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LUXURY AND AFRICA –
UNCOMFORTABLE BED FELLOWS? It’s a challenge reconciling the dichotomy of deep social concerns for Africa and the poverty of many of its citizens with the light-hearted revelry and opulence generally associated with the luxury sector. This is particularly true as the global financial crisis has not yet loosened its grip, currency volatility persists and unemployment figures remain disturbingly high. BY SILVANA BOTTEGA
not consider luxury to be ‘distasteful’ but have nevertheless refined their spending patterns. Extravagance is out and less is being spent on external signs of opulence such as luxury watches or fine jewellery, instead the focus is increasingly on top-quality wines and gourmet dining experiences.
Clearly, marketing luxury goods amid such uncertainty requires extreme sensitivity. That said, instead of fixating on the perceived ills of luxury consumption, it is precisely the time to be bold and market products with a margin in order to stimulate economic activity, build confidence and initiate growth. Recession severely hamper sgovernment spending, yet inducing high net worth (HNW) individuals to spend can make a significant contribution, not just to the luxury industry but towards building the necessary confidence to trigger the next economic upswing.
However, the 2011 Richemont interim results for the six months ending September 2011 show substantial growth across the Richemont stable even during this recessionary period. Jewellery Maisons grew by 34% and Specialist Watch Maisons by 30%, across geographies and product lines. While these results indicate how global luxury continues to flourish, luxury brands and consumers in the South African market tend to toe a more conservative line.
There are scant insights into the spending patterns of these elusive HNW individuals but a few studies in recent years indicate some interesting trends. One such study, the Forbes Wealthpulse survey,
Caught up in analysis of consumption patterns, South Africa finds it hard to look beyond luxury goods to the employment opportunities the sector presents. The most obvious industries to generate
South African company Avoova created five bespoke ostrich eggshell tables for Chelsea Football Club owner Roman Abramovich’s yacht, Eclipse. The $ 3 5 0 million private yacht is the largest in the world and measures 1 6 3.5m in length.
explores how recession dynamics affect affluent individuals with investible assets over $1 million. It shows that this group tends to have a much more positive outlook and will continue to spend at prerecession levels. Even in difficult economic times, 42% of HNWs do
Hanneli Rupert’s new Okapi brand is committed to Africa’s development alongside the establishment of luxury merchandise.
employment through luxury goods and services are the mining industry - through which a myriad jewellery businesses are generated - and tourism, where highend hospitality and exclusive safaris showcase South Africa at its best. Aside from these two monoliths there are many other areas of growth. The multibillion-rand boat building industry has over 3000 permanent employees and has seen South Africa recognised for its high-end catamarans worldwide. BMW is a leader in the manufacturing of luxury cars and has recently announced further investment of R2 billion into the BMW World Plant Rosslyn, its South African facility. The German car maker anticipates that the upgraded plant will be capable of producing up to 60 000 units a year. Small and medium enterprises, well recognized in academic and policy literature for their economic and social importance, are perhaps where our craft-centric culture and the luxury industry could interest a government seeking job creation. There are many exemplary domestic luxury brands generating employment as well as being ambassadors for Brand SA. Avoova, for example, creates functional art and collectible items from the best fragments of ostrich eggshell which are carefully laid down as a fine veneered finish used as a decoration for objet d’art from bowls and bars to billionaires’ yachts. Avoova supports 40 artisans in the Karoo. For leather goods, Cape Cobra Leathercraft, which employs 90 people from the local community, and Via La Moda are both fine examples of sustainable, people-centric companies. Via La Moda employs 50 people and boasts an apprentice scheme where young people can learn and refine their craft over three years.
Job creation potential A new generation of designers are taking Africa’s raw materials and transforming them into world-class lines that are in global demand. Hanneli Rupert, the daughter of Richemont chairman Johann Rupert, has recently launched Okapi. The energetic, talented young designer is a firm believer in the job-creation potential of the luxury industry in Africa and is committed to supporting local manufacturing. She uses local suppliers in the creation of her new exotic handbag range (complete with signature ‘horns’) and has sourced rare leathers and materials from around the continent.
South Africa is the model for many other African economies. Household wealth at the tip of Africa has grown vigorously over the last decade, quadrupling in value from $8 400 in 2000 to $34 300 in mid-2011. Globally, wealth numbers are surging as the likes of South Africa, China, India, Brazil, Australia, Chile and Indonesia add numerous millionaires and billionaires each year. That is not to say that the volume of HNW individuals is homogenous, indeed it varies radically between emerging markets. China boasts in the region of 1,02 million US dollar millionaires (and 5 000 with a wealth of over $50 million) while South Africa sports a handful - just 71 000 - US dollar millionaires. Fortunately we also have a few notable billionaires who have travelled to space and built luxury empires, not to mention the obvious financial and mining kingdoms.
Sustainable luxury Wherever wealth is generated the luxury industry follows closely behind, generating aspiration and desire, which spurs on greater wealth generation and, ultimately, the knock on effect results in greater employment. Or at least that’s the pro-lux theory put forward in the battle of ‘The evil vs The good of luxury consumption’. But the shock of the new marketplace, fraught with recession and purchase sensitivity, has encouraged the luxury industry to be more introspective and demure. The move from conspicuous consumption to more conscious consumerism is well established in South Africa and tends to follow the international triple-bottom-line model: people, planet and profit. South African luxury brands must create a niche for themselves in an already hyper-competitive market and a few have been fast to adopt market-acceptable strategies that reflect the new luxury paradigm. African collectibles for sophisticated international and domestic buyers are growing. For example, Ardmore Ceramic Art not only produces exquisite hand-painted, hand-sculpted ceramic art but also contributes a percentage of profits to enable upliftment and socio-economic support for the artists and their surrounding community in KwaZulu-Natal. Luxury safari operators have become more innovative. Hayward’s, which has hosted the likes of Nelson Mandela and Oprah Winfrey, develops 50 to 200 people mobile safaris for those seeking absolute privacy and unique moments. They have adapted their strategy beyond the traditional safari to include
One often overlooks the impact of high-end consumption and disregards the more obvious arenas such as the gourmet sector championed by master-chefs such as Margot Janse, Reuben Riffel and Giorgio Nava - which employs and trains staff for numerous restaurants. Beyond fine foods, consumers are presented with an ever greater number of fine wines and spirits from farms and niche distilleries that are reaching a new price echelon, while creating employment in the winelands and broader drinks sector. Global luxury forecasts for 2012 seem optimistic, particularly for those businesses focused on growth markets. The 2011 Global Wealth Report by Credit Suisse comments that, in many respects,
Royal Chundu, part of the Mantis Collection of eco-lodges, is a sustainable, luxury getaway situated on the Zambezi River in Zambia. 9
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MAKING A CASE FOR WOMEN IN WORK socially responsible and locally relevant experiences. Luxury ecotourism in South Africa is globally renowned with companies such as the Mantis Collection and &Beyond spearheading a sustainable, considerate interaction with nature. South African fashion too is achieving international acclaim. From Gavin Rajah to Malcolm Kluk, home grown labels have not only a solid local following but are turning heads on international runways from Paris Couture to New York Fashion Week. Businesswoman Precious Moloi Motsepe, the wife of billionaire Patrice Motsepe, has worked tirelessly to create Africa Fashion International, which has seen the emergence and strengthening of many African couturiers and labels. However, more needs to be done in the fashion sector to generate employment and support local design. Major clothing retailers remain price sensitive and, in order to enjoy some of the highest margins globally, opt for low-cost manufacturing in Central and Eastern Europe and the East.
When the African Union declared in 2010 that this was the African Women’s Decade, it spoke of a need for “a grassroots approach to gender equality and women’s empowerment”. This set the tone for some serious discussion about the role of women in Africa’s economy. How this translates into action in terms of key issues like access to land, credit, technology, markets and farming mentorship remains to be seen, but an Ernst & Young report, Women of Africa, certainly makes the case for taking this imperative beyond theoretical discussions. “While it is beyond doubt an exceptional time to be doing business in Africa, there are hurdles to overcome. In particular, this growth and turnaround will not be fully leveraged and sustained if the full human potential of Africa remains under-utilised,” says Seshni Samuel, Ernst & Young’s Africa People Leader. “Africa needs to harness the power of one of its strongest assets, its growing population, especially women, to drive full economic growth and social development.”
This is also the case in the mining sector: South Africa boasts a wealth of diamonds and gold but the bulk of manufacturing and finishing happens offshore. Joburg-based African Romance has invested in local diamond finishing and the training of diamond polishers to retain value in South Africa. With the mining industry constituting one third of GDP - an estimated 50% of the world’s gold reserves are in South Africa and a huge 10 million carats of diamonds are mined annually (with 90% of the diamonds being exported) - it stands to reason that we should look at methods to retain value locally. The Southern Africa Luxury Association (SALA), through the SALA Artisan Accelerator, has recently worked with Keith White to develop an initiative to encourage and assist black jewellery designers, taking them through an apprenticeship to become master jewellers. White has worked with leading players in London such as Graff and Aspreys (on an average of 10 carats) and has turned his attention to fostering a new generation of talented jewellers in South Africa. And he’s not the only one. De Beers Shining Lights Awards is another noteworthy programme supporting the industry; it has recognised not only White’s talents but those of other jewellers using our natural resources to create world-class finished products. Businesses which take a more thoughtful view of luxury and succeed in carving out a unique niche for themselves, with consideration for people, planet and profit, will be firmly entrenched on the road to success by adhering to a new definition of local luxury that exemplifies ‘Proudly South African’. !"Bottega is CEO of the Southern African Luxury Association. SALA is an informative non-profit association which sits at the confluence of private wealth management businesses and luxury brands and their clients. In March this year SALA’s signature Wealth Summit attracted a high-level delegation and speakers exploring the new avenues of growth available to the South African luxury industry.
The report highlights how in the seven largest African economies a meagre 32.7% of women of working age actively participate in the labour force. This under representation clashes with generally accepted findings about the benefits countries reap when women participate in the economy. For example: q Women invest some 90% of their income back into their families and communities - more than double the contribution made by men – which creates a multiplier effect that impacts positively on development, child survival rates and education. q Closing the gap between the numbers of men and women employed in an economy appears to increase GDP growth rates. Eliminating gender discrimination in relation to occupation and pay could increase women’s wages by about 50% and national output by 5%, says the report. q A recent study into Fortune 500 companies in the United States shows that, on average, firms with more women on their boards perform better in terms of financials, outperforming more maledominated boards by an average of 54%. “When women participate fully in a country’s economy, GDP goes up—it’s a compelling fact supported by the way women invest and direct their income to support families, driving intergenerational benefit,” says Samuel. “We need economies that help put earnings in women’s hands in poor households. Women across Africa face multi-faceted challenges when they try to participate actively in economies, whether it’s restrictive laws, unconscious bias, infrastructure challenges, the impact of war and conflict or restrictive healthcare systems. We all have to consider how we can enable them in practical and innovative ways to achieve their full potential to the benefit of their economies, their communities, their families and themselves.”
!"#$%&'(#)*+,-)#,.)-#*#/.(#.0#1)*2.'#$,%#.3#,&04)5#6%)#$%)/#6%)#*#7)%8-9+# +,*0#,.)-#*#:+*06%)(#4)*(&*+-;< Philip Rosedale, software entrepreneur and creator of the virtual world, Second Life, discussing the move towards global outsourcing in a New York Times article 10