O&M CAPE TOWN 90276/E
UNJUST DIRECTIVESYES
vwcommercial.co.za BusinessBrief
The New Caddy Panel Van and Crew Bus.
NEVER ANSWERABLE C disclosure ORDERS
O contravention VALID labour court N OBLIGATIONF L I C T EMPLOYEE’S RIGHT TO SAY NO? Disclosure misconduct prescripts Reasonable
WRONGFUL RISK
COMMANDS! GUARANTEE Negativity
MATTERS THAT MATTER
principles DIRECTIVES C o mm o n L a w I
D
request C
L FIRED! Rebuttal Dismissal L E ACCURACY WORK i F PREVENTING I O G nI GN E I s R D i l e m m a NS S understanding judgefreedom t E CE L unreasonable fairness r TRAVEL p r e v&eOYSTER nLEISURE t i o nBOXE A democratic u D N WITCHCRAFT AT WORK! protection T FINAL WARNING significance BRAHMAN HILLS BLACK TAX OPPORTUNITIES? c T I QUARREL consideration REFUSE FINANCIAL CRIMES & COMPLIANCE?t O negligence tribunals POLITICS & CORRUPTION DRIVE DISTRESS! NOFFENDS termination i t r u t GIVEAWAYS hf ullne ss
protection
sensational Wrongful
unlawful
Built to build your business. The New Caddy Panel Van packs more than just a punch with a payload of 815kg, while the New Caddy Crew Bus combines versatility and flexibility like no other with seating options for up to 7 people. Cater to any business need with a short wheelbase or Maxi version of the Panel Van and Crew Bus. Both ranges include enhanced safety features such as Multi-Collision Braking and come standard with a 2-year/unlimited kilometre warranty and 3-year/60 000km Genuine AutoMotion Service Plan*. Invest in a partner that shows the world you mean business.
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motivation
unwilling
ETHICS professional duty
Commercial Vehicles
August/September 2016
Visit vwcommercial.co.za or your nearest Volkswagen Dealership to find out more about the New Caddy range.
CONTEXT
protected disclosues act o O V FONDI E RONREAL S I GCAM HT THE ULTIMATE COMPANION FEATURE ACTED code of conduct n professional FOR BIRDING
CCMA
EMPLOYEE RIGHTS FAIR s RIGHT TO REFUSE CYBERCRIME & SECURITY
August/September 2016 Vol 21 No. 4
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PROFESSIONAL BANKING
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COVER STORY
66
FEATURE
WRONGFUL COMMANDS! EMPLOYEE’S RIGHT TO SAY NO?
1
BusinessBrief
CONTENTS
August/September 2016
16
CYBERCRIME & SECURITY
REGULAR SECTIONS VIEWPOINT
26
ASSETS & INVESTMENTS
n POLITICS & CORRUPTION DRIVE DISTRESS!
n MULTIPLE INVESTMENT STRATEGIES
n REGIONAL INTEGRATION A PIPEDREAM?
n STOKVELS GO “UPMARKET”
MANAGEMENT
30
54
BANKING & INSURANCE
58
NSURE STRATEGY SUCCESS nE
nG OING OUT OF BUSINESS INSURANCE?
n LEARN FROM SUCCESSORS!
n AVOIDING DEATH BY A THOUSAND CUTS
EDUCATION & TRAINING
36
MARKETING & SELLING
62
n HOW RPL EMPOWERS?
n WHY THE CUSTOMER ISN’T ALWAYS RIGHT...
n DEGREE NO JOB GUARANTEE
n THINK COMMUNITY!
LEGAL
42
HUMAN CAPITAL
66
n INSOLVENT? REPEALED ACT STILL APPLIES
nW RONGFUL COMMANDS! EMPLOYEE’S RIGHT TO SAY NO?
n DAMAGE CLAIMS REQUIREMENTS!
n WITCHCRAFT AT WORK!
TAX 46
INFORMATION TECHNOLOGY
72
n BLACK TAX OPPORTUNITIES?
n INNOVATE IN ISOLATION AT YOUR PERIL
n NEW TAX REPORTING STANDARD!
n APPS BOOST PROFITS & PRODUCTIVITY!
FINANCE & EQUITY
50
PROCESS & OPERATIONS
76
n FINANCIAL CRIMES & COMPLIANCE?
n WHY IS OUTSOURCING A DIRTY WORD?
n UNLOCKING VALUE IN A DEBTOR’S BOOK
n AIR EMISSIONS COMPLIANT!
SEMINARS & CONFERENCES
5
n ALL THE LATEST EVENTS BRIEFCASE
10
nE XQUISITE LOCAL EXPERIENCES 6
nA LL THE LATEST GADGETS, GIZMOS AND OFFICE MUST-HAVES GIVEAWAYS
TRAVEL & LEISURE
CONTRIBUTORS 80 nC ONSULT OUR CONTRIBUTORS DIRECTLY FOR PROFESSIONAL ADVICE
6&7
n FONDI ONREAL n THE ULTIMATE COMPANION FOR BIRDING
Subscribe to BusinessBrief online: www.bbrief.co.za
follow:
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2
EDITOR’S NOTE
BusinessBrief August/September 2016
E
Tribute Gordon Patterson – principled, strategist, thought leader, media-guru – taken too soon from family, friends and colleagues. We are all poorer for this senseless loss.
A
s empires subside and their imperial blunders are laid bare, we can only strive to rebuild as best we can. In their wake of ignorance lie the kernels of wisdom that we can use. We cannot allow the past to dictate our future – we must learn from it and never allow corrupt leaders to rest on the laurels of their successes. Leadership must be continually held to the fire and tested for weakness or else be put to the figurative sword. This is their responsibility and curse and the reason they get paid the big bucks. Those who are managed must meticulously mind the manners of the powerful and be wary that they don’t take more than they’re worth. The best known defence against corruption is education. It is vital that you develop a deep understanding of the world around you, not just in your chosen professional field but in all areas. We owe it to ourselves to know more than what is mainstream. We need to nurture a desire for knowledge and have the wisdom to know how to apply it. The explosion of knowledge in the Information Age can be daunting but it also offers liberation to those who can harness its power. This edition Some of the most corrosive elements can be found on the fringes of the web, places where you don’t venture without certain anonymity. The dark web is home to useful as well as harmful ideas. It is also home to ingenious criminals, intent on hacking into your system. Technology is being used for good and bad purposes, and it is up to us to arm ourselves with an adequate defence. The feature article, Cybercrime & Security outlines some of forces at play as well as what you can do to protect your business. In the Cover Story, Wrongful Commands! Employee’s Right to say No? Johan Botes describes a recent case where employees stood up for their rights to say no their employers. The case for employees is not always clear, but this article seeks to hone our understanding. Societies have to evolve and adapt the way they do things or else they are doomed to become economic slaves to their new overlords. Some deeply held beliefs are an anathema to progress, impede innovative thought and are corrosive to cosmopolitan and secular societies. The freedom to religion is protected, but it must be curbed by common sense and the rule of law. Some traditions should not be tolerated as they are causing irrevocable damage to the dignity of others. However, some certain traditional values are protected by the Constitution, and respect must be shown where necessary. In Witchcraft at Work! Irvin Lawrence and Crystal Naidu discuss a recent case and what employers must understand to respect the rights of their workers. Farewell After four years at the helm of BusinessBrief it has come time for me to move on – I am relocating to the USA. It has been a pleasure reading and learning about all facets of business management while editing this diverse collection of thought leadership – thank you for being my mentors these last 24 editions. I would also like to thank all the communicators and thought leaders for engaging with me. Online & in print
Nicholas
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4
PUBLISHER’S NOTE
BusinessBrief August/September 2016
P CPD/E
THE TEAM PUBLISHER James Scott james@bbrief.co.za
ADVERTISING SALES Janine Levy janine@bbrief.co.za
EDITOR Nicholas Harland editor@bbrief.co.za
James Scott james@bbrief.co.za
TECHNOLOGY & GADGETS Steven Ambrose steven@strategyworx.co.za Tel: 083 601 0333 OFFICE MANAGER/ SUBSCRIPTIONS Lucia de Andrade admin@bbrief.co.za PRINTED BY United Litho (JHB) Tel: (011) 402 0571
DESIGN & LAYOUT Bryan Maron Design Bandits bryan@designbandits.co.za Tel: 083 460 3633
The following organisations, subject to individual requirements, have accredited BusinessBrief for purposes of CPD/E (Continuing Professional Development/Education)
Association of Accounting Technicians South Africa
Association of Chartered Certified Accountants
Federation of African Professional Organisations
Chartered Institute of Management Accountants
Chartered Secretaries Southern Africa
Chartered Marketer South Africa
Compliance Institute Southern Africa
Financial Planning Institute of Southern Africa
The Institute of Certified Bookkeepers and Accountants
Institute of Credit Management of South Africa
Institute of Directors Southern Africa
Institute of Management Consultants of South Africa (IMCSA)
Institute of Marketing Management
Institute of People Management
The Institute for Public Relations and Communication Management (South Africa)
Marketing Practitioner South Africa
South African Auditor & Training Certification Authority
South African Board for People Practices
Southern African Institute for Business Accountants
South African Institute of Professional Accountants
South African Institute of Tax Practitioners
South African Payroll Association
Southern African Society for Quality
COVER DESIGN & CONCEPT James Scott Bryan Maron CONTRIBUTORS Please see our list of contributors on page 80
PUBLISHED BY BusinessBrief Publishing (Pty) Ltd Tel: (011) 788 0880 | Fax: (011) 788 2807 57a Second Avenue, Inanda, Sandton P.O. Box 1546, Parklands, South Africa, 2121
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EDITORIAL: Articles are published at the editor’s discretion, and are not linked to the payment of any consideration or to any obligation to place advertising. ADVERTORIAL: Published for a consideration, this material is provided by the client and does not necessarily reflect the views of the publication. It includes profiles, features, white papers, case studies, and thought leadership pieces. SPONSORED EDITORIAL: Written by an independent journalist, this material is published for a consideration, and includes profiles, features, white papers, case studies, and thought leadership pieces. Editorial contributions are welcome, but the publisher cannot accept responsibility for unsolicited material. The editor reserves the right to alter or cut copy. Copyright: BusinessBrief Publishing (Pty) Ltd. All rights reserved. Requests to lift material should be made to the editor. While every effort has been made by the publisher to ensure the accuracy of the information contained herein, the publisher and its agents cannot be held responsible for any errors, or loss incurred as a result. The publisher advises that readers consult their financial and professional consultants before acting on any information. All material used has been submitted with the understanding that it is original, and the publisher accepts no responsibility for any misrepresentation in this regard. No consideration is accepted for any editorial published. Published articles are not linked to the placement of any advertising.
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SEMINARS & CONFERENCES
BusinessBrief
MANUFACTURING INDABA
is the subject of the 29th Annual Labour
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BusinessBrief
BRIEFCASE
August/September 2016
HP ELITEBOOK REVOLVE 810 G3 TABLET The HP EliteBook transforms into five usage modes and offers performance, security, and manageability for work in the office or on the road. Tablet mode is perfect for presentation and browsing; snap on the keyboard and transform into full productivity mode. The HP EliteBook offers the latest Intel i5 or i7 processors, 8GB of Ram and 256GB of storage. The HP Elitebook offers an 11.6” multitouch screen. A three-year warranty brings peace of mind. For more information: http://www8.hp.com/za/en/products/tablets/
SAMSUNG R3 WIRELESS 360° MULTIROOM SPEAKER Samsung’s R3 speaker is fresh, round and sophisticated. The Samsung R3’s unique design offers 360° sound, and one speaker can fill an average size room with clean, clear sound. Simple pairing via Wifi or Bluetooth allows multiroom or multiple speakers in one room. The R3 top panel features an OLED display and acts as a control surface. Connect your favourite music streaming service or enhance your flat screen TV sound. For more Information: http://www.samsung.com/za/consumer/tv-av/audio-video/ wireless-audio/WAM3500/XA
FONDI – LET’S CAPTURE LIFE ONREAL GIVEAWAY 1
Fondi OnReal is an easy to wear and easy to share cam that brings to life real time fun. Fondi OnReal Cam has a smooth surface and weighs less than 25g with external memory up to 32GB, 1080P Full HD, embedded battery, 8MP CMOS lens and four built-in accessories including Magnet, Adhesive mount, Suction cup and Clip. It can be connected to any smart device through Wi-Fi and is compatible with both Android and IOS.
BusinessBrief
BRIEFCASE
FITBIT BLAZE Fashion meets fitness with the latest from Fitbit. The Fitbit Blaze is a stylish sports watch with interchangeable straps and functionality beyond the usual. All Day Activity tracking with a smooth colour touch screen and multiple faces. Long battery life of up to 5 days and full smartphone call and notifications. The Fitbit Blaze offer automatic sleep tracking and activity monitoring. Fitstar on-screen workouts assist in reaching your fitness goals. For more information: www.fitbit.com
GIVEAWAYS For a chance to receive a Fondi OnReal or The Ultimate Companion for Birding, please send an email or postcard (one entry per person) with your name, physical address and telephone number marked “Fondi” or “Birding”. Please note that these giveaways are only open to our South African readers. Email: editor@bbrief.co.za Postcard: P.O. Box 1546, Parklands, 2121 Closing date: Tuesday, 20 September 2016 Congratulations to last edtion’s entrant: • Nick Bebbington of Bryanston – Huawei Mate 8
THE ULTIMATE COMPANION FOR BIRDING GIVEAWAY 2 BusinessBrief is giving away two copies of The Ultimate Companion for Birding in Southern Africa by the celebrated South African birding authors, Peter Ginn and Geoff McIlleron. It’s not only the ultimate, large-format, coffee table bird book, but also a very useful birding companion by virtue of a digital app that allows enthusiasts to take the entire contents of the printed version into the field on a smartphone or tablet. It focuses on southern Africa and features powerful, full-colour images for all 960 species of birds recorded in southern Africa (including uncommon migrants). Available online at www.birdbook.co.za. Includes a free app.
7
August/September 2016
8
BusinessBrief August/September 2016
BRIEFCASE
I AM TALENT By John Gatherer & Debbie Craig This publication is aimed at providing a comprehensive guideline and toolkit which will help you provoke and stimulate your thinking, and help you cope and flourish in the workplace. It will support you as you take stock of your inner strengths, personal attributes, skills and capabilities, on your journey to being the best that you can be. I Am Talent is a userfriendly resource guide aimed at optimising your talent and potential, coaching you how to differentiate yourself and succeed in a competitive and dynamic global business environment. The guide takes you on a journey of personal discovery and mastery through activities, tools, assessments and practical advice that you can apply in your everyday life and work, to achieve your personal goals and aspirations. It is designed to challenge your thinking, create insight, motivate you to action and empower you to accelerate your growth and development, manage your career and enhance your quality of life. For more information, contact Knowledge Resources: +27 (011) 706 6009 orders@knowres.co.za | www.kr.co.za
EMPATHY Compiled and edited by Nia Magoulianiti-McGregor While driving to work one morning, internationally acclaimed South African photographer and photojournalist, Debbie Yazbek came across the body of a homeless man, on a roadside. The paramedics were called but they remarked that nothing was wrong; he was simply “dirty”. That morning, Simon Magaliso Radebe, 55, was dead. The incident affected Debbie deeply, and she soon realised the need for South Africans to gain more understanding into the lives, hearts and stories behind the often discounted homeless community. And so, the Empathy coffee table book was born, as a special editions project in collaboration with Ali Gregg, Founder & CEO of The CEO SleepOutä, Sun International, Caxton and CTP Publishers and Printers and The Salvation Army. Empathy aims to give the rest of SA a not-often-seen insight into homeless life – and to give dignity to those we so often overlook. Available from: yazbekd@icloud.com | for more information on The CEO SleepOut™, visit www.theceosleepoutza.co.za
NEW FINANCIAL GUIDE FOR ENTERPRENUERS From ACCA (the Association of Chartered Certified Accountants) Whatever the force that drives South African entrepreneurs to get their ideas off the ground, the fact remains that there are many obstacles that they will have to overcome. Financial management is at the heart of running a successful business and remains a major challenge for many business owners. According to Fin24, 63% of businesses operating for less than 3 years fail in South Africa. In many instances, entrepreneurs are not equipped with the skills and knowledge needed to make informed and effective decisions about their financial business model. ACCA have addressed the issue through a brand new guide, Financial management and business success – a guide for entrepreneurs, designed to help small businesses understand the importance of financial literacy and guide them through the basic elements. Understanding financial information is vital for offsetting this risk as it reveals the early warning signs of impending problems. The guide stresses the importance of business planning at every stage of business life, helping to assess and identify opportunities directly, and avoid mistakes through applying correct financial knowledge. For more information, please contact: Nomsa Nkomo | Nomsa.Nkomo@accaglobal.com
BRIEFCASE
BusinessBrief
9
August/September 2016
TIKI LAMP Designed to sit in clusters and to form a flock, these delicate bird like lamps use futuristic forms to animate and evoke character. The flawless acrylic shade balances above a metal formed base making a dynamic pairing. Tiki is a modern and exquisite table lamp created by Established & Sons. Available from M-Square Lifestyle Necessities: +27 (0)11 447 0807 | msqr2@ msquarelifestyle.co.za | www.msquareonline.co.za
ALIAS MEETING CHAIR The frame collection is characterised by PVC covered polyester mesh available in many colour variants, with a structure in extruded aluminium and stove enamelled die casting components. Comprised of an array of products, each designed differently to combine comfort and function, frame is a successful collection, which, over the years, has become an icon for other collections. Ideal for relaxing, comfortable, elegant, functional and ergonomic in private or public areas, floatingframe guarantees the same comfort in numerous applications. A connecting seating system with arms, available with stove enamelled, polished or chromed structure, can be adjusted according to the needs. Available from M-Square Lifestyle Necessities: +27 (0)11 447 0807 | msqr2@msquarelifestyle.co.za | www.msquareonline.co.za
MULTIPLI CEO EXECUTIVE OFFICE SYSTEM The warmth of leather, in classic, natural or modern shades, is inviting. The striking look of the 7cm tops, with 45° edge. Two unmistakable stylistic features, in a unique combination of good looks and functionality, cabinets, in black and white, complement the range with the same edge. The warmth and natural beauty of wood envelop the Multipli Ceo Desk, from the Fantoni Group, to create new sensory emotions and aesthetic values, while maintaining all the simplicity and versatility of the range. Available from M-Square Lifestyle Necessities: +27 (0)11 447 0807 | msqr2@msquarelifestyle. co.za | www.msquareonline.co.za
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August/September 2016
TRAVEL & LEISURE
Oyster Box
Standing majestically on Umhlanga’s prestigious beachfront, with sweeping views of the Indian Ocean and direct beach access, The Oyster Box has been providing guests with special memories for over 60 years. She remains a much-loved favourite with all who visit her…royalty included!
R
enowned for generous hospitality, passionate service and excellent cuisine, guests have a choice of venues for wining, dining and relaxing. The Ocean Terrace, serves a Bistro menu which includes freshly prepared pizzas from a wood-fire oven and the incredible curry buffet, with its choice of Curries and the finest selection of fresh seafood. Inspired by the hotel’s original colonial architecture, with chandeliers from the Savoy Hotel in London, the Palm Court serves a decadent, traditional High Tea daily, with live piano accompaniment. The menu includes freshly prepared home-baked scones with cream and strawberries, cakes, finger sandwiches, pastries and savouries. For a more intimate dining experience the Chef’s Table in the intimate wine cellar or in the Kitchen, is ideal for private dinners, corporate functions and unique celebrations, for up to 10 guests. Our Sommelier has assembled an extensive list of fine local and international vintages, combining Old World style wines with the more robust New World wines. He is on hand to offer advice on food and wine pairings for special events, or to individual diners looking for that ‘perfect match’ to accompany their food choice. The legendary Grill Room is the pearl of The Oyster Box. The menu is an inspired combination of enduringly popular
dishes created by Bea Tollman, president and founder of the Red Carnation Hotel Collection, the restaurant’s Signature Dishes and new dishes from around the world. For something a little more laid-back, the stylish Oyster Bar is an essential pre-dinner or sundowner stop where you can enjoy chilled Champagne and freshly harvested oysters from the hotel’s own oyster beds, or indulge in a selection of fresh seafood at the Oyster, Salmon & Sushi Bar. The Lighthouse Bar is the hottest meeting spot in Durban offering breathtaking views over the Indian Ocean as well as an informal social menu. Reflecting and celebrating the intricate tapestry of KwaZulu-Natal’s rich Colonial-Afro-Indian culture, The Spa ensures the highest level of personal care by dedicated, trained staff equipped to deliver exceptional levels of spa therapy and pampering. With six modern, treatment rooms, a hydrotherapy bath, grooming lounge, plunge pool, state-of-the-art private gym, infinity pool with garden views and a post-treatment tranquillity lounge, guests are pampered in every way. In addition, The Spa at The Oyster Box houses an authentic eastern Hammam, an experience as special, as it is healing.
The hotel’s outstanding range of venues makes it a premiere wedding and honeymoon destination, as well as being a sought-after venue for conferences, workshops, the corporate sector and business travellers. An in-house 24-seater cinema shows classic and current releases. A business centre with complimentary Wi-Fi and high-speed Internet access, valet and secure parking are available to guests. Time spent at The Oyster Box will leave you with magical memories to last a lifetime. For reservations, contact The Oyster Box: +27 (0)31 514 5000 | info@oysterbox.co.za www.oysterboxhotel.com n
You’re about finding the right transport solution. We’re about providing it. When you require a transport solution for your company, Avis has a host of solutions to suit your needs. This includes Avis Rent a Car, Avis Luxury Cars, Avis Monthly Rentals, Avis Van Rental, Avis Truck Rental, Avis Car Sales, Avis Safari Rental and the Avis M.I.C.E. division. So why not take a look at what the company that will always try harder can do for you and your business?
avis.co.za
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BusinessBrief
August/September 2016
TRAVEL & LEISURE
Brahman Hills
wildlife roaming free, the great outdoors beckons. From easy
Situated in the heart of the KwaZulu-Natal Midlands, in the foothills of the Drakensburg Mountains, Brahman Hills has undergone an extensive renovation since its days as the old Windmills Hotel.
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walks to more adventurous trails, why not bring your mountain bikes and explore the distant reaches of the farm. Or if you prefer a bit of pampering and indulgence, the spa will offer a range of relaxing treatments including a full bridal hair and make-up service.
ith spectacular views as far as the eye can see, its unique chapel on a lake and glass reception venue
Offering a range of accommodation made up of hotel rooms and
set it apart as a country wedding venue and saw
self-catering cottages, together with a number of noteworthy
many a dream wedding come true. Now under new management,
facilities, including a restaurant (complete with a separate Halaal
the resort has undergone a complete makeover and name change
kitchen), coffee bar, cellar and underground bar, as well as a
to suit its brand new look.
variety of eventing venues seating up to 400 people, Brahman
Hospitality specialist, Gill Bowmaker (of Granny Mouse fame) has
complete flexibility to meet every need, making it a destination of
driven the refurbishment and business shift, making Brahman
choice for those looking for the perfect wedding and conference
Hills a destination that delivers real experiences, with real people
venue or idyllic country escape.
Hills guarantees impeccable attention to detail as well as
in its tranquil surroundings. Lying just a stone’s throw away from the N3 highway, Brahman Natural wood and stone finishes accented by warm copper tones,
Hills is easily accessible and central to the famous Midlands
create a warm and welcoming effect, while hidden nooks and
Meander, which means day visitors are always welcome to pop in
crannies throughout make Brahman Hills an authentic country
and enjoy the scenery too.
retreat just waiting to be discovered. For reservations, contact Brahman Hills: www.brahmanhills.co.za Nestled amongst rolling hills, with Brahman cattle and abundant
| +27 (0)33 266 6965 | reservations@brahmanhills.co.za n
TRAVEL & LEISURE
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Century City Hotel
he contemporary Century City Hotel in Cape Town is pure class; from the chic bedroom design to extraordinary dining and quirky signature cocktails. Together, the management and design teams have created a trademark style that blurs the line between home and office, offering a sophisticated experience. The concept of the Century City Hotel has been pioneered by a seasoned team of hospitality experts, who embraced the opportunity to create a truly unique offering for guests. As an independently owned and managed hotel, the team are able to be flexible and offer a personalised service. The hotel offers an inspiring yet functional space, expertly designed to facilitate everything from business meetings to simply taking time out. The hotel boasts a 200 Mbps fibre connection, with unlimited WiFi access for hotel guests. Travellers are encouraged to consider their time at the hotel as a “home away from home”. The 125 superior rooms and deluxe suites are flexible and can sleep up to two people per room. There is also the option of interconnecting rooms, which cater perfectly to families. For those who prefer to have a night in, there are twenty premium television channels to choose from, and the in-
room take out is beautifully packaged as a deli delivery from the Square Cafe & Wine Bar. The Square Cafe & Wine Bar, which is on the hotel premises and spills out onto the bustling Century City Square, offers relaxed dining from a choice of delicious meals from the a-la-carte menu, as well as home-style dishes from the Harvest Table which works on a “weigh-and-pay” system. There are also gorgeous deli items such as fresh fruit, salads, sandwiches and confectioneries for sale for those on-the-go. Designer details such as custom-made furniture, black subway tiles and colourful Le Creuset crockery make this a refreshing new dining destination.
The Century City Conference Centre and Hotel forms part of a mixed-use development situated around the Square – forming the centre of Century City’s new hospitality and commerce hub. The hotel looks onto the Square, which boasts a diverse offering of carefully selected restaurants and coffee shops. This open-air setting, complete with the canal that meanders through the precinct, serves as the ideal location for live outdoor concerts, markets and gatherings. For reservations, contact Century City: www.ccconferencecentre.co.za +27 (0)21 204 8000 events@ccconferencecentre.co.za n
Cheeses, cold meats, seafood, wines, spirits and assorted goods delivered ORDER ONLINE – www.europfoods.co.za
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TRAVEL & LEISURE
Light at the end of the immigration policy tunnel? By Stefanie de Saude | Immigration & Citizenship Law Specialist | De Saude Attorneys Inc. | stefanie@desaudelaw.com
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fter a disastrous initial implementation of SA’s revised immigration regime, government has made great strides toward a more practical and equitable immigration policy. The Department of Home Affairs (DHA) can rightly claim success across a broad spectrum of issues. But there is still a long road ahead. When the new immigration regulations were implemented in 2014, it was met with near-universal condemnation and outcry. Parents were outraged at the new requirements for travelling minors, the tourism sector was in a state of near-panic as tourist arrivals dwindled thanks to prohibitively onerous legal requirements, and investors and businesspeople were left unsure as to what extent their freedom of movement would be impeded. It was an untenable situation. In response, an Inter-Ministerial Committee was established to develop measures to address some of the main issues. The immediate measures proposed by the Committee included:
• Implementing systems to capture biometrics at key ports of entry, with pilot programmes at OR Tambo International Airport, King Shaka International Airport, and Cape Town International Airport; • Introducing an Accredited Tourism Company programme for BRICS countries, specifically China, Russia and India; • Considering a long-term Multiple Entry Visa for a period ranging from 3 months to 3 years to accommodate business travellers and academics; • Allowing principals to issue letters confirming permission for children to travel on school tours; and • Extending the validity period of the parental consent affidavit to 6 months. Progress has been swift and highly encouraging. The biometric systems are in place at the three major airports as well as Lanseria, and have been successfully tested. Thanks to this, transit visas are no longer required for persons traveling through these ports of entry. To ease the entry requirements for groups of Chinese travellers, the Department of Home Affairs waived the requirement to have to apply for a port of entry visa in person when traveling in a group – on the condition that the biometric data of such travellers are taken upon arrival and departure from SA. Business travellers and academics can now apply for a long-term multiple entry visitor’s visa that remains valid for a period between 3 months and 3 years. In addition to the existing 10-year visa waiver for business executives
from BRICS countries, the DHA in January 2016 approved the granting of a 10-year multiple entry visa to business travellers and academics from Africa. A standardised template for school principals that can be downloaded from the DHA website has eased freedom of movement for school groups. In addition, the DHA took steps to facilitate travel of South African sports teams abroad. The highly controversial Parental Consent Affidavit has also been extended from 4 to 6 months. Over the next few months, the DHA also plans to give effect to a broad range of additional measures, among them: • Additional visa facilitation centres in Zimbabwe, United Arab Emirates, and Botswana; • Visa waiver for India, Russia, China and other countries; • Opening two additional business visa facilitation centres in Durban and Port Elizabeth; • Printing parents’ details in their passports so they don’t have to carry birth certificates. In the judgement related to a recent case, it was found that if a foreign national is married to or in a life-partnership with a SA citizen or permanent resident and is in possession of a visitor’s visa in terms of Section 11(1), they may apply for a visitor’s visa in terms of Section 11(6), from within SA. Following this judgement, however, Visa Facilitation Services centres have been instructed not to process such applications. The Immigration Act makes provision for the spouse and dependent child of the holder of a work or business visa to change their status in SA but excludes the spouse of a South African to submit an application in SA. What has this country come to if our own government are affording foreigners more rights and respect for their family units/marriages than its own citizens? The DHA has an obligation in terms of our Constitution and the Preamble to the Act to respect the relationship between spouses and their rights to dignity as enshrined in section 10 of the Constitution. This includes the right to form and live as a “family” unit. South Africans have a constitutional right to have their spouses (foreign or not) live in SA with them without any interruption whatsoever. The DHA must shed light on this matter and to bring speedy resolution to an issue that is certainly not designed to protect and enforce the rights of South African citizens. n
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Investment MIGRATION programmes By Sandra Woest | Senior Manager | Henley & Partners | sandra.woest@henleyglobal.com
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hanging wealth patterns around the world have led to an increase in the popularity of investment migration programmes, a form of financial and personal growth and sustainability planning that’s become more important over the last 20 years. Wealth accumulates Wealth today is emerging in countries that didn’t enable previous generations to grow their personal prosperity to any great extent and in countries that had difficult pasts. Think China, India, certain South American countries – and even SA. The new affluence implies the need to travel internationally for business purposes and, since these big-income individuals have the means, to travel for leisure purposes too. But, with the credibility of the new elite’s passports remaining fairly low, travel and the ability to settle elsewhere is difficult. Migration It is this background that has led to the growth of investment migration programmes offering residence or citizenship in more attractive destinations to people who don’t enjoy the same travel and settlement freedom rights in their own countries. Often, to secure residence rights (and thus enjoy greater freedom of travel), one must commit to living in the country in question for a number of years; however, citizenship rights, which allow for greater travel and settlement freedom do not necessarily require you to live in the country. Growing a business in a new location may also necessitate that one lives in another part of the world for some time. This is where ease of
settlement becomes crucial – and it’s not a feature that characterises the South African passport. Attract investments Some countries have realised that they can attract investments in new businesses and in property, and provide the investor with rights for travel and settlement that the investor’s own country cannot. Many of the countries offering these programmes are not leading states themselves, but their passports are among the strongest in the world. This refers to countries such as Portugal, Cyprus and Malta, for which an investor gains the right to live, work and study in any of the 28 EU countries and Switzerland, as well as states in the Caribbean, where investors gain visafree travel opportunities to the Schengen area, the United Kingdom, and some Asian states,
depending on which state’s passport is acquired. Visa-free travel is certainly something needed by businesspeople today. The need to move and live elsewhere in our ever-changing and more mobile world, as well as a country’s need to attract direct foreign investment, is what drives the investment migration programmes offered by a number of countries in different parts of the globe. n
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FEATURE
CYBERCRIME & SECURITY Cyber threats are often recorded in integrated reports as one of the top risks facing corporates and government. Globally cyber-attacks are increasing, in part due to the rise of value of personal information and “big data”, says Bram Meyerson, Managing Director at Quantimetrics.
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s Business-to-Consumer (B2C) technology provides more reach, criminal activity can be heightened by the introduction of new channels. This places increased demands on risk management, which involves monitoring and anticipating attacks and in particular understanding the ecosystem of people, systems and technologies to effectively ensure protection (on internal systems and on cloud services). Security vendors use threat intelligence to configure their solutions to become more proactive in identifying vulnerabilities and anticipating attacks. Some businesses opt for managed security services, relying on experts to keep them safe. According to Meyerson, investment for protecting against phishing, denial of service and other cyber threats is regarded as a “grudge” spend, but this new reality will impact IT budgets until effective solutions are found. Norton by Symantec has released its findings from the Norton Cybersecurity Insights Report revealing that despite growing concerns over online crime, over 8.8mn South Africans fell victim to it in the past year, says David Ribeiro, Head of Norton, Middle East and Africa. The research sheds a light on the global impact of consumer cybercrime, showing: • 76% of South Africans believe that identity theft is more likely than ever before • 2 in 3 (67%) feel it is more difficult to control their personal information as a result of smartphones and the Internet • South Africans are engaged with the topic of security (78% acknowledge the need to actively protect their information), but there is still some notion that security is an inconvenience
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•5 8% would rather cancel dinner plans with their best friend than have to cancel their credit/debit cards after their account has been compromised • And the same percentage (58%) would rather endure a terrible date than deal with credit/debit card customer service after a breach or hack Enabler & a barrier Online crimes are increasingly prevalent with more than 1 in 7 having had unauthorised access to a social network profile. Compared to their global counterparts, South Africans have heightened sensitivity to online information compromises – 76% believed identity theft was more likely than ever before and 67% said it was easier to control personal information before smartphones and the Internet. South Africans are more likely than their global counterparts to consider themselves tech savvy, but despite this, South African millennials are less likely to take personal responsibility for their security – nearly 1 in 3 millennials admits to abandoning an account rather than deleting it simply because it was easier (31%). Millennials and Generation Xers are equally likely to have been victims within the last year at a staggering 39% and 37% respectively. However, only 23% of South Africans aged 55 and over experienced cybercrime during this period. Additional findings include: •N early 1 in 5 do not have a password on his/her smartphone or desktop computer • 6 in 10 consumers say it is riskier to share their email passwords with a friend than lend him/her their car for a day
•S toring credit/banking information in the cloud is viewed as riskier than not wearing a seatbelt • South Africans are more likely to own internet-enabled devices than their global counterparts smartphones and laptops being most common • Though most devices are protected, South Africans falter when it comes to protecting home theatre devices, wearables, and Internet-connected video game systems • Devices considered easiest to hack are among the most frequently used, such as a smartphones and laptops Too much hassle to be careful The research has shown that although there are considerable interest and fear in cybercrime, South Africans consider security measures to be a hassle. 58% would rather cancel dinner with their best friend than cancel their debit or credit cards when hacked. •O ver 1 in 3 South Africans admits to password sharing with email account passwords most shared • Nearly 7 in 10 change their passwords after they’ve been compromised…meaning nearly a third don’t (32%) • Over half check their accounts after a breach have been announced by the media • While nearly half of South African password users always use one that is secure, 1 in 5 still only does so when required • Dealing with the consequences of a stolen identity is considered more stressful than many everyday inconveniences The good news is more and more consumers are aware of the risks of cybercrime but the bad news is they neither feel they are doing enough to prevent it, or feel that technology has prevented them from being able to do anything about it. Despite personal experience, many South Africans continue to put themselves at risk when it comes to online activity.” Best practices: •P asswords are the key to your kingdom so exercise caution and do not share • Review all bank account and credit card statements to see if there are any irregularities • Always use trusted online payment methods • Do your research on merchants before purchasing online • Never let your bank cards out of your sight Global impact Cybercrime in SA has increased by 30% since 2013 and SA is currently losing more than R1bn a year to cybercrime according to the South African Banking and Risk
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Information Centre (SABRIC). SA is also among the highest targeted countries in Africa and the third highest number of cybercrime victims worldwide, notes Nerushka Deosaran, Senior Associate at Norton Rose Fulbright. Regulatory framework SA is a safe haven for cybercriminals because: •C urrently lacks comprehensive laws to protect information and to implement adequate cyber security measures • Consumers do not take steps to protect their information, for example, by using different passwords on different platforms • The law does not always provide appropriate procedures to prosecute certain types of cybercrimes • In some instances, law enforcement lacks technical expertise and capacity to deal with cybercrime Certain cybercrimes are not currently recognised as a cybercrime in SA, for example identify theft. The most vulnerable to these cyber-attacks are people who are not educated with regard to cybercrimes and small to medium businesses who cannot afford expensive security systems to protect them against such attacks, as well as large businesses who are the targets of sophisticated zero-day attacks (i.e. an attack using technology for which a defence or anti-virus has not yet been developed). At present SA does not have specific legislation or regulations that deal comprehensively with cybercrime. There are a number of legislations that deal with different aspects of cybercrime. For example: •E lectronic Communications Transactions Act, 2002, deals with extortion, forgery and hacking • The Criminal Procedures Act, 1977 deals with the traditional search and seizure methods and preservation of evidence • The Prevention of Organised Crime Act deals with organised crime and money laundering
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and Cyber security Bill (Cybercrime Bill) in August 2015. The Department of Justice has subsequently formed an expert panel to review a further version of the Cybercrime Bill that will be amended to incorporate public comments. The Cybercrime Bill intends to establish new cybercrime offences namely: hate speech, terrorism, espionage, extortion, appropriation, copyright infringement, prohibited financial transactions (such as phishing), identify theft, hacking and use of hardware or software for the commission of criminal offences. The Cybercrime Bill: •P rescribes penalties for cybercrimes • Regulates jurisdiction • Provides for the establishment of a 24/7 point of contact and various structures to deal with cyber security • Identifies and provides protection for National Critical Information infrastructures • Imposes obligations on electronic communications service providers (including financial institutions) regarding cyber security • Allows the President to enter into agreements with foreign States to promote cyber security The drafting of the Cybercrime Bill is a step in the right direction however the fight against cybercrime is not one that the legislature or government can tackle alone. Individuals and organisations must also take active steps to educate and protect themselves from cybercrime. In order to make effective strides in combating cybercrime we need to create a culture of awareness that will make it difficult for cybercriminals to penetrate our environment. Enactment and implementation of legislation such as the Protection of Personal Information
Having sporadic pieces of law makes it difficult to monitor, enforce and prosecute cybercrime. What is needed? SA needs legislation that criminalises new forms of criminal activity, enables investigations and detection of cybercrime, provides for specialised cybercrime training for law enforcement authorities and allows for international cooperation to ensure that cybercrimes can be investigated and the perpetrators can be prosecuted. In response, Parliament published the draft Cybercrimes
IT project effectiveness, underpinned by real benchmarks Project and organisational resilience via sensible risk mitigation IT project and application sizing quantity surveying for software delivery
BENCHMARK RISK ADVISORY
info@quantimetrics.net +27 (0) 11 880 7613
www.quantimetrics.net
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Act, 2013 will assist in reducing our vulnerability to cyber-attacks. Is your security provider in touch? Saurabh Kumar, MD of In2IT Technologies SA, says that cybersecurity is a fast paced industry – new threats emerge every hour and attacks are launched as easily from within the businesses as from without. Digital and, increasingly, mobile and the Internet of Things (IoT)driven threats add complexity. This makes it vital that any security or cybercrime consultant you engage with be at the top of their game. They must be able to look beyond traditional threats to find new solutions to evolving threats. Critical traits for security providers Successful security solution providers: •U nderstand the security landscape • Are in touch with the global environment from which threats are emerging • Have the experience, skills and capability to respond to threats quickly, providing concrete solutions It takes deep insight into the technology and processes, as well as the operations of a business, and the broader workings of the vertical industry value chain to create a secure environment. Best practices must be matched with the ability to innovate and an endless curiosity that keeps the business abreast of developments in the sector. However, today, security starts with monitoring. Aggregated, analytics-driven threat monitoring There are any number of security solutions and devices deployed across enterprise networks and in the cloud to
facilitate control and provide monitoring and protection. With the massive growth of digital and mobile technologies and the explosion of the IoT connected world, the volume of devices and sensors that need to be monitored and protected from threats has escalated immensely. Analytics-powered monitoring aggregation solutions help companies and their security providers understand threats, where they originate and how they impact different systems, and keep their priorities straight in terms of identifying and protecting against potential threats. While security vendors may provide security management platform solutions that enable integration and monitoring of different systems (e.g., access control, CCTV, perimeter security), specialist security providers will often make use of their own, highly sophisticated solutions, which are built on open systems and standards to monitor client systems. These options are worth exploring. In fact, as security increases in complexity, security as a service is becoming an option that more companies are investigating. That said, the best security solution is one that is built over time. Trust Compromise your clients’ trust and you compromise your business. That puts the onus on the business to build ethics and rigorous data management and protection into the fabric of their business. It requires ongoing refinement to the system. Confidence in the system is achieved by continuously identifying and addressing specific challenges. A layered and integrated enterprise security solution does not just defend from external threats, it looks for threats from inside the company too – monitoring behaviour and
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ensuring the policies and practices and even the culture of the organisation is tailored to protect the nervous system of the organisation. Protect your business Mark McCallum, Director & Head of Africa Solutions for Business at Orange Business Services, notes that modern business increasingly relies on network-supported technologies, such as cloud computing, mobility and the Internet-of-things (IoT). The flexibility and agility they offer are essential for ensuring competitiveness in an increasingly global marketplace. But these benefits comes an increased risk of data compromise. Cybercriminals have become increasingly professional and use “multi-vector” attacks, which target various areas of the enterprise in parallel to find the weakest link. These include end-users, mobile devices, networks, applications and data centres. The key to protecting yourself against these multiple threats is to take a holistic approach to security. Tips to help you build multi-layered security that protects your data and infrastructure, while keeping you competitive in the digital world: •B reak boundaries with network-based security: traditional approaches to security rely on many different solutions installed at the boundary between a “trusted” private business and the “untrusted” public Internet. Enterprise IT security professionals are demanding a network-based solution that is specifically engineered for the cloud, mobile, IoT and open API era where there is no fixed network perimeter. • Take a strategic approach: Security experts can help you prioritise which data is most important to your business and outline ways to reduce attack risks. Understand cybercriminals’ objectives, be those monetary, ideological or competitive – rather than focusing on system vulnerabilities alone. • Gain insight with a security information and event management (SIEM) platform: it correlates security alerts and turns them into actionable intelligence. SIEM can help identify malware and abnormal application access requests to detect intruders in your network. Big data analytics powers real-time threat visualisation, dynamic incident response and post-event forensics. • Dynamically match infrastructure to business requirements: choose the most appropriate network based on the business criticality of the data travelling on it, such as private WAN, or secured public Internet connectivity with a private, shared or public gateway. • Deliver security from the cloud: it is vital to have consistent security protection across your entire IT infrastructure – including mobile devices. Use security
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protection in the cloud to block suspicious data before it even reaches the end-user. • Authenticate users for all enterprise resources: federated identity and access management (IAM) scheme gives approved employees and partners access to cloud and on-premise applications from any device using a single login. Multi-factor authentication protects VPN access over unsecured Internet connections. • Protect data in public environments: Sensitive data should be encrypted and tokenised before being processed or moved between public and private clouds. • Protect the Internet of Things (IoT): the devices that make up the IoT are a potential weak link in your security chain. The dangers posed by insecure protocols and unpatched firmware are accelerated dramatically considering the exponential number of devices available and in use. Increase cyber risk awareness & preparation Ryan van de Coolwijk, Cyber Specialist at Hollard Specialist Liabilities, says that businesses use of technology is expanding at a rate that is jet propelled and leaves them increasingly exposed to evolving cyber and data related risks which need the focused attention and awareness of all business leaders. Only one third of us have a cyber-attack response plan. Companies face numerous daily risks to their data. Much of this doesn’t even require a targeted attack or knowledgeable hacker. Examples are a stolen laptop containing the owner’s and client’s personal data; or intellectual capital as well as rogue employee selling off data to a competitor. An important first step is that data risks need to be evaluated from multiple angles including IT security, HR practices as well as the management of physical access to your premises and confidential physical files. This is why the objective view of experienced consultants
Creating the strategy required to effectively operate online Tel: +27 11 782 0045 ✱ www.Strategyworx.co.za
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are invaluable because they bring a fresh eye along with a wealth of experience from different environments. People who work within a company are too familiar with the people and routines to be effective and are deeply influenced by the belief: “but that’s how it’s always been done”. The importance of challenging the current status quo cannot be over emphasized because hackers think outside the box and use your status quo to their advantage. Data value: classify & protect Cyber risks differ from company to company. Thoroughly understanding a company – including its risks, systems and data – is pivotal to implementing effective security suited and tailored to the needs of each company and not the budget of the provider. Security need not be expensive. Your company may not need what costs most. The obvious security solutions that most people know about are firewalls, data loss protection and various encryption solutions. But in designing good security it’s critical to understand what data you store, where you store it and exactly who has access to it – day and night. It is important not to be casual. Keep tight reigns on where your sensitive and most valuable data is kept and who is allowed access. In the same way that you would protect diamond and gold possessions more carefully than everyday items, your data needs to be carefully classified according to its sensitivity and value to your company. The number of segments depends on the size and complexity of your company. It is possible that one person has access to several, or only one, segment. Each value segment needs its own security
controls as well as people and passwords whose access is defined according to their roles. It is important to consider monitoring and encryption solutions. These will help drive down the delay between compromise and detection as well as how easily data can be used if compromised – key items in looking to limit potential damages should a breach occur. Only 35% are prepared! South African businesses need to make cybercrime risk prevention a priority without delay. The findings of a recent PWC study should come as a shock. The report called Economic Crime: A South African Pandemic found that only 35% of South African companies reported having a cyber incident response plan. This is a definite area where insurance can assist by providing and picking up the costs for specialists to help take the sting out of a data breach through investigation, containment and management of an incident. Progressive counter measures Justin Keevy, Director: Commercial, Cyber Liability and National Sales at Camargue, notes that in 2014, SA experienced the most cybercrime attacks of any country on the continent and these figures are not expected to change in 2016. As a country we are losing more than R1bn to cybercrime annually and 70% of South Africans have experienced cyber-crime compared to the 50% global average. All alarming figures considering it’s hard to accurately determine the levels of cybercrime in SA as there currently is no legal obligation to report such crimes. Taking unreported cases into account, one can only imagine that this number must be higher than what’s been confirmed.
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Inc DTP 6345
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The top vulnerabilities organisations should consider: • • • • •
mployees E Unsecure mobile devices (BYOD) Cloud storage applications Third-party service providers Malicious attacks
From this it’s clear that cyber safety can no longer be considered the problem of IT alone – it’s the collective responsibility of each member of an organisation but the drive must come from the top down. Moving on from credit cards, increasingly sophisticated cybercriminals are breaching data and committing cyber blackmail – holding data hostage while attempting to extort money from companies trying to avoid the loss of data, IP and reputation. It’s therefore not if but when a breach will occur. For this reason having breach protocols and a breach response plan is of critical importance. Insurance against a breach and access to a reputational consultant to manage the likely damage to the brand following a breach should be considered mandatory and good governance. There are currently two kinds of cyber risks insurance coverage options available: • Commercial Crime insurance: This type of coverage addresses losses to the insured business as a result of employee dishonesty, computer fraud, fraudulent transfer instructions, extortion and contractual penalties. In essence theft of funds when business accounts are exposed as a result of computer fraud. • Cyber Liability insurance: This cover deals with all the exposures facing computer networks and systems. It includes the liability attaching to businesses in rendering
their services and giving advice to third-parties (particularly IT related businesses), as well as the multimedia liability to which the business is held liable (for statements made in its marketing and advertising efforts, which includes defamation and breach of copyright). It also covers security and privacy liability, which the business will be held accountable for following a data breach (such as legal defence costs in the event of a class action against the business). Business interruption following vulnerabilities on the network that brings down the computers is also covered (this is often not covered by other insurance policies as there may be no physical damage to the IT infrastructure). Breach of legislation – fines and penalties imposed on the business for failing to adequately safeguard stakeholder information (this can be up to R10mn in terms of the Protection of Personal Information Act (POPI)); crisis management costs following a data breach, including customer notification, support and credit monitoring expenses are all included in this cover. Data extortion, which is the ransom monies paid to avoid an imminent threat on the computer networks and systems, is also covered by a cyber-policy. While it’s true cyber insurance provides coverage for data breaches, insurers do require that insureds implement the necessary security to protect such information. Cloud opportunities & risks! Bertus Visser, CE of distribution, PSG Insure, says that there is no doubt that the cloud is opening up a new world for businesses, but what are the risks? As with anything new, migrating to the cloud can be frightening, particularly if you haven’t had the time to become familiar with it and to understand its potential opportunities and threats. The cloud’s very name suggests something intangible and elusive. Think of the cloud as a utility, facilitated by the internet, in the same way that electricity became a utility in the 20th century. Before this time, factories had to generate their own electricity as there wasn’t a grid to draw from. The cloud has created a computing “grid” that users can tap into for as much, or as little, storage and processing capacity as they require. Yes the cloud presents risks, such as the risk of your data being compromised or stolen through a cyber-attack; but many of the same risks exist if you have your data stored locally on your own client server. There are also legal risks, such as the risk of falling foul of the Protection of Personal Information Act (POPI). There is still uncertainty about when POPI will actually become effective but once it does, companies will have 12 months to comply with its provisions. The current consensus is that the effective date will only be declared by the President once the
Information Regulator has been established. Risk of any kind can be difficult to eradicate completely, which is why in insurance we talk about “mitigating” or “managing” risks. The same applies to your home and other physical assets. While you can add layers of security to reduce the risk of a break-in, you can’t eliminate the risk altogether. You can also insure your data risks as part of a cyber insurance product. As with any other type of insurance, providers will have certain requirements for you to fulfil in order for them to assume liability. Just as a home insurance policy might require you to have an alarm system, so cyber insurance has its own set of conditions that have to be fulfilled for a claim to be valid. Cybercrime is carried out by much more sophisticated criminals than the average robber. As a result cyber insurance is very sophisticated, so it’s important to use a specialist. Opportunities Whether your business is large or small, the cloud appears to offer real opportunities to streamline and simplify your business, save costs and increase your functionality. It can enhance front-end sales, distribution and customer service while improving back-end operational efficiency and expense management. It allows you to engage and track your clients, deliver advice and provide fulfilment of that advice not only from the office, but from anywhere and on a variety of different devices – from laptops, to tablets to mobile phones. All this, of course, has significant advantages for your clients, who increasingly want a personalised experience, irrespective of their value to your company. They want you to really know them, and to understand their needs and preferences quickly and easily. The cloud makes all of this – and more – possible. It can provide the kind of scalability and power you need quickly to provide this kind of experience. Stopping the next attack Doros Hadjizenonos, Country Manager at Check Point Software Technologies SA, notes that organisations need to ensure that they remain on top of security as best they can, in order to protect themselves and to adhere to regulations. Technology is advancing at a rapid pace and this opens up vast opportunities for both businesses and individuals. However, it also unfortunately enables cybercriminals to evolve how they attack organisations. As soon as organisations think that that they are ahead of cybercriminals, they attack with new and adjusted attacks in order to steal information and data. Protecting organisations and safe-guarding the personal data of clients, staff and other stakeholders is crucial.
Organisations need to ensure that they secure personal data in accordance with POPI, which regulates all business information security in SA. Organisations need a complete IT security solution that will assist them with compliance of the POPI Act. Businesses need to ensure that their security solution protect their network from external threats, preventing data leakage, as well as provide realtime monitoring In this day and age it is crucial to have a multi-layered security approach, so that if a hacker breaches one system, there’s a good chance he’ll be tripped up by another. While anti-virus solutions are good at blocking known malware, they are less effective against unknown malware. Hackers can also turn known malware into unknown malware in minutes using freely available online modification tools. Security should therefore be bolstered by sandboxing and other security monitoring tools. Once an app or document bypasses the anti-virus system, a sandboxing solution will emulate how the app will perform if a user were to open it, and will either alert the user if it is malicious or prevent the user from downloading it. To protect against multifaceted threats, security professionals are likely to increase their reliance on centralised security management solutions. With large enterprises having a plethora of different security products on their network, consolidation offers a way of reducing both complexity and cost. Consolidating security provides an effective way to cut complexity and make for easier management, so that new threats don’t get lost in the gaps between systems. Shore up security cracks As the saying goes, “You are only as strong as your weakest link”. Therefore businesses need to ensure that when it comes to security everyone involved, including management, security teams, security providers, and employees; everyone needs to be on top of their game and diligent in securing the organisation. n
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Politics & corruption drive DISTRESS! By Nisha Dharamlall | Restructuring Services Leader | Deloitte South Africa | ndharamlall@deloitte.co.za | @DeloitteSA Political uncertainty, high unemployment rates, slow economic growth and severe drought has created a perfect storm of economic and political events for SA. This has placed pressure on the economy, forcing companies to restructure in order to adapt, compete and survive.
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ccording to Deloitte’s South African Restructuring Outlook Survey 2016, close to 39.4% of business restructuring experts expect a recessionary economy driven mainly by political uncertainty and corruption, concerns around global economic health and poor commodity prices. Despite these expectations, only 39.4% of respondents believe that the extent of distressed funding available will be advanced. This highlights how few South African businesses are able to use this tool to manage financial stress. Restructuring refers to any formal or informal process involving a financial and operational restructuring of a company’s affairs as a result of financial stress. To better understand the challenges and expectations of SA’s restructuring market in 2016, Deloitte surveyed over 30 key restructuring professionals in the country. The survey started in 2014 and is in its 3rd year. Respondents included a selected mix of Commercial Banks (40%), Development Finance Institutions (21%), Lawyers (16%), Business Rescue Practitioners (10%) as well as academics and other key restructuring professionals (13%). Key themes that emerged from the survey: • 39.4% of the respondents expect a recessionary economy driven by political uncertainty and corruption, global economic health and commodity prices. • Resources including mining, agriculture and construction are most at risk of being in distress in the next year. • 80.6% of restructuring teams expect an increase in activity in the next 12 months. • Protecting the business still ranks as the top priority of restructuring projects. • Early identification of financial distress remains one of the main areas where restructuring professionals believe the local restructuring industry could be improved.
• 15.7% of respondents report that “Amend & extend the debt” is the most frequently used form of restructuring. This is followed closely by “Exit via sale of business” and “Business Rescue”. • Only 1.9% of respondents highlighted the use of distressed funding as a feasible restructuring option, highlighting the continued infancy of the development of this critical industry. • Existing banks are still the preferred source of distressed funding for the majority of respondents (21.7%) but existing shareholders are listed as the 2nd most preferred option (16.9%). • 6% of respondents have had a less than 25% success rate in business rescue, 38.7% of business rescues have a success rate over 75% and Informal restructurings overall have a higher success rate than business rescue. • Success in business rescue is cited as a better return for creditors – along with the business continuing on a solvent and liquid basis. • 54.8% of respondents believe that business rescue practitioners are not adequately skilled or qualified, mainly as a result of their lack of experience or type of qualifications. • Board of directors are the most likely to place a company in business rescue, and commercial banks (secured creditors) are most likely to oppose a business rescue. • C ommercial banks have the highest level of awareness and understanding of business rescue, and (unsecured) creditors have the lowest. • Overall over 64% of respondents still believe that business rescue is currently effective. Despite restructuring being in its infancy in SA, results are encouraging in that the industry understands that it requires more support in financial restructuring. This is a significant trend at a time when increasingly more businesses in SA will need to become literate in managing financial stress professionally. n
VIEWPOINT
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August/September 2016
A “REVOLUTION in how we think and act” By Ralph Hamann | Professor | UCT Graduate School of Business (GSB) | ralph.hammann@gsb.uct.ac.za | @UCTGSB
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outh Africans don’t collaborate well and often implement “solutions” to address major societal issues that are too simplistic and out-of-date in a world of rapidly changing economic, social and environmental realities, says a diverse panel of experts. SA may have staved off a rating downgrade last week, but to tackle the country’s big societal issues – including unemployment and corruption – is going to demand a more deep-seated change in the way South Africans approach these issues. Business, government, civil society and citizens must stop pointing fingers and reach out across racial, income, and sectoral boundaries to work more closely together. Too much current analysis and policy tries to grapple with the complexity of SA by focusing on specific parts and actors, and all too often this results in finger-pointing and destructive conflict. Can we broaden our view and thereby achieve more of the courageous, optimistic, and innovative collaboration that we see in some places, with a more constructive approach to conflict? We need a revolution in how South Africans think and act. Growing the economy in its existing format, building
an unaffordable suite of nuclear power plants, or simply increasing the education budget, will not solve poverty and inequality, establish a carbon and cost-effective energy supply, or produce well-educated and economically active citizens. There needs to be a much greater recognition of the interconnectedness of these elements as well as the impact of poor leadership, bad planning, energy issues, corruption and unstable industrial relations. Tough global conditions are further exacerbated in SA by “economic sabotage” including the disastrous dismissal of former Finance Minister Nene and the on-going campaign being waged against Minister Pravin Gordhan, as well as a severe lack of collaboration and trust between business and government. The blueprint for a new approach is already emerging globally. The global financial sub-prime crisis and the growing environmental crisis, with its physically felt impacts, has helped us recognise the complexity and interconnected nature of the local and global societal and environmental systems we live in. Some businesses have come a long way and as a result are thinking differently and are tackling the business and societal issues more holistically and by collaborating more
widely and deeply. More leaders must have vision and heart. South Africans must “listen listen listen” to each other to better understand different perspectives and viewpoints, so that together they can develop and implement shared, innovative solutions. This society of ours has lost its heart and South Africans don’t see themselves as partners. The National Development Plan speaks to many of the above concerns. We talk about a holistic or systemic approach for addressing issues, and the plan does this with a suite of proposals spanning economic, health, education, infrastructure, spatial planning, environment, broader sustainability and transition to a low carbon economy, among others. In the fight for change, South Africans should not be afraid of conflict. Conflict is healthy and is important because it challenges all of us. There is no centralised silver bullet that government (business or anyone else) can unleash to solve these issues. Solutions need to arise out of many different experiments and collaborations involving the full spectrum of citizens and sectors. Instead of lamenting the lack of ethical and visionary leaders, people must themselves become active citizens and leaders. n
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AFRICA: meltdown or slowdown?
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conomic growth across the region is likely to remain slower in coming years than it has been over the past 10 to15 years. The International Monetary Fund’s (IMF) baseline projection for 2016 is now down to 3%, from what was a forecasted 6.1% in April 2015. The main reasons for a relative slowdown are not unique to Africa and are the same as those weighing down the global economy: a general slowdown in emerging market economies, and in particular the rebalancing of China’s economy; ongoing stagnation in most developed economies; lower commodity prices; and higher borrowing costs. Although growth in region has relatively slowed, two-thirds of Sub-Saharan African economies are still growing at rates above the global average, and will remain the second fastest-growing region in the world for the foreseeable future, after Emerging Asia. This is further supported by the year-on-year increase in FDI project numbers in Africa in 2015 that occurred in a context in which the total number of FDI projects globally dropped by 5%. In fact, Africa was one of only two regions in the world in which there was growth in the number of FDI projects over the past year. Measuring potential and progress: the Africa Attractiveness Index To support investors in adapting to a more uncertain environment and to assess variable opportunities and risks across the continent, the EY Africa Attractiveness Index (AAI) tool provides a balanced set of shorter and longer term-focused metrics. The index helps to measure both likely resilience in the face of current macroeconomic pressures, as well as progress being made in critical areas of longer-term development, namely governance, diversification, infrastructure, business enablement and human development. The index illustrates that:
• Despite macroeconomic challenges (and a low-growth environment): SA still outperforms most other African economies due to relatively high scores across every other dimension (partly a reflection of the fact that the South African economy is more developed than any other African economy). • Kenya and Cote d’Ivoire benefit from strong economic growth performance and prospects, with both performing moderately well in terms of infrastructure and business enablement.
• Botswana, Mauritius and Rwanda, although small markets, have all got a strong track record in areas of business enablement, social development and economic management, and so perform relatively well. • The North African countries of Egypt, Morocco, Tunisia, as well as Ghana, in West Africa, remain under some pressure economically, but have the advantage of a relatively business-friendly environment, good infrastructure and, in the case of Ghana, a strong governance track record. • Nigeria’s relative “underperformance” on the AAI (ranked at number fifteen overall) is perhaps somewhat surprising; while the Nigerian economy ranks as one of the most resilient in Africa, lower scores on the business enablement, governance and human development pillars are reflected in the overall ranking. • Similarly, other high-growth economies like Tanzania, Uganda and Ethiopia are all ranked in the top 10 in terms of macroeconomic resilience, but are also relative underperformers on other longer-term focused dimensions. The index clearly indicates that there will be different answers for different organisations and investors with different priorities; and as priorities change over time, so will the answers. Given the scale, complexity and fragmented nature of the African continent, making well-informed choices about which markets to enter when and via which mode will be more critical than ever. A country’s macroeconomic resilience is also only one of several factors that investors and organizations needs to consider when conducting this kind of analysis. We are at an inflection point in terms of the structural evolution of most African economies; decisions made and actions taken now will determine, which of these economies consolidate the gains made over the past decade as a platform for sustainable growth in coming decades, and which of them begin to slide backward. n
By Michael Lalor | Lead Partner Africa: Business Centre | EY | michael.lalor@za.ey.com | @EY_Africa
VIEWPOINT
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August/September 2016
Regional integration a pipedream? By David Ansara | Consultant | Afriwise consult | david.ansara@afriwise.com | @afriwise
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fter the dramatic events of Brexit, many have questioned the sustainability of the European Union (EU) and whether regional integration is a workable ideal. What is the current state of regional economic integration in other parts of the world, and more specifically in Africa? For a continent comprising 54 distinct markets, the free flow of people, goods, services, and capital is essential for boosting economic growth and eradicating poverty. Free movement? Freedom of movement in particular has the potential to open up opportunities for Africa’s best and brightest, allowing Africans to learn from each other, and to contribute to their own development. Closer integration will also improve peace and stability: history suggests that as economic integration increases so conflict decreases. However, a lack of integration is currently holding Africa back. According to a recent report by the Africa Regional Integration Index, high tariffs, regulatory barriers and red tape inhibit intra-Africa trade. Compared with other regions, trade between African countries is the lowest in the world, accounting for a mere 11% of total trade volumes (although this comes in the context of increased exports to international markets in recent years). Mobility Africans also suffer from a lack of mobility. Restrictive visa regimes and poorly connected infrastructure means that traveling between African countries can be costly and time-consuming. According to the African Development Bank (AfDB), African citizens on average require visas to visit 60% of African countries. “Only five African countries (Seychelles, Mozambique, Rwanda, Comoros and Madagascar) offer visa-free access or visas on arrival to citizens of all African countries,” says the AfDB. The African Union (AU) is seeking to introduce a single African passport at its annual meeting in 2017, but for the time being this will be limited to use by African heads
of state. Africa’s eight Regional Economic Communities (RECs), containing 28 countries between them, have achieved varying levels of progress. The East African Community (EAC), by far the most successful of the RECs, has done the most to move towards a common market and progressively reduce trade barriers. It also has plans for a common East African currency. However, the EAC has faced similar challenges to the EU, having struggled with the practical implementation of regional integration processes at the domestic level (despite the clear roadmap outlined in its treaty). Politics hampers The biggest obstacle in the way of regional integration is politics. African leaders have given much rhetorical support to the idea of regional integration in the past, but it is rare to see these words translating into action. “Paper integration” is the order of the day. The lesson from Brexit is that regional integration cannot be based on treaties alone. Political leaders will have to take responsibility for driving the policy reform agenda to ensure open markets and free trade. Leaders must also be accountable to citizens within the regional bloc and articulate the net benefits of the integration project to create a common vision for the member states. Following Brexit, the case for integration in Africa will be harder to make, but it should still be made. n
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Ensure strategy SUCCESS Back in 2013, Africa’s largest airline carrier, South African Airways (SAA) made a big splash of announcing their new turnaround strategy, aimed at ensuring the airline’s financial sustainability and operation efficiency. Fast forward three years to 2016, to endless meetings between the airline, the Treasury and labour unions and the revelation that the company is unable to table its 2014-15 financial results as it is technically insolvent.
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uch has been written about how organisations should approach strategy, whether it be through workshop facilitation, strategic insights research, brainstorming sessions, or the application of preferred strategy framework models and tools. But there’s a gap in literature when it comes to describing how to engage in a structured process that guides the organisation from strategy design and development to effective implementation. What’s lacking is a proper “end-to-end strategy” to capture this holistic and rigorous approach to strategy. End-to-end strategy addresses all the necessary steps in the strategising activities of an organisation, where the intention is not only to envision future strategic paths, but also to translate these strategies into concrete reality, and align the essential elements of the organisation – structure, systems, process, culture, competence and the business model – with the strategy, vision and organisation purpose. The steps include facilitation, alignment and reporting. Strategic alignment involves engaging with stakeholders – both internal (staff and management) and external (customers, suppliers, partners) to get buy-in, and when necessary, adjusting organisation structure and culture, changing strategic emphasis, and changing leadership style to optimise alignment with strategic imperatives. The natural starting point for any strategy intervention is an initial conversation with the CEO. Regardless of the ultimate approach to strategy, the strategy development process is unlikely to succeed without engaging effectively with the CEO, to understand leadership objectives and challenges. Optimising strategic alignment is a critically important and on-going challenge for organisation leadership.
It involves changing the strategy to accommodate unique company characteristics or operational challenges. Another important step in the strategy development process for most organisations is reporting, to fulfil certain minimum investigative and analytical requirements and to avoid blind spots that could be sources of potential weakness. To ensure that it does, and to reassure the Board and executive directors, both the process and their outcomes need to be clearly documented, along with recommendations for strategic direction and action. Reporting is not just about documenting evidence of strategic analysis and decision making, it is also about communication. The strategy needs to be able to be communicated to stakeholders in appropriate formats, and at the right level of detail, to ensure that it guides behaviour and elicits the optimal responses. An essential and sometimes neglected element of strategy formulation and development is the translation of the corporate (and even operational) strategy into a cohesive and relevant marketing and sales strategy, with associated marketing and sales plans. This is more often the case when the organisation culture is more internally than externally focused, which is in turn more often the case when the organisation is in the mature phase of its life cycle. A different, extended set of models and tools are needed to develop the marketing and sales strategies, and to translate these strategic plans into high impact action plans that deliver results. It is also likely to involve a different set of people in the organisation, who may not have as much experience with strategy development. Without a focus on the strategizing process, strategy may just be a talkfest of bright ideas, or – worse still – a worry-fest of fears and concerns about threats and uncertainties, where the workshop outcomes don’t translate into clear strategic direction or the delivery of strategic objectives and the ultimate failure of the new strategy. n
By Dr Grant Sieff | CEO | IC Growth Group | Course Convenor: University of Cape Town Graduate School of Business grant@icgrowth.co.za | @GrantSieff
MANAGEMENT
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August/September 2016
It’s NOW or NEVER for CEOs By Trevor Hoole | CEO | KPMG Southern Africa | trevor.hoole@kpmg.co.za | @KPMG_SA
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PMG have launched its annual Global CEO Outlook, which this time around included a South African viewpoint.
The report reveals that the next three years will be a time of unprecedented change and significance for businesses around the world, but growth will be moderate. Global CEOs of the largest corporations are prepared to handle this period with realistic expectations and a healthy dose of confidence. Indeed, whether the tide rises or falls in the economy, they are increasingly optimistic that they can transform their organisation for what the future holds. That confidence is apparent in their hiring plans and projected top-line growth over the three year horizon. However, CEOs in SA shared their level of concern around a variety of challenges. For example, 64% of the CEOs said that they are concerned about the loyalty of their customers while 62% see increased use of data and analytics as a way to drive process costs and efficiencies. CEOs operating in SA are well aware of their many challenges and they are reasonably bullish about the future of the country. Although they are confident that their industry and companies will grow over the next year, their growth expectations are modest. That said, they are grappling with a multitude of issues simultaneously. Globally many CEOs feel that they are not disrupting their industry’s business models enough.
survey. Brazil, India and China are seen by these top executives in SA as the most attractive foreign markets. While still among the leading markets, the US and China decreased since last year. Western Europe has also seen a significant decline in its attractiveness as a foreign market. The CEO Outlook also confirmed that 60% of CEOs are concerned about how Millennials and their differing wants and needs will change their business. The growing Millennial generation needs to be empowered and mentored to assume leadership positions because they have the potential to lead in a world of rapidly expanding technology and social change. Corporate SA needs leaders who are capable of leading a global, diverse and virtual workforce. n
• More than 70% agree that regulatory changes will inhibit their growth • 58% of CEOs are concerned about whether their organisation is staying on top of what’s next in services/products • Almost 50% say that their organisation will battle to increase its market share • 70% of CEOs are concerned about the impact of global economic forces on their business The CEO Outlook further revealed how CEOs’ view of growth potential in the world has shifted since the 2015
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When adaptability meets change
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By Riaan Steenberg | Director | Regenesys Business School | riaans@regenesys.co.za | @RegenesysSB
hen we introduce change in organisations, we often see a wide range of responses. Some individuals realise early that change is good and they become the champions of the new way; others are willing and will cooperate, others will tolerate change and offer various levels of contribution and discontent. Take the case of Tumi, last year’s employee of the year. She storms out of the room after a major altercation with her boss about poor job descriptions, bad working conditions and missed deadlines. She believes she is very adaptable and initially impressed her colleagues when she was moved into a new area of the business. Things soon turned sour and the star became bogged down and missed major milestones in high-profile projects that were assigned to her. She began missing workdays and became ill. Her boss is now considering if she should enter into a performance management process with the possibility of losing a good resource or if another shift in the organization is required. It is not clear if Tumi has a future with the organisation. Every time we shift an employee in an organisation, there is a major change in that person’s life. Often the employee going through the transition loses their
self-esteem, co-workers that contributed to their success are no longer accessible, there is a change in power relations and great people start questioning their abilities. We are reluctant to acknowledge that being adaptable is just a way to delay with that fact that we need to deal with change. Change managers manage these categories statistically. For the most part, people avoid dealing with change and contribute to creating confusion around key issues. Other responses include dismissing it; attacking it or attempting to use the change for other objectives. People are wonderfully creative and diligent in expressing their unwillingness to change without acknowledging that it is resistance. The example of Tumi challenges us to rethink how seriously we take change management and what we are doing to create a supportive environment, when there are major changes in organisations. Unfortunately, most change management interventions are designed to arguably force people to say yes, and get them to realise there is a change happening without looking at how to support the resulting emotional and constructive issues. Managers are traditionally trained to answer the question of “What is in it for
me?” for the employee, when signalling change. This paradigm needs to change to “This is how we will support you to succeed in the new approach”. Managers must deliver support systems that will enable employees to understand goals, be able to access support and socialize new approaches and their own and organisational issues in a nonthreatening way. The eco-system that the person will enter must be considered and links and connections be created to facilitate a new approach. Things will take longer than before while each employee builds up new micro-skills and as the learning curve gets fulfilled. Training and development during this time should focus on coaching, building micro-skills in new areas and enhancing perspectives to support new work systems. Research shows that three months in - the employee will start settling, six months in - the organisation would have dealt with most of the change and that only nine months into a change – will we start seeing the full effect. Complex changes can take much longer. Often managers are not as patient and expect change to deliver immediate results and employees should have learnt to adapt – but have managers really learnt how to manage change? n
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LEARN from successors! By Barry Vorster | Leader of People & Organisation | PwC | barry.vorster@za.pwc.com | @PwC_LLP
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ext generation leaders are more optimistic than CEOs about economic growth, but more pessimistic about cybersecurity, education and trust in business. These are the key findings from a new report by PwC in collaboration with AIESEC, one of the world’s leading international student organisations that contrasts current and next generation leaders views on growth, education, technology and business responsibilities. The research compares the results from PwC’s Annual Global CEO Survey with the views of Young AIESEC leaders and examines where they agree and disagree, what the implications are for companies looking to attract the best young talent and what today’s CEOs can learn from those who will most likely succeed them. The top global figures next generation leaders considered to have had the greatest impact on the world in the past 50 years were: Nelson Mandela, Steve Jobs, Barak Obama, Bill Gates, and Elon Musk. They also named Justin Trudeau, Malala Yousafzai, Martin Luther King Jr and Muhammad Yunus in the top 10. Confidence Soars One of the most eye catching findings from the AIESEC results is the degree of confidence these young leaders have. For instance, 60% believe economic growth will improve over the next 12 months compared to only 27% of CEOs. This might be the optimism of youth, but could also reflect a more profound insight into trends like the digital revolution, where the younger generation sees opportunity, and the previous ones cost and risk. Although tomorrow’s leaders are optimistic about the future they are also realists. They look for opportunity, but are not naïve about risk. They care about wider social and environmental issues, and understand how stakeholder
term issues of social instability, climate change and environmental damage, and unemployment. Young leaders challenge CEOs to put their business purpose into practice The survey finds that both generations are agreeing that business success in the 21st century will be defined by more than just financial profit. However, businesses today are still mainly focused on shareholder value, despite CEOs progress and future aspirations to connect more strongly with wider stakeholders. expectations are changing. While pay and incentives are important, they want to work for companies that have similar values to their own and place a lot of emphasis on the nature of their work. Young people today are very purposedriven. There are three motivations of youth globally: family, purpose in life and love. Both a strong sense of purpose and value are something youth requires in a workplace and looks for in their employers. Organisations should be more concerned about some of the threats they face than CEOs typically are: • 86% of AIESEC respondents say companies should be worried about cybercrime, while only 61% of CEOs are concerned about this • 85% see a threat in shifts in consumer behavior, as against 60% of CEOs • 83% cite a lack of public trust in business, compared to 55% of CEOs There’s also a clear difference in how the two groups perceive risk. Reflecting the struggle many business leaders face in shifting from a short term to long term outlook, CEOs ranked their top three concerns as over-regulation, geopolitical uncertainty, and exchange rate volatility. By contrast, AIESEC respondents took a more long term view, believing CEOs should be more concerned about longer
Customers and clients have the biggest influence on corporate strategy. Governments and regulators are important, however the media are seen as much more significant by AIESEC leaders (74%) compared to CEOs (25%), and there is a similar pattern with local communities (52% versus 27%), the general public (50% versus 30%), and NGOs (40% versus 9%). This suggests the young leaders have a much broader perception of what communicating to a wider stakeholder audience means in 2016. In particular how technology has made communicating and connecting with stakeholders possible instantaneously, the challenges that presents to how companies are viewed, and how organisations need to adapt as a result. Education will make or break tomorrow’s leaders These young leaders are clearly believers in nurture not nature: 64% said the education system is the single most important factor in shaping and preparing young people for leadership roles in the future. Despite this, 70% believe the education system in their own country is failing to fully equip students with the skills they need to survive and thrive in the digital age. n
Report misconduct!
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hile awareness of corporate ethics codes has increased, there has been a drop in the number of persons reporting ethical misconduct. 52% of people observing business misconduct do not report it! This is probably because South African companies are investing fewer resources in improving their ethics performance and, as a result, ethical business practices are still not well-embedded into the organisational culture of corporate SA. That is one of the key findings of the fourth South African Business Ethics Survey. The main culprits behind these results are probably the global economic situation and the poor performance of the local economy. Organisations have ethics codes in place, and people know about them, but the pressure to meet unrealistic financial targets is probably to blame for many unethical actions. At the same time, it seems as though weak trading conditions are reducing budgets for “non-essential” programmes like strengthening formal ethics programmes aimed at embedding ethics in organisational culture. The 11% increase since the previous survey in 2013 in the number of employees who observed misconduct (to 25%) may also be related to the country’s weak economy, which is reducing disposable incomes and increasing the financial burden on everybody. However, the main reasons that people do not report misconduct are a belief that the company would not take action and a fear of victimisation. 42% of those who did not report observed misconduct were motivated by fear of victimisation at work. This increase in observed misconduct, combined with the fact that 16% fewer employees are reporting it than in 2013, is extremely worrying. Organisations can only respond to unethical behaviour if they know about it. Above all, organisations should guard against giving the perception that unethical behaviour, especially in pursuit of
financial or other organisational targets, is acceptable. Key findings Awareness of formal interventions aimed at promoting ethical business practices remains constant, and employees generally (79%) find that corporate values are a useful and clear guide to behaviour. However, only two-thirds of employees consistently consider corporate values when making decisions, and only 35% indicated that employees consistently adhere to them. Insufficient attention is paid to how employees reach their targets or fulfil their roles. We recommend that alongside measuring what employees do, companies begin to measure how they do it. Otherwise, the Survey notes, employees might receive a bonus for achieving an unrealistic financial target despite the fact that they did so by transgressing organisational ethical standards. The percentage of employees who agree that their companies expect its employees to do what is right for clients/customers (customer service) has decreased significantly by 30% from 2013 and 34% from 2009. It seems as if companies do not yet understand the impact of unethical behaviour on customer service, and thus on customer loyalty and brand equity. Perhaps one of the most disturbing central conclusions of the research is that a significant proportion of corporate SA is still not serious about integrating ethical behaviour into its culture, and that the focus remains merely on compliance with laws. It seems as though companies’ real focus remains the short term financial bottom line, instead of sustainable value creation. We must hope that the forthcoming launch of the Fourth King Report on Corporate Governance (King IV) will strengthen efforts to embed ethics into the way we do business, and make the correlation between sustainability, which is founded on ethics, and financial performance much clearer. n
By Professor Deon Rossouw | CEO | The Ethics Institute | deon.rossouw@ethicssa.org
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36
BusinessBrief
August/September 2016
EDUCATION & TRAINING
How RPL empowers? SA has come a long way since the first democratic elections in 1994, but in the field of education, many inequalities still remain. As Nelson Mandela said, “education is the most powerful weapon which you can use to change the world”. In order to achieve this, access to good, affordable education is essential.
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outh African history features many disadvantages. These include the exclusion of many people from education and training (due to regulations governing institutions), the exclusion of certain population groups from employment opportunities, and so forth. To assist in the redress of these hindrances, Recognition of Prior Learning (RPL) was instituted. Through RPL: skills and knowledge are validated; individuals are afforded a greater opportunity for broader development; access to jobs, career progression and salary grading increases are fostered; and employment equity is promoted. What is RPL really? According to the South African Qualifications Authority (SAQA); “RPL is a process whereby people’s prior learning can be formally recognised in terms of registered qualifications and unit standards, regardless of where and how the learning was attained”. As such, RPL acknowledges that people never stop learning, whether it takes place formally at an educational institution, or whether it happens informally. RPL is, however, much more than this; it can be used to recognise experience and informal learning in the workplace to structure and legitimise succession planning. It can be utilised to build portfolios for professional designations and can increase the flexibility of entrance into studies, and allow us to not redo what we have already been proven to be able to do, decreasing our financial and time outlay. The RPL process entails identifying what a person knows and can do; matching the person’s knowledge, skills and experience to specific standards and the associated assessment criteria of a qualification; assessing the learning against those standards; and crediting the person for skills, knowledge and experience built up through formal, informal and non-formal learning that occurred in the past. This means that an employee’s non-traditional or non-formal experience and learning can be recognised along with their formal
education. The RPL assessment of candidates for formal qualifications or programmes is done against the same unit standards and level outcomes of qualifications, using the same assessment criteria as implemented for full time learners. The result is that the value of certificates obtained through RPL are the same as those obtained through full time learning. By fast tracking workers through the skills recognition process, employers enjoy a reduction in training costs and are more engaged as their skills are recognised. By accelerating learning in the workplace, down-time is reduced. Through the efficient identification of “skills gaps”, more focussed training is achieved. RPL has the potential to break down the traditional barriers to education and training, while avoiding duplication of learning, and promoting a positive learning culture. The benefits for the learners/employees include the identification of gaps in knowledge, the recognition of nonformal learning towards a qualification, and saving time in achieving this qualification. The continuous upgrading of skills and knowledge through structured training helps employees to achieve a formal qualification which, in the long term, will improve their employment opportunities. It is important to note that RPL is not a shortcut to a qualification. If the RPL process is not properly managed, the fairness of the qualification can be challenged. Unfortunately, for this reason and due to a lack of understanding, candidates are often stigmatised. They are seen as people who have not acquired their competence through the “normal” learning path, and are therefore perceived not to be equally competent. Another RPL pitfall commonly noted in the workplace, is a lack of support for the employee while gathering evidence. RPL is not a simple process of matching evidence to outcomes. It can be complex, and the conditions under which RPL candidates have acquired their competence should shape the assessment process and tools. Although evidence of practical competence is usually easy to provide, strategies for proving foundational and reflexive competence must be built into the assessment design. The process is often misunderstood and not properly guided by a qualified RPL Advisor. n
By Gizelle McIntyre | Director | The Institute of People Development | gizellem@peopledev.co.za
EDUCATION & TRAINING
BusinessBrief
37
August/September 2016
Develop your EXECUTIVES! By Dr Tim London | Course Convenor of the Executive Development Programme | UCT Graduate School of Business (GSB) | timothy.london@gsb.uct.ac.za | @UCTGSB
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t’s crucial at senior executive level to challenge patterns of thinking to facilitate growth in unconquered markets and companies are investing in executive education to help them do just that. As multinationals increasingly expand into emerging markets – and local entrepreneurship grows alongside – the market for executive development has become all the more important, leadership scholars believe. Fuelled by growth in emerging markets, the business of executive education is booming. The affordability of executive development has been a key discussion point, particularly during times of recession, and hit a low point during and after 2008. However, as multinationals and entrepreneurs alike begin to see growth opportunities in emerging markets; executive development is becoming increasingly relevant. By 2025, annual consumption in emerging markets is projected to reach $30tn – the biggest growth opportunity in the history of capitalism, estimates the ISB Centre for Executive Education. If such predictions are correct, emerging markets provide an unprecedented opportunity for growth. But where does this growth begin? The first step is with the development of senior executives. Each context is unique – no model will work for everyone. That’s why it’s crucial, at senior executive level, to challenge patterns of thinking first and foremost to facilitate growth. If this sounds abstract at first, it should not remain that way – it’s critical that executives learn, and communicate, the tools needed to translate an “abstract idea into concrete actions”. These skills are essential to facilitating the desired growth in emerging markets. Other analysts agree. Independent executive development monitoring group IEDP writes, “[I]t is not just the executives in emerging economies that are benefiting from the increased investment in their executive education markets. According to … the Independent, even executives in developed economies cannot afford to solely focus on their domestic markets, when the most exciting future career opportunities are likely to be offered elsewhere.” Demand for executive education in China has risen by just 3% in recent years, but the rise in Latin America is more promising at 17%, and Africa is making its mark in no
uncertain terms – earlier in 2016, Business Day reported that African business schools were receiving more applications than ever. And the BRICS countries were well represented in the Financial Times executive education rankings as well. Leading companies are investing in talent. This is not about financial return but about gaining the insight and resilience to make a much bigger impact within the organisation. It’s not always necessary for executives to attend degree programmes in order to attain the kind of development that can facilitate personal change or kick-start a period of growth. Shorter courses can be enormously helpful in terms of stimulating dialogue and the exchange of ideas, he explains. For emerging markets, where growth is desired but affordability may still be a challenge, this may be an advantage. People from many different industries may participate in a session, but the exchange of insights is often transformative when one has a group of very smart people in a room together. n
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BusinessBrief
August/September 2016
EDUCATION & TRAINING
Turn managers into COACHES The 21st Century workplace is characterised by change, uncertainty, complexity, increased competition, and globalisation. Leaders are expected to continually adapt and keep themselves, their people, and their businesses on track despite these challenges. Coaching is a powerful way to provide support to leaders and help them to navigate current and future challenges in a practical, relevant way.
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oaching and mentoring are built first on the relationship between the two individuals. It is sometimes a luxury but usually best for the manager to choose their coach from a pool of potential coaches, rather than be told who they will work with. This adds to the creation of a genuine, trusting, two-way working relationship. Mentoring can be implemented formally or informally within an organisation and research suggests that informal mentoring relationships last longer, although both are effective in helping the protégé to on-board, fit into the organisation’s culture, develop their functional skills and competencies to be ready for promotion, address attitude and engagement, and develop commitment to the organisation. Self-awareness is key because through assessments, learning to ask for feedback from others, and selfreflection the manager becomes aware of their personal strengths, weaknesses and blind spots, their attitudes, their performance, and their effect on others. Coaching is strengths-based, and there are various assessment tools available to diagnose strengths and weaknesses, blind spots and hidden strengths, career stallers and stoppers. This is just the beginning however, and once feedback has been given on the results of the assessment, the coaching programme can be designed to suit the specific needs of each individual. Coaching follows particular methodologies as a guideline but it is not a one-sizefits-all, vanilla programme. 360 assessments are a particularly useful tool as it focuses on discrepancies between self and others’ ratings. A certified coach can help the manager deal with different perceptions and plan how to adjust their behaviour towards more effective and productive practices. A variety of coaching solutions are available to suit an individual or a team, such as:
ransition and onboarding coaching: Focuses on •T accelerating performance and improving leaders’ success during the first 100 days of a critical transition, whether onboarding from outside the organisation, or transitioning internally through a promotion, international assignment, or a lateral rotation. • E xecutive Coaching: Fosters the development of strategic leadership competencies, whether it is part of an enterprise-wide initiative or an individual development plan. • Systemic and Enterprise leadership coaching: Accelerates organisational development through multiple executive coaching engagements that are aligned to the business strategy, building personal, team, and strategic leadership. • C ohort and team coaching: Enables small groups of leaders with shared development goals to improve individual and organisational effectiveness while also forming new business partnerships. • Reinforcement coaching: Reinforces new leadership behaviours through ongoing coaching and practice. • Specialised, topical coaching: Builds effectiveness for leaders that are exposed to unique challenges. • Communications and executive presence: builds presentation skills, stronger messaging, and personal brand in both small and large group settings. • Women in leadership: focuses on the unique challenges of women as executive leaders. • Cultural dexterity: for executives working in cross-cultural environments, including expatriate assignments. • E fficacy coaching: for executive leaders from underrepresented groups who face unique challenges. While coaching and mentoring relationships can be interesting and enjoyable, they should also be productive and provide opportunities for both learning and action. The best relationships have the potential to create value for the employee, the mentor and the company as a whole. n
By Michelle Moss | Director | Talent Africa | michellem@talent-africa.co.za | @Talent_Africa
EDUCATION & TRAINING
BusinessBrief
39
August/September 2016
Degree NO job GUARANTEE By Kay Vitte | CEO | Kelly | KayV@quest.co.za | @KellyRecruitSA Many graduates assume that because they have a qualification from a higher education system, they’ll be able to walk into a job. This is not the case. A degree will not correct spelling mistakes on a CV and will not excuse poor interviewing skills.
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ccording to global higher education analysts, SA has Africa’s strongest higher education system. SA was placed 30th out of the 50 countries ranked. So why are people like Anthea Malwandle, a BTech: Chemical Engineering graduate, standing at intersections with a placard, looking for work? The Deputy Minister of Higher Education, Mduduzi Manana, recently said that there are 600 000 unemployed graduates in SA and if the number increases, it will cause chaos. Graduates must consider the following attributes, which, together with a degree, is a recipe for job success: Passion: Employers hire people who want to be there. If you can articulate why this particular job excites you, and why you feel you can offer a lot of value to the company, you are well on your way. Cultural fit: Recruiters need to ensure that the candidate’s personal core values are aligned to the company. To
demonstrate this, research is key. Experience: If you are fresh out of university, chances are that you don’t have much on-the-job experience. By talking about the experience you gained while in university – like volunteering for causes you are passionate about – you’ll be able to demonstrate that you are motivated and involved. Interpersonal communication skills: Employers cite critical thinking, communication and problem-solving skills as more important than a candidate’s field of study. Furthermore, 95% of employers are looking for candidates whose skills translate into out-of-the-box thinking and innovation. Network: It’s not what you know, it’s who you know. Consider joining a business networking group so you can meet and mingle with industry experts. First impressions last so be sure to wow the experts with your passion and interpersonal communication skills. Most importantly, be bold. n
ATNS – uplifting South Africa’s youth and inspiring them to reach new heights
ATNS is c to pr ommitted mathe omoting scienc matics and e to he education our yo lp motivate u caree th to pursu rs in a viation e .
For the 2015/16 financial year Air Traffic and Navigation Services SOC Limited (ATNS), alongside the Department of Transport, contributed to CSI initiatives across the country with the intention of improving the facilities and capabilities of less privileged schools and inspiring learners to excel in both mathematics and science. Our CSI beneficiaries included: • • • •
Colesberg Combined School, Northern Cape Mgezeni Technical School, KwaZulu-Natal Ramohlakana Secondary School, Limpopo Selowe Primary School, Limpopo
Our contributions ranged from supplying computer labs with new computers, educational software, printers and internet, to data projectors and container libraries.
ATNS In 2016 Ineel will inves en t in Scho g Primar North ol in the y and ern Cap Secon Shikund e u da in Limry School popo .
Who is ATNS?
ATNS IS AN ENTITY OF THE NATIONAL DEPARTMENT OF TRANSPORT Tel: 0860 286 726
Web: www.atns.com
Email: marketing@atns.co.za
Lesoba 16333
Air Traffic and Navigation Services SOC Limited (ATNS) provides air traffic, navigation, training and associated services within South Africa. ATNS is also responsible for Air Traffic Control throughout the African Indian Ocean (AFI) region, comprising approximately 10% of the world’s airspace. ATNS operates from nine ACSA and 12 other aerodromes. As a globally competitive employer of choice, ATNS is committed to diversity and has achieved ranking within the top 10 companies in South Africa with regards to female representation at executive levels.
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BusinessBrief
August/September 2016
EDUCATION & TRAINING
“Future proof” YOUR career By Johanna McDowell | Founder & Managing Director | Independent Agency Search and Selection Company (IAS) Johanna@agencyselection.co.za | @jomcdowell | @agency selection
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obody can care enough about your career as much as you can, even if you are lucky enough to have the most supportive manager in the world. This is the view held by renowned business executive and business coach Elaine Seale-McKend, who argues that in today’s fast changing and highly demanding business environment, it has become increasingly important to “future proof” one’s career in order to reach your full potential. According to Seale-McKend, whether you love your job or mildly tolerate it, it can be helpful to consider what you need to do to be successful, both in your current role and the next. In order to make the best choices for yourself, one needs to understand the dynamics at play in the workplace today and the trends that will shape things tomorrow. Constructive analysis It is particularly important for corporate and business leaders who want to be taken seriously when they have to report back on what their campaigns have achieved over a certain financial period or for those who really want to get into the mind of the client and gain a cutting edge in the fast paced marketing and advertising industry. You need constructive analysis on how to create a career plan for the short and the long term and provided insights to how you can maximise opportunities in your current role at the company that you represent. It’s important to have a flexible professional style that would ultimately lead to a greater impact and success in an organisation. Also, it’s important to identify the “must-have” conversations for today in order to future proof one’s career as well as how to maximise the potential of a mentor identifying areas for mastery and how to develop a plan to deepen your learning. Generational mind-sets It is important to gain an understanding of the different mind-sets and how they impact one’s experience, specifically the Millennial (those under 33 years old) mind-set and the mind-set of non-Millennial (those over
33, who are often the group influencing the next job opportunities). We need to take these insights and future-proof them by exploring the key trends that are shaping the world of work tomorrow to help you create a plan that will help you in your current role, your current company and what you can do in the future. There are still a number of challenges and subsequent opportunities for middle to senior management and their agencies in the industry. Integrate & collaborate Which makes it all the more important to start planning effectively as far as future proofing your career is concerned. Also, if you intend on establishing a career in the marketing and advertising industry, one needs to look at how the industry has changed over the years as well as understand what it is that clients want in order to grow more effectively. Integration and collaboration is now top of the marketer’s agenda and the challenge for those marketers was the management of all of the agencies on their roster. Secondly, advertising expertise had become an increasing requirement. The role of the account manager, if played well, was the role that pulled all of the different agency experts together in order to help the client. Clients were constantly looking for solutions and continue to be open to innovation. They also need to be shown how to bring their product or service message to life within their organisations. Be proactive Agencies need to be proactive around sales issues for clients, partner with them in ensuring that they reach their own objectives and understand what those are. Another challenge is that marketing is often not taken as seriously as it could be by organizations. How marketers are perceived within their own companies often has a direct impact on the relationship and success of the agency partners. Agencies need to understand the challenges that a marketer faces and work with them to elevate the importance of marketing through finding direct ways to measure the success of their campaigns. n
Fasset drives transformation in the finance and accounting sector
The Finance and Accounting Services Seta has been driving transformation in the finance and accounting sector for the past sixteen years. Fasset has embraced transformation as a process, which will result in dramatic and radical changes in the finance and accounting sector’s demographic profile. “Transformation is not negotiable. It is a critical component of nation building. The transformation imperative will create a more robust and sustainable finance and accounting sector,” says Fasset CEO, Cheryl James.
BLACKMOON 16779
Fasset has always incentivised employers to hire and train African Black learners through the disbursement of the Seta’s discretionary grants. Fasset is also driving transformation through its Bridging Programmes, which bridge African Black learners into university for admission to a BCom or BCompt degree, place unemployed learners into employment, or make it possible for young people to obtain a professional qualification. Collectively, Fasset has funded more than 10 895 individuals on these programmes. Fasset’s resolve to fast track transformation has deepened. “Since the 2012/2013 financial year, Fasset has only funded African Black learners on its Bridging Programmes, and only made discretionary grants available to African Black learners,” James informs. Initiatives to fast track transformation are bearing fruit. “Since 2001/2002 the number of African Blacks employed in the
Facebook: fasset.org • Linkedin: financial-and-accounting-services-seta-fasset-
sector has increased by 60%; Indians by 62%, Coloureds by 47% and Whites by 25%. The employment profile has also changed markedly. Since 2001 the number of African Black managers has increased by 78%; Indian managers by 133% and Coloured managers by 50%. The number of White managers has declined by 25%,” she reveals. Fasset’s initiatives to fast-track transformation have coincided with legislation and employer and professional body initiatives to fast track transformation. This makes it very difficult to quantify the exact impact that Fasset initiatives have had in terms of driving transformation. “Two things are, however, very clear: Fasset employers are committed to transformation, and Fasset will continue to drive transformation until the finance and accounting sector’s demographic mirrors that of the population,” James concludes.
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BusinessBrief
August/September 2016
LEGAL
Insolvent? Repealed Act still applies By Johan Roodt | CEO | Roodt Inc. | jaroodt@roodtinc.com
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n Noordman NO vs Bruin, in which judgment was handed down by the Free State High Court on 29 January 2016, the liquidators of an insolvent company were attempting (unsuccessfully as it transpired) to persuade the court to declare the sole director and shareholder of the defunct company personally liable for its unpaid debts on the grounds that he had been party to reckless or fraudulent trading. The impugned conduct of the director had occurred prior to the date of the coming into force of the Companies Act 2008, namely, 1 May 2011. However, the liquidators had issued summons on 10 September 2013, that is to say, after the new Act came into force. In these circumstances, did the old Companies Act 1973 or the new Companies Act 2008 apply? In terms of which Act must the liquidators institute legal proceedings against that director? This was an important question for the old Companies Act of 1973 had a specific section, namely section 424, which provided for the imposition of personal liability for reckless or fraudulent trading. By contrast, the new Companies Act of 2008 has no provision that explicitly empowers a court to make a declaration of personal liability for a company’s
...the liquidators of an insolvent company were attempting (unsuccessfully as it transpired) to persuade the court to declare the sole director and shareholder of the defunct company personally liable for its unpaid debts debts in respect of a person who has been party to reckless or fraudulent trading; such an order can be sought only in terms of the general provisions of section 20(9)(b). Companies that are being wound up on the grounds of insolvency However, in relation to companies that are being wound up as insolvent, Chapter 14 of the Companies Act 1973 (which includes section 424 of that Act) continues to apply, notwithstanding the repeal of that Act by the new Companies Act. This extended existence of Chapter 14 of the old Companies Act is provided for in the transitional arrangements – see Schedule 5 item 9(1) of the Companies Act 2008. Thus, in Noordman NO vs de Bruin the liquidators of the insolvent company in question correctly took the view that, although summons was issued after the new Act came into force, relief could be claimed by instituting legal proceedings against the sole director of that company in terms of section 424(1) of the old Companies Act of 1973. If the company was not being wound up as insolvent (for example, if it was being wound up on other grounds) that statutory provision would have not been applicable and any relief would have had to be claimed against the director in terms of the new Companies Act of 2008 unless the legal proceedings had been commenced before the new Act came into force. n
LEGAL
BusinessBrief
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August/September 2016
Technology revolutionises court filing! By Bruce Henderson | Managing Director | Litigator | bruce@litigator.co.za | @LitigatorSA Chief Justice, Mogoeng Mogoeng, called for the introduction of an electronic court filing system, to increase efficiencies, reduce costs and mitigate against the lost and stolen court documents. The implementation of a digital court filing system would greatly benefit SA’s legal profession by minimising the time and costs associated in filing litigation documents at court.
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he court rules have been amended to permit electronic service of litigation documents and that attorneys must embrace digital systems. The traditional manner of physically serving and filing documents remains costly, cumbersome and inefficient and adopting electronic methods is hugely beneficial to practitioners. Some misconceptions exist within the legal community regarding the security and compliance of electronic systems which must be addressed to ensure greater buy-in from the profession. The legal profession is keen to adopt digital practices. However, there are concerns as to the manner in which the service of documents is verified. Cloud-based systems, however, can confirm the serving of a document to all relevant parties and allow these parties to access these documents instantly anytime / anywhere. Another concern is that by storing the original documents in the cloud, one is increasing the chances of those documents being accessed, altered or manipulated by parties acting in bad faith. There are, however, services and products available that protect the integrity of the documents and arguably make them more difficult to alter or destroy than physical documents. An advanced electronic signature is a practical means to electronically sign a document, and
thereby protect the integrity of the document. In accordance with the Electronic Communication and Transaction Act (ECTA), the applicant for an advanced electronic signature (AES) is subject to a registration and validation process that includes, a background check with Home Affairs, finger print verification and a face-to-face assessment meeting. Once this process has been completed the applicant receives a unique advanced electronic signature. When a document has been signed with an advanced electronic signature, its authenticity is deemed verified. The signature also serves as a security mechanism whereby the signatory’s details are available by simply clicking on the signature. Information as to the identity of the signatory, time date and validity are then disclosed. Should the document have been altered in any way, the signature will be marked as invalid. Document integrity is thus guaranteed when signed with a valid and verified AES. The ECTA also stipulates that where a document has been signed with an AES, it will be deemed an original in its digital state. The magistrates court rules specifically define ‘signature’ as including advanced electronic signatures, so there should be no barrier to these courts accepting documents that have been signed in such a way. n
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BusinessBrief
August/September 2016
LEGAL
DAMAGE claims requirements! By Yash Naidoo | Candidate Attorney | Norton Rose Fulbright | yash.naidoo@nortonrosefulbright.com | @NLegal_ZA
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recent case discussed the circumstances under which a person can sue for damages if someone is guilty of an abuse of rights that intentionally causes
harm.
For an act to constitute the abuse of a right, two requirements must be present: the subjective requirement that the act is performed with the sole or predominant intention to harm another; and the objective requirement that the act serves no appreciable or legitimate interest of the person exercising the right. A bad motive is not in itself sufficient to indicate wrongful conduct. Historical dispute The respondents in Koukoudis vs Abrina operated a Spur restaurant in a mall owned by the 2nd appellant. The relationship between the parties as landlord and tenant throughout the period of the lease was interspersed with disputes dating back to the outset of the lease in 2003. The respondents decided against renewing the lease before it expired at the end of April 2008. In the meanwhile, they acquired land less than 1km away from the mall, and intended building on it with the objective of moving the restaurant there. In order to commence building the respondents needed to have the land, currently zoned as agricultural, declared a township. The respondents made their necessary application to the municipality in 2006, to which the appellants filed an objection. Eventually, in 2008, the application to establish the land as a township was approved.
Stifling development? The appellants appealed this decision; however, in July 2009 this appeal was dismissed. Having eventually built on the land by the end of 2009, the respondents sued the appellants for damages allegedly sustained through delay of the project. They alleged that the appellants acted with the specific intention of stifling the development and causing them financial harm. To support their contention, the respondents relied upon the “doctrine of the abuse of right”. The court of appeal paid cognisance to the fact that South African courts have held that actions performed in terms of rights but for improper purposes are unlawful. From the various cases that the court referred to, it is evident that the basis for unlawfulness of acts performed in abuse of rights is always that the acts are performed with the sole or predominant purpose of harming another. The court analysed various academic authorities regarding the requirements of a claim for abuse of a right, and concluded that one should not regard an act as being unlawful if it advances the legitimate rights of the persons exercising it, even if others may be prejudiced by the act. Abuse of statutory rights The question whether the abuse of a statutory right is ever actionable was left open by the court. However, it indicated that on the face of it, the abuse of a statutory right is actionable and that no rights should be regarded as absolute and capable of being exercised solely to cause harm. This is the likely outcome should that question ever be examined directly. On the evidence, the court found that the appellants’ act in objecting to the respondents’ application to establish a township met neither of the two requirements to constitute the abuse of a right. The most probable inference to be drawn from the objection was that the appellants were protecting their commercial interests by preventing the restaurant from vacating the mall owned by the appellants. The claim was dismissed. These abuse of rights cases are rare because of the burden of proving that the other party exercised their right without seeking to advance any interest of their own. n
Mediation – a complex art By Jonathan Sahli | Partner | Bowman Gilfillan Africa Group’s Dispute Resolution Department | j.sahli@bowman.co.za | @BowmanGilfillan
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ediation is a facilitated negotiation in which a mutually acceptable third party attempts to facilitate the settlement of a dispute. It is a non-adversarial process, aimed at achieving consensus and a mediator does not adjudicate on the merits of a dispute. Rather, the mediator attempts to bring disputing parties to a point where they are able to settle their differences amicably. Mediation is seen as an alternative to litigation, which may take years and prove costly and time consuming whereas mediation can be finalised within a matter of hours. There are many advantages to mediation when compared to litigation. One of the key advantages of mediation is that the negotiations take place on neutral soil, and the parties to the negotiation can design and have some control of the possible outcomes of the mediation. The court system, on the other hand, is unpredictable and the outcome is out of the hands of the parties concerned. Mediation also allows bridging opportunities between the two parties concerned as it separates the person (and therefore the emotion) from the problem. This enables the parties to maintain composure and avoid flaring tensions, which can impede resolution. Mediation works to restore the relationships of the parties concerned. It offers a wider range of solutions and allows time for apologies and explanations. This bodes well for the continuation of
existing professional relationships, even if this relationship is established on new terms or after a new agreement. Another advantage of mediation is that it can offer outcomes of mutual gain. Options can be generated that are aligned towards meeting all of the parties’ interests. In this regard, concessions and compromise can be used to resolve the dispute in a way that pleases everyone. Mediation also allows for creativity in addressing the interests of the parties concerned. This could be done by focusing on a desired outcome and by negotiating on interests and not positions. In this way, disputes are resolved based on the dynamics of personal relations and not points of law. Thus, finding common ground is essential in the resolution process. Mediation is not always feasible, especially when an urgent injunctive relief is sought or if the nature of the dispute does not lend itself to mediation. For example, if one party is owed money and the other party is simply trying to avoid payment without any real justification, mediation would not be suitable. Mediation used as a delay tactic in a legal battle will always prevent a successful outcome. Mediation would also not be suitable if the dispute involves allegations of fraud and dishonesty, as a continued relationship would be unrealistic. Litigation would also be a better option if the dispute is a matter of principle or if one party wants to set a precedent. n
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August/September 2016
TAX
Black TAX opportunities? By Tumisang Matubatuba | Strategist | Yellowwood | tumisangm@ywood.co.za
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he concept of black tax has drawn a lot of attention in recent years. It is something that is considered important yet remains difficult for many marketers to fully understand. The concept of black tax has many layers to it, which has led to various interpretations of what it means and its impact on society.
Africans have parents who have either financially supported – or have been financially supported by relatives and it is because of this that many black South Africans have the privilege of better opportunities in life. What is of value, is to develop an understanding of the motivation behind those that honour this responsibility towards their family.
What is Black Tax? Black tax is defined as black working class individuals who are financially indebted towards supporting immediate and extended family. It can take on many forms - for example, having to contribute to household living expenses, paying for a family member’s school fees, and in many cases, being the person who the family turns to when there is a financial need however big or small. This can become a financial burden for a young person starting out in their career.
Understanding Black Tax Through an African cultural lens, family support is an act of Ubuntu, grounded in the virtues of compassion and humanity. Black tax in itself should be seen as being rooted in empowering others for the greater good of the community.
It may even be viewed as unfair, and when coupled with the recent statistics released in the Stats SA ‘social profile of youth’ report, which highlights that the percentage of black youth in skilled jobs has been static for a period of 20 years – it paints a rather bleak picture. Merely portraying a black taxed individual as a victim of their circumstance diminishes the role that they are playing in the lives of those around them. Marketers would be wise to view these individuals as change agents redefining the opportunities available to their families. Many young black South
By shifting this perception, it changes the way we as marketers view this generation who are “bridging the gap.” It allows us to better understand how the consumption of products and services are impacted by the wider group of people a black taxed individual has to take into consideration when making a purchase. The opportunity for Brands These brands have understood the dynamics at play in the lives of the target audience, and by changing their perspective, they have found ways to help individuals manage their responsibilities rather than renounce them. There are opportunities in other categories to drive relevance by amending offerings and driving innovation. For example, making education affordable for a generation of scholars supported by one breadwinner. Public transportation packages that offer family discounts and value. Healthcare or insurance offerings that make it possible to include extended family into the cover and investment policies. Family responsibility leave from employers that takes an employee’s extended family into consideration. These ideas are thought-starters for alternative perspectives on how this specific market can be engaged with in a way that is more meaningful and relevant. In short, by taking a more empathetic and considered approach, marketers can not only assist in reframing a complex issue, but can also find ways to help South Africans improve their own circumstances - and those of their loved ones. n
BusinessBrief
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August/September 2016
BEPS concerns? By John Jones | Corporate & International Tax Partner | RSM South Africa | john.jones@rsmza.co.za | @RSM_za
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.E.P.S is an acronym for Base Erosion and Profit Shifting and refers to the numerous tax strategies put in place by international corporates around the world to artificially shift profits from high tax jurisdictions to those jurisdictions with low, or even in some instances, no taxation. In general the entities housed in these low tax jurisdictions have very low levels of factual economic activity. The Organisation for Economic CoOperation and Development (OECD), at the request of the G20 Finance Ministers, started its Action Plan on BEPS in 2013 and released its final reports in 2015. The OECD BEPS Action Plan identified and focused on 15 Actions it was felt needed to be addressed when considering perceived tax avoidance by international corporate groups. So why should South African corporates be concerned about BEPS? We are not part of the G20 nor are we a member country of the OECD. Firstly, SA has agreed to be part of the Joint BEPS Action Plan and secondly, the BEPS Action plan is possibility the most significant change in international corporate taxation to have ever taken place. So factually any corporate that operates internationally whether part of the G20, OECD or not, needs to be cognizant of the possible impacts of BEPS and its impact on their business operations. This potential impact is also not limited to size. BEPS is going to impact large multinationals, corporates operating in the middle market and even much smaller organisations. Although the BEPS Action Plan is not law domestically, as with many other developed countries, SA has started to put in place legislation implementing the BEPS Action Plan at a domestic level. We have seen the introduction into our Income Tax Act of Section 23M creating potential limitations on interest deductibility where interest is paid on cross border connected party loans. There have been amendments to the Value-added Taxation Act affecting entities operating in the Digital Economy, the introduction of Reportable Arrangement legislation in terms of Section 35 of the Tax Administration Act and the introduction of legislation specific to Country by Country Reports. So, as with other jurisdictions around the world, our domestic law is
being changed in reaction to the BEPS Action Plan. And there is more to come. It was identified in a worldwide survey of International Businesses commissioned by RSM that the vast majority of businesses surveyed believed that BEPS would result in an expected increase in effective tax rates as well as an increase in compliance costs as a direct result of legislation arising from BEPS. So when it comes to BEPS SA is not an island and any corporate operating internationally should consider performing a high level risk analysis to establish the potential impacts of BEPS. They can be significant and corporates need to react strategically and better yet, proactively to the implications of BEPS. n
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BusinessBrief
August/September 2016
TAX
New tax reporting standard! “Hiding” or shifting profits will become increasingly difficult as new era of transparency takes effect. Scores of South African corporate companies will soon be subject to increased scrutiny and cross-border tax reporting regulations as the country aligns its tax regulations with global standards. By Marcus Stelloh | Associate Director, Tax Services | Grant Thornton | Marcus.stelloh@za.gt.com | @GrantThorntonZA
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hese latest requirements are contained in two draft notes from the SA Revenue Service (SARS). The first deals with compulsory transfer pricing documentation retention requirements for companies with revenues over R1bn and the second introduces the Country-by-Country Reporting Standard for Multinational Enterprises.
artificially shift profits to low or no-tax locations.
The requirement stems from the OECDled Base Erosion and Profit Shifting (BEPS) project that aims to eliminate tax planning strategies which exploit gaps and mismatches in tax rules to
The concept of eliminating profit shifting through practices such as transfer pricing is not new, but there has been renewed vigour on a global scale to accelerate agreement and compliance. The aim of the countryby-country reporting standards, which is the second draft note from SARS mentioned above, is to improve transparency of earnings by multinationals in multiple territories. Through this measure, countries will be able to gain a more accurate picture of whether tax liabilities in their jurisdiction are being fully met.
The OECD reports that the magnitude of the problem, according to research since 2013, is conservatively estimated at between 4% and 10% of global corporate income tax revenues, worth between US$100bn and US$240bn annually.
The upshot of the new regulations is a far more vigorous reporting requirement on qualifying companies. The regulations call for organisations to submit their first reports as from 31 December 2017 for the fiscal year starting on or after 1 January 2016. The threshold for companies to complete country-by-country financial reports has been set in SA at a turnover above R10bn, with additional provisions that throw this net a little wider. It’s important to note that these additional provisions apply to South African tax resident companies that are not the ‘ultimate parent entity’
of a multinational group when their parent entity is not obligated to file a report in its tax jurisdiction; when the parent entity does not yet have a tax information sharing agreement with SA; or that fails to share information required by the new regulations. But despite these options, the group must still meet the R10bn first, and then if any of these apply, the SA entity will be legally obligated to report according to the Country-by-Country Reporting Standard. The finer details and definitions of what constitutes a parent entity are quite complex, but any large corporate that is a subsidiary of a global group or a South African entity operating in multiple international markets will undoubtedly be affected. What these regulations do make very clear, though, is that many large corporations are going to have to invest considerable time and effort to ensure they comply with the new reporting standards. Apart from adopting new processes, companies that do not have the ability to consolidate financial statements across multiple entities, particularly cross-border operations, may have to invest in the necessary technology to minimise disruption to their accounting teams. There is little doubt that hiding or shifting profits is going to become increasingly difficult as this new era of transparency and information sharing takes effect. Ultimately, this is for the good of the local and global economy, and companies are advised to take these measures seriously and start preparing for the first reports in order to avoid disruption or non-compliance. n
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August/September 2016
Does King IV go far enough? By Devon Duffield | Managing Partner | KPMG’s Tax & Legal | Devon.duffield@kpmg.co.za | @KPMG_SA
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ardly a week goes by in the local and international press without the spotlight being thrown on a corporate or an individual’s tax affairs. Particularly in tougher economic times, the range of interest in an entity’s tax affairs is reaching far beyond the taxpayer and the Revenue Authority. These days shareholders, employees, customers and members of the public at large, want to know that an entity’s tax affairs are not only ‘compliant’ but also that they meet a standard which is ‘beyond reproach’. Tough as it is to meet these ‘undefined’ standards, taxpayers are having to think more broadly about how they arrange their tax affairs. And boards of companies, are having to think about how they can discharge their responsibilities to govern the entities tax affairs. It is against this backdrop, that the draft King IV report has included Tax Governance as one of its foundational concepts. The report places responsibility on the governing body and audit committee in leading a compliant tax strategy and policy that also aligns itself to corporate citizenship
and wider stakeholder relations. However, it might not go far enough to fully enable those charged with governance on how to carry out these responsibilities. Organisations that want to be able to adopt a position of responsible tax will have to be able to demonstrate to the board not just a strategy and policy around this, but also all the other aspects of control and assurance that a board will need. This includes an organisation’s systems, processes, internal controls and the increasing use of data analytics to prove compliance with laws and stakeholder sentiments across multiple jurisdictions. We have started to see some progress in this space, but we need to see a formalised and comprehensive approach to how an organisation manages and controls its tax affairs across the globe, as well as how the board gains its assurance on these
affairs. Only in this way can boards of companies be comfortable that they are discharging their governance responsibilities around this new, many faceted challenge. Given the Automatic Exchange of Information that will occur between revenue authorities in the near future, the increased public interest in an entity’s tax affairs and the ever increasing costs of non-compliance, forward thinking companies are not only building improved governance and control over their tax affairs, but they are taking the bull by the horns. They are proactively engaging with their stakeholders about how they govern this complex area of taxation, and demonstrating what economic contribution they make to the various jurisdictions in which they operate both through the variety of taxes levied but also through their contribution to economies more widely. n
Shareholders want to know that an entity’s tax affairs are not only ‘compliant’ but also that they meet a standard which is ‘beyond reproach’
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BusinessBrief
August/September 2016
FINANCE & EQUITY
Financial crimes & compliance? For months, there has been strong focus on the so-called Panama Papers and on the pending results of the national investigations faced by several implicated individuals. As more details emerge, there is one clear and significant take-out from this scandal – that white collar crimes are alive and well.
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he Panama Papers showcase the array of ways in which the rich, the world over were able to exploit offshore tax regimes. Among those cited are world leaders, celebrities, sport stars and in some cases, family members of these individuals.
Africa had the biggest amount of illegal financial outflows. In addition, eight African countries are now listed on the Office of Foreign Assets Control (OFAC) and Financial Action Task Force on Money Laundering (FATF) watch lists which emphasises the importance of enhanced due diligence.
While due diligence and compliance officers have had success in identifying threats to their business, the sheer scale of the Panama Papers leak proves that suspicious financial activities can easily slip under the radar.
What to Do Due diligence and compliance officers have the onerous task and legal obligation of effectively and efficiently rooting out corruption by meticulously understanding suppliers, partners, acquisition targets, contractors, resellers, grant applicants, and other associates.
The South African Revenue Service (SARS) recently identified the names of 1 700 individual South African residents released in the data, ranging from shareholders and directors to beneficiaries. So far 79 of a total 560 offshore entities have been matched to 81 South African residents. These findings indicate a need across the globe to become more cautious against the risks of non-compliance and associating with suspicious financial activity. Although the act of money laundering itself is a victimless whitecollar crime it is often connected to serious and sometimes violent crime. Being able to stop money laundering is in effect, being able to stop the cash flows of international organized crime. In 2014 international monitoring organisation Global Financial Integrity (GFI) released a report on illegal capital flight, which suggested that South Africa loses an estimated R147-billion a year through the illegal movement of money out of the country. South Africa was one of 151 countries featured in the report and ranked 12th overall. The report also indicated that Sub-Saharan
It is important not just to understand the companies and individuals with whom the company interacts, but to do so as thoroughly as possible so that you are in the best position to comprehend the complex relationships and affiliations between companies and individuals or companies and other companies. Companies found guilty of failing to prevent bribery are at risk of unlimited fines, directors can be disqualified and individuals could be imprisoned for up to 10 years. To avoid these legal penalties, costs, and reputational damages of being associated with unethical or criminal associates, consider the following guidelines: horoughly understand the companies •T and individuals with whom the company interacts and/or does business. •B etter comprehend the complex relationships and affiliations between companies and individuals or companies and other companies.
•R esearch and stay up to date on key developments with respect to key clients, suppliers, contractors, or partners. •R esearch and vet potential investment opportunities, partnerships, acquisitions, or other strategic alliances. •E nsure the ongoing financial health of key suppliers, clients, or other entities the business relies upon •A void the legal penalties, costs, and reputational damages of being associated with unethical or criminal associates. •E nsure you comply with local and international anti-bribery legislation. •C onduct ongoing screening and monitoring, particularly around high risk third-parties to ensure you are alerted to any changes as soon as they happen. •S eek information on your potential business associates’ legal history, including local and international cases to determine how litigious an individual or company may be. •U nderstand that the onus to perform these procedures is on the institutions, not the criminals or the government. Tailored solutions let you perform these steps with ease through simple fill-in-the-blank search fields. Users can select a prospective third party, perform a company or person check, explore associated entity interests, check against sanctions, check for red flags and politically exposed persons data, search for negative news, check the litigation history, assess country risk and confirm as partner/ supplier/ distributor. They also enables compliance officers to review data from the UK, EU, US and selected Asian jurisdictions. n
By Rudi Kruger | General Manager | LexisNexis Governance, Risk & Compliance | rudi.kruger@lexisnexis.co.za | @LexisNexisZA
The HUMAN behaviour element
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o one single person, entity or body can be held responsible for fraud when corporates fail.
When corporate failures occur, they will certainly have an impact on the stakeholders, shareholders and in many instances the general public. In my experience, it is natural for people to speculate about the existence of fraud in corporate failures. The publication clearly states that corporate failures do not occur only as a result of fraud, but in some of the biggest corporate failures fraud was involved. In the event that fraud was involved in corporate failures, it is highly unlikely that the act of fraud alone was the only reason for the corporate failure. However, more often than not the question arises as to whether the auditors should have detected the fraud. The answer is simply “not necessarily”. The primary reason for this is that financial statement audits are not designed or executed to detect fraud. In a recent survey of 750 investigations conducted by KPMG worldwide, it was revealed that external auditors were responsible for identifying fraud only in six percent of the cases surveyed. Questions are often directed regarding the role of the auditors in various instances of fraud/corporate failures. It, therefore, appears that the general public is not aware of the purpose and limitations of financial statement audits. Another reason why financial statement audits do not always detect fraud is the influence
of management in the audit process. The influence that management has on a financial statement audit should never be discounted. External auditors can be expected to accept documentary evidence and reasonable explanations provided by management. In most of the case studies referred to in the publication management intentionally misled the external auditors. Further misrepresentations were also made to financial institutions and even the entities’ boards. Although the human behaviour element is a tricky situation for companies to manage or analyse it, is not impossible. The publication provides insight into two investigation strategies to address the human behaviour element in organisations and the impact it may have on the business or future existence of the organisation, namely Risk-Based Investigations and Behavioural Investigations. Corporate failures is not the result of one single event, and not one single body can be held responsible for fraud. But that does not mean that management or boards cannot get insight into the fraud risks of their organisation. By performing a Behavioural Investigation you are effectively performing a health check on your company. You will know whether your company is in a healthy state, or whether remedial action is required. Similarly, Risk-Based Investigations allow management to opportunity to explore suspicions of possible fraud and misconduct where no fraud has been identified. n
By Estelle Wickham | Forensic Senior Manager | KPMG estelle.wickham@kpmg.co.za | @KPMG_SA
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BusinessBrief
August/September 2016
FINANCE & EQUITY
Unlocking value in a debtor’s book By Arno van Niekerk | National Sales Manager, Business Banking | Sasfin Bank | arno.vanniekerk@sasfin.com | @SasfinBank
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he South African market has become unpredictable with fluctuating interest rates presenting a challenge for SMEs and investors that do business locally and internationally. How then, can growing businesses identify financing opportunities? Trade and debtor finance is not a new concept in the business world. It has become a solution of choice for entrepreneurs and SMEs who import and export goods and services from across the borders into SA. Here are some guidelines that the entrepreneur or business owners needs to be cognisant of when involved in the trade and debtor finance in the application process. Secure your proceeds in the following three ways:
et insurance on an open account trade. •G Insurance can be used to obtain finance from a bank. • O btain a letter of credit from the foreign buyer, this is a common approach taken by exporters. • Factoring is another way of securing finance, where the seller of good and services sells their receivables (represented by outstanding invoices) at a discount to a finance provider (commonly known as factor). The finance provider advances funds and is then usually responsible for managing the debtor portfolio and collecting the underlying receivables. Have your information on hand The following information is required to support an application for finance: inancial reports •F such as balance
Often many businesses fail to pay sufficient attention to the operation and control of their debtors’ book which, in many instances, is the largest asset in their balance sheet sheets, management accounts, debtor and credit histories. • P urchase orders and shipping costs. Environmental analysis is required Exporters need full analysis and understanding of the economic, political and social environments of the countries they want to export to before they finalise the transaction. This exercise will help them gain insights into challenges or opportunities that lie ahead. Often many businesses fail to pay sufficient attention to the operation and control of their debtors’ book which, in many instances, is the largest asset in their balance sheet. A reputable trade and debtor finance house is often able to unlock value in the debtors’ book, enabling a business to grow and take advantage of better terms and discounts from its creditors. At the same time, the trade and debtor finance house can keep a watchful eye on the many risks associated with selling goods and services to its client base on credit. n
Register CREDIT providers By Janine Will | Senior Associate Garlicke & Bousfield Inc | janine.will@gb.co.za A person must register as a credit provider in terms of the National Credit Act, 2005 (the Act) if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the threshold prescribed by the Minister in terms of section 42(1) of the Act.
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t present, the threshold prescribed by the Minister is R500 000. This means that a person who provides credit to another must register as a credit provider only if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds R500 000. This is about to change.
If the credit agreement is unlawful, a court is required to make a just and equitable order With effect from 11 November 2016 the Minister has prescribed the new threshold as nil (R0). In other words, every person who provides credit to another is required to register as a credit provider, no matter how much credit he or she has provided. Registration as a credit provider is crucial because a credit agreement which is concluded by a credit provider who is not registered as such, but is required to be so registered, is an unlawful agreement, with two limited exceptions. The agreement would be lawful if either (1) at the time the credit agreement was concluded, or within 30 days after that time, the credit provider had applied for registration and was awaiting a determination of that application; or (2) at the time the credit agreement was concluded, the credit provider held a valid clearance certificate issued by the National Credit Regulator. If the credit agreement is unlawful, then, despite any other legislation or any provision in an agreement to the contrary, a court is required to make a just and equitable order including a directive that the credit agreement is void as from the date on which the agreement was concluded. n
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BusinessBrief
August/September 2016
ASSETS & INVESTMENTS
Multiple investment strategies
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By Rodney Msimango | Senior Investment Consultant | Old Mutual Corporate Consultants RMsimango@oldmutual.com | @OldMutual
ow gross domestic product growth, an unpredictable currency and rising political tensions have all contributed to a particularly uncertain economic outlook for SA. Selecting the right investment management approach is paramount in ensuring that retirement funds achieve the desired outcome of ensuring their members retire financially secure, despite the current local and global market volatility.
Differing considerably in terms of fee structure, volatility and complexity, each investment management strategy is expected to perform better during different market conditions and, as such, the choice of strategy should depend largely on the specific members and what is most appropriate for them. A clear understanding of each investment management strategy and their fundamental differences is required. Cost is one of the differentiating factors. Passive or index-linked funds undoubtedly have the lowest fees in both the retail and institutional space. Actively managed funds are more expensive, but if competitively priced can still provide clients with value if the managers can exploit inefficiencies in the market and deliver superior returns in excess of their additional cost. Using a smoothed bonus approach is more expensive than indexlinked funds as this investment strategy generally incorporates active management while also controlling volatility and offering clients’ investment guarantees to protect them from adverse market movements. Multi-management simplifies the investment world and the process of selecting the most appropriate investment managers for clients while also mitigating the obvious risk that comes with selecting one single manager who may fail to perform as expected. A multi-manager will also cherrypick the specialist
skills within the asset management industry to secure the outcomes. There will always be a debate about fees but what is important is for members to weigh up net returns against the fees to ensure they are getting what they pay for. The level of exposure to volatility members should embrace is another consideration when selecting an investment strategy. While exposure to volatility is unavoidable when investing in growth assets, members’ time horizons should play a big role in determining how much volatility they can tolerate. In an environment where members are encouraged to take ownership of their retirement savings, member understanding becomes an important aspect. Whether members are choosing an investment portfolio or are put in to a portfolio by a trustee, they need to understand what it is they are going to get. Members generally understand a single active manager, as they see these managers advertised in the paper and understand that their role is essentially to “actively manage” a fund. Index-linked investments are somewhat less understood. Though people do understand that they will receive market-related returns, they don’t understand that there are various indices to choose from. Multi-managed and smoothed bonus funds, although carrying the lowest risks, are often less well understood by members. A low level of understanding is a driver of poor investment behaviour. People too often choose a manager based on brand or short-term performance, when they should be basing their choice on long-term objectives, risk tolerance and preferred investment philosophy. There are trade-offs between the options: Where a client has a long time horizon with a small risk of having to disinvest then an index-linked fund may be the most cost-effective option, while if other factors, such as volatility need to be balanced, then the higher costs of the other options may be justified. No matter how much time and effort is spent comparing these investment philosophies, there is no silver bullet approach and each strategy can yield good results during different periods, depending on the given market cycle. Each strategy has its particular merits and has performed better than the other strategies at one time or another, resulting in a complicated selection process. This is where consultants become invaluable as their ability to understand the clients’ needs enable them to guide clients to select the most appropriate approach and product for their particular member base. n
ASSETS & INVESTMENTS
BusinessBrief
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August/September 2016
The BIGGEST investing anomalies When asked why the majority of South Africans fail to reach their retirement goal, most industry players will cite factors such as saving too little, starting too late, low preservation rates or a lack of portfolio diversification. Unfortunately, they often fail to mention the devastating effect that undisclosed fees, lack of ethics and wasteful active management have on retirement savings.
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nvestors should re-evaluate everything they think they know about investing. While there are naturally common mistakes we should avoid, there are several other oversights that investors are unknowingly making that hamper their chances of a decent retirement. These are those factors the industry doesn’t want to highlight, mostly because they are partly responsible for their manifestation. How to avoid the biggest investment anomalies: You love Warren Buffett, but ignore his advice The current system promotes hundreds of different, often complex, investment products managed by mostly underperforming fund managers and hedge funds with high fees that are endorsed under the guise of independent advice by investment consultants. Multi billionaire Warren Buffett’s single-biggest take out message from the Berkshire Hathaway Inc AGM in April 2016 was: “Don’t pay for investment advice - buy a low-cost S&P 500 index fund instead. Market-beating investment consultants were usually a ‘huge minus’ for those following their advice. Passive investors will likely outperform ‘hyperactive’ investments recommended by consultants and fund managers. These arrangements eat up capital like crazy.” Investors face a real problem trying to figure out what advice they should listen to. Before you pay another rand in fees, investors should question the costs charged by expensive money managers and consultants. The traditional investment system mainly results in an enormous wealth transfer away from savers to the industry. This situation persists despite the overwhelming and continued evidence that most fund managers destroy value compared to a low cost index fund. You keep doing business with companies that abuse your trust The South African retirement fund industry is littered with companies fined for unlawful and illegal practices. These range from bulking retirement fund contributions by taking interest from member payments without disclosure, pension surplus stripping and undisclosed commissions. The list goes on and on. In the 2015 the South African financial and investment industry received a regrettable D PLUS for poor disclosure by the Morning Start Report. Advisors are
not subject to fiduciary duty. The Morningstar Report noted that South African advisors and brokers have no legal obligation to act in the interest of the investors ahead of themselves. They can make any recommendation they feel is appropriate without considering equivalent products available that are more suitable for the specific investor. Despite these immoral and often illegal activities, people continue to entrust billions of Rands to these investment companies. Even more concerning is that most people, trustees included, don’t really know where their money is invested, or what they’re paying in total fees. You continue to search for patterns where none exist Active fund managers argue that their skills enable them to outperform the market return, but research is proving once again what passive managers have known all along – it is simply not possible for most funds to outperform the market. In South Africa, over 95% of investments are actively managed. Unfortunately, the vast majority of South African retirement funds are invested in managed funds with the expectation - or hope - of earning a market-beating return. Only 1% of institutional investors were able to beat performance benchmarks once costs were deducted according to research commissioned by the State Street Corporation in the United States. This isn’t a surprise for Eugene Fama, a professor of finance at the University of Chicago and recipient of the Nobel Prize for economics, who has proved that it’s impossible for fund managers to outperform market returns, due to efficient financial markets, unpredictable stock-price movements and costs. Take the time and do your research. Seek out independent, objective advice yourself. At the end of the day you have the single biggest stake in your investment. n
By Steven Nathan | CEO | 10X Investments | steven@10x.co.za | @10xinvestments
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BusinessBrief
August/September 2016
ASSETS & INVESTMENTS
Abnormal negative interest rates?
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move toward negative interest rates by Central Banks across the world could affect the sustainability of money market funds, the tightening of lending conditions and result in money being kept “under the mattress”. The European Central Bank and countries such as Japan, Denmark, Sweden and Switzerland have moved toward Negative Interest Rate Policies (NIRPs). NIRPs have increasingly become a last ditch attempt by Central Banks to halt deflation, stimulate both corporate and consumer spending and boost faltering economies, especially since the global credit crisis of 2008. Furthermore, the volume of government bonds with negative yields have already exceeded $7tn, the majority of which are Japanese bonds followed by Germany and other EU and Scandinavian countries. Deflation devastates Deflation has had a negative impact on several economies because – despite falling prices – consumers often hold back on spending as they wait for the price of goods and services to fall even lower, slowing economic growth. Falling prices also worsen the position of debtors, by increasing the real burden of their debts, and a deflationary environment results in “sticky nominal wages”. The latter refers to the problem that wages, like prices, should fall during periods of deflation but, in reality, are extremely difficult to cut due to socio-political pressures. Wage bill reductions, either through lowering wages or more commonly by cutting jobs, has resulted in social unrest in countries like Greece, for example.
the fact that all 11 major Japanese asset managers that offer money market funds have stopped accepting new investments. Many individual and institutional investors rely on money market funds to hold cash, knowing that they can access that liquidity easily, and that it will maintain a steady asset value, even if it doesn’t generate much yield in a low interest rate environment. Preventing drag If money market funds had to pay to own short-term unsecured promissory notes, or commercial paper, they would not be able maintain a stable net asset value and the economic model breaks down. This may result in investors in these funds preferring to hold deposits at a bank or even cash rather than suffer the drag of negative interest rates and credit conditions would likely tighten as a result. In this scenario, the metaphor of money under the mattress becomes a reality and crimes such as robbery, petty theft and money laundering would likely rise substantially. As a last resort to unresponsive NIRPs, countries could eventually even look at the possibility of implementing “helicopter money” to boost their economies. Helicopter money is a concept already being considered by some European and North American countries in which, for example, the government gives a basic income to each of its citizens in an effort to stimulate spending and halt deflation. The phrase comes from the idea that the government is metaphorically throwing money from a helicopter to spread among its people to go out and spend. C
In theory, NIRPs encourage banks to provide more loans to stimulate spending, rather than holding excess funds on deposit with the Central Bank. However, as we know all too well with macro-economic policies, what works in theory does not necessarily translate to real-world effects. Catch-22 Banks facing negative interest rates are often reluctant to charge depositors negative interest and opt for raising lending rates instead, to maintain profitability. This has the potential to further tighten lending conditions – the opposite of the desired effect. Another negative impact of NIRPs would be the likelihood of money market funds collapsing, which is evident in
Managing risks In countries adopting NIRPs, financial institutions and firms are grappling with previously unknown technical, legal and risk management issues thrown up by negative rates. This is forcing them to adapt or redesign their IT systems, redevelop spreadsheets and tax compliance processes, and redraft legal contracts. Although the effects of low or negative interest rates will have an impact on the global economy, including SA, the effects are quite far off considering the country’s problems with high inflation, rising interest rates and interesting politics. Therefore the money market proposition for domestic treasurers and investors remains strongly intact. n
By Ray Wallace | CIO | Taquanta Asset Managers | rayw@taquanta.com
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ASSETS & INVESTMENTS
BusinessBrief
57
August/September 2016
Stokvels go “upmarket”
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By Riaan Appelgrein | Senior Manager, Customer Financial Solutions | Standard Bank Riaan.Appelgrein@standardbank.co.za | StandardBankZA
tokvels, the traditional community-based saving scheme is going upmarket as different income segments embrace the concepts that many have held dear for generations. Stokvels are being formed to help members participate in various investment vehicles, including property and the JSE. Individual contributions are determined by what people can afford, however, once committed, members are determined to contribute without fail.
paying in advance means you can shave significant amounts off the total interest bill on a house and reduce the life of a bond by several years. So why would people who have some disposal income turn to stokvels? It’s really all about the wonders of peer pressure. It is easy every month to find a reason not to save. But, when you could disappoint fellow members or even alienate friends by not meeting your obligations, the picture changes significantly.
Having a number of like-minded individuals with a common objective ensures that you are part of a significant Whilst stokvels provide a wonderful monthly contribution into an investment. opportunity for people to save together The benefits are great as not only is for a AM common goal, people always Business Brief Advert.pdf 1 2016/07/15 11:25:31 the balance on the loan reduced, but need to be careful as to what they
are getting into. Should anyone wish to join or establish a stokvel, they need to take care of the following: • Be clear as to what benefits you will receive, how regularly, what amounts – a copy of the constitution will provide clarity on this. • Be mindful of promises that seems too good to be true – if it sounds too good to be true, it very often is. Regardless of the income level of customers looking to invest in stokvels, the schemes are proving their worth and creating communities of savings-orientated people. This is something to be encouraged in a country with a weak savings culture. n
DEVELOPING YOUNG PEOPLE FROM CRADLE TO CAREER
Early Childhood Development (0 – 6 years)
Child and Youth Development (7 – 18 years)
Youth Skills Development (19 – 35 years)
Support Services
For the past 22 years, Afrika Tikkun has implemented development programmes to redress the inequities of apartheid and to help disadvantaged young people to be able to realise their inherent potential. Within the changing South African context our programmes have evolved reflecting the needs of our youth at each stage of their development from Cradle to Career. Through our Cradle to Career model, we support children from infancy into adulthood and employment to ensure that they become the next generation of productive South African citizens.
Contact us on +27 (011) 325 5914 or visit our website Afrikatikkun.org
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BusinessBrief
August/September 2016
BANKING & INSURANCE
Going out of business insurance?
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By Bertus Visser | Chief Executive of Distribution | PSG Insure | Bertus.Visser@psg.co.za | @PSGInsure
n difficult economic times, it’s important that you carefully watch how your business allocates its hard-earned money. This is particularly true when it comes to your insurance cover. Small to medium-sized businesses may have limited cash flow and potentially have insufficient cover in the event that something affects their ability to do business. Business owners need to question contingency plans and ensure adequate insurance cover We often find that small to mediumsized businesses focus on insuring portable, expensive all risk items like cellphones and tablets, or tools on the back of a bakkie. They are usually focused on what can affect their immediate cashflow. However, a more prudent approach is to focus on things that could interrupt your operations and ultimately put you out of business. What you need to think about Our experience shows that less than 20% of small and medium-sized businesses have insurance cover for business interruptions. Premises are often covered because they have to be when they are financed via a property loan. However, there is often no cover for
the potential risks of not being able to conduct business for an extended period of time. What would happen, for example, if a fire burns down an engineering company’s workshop and ruins one or two specialised machines? The cost of rebuilding the premises and replacing the machines would be covered under a standard commercial insurance policy. But what about the fact that it may take six months for new machinery to be ordered and shipped from Germany? Who pays for the associated loss of income, so that the business can continue to meet its many expenses over those months? More importantly, do you know that you can insure your business against such eventualities? Questions to ask your adviser The first step to making sure that your business is properly covered is discussing business interruption insurance with your adviser – which options exist and which are most suitable. It is also a good idea to relook at your existing insurance cover to make sure it is still sufficient. There are many different risks that can be classed as arising from a business interruption. These vary considerably from sector to sector and
company to company. A few of the more common risks include: • I f a company’s trade is interrupted, how will it honour its financial commitments, such as an overdraft, salaries or a set of lease agreements? How will it pay for stock that has been ordered but not yet delivered? • What about discounts that have been negotiated? Will they still stand? If not, what will that cost the company when it resumes operations? • Are there any expansion plans in place that still need to be paid for (such as a second warehouse being built)? • What is the risk of losing skilled staff, and the cost of retaining them during the interruption period or replacing them if they decide to leave? It is reassuring to know that you can insure yourself against such risks, so that the success of your business is not jeopardised by unexpected adversity. Because business risks are so diverse, it is best to consult a qualified adviser who can help you to assess and quantify your unique risks. Time spent on in-depth analysis will ensure business continuity in the event of a major interruption. n
BANKING & INSURANCE
BusinessBrief
59
August/September 2016
The POWER of preservation
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By Mayuri Reddy | Director | Sanlam | Mayuri.Reddy@sanlam.co.za
here are three essential components that employees need to consider to ensure they retire comfortably: contributing enough of their earnings to a retirement fund, investing in a manner that will grow these investments – and ensuring that these savings are in an investment vehicle long enough to reap the benefits of compound interest.
more and more to encourage members to preserve their savings at the point of withdrawal from the fund.
On paper this sounds fairly simple, but unfortunately in reality many of us will make decisions that are contrary to the components above and this will negatively impact our financial health in retirement. And one of the biggest stumbling blocks is choosing not to reinvest monies when changing jobs.
The 2016 Sanlam BENCHMARK Survey found that 69% of pensioners who had withdrawn their savings at some point during their careers, did not understand the impact their decision would have on their retirement outcome. Added to this, 57% also did not understand the tax implication.
While some fund withdrawals may be unavoidable - for instance if the employee is the breadwinner, has been retrenched or has no other source of savings -many South Africans who have withdrawn their retirement money, never compensate with a higher savings rate in the future and have to postpone their retirement in order to give their capital more time to grow, or are forced to constrain their standard of living in retirement.
Currently, 73% of funds that provide information to members about preservation do so as part of a ream of forms given to the employee on their first - or last day of employment. From this only one in four have forms and procedures specifically designed to encourage members to preserve with only 35% of funds polled arranging for an advisor to counsel and assist employees. We believe this needs urgent attention.
At Sanlam, we believe that employers should do more to educate employees about their role in retirement readiness. In this year’s research, 46% of pensioners surveyed retired earlier than their employment contract originally stipulated, and of these pensioners 34% now know they do not have sufficient capital to last the rest of their life. Such statistics highlight a lack of understanding in assessing our financial health and ability to retire, and it is precisely because members are not fully able to understand the implications of their decisions that employers and funds are looked to
There has been much discussion about whether to force preservation, however the focus should be on encouraging and educating those who can afford to preserve but do not do so as a result of their lack of understanding.
Previous Sanlam BENCHMARK surveys have shown that 45% of employees found their financial
situations stressful and one in three experienced a year on year increase in financial stress. 20% of employees said they were distracted due to financial stress and two in every five had spent more than 150 working hours on dealing with financial stress. Having adequate provision for retirement may assist in alleviating some of this stress. There is therefore a compelling reason for employers to incorporate financial wellness in the overall packages offered to members. Employers should place greater emphasis on educating new recruits joining the company on the benefits of starting to plan and save from an early age, and of transferring existing retirement savings to their new company’s fund. n
60
BusinessBrief
August/September 2016
BANKING & INSURANCE
Avoiding death by a thousand cuts By Gary Palmer | CEO | Paragon Lending Solutions | gpalmer@paragonlending.co.za | @Gary_Paragon If the 2008 meltdown was a bloodbath, then 2016 can be described as a death by a thousand cuts. However, even though traditional lenders are pulling back, the alternate lending market is growing in size and relevance.
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hile we have not had the shock drop to the markets we saw in 2008 and 2009, the inflationary pressures, rising interest rates, growing unemployment and the continued threat to our sovereign credit rating is certainly taking its toll. We can count on traditional lenders to retreat even further when it comes to their willingness to extend credit. SA’s economy has suffered a barrage of negative sentiment of late and the banking sector and traditional lending market has not escaped. The real collateral damage will be investors or business owners looking to take advantage of growth opportunities. While SA narrowly avoided its investment grade rating being downgraded to junk status early in June, the pervading feeling is that this still may happen, come December. This cloud of impending doom as well as the knock-on effects of slowing growth, have impacted local banks. All three rating agencies have re-rated the local banking sector to negative from stable citing deteriorating operating conditions, and Moody’s warned that profitability in the sector may come under strain due to a falling demand for credit and lower business opportunities. There is no doubt that the bigger banks will be pulling back on approving deals. They will be looking to keep their profitability up and will continue to focus on key, existing clients. The ratings drop will have its impact and, together with tighter regulations such as Basil III, we can expect a slowdown in the number of deals approved by banks. Although we saw a big drop in 2008, there was still light at the end of the tunnel. The outlook for those looking for credit now is not so bright, a fact which has been confirmed by the Business Confidence Index hitting record lows for May. While the traditional lenders may be battening down the hatches, all is not lost for businesses looking to capitalise on a downturn economy. SA is following the route of the US and UK, where the alternate lending market is growing by leaps and bounds. The lightly regulated entrants such as specialist investment houses, asset managers, insurance funds, and peer-to-peer lending institutes offer fairly cheap and convenient finance. According to data analysis firm, Preqin, investors worldwide have raised almost $80bn for direct lending funds in the past
two years due to the rising demand from small businesses for alternative sources of finance. In the US, about 25% of loans to small to medium companies come from alternate lenders positioning themselves as ‘business development companies”. There are far more alternate lenders than many people are aware of. Currently there are well over 60 specialised finance providers, which exclude banks and private equity firms. These include specialised equipment finance providers, general and specialist finance houses and bridging financiers. We all know that there are opportunities to be had in a downturn economy. Sellers are more realistic and those who have access to capital have good bargaining power. Investors need to remain circumspect and check for the fundamentals. They should also be well capitalised before entering negotiations. The good news is that access to capital is still available. Some financiers have never seen deal flow like right now. n
BANKING & INSURANCE
BusinessBrief
61
August/September 2016
Are contactless cards cloneable?
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he security community has been demonstrating successful cloning of contactless transactions since at least 2012. Full cloning of cards is not possible, and current cloning methods can only rely on copying an out-of-date implementation of the contactless standard to be successful. There are two standards that contactless cards generally support: a legacy magnetic stripe compatible mode and an EMV compliant mode. The magnetic strip compatibility allows contactless cards to be used in the place of old swipe-to-pay technology. The EMV complaint implementations use secure cryptography and transaction checks that make even the most advanced cloning techniques obsolete. Contactless cards also support the new EMV complaint standards and therefore the entire card cannot be cloned, only the legacy implementation part of the card can be cloned. How is cloning of transactions done? A criminal needs to get a contactless reader within close proximity to the card he intends to copy. While reading of contactless data should be possible up to 10 cm, in practice this distance needs to be less than 5 cm to be reliable. The reason for the range limitation is that the contactless card receives its power directly from the reader, and sufficient power transfer is only possible at short range. The contactless card reader presents the victim’s card with a payment request that mimics that of a payment terminal. Different payment processors such as MasterCard and VISA have their own security implementations to attempt to provide security. The standards between these payment processors differ, however, and the cloning process is unique to the type of card. What can be done to prevent my card transactions from being cloned? At present customers need to insist that banks provide them with safe contactless cards that conform to up-todate international security standards. Secure contactless card implementations do exist, but many banks are currently not making use of these methods. While the legacy modes are sometimes required for successful transactions, there exist secure implementations of these modes that are not easily cloneable.
By Niel van der Walt | Security Research Consultant MWR Infosecurity | niel.vanderwalt@mwrinfosecurity.com @mwrinfosecurity
Furthermore, payment processors can update their systems to detect cloned cards and block them. Any cloning method will cause a detectable change in the payment details due to the sequential nature of payments. A break in the sequence is an indication that card cloning may have occurred. Is contactless technology safe? Contactless card crime is currently on the increase, but thus far the statistics show that it is of much less concern than other payment methods. Having said that, contactless fraud may increase significantly as criminals gain access to hardware and software that allow them to steal contactless information. It is the responsibility of the banks and payment processors to make sure they stay one step ahead of criminals by updating their contactless cards to use secure transaction standards. The failure at this point is not that the contactless standards are insecure, but rather that outdated standards are used. Implementing the available countermeasures to card cloning and other attacks would improve contactless card technology to a very high level of security. n
62
BusinessBrief
August/September 2016
MARKETING & SELLING
Why THE CUSTOMER isn’t always right… By Leon Coetzer | Business Development Manager | redPanda Software | leon.coetzer@redpandasoftware.co.za For outsiders, software development may seem difficult – of course – but relatively straightforward given the relevant training. Development partners are given the business problem or brief, the timeline, and the budget. From there, it’s happy coding… right?
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ot so much. Software development is an inherently complex and nuanced task, and requires both experience and talent to achieve the desired outcomes. It also requires an in-depth understanding of the systems and processes needed to get to a certain point. In the world of enterprise software development, there is more often than not a tussle between clients and development partners. Sometimes, clients want to keep certain elements inhouse, while working with partners on selected projects. This approach can be problematic, on a number of levels. For one, localised decision-making processes within the business often encumber in-house teams. The Finance department is fretting about budget, while the Marketing department is calling for delivery of something unrelated to the initial brief. The various departments usually have no understanding of the impact of their demands on the development process – which can lead to a great deal of confusion and unhappiness amongst internal development teams. In-house teams are often under-resourced, and pulled in many different directions. Because of the nature of their work, these teams often lack specialist knowledge – and are asked to deliver way beyond what they are actually capable of. Ditch the Control Freak In these instances, the client would benefit from recognising the business benefit of partnering with a software developer on full-scale projects – not just piecemeal tasks. And instead of clinging on tightly to control the process, the client has to trust the partner and allow them to do what they do best. Unsurprisingly, software development houses tend to attract leading talent, as developers, by nature, are looking
for projects that are both varied and challenging. They often have a different approach to problem solving, characterised by a creative and sometimes unconventional approach. Software development houses have a very specific process and approach to projects. This process is fine-tuned and improved over time, and is designed to produce work that can be sent to clients in small increments. In other words, the delivery and feedback process is built in – which ensures that no time or resources are wasted on elements of a project that don’t work/suit the business objectives. Measurement is Key When working with software development houses – as opposed to relying on in-house teams – there is an important measurement element that comes into play. With a development partner, businesses naturally take a closer look at the processes and outcomes – and measure the return on investment. Budgets and resources come under scrutiny, and clients are forced to be very strategic in their approach. For the development partner, it is therefore imperative to be able to demonstrate value and ROI – so that visibility for both parties is maintained throughout. This leads to the client and development partner taking equal responsibility – for what undoubtedly ends up being a more efficient and commercially successful outcome. It’s About Trust… Inevitably, during the course of any software development project, there will be times when the client and partner disagree. This shouldn’t be interpreted as problematic. Rather, if a transparent and trusting relationship has been established, then this can lead to healthy debate – and sometimes, new approaches to a difficult problem. In certain instances, the client has a key commercial objective in mind – which means that delivery has to be moved forward. As long as there is an awareness of the possible ramifications of each decision, then both parties can move ahead with confidence. n
MARKETING & SELLING
BusinessBrief
63
August/September 2016
THINK community! By Atiyya Karodia | Social Media Manager | NATIVE VML | atitta.karodia@native.co.za | @native
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hink back a number of years to a time when being a Social Media Manager or Community Manager was one of the most sought after gigs around. We were the explorers, testing out new platforms, strategies and above all – being the human voice to our brand’s purpose.
a few key points on great community management. We need to be fully immersed in the way our community talks, interacts, consumes and shares content if we ever hope to create and execute great ideas. Community management is more than a CRM tool, or a way to “improve brand sentiment”.
Then we learnt that Content is King and shifted our energy to creating crafted copy and creative executions that could live “absolutely anywhere” on social, and our glorification of community management got knocked down a few notches. The truth is that Content may be King, but without great community management, great content dies a slow digital death. It’s all about striking a balance and giving your content the best chance at success by understanding
Design messiah Todd Waterbury mentions that a key to building any brand is thinking about the relationship that consumers have with the brand. Once you’ve understood the state of the relationship, you have to think about the long term plan and steps to revive, repair or grow the relationship. Instead of having to “spray and pray” with a wide-reaching campaign, you get to take on the groundwork. Being a great CM (Community Manager) or
SMM (Social Media Manager) means going beyond. You have to be willing to go beyond passively engaging with your community. You also have to be a part-time strategist to gather the most useful insights; but those insights mean nothing if you aren’t listening to them. If your community engages less with video than they do with GIFs, why force another video their way in the hope that their consumption habits will change? Know your community, understand how they feel about you and interact with them accordingly. Keep your ear to the ground and listen to what your community has to say. Then take that information and create better content, deliver it to your audience in a better way and provide value. n
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64
BusinessBrief
August/September 2016
MARKETING & SELLING
Measurability is key!
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arketers and accountants are usually on opposite sides of the boardroom table, but in tough economic times, marketers need to begin speaking the language of finance to account for their role and impact or they risk becoming irrelevant. Technological and strategic developments are offering unprecedented opportunities for organisations to reach their customers, but marketing professionals are also facing bigger obstacles when it comes to delivering financial accountability in the boardroom. A major challenge to marketers remains measurability – and it’s becoming increasingly difficult as customer-driven strategies gain traction globally. There are certainly ways of monitoring activity, but it is difficult to develop an effective ROI model for all marketing channels. That’s because the conversation is in the hands of the customers, not the organisation. But how then can marketers look their executive in the eye and say that what they are doing is adding value to the business, especially in belt-tightening times? Marketers have got to be accountable or they risk irrelevance. A recent McKinsey report quantified the problem as follows: “In an ideal world, the financial returns and the ability of all forms of communication to influence consumers would be precisely calculated, and deciding the marketing mix would be simple. In reality, there are multiple, and usually imperfect, ways to measure most established forms of marketing. Nothing approaches a definitive metric for social media and other emerging communication channels, and no single metric can evaluate the effectiveness of all spending. Yet you must have a way to track progress.” Marketing’s many hats Marketing executives need to wear a corporate hat as well as a marketing hat in this rapidly changing environment, realising they are key players in organisational growth – or stagnation. They can provide accountability through numerous channels: building the business; driving shareholder value; improving
the competitive advantage; increasing profitability; or growing the brand and customer base – although there must be recognition that some assets are intangible. Brand equity is a very important asset. Building the brand drives shareholder value, and part of this is employee branding. But all these factors are intangible. The same applies to measuring the value of the customer base or building customer equity, which similarly increases shareholder value. Looking at marketing through an accountability lens has been instrumental in the success of major marketing campaigns. Most notably, when the company was approached with an offer to print flyers for a given budget, they considered alternative strategic uses of that budget. It opted instead to give the budget to the customer service department, so that in the event of a complaint, customers could be compensated. All of those “wow” moments got them far more business than a flyer insert. That’s innovative marketing. Innovative branding, he argues, must be customer driven – based on what makes the customer experience positive. Speak financial lingo With any luck, there will soon be a way to translate existing metrics into reliable financial data. Hopefully someone will soon undertake a Masters or PhD study on the subject and make a name for themselves as something of a specialist in that field. But as yet that has not happened. There is a strong expectation that marketers must be able to speak the language of finance at boardroom level. Tough economic times mean there will be pressure on South African organisations to make resources go further too. Whether it’s because tax has gone up or it’s going to be harder to depend on government sector spending, it’s going to require more innovation to achieve the same goals. It’s going to be about how to do more with less. It will be about working on methods that will show the results and the returns of marketing investments. If it’s not possible to show returns, companies are going to look for other ways to invest their resources, and competitors will come into the space that is not being addressed. Ultimately, it will be critical in the months and years ahead for marketers to develop the skills to be accountable, regardless of their strategies. Marketing needs to show how it contributes to the organisation, rather than operating on its own with its own agenda. n
By Professor Geoff Bick | Convenor of the Strategic Marketing for Executives course UCT Graduate School of Business (GSB) | geoff.bick@uct.gsb.ac.za | @UCTGSB
MARKETING & SELLING
BusinessBrief
65
August/September 2016
Building BRANDS digitally Africa is the second-fastest mobile adoption market in the world with almost a billion mobile phone subscribers. And, in South Africa, some 50% of active mobile phones are smartphone devices. This means that brands accustomed to dominating in predictable and controlled media environments are having to rethink how they reach and engage people.
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ith media costs comprising the biggest line item in any traditional advertising budget, advertisers with the deepest pockets used to be able to buy the attention of consumers. All that was required was to outspend any competitor brand to ensure your brand message cut through the clutter. Along came the internet followed by the world’s greatest disruptor - Mobile, leaving traditional media owners and advertisers scrambling to regain some form of control and assert their role in the lives of audiences. Internet and Mobile have both liberated and democratised the means of distributing and accessing entertainment, news, information and advertising. And, today, anyone with an internet connection and a mobile phone has the means and the appetite to be an active content curator and a potent media owner and distributor. As a result, advertisers are fiercely pursuing a new wave of empowered, fragmented and distracted audiences spoilt for choice by online video, video-on-demand, multi-screen viewing, podcasts, vlogs and blogs to name a few. The overreliance on the ubiquitous TV or radio ad and the ability to negotiate the lowest ad rates are no longer enough to continue building a brand successfully and sustainably. The terrain on which advertisers must continue to build brand equity and grow market share has been disrupted. But, navigating this terrain effectively and efficiently is made easier by adopting a brand communication mind-set that follows some simple rules: No one thumb to rule them all Advertisers must accept they now have to operate in a fundamentally democratised media and communications environment where the power resides in the thumbs of many, not in the pockets of a few. ‘Command and control’ thinking and access to resources have been replaced by collaboration as a source of competitive advantage, where authenticity, agility and responsiveness – not necessarily big production and media budgets - are often key determinants of success in building brand love and driving sales. While people actively seek out compelling content,
traditional advertising is imposed on them. Although brilliant pieces of advertising sometimes bubble to the surface and generate public interest, this is now the exception rather than the rule. The rule right now is that content created by individuals rather than companies gets the greatest attention. Take a look at what’s getting the most views and shares on Facebook, Youtube, SnapChat or Instagram. Missing from the top of the list is anything that appears contrived and sterile. Often, that’s exactly what you’re likely to get from that brand that steadfastly believes “If we build it, they will come - just make the logo bigger!” The information buffet While there is still a place for mass media to drive reach and scale, what these traditional channels previously offered advertisers in terms of aggregated audiences for news, entertainment and information, now competes with the needs of a generation who have an insatiable desire to feast on a buffet of information and entertainment 24/7/365 via multiple digital platforms on topics that are increasingly fragmented, highly personalised and infinitely diverse. There are an exhausting number of factors (including adblocking, programmatic buying and SEO) that advertisers now need to stay ahead of the curve on when making smart brand communication investment decisions. The ones mentioned above speak to the most overarching. Which is that no advertiser can afford to view what they communicate and where they communicate through two separate lenses. People no longer consume media, they consume content. And the choices they have of what content to consume, when to consume it and how they’ll consume it have never been greater. Why try and fight it? Embrace digital disruption and let’s continue building great brands. n
By Enver Groenewald | CCM Director | Unilever Africa | Barry.Dijoe@unilever.com | @UnileverSA
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HUMAN CAPITAL
Wrongful commands! An employee’s right to say NO?
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mployees are often placed in an uncomfortable position when given an instruction or command by an employer or superior that is wrongful. Wrongful could mean that the action would be contradictory to the employees understanding of common law, their individual morality, culture, dignity and professional ethics. What should the employee and of course the employer consider in such instances? Bound by common law Inherent in the common law duties of the employee is the obligation to submit him or herself to the directions of the employer. The employee is subordinate to the employer and has to adhere to its lawful instructions. Even under our (generous) common law, an employer may not issue unlawful instructions and expect the employee to blindly follow it. An employer may not instruct an employee to break the law, whether it is to commit murder, cook the books, or neglect to adhere to a statutory obligation. In Maneche & others vs CCMA & others, the Labour Court
confirmed that an instruction to employees to work overtime was unlawful where the employees had not agreed to work such overtime (and such consent was a statutory requirement). Muzzling the media? The public broadcaster recently suspended and then dismissed journalists following the latter’s refusal to abide by the broadcaster’s policy decision on broadcasting public protests. This raises the question of whether employees are always obliged to carry out their employer’s instructions. Professional obligation Journalists are obliged to report news and events accurately and fairly. In terms of the code of conduct of the Broadcasting Complaints Commission (BCCSA), employers (broadcasters) have to ensure that their employees understand the importance and significance of the code. The same code obliges licensees (the broadcaster) to “…report news truthfully, accurately and fairly.” It further provides that “news must be presented in the correct context and in a fair manner, without intentional or negligent departure from the facts, whether by distortion, exaggeration or misrepresentation, material omissions; or summarisation.” A court may be willing to accept that an instruction issued by a broadcaster that will prevent a journalist from complying with the BCCSA code is unreasonable. The constitutional rights to freedom of opinion and expression may also be relevant when a court has to consider the reasonableness of the workplace rule. The importance of the role played by journalists in an open and democratic society based on human dignity, equality and freedom may also convince a judge that the employees acted within the interests of society in disobeying the instruction.
By Johan Botes | Partner & Head of the Employment Practice Group | Baker & Mckenzie johan.botes@bakermckenzie.com | @bakermckenzie
HUMAN CAPITAL
Protected Disclosures Act Employees in the horns of such a dilemma may also consider the protection offered in terms of the Protected Disclosures Act (PDA) should they suspect that there is unlawful or wrongful conduct in the workplace. The PDA protects employees from occupational detriment where they act in good faith to report wrongdoing and then suffer as a result. Whilst it does not protect disclosures made for an ulterior motive, reporting wrongdoing that falls within the scope of the PDA could provide an additional level of protection against employees in vulnerable positions. Present the proof Four out of five dismissal disputes referred to the Commission for Conciliation, Mediation and Arbitration (CCMA) relates to dismissals for misconduct. A valid misconduct dismissal requires proof that the employee breached a valid or reasonable workplace rule or standard. What is reasonable? Issuing instructions that are unlawful are clearly wrong and would offend public morals. But what about instructions that do not contravene legal duties or obligations, but that may otherwise be unreasonable? When can an employee refuse to carry out an instruction because he or she feels it to be unreasonable? Will conflicting obligations owed to society or an industry body meet the test for refusing an order issued in contravention with such a duty? Professional duty Many professions are answerable to an industry body, code or greater
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An employer may not instruct an employee to break the law, whether it is to commit murder, cook the books, or neglect to adhere to a statutory obligation societal oversight. Pilots are not only subject to the instructions of the airline employing them, but also have to adhere to civil aviation legislation and regulations. Doctors and health professions have to act in accordance with the rules and guidelines of the Health Professions Council. Attorneys are bound by the Rules of the Law Society, advocates by the same issued by the Bar Council. In all instances the employees employed in such a position may be faced with a conflict where their employers may issue them with instructions that contrast with their obligations to society or an industry body. When, if ever, may an employee disregard an employer’s instruction and act in accordance with a wider responsibility owed? The short answer is that employees should act with care and diligence in determining whether they may disregard or refuse an instruction issued by their employer. Risk of anarchy! Employees who are not willing to be bound by their employer’s instructions run the risk of dismissal. Many employers will swiftly terminate the service of an employee who blatantly refuses to follow orders. Allowing employees to select which instructions demand adherence is a shortcut to anarchy
in the workplace. Courts are unlikely to have sympathy for employees who give the employer the two-finger salute, unless the employees can convince the court that the instruction was so unreasonable that no reasonable person in their position should have been expected to act differently. Steps for employees The steps taken by employees prior to (or short of) refusing to carry out the instruction may also be telling in determining the rationality of their decision. Where possible: • E ngaging the employer in discussion in explaining why the rule will impugn the employees’ or industry’s standard of reasonableness • Appealing to higher levels of management • F iling grievances or declaring disputes at the employment tribunal whilst doing the work under duress. • R aising the issue via a representative body such as a trade union or an industry body. The right to say no! Refusal to implement an unreasonable instruction should be a last-resort measure for employees at their wits end or who are confronted with morally repugnant choices. n
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Witchcraft at work! T
Using muti or traditional preparations to intimidate, scare or threaten a colleague constitutes misconduct and employers have the right to “remove such purveyors of darkness from their environment”. This was the outcome of recent arbitration proceedings before the National Bargaining Council for the Sugar Manufacturing and Refining Industry in the case of NASARIEU obo Mngomezulu vs Tongaat Hulett Sugar Limited (Darnall).
he case centred on whether Tongaat Hulett Sugar Limited (Tongaat) had unfairly dismissed Louis Mngomezulu, a boiler panel operator who was accused of using witchcraft to intimidate the company’s HR manager for operations, Khanyo Nxele.
This was after Ms Nxele found a black gummy substance on the door handle of her BMW, which had been parked in the company’s parking lot. She knew that her car had been clean when she arrived at work and, sensing something sinister about the substance, she prayed as she removed it from her car. She described the substance to a traditional healer, who believed it was harmful muti. After viewing CCTV footage, which showed Mr Mngomezulu as the only person near her car at the time, Ms Nxele reported the incident to the General Manager of the Darnall Mill. Believe it or not Mr Mngomezulu was charged with placing the safety, health and/or life of Ms Nxele at risk by placing the substance on and near her car, with the intention, “through the practice and belief in witchcraft”, to cause her spiritual, mental or physical harm. Mr Mngomezulu, who had been on a final written warning at the time, denied using witchcraft on Ms Nxele. He was subsequently dismissed and referred a dispute to the bargaining council for resolution, and later arbitration. The key issue before the council was whether Mr Mngomezulu had placed the substance on and near Ms Nxele’s vehicle and whether this amounted to an act of witchcraft intended to cause her harm. Respecting others’ beliefs A certified sangoma testified that, based on the description of the gummy substance, she believed it was “stap stap”, and various muti, and was intended to cause harm to Ms Nxele. The Commissioner found that the nature of the substance was not the critical issue – rather what was important was how Ms Nxele perceived it
and her reaction to it, including that it had immediately made her feel uncomfortable. During her deliberations, the Commissioner considered the right to participate in cultural life of one’s choice contained in section 30 of the Constitution and noted that “all aspects of African cultural beliefs, including witchcraft and the belief in supernatural forces, such as the ancestors, has to be recognised and endorsed.” She added: “The act of witchcraft does not have to achieve its purpose…for it to become an act of misconduct. The mere use of muti or traditional preparations to intimidate, scare or threaten another person is sufficient. The placement of the muti was an attempt to psychologically exploit [Ms Nxele] and create fear and panic in her, for herself and for her family and possessions. And it did cause her grief. This behaviour amounts to serious intimidation and cannot be tolerated in the workplace.” Justified dismissal The Commissioner confirmed that Mr Mngomezulu’s dismissal was justified due to his “reprehensible” behaviour in attempting to use a shared cultural belief system to intimidate a colleague. “That is unacceptable in any workplace and will most definitively break down a relationship of trust and cordiality that exists between an employer and an employee and between an employee and his colleagues,” the Commissioner held. This decision embraces the sentiments expressed by the Supreme Court of Appeal in the Kievits Kroon Country Estate (Pty) Ltd vs Mmoledi and Others 2014. An employee was dismissed after submitting a traditional healer’s certificate, rather than a valid medical certificate, as justification for time off from work. The matter proceeded all the way to the SCA, which dismissed an appeal brought by the employer. The SCA held that, had the employer appreciated the nature and purpose of the traditional healer’s certificate and its import, it could have accommodated the employee’s request. n
By Irvin Lawrence, Director and Crystal Naidu, Associate, ENSafrica cnaidu@ENSafrica.com; | ilawrence@ENSafrica.com | @ENSlaw
HUMAN CAPITAL
BusinessBrief
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August/September 2016
Global recruiting TRENDS
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By KC Makhubele | President | Federation of African Professional Staffing Organisations (APSO) president@apso.co.za | @APSOZA
he need and demand for talent is massive and continues to increase. Recruiters are going to have to take an even more strategic and technical approach to talent acquisition and differentiate themselves from competitors if they want to succeed. Cellphone Recruitment: We live in a hyper-connected world in which 43% of candidates use their cellphone to search for jobs. As such, it is fast becoming the preferred method for job applications. Recruiters should ensure that candidates can complete and submit a job application from any mobile platform. Video Recruitment: More and more recruiters are realising that a video is worth a thousand words and can have a profound impact on selling candidates. Video is also being used as a way to
advertise jobs and it’s predicted that this year, recruitment sites will be jam-packed with insightful content to capture the attention of candidates. Resumes are relics: Say farewell to the humble resume and hello to online profiles. This year, it will become essential for recruiters to utilise social professional networks, like LinkedIn, when searching for and placing talent. Do you speak GenY? Generation Y (born between the early 1980s to around 2000), are entering the workforce en masse. Recruiters should start thinking about how they will deal with this tech-savvy, globally minded generation. 61% of millennials feel personally responsible to make a difference in the world, 50% want to start their own business, or have already done so and 44%
are not expecting to stay with an employer for more than two years. Employer Branding: LinkedIn’s 2016 Global Recruiting Trends report says employer brand has re-emerged as a top priority. Quality candidates won’t apply to a company if they can’t find enough information about the company online. What HR professionals will be focusing on: LinkedIn notes that in 2016, talent leaders will continue to value quality of hire as the most important metric to track performance, and most organisations are measuring it with employee turnover. This could be why employee retention has emerged as a top priority. Also, employee referral programs are a key source of quality hires and are growing as a long-term play. n
A BUSINESS APPROACH TO RECRUITMENT Many recruiters can give me: Web based applications, electronic responses to my posted positions, and internet matching of candidates and positions
My recruiter: • Uses traditional head-hunting and recruitment skills • Visits my business and understand my requirements • Conducts definitive personal interactive interviews and reference checking • Has sound operational business experience and understanding of my business • Would definitely employ for themselves the people they send to me • Can interact with candidates on a business level to get the best information
Head-On Recruitment YOUR BUSINESS | YOUR CALL | YOUR CANDIDATES For your Recruitment Solution Contact:
Arlaine’ Kramer | Email: arlaine@head-on.co.za | Tel: 011 026 6000 | Cell: 082 884 1144
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August/September 2016
Managing employee performance South Africa has come a long way since the first democratic elections in 1994, but in the field of education, many inequalities still remain. As the late Nelson Mandela once said, “education is the most powerful weapon which you can use to change the world”. In order to achieve this, however, access to good, affordable education is essential – and perhaps this is where SA is missing the mark. It is important that performance objectives are defined in very specific terms. Various guides are available to help organisations, managers and employees define stretch objectives including the widely used CSMART approach.
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anaging employee performance remains a key element of ensuring that businesses remain competitive by executing their strategies better and more efficiently. Employee assessments Performance improvement cannot be achieved through traditional performance management approaches that focus primarily on employee assessments. For this reason top organisations are improving their practices. In order to bring your organisation’s performance management up to date, the setting of clear performance objectives at the right levels of stretch, followed by more regular, real-time and forward looking conversations on performance between managers and employees is key. The right level of stretch This is the level of performance that encourages employees to do more than what is normally expected so that they can improve or sustain desired performance outcomes.
This approach refers to defining objectives that are challenging, specific, measureable, achievable, and realistic and time bound. Real-time conversations Organisations should endeavour to create an environment where great conversations about the business are the norm and people are generally encouraged and feel it is safe to participate in them. Performance focused conversations should be held whenever support is required to make progress or when progress has been made. It is especially important to ensure that issues that impact on performance are addressed quickly.
to focus on and get the support they need to deliver great results. Using a Reward Specialist Where organisations are aiming at improving their performance management practices, the use of a Reward Specialist is suggested. Reward Specialists generally ensure that their organisation’s total reward strategies and policies are formulated and implemented in a way that rewards people fairly and consistently in line with the value of their skills, knowledge and experience. They particularly have to ensure that performance based rewards encourage employees to maximise their performance. Remuneration options Bonus plans, incentive schemes or stock options must fairly reward employees for achieving stretch performance objectives and contributing optimally to the success of the organisation.
Keep it regular Traditional performance management approaches advocate set intervals, however, whilst this may work for some environments, it does not work in others.
As performance is a key decision factor for such schemes, a Reward Specialist has to ensure that their organisation’s performance management practices are effective and are therefore a sound basis on which to make performance based reward decisions.
Flexible approaches are often necessary to cater for any event that may impact on an employee’s understanding of what they need
It is also important that they ensure that such schemes are motivational and speak to the needs and desires of the employees. n
By Lindiwe Sebesho | President | South African Reward Association (SARA) | Lindiwe.Sebesho@absa.co.za | @Lindi01Sebesho
HUMAN CAPITAL
BusinessBrief
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August/September 2016
Reading your payslip PROPERLY By Nicolette Nicholson | Director | South African Payroll Association (SAPA) | nicolette@presclean.co.za | @SAPayroll
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ayslips are among the most important documents people receive, yet few pay enough attention to them. Too many people just see their payslip as confirmation that their salary has been paid and they can relax. In fact, it’s an extremely important document and it’s worth checking it carefully to make sure it is accurate. Mistakes could cost you dearly in the long run and you are responsible for making sure the payslip is accurate. Everybody should file all the payslips they ever receive and keep them forever! A record A payslip is first and foremost the irrefutable record of a person’s work service for any employer. It provides factual proof of the jobs he/she have held and what they were paid. It’s also the receipt for work performed and should be carefully compared with the letter of appointment, contract or other official documents to ensure that a person’s work is being properly rewarded. Also confirm that the correct employer name and address appears on the payslip. Payslips typically have four main types of information: the fixed salary or contract of employment; the variable income for things like overtime; the deductions area, which would include statutory and personal deductions; and the statistical area, which includes annual and sick leave, job description and so on. Job descriptions are often omitted to avoid potential conflict between employees, but this is not good practice. Deductions A particular point to notice is that personal deductions cannot exceed 25% of a person’s gross pay, and businesses have the responsibility of protecting their workers’ interests here. This means, for instance, that a company’s payroll department has the obligation to act on statutory deductions and, in the case of an emolument order, contact the attorney if the garnishee exceeds this ceiling and guide the employee to make arrangements to lower the repayment value on the court order. However, the onus still falls on employees to check these deductions carefully. Staying with deductions, it is also critical to check that
contributions to pension or provident funds, among others, have been properly made. If the incorrect deductions have been made, it will affect retirement income and pay-outs, as well as death benefits. Another important figure to check is tax and unemployment insurance deductions. The employee should also ensure that these deductions have actually been paid over to the taxman and Department of Labour respectively on the IRP5 certificate issued at the end of the tax year. These authorities will hold the employee liable alongside the employer if the right taxes are not paid. Structuring Payslips will also reflect how an individual’s pay is structured and it’s prudent to make sure that this structuring is legal and harmonises with the job description. For example, travel benefits that are simply there to help reduce the tax liability are not advisable. Tax evasion, or actions aimed at not paying tax, is a very serious offence and carries jail time; while tax avoidance that refer to using legal ways to reduce tax, is less serious, but can attract a fine of up to 200%. It is good practice to ask for a dummy payslip before accepting a job. This will enable a person to determine whether the deductions are fair and that take-home pay is at the expected level. If there’s something on your payslip you don’t understand or don’t agree with, take it up with your immediate boss, who will escalate to the payroll department. If you don’t get satisfactory answers, your union representative should be able to help. n
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INFORMATION TECHNOLOGY
Innovate in isolation at YOUR peril By Vish Rajpal | Group Executive of Business Solutions | Business Connexion | Vish. Rajpal@bcx.co.za | @bcxglobal
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ndustry disruptors are forcing traditional organisations to move out of their comfort zones and unless they have a solid innovation strategy and roadmap in place to compete, they run the risk of becoming obsolete. Gone are the days where a slight change to a product or solutions could be classed as innovative. Today’s fast changing business environment demands that real innovation takes place in real time. Organisations can also no longer innovate in isolation. We foresee that we are going to see a lot of consolidation going forward where traditional organisations will collaborate with smaller companies and start-ups to stimulate further innovation. Why is innovation so important? Innovation is at the core of industry as the world becomes more digitised. A company that does not innovate will eventually become redundant and cease to exist. As our clients and their specific needs evolve, so should we. If we don’t, they will simply find a more innovative partner that can meet their requirements at a much faster pace. The problem is that many organisations have become complacent and because they consistently apply the same thinking, they keep getting the same results. Unless they start doing things differently, they won’t survive. More brains, more gains According to Gartner’s
2016 CIO Survey the five key bimodal practices, that deliver the highest improvement in digital performance, are the least used by CIOs. The five practices that have the highest correlation to digital performance were crowdsourcing, differentiated funding, differentiated metrics, working with start-ups and formal innovation management. Through crowdsourcing, organisations leverage the collective intelligence of a group of stakeholders to solve a problem. Crowdsourcing opens up the organisation to a much broader range of ideas, making it a lot easier to come up with innovative ideas to implement for clients. It ensures that organisations don’t stagnate and that industries are able to move forward. Gartner does, however, believe that while crowdsourcing is a very powerful tool, risk-averse organisations might be sceptical when it comes to implementing it. Targeting the right audience with a very specific challenge to solve is critical to crowdsourcing success. It requires a very different way of thinking and working, which makes many of the most traditional organisations nervous. Once they can get over that initial hurdle, it opens up tremendous opportunities to come up with new ideas that can then be tested and developed further. Are there more changes on the cards? A shift towards crowdsourcing could see consolidation in the market and traditional organisations partnering with disruptors. Once organisations start seeing the benefits of crowdsourcing as part of their innovation strategies, they will be more open to partnering with non-traditional companies. This eliminates the fragmented approach to innovation, opening many further-reaching opportunities for companies and communities alike. It also creates an opportunity for less risk-averse entrepreneurs to adopt the potential solutions to test and develop them further, creating even bigger economic opportunities. n
INFORMATION TECHNOLOGY
BusinessBrief
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August/September 2016
Social media ROI? By Bianca Quinn Diavastos | Head of Business Solutions & Strategy | 25AM | BiancaQ@25am.net | @_25am
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illions of South Africans today depend on social media to keep in touch with the information and people that matter to them – whether they’re watching the Twitter war between DJ Zinhle and AKA, keeping an eye on running commentary about President Zuma’s state of the nation speech, or simply sharing personal photographs with their friends and families. More than 36% of SA’s people (13mn-plus users) are active on Facebook today, giving just one illustration of social media’s growing reach. In addition to the fact that social media is starting to rival television and radio in terms of its reach, it also drives levels of engagement that make it an exciting platform for speaking to customers. Yet, despite its prominent role in our customers’ lives, many brands and marketers are struggling to come to grips with how they measure their return on investment from social media campaigns and strategies. Part of the complexity comes from the fact that social isn’t just about audience numbers, circulation, clicks or conversions – it’s also about trust and relationships. That means we need to measure social media results by quantitative metrics as well as qualitative outcomes. But before deciding which tools to use to measure social media results, marketers should decide what their business objectives are so that they can determine how they will measure the results. Measuring what matters Brands that invest in social media – whether we are talking about paid social media ads or owned social media channels – need to decide how they will use it to further sales, marketing and branding objectives. For example, is the aim to nurture customer relationships and improve service? Drive prospects
to an e-commerce website? Gain insight into customer needs or build brand awareness? Once a marketer has decided on the goal, he or she can start thinking about which social media channels are the best fit and decide how to measure success. It’s worth remembering, for example, that Twitter can be a powerful tool for disseminating news and addressing customer service queries, while Facebook can be good for direct marketing. It’s wise to keep these metrics simple: for example, increase web traffic by five percent, improve share of voice in a topic, or improve SEO rankings for brand keywords. In addition to these hard numbers, remember to look at more qualitative elements such as how well you’re doing in building trust and relationships. These may be harder to measure, but they’ll also have a positive result on the quantitative elements you are tracking. The tools of the trade Luckily, marketers have a range of powerful tools today to help measure social media’s business results. You can use Google Analytics to track how your social activity is driving people to your site, as well as which social content is helping to increase engagement with your brand. You can see, for example, how visitors from different social sources behave on your site, which blog and social posts attracted the most traffic and how social media is impacting on your conversion goals. Most social media platforms – including Twitter, Facebook and LinkedIn – also offer marketers powerful tools they can use to track user engagement with their content. More and more marketers are using social listening tools, such as BrandsEye to get a wider perspective on how their social media efforts are building the company’s brand and
reputation. Social Listening tools can also listen to sources like blogs, forums and news, in addition to social media. They can enable marketers to track their share of voice compared to competitors and customer sentiment about their brands, products, services and campaigns. And they can also alert brands to specific social media topics and conversations that need their attention. For example, an airline can see if a passenger on a delayed flight is tweeting a complaint, and respond with advice. Making things right at the moment a customer has a problem can build loyalty and create positive sentiment for the brand. Closing words Social media isn’t just about sales and direct return on investment, so marketers should focus on the value of the relationships they build with customers. It’s hard to measure trust directly, but one can see it reflected as metrics such as customer survey results, social media sentiment, and sales improve. Social media isn’t a short-term campaign – it is a long term strategy for building customer relationships and growing the business. n
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INFORMATION TECHNOLOGY
Information security misconceptions Every time the headlines flood with a new story about a breach at a major organisation, the assumption is that the attackers got in due to a high level of sophistication, or through careful studying of their target looking for the weakest link in the security chain.
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n truth, most security events are a result of a badly configured cloud gateway between local and public cloud infrastructures, inadequate authentication methods or even because the company considered itself too small or unimportant to be a target in the first place. There are several widespread enterprise security misconceptions have had disastrous consequences on more than one occasion. Firstly, the notion that your company is too small or unimportant to be of interest to cyber criminals. Believing your data is not valuable enough to be worth the effort of a criminal’s part, is dangerous. Data of all types, be it HR records or billing receipts, login credentials or even telemetry information, can be used to perpetrate spearphishing attacks or social engineering schemes. Moreover, smaller, less secure entities are often used as a stepping stone to more lucrative thirdparty partners.
Another misconception is that public clouds are more easily breached, because cloud providers are responsible for security. In truth, too often security experts fail to properly configure cloud environments and applications, leaving them vulnerable to attacks. Of course it’s easier to blame someone else, and public cloud providers are a useful scapegoat, despite the fact that they offer a wide range of tools and solutions for enforcing security. Their main responsibility is really to ensure the IT infrastructure and applications themselves are operational – with the least possible downtime. The company making use of public clouds should be doing everything within their means to protect and secure their data, and have controls in place for preventing any unauthorised access.
In the business world, strong authentication is touted as an acceptable security practice, but, without multi-factor authentication, it is not an effective solution, and access to critical systems can easily be lost. A massive error is thinking that a single password, albeit a strong one, can keep attackers out. Password strength is only a good solution when it is in conjunction with multi-factor authentication. The next misconception is that anti-virus solutions and firewalls are a total solution. While both of these solutions are parts of the chain needed to protect your network and data, simply deploying these on your infrastructure will not have a hope of keeping any sophisticated threats or attacks at bay. The threats we see today are far more sophisticated and complex, and the attack surface has widened to include a multitude of threats, from simple data-harvesting malware Trojans to ransomware and advanced persistent threats delivered over a plethora of devices that connect to the company network. Today’s threats have morphism capabilities built in, that make it highly unlikely for traditional security solutions to detect malicious payloads, and also leverage unpatched software vulnerabilities to breach critical systems. A layered approach to security should include SIEM, analytics and netflow monitoring too, to detect and respond to any anomalous behaviour that might indicate a new or unknown threat. There is also the incorrect assumption that software updates and patches prevent attacks. Installing the latest updates and patches will lower the risks of attackers exploiting known vulnerabilities, that is true, but there is also the question of deploying these updates across the entire organisation in a timely way, as well as the danger of cyber criminals exploiting unknown vulnerabilities or zeroday attacks – to compromise a particular company system or endpoint. Security is a difficult and ever-changing topic. Businesses need to be responsible for security breaches and shift the paradigm from assigning blame to playing an active role in designing incident response plans, as well as identifying their most valuable assets and focusing security efforts on those. n
By Lutz Blaeser | Managing Director | Intact Security Lutz.b@intactsecurity.co.za | @IntactSecurityS
INFORMATION TECHNOLOGY
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August/September 2016
Apps boost PROFITS & productivity! By Gary Turner | Managing Director | EMEA | Xero | Sales@xero.com | @garyturner
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ccording to the OECD, labour productivity in SA has trended downwards since 2011 – and, in the 47 years between 1967 and 2014, it’s declined by 41%. While this is concerning, it hasn’t hampered SA’s thriving small business community as confidence is running high: according to research recently conducted by Xero and WWW, some 58% of small business owners anticipate growth within the next year. To drive growth and make immediate, impactful improvements to productivity, small businesses should focus on technology: it plays a crucial role in maximising efficiency and generating profits. It’s encouraging that many South African small businesses already recognise this: 47% consider it “very important”, while 19% go as far as to call it “essential”. However, we still have some way to go, as 26% consider PCs to be necessary business tools, and only 6% consider their internet connection to be crucial. A mere 4% of respondents believe smartphones to be essential – and 10% don’t have one at all. So if you’re a small business owner looking to increase profits and efficiency, your top priorities should be to rethink your approach to technology and, in particular, consider how mobile apps might revolutionise the way you run your business. Which apps can help me simplify my business? 40% of South African small businesses rely on paper records and spreadsheets, and research suggests that 88% of these spreadsheets contain errors. When you’re handling sensitive data, it’s important that it’s done quickly and accurately. The age of the app has given rise to more SME-friendly tools. It’s now possible to automate and consolidate functions like payroll, bookkeeping, training, and marketing – and if you take advantage, you’ll spare yourself a big headache. Within the mobile Salesforce dashboard, for example, you can manage customer relationships, monitor employee work performance, and send marketing
material with Pardot – much easier than logging in and out of several different applications. What’s the most cost-effective option? Some 39% of the businesses we surveyed reported cashflow concerns, which have a direct influence on whether or not the business can afford the tools it needs. An increase in labour productivity only matters if you’re making money – which becomes exponentially more difficult if the tech you’re using is unaffordable. Where enterprise software can be exorbitant on a perpetual license, tools like Slack, CamScanner and Evernote offer unlimited free plans for smaller teams. If you need to scale up, you can usually upgrade to premium for a reasonable monthly fee – significantly cheaper than an outright purchase. Which apps can give my team more flexibility? The modern employee demands flexibility, and modern apps can give it to them. Project management software like Trello and Asana make it possible to keep track of individual tasks and assignees, while the cloudbased hosting service of Dropbox allows you to access whatever you need from anywhere across the globe. What’s more, you don’t lose anything by allowing your employees to work in their preferred way: it actually has a positive effect on their productivity. That said, adopting technology isn’t just a means of improving labour productivity. It’s a chance for South Africa’s SME community to give itself a shot in the arm. The analogue world is receding further into the distance. We are in the age of the app, the smart device, and the hot desk. Soon enough, we’ll be in the age of the ‘Internet of Things’. If small businesses make strategic use of the right apps, they’ll not only improve productivity and profits: they’ll carve out a place for themselves in a bright – and notso-distant – future. n
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PROCESS & OPERATIONS
Why is outsourcing a DIRTY word?
A
mongst South African business leaders, outsourcing is still something of a dirty word. For many, it denotes weakness and an inability to properly grow and manage all the traditional aspects of a successful company. Yet this is an outdated view – and one that does not take into account today’s complex business and operating environment. Given the fast pace of change, ongoing technological development, and prevailing uncertainty, savvy businesses are focusing on their core activities. They understand the importance of holding strategic functions close, and then looking to external partners to fulfil those roles where specialisation is not needed. In the 13th annual Barloworld Logistics supplychainforesight programme, which explored how companies have changed and adapted over the years, the prevailing attitudes toward outsourcing became clear. The report found that there appears to be a high adoption rate for both supply chain technology and supply chain and logistics skills development; however, ‘the full impact or value thereof is not yet being realised.’ Even though supply chain outsourcing is shown to have a positive impact for companies, the adoption rate seems to be low. This is interesting to note and is in contrast to general shifts seen in the market, both locally and internationally. Moreover, outsourcing also appears to be off the radar for future strategies which raises the question: is the true nature and value of the
concept of outsourcing understood? Based on the report findings, the dominant perceptions seem to be based primarily on the ability to control functions more effectively if run internally as part of the company. If, however, there is a specialised external organisation that can perform certain functions more effectively, efficiently or faster, consideration needs to be given to outsourcing such functions through strategic relationships. Like the outsourcing of manufacturing or IT management, outsourcing of logistics management and logistical activities can - and often are - an essential component of gaining access to specialised skills and creating and sustaining market share…and a competitive edge. Interestingly, the survey reflected willingness to ‘partner’ with external suppliers/ providers, but a negativity towards ‘outsourcing’ – which perhaps indicates an entrenched misperception of the concept. Shift Towards Specialisation Today’s operating environment is undoubtedly far more complex and fast paced than that of even a decade ago. As a result, there is a marked shift toward specialisation – and the ability to offer niche products and services. Yet in order to achieve a high level of specialisation, leadership needs to cede control of those non-core or non-strategic functions. So, for example, as a retailer, can you shed your IT department in favour of partnering with a more agile and nimble cloud-based provider? If there are better IT skills available elsewhere, then why spend money on maintaining an internal team? The challenge for leaders is to make this shift – and recognise which strategic functions to keep internal and prioritise, and which non-core functions would be better serviced by external partners. It is important to note that as this shift takes place, success and sustainability of the outsourcing model will come down to the quality of relationships. For leaders, it is critical to understand where the business is at, as well as the positioning and future trajectory of its key partners and suppliers. While outsourcing was traditionally perceived as a ‘master servant’ relationship conducted at arms length, this is no longer the case. True outsourcing today is about partnering and sharing information around the critical facets of a business and its moving parts, and conducting a relationship characterised by trust and transparency. n
By Kate Stubbs | Head of Marketing | Barloworld Logistics | kstubbs@bwlog.com
PROCESS & OPERATIONS
BusinessBrief
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August/September 2016
SECURITY – it’s about planning for failure As the world continues to become increasingly connected, organisations are faced with large quantities of data they need to protect and make sense of. International Data Corporation (IDC) predicts that 66 percent of CEOs will have digital transformation at the centre of their corporate strategy and 65 percent of large enterprises will become information-based companies, significantly increasing the value of their data assets by 2020. By Jon Tullett | Research Manager | IDC Sub-Saharan Africa | jtullett@idc.com | @IDC
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rganisations must, therefore, stop talking about security and rather focus on the risk to highvalue data assets. It is about time the industry focused more on risk rather than the traditional security measures of the past. The fact is, you are always under threat and, therefore, your security strategy needs to be designed in such a way that you are proactively assuming that it will fail. If you plan for failure, you will have the necessary contingency plans in the event of a breach to ensure you can protect sensitive data. Transforming your organisation’s security practise in isolation will result in failure. The majority of digital transformation projects done in silos will ultimately fail and security transformation is no different. The threats your organisation faces will always move faster than you, which means you will always be reactive and, by definition, your security practice will always be behind. It’s a question of how far behind. Throwing money at the issue will not make the problem go away. Security is a long term investment and every individual thing you do is not necessarily measurable on its own. Organisations have to take a long-term view and realise that this is an ongoing investment. It’s about risk rather than security Quite often security investment is done backwards. Organisations buy solutions under the assumption that they need it and that it is going to work. They should, however, start with risk profiling. Classify your assets so that you know what you’re protecting and then you can put the
appropriate measures in place. Ensuring that your entire organisation is more aware of the risks is also crucial. The user isn’t thinking about the risk they are creating for the organisation and that’s not their fault. The majority of users also don’t care about the business losing data, but it is a different story when it impacts them personally. By turning the security operation into a champion that is educating them on how to preserve their personal data, they will become more security aware individuals and will be less likely to expose the organisation to risk. We are seeing a movement towards deconstructing security. Where in the past organisations invested in huge monolithic security stacks, they are now moving towards more agile strategies, with smaller components. In the event of a breach, this allows them to realign their resources fairly quickly and recompose them into new solutions, on demand. He adds that this implies growth in managed security services, as many organisations do not have the capacity or skills to do this themselves. Going forward it will be about creating better layers of security. Protect as much as you can, but also ensure that you can detect, mitigate and isolate breaches in real time, and do it in a way that is aligned with the value of the asset you are trying to protect. Unfortunately, most organisations have not classified their data effectively and therefore they don’t have sight of where that data resides, who has access to it and where it is moving to. More importantly, they don’t understand the future value of their data asset. n
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PROCESS & OPERATIONS
MAXIMISE return on your BCM
H
ow do you ensure that the time and money spent on business continuity is yielding the desired results? As business continuity management (BCM) becomes more important as a way to mitigate risk and create peace of mind, ensuring the money and time spent on BCM yields the desired results is critical.
Organisations need to be certain that the BCM programme they have in place is realistic, and that it will work. One of the best ways of answering these questions is to measure how mature the BCM plan and capability actually is. Measuring, as we all know, is the first and vital step to managing anything. Critical BCM success factors that make the logical areas against which BCM maturity should be judged: • Executive support, including a proper business case for BCM, BCM objectives and framework, a steering committee, budgetary commitment, and policies and procedures. • Resources and expertise. Is there a skilled team with defined roles and responsibilities, and is its performance appraised? • Core enterprise impact and threat management to understand the impact of disasters on critical business processes and what the resource dependencies are. It is also important to identify threats and single points of failure, as well as the measures for
mitigation. • Extended enterprise impact and threat management to cover risks relating to regulators and supply chains • Continuity strategies and tactics for each of the resource dependencies based on a cost/ benefit analysis. What BCM strategies have been selected and how are they being implemented? • Incident management framework that covers strategic, tactical and operational areas, including a communications network. • Emergency response framework—the subset of the incident management framework that focuses on protecting the organisation’s most valuable asset, its people. • Reputation and trust management, with procedures, policies, infrastructure and teams in place to protect the second-most valuable asset, the brand. • Solution implementation. Is the implementation strategy fit for purpose, and is the appropriate infrastructure in place. It is also critical to ensure that the identified risks are continually monitored, and that servicelevel agreements are in place to provide dependency assurance. • Business recovery and resumption can take place within the agreed recovery time objective. • Validation and assurance to ensure that the BCM solution is exercised and tested—probably the single most important success factor. • Management system and continuous improvement to ensure that BCM is integrated into existing management systems and that the BCM capability is continuously improved. Each of these success factors can then be regularly assessed in terms of the existing best practices, the day-to-day practices within the organisation, the resources allocated to them and the underlying policies and procedures. Scores can be given for each component of each factor in each business unit and geographical location. This granular approach effectively highlights areas of notable success or failure in terms of different criteria. It is extremely useful in pinpointing areas meriting investigation, and thus acts as a diagnostic for over- and under-performing areas. More important, it offers a way to plot the path towards improvement and helps to set realistic time frames – and because it is score-based, it provides a way to quantify progress, and thus return on investment. n
By Karen Humphris | Senior Advisory Manager | ContinuitySA Karen.humphris@continuitysa.co.za | ContinuitySA
PROCESS & OPERATIONS
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August/September 2016
Air emissions COMPLIANT! By Wouter Jordaan | Associate Partner & Principal Environmental Scientist | SRK Consulting wjordaan@srk.co.za | @SRKConsulting While a number of large South African companies have had to ask for postponements until 2020 to find ways of meeting government’s emission targets, many firms are already discovering they can reduce emissions while actually cutting energy costs – through cogeneration strategies.
S
A is in the early stages of an exciting journey in cogeneration, with a reported potential of over 2 000 MW of electricity from hot gases in mineral smelters and chemical plants alone. Cogeneration refers to the combined production of heat and power, as well as to the production of energy from a waste product or residual product from industrial processes. In countries like Germany, cogeneration is well proven to make primary energy production more efficient and to reduce carbon emissions. Cement kilns are another good example of where cogeneration can not only reduce emissions but also save on the cost of waste disposal. These are highly energy-intensive plants, but careful selection and treatment of waste can lead to an energy source with
Connecting People...
much fewer noxious emissions than coal, the fuel usually used. Clients have achieved substantial savings by being innovative about their waste products; the transportation of waste was often a severe drain on company resources, so strategies to keep waste on site and put it to productive use are worth exploring for their commercial merit. Tightening of controls regarding liquid waste on landfill sites is another factor that is encouraging firms to reconsider their waste management options. Advancing technologies offer a range of alternatives to dewater waste material – possibly rendering it suitable for use as a fuel source; these processes could also serve efforts to conserve water and make it available for other purposes. A strategic evaluation of plant optimisation options was a good way to begin the path to greater compliance while restraining the cost base. n
Connect with us t. 011 440 3430 m. 083 407 2690 e. vickyb@limemarketing.co.za
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CONTRIBUTORS
As a service to our readers, we have listed this issue’s contributors, together with their contact details. Should you require more information or consultation on these topics, please contact the company or firm concerned.
VIEWPOINT
Afriwise Consult Deloitte South Africa EY UCT GSB
+27 +27 +27 +27
(0)10 (0)11 (0)11 (0)21
596 806 772 406
8518 5000 4805 1911
afriwise.com www2.deloitte.com ey.com gsb.uct.ac.za
MANAGEMENT
KPMG PwC Regenesys Business School The Ethics Institute UCT GSB
+27 +27 +27 +27 +27
(0)11 (0)11 (0)11 (0)12 (0)21
647 797 669 342 406
7111 4000 5000 2799 1911
kpmg.com/za pwc.co.za regenesys.net tei.org.za gsb.uct.ac.za
Independent Agency Search & Select Kelly Talent Africa The Institute of People Development UCT GSB
+27 +27 +27 +27 +27
(0)10 (0)11 (0)11 (0)11 (0)21
594 628 771 315 406
0281 agencyselection.co.za 0300 kelly.co.za 4800 talent-africa.co.za 2913 peopledev.co.za 1911 gsb.uct.ac.za
Bowman Gilfillan Litigator Norton Rose Fulbright Roodt Inc.
+27 +27 +27 +27
(0)11 (0)11 (0)11 (0)11
669 783 685 685
9000 bowman.co.za 8017 litigator.co.za 8500 nortonrosefulbright.com/za 0000 roodtinc.com
Grant Thornton KPMG RSM South Africa Yellowwood
+27 +27 +27 +27
(0)10 (0)11 (0)11 (0)11
590 647 329 268
7200 7111 6000 5211
Garlicke & Bousfield KPMG LexisNexis Sasfin Bank
+27 +27 +27 +27
(0)31 (0)11 (0)31 (0)11
570 647 268 809
5300 gb.co.za 7111 kpmg.com/za 3111 lexisnexis.co.za 7500 sasfin.com
ASSETS & INVESTMENTS
10X Investments Old Mutual Corporate Standard Bank Taquanta Asset Managers
+27 +27 +27 +27
(0)21 (0)21 (0)86 (0)21
412 509 012 681
1010 9111 3000 5100
10x.co.za oldmutual.co.za/corporat standardbank.co.za taquanta.co.za
BANKING & INSURANCE
MWR Infosecurity Paragon Lending Solutions PSG Insure Sanlam
+27 +27 +27 +27
(0)10 (0)21 (0)86 (0)21
100 418 110 947
3157 2555 1179 9111
mwrinfosecurity.com paragonlending.co.za psg.co.za sanlam.co.za
MARKETING & SELLING
Native VML redPanda Software UCT GSB Unilever Africa
+27 +27 +27 +27
(0)11 (0)21 (0)21 (0)31
555 680 406 570
3800 0900 1911 2000
vml.com/native-vml/ redpandasoftware.co.za gsb.uct.ac.za unilever.co.za
HUMAN CAPITAL
APSO Baker & McKenzie ENSafrica SAPA SARA
+27 +27 +27 +27 +27
(0)86 (0)11 (0)21 (0)11 (0)11
142 911 410 061 061
6282 4300 2500 5000 5000
apso.co.za bakermckenzie.com/SouthAfrica ensafrica.com sapayroll.co.za sara.co.za
IT
25AM Business Connexion Intact Security Xero
+27 +27 +27 +27
(0)21 (0)11 (0)11 (0)72
487 3160 266 5111 314 0293 791 8666
EDUCATION & TRAINING
LEGAL
TAX
FINANCE & EQUITY
PROCESS & OPERATIONS
Barloworld Logistics ContinuitySA IDC SRK Consulting
+27 +27 +27 +27
(0)11 (0)11 (0)11 (0)11
445 554 517 441
grantthornton.co.za kpmg.com/za rsm.global/southafrica/ ywood.co.za
25am.net bcx.co.za intactsoftwaredistribution.co.za xero.com/za
1600 barloworld-logistics.com 8000 continuitysa.com 3240 idc.com 1111 srk.com
15180
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vwcommercial.co.za BusinessBrief
The New Caddy Panel Van and Crew Bus.
NEVER ANSWERABLE C disclosure ORDERS
O contravention VALID labour court N OBLIGATIONF L I C T EMPLOYEE’S RIGHT TO SAY NO? Disclosure misconduct prescripts Reasonable
WRONGFUL RISK
COMMANDS! GUARANTEE Negativity
MATTERS THAT MATTER
principles DIRECTIVES C o mm o n L a w I
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request C
L FIRED! Rebuttal Dismissal L E ACCURACY WORK i F PREVENTING I O G nI GN E I s R D i l e m m a NS S understanding judgefreedom t E CE L unreasonable fairness r TRAVEL p r e v&eOYSTER nLEISURE t i o nBOXE A democratic u D N WITCHCRAFT AT WORK! protection T FINAL WARNING significance BRAHMAN HILLS BLACK TAX OPPORTUNITIES? c T I QUARREL consideration REFUSE FINANCIAL CRIMES & COMPLIANCE?t O negligence tribunals POLITICS & CORRUPTION DRIVE DISTRESS! NOFFENDS termination i t r u t GIVEAWAYS hf ullne ss
protection
sensational Wrongful
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Commercial Vehicles
August/September 2016
Visit vwcommercial.co.za or your nearest Volkswagen Dealership to find out more about the New Caddy range.
CONTEXT
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August/September 2016 Vol 21 No. 4
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