATE ANY SHAPE, NO MATTER HOW COMPLEX OR INTRICATE . . . ”
“The CRPM was established in 1997 as part of a research initiative in the school of mechanical engineering to do research in the field of 3D printing, or rapid prototyping as it was called then,” he says. It was called rapid prototyping because it was possible to
. . . ADDITIVE MANUFACTURING IS NOT FOR THOSE WITH LIGHT POCKETS”
There are a number of successful 3D printing initiatives in the country, and Booysen’s centre is home to some of them. In 2014, the centre printed a metal jawbone, which was implanted into a man who had lost his to cancer. It was the first time this was done in South Africa using a 3D-printed implant. There are a number of advantages to 3D-printed biomedical implants: they can be custom-made as a once-off object and perfectly fitted to their recipient. The centre, which received its international ISO certification, will be creating two more mandibles this year to implant into people whose jaws have been damaged, one from a hijacking incident. These mandibles are made of titanium, which is biocompatible, meaning that the body is less likely to reject it as a foreign object. Titanium is the material of choice for this type of biological implant: it is non-corrosive and very strong while lightweight. These properties are also what recommend titanium to the aerospace industry, another major focus area for South Africa’s additive manufacturing industry.
Every kilogram you add to an aeroplane or spacecraft costs money – it costs money in fuel, efficiency and durability. In the case of the space industry, an extra kilogram can cost millions of dollars. However, titanium and its alloys are also expensive. Part of the reason why they are so expensive – thousands of rands per
kilogram, with the amount determined by the type of alloy you require – is that a great deal of it is wasted in traditional machining. It is possible to use 100kg of titanium to make a 2.5kg part.
“We’re in the right place at the right time with the right technology.”
NOT SO CHEAP?
This explains the allure of additive manufacturing: you only use as much of the powder as you require to make the part, with less wastage, even though titanium powder retails for about R7 000 per kilogram.
Another important factor in 3D printing is time. “It’s important to have a machine that does large components, but also speeding up the process,” he says. “It’s expensive technology compared to conventional manufacturing, so anything we can do to bring the cost down” makes them more competitive.
In 2011, South Africa in partnership with its Council for Scientific and Industrial Research (CSIR) and commercial partner Aerosud launched Project Aeroswift. The centre piece of this collaboration is the largest 3D printer in the world, located in a two-storey room in the National Laser Centre at the CSIR’s Pretoria campus. It can print parts up to 60cm x 60cm x 2m.
While 3D printing complex parts for airplanes makes financial sense, that isn’t true for all components. Booysen says: “People said additive manufacturing will replace conventional manufacturing, but in my opinion, the one complements the other. Machining is still the cheaper option [for many components].”
“The problem with the commercial systems that are processing metals is size,” says Hardus Greyling, Manager of Commercialisation and Programme Management at the CSIR’s National Laser Centre.
He says that a large part of his work at the centre involves advising people, companies and academic institutions as to whether additive manufacturing is the right technology for them and their applications. “As more people use the metal and high-end machines, then that will push down the material and machine prices,” he says. But for now, additive manufacturing is not for those with light pockets. While you can get a plastic 3D printer from R15 000 upwards – or lower if you’re prepared to compromise quality – a metal printer will cost you between R2 million and R6 million, and that is before materials.
One of the reasons that other commercial 3D printers cannot grow such large parts is that a two-metre component can take days to grow. This means that the one end of the part will be cold whilst the other end where new layers are being added is at about 1 670 degrees Celsius, which is the melting point of titanium. “A big component can take days to grow … and the different temperatures at each end contain thermal stresses that reduce the strength of the part – which is not acceptable if that part is going to go into an aeroplane,” Greyling says. Project Aeroswift is working closely with aerospace players Boeing and Airbus, he says. “The aerospace industry is the major focus at the CSIR. It’s the most attractive [niche for metal additive manufacturing] at present because of the need for high complexity parts, which require design optimisation.” The Aeroswift project has managed to overcome these constraints, and last year the printer printed its first three tester parts: a pilot’s throttle lever, a fuel tank pylon bracket and part of the throttle assembly. “All the commercial companies are trying to upscale the technology which they have,” says Greyling. “With Aeroswift, we didn’t have that baggage that came with an existing design. We approached it from a new perspective and are busy filing a number of patents which describe the technology.
But there are still places where businesses can go to get objects printed. Booysen’s centre, for example, has about 750 commercial clients and last year printed in the region of 10 000 parts for industry. He says that the ISO certification awarded last year allows the centre to “design and manufacture 3D-printed implants, cutting guides, models”. Asked how South Africa compares to the rest of the world, Booysen says that “the biggest challenge is bioengineered organs and 3D-printed organs that are coming into the market”. There has been an explosion of interest in the last two years in 3D printing biological materials. Scientists have managed to 3D print muscles and blood vessels, with experts expecting breakthrough in the 3D printing of kidneys and livers within the next five years.
South Africa currently is not playing in this field. “I think we are lacking behind that international trend, but otherwise I think we’re keeping up,” Booysen says
. . . THE CENTRE PRINTED A METAL JAWBONE . . . ”
A BEAN'S JOURNEY Words Cara Bouwer Photographs Marc Shoul
When it comes to Rwandan coffee the journey from the tree to the table is a story of hands. Hundreds of hands that clean, sort, package, transport, roast, grind and serve your daily fix. Along the way, each hand takes it cut.
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An analysis of the coffee value chain, prepared by Oxfam in 2002, estimates that some coffee beans change hands upwards of 150 times. Furthermore, Fairtrade, the ethical certification label, estimates that the process of handling, processing, storing and transporting raw coffee adds as much as 50% to the price. These costs drive up the price of coffee, while the farmer – many of whom count on coffee as their only source of cash income –
Left: This is where it all starts, with a small red berry nurtured by hundreds of small-scale farmers in Rwanda and across East Africa. Above: A farmer sorts through the coffee cherry crop before delivering the yield to a local co-operative.
continues to earn at the bottom end of the scale, and takes the biggest hit when prices slump, as commodities are apt to do. South Africa-based Jonathan Robinson, founder of Bean There Coffee Company, explains that the New York market basically sets the global coffee price. “The problem is, when prices do come down, farmers who have produced a really great coffee can’t
cover their costs of production,” he says. Fairtrade adds a safety net to prices, ensuring that if prices rise the farmer benefits and, if they plunge, the amount doesn’t fall below a minimum. “The Fairtrade minimum is US$1.40 per pound,” explains Robinson, whose Bean There brand is Fairtrade certified. “Say the New York price is US$1 then you will have to pay an additional US$0.40 for Fairtrade. That is more acceptable for producers and it protects the farmers more. But, in our case, because we buy such high-quality coffee, even without Fairtrade our prices are so much above the US$1.40. We are buying coffee at over $3.00 per pound. And we still pay US$0.20 on top of our rate, which is the Fairtrade premium.”
He adds: “If you ask any co-operative we work with if Fairtrade makes a difference in their lives they’ll say absolutely… money goes into the community and then money goes into improving coffee quality. And that helps everyone.” Putting farmers at the centre of the Fairtrade approach has worked well by empowering the hundreds of co-operatives which have sprung up around East Africa’s coffee sector and the individual farmers who make up – and own – these co-ops.
Bean There began importing Rwanda Musasa coffee in 2008 and currently works with the Dukunde Kawa co-op in Musasa,
about two hours outside of Kigali. Dukunde Kawa has 1 184 active members. Robinson, who started Bean There in 2005, has worked with co-ops in Ethiopia, Tanzania, Kenya, Burundi and the Democratic Republic of Congo, and he rates Dukunde Kawa among the best. “The overall organisation is Rwashoscco [a farmer-owned marketing, export and roasting company] and they have a variety of co-ops who work through them. There is no point having multiple warehouses for coffee and multiple mills, and not everyone needs to be an expert in exporting coffee, so rather consolidate,” explains Robinson. Co-ops like Dukunde Kawa, Coopac on Lake Kivu and the Cyarumbo washing station in Huye remain sustainable by helping their members rise. The good ones help farmers get the most out of their land by offering agronomy training. In the case of Dukunde Kawa, this is supported by having a number of demonstration plots, which are used to teach new techniques, such as how to prune crops correctly and how to stump trees. “The farmers aren’t that keen until you demonstrate,” explains Robinson. “Telling farmers to reduce their income by a third, by cutting down a third of their trees, is a hard ask; even if you tell them that in three years their volumes will be up. But once farmers get into the cycle, their livelihoods are much more sustainable.”
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Diversifying income streams – such as investing in cows and installing a pasteurising machine at Dukunde Kawa – makes for a successful co-op. And the more financially prudent the co-op, the less chance they’ll overextend themselves and be forced
Top left: Goods to market … women transport their coffee cherry crop by foot to a co-operative in the Huye region of Rwanda. Bottom left: Each farmer’s produce is weighed and counted at the co-operative. Top right: Women sort through coffee beans to weed out the bad ones at the Cyarumbo washing station in Huye. About 400 farmers deliver their produce to this co-operative. Bottom right: Each batch is tasted to ensure that none are tainted – should a bad bean have made it through the extensive hand-sorting and washing process it can foul an entire batch.
to borrow, says Robinson, who notes that “banks in some of these countries charge heavily because of the risky nature of the business”. Rwandan financial institutions charge between 5% and 20% for agricultural loans, according to Rwanda Focus newspaper. “Farmers can really be put into financial difficulties with these high interest rates,” says Robinson. In an effort to ensure the sustainability of these co-ops, companies like Bean There work by committing to buying their coffee upfront, making it easier for the co-ops to access funding, since banks have more of a guarantee. “We commit to containers upfront in one go and it all arrives together. So we basically have to work our cash flow based on that, into the next year,” explains Robinson. “That’s probably been the most difficult part for us.” The rationale behind this move was to create linkages and relationships with the farmers producing every bean of Rwanda Musasa coffee drunk in South Africa. “With us, all the Rwandan coffee you drink all year must come from Dukunde Kawa,” says Robinson. It’s a model which allows him to get to know his farmers. For example, Rwandan Stephanie Kozabukanya is part of the Bean There family. A mother of seven, she has 6 000 trees on two hectares of land, all with an average yield of between 2kg and 5kg. “One of my [older] children has finished high school and the other one is in university,” says Kozabukanya, who had to stop her schooling in the fourth grade to help her family. “Since the age of 18, I have been growing coffee trees and it has helped to improve my life,” she said in a translated video
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interview. “With coffee I have been able to invest in other activities when it is not the coffee season.” This includes buying more land, growing other crops and investing in her family. She adds: “Since there are now more washing stations, the coffee will always be bought, so I have no worries.”
WASHING AND SORTING
Washing and sorting stations are essential in the general coffee bean process and especially so when it comes to Rwandan coffee. “Rwanda and Burundi suffer from a defect in coffee called the ‘potato defect’,” explains Robinson. “This causes some beans to have the taste of raw potato and smell of raw potato, it is quite well known and it seems like the way to root it out is to make sure that the cherry sorting is very well done.” Firstly, when farmers bring in their crop, they lay the coffee cherries on massive tables and, by hand, take out the green cherries and those with defects, explains Robinson. Then comes the floatation process: the red cherries are put in water, agitated
“If you ask roasters internationally what their favourite coffees are, most of them – 70% to 80% – will say Africans,” says Robinson. “But there isn’t enough supply of Africans and the prices are really high. A really good Fairtrade Ethiopian coffee would trade at double the price of Brazil, primarily because of the quality.”
THE LONG ROAD TO THE ROASTERY
An additional challenge for Africa, which adds considerably to the cost of African coffee, are the logistics around getting the product to market. “Our biggest challenge is planning,” admits Robinson. “Everything takes time. Everything has to cross borders. From the time the coffee comes off the tree it can take up to six months to get here, and half that time is logistics and paperwork.” It can be stressful, but it’s OK, says Robinson, “I’m powered by caffeine!” And so are the likes of Kozabukanya and the hundreds of Rwandan farmers for whom coffee powers their families and their communities. Not bad for a little red berry
Top left: After much patience, paperwork and crossing borders, the Dukunde Kawa co-operative’s product arrives at Bean There Coffee Company in South Africa. Bottom left: Ready for grinding and percolating at the Bean There Coffee Company outlet in the 44 Stanley precinct, Milpark. Top right: Bags are filled, ready for the retail customer. Bottom right: After a long road, and having been through many hands, patrons can sit back and enjoy a perfect cup of Rwanda’s finest.
and the bad cherries float to the top. The process has just been automated at Dukunde Kawa, but in most stations a bucket and water does the trick. “If you remove the floaters well, then you can root out a lot of the potato defect,” says Robinson. But this is not 100%. The co-operative only buys cherries without defects, tough on the farmer but essential in ensuring the good name of Dukunde Kawa Rwandan coffee on the world market and in keeping prices for African coffee high.
CHINA'S CHANGING MARKETS Words Kate Whitehead
South African exporters are waking up to the opportunities presented by market evolution in China. China is not the country it was a decade ago, nor even five years ago. We’ve all heard about the phenomenal growth rates – GDP grew an average 9.76% from 1989 to 2016 – and even though growth has slowed to about 6.5%, its monster economy
is expected to overtake the US next year. This growth has been matched by rising labour costs and with that has come a more demanding and sophisticated consumer. International brands have long been eyeing the Chinese market. Superficially, it looks like a golden opportunity and it does offer potentially incredible rewards, but as with everything in China you have to be super-savvy, particularly in this fast-changing environment. Even those who got in early and established a strong brand presence are finding they have to work hard to stay relevant. For many years, labour costs have grown faster than consumer inflation. This has meant that low-cost manufacturers have been shifting their bases from China to Cambodia, Laos, Vietnam, Bangladesh and Myanmar where labour is on average 25% the cost of China. Alongside this move, China has been pushing companies to automate and make more high-value products and has seen success in moving upmarket although it’s still a long road ahead. And the population is rapidly ageing. The number of people aged over 60 stands at about 200 million now and is expected to swell to about 300 million by 2030. Meanwhile, the number of youth aged 20-24 is expected to fall from 125 million to 68 million over the next decade.
PHOTO: SHUTTERSTOCK IMAGES
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Sanlitun, the fashion and business landmark in Beijing
. . . AS WITH EVERYTHING IN CHINA YOU HAVE TO BE SUPERSAVVY . . . ” “In 2010 it really was boom time and now things are getting to a normalisation. Manufacturing is slowing considerably, consumer goods has slowed and the middle class is growing quickly and moving to the cities,” said Camerata, who lived in Shanghai for five years and Hong Kong for the last seven. Quality is still a big driver, she says, noting the regular health scares related to quality, but while this field used to be dominated by international brands, now local labels are making their mark and proving popular. No longer simply copying, local brands now have a reputation for innovation. “There is no longer the equation of foreign means higher quality. Luxury is slowing down, but it’s still holding strong, especially with the younger consumers,” she said.
THROUGH CHINESE EYES
Camerata advises international brands eyeing the China market not to be arrogant and assume that what works in their country will work in China.
NO EASY PICKINGS When the Chinese market first opened up, western brands, especially luxury goods, were revered. For well over a decade luxury brands rode the China wave, but that was served a brutal awakening in 2012 when, as part of a massive anti-corruption campaign, there was a clampdown on gift giving. Luxury brands such as Burberry and Prada, along with those owned by Swiss-based holding company Richemont, struggled as Chinese consumers scaled back on luxury goods. Last year Richemont, which is known for its Cartier diamond necklaces and Piaget and IWC timepieces, announced job cuts and early retirement packages on the back of plunging profits. But all signs suggest that the luxury goods market is bottoming out. South African-owned Richemont responded by adapting to the shifting market – for example, Piaget launched a lower-priced sports line. And sales to retailers are dropping less as demand in China improves. Caterina Camerata is Regional Strategy Director at Starcom MediaVest Group and advises brands about how best to operate in China.
“You really need to understand the way consumers will use your brand, you’ve got to do things the Chinese way. You need to partner with someone who really understands the drivers and platforms,” she said. Two key trends that impact all retail in China today are digital payments and the move to check products online before buying. With the rise of Bidou, Alibaba and Tencent there has been a boom in e-commerce and mobile payments have become ubiquitous. “In Shanghai, Beijing and the big cities, the only people using cash and credit cards are foreigners. Consumers are becoming very digitised, very mobile centric. That’s a whole ecosystem that brands that want to enter need to understand,” said Camerata.
And as Chinese consumers become more sophisticated, they are doing a lot of research online before they buy and sharing that information, particularly the millennials. “They buy everything on their mobile, even vegetables, even oysters from New Zealand. Brands need to understand how people buy and share and give them a good reason to talk about their brand,” said Camerata. Take Maserati which last year launched its new SUV model priced at 999 800 yuan (ZAR 1 954 000). It tested the market by
partnering with Alibaba’s online TMall platform and sold the first 100 cars in 18 seconds – 30% of the customers bought the car on their mobile phones. With an increasingly moneyed middle class comes new buying trends. Camerata says health, travel and leisure are three key growth areas. “The younger white collars in big cities are becoming more health conscious. Nike and sportswear brands are more relevant and marathons are exploding across China,” she said. The days of big international brands swooping into China and making seemingly easy money are long gone. It’s a fast-changing
WINE & CHINA
Chinese consumers have increasingly sophisticated tastes and that extends to the good things in life, such as fine wine. They first got an appetite for good wine in 2008 – it was the heyday of the big brands and high-end labels, so it was no surprise that they favoured the well-established, classic French wines. “There was a high dependence on Bordeaux, the level was unprecedented, no one expected that and there was huge excitement about French wine in general and the Chinese consumer market for wine,” said Paulo Pong, founder of the wine trading company Altaya Group. The Chinese anti-corruption crackdown in 2012 had an immediate impact on high-end wines. The price of Château Lafite Rothschild, the golden product of 2011, was halved almost overnight.
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“It’s important to stay curious because it’s a fast-changing world. People’s palates and spending habits change quickly and you have to move with your customers. It was fashionable to drink expensive wines for a while and then all of a sudden because of the economic times it changed,” said Pong. The upshot of these changes meant that Chinese wine consumers became more open to trying wines from other regions. Australia, which has a trade agreement with China, saw a huge increase in its wine exports to China.
THEY BUY EVERYTHING ON THEIR MOBILE, EVEN VEGETABLES . . . ” market and staying on top of it means understanding it from the inside out and having local partners, but for those who manage to crack it the rewards still stand to be phenomenal.
“There is also a trend of consumers wanting to show off anything to do with culture and heritage, how you found something niche and special,” said Camerata. Several times a year Pong visits the world’s top wine-growing regions and invariably meets mainland visitors sampling the wines. He suggests that wineries make the most of this hunger for travel with an increasing thirst for fine wine to get themselves noticed and boost sales. “South African wineries can promote their own winegrowing regions and get Chinese consumers more interested in wine,” he said. South African wine exports to China have been steadily increasing for several years. Last year South Africa exported 15 760 055 litres of wine to China, a 39% increase over the previous year. Most of this was red wine (87%), according to the SA Wine Industry Information and Systems. Charl Coetzee is Cellarmaster at Babylonstoren, the vineyard owned by South African media tycoon Koos Bekker. The winery began exporting to China last year and says Chinese consumers appreciate the quality of South African wines at a reasonable price. “For China it is all about reputation. If we can get the reputation of South African wines right, then we all will do well in China,” he said, speaking from Chengdu.
“The success of Australian wines in China we see as a good sign they will continue to explore and look into other options. I believe there are definitely opportunities for other wines, such as South African wines, into the Chinese market,” said Pong.
Meanwhile, the farm and winery, which nestles against the Simonsberg, is seeing more mainland Chinese groups visit, hopefully nurturing a new generation of South Africa wine connoisseurs.
Caterina Camerata also notes the strong demand for wine, particularly in China’s Tier One and Tier Two cities. In Shanghai she sees a strong interest in New World wines, such as those from South African wineries.
“The best way to change somebody’s perception is to do it on home turf and I definitely believe they bring the appetite back with them because, in my opinion, a Chinese person stays loyal to something that he or she likes,” said Coetzee
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THE BUSINESS OF CRUISING Words Eugene Yiga
MSC Cruises is betting big on the growth of holidays at sea.
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MSC Meraviglia arrives at Le Havre Port to be christened
According to Cruise Lines International Association, the global cruise industry capacity grew from 17.8m passengers in 2009 to an estimated 25.8m in 2017. “Cruising is an alternative to a vacation,” says Pierfrancesco Vago, Executive Chairman of MSC Cruises, the Swiss-based arm of the international shipping group. “We still have first-timers that are a problem because they don’t understand cruising. They still think of The Love Boat – black-tie, boring, expensive, and only for old people – [even though] cruising has evolved.” While the growth in the cruise industry outpaced global landbased tourism by 20% from 2004 to 2014, penetration rates remain as low as 1.7% in Western Europe, 2.6% in the United Kingdom, and 3.4% in North America. This, coupled with the fact that 48% of non-cruisers surveyed by CLIA expressed interest in a holiday at sea, represents a massive potential for growth.
“We’re the last kid on the block,” Vago laughs. “We entered the cruise industry in the late 1990s with three ships. One day we realised the cruise industry had evolved, exactly as we know it today. So we started our industrial growth plan.” From 2003 to 2013, MSC Cruises invested €6 billion and built a dozen ships in three flexible groups. First was the Lirica Class: the MSC Lirica (2003), MSC Opera (2004), MSC Armonia (2004), and MSC Sinfonia (2005). Next was the Musica Class: the MSC Musica (2006), MSC Orchestra (2007), MSC Poesia (2008), and MSC Magnifica (2010). Last was the Fantasia Class: MSC Fantasia (2008), MSC Splendida (2009), MSC Divina (2012), and MSC Preziosa (2013). “We’ve had 800% growth in the first ten years,” Vago says, adding that passenger numbers increased more than fourteenfold from 127 000 guests in 2003 to 1.8 million in 2016.
Programme, which invested €200 million for an extensive overhaul of the entire Lirica class. The company also decided to invest €9 billion in building up to eleven new next-generation mega-ships between 2017 and 2026. The first of these is the MSC Meraviglia (the G is silent), a ship the company refers to as the “Eighth Wonder of the World”. It’s not just because the name means ‘wonder’ or ‘marvel’ in Italian, but also because it’s the biggest one ever built by a European ship owner. At 315m long, 43m wide and 19 decks high, it’s also the largest ship to come into service this year. “Words are sometimes difficult to explain how much there is in a ship today – the capacity to innovate and design is complex – but the MSC Meraviglia emphasises what the present and future of cruising is all about,” Vago says. “This ship is incredible. It allows us to give a variety of itineraries throughout Europe and the world.” The ship took three years of planning, 26 months of construction and 1 700 workers per month (over 3 000 per month during peak periods) for a total of nine million man-hours. It was built by STX France, further reinforcing a long-standing partnership that has already produced all vessels in the fleet so far. “Our aim was not to build a big ship,” says Gianni Onorato, CEO of MSC Cruises. “Our aim was to build a rich ship that offers features and amenities to accommodate people who are already used to cruising and people who have never thought of going on a cruise in their lives. This is what inspires our concept when we think about new platforms.” The MSC Meraviglia accommodates over 5 700 guests and more than 1 500 employees. And while Onorato highlights the need for comfortable suites (and the fact that 75% of the ship’s cabins have balconies) he explains that people are more concerned with where they’ll be going instead of where they’ll be staying. For its inaugural season, the MSC Meraviglia is sailing through the Mediterranean on seven-night cruises with six ports of call: Genoa, Naples, Messina, Valletta, Barcelona and Marseille. The company added nineteen new shore excursions (five of which are exclusive to the ship), offering more than 80 altogether.
WE’VE HAD 800% GROWTH IN THE FIRST TEN YEARS” “We needed to reach economies of scale. But then we didn’t have any ships because we grew so fast and wanted to have three years of no growth. We needed to stabilise the company. We wanted systems, processes and the economies of scale to kick in. But now we’re ready for the big second wave of growth.”
BUILDING A ‘RICH’ SHIP
In 2014, MSC Cruises launched an investment plan to support this new phase of growth. One aspect was a two-year Renaissance
“The number one driver of choosing a cruise will always be the destinations,” Onorato says. “And when we say that this is a ship for all seasons, this is also a ship for all ports. This is proved by the itineraries that have already been designed and worked out.”
DESIGNING THE FUTURE
While the MSC Meraviglia is designed for all seasons – next year’s itinerary will see it embark on long cruises through Northern Europe – the company is launching another class designed for warmer climes. The Seaside category will include the MSC Seaside (launching in Miami in December 2017), the MSC Seaview (launching in Rome in June 2018), and an option for a third ship in 2021. In 2019 the company will also launch the MSC Bellissima, a sister ship to the MSC Meraviglia, as well as the extended Meraviglia-Plus Class. “We’re so happy with the results of this platform that we decided to add an extra 50m in the promenade because we want to
The bottle smashes on the hull to officially christen MSC Meraviglia
give an even bigger ‘wow’ factor,” Vago says. “So we’ll have two Meraviglia-Plus Class deliveries: one at the end of 2019 and the other in the spring of 2020… We’re going to have a real museum. We’re talking with the Italian ministry and museums in Florence, the Louvre in France and the Museo Nacional Del Prado in Spain to have masterpieces on board.” MSC Cruises has also confirmed the order of two ships for its World Class. With a futuristic Y-shape for panoramic sea views and a maximum capacity of close to 7 000 guests, these ships (to launch in 2022 and 2024, with an option for two more in 2025 and 2026) will be the largest by passenger capacity in the world. “We’re extending the growth and industrial plan for the next ten years but with the measures that we can operate in all the ports in the world,” Vago says. “Big is great but we want to be able to go everywhere. MSC Cruises is a global brand so these ships will be operating globally.”
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Planning so far ahead is tricky, especially when major capital expenditure is involved. But Vago believes that “designing the future” is an exciting prospect. “We’re designing something that will be delivered in 2026 but ten years later, in 2036, will have to be ‘actual’,” he says. “That means we’re designing what the experience in 2036 will be: what people will want and expect in terms of entertainment, food and so on. This is the challenge and the beauty of this business.”
Still, Vago is confident that these developments will allow MSC Cruises to triple its passenger numbers (from 1.8 million to 4.8 million) in the next ten years. While it’s currently the world’s fourth-largest cruising company by capacity, it ranks as the number one brand in Europe, South America and South Africa. It’s also the largest privately owned cruising company in the world. “Today we offer 194 itineraries,” Vago says of its trips to 86 countries and 199 ports of call around the world. “We welcome over 192 nationalities on-board so the capacity to deliver an
“Godmother” Sophia Loren cuts the ribbon with MSC Group Executive Chairman Gianluigi Aponte
. . . ‘DESIGNING THE FUTURE’ IS AN EXCITING PROSPECT” experience that pleases is incredible. In fact, we have such a presence and such a distribution because of our ticketing and selling in 67 countries.” Vago believes that the appeal of cruising compared to land-based holidays is about value for money, waking up in a different place every day, and the ship itself becoming a destination. Indeed, with nine out of ten customers becoming repeat guests, he’s confident that word-of-mouth will be a big promoter. “The capacity to reach each segment of the population – all tastes, all ages and all pockets – is the strength of the cruising industry and experience versus other types of holidays,” he says. “We’re always talking about democratisation of luxury with the cruising experience. That’s why cruising is so successful.” Keeping MSC Cruises afloat in potentially stormy seas are its people. The company has close to 18 000 on-board and on-shore employees and, by sourcing more through its global training centres, aims to create 25 000 new jobs by 2026. Controlling all products from A to Z in-house also allows it to “fine-tune and deliver” on its offering. “We’re a family company with 300 years of seafaring tradition,” Vago says. “We’re in a capital-demanding industry and I think it’s a huge advantage that we can keep that family spirit, that attachment to the company and that quick decision-making. The fact that we’re family – this sense of belonging – is what gives us an edge.”
Lilongwe 2780 km 5-6 days Lusaka 2067 km 4-5 days Johannesburg 1772 km 2 days Livingstone 1565 km 2 days Gaborone 1498 km 2 days
The Port of Walvis Bay is Namibiaâ€™s largest commercial Port. It stands as a natural gateway for international trade and is strategically situated along the central coastal region of Namibia, offering direct access to principal shipping routes. The Port receives approximately 4,000 vessel calls per year, handling over 6 million tonnes of cargo. The container terminal accommodates ground slots for 3,875 containers with
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Two decades of Port Excellence
provision for 424 reefer container plug points, and a capacity to host 355,000 containers per annum.
COMMITTED TO ECONOMIC GROWTH The Export Credit Insurance Corporation of South Africa (ECIC) was established 16 years ago in July 2001 when it was given the mandate of filling a market gap through the provision of medium to long-term export credit and investment guarantees by underwriting bank loans for political and commercial risk insurance cover, on behalf of the South African government. ECIC's mission is to provide export credit and investment insurance solutions in support of South African capital goods and services by applying best practice risk management principles. The short-term transaction market was amply catered for, but medium to long-term export transactions still had a need for a dedicated export credit agency, hence the formation of the ECIC. Acting as a catalyst for private investment, the ECIC steps in where commercial lenders are either unwilling or unable to accept long-term risks. While the ECIC is part of a broader government policy, it remains an independent limited liability company, but with the government as its sole shareholder. The institution is enabled under the amended Export Credit and Foreign Investments Insurance Act of 1957. Along with the ECIC’s major shareholder – the Department of Trade and Industry – the ECIC makes use of market research tools and specialised business development units to create new insurance products that support government’s export promotion objectives. The revised performance bond insurance product, which was launched in 2016, is one such example. ECIC has recently developed new products including lines of credit, lease and return of plant equipment. It also continues to be a catalyst for increased lending capacity by financial institutions by entering into agreements with other export credit agencies (ECAs). In this way, it creates a framework for both re- and co-insurance. To this end, it has adopted a comprehensive plan of action aimed at actualising co-operation programmes for mutual benefit in conjunction with, among others, BRICs ECAs, Afreximbank and African Trade Insurance.
Most African markets are considered as uncharted territories with challenging business environments. Thus, the business strategies foreign investors apply elsewhere in the world cannot be used in the continent. Accordingly, the business approach to the continent by financiers and project sponsors will have to be informed by a comprehensive understanding of individual country and regional dynamics. The ECIC excels in this regard by virtue of its presence and proximity to most African markets. Through its credit enhancement and risk mitigation facilities the ECIC enables South African exports and outward investments. Access to competitively priced export credit creates the ability for local contractors to bulk up and compete more effectively in foreign markets. With the ECIC in support of such transactions, the South African export market is enabled and contractors are becoming more credible. This has a far-reaching impact on fostering a stronger economy and drives domestic job creation, contributions to fixed capital formation and the GDP, as well as the generation of fiscal revenue. The ECIC is also able to price African risk more competitively, given its knowledge of the African market. The ECIC addresses obstacles through facilitation and by aiding in the release of funding required for infrastructure, which is of particular concern to global organisations seeking a presence in Africa. Export credit is imperative, considering capital exports are long-dated assets. It is customary for firms to finance such exports with bank debt for cash flow management purposes. Export credit financing is therefore an important and key aspect of international trade. The ECIC is committed to sustainable business through innovative solutions, operational and service excellence, business development and strategic partnerships. In enabling frontier markets to optimise production, the ECIC is effectively motivating a positive socioeconomic impact
Export Credit Insurance Corporation of South Africa SOC Ltd. Block C7 & C8 Eco Origins Office Park, 349 Witch Hazel Avenue, Highveld Ext 79, Centurion, 0157, South Africa Tel: +27 (0)12 471 3800 Fax: +27 86 681 2672 E-mail: email@example.com Web: www.ecic.co.za ECIC is a registered service provider. FSB No: 30656
SUCCESSFULLY GROWING OUR PORTFOLIO IN FRONTIER MARKETS
If youÊ¼re planning on exporting to or investing in capital projects beyond our borders, contact ECIC for assistance +27 12 471 3800 | firstname.lastname@example.org | www.ecic.co.za ECIC is a registered service provider with the FSB No. 30656
THE BUSINESS OF AFRICA Words Prof. Lyal White
A fascinating picture is beginning to emerge of African firms investing more and more successfully in their own continent. Is it because they know local markets and conditions better than players from much further afield? Which countries are producing the big success stories? And what are the barriers preventing African firms from becoming even more successful? Professor Lyal White, who heads GIBS’ Centre for Dynamic Markets, examines these and other questions in a new book co-edited with colleagues Ifedapo Adeleye and Nathaniel Boso – Africa-to-Africa Internationalization: Key Issues and Outcomes. He spoke to Acumen at GIBS.
GORDON INSTITUTE OF BUSINESS SCIENCE
WHAT DO YOU MEAN WHEN YOU TALK ABOUT AFRICA-TOAFRICA INTERNATIONALIZATION?
Put simply, we are referring to Africans investing in other African markets. In the field of international business, there’s a lot of discussion about internationalization and it can cover things like market entry and exports, and so on. But when it comes to firms from dynamic markets, very little has been written on the topic, and even less about the internationalization of African firms. Yet, over the decade between 2004 and 2014, we saw the rise of the African multinational, companies from particularly South Africa, Nigeria and Kenya, expanding into other parts of Africa. DID THIS HAPPEN QUICKLY?
In some instances, yes, but it depends on where you look and into which markets. As I’ve mentioned, South Africa, Nigeria and Kenya are the best examples because they are, effectively, the swing states in their respective sub-regions. We have always
known that South African companies have had a global reach – far more so than firms from other similar-sized economies – but Kenya and Nigeria now have companies that have innovated, built competitiveness and expanded into other African markets very, very quickly. To come back to your question: between 2002 and 2014, we saw the emergence of a number of names and brands previously unknown to us. For example, if you had asked back in 2002 whether anyone had heard of Dangote, maybe one in ten would have raised a hand. Now I think it’s just about ten out of ten, because Dangote is the largest African multinational on the continent. AND ALL OF THIS DESPITE WELL-KNOWN ISSUES LIKE POOR ROADS AND CROSS-BORDER INFRASTRUCTURE, CORRUPT CUSTOMS, POLICE AND TRAFFIC OFFICIALS, AND HIGH TARIFFS?
Let’s not forget that this hampers trade and investment not only for the African players but also multinationals and others
entering these African markets. They are hampered by these ‘institutional voids’, as they call them, which include anything from poor infrastructure, endless waits and costs of crossing borders and then the red tape which is associated with that. This, obviously, has detracted from the growth of many African firms although some would argue – and this is a very interesting area of research – that African firms have managed these gaps in the fabric a lot more effectively. They’ve managed these difficulties and challenges because this is where they come from and they understand the culture of doing business in and across Africa far better perhaps than multinationals from developed markets in the north and the west.
. . . THEY UNDERSTAND THE CULTURE OF DOING BUSINESS IN AND ACROSS AFRICA . . . ”
WHERE DOES SOUTH AFRICA FIT INTO THIS PICTURE?
South Africa is a strange example. I say strange almost in admiration, because they have leveraged two important strengths. The first, as we know, is that they are very westernoriented in their approach, their business acumen and strategies. They have expanded far more quickly than similar firms in other similar-sized markets. This could be the impact or effect of history or even the legacy of apartheid. Just as apartheid ended, South African firms expanded abroad very quickly because they had accumulated a lot of capital. But the second reason is that South African firms have something in their DNA which seems to wedge them between a western-based value system and the fact that they were born in South Africa. They have emerged from often-complex, even precarious, markets, influenced by a range of socio-political and other economic factors which may have helped them build their competitive performance in very, very complex markets. SO HOW DO YOU EXPECT AFRICA-TO-AFRICA INTERNATIONALIZATION TO DEVELOP OVER THE NEXT FEW YEARS? WILL AFRICAN FIRMS CONTINUE INVESTING IN THE CONTINENT?
This is becoming even more interesting than looking at the achievements of South African firms. We’re seeing the emergence of the next tier of large economies. Included in this list is Nigeria. Even though it is one of the largest economies and has the largest population in Africa, it is still very, very underdeveloped and far behind South Africa in terms of economic sophistication. But what we have seen in Nigeria is the emergence of local firms that are not only interested in the Nigerian market, but also interested in the West African market and in other sub-regional markets like East and Southern Africa. When we travel to Kenya, for example, we see a huge number of Nigerian firms that are interested in anything from FMCG, industry, manufacturing, all those types of things. Nigerians are increasingly travelling around the continent. There is similar progress from East Africa, where there has been a form of specialisation in financial services. An example is Equity Bank, the second-largest bank in Kenya after KCB – Kenya Commercial Bank. The expansion of Equity Bank is exciting because their business model, which they have nurtured in the Kenyan context, is now being adapted to other low-income markets across the African continent.
We are going to see an increase in Africa-to-Africa investments and we’re going to see African firms competing much more effectively in these markets. This is not because they are more competitive or stronger or bigger than rivals from traditional markets, but because they seem to understand Africa’s markets a little bit better. The modus operandi, or the culture of doing business, is very, very different, I would argue, to other parts of the world. Even to other emerging regions. A RECENT EDITION OF THE ECONOMIST HAD A COVER STORY ABOUT THE DECLINE OF THE GLOBAL MULTINATIONAL AGAINST THE BACKGROUND OF AN UNCERTAIN GLOBAL ENVIRONMENT. DOES THIS LEAVE AN OPEN DOOR FOR AFRICAN FIRMS?
In international relations, experts would argue that we have seen a ‘realist default’ – firms and individuals look inwards and keep their cards close to their chest. This is of great concern to emerging regions but it does present an enormous opportunity because it opens up space for emerging market multinationals to really surge ahead, as they did between 2007 and 2010, when they built their competitive advantages in new markets. They showed how to do this through a very nuanced approach to investments. Where does this leave African multinationals? It opens up space and new opportunities. We see now, for example, the Dangote Group diversifying its operations beyond just FMCG and cement, all the way to oil refineries and, more recently, into building one of the biggest truck fleets in Africa. Of great concern is that African multinationals can’t rely on capital from their own markets. They need to scale up and capitalise in new markets, they need to list on stock exchanges perhaps in London and elsewhere. With the retraction of the global firm, this does pose a huge problem in terms of injecting much needed capital. The other threat that it raises is the one that we’ve been watching very closely over the last 20 years here in Africa: when there’s a retraction of the big western multinationals, the door opens for Chinese and other firms from East Asia, including India and the Philippines to fill the gaps.
*Africa-to-Africa Internationalization – Key Issues and Outcomes edited by Ifedapo Adeleye, Lyal White and Nathaniel Boso is published by Palgrave Macmillan at R2 825
CORPORATE LEADERSHIP: NAVIGATING AFRICAN MARKETS Words Dianna Games
It is often the soft issues that trip up companies doing business in Africa; the failure to intrinsically understand the local culture and business mores, which can have an impact on the ability of foreign companies to compete on the continent.
GORDON INSTITUTE OF BUSINESS SCIENCE
Succeeding in Africa’s corporate landscape demands a lot of leaders and managers. The environment in most countries is dynamic, uncertain and prone to disruption and even sabotage by government officials. The operational terrain tends to be fluid and unpredictable. There are many stakeholders, each with different expectations of what companies should be delivering, not just in their own sectors but to development more generally in both urban and rural areas, often doing the government’s job for them. It is no longer enough for companies to have corporate social responsibility budgets to keep everyone happy while they carry out their core business. Stakeholder engagement and managing expectations have become central to the job of corporate leaders. They have to be nimble and innovative. Leaders of global companies running operations in Africa have another challenge: they have to figure out how to adapt traditional western business models to succeed in markets characterised by significant infrastructure deficits, skills shortages, overzealous and mostly inefficient bureaucracy and weak institutions. They also have to learn how to navigate local business practices, networks and competition. Growing domestic businesses have become serious competitors to Multinational Corporations (MNCs); they have helped to shape the business landscape and know how to make it work for them.
A culture of doing business has evolved around the problems and inefficiencies inherent in many economies, which has elements that are regarded by outsiders as being corrupt but which are accepted locally as being business norms. This includes issues such as paying commissions for deals, introductions and information or giving unsolicited gifts to prominent people who have influence in the society. This is not easy for MNCs from western markets who have a raft of international conventions to comply with. Rules drawn up in, and suited to, developed economies make it difficult for companies to adapt to less-developed operating environments, including in Africa.
GRAFT With African countries regularly ranked at the top of Transparency International’s Corruption Perceptions Index, dealing with graft is usually the main concern for MNCs operating on the continent. According to the World Economic Forum (WEF) Global Competitiveness Report 2015-2016, corruption ranks alongside access to finance and government bureaucracy as the most significant economic and political barrier to business. Companies normally state that they adhere to a policy of zero tolerance towards corruption as they cannot afford to be caught up in dealings that will compromise their brand and reputation. But this is not always as easy as it sounds.
Graft can come in many different forms. It is not always an ‘upfront’ transaction such as a bribe in return for an operating licence or a government contract. It can be much more insidious. Ethical dilemmas are unpredictable and can emerge without notice. Foreign managers, often with little experience of such matters, have to react fast in complex situations. But how you react, particularly with state officials, is important. Being affronted or hostile can have implications for the company with the agency or ministry concerned down the line. To assist them, companies need to become familiar with the potential ethical issues that may arise and devise a strategy to manage them. MNCs advise staff to use common sense or to consult their colleagues on ethics issues if the line seems particularly blurred. One rule of thumb is that if you would not be comfortable sharing your actions with colleagues, it is best to err on the side of caution. Almost every African country has mechanisms and institutions in place to fight corruption but the danger is that they themselves, or elements within them, become corrupt. Judicial officers, too, can be susceptible to incentives to ensure that court cases or business disputes go one way or another, often in favour of a local shareholder in a dispute with a foreign investor. MNCs’ investment treaties usually include a proviso for disputes to be heard in international courts or tribunals. MNCs have tried to get around compliance with western anticorruption conventions by outsourcing functions with high exposure to government officials and agencies to third parties. These tend to be local companies who know how to “manage” their officials and may, without disclosing this, pay “dash” to unlock bottlenecks, source deals or facilitate government business. The definition of such parties is extremely broad and allows a lot of leeway for ignorance of the business practices of these companies. Increasingly, strict due diligence of third parties is being conducted to ensure the alignment of their practices with the company’s own ethical standards. Companies listed on international stock exchanges have another raft of compliance issues to deal with. Their rules, drawn up in, and suited to, developed economies, make it difficult for compliant businesses to adapt to less-developed operating environments in Africa.
Take South African petrochemicals giant, Sasol. One of the company’s most strategic markets outside its home base is neighbouring Mozambique, a mostly poor and undeveloped nation but one with some of the world’s highest gas reserves. The company has been exporting gas to South Africa’s industrial heartland over more than a decade from its gas plants in a fairly remote part of southern Mozambique. As one of the first big international investors in Mozambique after the war, Sasol’s market entry and its First World operations in the midst of underdevelopment and poverty raised
YOU CAN’T BE ONE SASOL IN LONDON AND ANOTHER SASOL IN MOZAMBIQUE” expectations of the role it would play in the country and what it could offer locals. However, many actions that seem innocuous locally, and are even expected, run counter to the best practice principles embedded in Sasol’s Group Code of Conduct. Giving gifts to officials or paying for them to travel to South Africa to see the company’s operations there are not allowed. Even giving villagers near the plant lifts on the back of branded company vehicles flouts company policy. In fact, it is Sasol that is flouting the norms of life in Mozambique. The inability of Sasol’s managers to follow local business norms has had a knock-on effect on the company’s reputation among locals who see the company as being arrogant, ungenerous and out of kilter with local norms. As a company executive said in a GIBS article in the book Africa-to-Africa Internationalization: Key Issues and Outcomes (Palgrave Macmillan, 2016), “You can’t be one Sasol in London and another Sasol in Mozambique”.
Although these may seem like small issues at source, the way international companies are regarded by African governments, a perception often informed by reports of behaviour at a local level, can be far-reaching, potentially even affecting future state contracts and licences. It is critical for leaders to understand the links between the soft issues, such as perception and legacy issues that may have arisen due to poor entry strategies, and the hard operational issues. Local management can help in this regard. It is easy to see graft as emanating mostly from government officials but international companies have also been implicated in unethical behaviour, often to stave off competition or to deal with problems in the local business environment. For years, countries such as the UK, Germany and France allowed bribes to be claimed against tax as legitimate business expenses because it facilitated business and enabled timeous delivery of goods and services. The African Union’s high-level panel on illicit financial flows, which estimates that between $60bn and $80bn is leaving the continent illegally every year, claims that 60% of this activity derives from the activities of large commercial companies in the form of transfer pricing, tax dodges, trade misinvoicing and other such behaviour. Their defence is that such actions are a response to weak systems and institutions, widespread graft and challenging operating environments. Some companies have argued that they prefer to have their systems favour jurisdictions where tax payments do
not fall victim to state corruption and inefficiency. They argue for the need to protect their operations against the consequences of poor and often unpredictable policy and to ensure good returns in high-cost, difficult environments. But corruption in any form, once the norm, is now a big risk for companies, particularly MNCs. It does not make business sense to enter into unethical deals in emerging markets. The gains are short-term and undermine the development of sustainable economies. The risks of unethical practices for business are greater than ever. Corporate reputation matters more in a connected and competitive world dominated by social media and rapid information flows. Developed country multinational corporations have a plethora of anti-corruption conventions and legislation to adhere to, which limits their ability to behave unethically or at least imposes penalties for such behaviour. The US Foreign Corrupt Practices Act (1977) and the UK Bribery Act (2010) carry stiff penalties for companies found to have bribed foreign public officials, for example.
A critical issue for MNCs is having a set of non-negotiable corporate values and standards of governance through the group and finding ways to implement them in challenging markets where the on-the-ground realities can make it tough to do so. The key to managing this lies in strategic and skilful stakeholder management but also in getting staff to ‘live’ the values of the company. Business schools are seeing increasing demand from executives for courses on how to address the new challenges faced in an ever-changing world where risks are more insidious than ever.
GORDON INSTITUTE OF BUSINESS SCIENCE
For example, the Giving Voice to Values curriculum is being taught by leading business schools across the world and is being adopted by MNCs. It involves training staff how to prepare for and deal with ethical challenges that may be presented by colleagues, shareholders, bosses and others in the workplace, and reacting to them in a way that is aligned to the core values of the company and the individual.
It is not foolproof. For example, in 2015, Unilever suspended six members of its top management in Zimbabwe for violating company corporate governance principles. There was no line between personal and company business with some found to be running their own thriving businesses in addition to their corporate jobs with the company. Most large MNCs these days have company ethics councils that consider possible breaches of behaviour by staff across jurisdictions on a regular basis and catch problems before they get into the media. It is also helpful for companies to be embedded in a market in terms of a local listing, having local stakeholders and equity partners and well-known business leaders on the board or at the helm. Business leaders operating in emerging markets have had to find ways to make strategy relevant to the context in which they find themselves. This has metamorphosed from corporate social responsibility add-ons to the more integrated concept of shared value, which embraces the concept of ‘doing well by doing good’. This is increasingly a driver of business strategy. It is not limited to consumer companies helping people to improve their lifestyles through buying hygiene and fortified food products but extends to mining, energy and many other sectors. Recruitment agencies are having their work cut out for them as they try to meet the demand for a new breed of corporate leaders to head up companies competing on this changing and modernising continent. The new leader is someone, they say, who understands not just the technical aspects of the business opportunities but the local business and cultural norms too. Finding talent on a continent with substantial skills shortages is not easy and many source African skills from the Diaspora in international recruitment roadshows. When they find it, global companies do what it takes to hang onto it, leveraging their brand and corporate reputation and paying handsomely to deter predators. Governments are increasingly cracking down on expatriate permits and anyway, companies are eager to get corporate leaders who have an intrinsic understanding of and links to the challenging terrain that Africa presents
IT DOES NOT MAKE BUSINESS SENSE TO ENTER INTO UNETHICAL DEALS IN EMERGING MARKETS”
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DOING BUSINESS IN CHILE Words Tom Hennigan, São Paulo
Since democracy returned to Chile in 1990 the Pacific nation has become the envy of the rest of South America.
Like on the rest of the continent, the decades before 1990 had been turbulent both politically and economically. They included an attempted socialist revolution aborted by the CIA-backed military coup of 1973 which produced the long, bloody and corrupt dictatorship of Augusto Pinochet. But since voters finally seized their chance to turn Pinochet out of office the country has flourished. Politically, it is one of the continent’s most stable – boring, even – nations ruled alternatively by two centrist blocs, one leaning left, in power most of the time at the expense of its rival on the right. This political class has set itself the ambitious target of eliminating extreme poverty by 2020, which would be a historic achievement in what is the world’s most socially unjust continent. Already it has largely done away with the shanty towns that still scar cities and towns across the region. The United Nations has praised this commitment to poverty reduction by means of a battery of social programmes, describing Chile as “a model for the Latin American region in terms of its commitment to human rights, its high economic growth rates, and its sustained social policy innovations”.
THE RIGHT CLUBS
Economically, it has thrived, a fact recognised in 2010 when the country became the first – and to date only – South American member of the Organisation for Economic Co-operation and Development (OECD) in recognition “of nearly two decades of democratic reform and sound economic policies”. It is a now a proud trading nation where exports and imports combine to make up 60% of GDP. Having shunned the protectionist Mercosur trade bloc dominated by Brazil and Argentina, it is instead a member of the far more dynamic, outward-looking Pacific Alliance group along with Peru, Colombia and Mexico. For decades, it was not much of an exaggeration to reduce Chile’s economy to one word – copper. The country has by far the largest reserves of this vital metal for industrialisation and urbanisation. During much of the 20th century Chile’s economy rose or fell with the metal’s price. But in recent years there has been huge diversification away from the metal. Its service sector is one of the most respected in Latin America, represented by giants like Latam, the region’s biggest carrier, as well as a robust
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GORDON INSTITUTE OF BUSINESS SCIENCE
Chuquicamata, the largest open-pit copper mine in the world, Antofagasta region, Chile.
financial sector. The country has become a major agricultural exporter as it takes advantage of a Mediterranean climate in its central regions, watered by snowmelt from the Andes, to become the world’s fourth-biggest wine exporter as well as a global supplier of fruit and vegetables. Further south, the country’s forests have become a major source of wood and wood products as well as the centre of a burgeoning renewable energy sector, while the spectacular scenery of the Atacama Desert in the far north and Patagonia in the far south, allied to low levels of violence, mean per capita, Chileans welcome far more foreign tourists than their neighbours Argentina and Brazil.
This diversification has helped the economy traverse the end of the commodity cycle of recent years, that has accompanied the slowdown in Chinese demand for its copper – still worth around half of all exports. Unlike neighbouring Brazil and Argentina, sunk in deep recessions, Chile has managed to keep expanding output though at a slower rate during the last three years. But this dip in growth has nevertheless exposed underlying tensions in Chilean society. Membership of the OECD might have marked Chile’s entrance into the ranks of ‘developed’ nations but this progress has ironically shone a harsh light on the country’s failings. In this rich nation’s club, Chile has the highest levels of inequality and slower growth has stoked anger among the population at the failure to share the benefits of democracy more widely. A lid was kept on this discontent while fast growth seemed to open up exciting horizons for everyone. But, as in other western democracies, economic slowdown has led to social and political unrest as the promised land suddenly seems further away than was recently thought. The result has been street protests over education funding and in opposition to labour reforms without a prior move to tackle the country’s stubborn concentration of wealth.
. . . CHILEANS WELCOME FAR MORE FOREIGN TOURISTSTHAN THEIR NEIGHBOURS. . . ” presidential election. The country’s two main political blocs look increasingly exhausted as exemplified by their candidates for this year’s poll. Representing the left is moderate socialist Ricardo Lagos, 79 years old and looking for his second term to succeed his socialist colleague Michelle Bachelet who is herself completing a second term. The main right-wing bloc has also put up another former president as its candidate. At 67 years of age, millionaire businessman Sebastián Piñera wants another shot at running the country after a first term sandwiched between the two Bachelet administrations. This rather stale political act is now wearing on voters. In recent municipal elections there was an unprecedented 64% abstention rate which underlined how parties have lost credibility. Only 10% of voters approve of the two traditional ruling blocs. “Chile’s neo-liberal model is in question, but neither the traditional left and its legacy, and especially not the right, are in the position to change,” notes political analyst Guillermo Hoizmann. Into this gap have stepped numerous candidates looking to break the duopoly of Chile’s traditional centrists of left and right. Both are dissidents from their respective tribes. To the right of Piñera is the noisy populist, Manuel José Ossandón. To the left of Lagos, the most significant challenger to the traditionalists is journalist Alejandro Guillier. A senator from Lagos’ New Majority centre-left bloc, Guillier is making an independent bid to be its presidential candidate, shaking up the
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Despite this, Chile remains a stable place. There is none of the social instability that provokes the episodic explosions of social violence in Brazil or the rancorous politics of Argentina. But there could be a shift in the tectonic plates with November’s
Haras de Pirque vineyards, Chile
. . . THERE COULD BE A SHIFT IN THE TECTONIC PLATES WITH NOVEMBER’S PRESIDENTIAL ELECTION” The Paine small mountain group in the Chilean Patagonia, southern section of the Andes mountains
DOING BUSINESS IN CHILE
Like most of Latin America, Chile’s business culture is relatively closed and revolves around long-established family and school networks. Someone from this background can open many doors for a foreigner looking to get a foothold in the country. Chileans are less flamboyant than their Argentine neighbours which can leave them seeming stand-offish by comparison. But if you put in the effort you can build lasting partnerships within one of the continent’s most dynamic business communities. When starting off, remember lots of eye contact. During early meetings you will likely exchange a handshake regardless of gender. But all going well, as the relationship develops, a hug should replace it. Like elsewhere in the region, there is a premium placed on establishing trust between prospective business partners. So plan on spending plenty of face time with your contacts. An interest in the country will go a long way in building friendships. Chileans are fiercely proud of their republic, as you will notice if in the country when the national football team wins a match. Let your hosts know how excited you are to visit and how much you are looking forward to learning a bit more about the country. If you have an interest in wines bring it up. The country’s wine culture is sophisticated and a source of great national pride. Much of Chile’s business class speaks good English and is well travelled. Many executives have studied abroad, especially as more multinationals set up operations there. But there are local customs to be observed. Do not rush into the main reason for your meeting. Be prepared to talk about family. If you are arranging a business dinner, you will be expected to pay the bill. If you are the guest, offer to pay but do not expect to do so
. . . CHILE’S BUSINESS CULTURE IS RELATIVELY CLOSED . . . ”
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GORDON INSTITUTE OF BUSINESS SCIENCE
contest. What was once seen as a two-horse race between two old hands looking for another stint in office has become far less clear, upsetting Chile’s staid political certainties. Polls show Guillier way ahead of Lagos and close to Piñera. His campaign is being driven by support from those – mainly young – discontented with the political status quo even though he himself has made his political career within it, leaving some with doubts about how much of a break he actually represents. His main message is that he will more vigorously tackle Chile’s concentration of wealth in order to drive progress in delivering better education and health services for citizens. “Guillier can transform himself into the guarantee of a new centre-left proposal that comes from grass roots,” is how Hoizmann puts it. But Lagos might be able to use the party machines to beat back this insurgency and secure the nomination. Polls show that might be fatal for his chances of winning the presidency, even if Guillier does not respond to being denied a crack at the main prize by mounting an independent run. For now, Piñera remains the frontrunner and if his previous term in office is anything to go by, that will mean a frenetic personal style masking continuity. Whoever is sworn in next March after a likely second round (Chile has a particularly long transition period) might though keep from undertaking anything too drastic no matter the discontent to be seen on the street. The economy is now showing signs of exiting its recent doldrums, largely driven by increasing consumer confidence. Retail sales are on the increase helping drive an up-tick in the labour market. Meanwhile the old Latin American scourge of inflation, which is causing such problems in regional powerhouses Brazil, Mexico and Argentina, has been licked in Chile with real wages increasing thanks to a bout of that lesser-spotted Latin bird – disinflation. Renewed growth – and confidence – might buy the new administration time to work out how to tackle the causes of the current discontent without letting it – or any hastily conceived solutions – put the great progress of the last quarter century at risk.
COLLABORATION IS KEY TO SUPPLY CHAIN SUCCESS Monica Singer, in conversation with Chris Gibbons
A recent McKinsey report states that: “The competitor that’s best at managing the supply chain is probably going be the most successful competitor over time. It’s a condition of success.” Various strategies, technologies and approaches are leveraged in the quest for optimal supply chain management, but Imperial Logistics Chief Strategy Officer Cobus Rossouw contends that collaboration is one of the most critical keys to supply chain success.
Cobus Rossouw, Chief Strategy officer
“Collaboration can revolutionise supply chains, but unfortunately, it is not always prioritised by supply chain professionals,” he states. Rossouw offers five reasons for supply chain professionals to put collaboration at the top of their agendas, and five reasons why it may not be happening in your business:
5 WAYS COLLABORATION CAN REVOLUTIONISE YOUR SUPPLY CHAIN • Any business depends on its customers (and their customers) and suppliers (and their suppliers) for its own success. • Collaboration with customers and suppliers builds partnerships, which are much better than transactional relationships. • The supply chain requires trade-offs to achieve its optimal state – we cannot expect perfect availability with the lowest operating cost and no stock on hand, but we can achieve the optimal balance between service, cost and agility. • Collaboration aims at finding the ideal trade-off between organisations to ensure that the end consumer has access to the best proposition of the end-to-end value chain (which is made up of your business, all these customers and their customers, and suppliers and their suppliers). • Collaborative planning improves availability, collaborative continuous improvement removes cost, and structured communication improves agility.
5 REASONS COLLABORATION IS PROBABLY NOT HAPPENING IN YOUR BUSINESS • Your procurement people are focused on buying at the right price against the technical specification provided by business
and may not have the mandate (or ability) to identify trade-offs to build partnerships. Your sales people believe that the customer is king and do not consider measuring the impact of the customer’s actions on your cost and ability to serve them (…and we all know that even kings and presidents are subject to some challenge from the servants). Your production people are focused on quality at the lowest cost which is compromised through agile short production runs and product diversification, which are exactly what could differentiate your business in the eyes of your customers. Your financial people measure lots of things but probably spend very little time asking, “What if we do things differently?” Your HR people are fighting labour battles and have probably never considered how important it is to align your culture with the culture of your customers and suppliers.
“Collaboration across your supply chain requires the involvement of all parts of your own business, and clearly internal collaboration is essential for external collaboration to succeed,” Rossouw concludes
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EIGHT THINGS TO SEE & DO IN CHILE Words Tom Hennigan
When the business is done, Chile reveals why it is one of the world's most popular tourist destinations.
GORDON INSTITUTE OF BUSINESS SCIENCE
Chile’s capital is the main point of entry and a buzzing metropolis that is home to almost half of the country’s population. Dramatically framed by the Andes, it is a patchwork of distinctive
Though more than 3 500 kilometres from the mainland, this mysterious, remote island has been part of Chile since 1888. It is rightly famous for its 887 giant moai statues that stare out at the
neighbourhoods from the tony to the bohemian, meaning there is a variety to it without the chaos of its regional peers like Lima, Buenos Aires or São Paulo.
empty Pacific Ocean giving the place a mystical – some say haunted – vibe. Thankfully for those who make the effort to visit, as well as archaeology, there is excellent adventure sport, scuba and surfing.
If you ever wanted to catch a glimpse of what life is like on Mars, head to the surreal landscapes of the Atacama in Chile’s far north which is the world’s driest desert. The air is so clear that astronomers from across the globe come here to stare at the stars through it. For exploring, base yourself in the adobe village of San Pedro.
A world apart at the end of the world. Patagonia is a spectacular region at the tip of South America shared between Chile and Argentina. It is a harsh, lonely region that is home to some of the world’s most stunning if hard to access sights. One of the highlights is Chilean national park Torres del Paine with its dramatic granite towers.
THE LAKES DISTRICT
FISH IN THE MERCADO CENTRAL
A port town that boomed as a stop-off point for ships going round the Cape Horn to San Francisco, Valparaíso is Santiago’s bohemian alter ego. Somewhat dilapidated now far fewer ships call, it has been recolonised by young artists, writers and musicians that have given it a colourful makeover that is beginning to attract the more adventurous tourists from Santiago.
Somewhat overshadowed by the Atacama to the far north and Patagonia to its south, Chile’s Lakes District is nevertheless a stunning region of glacial lakes fringed by snow-capped volcanoes. Here bucolic local villages preserve the traditions of the Mapuche natives and settlers from Europe’s Alpine region. In winter, the snows make for some of South America’s most agreeable skiing.
Chile’s fertile Central Valley is home to some of the world’s most productive wineries. The area has rebounded after being badly damaged in 2010’s huge earthquake. They’ve been making wines here since the 1550s and the patchwork of specific wine regions north and south of Santiago all have increasingly sophisticated visitor experiences.
Thanks to its long coastline off which lies rich fishing grounds, Chile has a love affair with fish the way the Argentine cousins over the Andes have with beef. For an early introduction, head to the main market in central Santiago. Here you can experiment with excellent ceviche, more traditionally associated with Lima in neighbouring Peru. For a distinctly local dish try the caldillo de congrio fish stew
GOING AGAINST THE STREAM Words Eugene Yiga
Catherine Lückhoff, founder and CEO of NicheStreem, is making waves in the online music world. Is streaming the future of music? Catherine Lückhoff believes so. More than that, she believes that you can make music streaming profitable by giving fans an app built around their tastes and doing so at a fraction of the cost. It’s what inspired her to create NicheStreem, a platform that focuses on building targeted and profitable music streams. “NicheStreem creates ‘homes’ the music fans love and a dedicated distribution portal for the artists who create the music,” Lückhoff says. “Our focus is on emerging markets where there is a need for affordable, curated music solutions, and where music and cultures are intrinsically linked.” Catherine Lückhoff
Liedjie.com, its first stream, launched in February 2016 and is available on Android, iOS, the web, and via
an embeddable web widget on participating Media24 websites. The service offers a 30-day free trial, after which the monthly subscription fee is R49.99 for unlimited, ad-free and on-demand listening with offline capabilities. “For the user it offers a culturally relevant, uniquely curated experience,” Lückhoff says. “And for the artist it offers an opportunity to not only be the star of the show, but to also earn meaningful revenue from a streaming platform.”
KEY MILESTONES FOR RECORDED MUSIC
But can artists make money if they aren’t megastars like Beyoncé or Adele? The numbers (like Shakira’s hips) don’t lie. According to the International Federation of the Phonographic Industry’s Global Music Report for 2017, digital sales were half of worldwide industry revenues. Furthermore, digital revenue growth was up over 17% while streaming revenues grew over 60%, more than offsetting the decline in downloads (down 20.5%) and physical formats (down 7.6%). “After two decades of almost uninterrupted decline, 2015 witnessed key milestones for recorded music: measurable revenue growth globally; consumption of music exploding everywhere; and digital revenues overtaking income from physical formats for the first time,” says Frances Moore, IFPI Chief Executive. “They reflect an industry that has adapted to the digital age and emerged stronger and smarter.” Alas, celebrations are muted. Even though streaming now accounts for 43% of digital revenues and is close to overtaking downloads to become the industry’s primary digital income stream, many streaming services are reporting huge losses. Spotify, a digital music service, reported losses of $194m for 2015. SoundCloud isn’t faring well either, having lost $52m the same year. “The occurrence of these risks can seriously affect the ability of the group to generate sufficient cash to cover the planned expenditures,” says Alexander Ljung, SoundCloud co-founder. “[This] could require the group to raise additional funds which have not yet been agreed.” Read through the corporate speak and what he’s saying is that they could run out of cash before the end of 2017. Worse, even though an estimated 100 million people are now paying for music subscriptions, most artists don’t see a viable return. Spotify’s average payout ranges from $0.006 to $0.0084 per stream. It is any wonder that many musicians, including singer Taylor Swift, have been vocal in their unhappiness? “The message is clear and it comes from a united music community: the value gap is the biggest constraint to revenue growth for artists, record labels and all music rights holders,” Moore continues. “Change is needed.”
. . . YOU CAN MAKE MUSIC STREAMING PROFITABLE. . . ” ON THE RIGHT TRACK
Part of the problem seems to relate to what psychologist Barry Schwartz discusses in his writing on the paradox of choice: when there’s too much to choose from, people tend to choose nothing at all. Indeed, according to MIDiA, a boutique media and technology analysis company, only 5% of digital catalogues are frequented. This means that fans repeatedly listen to music they already love. A special report from The Economist, published in February, corroborates this evidence by stating that of the 8.7m tracks that sold at least one copy in 2016, 96% sold fewer than 100 copies and 40% were purchased just once. Furthermore, Spotify said that 4m of its songs in 2013 (representing 20% of its catalogue at the time) received no interest at all. “All the music in the world is a compelling proposition for super fans, but it is both a daunting prospect and more than is required for casual fans,” writes Mark Mulligan on the Music Industry Blog. “[Niche services] will be crucial to unlocking the scale end of the subscription market and they will be needed sooner rather than later.” For Lückhoff, this is proof that NicheStreem is on the right track. She acknowledges that there are companies with niche music streaming services (such as The Overflow in the United States) but, in Africa, NicheStreem is the first to take this approach. And while services such as Apple Music feature Afrikaans content, Liedjie is the first dedicated service of its kind. “What sets us apart is our price, depth of catalogue, content curation and localisation in terms of language, with Liedjie available for Afrikaans and English language settings,” she says. “But competition is a good problem to have as it proves that there is a market and it helps to grow the total addressable market with each new user who learns about and embraces streaming as a service.”
A PERSONAL EXPERIENCE
Right now, the company is doing “as well as any start-up can hope”. While licensing agreements prevent it from sharing subscriber numbers publicly, Lückhoff is able to disclose that, as of June 2017, NicheStreem had 13k+ registered users. “Considering we’ve had limited to no marketing budget, we’re pleased with the results,” she says. “Media24 just closed a $500k
The NicheStreem team
investment into NicheStreem as part of our $1.5m Seed Round and the first campaigns went live on Netwerk24 and Huisgenoot in January.”
GORDON INSTITUTE OF BUSINESS SCIENCE
Since the launch of Liedjie.com, which features 40k+ tracks and 1 000+ curated playlists, the service has streamed in excess of 850k tracks. It’s one of the reasons Lückhoff is confident in the company’s ability (as well as that of streaming services as a whole) to compete with radio. “The biggest difference is that streaming is an on-demand service versus radio where the station/DJ decides what will play next,” Lückhoff says. “I think the two are complementary with streaming being more of a personal experience and radio still filling the shoes of information disseminator, tastemaker and community builder.”
MOVING THE NEEDLE
Looking ahead, Lückhoff is excited about several trends. Digital services embracing data analytics, transparency and value-added services (such as ticketing) are a definite positive. “Our back end is built to gather in-depth data on target audiences, which we plan to harness to personalise the experience for each user through real-time recommendations and value-added services,” she says. “Data also allows us to connect brands, artists and users in a meaningful way.” NicheStreem is currently focused on scaling Liedjie both in South Africa and in expat markets. It also has two more streams in
. . . THE COMPANY IS DOING ‘AS WELL AS ANY START-UP CAN HOPE’” the pipeline for 2017/2018 and will soon begin creating a gospel stream focused on sub-Saharan Africa. “Each niche service will have its own target audience, such as Nigerian gospel fans or Arabic music fans,” she says. “And each stream is an opportunity to unlock mutually beneficial distribution partnerships with telcos, media, cultural societies, artists and brands who all gain huge value from the relationship, be it access to audiences and/or content, stickiness and cultural relevance.” By ensuring that artists only compete against a smaller pool of their peers, they’ll have a better chance of earning more money. Indeed, because this is exactly what the company’s streams offer, she’s confident that artists will have a more equitable chance of “moving the needle” on their market share.
“We want to prove that streaming can be profitable for the service and the artist,” she says. “It is only when both parties see the upside that the user will win.” Learn more at www.nichestreem.com and www.liedjie.com.
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CONNECTING FOR GROWTH, ECONOMIC INCLUSION AND PROSPERITY Words Prof. Adrian Saville
The 4th edition of the Visa Africa Integration Index has just been published. What does it track, why, and what does it reveal? Economic history is rich with examples of countries that have found the path to prosperity. These miracles, wide-ranging and numerous, include countries as varied as Japan from the 1940s; South Korea from the 1960s; Chile from the 1970s; and Estonia from the 1990s. Each of these economies has transformed from poor to prosperous, which means not only elevated levels of income per person, but also social prosperity, including long life expectancy, low infant mortality rates, high labour force participation rates and so on. Whilst many countries have found this path to prosperity, there are also many that failed to find the path. Historically, the bulk of sub-Saharan Africa’s economies belong to the latter group.
GORDON INSTITUTE OF BUSINESS SCIENCE
Take one simple measure of prosperity, per capita income. Between 1900 and 2000, global per capita income grew five times, whereas per capita income in sub-Saharan Africa less than doubled. In sweeping terms, the region was left behind, leading to an animated narrative about ‘the hopeless continent’. But, in the last 15 years, this story has changed. Taking the year 2000 as a marker, a number of sub-Saharan African economies have switched tack and now find themselves on the path to prosperity. As an example, Rwanda has achieved annual economic growth of 7.6%, which means its economy has doubled in size every nine years. Ethiopia is another stand-out case, having grown at 9.2% per year since 2000, translating into a fourfold increase in per person income in just 15 years. These are just two country examples that sit behind a bigger story. Since 2000, sub-Saharan Africa has achieved a growth rate in per person income double the world average, and has held firmly to the mantle of second-fastest growing region in the world of the 15 years, after South-East Asia. This backdrop begs the question: What sits behind this success? Is there anything that Ethiopia and Rwanda share in common with Japan, South Korea, Chile and Estonia? Over the past ten years we’ve been working with a rich data set that includes 140 countries spanning 55 years. From this, we have
identified a small set of powerful ingredients common to each of these economic “miracles” which includes elevated savings rates that translate into high levels of gross domestic fixed investment; a demographic structure that sees more people going into the workforce than going into retirement; stable policies supported by capable institutions; growing education levels; advances in healthcare; and rising economic openness. We’ve also tried to figure out two particularly pertinent questions. Firstly, if those six factors are common across countries that achieve socioeconomic prosperity, do the factors carry equal weight? Secondly, does the sequence or order of download matter?
The answer in both cases is yes. Notably, though, in terms of weight and sequencing, two factors stand out. Elevated savings rates underpinning high levels of gross domestic fixed investment and rising economic openness matter most in that they need to be downloaded first – no country has become “rich” with low savings rates and high walls – and collectively, these two factors explain as much as three-quarters of the difference in human development indices across countries. The other four factors explain the balance. To evidence this, “miracle” countries tend to boast savings rates in excess of 30% of GDP. In the case of sub-Saharan Africa over the last 15 years, a number of the region’s economies have produced and sustained elevated savings rates supporting high investment rates. Examples include Ethiopia with a 36.1% investment rate, Zambia (35.3%), Botswana (34.1%), Tanzania (30.0%), Namibia (28.3%) and so on. Although growing quickly, Kenya is a little off the pace, with an investment rate of 21.4% over the past decade.
Whilst this is enough to fund fast, inclusive growth, Kenyan policymakers want to do better, and in March 2017, the Kenyan government achieved a world first by issuing the M-Akiba bond on a mobile phone platform to fund infrastructure spending. The bond was launched with a value of 150 million shillings and had a minimum subscription of 3 000 shillings – or just US$30 per person. This not only means that savings and investment are democratised, but also that individual savings fund investment in productive social infrastructure rather than private consumption. Such elevated savings and investment rates are now endemic to sub-Saharan Africa.
country after country being subjected to dysfunctional openness that was overarchingly extractive. Whereas in the last 15 years, not only is there evidence that sub-Saharan Africa’s openness is improving, but also that the evidence almost unequivocally points to win-win connections in terms of that openness.
...AND LOW WALLS
The most recent version of the Index covers 19 countries. It would be disingenuous to suggest that everyone is playing catch-up, but it is fair to argue that connections are rising and that there are a few stand-out countries. The index clusters into four regions – West Africa, Central Africa, East Africa and Southern Africa. At a regional level, the most connected set of countries belong to East Africa, followed by Southern Africa. Least connected is Central Africa, and, although Cameroon stands out as being the leader of that pack, it is a sluggish pack. In West Africa, businesses often tend to talk of Nigeria first, yet the evidence from the Visa Africa Integration Index points to Côte d’Ivoire and Ghana as the impressors. In Southern Africa, South Africa has the highest integration level but countries like Namibia and Zambia are in the business of quick catch-up.
This observation has led us to build the Visa Africa Integration Index, which measures the extent, form and nature and of connectedness across sub-Saharan Africa. It seeks to help explain the economic transition and social transformation of the last 15 years.
The second key ingredient of the so-called six pack is economic openness. Openness needs to be qualified because it takes a range of forms and whilst potentially very powerful, it can also translate into material damage. The slave trade, colonisation and world wars stand out as examples of countries “interfering or engaging with others” to produce socially and economically disastrous results. For this reason, openness needs a qualifier, which is that the connection to others needs to be functional by feeding winwin outcomes. A further qualification relating to openness is that, invariably, when economists talk about economic connections, they reference trade and capital flows as being the way in which connectedness happens. Yet, when we interrogate the connections that countries make, although trade and capital matter, there are two other elements that are far more powerful and easier to initiate. These elements are connections through information, which takes the shape of data, knowledge, know-how, know-why, licenses and brands, and people, who also take a range of forms starting with tourists and reaching all the way through to immigrants.
The story of ‘Africa rising’ is filled with colourful examples and impressive turnaround tales. Heady anecdotes are open to criticism. Our evidence points to a region that, as a collective, is investing, growing, connecting and integrating. In short, Africa is rising, and the Visa Africa Integration Index supports this case. Equally important is that inside of this set, whilst Ethiopia, Ghana, Kenya, Rwanda and Zambia are materially different places, the drivers of prosperity in all places are the same – just ask the citizens of Chile, Estonia, Japan or South Korea
This second element of rising economic integration is the other leg of the story of sub-Saharan Africa’s transformation over the last 15 years. If we reach back over the 20th century, we find
VISA AFRICA INTEGRATION INDEX (2016) 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 Nigeria
THE GREAT DISPLACEMENT A.K.A COMING FACETO-SCREEN WITH AUTOMATION Words Dion Chang
“What’s going to happen to our jobs when the machines take over?" That’s the question that I am most frequently asked. After travelling through a couple of international airports, and seeing the rapid rate of automation, I feel that question needs to be addressed by all industries. Urgently. When you first encounter it, it is somewhat surreal: the lack of humans that is. If you’re going to be passing through an airport soon, anywhere from Singapore’s Changi Airport to Heathrow’s Terminal 2 to Charles de Gaulle in Paris, brace yourself for a selfservice frenzy.
GORDON INSTITUTE OF BUSINESS SCIENCE
I say “frenzy” because there are a lot of mildly panicked people hovering over self-service touch screens, either muttering to themselves, or rubber-necking the departure hall looking for human assistance. The assistance is there, but they have their hands full, moving from one confused traveller to the next. But this too shall pass, as it just takes one quick tutorial and you’ll never have to ask again. Soon those criss-crossing the globe will find self-service automation just another of those chores that travellers must do. For those who have yet to experience the joys of travel automation, let me describe the process. On arrival at the airport, you are greeted by a departure hall filled with self-service stations. These not only facilitate automated check-in, and print out your boarding pass (something most travellers are already accustomed to), but this new system now requires you to also check in your luggage – a job previously handled by an airline’s ground staff. You scan your passport at the self-service station, which then activates and accesses all your travel details: your full itinerary, who you’re travelling with, how many bags you’re checking in, etc. It’s big data and algorithmic management at its best. Startling, in terms of how much information they have on you, but undoubtedly efficient – which is the point.
The self-service station then spits out your luggage tags, along with your boarding pass. With those in hand, you proceed to the luggage drop stations – the traditional check-in counters – which are now totally devoid of humans. In their place are rows of touchscreens and bar code scanners. This is your cue to attach your luggage tags to your bags, scan the barcode and place your luggage onto the conveyor belt, which weighs and assesses each bag before pushing it through to wherever luggage goes to meet its fate. Again, there is human help at hand, stepping in to explain the process should you get bewildered by the machines. Many are, but again, this too shall pass.
WHERE ARE THE PEOPLE?
What is noticeable, and startling, is the evidence of the reduced workforce in these departure halls. When you had humans checking in your luggage, there would be about a dozen or more staff manning the check-in counters. Now there are only three or four people on hand to assist and guide you through the automated process. It’s approximately a 60% or 70% reduction in staff. And this is just the beginning.
The International Air Transport Association (IATA) wants 40% of passengers to have a self-service option by the end of this year, with a target of 80% by 2020, which does beg the question: “What’s going to happen to your jobs when the machines take over?” McKinsey predicts that 45% of jobs today will be automated out of existence in the next two decades, and already, one of the terms that is used repeatedly with regards the Fourth Industrial Revolution is “The Great Displacement”. In this phase of the revolution, most of the jobs lost to machines will be of a rote nature and it’s surprising just how many jobs can be considered “rote”. In the past 18 months alone, I’ve personally met a few service bots (or co-bots) that are already “working” in very diverse industries. In San Francisco I met Relay, a room service bot that brings extra towels and refreshments to your hotel room. In London, I finally had the great pleasure (I’ve been reading about him/her/it for a while) to meet Pepper, the social home bot. I haven’t had the pleasure, but would like to meet Dubai’s new Robocop, which has just been put into active street patrol service this year. My point is that the machines aren’t rising, they’ve already risen, and now we’re coming to grips with the language of the machines: artificial intelligence and algorithms, which manifest in chatbots.
Revolution, the concept of “premature de-industrialisation” is being flagged: a scenario where the rapid adoption of robotics (specifically industrial robotics) will do the reverse and eliminate jobs. This is already happening in China, where an increasingly expensive labour force is being quickly replaced by robotics, yielding greater production efficiency and therefore a faster return on investment. So how does one mitigate robot takeovers and human job loss?
SKILLS, SKILLS AND MORE SKILLS
Firstly, you need to examine where the jobs, most at risk, sit in your industry’s value chain. Digitisation collapses value chains, and we’ve already seen the elimination of the middle man in many industries: for example, travel agents and third party intermediaries in insurance. If your job is at risk, pivot your services and justify the price of your advice – i.e. what makes you better than the algorithm, or what can you do that an algorithm or robot can’t? Usually it’s services and solutions, but think carefully. If you thought digitisation was disruptive, automation and robotics are in a different league altogether. Secondly, rethink the concept of CSI. My take on a CSI policy in the Fourth Industrial Revolution is not just outward looking, but inward looking as well: there’s now a need for a dual direction and changed purpose.
Chatbots – or chat robots – are algorithms that you converse with via text message, and even these are popping up everywhere. In the fintech space, there’s a rash of chatbots that are aimed at millennials to help manage monthly budgets. Their more sophisticated cousin, the lawyer bot (google DoNotPay) is already contesting (and winning) parking fines and claiming airline compensation for travellers delayed for more that 4 hours. What is considered as a “rote” job – at risk of being replaced by automation – is no longer that clear.
The rules of traditional CSI have changed. Companies and big business are now expected to be vocal and visible about pushing for positive social change, bearing equal responsibility as governments to create impact. That’s just the one direction.
JOBS, BUT WHAT KIND?
The other direction and function is to consider social investment for your current workforce and provide continual upskilling. Even if you’re already doing this, scale it up.
While it is clear that jobs will undoubtedly be lost in the Fourth Industrial Revolution, those lost jobs generally resurface in a new ancillary service linked to the industry (e.g. repair & maintenance), hence the term “The Great Displacement”. However, this displacement requires technical skill, which is why a pivotal industry like mining in South Africa is such a concern. It is safer and more efficient to use machines underground, but most miners do not have the technical skills to be displaced. It’s a socioeconomic time bomb. In an open cast, iron ore mine in Australia, the mine already makes use not only of robots and drones, but also driverless trucks and trains to move the ore out of the mine. These semi-automated machines are still controlled by humans, but they are operators 15 000 kilometres away who have never physically visited the mine. Welcome to the – already functioning – industrial Internet of things. The first and second Industrial Revolutions (mechanisation and power generation) seemed, at the time, to be just as disruptive as our experience now. However, those machines created jobs and pulled many populations out of poverty. In the Fourth Industrial
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This has two benefits for a company. 1. In a digital era your skills become obsolete at the age of 40: sad and harsh, but true. Disrupted businesses require hybrid skills, and acquiring new skills does not always mean new people. Most companies battle to maintain institutional memory, while simultaneously merging high-tech implementation, so upskilling your current workforce ensures you have the best of both worlds. 2. If your workforce is continually upskilled, if and when they are replaced by a machine or algorithm, they then at least have a fighting chance of finding a new job with the improved skills you’ve given them. It’s the least you can do. Never before has adult education been so crucial to business. As the machines continue to rise, so too will the parallel trajectory of the upskilling industry rise. It’s time to learn the language of the machines, or at the very least, learn to gauge the temperament of your co-bot
Main street Stradun
Old Town entrance
DUBROVNIK! Words Caroline Hurry
Tales of historical turbulence tumble down red-tiled roofs and walkable walls embracing the bell towers, turrets and magnificent Slavic architecture of this 13th century city.
GORDON INSTITUTE OF BUSINESS SCIENCE
The best place to see Dubrovnik is from the 405m summit of Mount Srdj, reached via serpentine roads offering vertigoinducing views at every turn. From here, you can take in the old town’s red rooftops, medieval fortifications, craggy white bluffs, hidden coves and the island of Lokrum set like a jewel in the sparkling blue Adriatic beyond. The steps up the 2km-long, 700-year-old city walls are steeper than mobile data in South Africa but the circular hourand-a-half walk around the 22m-high perimeters is a ‘must do’ in Dubrovnik for the views alone. Below us, Stradun, the car-free main drag, has been buffed smooth by centuries of pedestrians. Merchants lined this marble promenade in the Middle Ages from the Pile Gate wall entrance. Before that, it was a canal. Now toddlers chase pigeons across the cobbles and tourists browse souvenir stalls and find shade at the secluded Franciscan monastery, Rector’s Palace and Onofrio’s Fountain where the water is still fresh enough to drink.
The roofs bear testament to the Siege of Dubrovnik in 1991 by Yugoslavian forces. The faded orange tiles are the originals while the brighter red ones mark the bombed-out buildings that had to be restored to glory – more than two-thirds of the Old Town. The scars from Serbian shells are still visible but on this sunny day with Monty Python’s Always Look on the Bright Side blaring out from a loudspeaker near the Old Church – as good as any hymn – the war seems far away.
from the Adriatic. We enjoyed an Ož ujsko beer here before lunching on sea bass, “bake-it” walnut cake and espresso with “whippet” cream at Gradska Kavana’s Arsenal Taverna overlooking the harbour where the air is redolent with the buttery aroma of frying fish and alley cats snooze on the cool stones.
There’s a monument to liberty outside the tourist office, the Museum of Croatian War of Independence and a cemetery up the road but Dubrovnik and its 40 000 inhabitants have moved on and for every stone battlement, a traditional woodenbeamed konoba (tavern) or café serves cocktails to surfer dudes in shorts.
When it comes to accommodation, the trick to Dubrovnik is to stay outside the Old Town. We found a self-catering villa about 2km from the city centre near the Franja Tuđmana Bridge for the equivalent of R1 000 a day. The bathroom, kitchen and resident cat were all small but our private patio festooned with grapevines overlooked an uninhabited island and the Dalmatian coastline. Late September, early October are good months to visit. The summer crowds have left and it’s still warm enough to swim.
The best-known bar is Buza, a stone terrace hewn from the cliffs where only a narrow railing separates you
Dubrovnik may sound like a Slavic belch but this Pearl of the Adriatic has become the world’s oyster
ADRIATIC ESCAPES Words Caroline Hurry
Like the coat of the region’s eponymous dog, the coast of Dalmatia is dotted with tiny islands. Lopud, Koločep and Šipan in southern Croatia make for great explorations. Just 5km from Dubrovnik’s Gruž harbour – 30 minutes by boat – Koločep, Croatia’s most southerly inhabited island with a population of 294, offers villages, a cemetery, cycling tracks and beaches. On a stroll, we heard The Lord’s Prayer sung in Croatian inside one of Koločep’s seven medieval churches. Evergreens shade a limestone promenade against a mountainous backdrop. You can snorkel or kayak through towering rocks, cliffs, reefs and bays. The water’s warm but wear aqua shoes as spiky sea urchins abound. Lush forest hugs the bay of Šunj on Lopud Island (population 220) between Koločep and Šipan, all part of the Elaphiti archipelago. Along this crescent of fine sand, a fat girl devours a paperback called Secret Dreams, old men ogle a couple skinny-dipping at the northern end of the beach, and sun worshippers bask under blue and orange umbrellas. To get there, you can walk up the steep
hill from the port and down to the bay where cicadas serenade you all the way. You could hire a bicycle or let a local whisk you off in a golf cart for 15 kuna but traversing the 4.6km² island on foot means discovering shaded gardens within an ancient walled town, vineyards, olive groves, a Franciscan monastery conquered by Napoleon in 1808, and – rising 216m above it all – Polačica, the island’s highest peak. First occupied by the ancient Greeks and Romans, Croats have lived here for at least 500 years, fishing, sailing, sheep farming and weaving. Souvenir sellers, art galleries and eateries line the promenade leading to the Lafodia Hotel. My husband and I visited their seafront terrace for a sundowner, but after being ignored for half an hour, we left to enjoy prompter service at a palm-roofed beach bar instead. Here, you can rent a boat, jet ski or kayak, otherwise public hammocks thoughtfully placed beside stonewalls invite horizontal contemplation.
Just 17km away from Dubrovnik, Šipan (pronounced “sheepan”) is the largest of the Elaphiti Islands with two villages – Sudjuradj on the southeastern tip, and Šipanska Luka on the western side. Each embrace a bay. Unlike Koločep and Lopud, Šipan isn’t car free but it’s still quiet and peaceful. We strolled around past a small beach, fishing boats and tackle, a café, a magnificent home behind walls – Dubrovnik aristocracy built their summer houses on Šipan – and some old ruins, to find a man at a stall selling olive oil, which I snatched up. The man turned out to be most congenial, uncorking a bottle of orahovica (the local liqueur) for us to taste. While my husband accepted the drink with alacrity I tried to refuse, but this was a Slavic land and he had made the hooch himself with green walnuts. Handing me a glass and slugging down another shot, he wheezed: “Živjeli!” We bought two bottles of the stuff
Old home in Koločep
THE FINER THINGS Words Cheska Stark
GORDON INSTITUTE OF BUSINESS SCIENCE
HIS CHECKLIST 1.
Fisherman’s jacket, R999, Woolworths This is the perfect jacket to take on outdoor adventures, especially those that may be wet and windy. Made from lightweight, quick-drying fabric, its slim-fit cut is a stylish spring coat that will be a long-lasting transitional item in your wardrobe.
Longmarket Barber Aftershave Balm, R130, Woolworths A lightweight, cooling aftershave balm leaves your skin feeling soothed and moisturised. The anti-bacterial lotion is formulated with a distinct woody aromatic scent.
Classic leather belt, R499, Country Road Finish off just about any look with this classic leather belt, featuring a cool metallic buckle for a touch of style.
Ace denim shirt R599, Old Khaki The denim shirt is a menswear essential that deserves a place in any style-conscious modern wardrobe. Stay away from pairing this shirt with jeans or any plaid, though. While denim is western inspired one doesn’t want to go too cowboy!
Langley crew sweatshirt, R650, Element Melange became big a couple of years ago and it has stayed right up there in the trend lists. A soft grey version is basically the only tracksuit top an adult man can get away with wearing out of the house, and it adds an easy urban style to your wardrobe.
Chinos, R2 399.95, Ted Baker These smart-casual tan chinos with a modern slim-fit cut feature all the right style touches for extra comfort and style. The best thing about chinos is their versatility so don’t be worried about what you pair them with.
Persol spectacles, R2 690, Sunglass Hut These two-tone glasses are a stylish twist on a classic spectacle frame.
Arthur Jack Woodstock messenger, R4 499, Thread and Miller Make an impression with a stylish 100% leather messenger bag. The contrasting leather accents draw your eye to the details. Practical, too, with sturdy handles and three different compartments.
HER CHECKLIST 1.
Thebe Magugu pleated skirt, R1 199, Woolworths This asymmetrical skirt creates such an interesting silhouette, taking the on-trend midi skirt to a whole new level, giving you an urban-chic aesthetic immediately. Designed for Woolworths by South African-born Thebe Magugu. P.S. Navy is the new black!
Estée Lauder Pure Colour Envy Hi-Lustre light sculpting lipstick, R410 (in Drop Dead Red) New season means one thing: new red lipstick please! This Estée Lauder lipstick saturates your lips with lustrous colour.
Chanel Chance Eau de Parfum spray, R1 600 There is always room for a classic scent and, even more so, Chanel in your beauty routine. This floral fragrance intertwines pink pepper, jasmine and amber patchouli, laced with white musks and vanilla…
Sandal booties, R1 299, Country Road One of the biggest trends for summer 2017 is shoes that emphasise your ankle. These sandal booties do just that and are an easy season-transition heel.
Cross-body satchel, R1 349, Witchery Invest in a cross-body bag this season: structured and stylish, this leather choice is finished with a glam bold buckle, and features a lined inner and a sleek strap for ease.
Prada sunglasses, R3 990, Sunglass Hut Yes, these are showstoppers: round sunglasses that enjoy a sleek grey frame and dark ombré lenses to keep your look on point.
Velvet loafers, R899, Witchery While velvet can be seen all over the runway this season our favourite velvet version is without doubt the velvet loafer. Rich velvet, in navy, make these loafers the shoe to obsess over this season. They can be dressed up and will add depth to your looks.
Kimono, R2 399.95, Ted Baker This sensational floral kimono is for spring. Its soft, eye-catching print will not only say “welcome to the new season” but also come in handy for when you need an extra lightweight layer.
FORWARD MOTION Photographs Jacques Marais Words Jacques Marais and Stephen Smith
With or without an internal combustion motor, here are half-a-dozen ways to get ahead (and stay ahead) of the pack. Funky or fun. Far-fetched or absurd. Classic or alternative. Acumen’s motion maestros check out six incredible ways of having fun while moving from Point A to Point B …
ON YOUR FEET – SALMING ELEMENTS TRAIL RUNNING SHOE
ON YOUR BACK – EVOC FR ENDURO BLACKLINE HYDRATION PACK
ON YOUR BODY – HI-TEC WOMEN’S LADY MONS-MOON RAIN JACKET
WHAT IS IT: The bombproof and brand new (in South Africa) Salming Elements shoe is a trail machine of note. This rugged off-road shoe has been shaped and constructed in the great Swedish outdoors to enable you to blast through tough, technical and varied terrain – even swamps, rivers or lakes – without impairing your natural movement.
WHAT IS IT: If you’re a trail cowboy at heart, pushing your limits on every ride, then this backpack with next-level protection is a must. The EVOC FR Enduro boasts a combination of maximum safety and superior comfort through utilising a full back protector together with a completely ventilated carrying system. This makes it the perfect pack for cycling, mountain biking, hiking or any outdoor activity which may involve some form of risk.
WHAT IS IT: This particular Hi-Tec Women’s Lady Mons jacket is a bright and technical garment, equally suited to wearing while trawling the mall, or when exploring into the high mountains. Think of it as the meeting point between fashion and the great outdoors.
GORDON INSTITUTE OF BUSINESS SCIENCE
WHY DO YOU WANT IT: The Element takes an aggressive stance, right up from the lugged outer sole, providing unrelenting traction in anything from sand to wet rocks. The RunLite cushioning provides lightweight, under-foot protection, but in a low-drop and very neutral fit to let you ‘feel’ the trail. Add to this a roomy toe box, allowing for forefoot expansion in the landing phase, and you know you have a biomechanical marvel in hand. DESIGN USPs: High performance, synthetic mesh uppers are combined with micro-fleece, moisture-wicking linings to help your feet breathe and shed water easily. The nylon fork-shank will improve your gait to keep your feet stable and secure, even on gnarly terrain. Finally, their moulded, impact-absorbing EVA midsoles guarantee lasting cushioning and comfort, while the on-trend colours and design will rock your world. GO GET IT : Online from Nativesport.co.za, or at MOOVE, Claremont. PRICE: R1 990
WHY DO YOU WANT IT: The EVOC FR Enduro Blackline allows for a number of hydration bladder sizes, and the feather-light back protector can conveniently be removed when it is not required. Storage space options for diverse activities mean you can select between a front pocket with mesh dividers (for organising tools, for example) or smaller zipped side pockets for easy access to items while on the go. The main section has more than enough space for overnight kit, with an overall capacity of 16l. DESIGN USPs: The safety aspect of this pack revolves around the patented Liteshield Back Protector. It maximises protection during impact with lightweight and very effective construction, while allowing a great deal of flexibility. EPS construction is specially adapted by means of a segmented, multilayer approach which provides excellent shock-absorbing properties, and furthermore serves as insulation against extreme temperatures.
WHY DO YOU WANT IT: High-quality fabrics and an eye-catching grey & bright pink colourway will make this rain-proof jacket your favourite go-to garment. The Lady Mons is both practical and lightweight, with an adjustable weather hood and a left arm dry pocket ideal for storing valuables or other delicate items. It is available in XS, S, M, L and XL. DESIGN USPs: Technical features include comfortable, zipped handwarmer pockets and a sleeve design with Velcro cuffs to ensure a perfect fit. The Tecproof 5 000 fabric technology helps keep you protected and geared up against the forces of nature. And to top it all, the Lady Mons jacket can be packed into its own pocket.
GO GET IT: Hullabaloo.co.za
GO GET IT: Available from Due South Stores; check Hi-tec.co.za for retailers.
PRICE: R3 450
PRICE: R1 299
FOR THE HEAD
FOR THE HEART
FOR THE PLANET
MOTORISED On the motorised side, we look at three cars similar at first glance, but with many a difference under the hood and inside. Read on and see which appeals to your soul... A trio of Japanese gems FOR THE HEART: LEXUS IS200 T
FOR THE HEAD: MAZDA BT-50
WHAT IS IT: Lexus used to be bland. They used to try to keep up with the Germans. But now they’ve got their own style, their own image and the IS200 T embodies it. The IS is Lexus’s range of compact premium sedans, recently updated and the IS200 T is the turbocharged one.
WHAT IS IT: A lifestyle vehicle par excellence, the BT-50 is Mazda’s version of the Ford Ranger, and it’s every bit as good. It’s also just been refreshed for 2017.
WHY DO YOU WANT IT: It’s edgy and aggressive to look at, but that’s only the start. It’s also built to the almost unattainably high levels that Lexus demands, and it’s fun to drive too. DESIGN USPs: Whether it’s the car’s appearance or the powerful 2-litre engine (180kW and 350Nm, paired with an 8-speed automatic gearbox) that first catches your attention will depend on your priorities, but one thing that you will definitely appreciate is the level of specification that Lexus has embellished the IS200 T with. This is where Lexus shines when compared to its German, Italian or British rivals, and it’s reason enough to sway your buying purchase. GO GET IT: The IS200 T is priced from R601 900, and a 4-year/100 000km service plan and 4-year/100 000km warranty are standard. Visit Lexus.co.za for more information.
WHY DO YOU WANT IT: We know why you want a double cab – you play on the weekends and you need to move your toys around. Why do you want a BT-50? Well, it’s got the same proven mechanicals as the Ford Ranger, but it’s just that little bit different from the average bakkie in terms of styling. DESIGN USPs: When the BT-50 was given a facelift earlier in 2017, the interior was refined to give a higherquality feel, while an automatic gearbox is now available on both the 2.2 and 3.2 models. Because it has been designed for the lifestyle market and not for being a workhorse, it features impressive ride quality. GO GET IT: A Mazda BT-50 can be had from R441 600, although you’ll have to shell out at least R541 700 for a 4x4 model. All BT-50s include a 5-year/unlimited mileage warranty and 3-year/unlimited mileage service plan. Visit Mazda.co.za for more information.
FOR THE PLANET: TOYOTA COROLLA 1.4D ESTEEM WHAT IS IT: Corolla might as well be a synonym for ‘family vehicle’, so engrained is it in our vehicular culture. The world’s bestselling car, the Corolla has sold over 40 million units worldwide since it was launched and it’s not hard to see why. The 2017 model has been given a number of subtle updates. WHY DO YOU WANT IT: 66kW and 205Nm might not sound that impressive, but the Corolla 1.4D is actually a competent performer, considering that it’s a family vehicle. Where it really wins, though, is at the fuel pumps, as it uses a claimed 4.5 litres of diesel every 100km. The six-speed manual gearbox helps in this regard. DESIGN USPs: There’s nothing revolutionary about the 1.4D – if there was it wouldn’t be a Corolla. Five comfortable seats, that great little engine and a surprisingly spacious boot make the Corolla an eminently satisfying family vehicle. It’s also well kitted out with a full complement of active and passive safety features (including driver, passenger and side airbags) and comfort features such as Bluetooth and steering wheel controls. GO GET IT: The Corolla 1.4D Esteem is priced from R294 400, and a 5-year/90 000km service plan and 3-year/100 000km warranty are standard. Visit Toyota.co.za for more information.
TECHNO Words Aki Anastasiou
LOGITECH SPOTLIGHT POINTER Time to modernise that old clicker Price R2 200 Anyone who has ever done any kind of presentation in front of a group of people has, without doubt, held an iconic Logitech Wireless Presenter. Let’s be honest: those clickers make us look slick! Interestingly, the current range of Logitech’s Wireless Presenters have been around since 2005 – that’s like 50 years in the digital world! But like every bit of technology, everything must eventually evolve and this includes adding a little more style and pizzazz to a presentation. Logitech’s Spotlight Presenter has been redesigned and modernised to reflect the current trends. Unlike the older plastic presenter, the Spotlight is moulded into a piece of metal and feels solid when holding it. The new pointer has a new
feature that allows you to highlight and magnify points on your slide. It also has a mouse-like cursor control to play videos and open links. There is also an app one can download which then connects to the device via Bluetooth. Through the app you can customise settings in the pointer and even set a timer that will make the pointer vibrate when you are running out of time. The smart recharge feature via USB will give you three hours of usage with a one minute charge. Do you want to be that person wearing bell bottoms while making your next presentation? Time to get with it, up your game and change your clicker! The one you have is so 2005.
One of the best smartphone cameras around Price R10 000
GORDON INSTITUTE OF BUSINESS SCIENCE
Huawei is on a mission to be the No. 1 smartphone manufacturer in the world. Five years ago, they were nowhere, today they are No. 3 and gaining fast on Apple and Samsung. Their phones have been growing in stature, quality and value and the company has made massive strides in design. Their latest flagship device, the P10, is focused on photography. A partnership with Leica has helped differentiate Huawei from other brands with the quality of their lenses. The dual Leica camera system features a 20-megapixel monochrome sensor and a 12-megapixel RGB
sensor that is combined by some smart algorithms and software to create great pictures. The front camera, for those who love selfies (don’t deny it now), includes a new F/1.9 aperture and an all-new sensor that captures more light. The actual phone design is slick and the metal casing feels solid and premium. It performs very well, and the battery life is great – but the design does feel a bit boxy and outdated. Even so, you’re getting great value on price with fantastic photography when compared to the Samsung S8 and the iPhone 7.
SENNHEISER MKE 2 ELEMENTS The waterproof microphone for the GoPro Hero 4 Price R3 600 If you are one of those action sports people who love to capture their outdoor activities then you will love this gadget. Sennheiser, which specialises in high fidelity products, has partnered with GoPro to create a waterproof microphone for the GoPro Hero 4. The Sennheiser MKE 2 Elements microphone is an essential addition to your kit if you’re a mountain biker, surfer or snow boarder. Up to now it would have been impossible to record great quality sound of your adventures. The MKE 2 uses a special windshield that takes away all the noise created by
wind or water to record perfect sound. The elastic suspension technology inside the microphone suppresses any structure-borne noise. It is incredibly easy to use and fits into a waterproof case with the microphone sticking out on the left of the casing. It is also IPX7 rated which means it’s waterproof and theoretically you can use it at a depth of around 1 metre. Sorry scuba divers, this one won’t work for you. Seriously though, who would want to record conversation underwater anyway!
PDF EXPERT FOR MAC Take your PDF skills to another level Price $60
The PDF (Portable Document Format) file format which has been around for 24 years is probably one of the most widely used ways of sharing and signing secure documents in the business world. Today this format has become incredibly sophisticated. While most readers are free to view a PDF, the challenge comes when you need to start editing, adapting, changing and creating new PDFs. It gets expensive. Adobe’s Acrobat Standard edition will set you back $299. But there are other fantastic alternatives out there that offer exceptional value and won’t break the bank. PDF Expert from Readdle is one and will cost $60.
The features are impressive. The interface makes it easy to add text, images, sign and annotate documents. It is an all-round great piece of software that offers great value to users. If you use PDFs frequently and are looking for a cost-effective editing tool, PDF Expert is the Swiss army knife of PDF editing! They were also Apple’s 2015 App of the Year in the Mac App Store
BOOKS Words Chris Gibbons
THE CRITICAL CORE
A TIME TRAVELLER’S GUIDE TO SOUTH AFRICA IN 2030
GORDON INSTITUTE OF BUSINESS SCIENCE
FRANS CRONJE TAFELBERG I R260 Frans Cronje is CEO of the SA Institute of Race Relations and a formidable scenario planner. In his latest book, he explains why scenario planning is infinitely superior to forecasting, assembles a raft of evidence about the current state of South Africa, Guptas and Zuma included, and then uses those facts to draft four possible scenarios setting out what the country might look like by 2030. None are easy reading. Three are downright scary: the rise of a right-wing, authoritarian but deeply efficient regime modelled on something like Singapore; an ideologically constipated group of hopelessly incompetent left-wingers from the Venezuelan mould; and the gradual disintegration of South Africa into armed enclaves, also known as security- and eco-estates. If you’re inside one of those, you’re most likely fine, but if you’re outside, the Mad Max zone beckons.
The fourth is the classic rainbow nation scenario, where South Africans wake up one fine spring morning and decide to ignore all our racial problems, social dysfunctionality and political hatreds, throw the bums out of office and just make things work. It’s scary because it’s the scenario we most need but the one which, in my view, is least likely to happen. I won’t spoil it by revealing which of the four scenarios Cronje thinks is most likely to occur, but be warned. A glass of something strong at your elbow to stiffen intestinal fortitude wouldn’t go amiss.
TONY MANNING PENGUIN BOOKS I R200 With more than 30 years as one of South Africa’s leading business consultants, Tony Manning knows a thing or two about strategy. Amongst his key insights is the fact that there has been little truly new in management thinking or practice over the past 60 years, and that despite bookshop shelves groaning with texts that purport to tell you otherwise, there is no such thing as a quick fix or a silver bullet. Instead, Manning, who is also a member of GIBS faculty, has brought his considerable experience to bear and sought answers to a series of fundamental questions which include: “Why do some companies, facing similar challenges to others, stand out from the crowd and consistently get superior results to others?” and “Why, with so much information and advice about management so easily, widely, and quickly available, is corporate performance so different from company to company, and so erratic within them?” Pondering these brings him to one central question: “Are there must-do practices that make companies competitive, and if so, what are they?” His conclusion, after extensive review of his own experience along with a mass of other external evidence, is that there is “a small set of practices that show up repeatedly, meet a set of rigorous criteria, and are necessary in all companies, in all industries, across the world.” He calls these practices “the critical core” and they first made an appearance in his 2015 book, What’s Wrong With Management and How To Get It Right. The Critical Core follows, after requests from his readers for a shorter version of the book, with “the ‘how-to’ material to be more accessible.” Shorter it is indeed, but nothing it contains leads me to change my opinion as I gave it when I reviewed What’s Wrong With Management for an earlier edition of Acumen: “Apply Manning’s eight practices to your business with rigour, and you will have to think as hard as you have ever thought about anything.” (Acumen 14, Q4, 2015, p.82) Take Manning’s lessons to heart – all of them, because not one of them stands in isolation – and I would be greatly surprised if you didn’t find yourself playing in a very different league.
THE REPUBLIC OF GUPTA: A STORY OF STATE CAPTURE
PIETER-LOUIS MYBURGH PENGUIN BOOKS I R260 Three brothers from India emigrate to South Africa, found a business empire, which includes a newspaper and a TV station, hob nob with politicians and become very rich and very famous and they all live happily ever after. It’s the stuff of fairy tales, not so? The truth, of course, is far closer to a horror story, courtesy of the Brothers Grimm. The three Gupta brothers do indeed come to South Africa and found a business empire. But they don’t just hob nob with politicians. According to Myburgh, they buy themselves a stable full, including South Africa’s President, Jacob Zuma, and get rich off the back of extremely dodgy deals. Despite a string of denials from both the Guptas and Zuma, Myburgh makes a compelling case. Nearly all his evidence is already in the public domain, including the ill-fated ‘Wedding Flight’ that landed at Waterkloof Airbase, the Optimum Coal and Tegeta deals, the funnelling of public funds to The New Age newspaper and ANN7, and the offering of the finance minister’s job to Mcebisi Jonas. But it’s only when read as a single volume that true extent of the looting of the public purse by the ‘Zuptas’ becomes apparent. The strength of Myburgh’s book is the detail in which he examines the Gupta brothers, their roots and their dealings. For example, I had almost forgotten their deep and inauspicious association with South African cricket, but Myburgh reminds us in great detail. The book’s weakness, however, is that insufficient light is thrown on Zuma himself and his motivations. Is he just a profligate, with too many expensive wives and children who needs extra cash? Or do his plans run deeper, as in the founding of a political and business dynasty, as several commentators have recently suggested? In other words, if Myburgh is right, why and how were the Gupta brothers able to capture Jacob Zuma so completely and effectively? To repeat: President Zuma and the Gupta brothers have frequently denied these allegations. But the evidence presented in The Republic of Gupta tells a very different, depressing and deeply worrying story.
GET SOUTH AFRICA GROWING
BRIAN KANTOR JONATHAN BALL PUBLISHERS I R250 If you are interested in business or economics in South Africa, this is a must-read. Kantor, Emeritus Professor of Economics at UCT, has produced a tour-de-force which not only explains the very basics of how a modern economy works but also applies that theory to South Africa right now. He argues with compelling evidence that we need less interference in the economy by government, much freer markets and far less regulation. Nor is he afraid to tackle sacred cows like Black Economic Empowerment and minimum wages, both of which are costing the country dearly, he believes. At the heart of his thesis is what he calls “a very strong general relationship between measures of freedom, competitiveness, the ease of doing business in an economy and incomes per head.” Countries that do well in the first three are mostly highincome countries and Kantor holds that “these relationships are causative not coincidental”. Does this mean that “the citizens of the developed world… are rich because they are free or are they free because they are rich?” Acknowledging that this is a complex question, Kantor believes that the evidence provided by recent newcomers to the ranks of the rich nations like Hong Kong, Singapore and Mauritius strengthens “the hypothesis that freedom leads and incomes follow…” He adds, by the way, that economic freedom does not mean the kind espoused by Julius Malema and the EFF – that is “not freedom to choose but freedom to consume more by confiscating wealth from others better-off…” The key question is not whether Kantor is right or wrong – his facts speak for themselves – but whether South Africa’s key influencers and policymakers, many of whom remain doctrinaire communists, will either read his book or implement his recommendations. Sadly, it seems unlikely
WINE Words John Maytham
Acumen’s wine expert picks three of the best at three different price points: Everyday, Dinner Party and Out To Impress. EVERYDAY Another Old Mutual Trophy Wine Show (OMTWS) – another top gong for Ultra Liquors in-house brand, Secret Cellars. The trophy for Discovery of the Show/Best Value Gold Medallist went to the Secret Cellar Merlot Malbec Cabernet Sauvignon No. 702 2015, which, at R37.99 a bottle, outperformed many other much pricier wines. Perhaps another object lesson in how tasting wines blind removes the bias (positive or negative) that seeing the label might bring into play. This is a blend put together by Mark Norrish of Ultra Liquors and ‘a well-known winemaker’ – it’s not called Secret
Cellar for nothing. Merlot makes up half the blend, then roughly equal amounts of malbec and cabernet sauvignon, with a 6% injection of petit verdot. The merlot provides black cherry and chocolate, malbec contributes plum Xmas pudding; and the cab gives structure and tannic weight. The residual sugar level is 3.4 g/l which is ordinarily a little high for my taste, but there’s vibrant acidity that tames the potential sweetness. There’s some judicious use of old oak, and with the alcohol level a pleasingly low 13.5%, this is a wine that gives significant pleasure at a very affordable price.
GORDON INSTITUTE OF BUSINESS SCIENCE
Another OMTWS decision that might have caused some raised eyebrows was the award to Buitenverwachting’s Meifort 2014 of the trophy for the Best Bordeaux-style Red Blend. That’s because the Meifort is generally seen as the poor cousin to the estate’s premium red wine, the Christine. Vintage decisions determine what grapes go into each wine, but both are usually dominated by cabernet franc and cabernet sauvignon. The Christine gets plenty of time – up to two years in new French oak; while the Meifort ‘makes do’ with slightly less time in second and third-fill barrels. The Christine is
more than three times the price of the Meifort. Be that as it may, both wines are excellent, and the Christine is the one that rewards patience the most. It requires up to a decade to show its best, whereas the OMTWS award demonstrates that the Meifort is currently drinking beautifully. It is full-bodied and complex, but on the elegant, rather than the big and bold, side of the stylistic spectrum. Dark and red fruit aromas assail the nose, and there’s also lovely spice to add interest. It has the long and savoury finish that I so value in a red wine. Outstanding value with retail price below R100.
OUT TO IMPRESS Nadia Barnard is a name to watch. She’s been at Waterkloof for most of her (still very young) career, joining as assistant in time for the first vintage in 2009, and appointed chief winemaker in 2013. She knows the soil and site very well, and is completely committed to the biodynamic philosophy of French owner, Paul Boutinot. Every vintage her wines get better, more assured, more complete. The apex label is Waterkloof, which for the moment is only on a sauvignon blanc. The Circle of Life range, as well as the Seriously Cool chenin blanc and cinsault provide great fruit purity and expression at more than value-for-money
prices. I think, though, the best wine Nadia has ever made is the 2015 Circumstance Syrah. It’s a wine that is fabulously fragrant – black pepper, red fruit, violets, rosewater – and detailed; light in alcohol (just 12.5%), but so expressive with its bright and pure fruit, fresh acidity and soft tannins. This is the kind of complete expression of site and philosophy that many winemakers aspire to. To have this wine with one of the exquisite dishes prepared in the restaurant by Chef Gregory Czarnecki with the stunning view that the restaurant offers is to experience true food and wine bliss. R185
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ELO ZAR'S ELECTRIC UNIVERSE Words & Pictures Victor Dlamini
She is, as the young people say, one of the cool kids. But she also has a honey-laced voice that delivers her lyrics with the confidence of one born to be a singer. Her name is Elo Zar. What Black Coffee has achieved as a DJ, Elo is set to achieve as an electro-pop artist. What Jimi Hendrix did with his electric guitar, Elo is doing with her sumptuous videos. The team behind her includes Tebogo Malope, the film and TV commercial director who won a Cannes Lion at the 2017 edition of the advertising honours. It shows in the quality of the videos that Elo puts out, the lighting, art direction and overall production are at the highest level.
GORDON INSTITUTE OF BUSINESS SCIENCE
It should come as no surprise that Elo has performed and recorded with the Johannesburg art rock band, Blk Jks. In the song Stare you can clearly hear the rich R&B tone in her voice.
But thereâ€™s something else going on in this song, a restlessness that mirrors the energy of innercity Joburg. That these two entities should come together is a declaration of intent by millennials that their music will chart bold new territories while remembering the sources from which it is founded. Where the Blk Jks use high-energy electric guitar and throbbing bass to frame their high-energy songs, Elo shows that electro-pop can be a vehicle for deeply soulful music. Elo, who was born in Soweto, has one of the most distinctive sounds that is quite clearly a mixture of the music she grew up listening to, including
Shangaan electro, disco, funk and jazz. The lyrics are always deeply personal and they reflect her own adventurous spirit and eclectic approach to her craft. The big Afro is reminiscent of Chaka Khan, and the futuristic videos mark her as one who knows that her generation enters the music via the visual. Pink is her signature colour, and her hair is mostly kept in a florescent pink. At a recent performance at the Sci-Bono in Newtown she was joined on stage by
an 8-piece. The choice of the venue was an inspired one, given the way in which Elo brings to her music a deliberately electronic approach. To add to the magic of a winter evening, the entire stage was painted a pastel pink. Her band members walked onto the stage barefoot, wearing flowing robes and striking Basotho hats. The song Make You Stay which was delivered in a future-meets-past mix of techno that harkens back to the golden age of disco while referencing
the sounds of acid jazz. The theme of the evening at Sci-Bono was Surreal So Real, an apt one given that Elo insists on merging both fantasy and reality in her music-making. Soweto has given South Africa and the world some of the most memorable songs, from Miriam Makeba’s Soweto Blues, written for the 1976 generation. Elo’s sultry vocals on Be It are a continuation of this musical legacy that borrows on Soweto’s complex identity and artistic heritage
POOCH POWER, OR PAWS FOR THOUGHT Words Sam Cowen
There is a dog in the office. Actually, a puppy. It’s a very sweet puppy. It is small and fluffy and has that wonderful puppy smell made up of puppy food and soft fur and fart. I think its name is Trudy or Rudy. I do not know because currently it sleeps in a pink bed and has a blue lead and appears, currently, to be living a gender neutral existence. And it is adorable. The puppy does sweet things. It chases a ball if you roll it. It cries to be picked up and cuddled. It bypasses its basket and goes to sleep in whatever item of outer clothing has fallen off the back of a chair. “Look!” its owner shrieks! “Look how the noo-noo is sweeping in your scarfy!” And whoever’s scarf is doubling as a bed shrieks back with equal delight. “So adorbs!”
GORDON INSTITUTE OF BUSINESS SCIENCE
I hate it. I don’t hate the puppy, I hasten to add. I would appreciate and even welcome that amenable ball of blonde fluff in my own home. No, I hate it because it is now impossible to have any kind of meaningful meeting without its disruptive canine presence. “So what I was thinking is that for the reunion show we could intersperse interviews with...” “NO NO NO NO NO!” “Really? I thought it was a good idea because…”
But no-one is disagreeing with me. “Not on the carpet baby!!!!” and the meeting dissolves as half the participants rush the puppy into the office garden to finish its ablutions and the other half heads off to find kitchen roll and carpet cleaner. Mind you, the puppy isn’t on the floor very much. Most of the time its ‘mommy’ (and I hate that moniker too) carries it around in a babysling. “They feel more comfortable if they can hear your heart beat. It soothes them.” I could think of several young, virile men in the office who would be incredibly soothed by such close proximity to such a cleavage. Meanwhile deadlines are missed and meetings are postponed. Even when Trudy/Rudy chewed through the power cable of the main edit suite, they were more concerned that it had shocked itself, than that 24 hours of footage had disappeared into a puppy-free ether. The puppy is the embodiment of all that I dislike in the modern office environment. It’s symbolic of the way lines have become blurred between work and home and if I wanted to work at home I would stay home. No, I want an office that knows it’s an office, with desks and meeting tables and a coffee machine and walls that no-one is allowed to write on. I want co-workers to have meetings at a Big
Table in a Meeting Room, not curl into beanbags in a corner of the room called “The Cuddle Puddle”. I want to feel as though I have gone to Work with the sense of achievement that comes with it. There is very little sense of achievement that comes from playing ‘fetch’ with a baby Labrador. I’m aware that this could be my age; that I come from an era when there were tea breaks and lunch hours and you went to work at 8 and left at 5 and never took children or dogs to the office. A time when grown men who were in charge of millions of rands, wouldn’t dream of dropping to their knees to scratch a puppy tummy faster than you could shout “Walkies!” However, perhaps I am wrong. The other week we had a conference call to France. The fate of a project lay in the balance. Trudy/Rudy was there. It put its paws on the laptop keys and licked the screen. The French executive had a Chihuahua. It too was in the meeting, barking furiously in its little jewelled collar. I’m not sure what was communicated but the project is going ahead. Perhaps this is how deals will be done in the future. And perhaps they should be. With the economy where it is, it will be a lot cheaper to pay commission in chew toys and kibble
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For the first time, business is attempting to speak with a single voice. That it did not do so during the apartheid era is to its eternal sh...
Published on Jul 3, 2017
For the first time, business is attempting to speak with a single voice. That it did not do so during the apartheid era is to its eternal sh...