MoneyMarketing November 19

30 November 2019 | www.moneymarketing.co.za

@MMMagza

First for the professional personal financial adviser

WHAT’S INSIDE

YOUR NOVEMBER ISSUE

AN APPLIED AND INDUSTRYRELEVANT APPROACH

GROW YOUR BUSINESS WITH EMPLOYEE BENEFITS

MoneyMarketing speaks to Marilize Putter, Dean of Financial Planning and Insurance at Milpark Education’s School of Financial Planning and Insurance p9

MoneyMarketing's guide to investing offshore in volatile times

By taking a fresh look at your clients, you could find unique opportunities

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A different kind of financial planning

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he financial planning landscape is changing as a radical decision and faster than at any point in history. There founded Kind Wealth. have been significant shifts in regulations “Kind Wealth offers financial planning, but the and technology, making it essential for advisers to difference is that we take a whole life approach,” transform the service they provide – and how they he told the conference, explaining that he works provide it. While change is often difficult, it brings with clients to understand what’s really important opportunities for those brave enough to capitalise to them and then designs a financial plan to enable on it. them to achieve their goals. Toronto-based David O’Leary is a financial “All we give to our clients is advice. We don’t planner with a difference. Upending the traditional manage their investments, and we don’t give way financial advice is priced and delivered, he investment advice, it’s just financial planning. doesn’t have an office; his business, Kind Wealth, We don’t accept commissions and we don’t sell offers only financial advice – and his clients pay financial products. And it’s entirely virtual as I him via monthly subscriptions. don’t have an office space.” From “Kind Wealth’s purpose is a client survey, Kind Wealth has THE TOP REASON determined that the top reason to empower Canadians to take control of their money so they can CLIENTS USE THE clients use the firm is because of its live life on their own terms,” he advice-only model. FIRM IS BECAUSE He explained that to bridge the gap told the audience at last month’s Morningstar Investment conference to investment management, Kind OF ITS ADVICEin Johannesburg, attended by Wealth partners with a robo-adviser. ONLY MODEL MoneyMarketing. “We don’t charge a fee – we could, O’Leary worked in a variety of roles at but we don’t. We onboard clients, transfer accounts, Morningstar where he led teams in both Toronto and process deposits and withdrawals.” He added and Cape Town, leaving the company after 13 years that while he does indeed talk to clients about their to co-found a fee-based financial advisory practice, investment returns, he’s not responsible for them. Eden Valley Partners – and when he found that Pricing plays an important role in wasn’t working for him, he took what he describes O’Leary’s business.

“We do pay-as-you-go pricing. Our bread and butter service of financial planning means a flat upfront fee and thereafter a monthly subscription, with the clients able to cancel at any time.” There are no hidden fees and no lockins. The fees are paid from clients’ credit cards so they can see exactly how much they’re paying. O’Leary doesn’t see the point of hiding the cost of Kind Wealth’s service. Instead, he hopes that clients see its full value and are willing to pay for it. Continued on page 3

David O’Leary, Founder, Kind Wealth

Laurium Flexible Prescient Fund Launched 1 February 2013, the Laurium Flexible Prescient Fund is ranked no. 1/35 funds in the South African Multi-Asset Flexible Sector since inception with an annualised return of 11.9% after

UPSTREAM THINKING

fees (111.0% cumulative) versus average peer annualised return of 7.1% (57.7% cumulative). Source: Morningstar (30/09/2019)

We know Investments T +27 11 263 7700 E laurium@lauriumcapital.com www.lauriumcapital.com

Annualised performance shows longer term performance rescaled to a 1-year period. Annualised performance is the average return per year over the period. Actual annual figures are available to the investor on request. Collective Investment Schemes (CIS) should be considered as medium to long-term investments. The value of your investment may go up and as well as down as past performance is not necessarily a guide to future performance. CIS’s are traded at a ruling price and can engage in script lending and borrowing. Performance has been calculated on the A1 class using net NAV to NAV numbers with income reinvested. The performance of each period shown reflects the return for investors who have been fully invested for that period. Individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestments and the dividend withholding tax. Highest rolling 1-year return since inception of 37.6%. Lowest rolling 1-year return since inception of -6.6%. A schedule of fees, charges and maximum commissions is available on request from the Manager. There is no guarantee in respect of the capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. Prescient Management Company (RF)(PTY) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). Laurium Capital (Pty) Ltd, Registration number: 2007/026029/07 is an authorised Financial Services Provider (FSP34142) under the Financial Advisory and Intermediary Services Act (No.37 of 2002). For any additional information such as fund prices, brochure and application forms please go to www.lauriumcapital.com

KINGJAMES 48536

Turns out offshore really is the future.

There’s never been a better time to be an investor.

www.sanlaminvestments.com Right now food is growing inside farms built on the ocean floor. It’s these alternative systems of agriculture, dedicated to areas where the environment makes plant growth extremely difficult, that promise yields which could be almost as satisfying to investors as they are to farmers. To find out how our innovative investment portfolios are taking advantage of the world we live in, visit www.sanlaminvestments.com. Sanlam is a Licensed Financial Services Provider.

NEWS & OPINION

30 November 2019

Continued from page 1

(In Canada, most advisers charge fees as a percentage of the amount a client has invested). Kind Wealth’s market is Canadians aged 30 to 45 (although they do take on clients of all ages). Most are starting families and have mortgages, but the family income is around CAN$300 000 to CAN$350 000. “This is pretty high in Canadian terms, making them high earners but not rich yet,” O’Leary said. It was this market that Kind Wealth wanted to serve, but O’Leary couldn’t help these clients through pricing based on a percentage of assets under management, as at this point they tended to have fewer assets than high-net-worth individuals – and they couldn’t be seen as profitable clients. The business’s pricing model was therefore changed to a pay-as-you-go one. The payment of monthly subscriptions means that Kind Wealth will interact with clients frequently, “otherwise clients would wonder why they’re paying us $200 a month”. O’Leary does not deliver one huge financial plan for clients at their first meeting. “We’re first going to talk about whatever is most urgent for the client, then we’ll have a meeting two months later and talk about another topic. And we don’t leave that first meeting until there’s another one booked.” This means that clients’ progress towards their goals are continually measured. “From a client perspective this is great, as the alternative would be to charge them one big fat fee of $5 000 to $10 000 – and they could come back if they needed to.” WHY KIND WEALTH?

Kind Wealth puts its prices on its website. “There isn’t one fixed price as everybody is different. If these prices freak people out, they don’t come to us,” O’Leary said. “Interested clients submit a form and that’s followed up by a 30-minute phone call so that Kind Wealth can get to know more about their circumstances to determine an exact price for them. As not everyone is quite ready for an ongoing relationship, there are also one-time engagements available.” O’Leary said the benefits of the pricing model for clients include convenience, transparency and peace of mind. The benefits for planners include that they can work from anywhere as everything is virtual, saving both time and money. The pay-as-you-go pricing model has not been hard to sell, he added. “When most people from our target market of 30 to 45 years old approach us, 90% of them have never worked with a financial adviser before and pay as you go is the way they pay for everything.” He admitted, though, that with older clients, the retainer-based model can at times be a tough sell, as it differs from what they’ve been used to their entire lives – even though it is almost always a better deal for them. A big focus for Kind Wealth is helping people to manage their finances in alignment with their values, and it comes as no surprise that O’Leary is also the Managing Director of Origin Capital, a company that creates high-impact solutions, enabling Canadians to invest in the fight against global inequality.

EDITOR’S NOTE

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’d never been a victim of credit card fraud – until last week. It appears that someone has been taking Uber trips around Hammanskraal and I’ve footed the bill. As soon as I noticed this, I went into the bank and informed them what had happened. The teller told me to fill in a form and went back to filing her nails, notifying me that the bank would close in five minutes. This wasn’t good enough, so I told the teller that I would complain to the bank on Twitter. Her attitude changed immediately, and she picked up the telephone and called the bank’s card division. Social media definitely has its uses. I’ve been informed by the bank that I’ll get my money back as it’s quite evident from my credit card records that I have never in my life been for an Uber ride, and I’ve never been to Hammanskraal. I suggest that with the festive season approaching, we all keep a very close eye on our bank cards. On another note: It was a rude shock when Eskom last month began its rolling blackouts once again, especially as the power utility is heading to court to demand that electricity prices be increased even more than they already have. While I do accept that the current situation is a malignant legacy handed down by the previous administration, the reasons given for the recent load-shedding are disturbing: malfunctioning boilers and the breakdown of the coal conveyer belt at Medupi power station. Eskom’s staff appear to be unable to cope. It came as no surprise to hear that Medupi’s manager – who was set to take up a position in the Philippines anyway – was made to leave before his official departure date. Foreign investors must be feeling very uneasy. Janice janice.roberts@newmedia.co.za @MMMagza www.moneymarketing.co.za

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NEWS & OPINION

PROFILE

30 November 2019

IMTIAZ SULIMAN DIRECTOR AND PORTFOLIO MANAGER, SENTIO CAPITAL

How did you get involved in financial services – was it something you always wanted to do?

What have been your best – and worst – financial moments?

What makes a good investment in today’s economic environment?

What’s the best book on investing that you’ve ever read – and why would you recommend it to others?

When I was 14 years old, one of our school excursions was to the JSE building in the Johannesburg CBD. We were shown how shares are traded on the market. My interest was immediately piqued and ever since then, I have taken a keen interest in the markets. My first job was an actuarial analyst at a life company and nine months later I joined an asset manager to pursue my passion.

Valuation is always key, as you want to avoid buying over-priced securities. What is gaining more attention, and rightly so, is the focus on Environmental, Social, and Governance (ESG) investing. Companies that make ESG criteria part of their operating activities are more resilient and do better over time than those that see ESG VALUATION IS ALWAYS KEY AS investing as just a tickbox exercise. YOU WANT TO ESG criteria are of critical importance. The AVOID BUYING power of the internet OVER-PRICED and social media has, SECURITIES for example, allowed today’s investor to see the harm caused by plastic waste or the way that our forests are being destroyed. We have a much more engaged and conscious investor today than we had 20 years ago. Millennials are better informed than their parents and are lifting the veil of investor ignorance. Today, there is over $20tn of professionally managed money paying at least lip service to ESG principles.

What was your first investment, and do you still have it?

My first investment was into warrants, which are geared derivative instruments. The tech bubble wiped out my capital. It was a painful lesson but a very valuable one in that it taught me about the dangers of leverage and concentration.

Best: Starting to save from an early age. The eighth wonder of the world, as referred to by Warren Buffett, is compounding. It’s time in the market, as opposed to timing the market, that is of vital importance. Worst: Putting all my eggs into one basket. A share might look attractive but is often cheap for a reason. Diversification is one of the free lunches in investments that one should take advantage of.

There are many books that I have read that are interesting. If I had to pick out one, it would be The Most Important Thing by Howard Marks. The book stresses the importance of second-level thinking and focusing on risk management in the investment process. You have to think beyond the obvious (first-level thinking). The first-level thinker sees favourable circumstances and decides to buy. The second-level thinker sees that the investment is over-hyped and too expensive to provide a margin of safety. The most important thing is understanding risk. There are several misconceptions about risk: Riskier assets don’t necessarily provide higher rates of return or they wouldn’t be riskier. Risk doesn’t come from weak fundamentals because almost any investment, bought at the right price, can be a profitable investment. Risk does not come from volatility; risk comes from how an investor reacts to volatility. Risk can be greatly reduced by making an accurate assessment of the real value of an investment and making sound decisions based on the relationship of the price to the value.

UPS & DOWNS

The US has imposed sanctions on the Gupta family and an associate over their alleged role in corrupt activities linked to former SA president, Jacob Zuma. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) said in a statement that it had sanctioned members of a significant corruption network in SA. “Specifically, OFAC designated Ajay Gupta, Atul Gupta, Rajesh Gupta, and Salim Essa for their involvement in corruption in SA pursuant to Executive Order 13818.”

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Last month, Eskom began load-shedding, the first in over six months – and occurring on the same day that the cabinet deliberated the government’s Integrated Resource Plan (IRP). The power utility said that load-shedding was necessary “due to high levels of unplanned breakdowns” at its coal power plants. “We unreservedly apologise to South Africans for the negative impact this may have and want to assure the nation that we continue to work tirelessly to ensure security of energy supply,” Eskom said.

VERY BRIEFLY Sizwe Nxedlana has been appointed CEO of Ashburton Investments, the asset management arm of the FirstRand group, with immediate effect. He replaces former CEO, Boshoff Grobler, who has moved to a new role in FirstRand Group Treasury. Nxedlana has been with the group for 11 years, previously as FNB’s Chief Economist and most recently as CEO of FNB’s Wealth and Investment activities. (He remains CEO of FNB’s Wealth and Investments business). Nxedlana says his focus will be on working with the existing teams to scale Ashburton Investments by leveraging more of the group’s capabilities. “Integrating our investment capabilities through a single investment process and unified digital platform will be an important focus for both FNB Wealth and Investments and Ashburton Investments. We will continue to streamline the investment processes through both businesses by managing existing and new investment portfolios to achieve promised client outcomes, winning new mandates and ensuring continued growth in assets Sizwe Nxedlana under management.”

Patrice Rassou has been appointed chief investment officer of Ashburton Investments with effect from April 2020. This is a new role created to coordinate the various investment management activities of the FirstRand group. Commenting on the appointment, Mary Vilakazi, FirstRand COO, says the group is very pleased with the appointment. “To attract an investment professional of Patrice’s calibre is a coup for us. It demonstrates how serious we are about building a competitive and innovative asset management business.” Rassou joins Ashburton from Sanlam Investment Managers, where he was Head of Equities. Before joining Sanlam in 2006, he worked at Thesele Group, Old Mutual Asset Management and PwC. He holds an MSc in economics from the London School of Economics and Political Science, an MBA with distinction from Manchester Business School, and is a Chartered Accountant.

The Southern African Venture Capital and Private Equity Association (SAVCA) – the industry body for the private equity and venture capital industry in Southern Africa – welcomed two new directors and reappointed one existing director to its board, following the SAVCA Annual General Meeting (AGM) held last month in Johannesburg. New appointees include Fulu Makwetla, Founding Partner and Managing Director of Third Way Investment Partners, and Kabelo Moja, Managing Director of Ascension Capital Partners (Pty) Ltd, with Samantha Pokroy, founder and CEO of Sanari Capital, being reappointed. SAVCA CEO, Tanya van Lill, says, “The new board appointments complement a board that already comprises individuals with extensive industry and business experience that are uniquely positioned to contribute positively to the industry and country at large, ensuring the association fulfils its strategic objectives.”

NEWS & OPINION

KIM POTGIETER Director and Head: Life Planning, Chartered Wealth Solutions

30 November 2019

Are women ignored by the financial planning industry?

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always ask new clients about their previous experiences with financial planners, and how it shaped their view of the industry. An astounding number of women are severely dissatisfied with the service received, with the most cited reasons being lack of respect, a one-size-fits-all approach, lack of relationship authenticity and poor communication. After helping women plan their finances over the last ten years, I have learned that women generally feel talked-down to, pressurised and stereotyped by their planners. The financial planning industry has traditionally catered for men. Even today, when couples attend planning meetings, men are still the primary source of contact (and the decision makers), leaving women unintentionally side-lined. Yes, women do have a historical disadvantage when it comes to finance; it has been a male-dominated realm and women are less socialised in this arena. Women are not a homogenous group. We have different life challenges, needs and most certainly different levels of financial knowledge and experience. And things are changing. Although financial planning as a career for women has been slow on the uptake, it is heartening to know that, according to the Financial Planning Institute of South Africa, 30% of certified financial planners entering the profession are women. According to Stats SA, 62% of children born in the country in 2017 had no details of fathers recorded at birth. This implies that more women are becoming breadwinners and heads of households, making the financial decisions. Women are fast emerging as entrepreneurs, innovators and leaders and they are comfortable prioritising money management, investments and savings. Unique challenges facing women Women still earn less than their male counterparts – 23% less according to Stats SA. In general, women have fewer years of earnable income, managing multiple demands such as caring for children and other household responsibilities. A significant challenge when it comes to retirement savings CPD-annualrefresher.pdf 1 2019/09/13 09:44 is getting caught in the ‘sandwich-generation’ –

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simultaneously caring for children and parents. Women are often pressed to decrease working hours, pass up a promotion or negotiate part-time work, which has a significant impact on their savings. Women also live longer than men, and are statistically likely to die single, divorced or widowed. Women think and talk differently about money Part of the problem is that the industry has too few female planners. Men are talking to women the way they talk to men, and that’s not working. In general, women behave differently around money – we are not purely interested in potential investment risks, returns and growing assets. We want to talk about our financial decisions and how these choices impact on the people and the world around us. We view money as an enabler of choice; enabling more free time, flexi-hours, and support for our families. In essence, women integrate life planning with financial planning. We want to discuss how to align the plans we have for our lives with our financial goals, and how our money will enable our dreams. If we are clear on what the money is for, we are generally quite willing to make sacrifices to achieve our goals. Financial planning for women is about more than just the money. It’s about thrashing out ideas, looking for alternative solutions and creative approaches. Our money needs and goals are unique, and the financial plan must be too. The challenge for planners is to facilitate money conversations for women in a different way: women value real connections, long-term relationships, listening skills and empathy.

THE FINANCIAL PLANNING INDUSTRY HAS TRADITIONALLY CATERED FOR MEN

How women should choose a financial planner

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Gender should not be the primary concern when looking for a planner. Women should look for someone who takes an interest in more than their money – someone who understands their financial needs and can align these with their life goals.

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A woman’s relationship with a financial planner will be a long-term one. Their financial plan will continuously change as their circumstances change. Women should think about how the planner makes them feel: is it someone they can form a close bond with?

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A good planner will facilitate a life planning session, where women map out their expectations and define their goals. The financial plan is then structured to enable their life plan. Chances are that plans will change – no matter how well prepared they are. The planner must be someone that is trusted enough to have these discussions with.

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The planner must be a good communicator with essential skills: listening, empathy and authenticity.

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Knowledge and experience: Women juggle many responsibilities and do not have time to manage their investments on a daily basis – planners should therefore be able to manage finances on their behalf with confidence, make suggestions, and provide feedback.

Women need to empower themselves and take control of their finances. If a woman is in a relationship, she should co-create the family financial plan with her partner, ensuring that it accommodates the wishes of both parties, thereby giving her money the attention it deserves. Kim Potgieter is the author of Retiremeant – get more meaning from your money and founder of the Women in Finance Network.

INTERMEDIARY EXPERIENCE

AWARDS 2019 LIFE AND RISK CATEGORY WINNER

NEWS & OPINION

ALEX COOK CEO, GCI

30 November 2019

IFAs: Don’t sell your business, capitalise it and leave a legacy

Independent financial advisers, wealth managers and brokers need to find ways of turning their businesses into a source of annuity income for retirement. Selling it is not the answer, argues Alex Cook, CEO of GCI.

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ndependent financial advisers, wealth managers and brokers face one of their biggest challenges right at the end of their careers: how to turn their hard-won business into steady annuity income to ensure a financially stable retirement. The most common solution – selling the business and its client base – is the worst option. That’s because these businesses, by their very nature, are typically one- or two-man bands, and so the price they would command is relatively low. The usual formula is a multiple of the annual turnover: 1.5 or twice is usual. This will not generate enough capital to come even close to replicating the existing income stream. For example, an independent practice turning over R2m a year in fees could expect to fetch R3m to R4m in a sale. Presuming a prudent drawdown of 5%, the capital realised would generate in the region of R175 000 per annum (R14 500 per month) – a

RICHARD RATTUE Managing Director, Compli-Serve SA

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he Conduct of Financial Institutions Bill (CoFI) embeds the Treating Customers Fairly (TCF) outcomes, which means they will become binding in SA. Far from a passé acronym, fair treatment should be central to a firm’s culture, and products should actually meet the needs of consumers. As part of any TCF initiative, the Regulator expects FSPs to demonstrate that they are integrating TCF into their business through adequate resources, and this includes having appropriate Management FAIR TREATMENT Information (MI) measures in place. SHOULD BE These are to test CENTRAL TO A if TCF is being FIRM’S CULTURE applied and if all six of its outcomes are being achieved. MI is collected during a period of business activity and can come in many forms, such as reviewing customer feedback, or compliance reports. A typical approach to delivery of the TCF consumer outcomes involves developing responsibilities, processes, controls and standards. However, evidence is needed. For example, the statement that a process exists, or a control is in

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far cry from the income the previous owner had enjoyed. A reduction in income of this magnitude will inevitably have a drastic impact on the quality of anyone’s retirement, even if there is additional income from other investments. Another common – and equally unsuccessful – strategy is to ‘transfer’

FOLLOWING A DELIBERATE MERGER PROCESS DELIVERS GOOD RESULTS clients to another independent operator of similar size in return for a percentage of the continuing income stream. The drawback here is that smaller independents seldom have the time to service a number of additional clients, nor the compliance, finance and admin infrastructure to cope with a far larger client base. My experience is that the only reliable way to

turn your independent business into a substantial annuity income stream is to undertake a carefully structured merger with a bigger independent firm. If this process is done correctly, the clients can be effectively transferred over an extended period. During this time, the owner can slowly introduce his or her clients to new advisers or wealth managers, and allow for new relationships to develop. It’s a somewhat delicate process, and we at GCI have actually created a dedicated merger department to handle it. Our experience is that following a deliberate merger process delivers good results. The merged business actually grows because the team can dedicate its time to clients rather than running the business. This growth is good for all parties: clients receive better service and advice and, by becoming part of the GCI team, the advisors themselves earn more revenue. A healthy advisory sector is a national imperative as we attempt to help more people achieve financial stability and, crucially, a secure retirement. Providing a way for independent advisers to reap the rewards of their hard work, and ensure continuity for their clients, makes good sense. Achieving these goals, however, means looking beyond the obvious.

TCF MI – the blended acronym for the best outcome place, does not indicate it is followed all the time. MI should be produced and monitored regularly to avoid problems rather than commissioned in response to problems. In essence, you cannot do TCF if your MI is not up to scratch.

the firm about the consumer outcomes?’ rather than, for example, the performance of the firm. MI on customer satisfaction may be indicative of fairness. However, it does not demonstrate fairness as customers can be satisfied with unfair treatment and dissatisfied with fair treatment.

Good principles to follow • TCF MI should generally focus on how far a firm is delivering the TCF consumer outcomes rather than just measuring processes • TCF MI is more than just MI that indicates the status of a firm’s TCF initiative. TCF relates to the business activities that firms carry out now and MI on those activities can be regarded as TCF MI • Some TCF MI will already exist. TCF should not generally require the creation of substantial amounts of new information; relevant information may already be available in the form of current MI the firm collects.

An example of good vs. bad MI Good MI: Of sales last month, 35% were product x, 25% were product z, 20% were product y and the remainder made up of product w. Bad MI: From the financial ledger, the firm can prove it made 41 sales last month.

In many cases, an expansion of existing MI to include extra analysis may enable firms to demonstrate delivery of TCF outcomes. The difference may be the viewpoint with management considering ‘what is the MI telling

The good MI demonstrates detail in the information, enabling management to identify risks (for example, how sales of each product compare to marketing plans). This will illustrate delivery against TCF Outcome 2; that an appropriate product reached its target audience. The bad MI example does not contain enough detail to enable management to review sale trends by product. MI is not just about different parts of a firm telling each other things. It is about measuring performance and identifying potential risks, enabling management to spot patterns and make informed decisions for the betterment of a business.

NEWS & OPINION

30 November 2019

An applied and industry-relevant approach MoneyMarketing speaks to Marilize Putter, Dean of Financial Planning and Insurance at Milpark Education’s School of Financial Planning and Insurance. Of all the courses that Milpark Education’s School of Financial Planning and Insurance offers, which are the most popular ones currently? The Postgraduate Diploma in Financial Planning remains very popular with prospective students. On completion of the Milpark Postgraduate Diploma in Financial Planning, students are eligible to apply to the Financial Planning Institute of Southern Africa to write its Professional Competency Examination for the CFP® Certification. We are very proud of the results of Milpark Education Alumni in the PCE, considering that we maintained the highest pass rate of all the providers over the past five exams. We also had a first for a Milpark Education alumni this year with Koba Jakob, who recently won the Financial Planning Institute’s Top Candidate Award – meaning she was placed first overall in the February 2018 and August 2019 PCE. We follow an applied and industryrelevant approach in teaching the content. We also believe that the improvements we have implemented over the past five years are paying dividends.

THE POSTGRADUATE DIPLOMA IN FINANCIAL PLANNING IS OFFERED VIA OUR DISTANCE LEARNING ONLINE MODE OF DELIVERY The Postgraduate Diploma in Financial Planning is offered via our Distance Learning Online (DLO) mode of delivery. We follow a very hands-on approach where students are required to work systematically through the material for a module over a six-week period. There is an assessment at the end of every week to ensure that all students remain on track with their studies. The exam is scheduled at the end of week 8. In terms of academic support available to students, we have a subject matter expert assigned to each module who interacts with students as an online lecturer. There is also a Milpark lecturer assigned to each module and we have a dedicated programme manager to assist students with administrative-related queries. Academic support in the form of online classes is available on content areas where students usually need

well as an NQF level 6 qualification in financial planning, to be considered. Academic performance on these qualifications is also considered important determinants of future success.

additional support. The B.Com with a major in Financial Planning remains popular with younger students who selected financial planning as their career of choice. The B.Com with a major in Short-term Insurance is also very popular with candidates who are working in the nonlife insurance industry and who want to progress into management positions or supplement their work experience with an industry-relevant qualification. We have also partnered with a number of corporate clients in the insurance sector where we have implemented graduate trainee programmes very successfully. Workreadiness workshops, an insurancespecific qualification and corporatespecific training and mentorship are crafted into a one-year programme to assist young people, who have completed a generic bachelor’s degree, with a smooth transition into the world of work. Can you elaborate on your collaboration with the FPI and the IISA? Milpark School of Financial Planning & Insurance is an Approved Education Provider with the Financial Planning Institute of Southern Africa (FPI) and the Insurance Institute of South Africa (IISA). Our qualifications on the various NQF levels are aligned with the respective professional designations awarded by these professional bodies. How do you make sure that your courses offer a relevant approach? We believe that one of the important contributing factors is employing lecturers with industry-relevant work experience. There is no substitute for having first-hand experience of what is required of a financial adviser/planner or short-term insurance expert working in the field. Lecturers are able to relate

to students and to relate the theory to industry-relevant examples as a result. Each Milpark lecturer also collaborates with a team of industry experts who assist in various ways to ensure that our material and the delivery thereof remains relevant. What criteria are applied to the appointment of lecturers at the Milpark Education’s School of Financial Planning and Insurance? Most lecturers in the School of Financial Planning and Insurance hold at least a Postgraduate Diploma in Financial Planning. The majority of the lecturers in the financial planning department are also CFP® professionals. Experience in the industry is also very important. What subjects at matric level are recommended for a financial planning career? It is important to a have a good understanding of basic Mathematics. Having completed Economics, Business Economics and Accounting will also benefit undergraduate students. Must students have a university degree to be accepted to study for a Postgraduate Diploma in Financial Planning? The statutory entrance requirement for a postgraduate diploma is a relevant bachelor’s degree. However, we are allowed to admit a small number of students onto the programme via Recognition of Prior Learning (RPL). As numbers are limited by legislation, we first select candidates with extensive work experience, but who did not previously have the opportunity to study a full bachelor’s degree. Applicants must have completed an NQF level 5 qualification in financial planning or wealth management, as

As qualifications are offered through distance education, are students who are struggling with some aspect of the course able to ask for a tutor’s help? As a part of the academic support available on all modules, students have access to tutors via an online forum. On our distance learning online mode of delivery, online lecturers are available to assist with content-related queries. Although the mode of delivery is distance learning or distance learning online, our offering is very different from the customary distance learning methods. We aim to use the online course environment to come closer to our students. To illustrate how we aim to achieve this, we are able to track students through their course activities. This allows us to identify students early on who appear to be hesitant to engage with the material and we can then contact them to offer our assistance. We also have various online support activities, such as online classes, which students can participate in. We follow an asynchronous approach to allow students to study at the time of day that suits their lifestyle best. From the students you enrol, can you say if there is evidence currently of transformation in financial planning and insurance – and are more women studying for these courses? Yes, there has definitely been a shift over the past ten years in the make-up of the average student. The average age has also decreased significantly and there is an even split between men and women, considering the Schools’ full student population.

Marilize Putter, Dean of Financial Planning and Insurance, Milpark Education’s School of Financial Planning and Insurance

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INVESTING

30 November 2019

Spire Awards winners announced

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he Johannesburg Stock Exchange (JSE) has announced the winners of the 18th annual Spire Awards. Highlights include wins from Rand Merchant Bank who won in the Best Forex House and Best Fixed Income & Forex House categories, as well as Nedbank who won in the Best Bond House and Best Interest Rate Derivative House categories. Absa Bank won the Best Research House Awards category. This year, four banks competed closely for the coveted Best House categories. The Broker Awards categories were dominated by Tradition and Prescient Securities. The winners are as follows: Best Broker: Agricultural Derivatives Research Robinson Mulder De Waal Financial Services Best Broker: Commodity Options BVG Commodities Best Commodity Broker: Physical Deliveries CJS Securities Best Broker: Commodity Derivatives Robinson Mulder De Waal Financial Services Best Research Team: Africa Absa Best Research Team: Forex Standard Bank Best Research Team: Credit Rand Merchant Bank Best Research Team: Economics Absa Best Research Team: Fixed Income Absa Best Agency Broker: Listed Interest Rate Derivatives Prescient Securities Best Inter Dealer Broker: Interest Rate Derivatives Tradition Best Market-Making Team: Listed Interest Rate Derivatives Rand Merchant Bank Best Sales Team: Interest Rate Derivatives Rand Merchant Bank Best Market-Making Team: Interest Rate Derivatives Nedbank Best Agency Broker: Listed FX Futures Prescient Securities Best Agency Broker: Listed FX Options Prescient Securities Best Market Making Team: On-Screen Listed FX Derivatives Rand Merchant Bank Best Sales Team: FX and FX Derivatives Standard Bank Best Market Making Team: FX & FX Futures Standard Bank Best Market Making Team: FX Options Absa Best Agency Broker: Bonds Avior Capital Markets Best Inter Dealer Broker: Bonds as voted by Agency Brokers Tradition Best Inter Dealer Broker: Bonds as voted by Banks Tradition Best Debt Origination Team Rand Merchant Bank Best Team: Credit Bonds Standard Bank Best Team: Inflation Linked Bonds Rand Merchant Bank Best Repo Team Absa Best Sales Team: Bonds Nedbank Best Bond ETP Market-Maker Nedbank Best Market Making Team: Government Bonds Nedbank Best IDB: Fixed Income Tradition Best Research House Absa Best Interest Rate Derivative House Nedbank Best Forex House Rand Merchant Bank Best Bond House Nedbank Best Fixed Income & Forex House Rand Merchant Bank

RMB Global Markets wins Best Fixed Income and Forex House Award

Above: RMB wins Best Forex House Award Left: Prescient Securities wins award for Best Agency Broker: Listed FX Futures.

Nedbank wins Best Interest Rate Derivative House award

SPIRE AWARDS 2019 #1 Best Agency Broker: Listed Interest Rate DerivativeS #1 Best Agency Broker: Listed FX Futures #1 Best Agency Broker: Listed FX Options #3 Best Agency Broker: Bonds Prescient Securities (PSec) is a Black-owned, Agency-only, Full-service, Level 1 BEE Stockbroker. We provide Research and Execution across our ‘PSec Pillars’ (Equity Research, Alpha Labs, Equity Trading, Derivative Trading & Analysis, Fixed Income Trading & Analysis and Operations). This is underpinned by GEARS, our locally built and supported Excel-based technology suite of Multi-Asset Tools, Functions & Templates. For more information, contact us at prescient_securities@prescient.co.za or visit us at www.prescient.co.za/our-services/stockbroking/ or follow us on Linkedin.

Prescient Securities is a proud participant of ASISA BEE Stockbroking Enterprise Development Initiative Prescient Sec 2019 Spire Awards 80x220mm Ad.indd 1 10 WWW.MONEYMARKETING.CO.ZA

2019/10/22 08:28:28

1010508/MM

INSPIRED THINKING 2019 SPIRE AWARDS

2019 SPIRE AWARDS

Best Fixed Income and Forex House

Best Forex House

3rd Consecutive Year

4th Consecutive Year

RMB. Solutionist Thinking.

CELEBRATING OUR PARTNERSHIP WITH OUR VALUED CLIENTS AT THE 2019 JSE SPIRE AWARDS. Clients are at the heart of our business, which is why we are honoured to have been recognised at the 2019 JSE Spire Awards – the benchmark for the South African Capital Markets. Our Solutionist Thinking is not only what sets us apart, it’s what inspires us to consistently deliver innovative solutions for our valued clients.

Search RMB Awards Rand Merchant Bank is an Authorised Financial Services and Credit Provider.

Corporate and Investment Banking

INVESTING

30 November 2019

Africa’s USD investment opportunity in a low yield world

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he rich palette of investment opportunities dollars, as opposed to the traditional method of and asset classes north of the Limpopo River borrowing in local currency, and allow investors continue to grow and develop year by year, to avoid local currency risk by investing in hard opening up a full range of possibilities for investors currency instruments. of every timeframe and risk appetite. In 2006, only one country in Africa had issued Stock exchanges and listed companies have long a Eurobond, with a total outstanding value of histories on the continent. Egypt had an exchange only half a billion dollars. Fast forward to today in 1883, four years before the Johannesburg and there are now 20 countries, excluding South Stock Exchange, and the first stock exchange in Africa, with Eurobonds that investors can choose Zimbabwe opened in Bulawayo in 1896, only nine from, with a total outstanding value of around years after the Johannesburg Stock Exchange. These $85bn. Countries that investors can access easily were followed by Morocco in 1929, Kenya in 1954 via Eurobonds that don’t have readily investible and Nigeria in 1960, with even tiny Rwanda getting stock exchanges yet include Angola, Benin, an exchange in 2008. There are currently about Cameroon, Ethiopia, Gabon, Mozambique, 16 countries with ‘investible’ Republic of Congo and Senegal. stock exchanges (although the The market is extremely liquid, AFRICA SOVEREIGN with around $500m worth of likes of Libya, Somalia, Sudan, Cape Verde and a few others bonds trading every day across EUROBONDS ARE technically have exchanges, trade over 65 instruments across the FIXED-INCOME is negligible and so they are 20 countries. This market is even SECURITIES not included in the 16). Other larger and more liquid if we established asset classes include include those bonds issued by a THAT ENABLE local currency fixed-income Supranational (an entity formed GOVERNMENTS TO securities (mainly short-term and guaranteed by two or more borrowing by governments) and BORROW MONEY IN governments; examples include Private Equity (investing into development finance institutions US DOLLARS unlisted companies). like the African Development However, a relatively newer asset class is Bank and African Export-Import Bank). currently grabbing headlines with its rapid But how have these Eurobonds fared? Since late development, strong returns and lower volatility 2006 (to end August 2019) the Africa ex-South than traditional assets classes in Africa. Africa Africa Eurobond Index (provided by Standard Sovereign Eurobonds are fixed-income securities Bank) has delivered 8.7% compound annual growth that enable governments to borrow money in US in USD compared to 4.1% in USD per year from

the JSE All Share Index and 2.5% per year from the South African All Bond Index, and with lower volatility (See chart). The Africa ex-SA Eurobonds have also beaten global bond peers, with the Emerging Markets Bond Index and Global High Yield Bond Index returning 6.7% and 7.1% per year in USD respectively over the same period.

Source: Bloomberg, Standard Bank

Current yields look attractive. African-ex SA Eurobonds have a yield to maturity of 7.3% (in USD), which equates to a spread over the US 10 Year Bond of 5.7%. This compares well to peers, with Global High Yield bonds on a spread of 5% and Emerging Market Bonds with a spread of only 4%. Any investor looking for a good USD yield should consider investing in African Sovereign Eurobonds, with the added benefit that this offshore asset class counts towards the extra 10% Africa exposure one may access over and above the 30% offshore allowance as per the SA Reserve Bank and Regulation 28 limit of the Pension Fund Act.

Wehmeyer Ferreira, 1nvest Executive and COO: STANLIB Index Investments

Specialist index tracking fund provider launched Standard Bank, STANLIB and Liberty last month introduced 1nvest, a specialist index tracking fund provider. MoneyMarketing was at the launch event in Johannesburg.

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nvest specialises in index tracking unit trusts and exchangetraded funds. It has been billed as the product of collaboration from all three businesses under the Standard Bank Group, combining existing index funds, experience and expertise to provide clients with a comprehensive range of 28 index tracing funds across multiple asset classes and geographies. “Stanlib has had a range of passive ETFs and unit trusts in the market for a number of years since its formation and Standard Bank has a range of commodity ETFs under the Africa ETF issuer banner, so as a group we decided to bring this together under a single banner called 1nvest,” Wehmeyer Ferreira, 1nvest Executive

and COO of STANLIB Index Investments told the launch event. 1nvest has five broad product ranges that span equities, fixed income, commodities and property asset classes. These include the Local, Global, Blended, Commodity and Smart Beta ranges. Explaining why the Group launched 1nvest, Ferreira said that the world had moved on since the severe worldwide economic crisis of 2007-2008. “We’ve seen the rise of index-type products because firstly, since the shock of the global financial crisis, there’s been distrust in the financial system and we see it every day, with people questioning why financial institutions do what they do. They ask

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if they’re getting the best service and when that happens, it shows people are fearful of the unknown and they want more transparent products. “Secondly, there’s been a regulatory push in the US, the UK and Europe, similar to our RDR locally, where additional emphasis has been put on disclosure of fees. People ask what they are paying for – is it advice, admin, product or platform? “Thirdly, post the global financial crisis, we went into a low-yielding environment. When assets are running and you’re earning a return of 15% or 20% per annum, people don’t necessarily worry about costs but when you have lower returns, they do. We have seen a shift globally to passive investing – not in South Africa just

yet, but as a Group we firmly believe the shift will happen here.” Ferreira added that passive investments have a place in every clients’ portfolio, “but we’re not as dogmatic as some other providers by saying all investments need to be passive with no active investing – we think there’s a balance, depending on the client’s needs”.

IMAGE: TISO BLACKSTAR

PAUL ROBINSON Portfolio Manager, Laurium Capital

OFFSHORE SPECIAL SUPPLEMENT

SA MANAGERS PICK UP ON GUERNSEY INVESTMENT SOLUTIONS PAGE 14

MONTENEGRO’S CITIZENSHIPBY-INVESTMENT PROGRAM NOW ACCEPTING APPLICATIONS

GOING OFFSHORE: HEDGING YOUR INVESTMENT BETS

PAGE 16

PAGE 18

WHY DEFENCE MAKES SENSE PAGE 18

N E G AT I V E G L OB A L I N T E R E ST R AT E S – T H E I N V E ST M E N T I M PL IC AT ION S PAGE 16

OFFSHORE SUPPLEMENT

30 November 2019

JAMES CRAWFORD Business Development Director, Guernsey Finance

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nvestment managers in South Africa continue to be attracted by the opportunity not only to reinvest outside of the country, but also to attract capital from overseas institutions and high-net-worth individuals into the country – and are finding that Guernsey investment funds are the perfect fit for their ambitions. We have discovered on previous trips to the country that EU UCITS funds are something of a default, but South African clients should be aware that there is no need to use those structures compared to a Guernsey ‘Class B scheme’ – which is quicker and more cost-efficient to launch, and offers managers far more flexibility and control, without the burden of European regulation and compliance. I have just made my second trip to South Africa in the space of a few weeks, promoting Guernsey’s expertise in funds, private wealth and international pensions, having been a regular visitor on business a decade ago.

SA MANAGERS PICK UP ON GUERNSEY INVESTMENT SOLUTIONS

There is clearly significant strength in the business ties between South Africa and Guernsey in funds. Not only do some of the big names in investment in South Africa have a presence in the island, in recent years that relationship has been growing significantly. Why would South African managers structure their funds in Guernsey? There are many compelling reasons. South Africans often invest their offshore allowance into mutual funds operated by the same fund managers who manage their money at home, but domiciled in an offshore finance centre such as Guernsey. Following relaxation of exchange controls, investment managers in South Africa have realised not

WE ARE

only the opportunity to reinvest client money outside of the country, but also to encourage capital from overseas institutions and high-networth individuals into the country. SA managers will be aware of the European UCITS funds, but Guernsey’s message is to look beyond the obvious. We say that UCITS are often misused, with more than 90% of the capital invested bearing the burden of European regulation and compliance unnecessarily. A Guernsey ‘Class B scheme’ is much quicker and more cost-efficient to launch, offering managers far more flexibility and control than a UCITS, with a disclosure-based model in drafting particulars that allows for the widest possible investment powers. A Protected Cell Company structure, pioneered in Guernsey more than 20 years ago,

provides flexibility not available elsewhere, and a PCC is suitable for both hedge and mutual fund managers going offshore for the first time. PCCs are often used in investment management, with different cells used for different strategies. Guernsey is Europe’s leading specialist centre for private equity administration; the number-one location outside of the UK for London-listed funds; is whitelisted for substance by the European Union and the OECD; and offers a simple funds regime with respected and responsive regulation. As South African managers seek the comfort of stability, security, sustainability and substance in politically turbulent times, Guernsey offers the solution. The value of a Guernsey platform is already well known to a number of established South African managers, and more are picking up on the opportunities offered all the time.

SAFEGUARDING YOUR FUTURE

In rising and falling tides, Guernsey’s bathing pools have provided

weareguernsey.com

families with a safe place to bathe for more than 150 years. Similarly our financial specialists provide a safe, secure, and well-supervised environment for you and your assets.

INSURANCE

INVESTMENT FUNDS

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TRUST & COMPANY PENSIONS

INVESTMENT MANAGEMENT

BANKING

Ashburton Fund Managers (Proprietary) Limited (Reg. No 2002/013187/07) is an authorised financial services provider (FSP number 40169) in terms of the FAIS Act, 2002. Ashburton Management Company RF (Pty) Ltd is an approved CIS manager in terms of the Collective Investment Schemes Control Act, 45 of 2002. The Global Leaders Equity Fund is a sub-fund of the Ashburton Investments SICAV; a Luxembourg-registered collective investment scheme approved by the Commission de Surveillance du Secteur Financier (CSSF) and which has been approved for distribution in South Africa in terms of section 65 of the Collective Investment Schemes Control Act, 2002. Issued by Ashburton (Jersey) Limited. Registered office IFC 1, The Esplanade, St Helier, Jersey JE4 8SJ. Regulated by the Jersey Financial Services Commission.

FULLY INVESTED IN BRINGING THE WORLD’S BEST, TO YOU In a volatile and uncertain world, where investment returns are unpredictable, wouldn’t you like the opportunity to access up to 25 of the world’s leading mega cap stocks? Wouldn’t it be even better if they came to you? The Ashburton Global Leaders Equity Fund is a concentrated portfolio of the world’s most prominent companies as measured by market cap, with the aim of delivering sustainable superior returns over the long term through geographic and sector diversification. The fund is available in US dollars as a direct offshore offering, or via the rand-based feeder fund without having to utilise your offshore allowance. From R500 per month or a lump sum of R5,000 via the rand feeder fund, you can put your money to work with the world’s best. Visit www.ashburtoninvestments.com to find out more.

FULLY INVESTED /

A part of the FirstRand Group

OFFSHORE SUPPLEMENT

30 November 2019

DUGGAN MATTHEWS Chief Investment Officer, Marriott

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he yield of a country’s 10-year government bond provides important insight into its economic prospects. Above-average yields on the debt of reliable borrowers typically represent an expectation of above-average inflation and strong GDP growth. Very low yields imply the opposite. Twenty years ago, over half of the global bond market boasted yields in excess of 5%. Today, only 3% are still able to offer those kinds of yields, and as much as a quarter of the global bond market are offering negative yields. In Germany, yields are negative all the way from cash deposits to 30-year bonds. In Switzerland, negative yields extend all the way out to 50 years. The message from the bond market is clear – investors need to consider the investment implications of a prolonged period of low inflation and weak global growth. Investment Implication no 1: Dividends will become increasingly sought-after With cash and bonds offering investors very little in the way of yield, investors are likely to turn to dividendpaying equities for income. The chart below highlights the yield differential between Nestlé (a Swiss multinational) and the Swiss 30-year government bond.

NEGATIVE GLOBAL INTEREST RATES – THE INVESTMENT IMPLICATIONS The current 2.6% yield differential is unusually high and unlikely to persist, considering both investments pay out income in Swiss Francs and exhibit similar levels of price volatility. This presents downside risk to bond investors, and upside potential for dividend investors. Investment Implication no. 2: Prefer defensives over cyclicals Companies that produce goods and services that consumers can’t go without, have the ability to increase prices without sacrificing volumes, even when times are tough. As such, a low growth environment favours businesses operating in ‘defensive’ industries (such as food, beverages and healthcare) over more cyclical companies like resource and energy stocks. The chart below highlights how Nestlé has been able to consistently increase its dividends throughout the various economic cycles, including the great recession of 2008/9.

Investment Implication 3: Quality is key A company’s brand, business model and balance sheet are all put to the test when economic growth is subdued. Based on our experience, the businesses that tend to come out on top have the following qualities:

1. Size and scale 2. Market-leading brands 3. Geographic diversification 4. Low debt levels 5. High, free cashflow Coca-Cola, for instance, is the market leader in multiple non-alcoholic beverage categories, generates sales in 180+ different countries, boasts a market cap of over $200bn, and has an A1 credit rating – qualities that have helped underpin 57 consecutive dividend increases. Best place to be invested The investment implications of a prolonged period of low inflation and weak global growth suggests that the world’s best dividend-paying investments are likely to serve investors best in the years ahead. Not only are the dividend yields of high-quality companies like Nestlé and Coca-Cola significantly higher than bond yields, ‘defensive’ products and strong balance sheets suggest they will continue to increase dividends despite tough conditions. The chart below highlights the relationship between dividend and capital growth over the long term.

Reliable dividend growth and an acceptable yield to re-invest should ensure inflation-beating returns from these investments in a world of negative interest rates.

MONTENEGRO’S CITIZENSHIP-BY-INVESTMENT PROGRAM NOW ACCEPTING APPLICATIONS

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he Montenegro Citizenshipby-Investment Program has opened for business, offering high-net-worth investors significant opportunities in a booming regional market, a powerful passport, and visafree access to the whole of Europe’s Schengen Area. Investment Migration firm Henley & Partners is one of only three government-appointed marketing agents for the program. Henley & Partners CEO Dr Juerg Steffen says, “The Montenegro Citizenship-by-Investment Program represents an extraordinary opportunity for both the Montenegrin people and for highnet-worth investors around the world. Montenegro is one of Europe’s bestkept secrets, with unparalleled natural beauty, a flourishing tourism industry, an array of exciting investment

opportunities, a rich cultural heritage, and is well-known for the hospitality of its citizens. Our extensive sovereign advisory, real estate, and marketing experience makes us confident that the country’s exciting new program will exceed all expectations.” As well as being a NATO member, Montenegro is a recognised candidate for future membership of the European Union and is currently aligning its policies with those of the EU as part of the standard accession process. Currently ranked 46th on the Henley Passport Index with a visa-free/visa-onarrival score of 122, the country has an admirable safety record and a strong commitment to the rule of law. The Montenegro Citizenship-byInvestment Program is limited to just 2 000 applicants and offers individuals several options in terms of investment,

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including a EUR 450 000 investment in projects in developed areas or a EUR 250 000 investment in projects in less developed areas. Applicants are also required to pay a contribution of EUR 100 000 per application, which is directed to a special fund for the growth of underdeveloped areas. To qualify for the program, the main applicant must be over 18 years of age, meet the application requirements, and make both a qualifying investment into a government-approved project and a qualifying contribution. In

addition, applicants are required to pay a processing fee of EUR 15 000 for a single applicant, EUR 10 000 each for up to three family members, and EUR 50 000 for each additional family member thereafter. Once the application is processed by the government, and provided that all due diligence procedures are completed satisfactorily, citizenship is granted. Once acquired, Montenegrin citizenship extends to family members (being received by children when they reach 18 years of age) and can be passed on to future generations by descent.

International Investment Portfolio Personalised Share Portfolio with access to the world’s best companies.

Invest for Income Contact our Communication Centre on 0800 336 555 or visit www.marriott.co.za

OFFSHORE SUPPLEMENT

30 November 2019

WHY DEFENCE MAKES SENSE

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any commentators are talking about an increasing risk of recession. Our own recession probability models agree, suggesting a more than 50% chance of a recession happening in the next two years. As recessions are typically associated with much worse market returns, this increasing risk has led investors to look for defensive strategies that emphasise drawdown management. However, we believe that even outside of periods of increased recession risk, defence makes good sense for investors – particularly for those whose investment horizon is limited. We think the nature of markets has evolved since the global financial crisis. Our analysis of markets since 1987 (the year of the Black Monday crash) shows that before 2009, outside of the bear markets often associated with recessions – when stock markets drop 20% or more from recent highs – investors tended to see drawdowns that were ‘well-behaved’: an equal weighted bond-equity portfolio suffered very few drawdowns of more than 5%, and never as much as 10%. By contrast, in the current cycle we have so far seen six episodes of more

than 5% drawdowns, including one of more than 10% – an unprecedented frequency and magnitude of drawdowns for a bull market over the last 30 years. Is a changing market structure to blame? We think there may be multiple drivers of this increased fragility across asset classes: • The rate of economic growth has been slower over this cycle than in past cycles, meaning the global economy has teetered closer to the edge of recession (and therefore to the risk of severe drawdowns) than it did before • To deal with this, central bank market intervention has become more significant and creative than it was previously, potentially leading to a ‘feast or famine’ environment for liquidity • The ability of private sector banks to absorb risk has been curtailed by regulation and shareholder demand for their business models to become more dependable • Passive ETFs/tracker indices make up a greater proportion of the investor base, potentially leading to more

herding into and out of positions, thereby exacerbating market moves. The impact of these changes is evident in the number of ‘flash crashes’ – instances when asset values changed significantly over a short period of time – seen in this bull market. These flash crashes aren’t just confined to equity markets and are likely a consequence of liquidity becoming more susceptible to drying up than before. This changing market structure and the resulting increased frequency in drawdowns has a significant impact for investors, particularly for those whose horizons are not aligned to the economic environment, but rather to their own specific needs for returns, as their assets may not be able to recover from a drawdown in time to meet their liabilities. One cohort of investors particularly impacted are retirees, or those approaching retirement. These investors are not able to rely on future earnings to fund shortfalls caused by investment losses, and so must depend on the assets they have already built up through their working life.

With the world population ageing later, these investors are living for longer and so need to make their wealth last for longer. For them, drawdowns can be fatal to their investment objectives. For investors, the benefit of investing in a defensive fund during a recessionary period should be clear, as the aim to reduce drawdowns in significantly falling markets makes it easier to regain capital in the future. However, with market structure changes leading to the increased frequency and magnitude of bull market drawdowns and flash crashes, a defensive strategy has an important role in an investor’s portfolio throughout the cycle, particularly for those investors with nearer-term liabilities and needs. We believe this is why defence always makes sense.

John Stopford, Head of MultiAsset Income, Investec Asset Management

GOING OFFSHORE: HEDGING YOUR INVESTMENT BETS Offshore investing is an essential ingredient in any discerning investor’s overall portfolio. In tumultuous times, it allows you to hedge against both domestic political and economic risk, and potential currency depreciation. Alwyn van der Merwe, Director of Investments at Sanlam Private Wealth, looks at different ways of accessing the global market.

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esides protecting against risk, global • Our London-based global equity team can put diversification provides an opportunity for together a customised share portfolio for you. You investors to gain exposure to growth across can transfer your funds onto our platform, and different markets as well as asset classes. It may the team will construct a tailor-made, segregated also allow you to benefit from portfolio of individual companies opportunities not available listed on international exchanges. GLOBAL locally, including certain high• You can invest directly in the quality assets. award-winning Sanlam Global DIVERSIFICATION Every international investment High Quality Fund. The fund nvests PROVIDES AN strategy starts with your own in quality blue-chip companies unique set of circumstances, that have diverse sources of OPPORTUNITY FOR however. Depending on your revenue in terms of product line, INVESTORS TO risk profile and investment geography and currency. It has GAIN EXPOSURE TO objectives, Sanlam Private built an enviable track record since Wealth can create a stand-alone its inception five years ago, and in GROWTH ACROSS offshore solution for you, or one it was named Best Fund in the DIFFERENT MARKETS 2018 that complements your South City of London Wealth awards, Best AS WELL AS ASSET African investment portfolio. Fund Manager in the European You can use your offshore Wealth Briefing awards and the CLASSES allowances to transfer your winner in both the Investors Choice funds abroad, or you can make use of our asset swap and Private Asset Managers awards. capacity, or invest in rand-denominated options. • If you’re restricted from going the direct route, or If it’s pure equity you’re after, Sanlam Private if it’s simply not practical for you to do so, you can Wealth has a global equity offering, which can be invest offshore via the rand-based Sanlam Private accessed in three ways: Wealth Global High Quality Feeder Fund, which

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provides convenient access to the Sanlam Global High Quality Fund. If you’d rather not go the equity-only route, Sanlam Private Wealth also has a global multi-asset class offering, as well as a strategic bond fund – both funds have excellent track records. A final option for investors who can’t or don’t want to physically take funds out of South Africa is to invest in dual-listed or rand hedge companies on the JSE. For these investors, Sanlam Private Wealth can put together a customised portfolio consisting of high-quality companies that have a significant portion of their operations or income generated in foreign jurisdictions. In a nutshell, Sanlam Private Wealth has all the building blocks you’ll need to increase your global investment exposure. Supported by fiduciary and tax experts, our portfolio and wealth managers will work with you to design a customised offshore solution based on your personal financial circumstances, and your dreams and plans for the future. To find out more, email info@privatewealth. sanlam.co.za

Alwyn van der Merwe, Director: Investments, Sanlam Private Wealth

INVESTING

30 November 2019

JOHANNA KYRKLUND Chief Investment Officer and Head of Multi-Asset Investment, Schroders

How you can prepare for tougher markets Economic, market and regulation challenges mean the future is likely to be more difficult than the past. Here’s one way that pension funds can overcome these obstacles.

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e know that a combination of economic, market and regulation challenges are likely to make navigating the future more difficult than the past. Here, I suggest a way that pension funds can overcome these challenges, based on my experience of multiasset investing. Get the ground-work right Before setting out on any journey or project, it’s important to agree on what success looks like. Setting expectations, aligning goals and agreeing realistic time frames are an important part of this process. It’s critical to be honest about return expectations, particularly if they are too optimistic. Our expectations for the decade ahead are that both equity and bond returns are likely to be lower than the last 10 years (figures 1 and 2). Recognising this may mean a difficult conversation with a fund’s stakeholders, but it is better to do this before returns deteriorate, rather than after. Asset owners are increasingly investing in less familiar asset classes

or incorporating ESG into their investment frameworks. As a result, it is important to ensure that the resources available are consistent with ambitions and that the timescale is consistent with the investment. In the case of ESG, this involves establishing a framework to incorporate ESG effectively, including setting objectives, parameters and limits to the extent of ESG integration. This is also likely to require asset owners to move beyond simple screening and stock selection approaches and take a holistic approach to the measurement of sustainability. Finally, evaluation of performance should be transparent and there should be accountability in the review and feedback process. Transparency and accountability are key pillars of our multi-asset investment process and they should also act as guiding principles for asset owners in their manager selection and evaluation processes.

Conclusion Acknowledging that it will be harder to generate good returns in future is one thing, but FIGURE 1: THE FUTURE IS DIFFERENT, knowing what THERE IS A NEED TO ADAPT TO A NEW REALITY to do about it is another. It’s not just about numbers and analysis. Ultimately, people and their leaders will have to manage through this and I firmly FIGURE 2: THE GAP BETWEEN FUTURE AND PAST IS believe that EVEN GREATER FOR SOVEREIGN BOND MARKETS it is their wellbeing (and a supportive environment in which to work) that will be the answer. Source for both figures 1 and 2: Schroders, December 2018. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions, which may change. Forecasts and assumptions may be affected by external economic or other factors.

20 WWW.MONEYMARKETING.CO.ZA

NERSAN NAIDOO Chief Executive, Sanlam Investments

There’s never been a better time to invest in a better world It is possible to yield good returns and help combat climate change in the process. Climate Investor One – a debut vehicle from Climate Fund Managers (CFM) – shows this. Ultimately, it will serve electricity to 13 million people, avoid two million tons of carbon dioxide and create 10 000 jobs. And it’s already scaled beyond its first target of $530m.

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he Climate Investor One is an example of why there’s never been a better time to be an investor. Sanlam Investments believes new times demand new ways of thinking. The asset manager spots opportunities where others don’t. It believes that a broadly diversified asset allocation will yield long-term returns and empower investors to play a role in the real economy in South Africa and Africa. Key to this is the role of alternative investing in portfolio construction. This catalyses higher risk-adjusted returns, portfolio diversification due to low correlation with listed assets, and the ability to deliver financial – and social – returns. Nersan Naidoo, Chief Executive of Sanlam Investments, says, “‘There’s never been a better time to be an investor’ stems from the incredible technological and human-centric advancements in Africa and globally. Now is the time for investors to be positive about these opportunities that go beyond the mainstream.” Opportunities to invest with impact Sanlam Investments has played its part in investing in key areas across the broader impact investment spectrum. Here are some of its alternatives: • Climate Investor One • The South African private debt fund, which finances entrepreneurs and businesses • The Affordable Housing Fund, which invests in low-income housing developments • The Hipgnosis, which invests in musicians • The Glacier by Sanlam AI Flexible Fund of Funds, which uses AI to dynamically alter asset allocation. Alternatives like these help build the crucial diversification needed for a sustainable strategy in tough times. Naidoo says, “We know that when you blend the capabilities that we have – our active, index, and alternative capabilities – the result is a robust portfolio construction, with robust returns.” How to successfully diversify According to Naidoo, Sanlam Investments is doing so by: 1. Deliberately building out the depth and breadth of its capability beyond traditional active management. It has an active manager and index tracking manager, which facilitate cost-effective solutions as part of a diversified portfolio. 2. Building out its alternative capability through real assets. Sanlam Investments also has experienced, high-performing people and the due diligence and governance procedures in place to seek opportunities when others don’t. Naidoo concludes, “We want to be a key player in solving collective challenges to afford a better life for all South Africans. We have topperforming funds across our active, multi-management, index tracking and alternative capability that are well suited for our multi-asset strategy. Our expertise and our balance sheet allow us to think in new ways. And to live and breathe our belief that there’s never been a better time to be an investor.”

INVESTING

30 November 2019

Market capitalisation of SA ETP industry continues to rise

MEYER COETZEE Head of Retail, Prescient Investment Management

Lessons from two leathery old souls at a Karoo watering hole

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Sculpture by Beth Diane Armstrong

uring late September 2013, I rode through the small Karoo town of Sutherland. As things go on adventure motorbike trips, I thought it sensible to make a quick pitstop at the Sutherland Hotel for a refreshment. At the worn hardwood bar counter sat two gentlemen, Willie and Gabriel de Waal. These two bachelors had been farming the family land for decades, since Oom Piet passed on “just after we became a Republic”. These gents had reached an age where they were ready to trade farm life for the flickering lights of Sutherland. As there were no heirs to take over the herd of sheep, they pondered selling the grond en skaap. And that’s where we started talking. They would invest the proceeds with the Soon thereafter we shook hands and I mounted local branch of a bank and leef van die rente. It my mighty KTM and made dust tracks towards transpired that all they wanted was a risk-free Fraserburg, some 100km to the north-east. income from their investment. During the hour Recently, I visited Sutherland once more on or so that followed, I explained to them that, another adventure motorbike trip, and against all although investing with the bank was safe, they odds, there, six years later, I vaguely recognised could do better with the same level of certainty and two leathery old souls at the same watering hole. predictability. Something like the income fund we They were indeed Willie and Gabriel de Waal. We manage at the company I work with, continued where we left off. Prescient, would be a much better They had sold the grond en skaap, IT TRANSPIRED but clearly my analogy made a bigger proposition than putting their money in the bank. impression on Willie. He had invested THAT ALL “The difference between our his share in the Prescient Income THEY WANTED Provider Fund through the local income fund and money in the bank WAS A RISKis this: because you care for your insurance broker, while Gabriel stuck herd of 1 000 sheep, it produces FREE INCOME with his friend at the bank. around 700 lambs each year. Because Willie also decided that, since he had FROM THEIR your neighbour, lazy Lappies, does never travelled outside the Karoo, he not rotate his herd to optimise the wanted to visit their sister in England. INVESTMENT grazing, his 1 000 sheep only produce Getting on an airship is too outlandish, 600 lambs each year. If you and Lappies each sell 600 but with the growth he had seen in his ‘herd’, he lambs each year, you will earn the same income, but could take the Queen Elizabeth II nogal straight your herd will grow whereas Lappies’ will not. Your to Southampton the following Easter to finally see herd will be like an income fund, and Lappies’ herd where the Kakies came from. like a bankPrescient deposit.”Money Mktg 1-4 Goose Ad_r3.pdf 7/19/17 That is income protection with a little bit extra… 10:27:12 AM

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he market capitalisation of the total SA Exchange Traded Products industry continued to rise strongly in the third quarter of 2019, according to etfSA.co.za. It now amounts to R99.3bn, an increase of 27.6% on the total value of the ETP industry at the end of 2018. During the third quarter of this year, total market capitalisation grew from R91.3bn on 30 June 2019 to R99.3bn on 30 September 2019. The R8bn gain stemmed mainly from a rise in commodity ETFs in issue and from price gains in these products. Total new capital raised in the first nine months of 2019 was R7 864.9m: R7 724.6m for ETFs and R140.7m for ETNs. Four new ETFs were issued in this period, all of these smart beta products. Absa (NewFunds) issued three ETFs that manage volatility by switching between cash and equities, depending on momentum and drawdown targets being reached, while CoreShares replaced their Equally Weighted ETF with a smart beta product, the Scientific Beta Multi Factor ETF, which uses six risk factor criteria to construct its portfolio. SA ETP INDUSTRY TOTAL MARKET CAPITALISATION (RM)

WHILE OTHERS ZIG AND ZAG, WE STAY IN FORMATION.

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INVESTMENT MANAGEment

PRESCIENT GROUP OFFERING: LOCAL AND OFFSHORE INVESTMENT MANAGEMENT / UNIT TRUSTS STOCKBROKING / RETIREMENT PRODUCTS / UMBRELLA FUNDS / ADMINISTRATION / PLATFORM SERVICES AUTHORISED FINANCIAL SERVICES PROVIDER (FSP 612)

WWW.MONEYMARKETING.CO.ZA 21

INVESTING

30 November 2019

Structured investments – a nuanced alternative in extraordinary times

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arly in October, Greece issued EUR488m in three-month debt at a negative yield of -0.02%. Negative interest rates – when bond investors pay issuers for the privilege of holding their debt – are not unusual these days. In countries like Japan, Germany or Switzerland, negative rates on bonds are common. At the beginning of September, there was about $17tn in negative-yielding bonds globally, or 30% of all bond issuance. However, it’s remarkable that Greece – which faced crashing out of the euro just four years ago and whose debt was rated as ‘junk’ – should now be part of the negative-yielding club. Negative or very low bond yields come at a time when global central banks are looking to cut rates and re-embark on the bond purchase programmes introduced as a response to the post-Global Financial Crisis environment. With inflation subdued and rates at such low levels, global investors are understandably anxious about where to find returns in cash or fixed income. One possibility is to look to equity markets. Yet with trade wars already proving a drag on the world economy, there is also a worry about what returns can be generated from equity

markets from here onwards. This worry is amplified by concerns that US equities are at or close to their all-time highs while valuations are also elevated – the Shiller cyclically adjusted price/earnings ratio (CAPE) for the S&P 500, based on Investec calculations on 15 October 2019, is around 29 times; well above the longterm average of 17 times. This creates something of a dilemma for investors. They can invest in the global cash or bond markets and risk earning very low returns, or they can invest in global equities at a time when many are worried that the next big move might be down. The usual guideline to investors is to invest in a portfolio well-diversified by asset class (eg equities, bonds and cash) sector (eg financials, mining and tech) and currencies, and to hold for the long term. While this approach has held investors in good stead over the years, those who are at or close to retirement need to take a more nuanced approach. A sharp fall in the market just before retirement can have a major impact on the value of a person’s portfolio, as one shifts assets into a post-retirement vehicle. It’s here where structured

REYNEKE VAN WYK Partner and Head of Investment Management Division: Stonehage Fleming

investments can be used to mitigate risks in a portfolio in a defined, easy-to-understand way. Structures are now readily available that deliver certain targeted outcomes, according to market conditions, using underlying derivatives or other market instruments to achieve this. Structured products and notes are good examples and will typically reference an underlying index to provide geared upside, while offering a degree of capital protection (often 100%). Other investments will provide access to asset classes and sectors not easily accessible on global exchanges, into so-called alternative investments. Good examples are private equity, credit and hedge funds. While these are not typically very liquid investments, they may suit certain investors looking for different ways to diversify. Others may provide access to parts of the debt and credit markets that are not usually available to private investors. “Structured investments can provide attractive returns and limit downside risk,” says Braam van Heerden, head of Investec Specialist Investments. “We created an investable fund that leverages our structuring expertise to open up the structured investment

opportunity set for investors. “Through the fund, investors can enjoy the benefits of long-term equity market participation, as well as protection against major downside movements in the market. Additional advantages of this type of fund is that an investor can remain invested through market turmoil and it also avoids the risks associated with active stock selection, asset allocation and market timing,” he adds. This type of fund is ideal for investors who need the superior returns that the equity market provides in the long term, but without wanting to carry all of the large downside risks that it may produce from time to time. In an age of increased lifespans, this should suit many retirees who are looking for equity market growth, but in the past would have remained in low-risk but low-return type of investments.

Braam van Heerden, head of Investec Specialist Investments

Fixed Income has crucial role in delivering sustainability goals

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nvironment, social and governance (ESG) UN’s agenda. Debt markets regularly issue bonds with investment is almost synonymous with maturities in excess of ten years. The average holding investing in equities. This has resulted in the period for an S&P 500 company, meanwhile, is four perception that equity investors alone deserve to months. Furthermore, debt issuance is double the size be in the ESG ‘club’ due to their ability to influence of equity issuance. company management teams through corporate In order to combat the scale of the problems posed engagement and the power of the shareholder vote. by climate change, companies must make huge This perception, though, is incorrect. Fixed income investments into their infrastructure. This is a classic investors have a fundamental role to play long-duration investment. Credit in sustainable investment. investors therefore have a significant ESG HAS The United Nations’ (UN) Sustainable opportunity to exert meaningful CERTAINLY Development Goals (SDGs) aim to influence over issuers’ ESG risk help governments deliver social and management and disclosure. ARRIVED IN environmental policy by 2030. Their Where state-owned enterprises THE FIXED ambitions – such as ‘no poverty’ and sponsor infrastructure projects, fixed INCOME ‘affordable and clean energy’ – are huge. income investors could also exert The UN estimates that a massive influence, as these are likely to be LANDSCAPE $2.5tn to $3tn per year (UNCTAD financed through debt over equity. World Investment Report, 2014) is required to achieve There is increasing awareness in markets that ESG the SDGs in developing countries. Longer duration or issues can present material credit risk, for both fixed income funding are suited to tackling the goals sovereigns and corporates. Countries and companies due to their long-term nature. Governments around with lower ESG scores have, on average, the widest the world will be looking to both equity and fixed spreads. Sustainability and governance issues affect a income investors to fill the funding gap. borrower’s ability to repay. Research has shown that Bonds are the most important source of corporate companies with better governance typically have finance to help companies address themselves to the tighter credit spreads.

22 WWW.MONEYMARKETING.CO.ZA

Ratings agencies also acknowledge this. ESG analysis is an established part of their evaluations. Moody’s has developed a heat map to illustrate how it sees environmental risks affecting different sectors. Standard & Poor’s (October 2015) believes environmental and climate risks “could lead to a more widespread weakening of corporate credit profiles, and subsequently more downgrades than in the past”. ESG has certainly arrived in the fixed income landscape. Many hundreds of years of human behaviours have brought us here, to a place where our planet and societies face serious problems. If we are to unpick them, equity and fixed income investors both have a vital role to play.

Sasfin Wealth offers one Retirement Solution for life. The Sasfin Wealth Umbrella Retirement Fund was designed with the Fund member in mind and provides a complete and seamless pre to post retirement solution. This includes flexibility and choice, quality investment offerings, value for money and transparent fee structures. Members have access to user friendly and technology-enabled applications that assist in securing their financial independence at retirement.

www.sasfin.com | 0861 SASFIN Sasfin Wealth comprises Sasfin Securities (Pty) Ltd, a JSE member ; Sasfin Asset Managers (Pty) Ltd, FSP No. 21664 and Sasfin Financial Advisory Services (Pty) Ltd, FSP No. 5711 and Sasfin Wealth Investment Platform (Pty) Ltd FSP No. 45334. This advert is general in nature and is not advice. Sasfin Wealth accepts no liability for errors or changes. All data and examples are given as indicators only and are not guaranteed unless confirmed in writing. Past performance is not necessarily indicative of future performance. As clients are responsible for their decisions, they should obtain independent advice before taking any action.

FEATURE RETIREMENT

JOHAN GOUWS Head of Advice, Sasfin Wealth

A retirement savings solution for South Africa

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olving the country’s retirement to the savings environment. Technology challenge requires a multi-faceted and innovation are driving down the solution that asks for the commitment cost of investment administration, while of every party involved in the retirement the increased use of passive investing value chain; a solution that gives South strategies is leading to a decline in asset Africans the necessary motivation, management fees. Sponsorships for endurance and comfort to save sufficiently initiatives that seek to enhance financial for their retirement. literacy are worthy social investments to be Government has in recent years made a made by SA’s corporate citizens. Treating great effort to provide a sound framework Customers Fairly (TCF) is an outcomefor retirement savings. It has taken a big based regulatory and supervisory approach step forward by introducing retirement designed to ensure that regulated financial reform through the Taxation Laws institutions deliver specific and clear Amendment Act, 2015 that took effect on fairness outcomes for financial consumers. 1 March 2016. The objective of the new Financial service providers should rules was to harmonise the tax treatment wholeheartedly embrace the TCF principles for all types of retirement funds; i.e. to ensure that any obstacles to achieving pension, provident and retirement annuity financial independence are removed. (RA) funds. Employee Benefit and Investment The new laws resulted in various benefits Consultants need to work closely together for retirement fund investors. The reference as service providers to retirement funds. to ‘taxable income’ effectively enables They must empower the Boards of Trustees pension and provident fund members who and Management Committees to make receive outside income (for sound decisions on behalf example, rental income of fund members when GOVERNMENT or investments) to claim it comes to appropriate a pension fund deduction investment strategies and HAS IN RECENT against such income. default solutions. Individuals YEARS MADE A Previously, such ‘outside’ and fund members should GREAT EFFORT TO seek sound and independent income could only be used to claim deductions PROVIDE A SOUND advice from a financial on RA contributions and adviser that will provide FRAMEWORK members who wish to top them with the best chances up their retirement fund FOR RETIREMENT of achieving their financial savings will no longer objectives at and during SAVINGS need to take out a separate retirement. These financial RA. Investors in RAs also benefitted advisers need to upskill themselves by from these changes as they now receive developing the ability to correctly profile the same tax deductions as other savers. their clients from a behavioural perspective. They are also able to claim RA deductions This will enable them to manage client against pensionable or retirement-funding expectations and help investors stay the income. Provident fund members now course on their long-term retirement also benefit from a larger tax deduction on savings journey. Members and individuals contributions made to their provident fund. should also take personal ownership National Treasury also introduced taxfor their financial future by educating free savings accounts on 1 March 2015 to themselves on all matters relating to their encourage saving, specifically targeting the retirement savings. low- to medium-income segments. Default Last but not least, government needs regulations were the next piece of to provide a clear signal when it comes to legislation to be introduced by National matters such as economic and fiscal policy, Treasury from 1 March 2019 and have the as well as highly emotive topics such as aim of ensuring that members of retirement prescribed assets. If government sends funds are able to retire comfortably. Greater incorrect or no signals, this can easily transparency and simpler fee structures, erode sentiment among local and foreign together with free counselling services investors and keep the local economy offered to members, should result in better from solving South Africa’s fiscal and preservation and more informed retirement unemployment woes. It can also result in fund members. members terminating or reducing their While government has played its part, regular retirement fund contributions it is also important that platform and and choosing not to preserve assets when product providers make a contribution changing jobs.

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30 November 2019

Women with breast cancer may qualify for a higher income in retirement

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reast cancer survivors may qualify for a higher income in retirement by declaring their full illness history when purchasing a guaranteed life annuity. The latest inhouse research by retirement income specialist Just shows that of Just’s medically underwritten cases, approximately 30% qualified for an uplift of at least 5%. Unlike living annuities, which pay out a portion of a retiree’s savings each year and offer no income guarantees, an enhanced (underwritten) life annuity guarantees retirement income for life. In addition, the pre-determined monthly amount can never decrease. It will either remain the same, or increase year-on-year, depending on the type of life annuity purchased. An enhanced annuity can pay a higher starting income based on certain health, socio-economic and lifestyle factors, including chronic illness such as breast cancer. Affecting 1 in 27 women nationally[1], breast cancer is the most common cancer for women across South Africa. Globally, the risk of incidence increases with age, with 80% of breast cancers occurring in women over 50. While the 10-year survival rate for early-detection sits equally high at 83%[2], Just Longevity FINANCIAL Actuary, Bjorn Ladewig, says that the financial implications of WORRIES surviving breast cancer are often SHOULD BE THE underestimated. LAST THING Apart from the financial pressures due to the current ON THE MIND economic climate, cancer OF A RETIREE survivors’ financial stress DIAGNOSED WITH could be exacerbated by not BREAST CANCER having enough capital to cover living expenses, let alone the unforeseen medical bills throughout their recovery years. “Financial worries should be the last thing on the mind of a retiree diagnosed with breast cancer,” says Ladewig. “It’s already difficult to live within your means at retirement and even more so if you have medical expenses. It is therefore beneficial that retirees purchasing an annuity income at retirement are medically underwritten at the beginning of the process to see if they qualify for a higher monthly income.” How much more could a retiree diagnosed with breast cancer qualify for? In an existing Just breast cancer case study, a woman aged 63 qualified for a monthly ‘uplift’ in income of 14% as a result of being medically underwritten. She received a diagnosis of advanced breast cancer in 2017 and although it is currently under control, she remains at high risk of it spreading to other parts of her body due to its advanced status. At retirement, she approached Just with a purchase sum of around R880 000 and requested a quote for a lifetime income. She also requested a 10-year minimum payment period, which would mean that in the case of an unexpected early death, income would continue to be paid to her nominated beneficiaries, in either a lump sum form or as ongoing monthly payments for 10 years. To calculate her starting income, an underwriter conducted a short telephone call to obtain her medical declaration, without requiring a physical medical examination. Many factors contribute to the high uplift reflected in her quote. These include the combination of her advanced diagnosis, smoking and socioeconomic factors. http://www.nicd.ac.za/?s=breast+ cancer+age+statistics 2 https://www.cancer.net/cancer-types/ breast-cancer/statistics 1

Bjorn Ladewig, Longevity Actuary, Just

Are you offering your clients an all-encompassing productivity enhancing solution?

Employees who are financially healthy and engaged tend to be more productive and contribute positively to business performance and a healthier bottom-line. Our FundsAtWork Umbrella funds help your clients on their journey to success and healthy productivity. Let’s talk to give your clients the momentum they need to build a productive workforce.

momentum.co.za

Contact your Momentum Corporate Specialist

Copyright reserved Š Momentum Metropolitan 2019 – Momentum Corporate is a part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider Reg No 1904/002186/06 (FSP6406) and rated B-BBEE level 1

EMPLOYEE BENEFITS

30 November 2019

NASHALIN PORTRAG Head: FundsAtWork, Momentum Corporate

Grow your business with employee benefits

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ost large organisations understand that putting their employees first is critical to achieving a competitive industry edge. One way that organisations can look after their employees is by including employee benefits in their employment contracts. This is also a powerful tool to attract and retain talent. By taking a fresh look at your clients, you could find unique opportunities – leveraging your existing relationships with those who are CEOs, CFOs or HR executives can open up conversations around employee benefits. Talking to these clients about the integral role of group benefits in their own financial planning highlights the same need for their employees. Creating continuous business Employee benefits can vary from basic to comprehensive. Securing group business through these individual (or ‘retail’) clients unlocks further opportunities with their employees as individuals. In companies that only offer basic benefits, many of their employees might want to supplement their benefits, giving you the opportunity to offer them individual solutions. Getting started The employee benefits industry is highly regulated, but entering this market is easy. Providers specialising in regulatory compliance and licensing solutions for the financial services industry can help you with applications to obtain your licences. This is what you need:

BRADLEY WORKMAN-DAVIES Director, Werksmans Attorneys

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t is critical for employees to understand that where retirement benefits are provided by the employer, the employer is a separate legal entity to the retirement fund, and the division between the legal liabilities and obligations that lie on these separate legal persons are critical to understand. The purpose of a Fund is to assist the employee to save for retirement. An employee becomes a member of the Fund, usually when the employer requires or allows it. The Fund is a legal entity separate from the employer, and is also regulated by a completely different set of laws from the employer. A retirement fund is administered and managed by its board of trustees and, in most instances, an administrator to manage the interests of members. The fund’s rules and the Pension Fund Act determine the scope in which the administrators, board and trustees may act in administering

Product

Licence required

Risk-only employee benefits

Long-term Insurance subcategory B1 (No 1.3) (You should already have this licence, which allows you to sell retail risk products such as disability, critical illness and life policies.)

Group retirement benefits

Pension Fund Benefits (No 1.7)

Bundled group benefits – retirement Both licences above and insurance benefits combined Other group benefits such as health solutions

Health Services Benefits (No 1.16)

There are providers that specialise in regulatory compliance and licensing solutions for the financial services industry, that are equipped to deal with applications quickly and efficiently to help you obtain your licences. Astute Financial Services Exchange recently partnered with Momentum Corporate to introduce South Africa’s first ever Employee Benefit Switch. As a financial adviser, you can now access your clients’ financial information – including employee benefits information – on Astute Online. Such a resource makes it easy for you to loop your group scheme business, turning group employees into retail clients. Establishing this cycle facilitates

Number of employees

Typical benefits

Average annual premium income

Average financial adviser commission*

5-50

Retirement plus lumpsum death

R390 526

R18 448

51-500

Retirement plus lumpsum death

R2 260 500

R48 037

501-1 000

Retirement plus lumpsum death

R12 589 854

R143 050

*Subject to the legislated maximum scale

Contributing to social change In a country that is struggling with a deepening unemployment crisis, growing your business into employee benefits also creates opportunities for South Africa’s young, talented financial advisers.

Distinguishing a retirement fund from the employer

Funds. Whereas the relationship between the employer and the employee is regulated by the Labour Relations Act, the Basic Conditions of Employment Act, and the Employment Equity Act, the relationship between the Fund and the employee is regulated by the Pension Funds Act, and the rules of the Fund. The only legal obligation, which may arise on behalf of an employer that has contractually elected to provide an employee with retirement benefits, is to make payment of the required contributions on behalf of the employee to the fund, and after the employer has paid the necessary monthly contribution to the Fund on behalf of the employee, it really has few remaining obligations to the employee. The savings accumulated in a Fund are dependent on the contributions made to the Fund, which can be made by either the employer, employee or both. Upon termination of the employee’s employment with the

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holistic financial advice and enables you to forge long-term relationships with your clients. This helps you provide appropriate advice throughout your clients’ lifetime and become pivotal in helping them reach their financial goals. A progressive, thought-leading insurer who understands the changing South African workforce, with a team of specialist employee benefits consultants, can give you a complete understanding of employee benefits. They can make it easier for you to expand your business into this market through innovative tools and data support. The figures below, based on available data in the manufacturing industry, give an idea of earning potential:

employer, the Fund (and not the employer) has the legal obligation to pay out benefits that accrue to the member of the Fund. On termination of employment, the employer does not receive any payment from the pension fund, and has no obligation to pass on, or make payment to the former employee. There is no legal obligation placed on an employer to administer the Fund. The Board of Trustees of the Fund and the administrator have the obligation to run, operate and administer the Fund generally. Therefore, in the instance that an employee is not paid out his benefits, the employee has a right of recourse against the Fund and not the employer. Ordinarily then, after the monthly contribution has been paid over to the Fund, the employer steps out of the picture. However, employers need to be aware that section 37D of the Pension Funds Act allows a registered fund to

deduct and pay any pension benefit that would usually be payable to a member or their beneficiaries, to the member’s employer as compensation for damages caused to the employer by virtue of the employee’s dishonest conduct while employed. The case of Highveld Steel & Vanadium Corporation Limited v Oosthuizen (2009) confirmed that the objective of s37D (1) (b) is to protect an employer’s right to recover money that has been misappropriated by its employees. Furthermore, the Highveld case confirmed that where an employer wants to seek the relief allowed by Section 37D of the Pension Funds Act, it is entitled to require the fund to withhold payment of the member’s benefit, until such time as a court order is obtained confirming that the damages are payable to the employer, so that the fund can then satisfy the court order out of the pension benefit.

RISK

30 November 2019

Making it easier for partners and clients to do business Garth Napier became Managing Director of Old Mutual Insure 12 months ago. MoneyMarketing asked him about his first year in the job.

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It’s been an interesting year,” says says. “We’ve grown 14% this year Napier. “Coming from a fashion and I think this should help. Our retail background [he was MD at direct business, iWYZE, saw around both Pep Africa and Edcon Speciality 20% growth around the half year, Division], the focus for me has been while our Speciality business has to learn about this industry and the also expanded.” He explains that business. I spent a lot of time with while an insurer can grow its top our well-balanced and experienced line, this growth can also increase team and that helped me settle in. I its risks. “But we have been very also spent a lot of time in the market cautious around what types of meeting clients and partners – and business we take on. We’ve grown getting feedback from them on what the top line, but I think we’ve done we do well and what opportunities so responsibly,” he adds. there are for us.” Where the harsh, local economic Napier’s first year has also been environment hit hardest over the about delivering on some of the last year is Old Mutual Insure’s trade plans the company announced to the credit business, CGIC. “In SA’s first market last year. quarter of negative economic growth, “One of those plans was to make it we saw a significant increase in claims easier for both partners and clients from our smaller clients, as some of to do business with Old Mutual their clients struggled to pay their Insure and that’s what we did. I’ll bills. As the year progressed, we’ve give you two examples. Firstly, we re- seen an improvement and we feel launched our refreshed we’ve turned the corner digital web-based in terms of how tough it self-service platform is out there.” REGAINING called MyOMinsure For Napier, artificial MARKET that enables brokers intelligence (AI) SHARE IN to respond to clients’ complements what the needs a lot faster,” he SOUTH AFRICA insurer and the brokers says. The platform do. “I don’t necessarily HAS BEEN A allows brokers to see AI as a threat, and create quotes, issue PRIORITY in our claims area we policies, register and use it to detect possible track claims, run renewals and make fraud. When someone calls in, amendments to policies. All from the based on the pace at which they’re comfort of their office. speaking and their voice tone as well “Secondly, we asked how we as their hesitation around answering could support clients when they certain questions, the software will have a claim, and we launched the identify possible fraudulent claims Old Mutual Insure Assist app.” He for us. We can then fast track the explains that through the app – and 98% of claims that aren’t fraudulent without having to make a phone and get the client back up and call – clients can initiate the full running, while those suspicious Old Mutual Insure Assist Accident claims will be referred to our special Assistance process. This permits them investigations unit.” to focus on the issues on the ground He adds that Old Mutual Insure is and allows for the dispatch of an very sensitive about how this software approved tow-truck driver to their is used. “A caller may just have been location. The app immediately sends in an accident and still in shock when the details of the tow-truck company, the call is made. Therefore there is an name of the driver and the estimated additional human layer to investigate time of arrival to the client’s phone, further.” enabling them to track the progress of Turning to customer loyalty, the assigned tow-truck and to make Napier says that in the intermediated sure that unapproved operators are insurance space, there hasn’t been a not used. significant increase in churn rates, While the company has a shortbut the direct insurance space is term insurance presence in 10 different. “There can be a lot of churn countries on the African continent, driven by what our competitors are regaining market share in South doing and if one of them launches Africa has been a priority, Napier a very aggressive TV campaign, we

see it playing out on some of our customer base.” He, however, has noticed a troubling sign in the direct space, “Many customers have been cancelling their cover rather than moving insurers.” Looking ahead to 2020, Napier hopes to see an improvement in the economy, “not just for our business but for the country – so that it can start driving employment in the economy. As a business, we’re about to launch our strategy for 2025 and we’ll continue to focus on making business easier. While we’ve put some good platforms in place, we can now enhance those, making it even simpler for partners and clients to engage with us.”

Garth Napier, Managing Director, Old Mutual Insure

RISK

30 November 2019

Income protection for not just one occupation, but two

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ccording to a recent study (July, 2019) by Henley Business School of Africa (HBSA) entitled What is the future of work in South Africa? Examining the Side Hustle Economy, some South Africans are undeniably juggling more than one job. Based on survey data of just under 1 160 individuals over the age of 18, 27% of respondents indicated that they are either involved in a side job or a ‘side hustle’. Similarly, a study by Geopoll (2017) focusing on millennials showed that 30% of South Africans have a second job. South Africa is not unique in this growing trend. International surveys have shown that 35-45% of employed individuals hold multiple jobs, and there is potential for this to grow to 50% of the workforce. This is an indication that South Africa is likely to see continued growth of hustling prevalence. The Geopoll study finds that the most prominent reason for holding a second job is the additional income. Over 71% of individuals with side businesses and 65% of multiple job holders indicated that the hustle was to supplement their income. To put it into context, the survey showed that hustlers made 19.8% to 24.2% of their total income from their side hustle, while the remainder came from formal employment, or main business if self-employed. Considering that 20% of the formal workforce is side-hustling, with the trend likely to grow, longterm cover needs to adapt to the changing needs and evolved lifestyle of many individuals in the country. The dependence on the side hustle is quite significant if one considers that it can make up almost a quarter of one's overall income.

one occupation, but two – under the same policy." The second income should be SARS compliant and make up 20% or more of a person’s annual income. Previously, policyholders with two streams of income would have to have them insured separately, thereby creating extra admin work. “Understanding our client's evolving needs is core to our client-centric approach, and at Liberty we are proud to be the first to offer this innovative solution to enhance our Lifestyle Protector product suite,” Pillay adds. “Years ago, you had one job where you worked in an office cubicle from eight until five, usually the one you were trained to do after school or by family. All that has changed. Due to the freelancing revolution, more flexible jobs and tough economic circumstances, people are working multiple jobs and earning money pursuing their hobbies and passions. It’s a whole new world of work that needs to be insured in a different way.”

A positive response to this new world of work Off the back of these emerging trends, Liberty is refreshing and updating its income protection offering – with a pioneering new change in keeping with the times. Kresantha Pillay, Lead Specialist: Lifestyle Protector at Liberty Group, explains, "For the first time ever, the long-term insurance space will offer clients income protection for not just

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How it works Should one become disabled and unable to work, the Lifestyle Protector replaces up to 100% of your primary after-tax income for up to two years after the event that caused the temporary or permanent disability – which can be extended up to retirement or beyond. The benefit pay-outs are as follows: • On temporary disability: 75% of the income is paid • On permanent disability: 100% of the income is paid • After retirement: the percentage paid depends on the severity of the impairment. “South Africans are under-insured in general, but the gap is even wider when it comes to disability cover. For most South Africans, the reality is that a disability could affect your ability to earn an income and impact your quality of lifestyle. Even if your

ability to do your job is only partially affected, it’s worth protecting yourself and your family,” Pillay says. Annual Bonus cover There is even an added Bonus Cover – when policyholders receive a boost to their primary stream of income, so does the insurance coverage. “The working world has spoken, and we have listened. Liberty’s Income Protector is the first to insure your earning capacity in this new way. Now you can follow your passions and prosperity freely," Pillay adds. The two-in-one income protection benefit will be available from Liberty as of 1 November.

Kresantha Pillay, Lead Specialist: Lifestyle Protector at Liberty Group

THE MOST PROMINENT REASON FOR HOLDING A SECOND JOB IS THE ADDITIONAL INCOME

30 November 2019

RISK

Why risk planning should start with Income First

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our clients’ income is so much more than just their monthly salary – it’s what supports their plans for today, and their hopes for the future. If their monthly income has the potential to provide for all their financial needs, why doesn’t risk planning start here? Life insurance is intended to insure South Africans against all major risks, but the majority of product solutions sold are not designed to meet this need sufficiently. Advisers typically default to insuring their clients against death and permanent disability with lump sum benefits, instead of insuring them against their most likely risks such as injury, illness, and critical illness. As an adviser you have a prime opportunity to positively impact your clients’ future, by recommending cover that will protect their ability to earn an income. The best solution is to start with a benefit that will replace your clients’ monthly income if they’re unable to work due to injury or illness. This product philosophy, coined by life insurer FMI (a Division of Bidvest Life Ltd) as Income First, is effective because it replaces 100% of a client’s hardearned monthly income when they’re faced with such unfortunate circumstances, in turn delivering on the basic customer need for which life insurance was designed in the first place. As South Africa’s fastest-growing life insurer*,

FMI is proving that the Income First approach Income benefits mimic the income stream promises better value for your clients: you are trying to replace when planning for an Better cover, with more chances of claiming for unexpected risk event. This should be easier to your clients. Adding income protection for injury explain, and therefore easier to sell. and illness protects your clients’ monthly income They also make policy servicing and annual against their most likely risks. The numbers speak reviews simpler. As an adviser, you simply need to for themselves. According to FMI’s 2019 Risk Stats, asses any lifestyle changes and update your client’s a 32-year-old male has a 91% chance of having a policy to match their latest monthly income to temporary injury or illness during their working ensure they have the correct cover. career, and a 37% chance of experiencing a critical Income benefits mitigate investment and inflation illness. risks too – your clients do not need to worry about Save your clients’ money investing a lump sum of money, on premiums or get more and the future impact of inflation, cover for the same spend. The in order to produce an income. RISK PLANNING Income First approach means And finally, income benefits are STARTS WITH you can rethink the balance proven to support significantly PROTECTING between income and lump sum reduced lapse rates. According to cover solutions. On average, FMI, lump sum benefits are 66% CLIENTS’ ENTIRE income benefits have proven a more likely to lapse in their first FUTURE INCOME 20% premium saving; and not year, compared to income-only just today, but over the life of a benefits1. policy. You can either invest the savings or keep The future of the long-term insurance industry the premium at what it was but give your clients belongs to ‘early adopters’, those who appreciate more cover or better claims terms, such as adjusting that risk planning starts with protecting their cover to a shorter waiting period. clients’ entire future income, from the day they Taking the Income First approach doesn’t just start working until the day they retire. provide a superior product that meets customer’s 1 needs, it also offers advisers advantages at every FMI 2017 Lapse Report *NMG 2018 Q4 Results: subject to participating providers stage of the process, says FMI.

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RISK

30 November 2019

SINENHLANHLA NZAMA Product Actuary, Investec Life

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he principles of client-centricity are clear. But, they don’t necessarily support the life insurance sector’s requirement to rethink what it means to deliver on client needs, in a world where change is the only constant. While we've seen some progress as insurance products evolve, the sector is still not doing enough to challenge the status quo. A lot more still needs to be done to address the funding needs for major illnesses like cancer. While traditional models provide for a lumpsum payment on diagnosis, at times, they do not consider the financial constraints due to treatment costs based on the severity of the illness. They also generally do not consider the holistic health and financialplanning needs of clients and their families. What’s increasingly notable is a demand by clients to partner with the type of insurer considering these issues and thinking about how to create financial solutions that address their changing needs into the future. Making insurance about life itself Partnering for the future starts in the now. Fundamentally, raising awareness and providing information for consumers to be well-informed about the need for cover that supports them while they're alive is critical. Most South Africans continue to use life insurance purely for funding postdeath family expenses and debt, as opposed to planning to live. Today, it's becoming more important to rethink how life insurance can be more about life rather than its current focus on death. It’s a harsh reality that the bulk of financial planning should be focused on client needs while they are alive, given the continuous increase in life expectancy across various socioeconomic groups in South Africa. With this comes the need for the life insurance sector to rethink the positioning of its offerings, and to place an increased focus on solutions that provide for severe illnesses and disability. Without a doubt, the education around ‘why do I need it?’ is still the biggest gap. According to the latest statistics from the Association for Savings and Investment South Africa (ASISA), the level of underinsurance among working South Africans is as much as R28.8tn. Even in the high-

More needs to be done to address funding needs for major illnesses earning segment, all factors point to the fundamental need for severe illness and disability cover as the most critical life insurance products to have, especially while clients are economically active. Increasingly, South Africans are becoming health conscious, and are putting in effort to enhance their day-to-day wellness. This indicates how receptive consumers are to the innovations that focus on their daily lifestyles, and brings hope for making insurance offerings such as severe illness cover much more relevant. An example of this is the introduction and use of DNA testing for one's response to different foods, exercises, stress and sleep. A healthconscience client who is well informed about their genetics is much more likely to live an optimal life, which is great news for the severe-illness claims for any insurer. Such rethinking of a life insurance offering beyond just the core product is making insurance more relevant. This is also something clients are adopting proactively, a winwin scenario for the client and the insurer. The gap in understanding the balance between life insurance and health products (for example, a traditional medical scheme) in funding severe illness creates additional opportunities in two key areas. Challenging the status quo to align to funding needs In the current environment, where medical schemes are constrained and do not typically pay for everything when you suffer a major illness, the pay-out from severe illness cover can ensure the client's family is not financially ruined. Financial gaps that can easily result in financial ruin include funding of the high-cost latest treatment or international treatment, time off work, a lifestyle adjustment or home nursing where it could be required to assist the family. All these are in pursuit of better outcomes. The funding of early detection of cancer truly enhances the value of insurance by better aligning insurance

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with a client's need to ensure best chances of successful treatment. Evidently, this makes insurance more pro-active and supportive of the early detection of major illnesses like cancer, rather than only paying out large lump sums in the later stages of cancer when the chances of treatment success have diminished. Take for example a stage 0 breast cancer, also known as ductal carcinoma in situ (DCIS), which is often found during mammogram screening and confirmed by ultrasound. Detecting breast cancer at such an early stage has significant clinical and financial benefits, including: • The fact that it’s still a non-invasive form of breast cancer and generally not as aggressive • The five-year relative survival rate is phenomenal, at 99% in the United States according to the American Cancer Society • The treatment costs are incremental and increase with the cancer staging. A 2016 study specifically on breast cancer revealed that treatment costs more than double by stage 4 compared to stage 0. Challenging the status quo in the life-insurance sector means asking ourselves how we can heavily incentivise a client to undergo early detection screening, and with this, how can we be generous in paying out even as early as stage 0 for cancer, notwithstanding that life insurance has not traditionally been used to cover the first line of treatment. This enhances the relevance of life insurance, making us a sector that's truly about life and is aligned with our clients and their families.

Challenging the status quo to personalise insurance The question that remains for the life-insurance sector is, how do we ensure coverage for consumers who are already deemed at high risk of any of the major illnesses? This question is still lingering mainly for cancer, heart conditions and strokes, given that lifeinsurance providers still apply blanket exclusions or load premiums for clients who either have a strong family history or a prior diagnosis of one of these three major illnesses.

THE PAYOUT FROM SEVERE ILLNESS COVER CAN ENSURE THE CLIENT'S FAMILY IS NOT FINANCIALLY RUINED While pooling of risk is the cornerstone of insurance, the life insurance sector should be rethinking how we can produce solutions for an effective sample of one. Beyond structural roadblocks, clients are increasingly looking to insurers that are asking the tough questions and doing the incremental things to address possible gaps. In the era where medical technology has taken us to personalised medication and genetic testing, perhaps it’s time the life insurance sector makes insurance personal. To do this, we need to align coverage to actual client needs rather than broadbased needs for a typical consumer out there. It is a focus that drives our own thinking at Investec Life, while being fully aware of what it means for clients today. Investec Life is exclusive to Investec Private Banking Clients

EDITOR’S BOOKSHELF

30 November 2019

BOARDROOM DANCING TRANSFORMATION STORIES FROM A CORPORATE ACTIVIST BY NOLITHA FAKUDE Nolitha Fakude grew up as a shopkeeper’s daughter in the Eastern Cape, studied at the University of Fort Hare and then entered the workplace in 1990 as a graduate trainee at Woolworths. Subsequently, she has worked in very senior positions at some major blue-chip companies, including Woolworths, Nedbank and Sasol. She was also managing director and then president of the Black Management Forum. Over a career spanning 29 years, Fakude spearheaded programmes that ensure the development of women and marginalised communities in the workplace and society. A passionate advocate for diversity and inclusion, she has earned a well-deserved reputation as a corporate activist. Fakude is held in high regard within business circles and serves on numerous boards, including the JSE Limited, Anglo American plc and Afrox Limited. Although Boardroom Dancing is her personal journey, it is also a lesson for South Africans committed to the transformation of boardrooms and the economy, and for women looking for role models as they climb corporate ladders and become thought-leaders.

BOOKS ETCETERA

SIYA KOLISI - AGAINST ALL ODDS BY JEREMY DANIEL When Siya Kolisi led the Springboks out onto the field at the Rugby World Cup this year, it was the crowning glory of an incredible journey that began on the impoverished streets of Zwide, a township outside Port Elizabeth. As a boy, the odds were stacked against Kolisi. Born into poverty, he was raised by his grandmother as his mother was too young to cope and his father worked in Cape Town. Food was scarce and he often went to bed hungry. But Kolisi had one great passion: rugby. He would spend his free time playing for the African Bombers Club until, one day, he was offered a rugby scholarship to Grey High School. And so began one of the most remarkable success stories in rugby history, one that culminated in his appointment as the first black Springbok captain. Against All Odds traces Kolisi's journey from a dusty township to the great arenas of international rugby. It is a remarkable story of grit and determination. From SA Schools matches to success with the Stormers and Western Province to the devastating lows brought on by injury, Kolisi just keeps on going. This book is all about the journey, against all odds, of a great South African.

SUDOKU ENTER NUMBERS INTO THE BLANK SPACES SO THAT EACH ROW, COLUMN AND 3X3 BOX CONTAINS THE NUMBERS 1 TO 9.

THE NIGHT TRAINS BY CHARLES VAN ONSELEN For half a century, up to the mid-1950s, privately operated trains travelled by night between Ressano Garcia, on the Mozambique border, and Booysens station, in Johannesburg. The night trains carried Mozambicans recruited to work in the mines of the booming Witwatersrand. The up-trains disgorged their human cargo into the jaws of the great Rand mining machine, while the down-trains whisked away the time-expired miners – often ill, broken or insane. While mine labour was recruited from all over southern Africa, Mozambican migrants made up the largest component, and they paid the highest price. Charles van Onselen clinically reconstructs the world of the night trains, which were run as a partnership between the mining houses and the railways. By tracing the up and down rail journeys undertaken by black migrants over half a century, it is possible to discern how racial thinking, expressed logistically, reflected South Africa's evolving systems of segregation and apartheid. Mirroring the brutal logic of industrial capitalism, this was a system of transport designed to maximise profit at the expense of the well-being – and even the lives – of those it conveyed. The story of the night trains echoes today through songs such as Stimela and Shosholoza. But the experience of the poverty-stricken Mozambicans who travelled on the trains has never been told – until now.

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