Issuu on Google+

SOUTH AFRICA

June/ July 2012

ESG

AFRICA’S SMART Smart Cities are changing our world INNOVATIONS

Design, trends, inventions you need

ENVIRONMENTAL SOCIAL GOVERNANCE

ESG

SOUTH AFRICA

ENVIRONMENTAL SOCIAL GOVERNANCE

S U S TA I N A B L E B U S I N E S S T H AT C A R E S F O R T H E E N V I R O N M E N T PARTNERS

W W W. E S G . C O . Z A PUBLISHED BY

topco media

final cover.indd 2-3

2012/06/11 3:17 PM


cities

The key to unlocking your city’s

summit

&

public private partnerships

Endorsed By:

Conference, Expo and Awards

10,11,12 July 2012 Southern Sun, Elangeni

C O N F E R E N C E

E X H I B I T I O N

A W A R D S

S I T E

V I S I T S

Special

Early bird special

R7 700

for bookings before 18 June. R8 700 for bookings before 25 June.

For a full list of speakers and topics, please visit our website: www.smartcities-africa.co.za

DESIGNING SMART CITIES By 2050 up to 80% of South Africa’s population will live in cities. The challenges presented by the rapid population growth demand that cities transform. The Smart Cities Summit in Durban 10, 11, 12 July will be the most future-focused event on urban planning in Africa. It is a space where public sector problems will meet innovation and solutions. The three-day event, endorsed by the Department of Environmental Affairs, covers every facet of modern city management. Be part of the future. There is limited exhibition space and seats are running out fast.

Int

er

KEY TOPICS INCLUDE: • The future of food • ICT resources and solutions • Mobility and transport • Water • Health and safety

• Environmental sustainability • Energy • Financing • Risk analysis and insurance • Sports and education

• Buildings • Waste reduction and recycling • Public administration

na

tio

na

ls

pe

ak

er

s

Contact Person: Deirdre O'Neill on 086 000 9590 or email deirdre.oneill@topco.co.za ENDORSED BY:

Smart Cities flyer copy.indd 1

MEDIA PARTNERS:

HOSTED BY:

2012/06/08 4:32 PM


FOREWORD

HIS EXCELLENCY JACOB ZUMA PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA

IN 1992 IN RIO DE JANEIRO (at what became known as the Earth Summit) Agenda 21 was agreed as a programme of action for sustainable development. It reaffirmed that sustainable development was delimited by the integration of the economic, social and environmental pillars.

The spirit of the conference was captured by the expression ‘Harmony with Nature’ and it laid the foundation for the first principle of the Rio Declaration. State leaders agreed on the urgent need for a deep change in consumption and production patterns, resulting in agreements being reached in the Convention on Biological Diversity and the Framework Convention on Climate Change. Fast forward 10 years to 2002 when we convened for the 10 year review of the Earth Summit. This was hosted in Johannesburg, South Africa at the World Summit on Sustainable Development. Ten years on and it was hardly a secret – or even a point in dispute – that progress in implementing sustainable development over the decade had been been extremely disappointing. With poverty deepening and environmental degradation worsening, what the world wanted was not a new debate, but rather a summit of actions and results. The Johannesburg Plan of Implementation (JPOI) captured the spirit and commitment of ‘Making it Happen’ and became the new basis of the global deal that emerged from the Johannesburg Summit. Another 10 years have passed and Rio+20 convenes in the context of both old and new emerging challenges. These include a food security and price crisis, climate change, and unstable international financial systems which continue to reverse some of the gains made by developing countries in their efforts to achieve sustainable development. Today Africa lags behind in the implementation of the Millennium Development Goals, Small Island States continue to be vulnerable to adverse weather conditions, workers around the world continue to lose jobs, and many of our children are hungry and sick. The Future we want should be the future we make as governments and our partners in this global village. Rio+20 should build on the concrete experience of approximately 20 years of experience, and reinvigorate political commitment and work towards assisting developing countries in their efforts to achieve agreed international developmental goals. We can only build the future we want by promoting sustainable and inclusive growth; protecting vulnerable groups; reducing carbon dependency, reversing ecosystem degradation and moving closer to achieving the Millennium Development Goal of ending extreme world poverty.

ESG SPECIAL FOCUS SOUTH AFRICA 1

zuma-foreword.indd 3

2012/06/11 11:26 AM


CREDITS Chairman Richard Fletcher Publisher Van Fletcher Editor Sarah Bullen editor@topco.co.za Managing Editor Shaheema Albertyn-Burton shaheema.albertyn@topco.co.za Head Designer Jayne Macé Traffic Coordinator Raeesah McLeod Website Manager Gaywin Walters   Studio Manager Candice Hooper Business Development Manager Ross Maltman ross.maltman@topco.co.za Business Development Executives Jason Kuttel Carl Chothia Human Resources Manager Janine Salick Financial Manager Haley Fletcher Printers Graphia Alliance Brazil Contact Details Topco Media (Pty) Ltd The Pinnacle, 5th Floor, Cnr Strand & Burg Streets, Cape Town 8001 PO Box 16476, Vlaeberg 8018 Tel: +27 82 331 1158 info@topco.co.za www.topco.co.za Disclaimer All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Topco Media (Pty) Ltd Reg. No. 2007/002190/07.  While every care has been taken when compiling this publication, the publishers, editor and contributors accept no responsibility for any consequences arising from any errors or omissions.

CONTENTS THOUGHT LEADERS Foreword by President Jacob Zuma John Oliphant – A Case for Sustainable Profits Edna Molewa – Water & Environmental Affairs Minister

1 2 28

SA TRENDS Design The Pick of South African Design

4

Trends Street Shopping and Inspiring Ideas

6

Innovations Trends and Inventions You Need

8

KEY FEATURES Smart Cities 5 Ways on How it Will Change How Africa Lives

11

SA City Guide Smart Grids and Smart People

14

Economy South Africa is Open for Clean Business

18

PARTNERS From Johannesburg to Rio The Department of Environmental Affairs

22

The Green Economy in SA The Department of Environmental Affairs 26 What Does Civil Society Say? The Department of Environmental Affairs 27 Delivering Social and Investment Returns Old Mutual Investment Group South Africa

32

The Durban Platform Department of International Relations & Cooperation

36

Industrial Energy Efficiency Improvement UNIDO 38 Sustainable Use of Resources Department of Agriculture & Rural Development

40

Investing Responsibly for a Sustainable Future The Government Employees Pension Fund

42

OPINION Jon Duncan – Embrace the Trend

31

New Apostolic Church Cape

52 -53

topco media

ESG SPECIAL FOCUS SOUTH AFRICA 00


THOUGHT LEADERSHIP

SUSTAINABLE PROFITS – CALL FOR A NEW ECONOMIC ORDER JOHN OLIPHANT, HEAD OF INVESTMENTS & ACTUARIAL AT GOVERNMENT EMPLOYEES PENSION FUND (GEPF)

AS THE WORLD’S LEADERS AND DECISION-MAKERS gather for Rio+20 to develop smart measures for reducing poverty, decent jobs, clean energy and a more sustainable and fair use of resources for all, one thing is certain: The 2008 global financial crisis, and subsequent and current economic events, remind us that it’s no longer business as usual. The days of laissez-faireism are over; governments are now seeking an active role in the economy in order to prevent the pursuit of short-term profits at the expense of long-term sustainable investment returns. Quite clearly, the status-quo is untenable. In addition to increasing government action on these issues – institutional investors such as pension funds, insurance companies and their service providers are also committing themselves to a more active ownership approach when investing on behalf of their members and beneficiaries. Asset owners, especially trustees of pension funds entrusted with the life savings of their members, are increasingly required to think more strategically about ensuring investment returns for the long-term. As fiduciaries, we must consider sustainability issues within our investment decisions and adopt an active ownership approach on behalf of the real owners of the assets we

manage, the members of pension funds. In our view as Government Employees Pension Fund, our objective as a defined benefit pension fund is to ensure that our members can retire comfortably and with dignity. We won’t achieve this objective by merely generating short-term financial returns: we also have to ensure the sustainability of returns in the long-term to meet the financial needs of current and future generations of members and pensioners. The investment landscape in South Africa has changed: pension fund trustees and their service providers will soon find themselves having to give account to the new owners of capital – the workers – as to their approach to investing. Regulation 28 of the South African Pension Funds Act now requires pension fund trustees to give serious consideration to the long-term by integrating environmental, social and governance (ESG) factors into investment analysis and investment activities as part of the delivery of superior risk-adjusted returns. Similarly, the Code for Responsible Investing in SA (CRISA) was launched in July 2011 as a voluntary mechanism to help asset owners, asset managers and their service providers’ monitor and report on sustainability issues. From the 1st of February 2012, South African institutional investors are required to publicly report against the application of CRISA’s five principles which seek to form part of an effective governance framework in South Africa. I believe that CRISA, working in conjunction with Regulation 28, the UN-backed Principles for Responsible Investment (PRI) and other best practice frameworks provides an enabling framework for institutional investors, as custodians of their members’ assets, to engage and hold companies in which they invest accountable to the demands of sustainable returns in the new economic order. We look forward to increased public reporting by South African pension funds and their service providers as to their approach to ESG issues within annual integrated reports, websites, member communications, and other publications. The ESG Green Pages is one such publication highlighting how government and business can work together to address sustainability challenges and opportunities. GEPF is committed to playing its part and we call upon government and business to work together to provide the leadership we need on sustainability. For real sustainable profits we need a partnership model between government and business and call on other asset owners to join us in seeking sustainable returns for our members.

2 ESG SPECIAL FOCUS SOUTH AFRICA

GEPF-foreword.indd 2

2012/06/11 9:22 AM


SA TRENDS BOTANICAL WALL ART

Durban-based photographer and designer Clinton Friedman’s new wallpaper range features more of his signature graphic designs inspired by the intricate designs found in nature. Particularly renowned for his Aloe Prints, Herbarium Pressings and Polaroid Studies, Friedman’s latest ‘Fotografik Botanika’ collection features graphic botanicals, florals and feathers in eye-catching wall coverings that are works of art in their own right. Shown here are the ‘Strelitzia Nicolai’ and ‘Black Modern Museum’.

www.clintonfriedman.com

HOW DOES YOUR GARDEN GROW?

Who says a small living space means you have to make do without growing your own herbs and veggies? We love the new MiniGarden from Terrace Living, which means you can grow flowers, herbs and vegetables on your balcony – or even in your kitchen or living room. The modular vertical gardening system, available in white, grey or black, can be used indoors and out. Each MiniGarden module, has three cavities, a lid and six circular clips, and comes with a range of products needed to build a small garden, including soil, plants, gloves and other accessories. www.terraceliving.co.za

INTO THE FUTURE / REIMAGINING OUR CITIES Sinking the railway lines between the Cape Town and Woodstock stations. It’ll cost billions, but free up some 3-million square metres of central land for creative city design and development. Intersite, the property division of the Passenger Rail Agency of South Africa (PRASA), will complete a feasibility study by 2012. Creating a massive urban park in downtown Joburg by decking over the railway lines into Park Station. The design – by MMA Architects in association with Cohen and Judin, Fiona Garson Architect and Rhizome Management Services – would create a pedestrian-friendly link from the station to the rest of the inner city. According to the Johannesburg Development Agency, which issued the call for proposals, it’s a strategic priority for the city over the next five to 10 years.

Text & images: Elle Decoration SA

THESE TWO BIG IDEAS COULD CHANGE THE FACE OF OUR CITIES

4 ESG SPECIAL FOCUS SOUTH AFRICA

upfront-innovation.indd 2

2012/06/08 1:32 PM


SA TRENDS

LADUMA!

URBAN LENS

Text & images: Elle Decoration SA

A LEADING ARCHITECT DAVID ADJAYE RETURNS TO HIS AFRICAN ROOTS, CAMERA IN HAND. THE RESULT? ONE OF THE FIRST SURVEYS OF URBAN ARCHITECTURE IN AFRICA

Since he showed his knitwear designs at the Design Indaba earlier this year, 25-year-old Laduma Ngxokolo has been overwhelmed with invitations to speak, sell, collaborate and show his work at home and overseas. His range of men’s mohair sweaters with bright motifs inspired by Xhosa beadwork began as a university project for his textile studies at Nelson Mandela Metropolitan University. He designed them for amakrwala, young Xhosa men who are completing their sixmonth initiation program after attending initiation school. As a rite of passage into manhood, their parents give them new clothing, including highquality knitwear by well-known brands such as Pringle. We chatted to him about his plans.

Which structures stood out for you on your travels? The mud city, Djenne, in Mali, which is rebuilt every season. There’s such an immense craft and artisan culture in places like this. On the other hand, you get cities like Tripoli in Libya, a sort of socialist Islamic country with incredible developmental ideas about housing – you’d never say you were in Africa. It also has this rationalist Italian past so you see these beautiful Art Deco buildings all over the city.

So what’s been happening since the Design Indaba? I’m working on getting my designs into production and hope for them to be available by June this year.

What fascinates you about urban life? To me, it’s this wonderful matrix that allows different communities to come together in close proximity of each other and contribute to this ultimately rich city life.

Why mohair? It’s lightweight, sustainable, warm and has a good sheen. And I live in Port Elizabeth, the world capital of mohair, so my line has the potential to boost the local economy.

What were your impressions of Pretoria? I found it incredibly administrative because of all the embassies there, and the homes are all kind of centred around these buildings. Joburg, on the other hand, has the most unbelievable buildings. I love how seconds out of the city, you’re suddenly driving down a tree-lined street.

What has the interest from overseas been? There’s been a lot of interest from European buyers. Li Edelkoort took three pieces for her ‘Talking Textiles’ show during the Milan Furniture Fair, and Trevyn McGowan invited me to take part in Southern Guild next year.

I want to get that sweater

‘Hey bra,

on my body!’

ESG SPECIAL FOCUS SOUTH AFRICA 5

upfront-innovation.indd 3

2012/06/08 10:32 AM


OVERVIEW

PICK OF THE BUNCH

WE PRESENT OUR SELECTION OF SOME OF THE BEST SOUTH AFRICAN DESIGN. THESE DESIGNS TRAVELLED TO THE MILAN FURNITURE FAIR IN APRIL 2012.

CATEGORY DESIGNER OF THE YEAR /FURNITURE WHO Award-winning designer Gregor Jenkin is known for creating functional objects that are both thoughtful and thoughtprovoking. Each piece is a result of searching for a new way of doing something old; of making the commonplace unusual. THE PRODUCT The distinct shape of this ‘Engrained’ wardrobe is inspired by feed and grain silos, a South African agricultural landmark. It’s made from a sustainable composite of materials including plywood and velcro. WHY WE LOVE IT We admire Gregor’s old-worldly craftsmanship, along with his attention to detail – visible in this restrained yet imposing design. www.gregorjenkin.com

CATEGORY YOUNG DESIGN TALENT OF THE YEAR WHO Twenty-four year old Malawian Raymond Masara, who’s based in Cape Town, has been making waves in the field of furniture design with his steel-rod wire-works. He was labelled an emerging creative at Design Indaba 2011. THE PRODUCT ‘Outdoor Wire Stools’. “The colours are inspired by nature and the twisting represents my childhood – the poverty and pain that I faced growing up in the villages,” says Raymond. WHY WE LOVE IT With their playful lines and bright colours, Raymond’s wire chairs are an exciting and fresh take on outdoor seating.

CATEGORY FABRIC WHO Ardmore is well known for its vibrant use of colour and detailed, energetic ceramic designs. Now, their distinctive imagery and luxurious styling have been translated into a fabric range for cushions, curtains and upholstery. THE PRODUCT The fabric on Ardmore’s ‘Qalakabusha Sofa’ (which means ‘new beginnings’) – a signature piece from their latest collection – which was nominated for the ‘Most Beautiful Object in South Africa’ award at Design Indaba. WHY WE LOVE IT The departure of Ardmore Ceramic Company into fabric design is a welcome extension of what is a distinctive and wellloved South African visual signature. www.ardmoreceramics.co.za

Text & images: Elle Decoration SA

www.raymondmasara.com

6 ESG SPECIAL FOCUS SOUTH AFRICA

upfront-innovation.indd 4

2012/06/08 1:33 PM


SA DESIGNS CATEGORY LIGHTING WHO Adriaan Hugo and Katy Taplin are the duo behind Joburg-based label Dokter & Misses, who first joined forces in 2004. Their designs are a celebration of pattern and primary colours, which they like to describe as ‘Bauhaus meets Dr Alban’. THE PRODUCT The highly sculptural ‘Tugboat’ and ‘Locomotive’ lamps – constructed from sprayed mild steel and Perspex – were ‘inspired by the stone age, industrial revolution and technological advancement of man’. WHY WE LOVE IT The contrasting use of materials and child-like playfulness of shapes, colour and context. www.dokterandmisses.com

CATEGORY OUTDOOR WHO Born from a desire to build a pioneering social enterprise, the Indalo Project is a unique South African design partnership. The Xhosa word ‘Indalo’ translates as ‘creation’ or ‘nature’ and captures the essence of this remarkable initiative. THE PRODUCT Created by Cape Town-based design studio Nuno, the shapes of these wet-felted ‘Phatha Bowls’ are drawn from Zulu beer pots and hats, with patterns that reference Zulu and Xhosa beadwork and weaving. WHY WE LOVE IT The use of felt for these biodegradable outdoor planters is perfect for small balcony gardens. www.indaloproject.co.za

CATEGORY FABRIC WHO Award-winning Laduma Ngxokolo exploded onto the fashion scene in 2011. Effortlessly fusing a euro-centric aesthetic with his familiar Xhosa heritage, Laduma strives to educate and elucidate a very particular look that has never been more important – or current. THE PRODUCT ‘Xhosa Time Piece’. Moving away from knitwear, but continuing to be inspired by Xhosa beadwork, Ngxokolo decided to integrate his heritage into a functional object – the clock. WHY WE LOVE IT Laduma finds his inspiration in traditional Xhosa initiation rituals and knitwear designs. www.africanknitwear.com

CATEGORY TABLEWARE (CRAFT) WHO ‘Wola Nani’ is a non-profit organisation that empowers individuals and communities affected by HIV/Aids. Its skills training and income generation programmes enable 60 independent craft artists to earn a sustainable income by working from home. THE PRODUCT A new range of papier-mâché ‘African Print Bowls’, specifically created for the Indalo Project. Inspired by vibrant print fabrics from Congo, these bold contemporary designs are available in a variety of colours and sizes. WHY WE LOVE IT For elevating the craft of papier-mâché, and the geometric patterns and colours. www.wolanani.co.za

ESG SPECIAL FOCUS SOUTH AFRICA 7

upfront-innovation.indd 5

2012/06/11 10:02 AM


CATEGORY SEATING WHO Using hand-made natural fibres, textile designer Ronél Jordaan lets her imagination run wild in the creation of rock cushions, pebble carpets, intricate wall hangings and more. All of her pieces are socially and environmentally friendly. THE PRODUCT The organic ‘Ndebele chair’ is covered with hand-felted 100 percent merino wool coils. A foam-covered metal frame gives the piece structure and comfort. WHY WE LOVE IT The interpretation of the characteristic neck rings of the Ndebele women of South Africa – and its transformation of it into a chair. www.roneljordaan.com

DIGITAL DRUM MAKES TIME INVENTIONS LIST A Digital Drum that doubles as a stand-alone computer system has been voted by Time Magazine as one of the top 50 inventions in the world for 2011. The drum was created by the United Nations Children’s Fund (Unicef) and South Africa’s Council for Scientific and Industrial Research. The team was tasked with coming up with an alternative computer learning solution for Uganda, using local materials in simple but robust housing. They used oil drums to design a robust stand-alone computer system that promotes self-learning of computer literacy and information skills, while giving people access to information on health, education and other relevant issues.

SA APPROVES 562MW OF WIND PROJECTS

South Africa has approved seven wind projects totaling 562MW as part of its second renewable energy tender. The government awarded 1.04GW out of a total of 1.23GW available. The projects include the 138MW Amakhala Emoyenia project in the Eastern Cape province. Wind also took the largest slice in terms of the maximum capacity available, with the government awarding 417 PV projects. Vestas is the preferred supplier for five of the projects, with the orders covering a total capacity of 297MW. Out of the bids, wind power accounts for just under 30 percent with eight of the projects selected.

RECLAIMING PCC FROM WASTE

South Africa has developed a novel process to reclaim high-quality precipitated calcium carbonate (PCC) from calcium-rich industrial solid waste. High-quality calcium carbonate is useful for various specialised industrial applications such as gastric acid treatment, tablet filling in pharmaceuticals, plastics, paint, adhesives and in pulp and papermaking. The newly developed process involves three steps: Leaching calcium from the solid waste using mineral acid; Neutralising the leachate using ammonium hydroxide; Carbonating the calcium-rich solution to produce high-quality calcium carbonate. www.csir.co.za

AN END TO LANDFILLS?

A new technology developed in South Africa could see the landfills packed with millions of tons of used tyres turned into productive green waste. The plant and its EcoZero technology has been described by environmental consultant Fabio Venturi as “the most advanced waste-to-energy facility in the world.” The system works on a process of continuous controlled pyrolysis. It means that hard-to-recycle waste like used tyres, coal dust and other industrial by-products can be transformed into a diesel fuel and syngas that in turn creates electricity to feed into the national grid. ‘We turn waste into zero waste green electricity with zero carbon emissions.’ says Jeanne Rose, the social-enviro entrepreneur behind Eco2. 8 ESG SPECIAL FOCUS SOUTH AFRICA

upfront-innovation.indd 6

www.eco2sa.co.za

2012/06/08 3:26 PM


INNOVATION

$8,800

That’s the cost of a “low-carbon, low-cost” house of the future. Designed to sit in low-income housing developments where the need for an

affordable housing solution

is strong, these houses made from tyres and recycled trash is a solution to the high need for housing. www.seed.org.za

LIGHTING OUTDOOR

UPCYCLE FLOWER LAMP

The Consol Solar Jar is literally bottled sunshine – created by fitting a solar panel and solar-powered LED lights onto the lid of a glass jar. When charged in direct sunlight for four to six hours it gives the same amount of light when activated.

Local designers find creative ways to make beautiful things from household goods. These Upcycle Flower Lamps use household olive oil and re-used jars. Handmade by community ceramics, they send out the message – use what you’ve got and do it with care. www.thebotanyproject.com

www.solarjar.co.za

FINDING NEW LIFE FOR SAILS

An exciting brand of recycled bags and accessories made from reclaimed sails is making waves. The Resails bags and gear are made from old discarded yacht sails and are about as cool as they come. The gear is both eco-conscious and edgy and the fashion conscious and sports enthusiasts are snapping it up alike. The brand is run by big wave surfer Mike Schiebach. “Love my jacket,” Tweeted UK style guru Beatrice Hurst after picking up a jacket on a trip. Mike says the idea was a simple one. “There is so much stuff like these old sails just lying around and headed for the dump. We started looking at ways of using what we love and what’s available and making it look cool.” www.resails.com

ESG SPECIAL FOCUS SOUTH AFRICA 9

upfront-innovation.indd 7

2012/06/08 5:03 PM


Harnessing Nature’s Forces in Response to Climate Change Biodiversity underpins the ecosystems on which all life depends. Ecosystem-based adaptation provides a natural solution to many of the problems associated with climate change, and millions of nature’s creatures play an important role. Through ongoing investment in the science and policy of natural capital and ecological infrastructure in South Africa, the South African National Biodiversity Institute is helping to defend against climate change by proving the power of natural solutions and building the green economy.

SANBI. Leading the way for ecosystem-based adaptation science, policy and action.

www.sanbi.org ESG-4xadvertorial copy 2.indd 1

SANBI Biodiversity for Life

2012/06/08 10:07 AM


SA TRENDS

5 WAYS THE SMART CITY WILL CHANGE HOW AFRICA LIVES

IMAGINE WAKING UP IN A HOUSE THAT PRACTICALLY RUNS ITSELF, A LOW-CARBON CITY WHERE TRAFFIC CONGESTION IS ALMOST NON-EXISTENT, NEIGHBOURHOODS ARE SAFER, AND YOU CAN JUST USE A SINGLE CARD OR TAG TO DO ALMOST EVERYTHING FROM BUYING GROCERIES TO PAYING YOUR BUS FARE. SOUNDS TOO FARFETCHED FOR AFRICA? IT’S ACTUALLY NOT. MATEBELLO MOTLOUNG LOOKS AT HOW SMART CITIES WILL CHANGE HOW AFRICA LIVES IN THE NEXT FIVE YEARS.

 INTELLIGENT

Credits: Shutterstock

TRANSPORT SYSTEMS

smart cities.indd 1

A HIGHLY EFFICIENT AND EFFECTIVE TRANSPORT MANAGEMENT SYSTEM IS A KEY COMPONENT OF A SMART CITY. Building new roads and lanes to deal with rising traffic volumes and traffic congestion is not enough anymore. Cars are getting more intelligent and therefore the roads have to follow suit. And they are. Globally, countries are building intelligence into the roads and the cars – with roadside sensors, radio frequency tags, and global positioning systems. South Africa is on par. The South African National Roads Agency Limited (SANRAL), an agency of the Department of Transport, is in the process of implementing an Intelligent Transport Systems (ITS) project for Gauteng freeways using technology to manage traffic, and to provide road users with traffic conditions on a real-time basis. The new technology will also include a centralised network management centre, closed circuit TV cameras, variable message signs, loops and other traffic detection and information devices, as well as continuous monitoring of the systems and its impact on improved road network operations. With this technology, SANRAL will be able to coordinate and facilitate faster emergency and incident response. Circling city blocks or parking lots looking for a parking space might also soon be thing of the past, thanks to ‘smart parking’. The Airports Company of SA is already using the technology – a bay detection system that comprises sensors above parking bays that activate lights that turn from green to red when a bay is occupied – at its OR Tambo International Airport parking facilities and most world-class parking malls are following suit. The system makes it easy for car users to locate empty bays, saving them time and improving efficiencies and fuel.

2012/06/08 10:20 AM


 SMARTER

BUILDINGS

 SMART

GOVERNMENT

THE NUMBER OF GREEN BUILDINGS IN SOUTH AFRICA, many of them commercial, is on the increase, says the Green Building Council of South Africa. According to the 2010 National Association of Realtors Home Buyer and Seller Survey, 88 percent of home buyers looked for houses that had energy efficient characteristics like central heating and cooling systems when purchasing homes, 71 percent highlighted the desire for energy efficient appliances, and 69 percent wanted energy efficient lighting. Propelling this change in lifestyle is newly introduced energy efficiency building regulations that now make it compulsory for the construction industry to adopt environmentally considerate methods. National electricity provider Eskom is in a massive drive to entice South Africans to save energy and wants to have between five and seven million houses fitted with solar heaters by 2019. This year will also see new and innovative models to South Africa’s housing problem being explored. An example is the pilot Cosmo City where affordable houses made from mining and manufacturing by-products will be built at Cosmo City, a mixed-income settlement in north-west Johannesburg. Sponsored by First National Bank, Sasol, and Tower Technologies, the walls and roof of the houses, which will be 85 square metres in size, will be made of steel. They will take an estimated five days to assemble, saving construction costs and energy use. The technology used utilises 25 tons less cement and the houses will be thermally superior.

IN MANY WAYS, SOUTH AFRICA HAS BEEN AHEAD OF THE GAME in trying to create a smart government through the implementation of the e-Government strategy, which was meant to improve its interaction with its citizens and enable them to access services and information by a mere click of a button from a single portal. This would have been convenient, lessened the need for hard copy forms, eliminated the necessity for physical travel to government departments, and hopefully improved record keeping through computerisation. While the implementation of this strategy has not been as successful as envisaged, due to a number of reasons (among them poor project planning and insufficient investment in ICT infrastructure), South Africa has not discarded this dream. Through the use of smart technology, South Africa now has one of the best tax collection systems in the world, which has made SA Revenue Services one of, if not, the most efficient government-related department in the country. 12 ESG SPECIAL FOCUS SOUTH AFRICA

smart cities.indd 2

2012/06/08 10:20 AM


 SMARTER

PEOPLE

WHAT REALLY MAKES A CITY? ITS PEOPLE. The changes in shape, size, engineering and governance aside, cities of the future will not be any different. So it is the quality of people that is going to increasingly begin to matter. Soon, competition will be intense among cities to attract and retain the best brains in the word that (hopefully) also bring smart ideas and solutions. This is important if the cities are to be economically viable and sustainable. Smart cities are not a one-size fits all design, and shouldn’t be. For many countries in Europe, reducing their carbon footprint is chief. In developing countries like South Africa, this commitment will continue to compete with the country’s pledge to halve poverty by 2015. We need people who uniquely understand the African experience, and develop solutions that speak to its nuances. The quality of services particularly in education will matter more. Last year only 7,000 schools across the country had Internet connectivity – an astonishing 21,000 yet to be catered for. However, government has given the Universal Service and Access Agency of SA a target to establish 400 ICT access centres in under-serviced areas by 2015, that is no less than 100 a year.

 SAVVY

CONSUMERS

ACCORDING TO IBM, SA IS MORE READY FOR THE SMART GRID THAN MOST COUNTRIES. The energy sector is centralised in the national authority Eskom, which should make implementing the technology nationally easy. Eskom has already piloted some 20,000 basic smart meters in its residential demand response programme in Fourways, Johannesburg. Combined with smart appliances, these energy load-limiting meters can also turn appliances on and off according to signals from the grid. You could set your washing machine to operate only when the price of electricity is below a certain amount for instance. With the smart grid, consumers can also have a two-way conversation with the electricity provider. According to the Electricity Regulations Act of 2006, all end-users consuming 1,000 kWh or more a month shoud have had a smart meter system installed by January 2012 – we are off the mark with this target, but the rollout is picking up pace. ESG SPECIAL FOCUS SOUTH AFRICA 13

smart cities.indd 3

2012/06/08 10:20 AM


SMART GRIDS AND SMART PEOPLE

NEVER BEFORE IN HUMAN HISTORY HAS THE NEED FOR CITIZENS OF THE WORLD TO ADOPT ALTERNATIVE LIFESTYLES EVER BEEN SO URGENT. THE RESULT: THE BIRTH OF ‘SMART CITIES’ GLOBALLY WHERE SMART PEOPLE USE SMART TECHNOLOGIES TO CREATE HEALTHIER, SAFER AND MORE SUSTAINABLE NEIGHBOURHOODS. MATEBELLO MOTLOUNG LOOKS AT HOW SOUTH AFRICAN CITIES COMPARE.

JOHANNESBURG PROVING THAT SIZE DOESN’T MATTER JOHANNESBURG FACES THE CHALLENGE OF WANTING TO BE A WORLD-CLASS CITY BUT POOR MANAGEMENT OF INFRASTRUCTURE AND RESOURCES IS A REAL CHALLENGE.

In a nutshell: Johannesburg might be South Africa’s most populous city with 3.8 million people, but coincidentally it is also the greenest with stringent air quality control and monitoring policies aimed at reducing pollution and an increase in the number of green buildings. According to the 2011 EIU African Green City Index commissioned by global electronics and electrical engineering giant Siemens, the city boasts the lowest greenhouse gas emissions per capita among the country’s major cities; the lowest per capita electricity consumption, and the second-highest amount of green space. It has 10 million trees and 231m² of green space per person against an index average of 74m² per person. A few years ago, Johannesburg embarked on a cleanup campaign to restore the inner city to its former glory. The campaign has been a relative success. Today, what were no-go zones have been transformed into cultural precincts such as Newtown and business hubs housing the headquarters of some of the country’s largest banks and mining companies. Last year, the city launched the Growth and Development Strategy 2040 (GDS 2040), which details how Johannesburg intends to be an efficiently run and sustainable metropolis. Part of the strategy is to become a smart city, though like most cities in developing countries, poverty alleviation is the overarching objective, which explains the absence of how exactly Johannesburg intends to be a smart city . That said, the city is aware of this need and is paving the way. It has a robust strategy aimed at reducing the

environmental impact of energy consumption. To date, it has spent more than R5-million of donated aid to install solar water heaters in 700 low-cost houses in Cosmo City, a mixed-type housing development. Plans are underway to extend the scheme to other particularly poor parts of the city. To ease pressure off the energy grid and avoid traffic congestion during power cuts, the Johannesburg Road Agency has been installing solar power traffic signals since 2009. However, it is the city’s two major transport projects – the Gautrain Rapid Rail system and the Rea Vaya Bus Rapid Transit system – which are its largest carbon emission intervention initiatives to date and Johannesburg’s most sophisticated public transport initiatives. The high speed Gautrain travels between Sandton, Pretoria, and the OR Tambo International Airport, which is one of the busiest traffic routes in the city. The Rea Vaya provides affordable public transport for residents of Soweto, the city’s largest township. All the Rea Vaya buses run on low-sulphur diesel and operate along a 25km route daily.

“It has 10 million trees and 231m² of green space per person.”

14 ESG SPECIAL FOCUS SOUTH AFRICA

city-guide.indd 2

2012/06/11 11:12 AM


SMART CITIES

Plans are also underway to introduce e-tolling in the city as part of having a smarter public transport system that includes technology systems to monitor traffic and CCTV cameras to guarantee residents’ safety on the roads. KNOWN FOR Its public transport system which is undergoing integration at present to increase adoption. The objective is to get at least 80 percent of the city’s residents including motorists to use public transportation. WORKING ON Reducing its carbon emissions, reducing electricity costs, adopting efficient water management systems and improving its waste management through the introduction of bylaws that make it compulsory for residents and businesses to recycle waste. About 244,000 tonnes of waste are dumped illegally every year in Johannesburg and the city is rapidly running out of landfill space. THINGS TO WATCH The expansion of the Rea Vaya system to the rest of Johannesburg’s surrounding townships and the conversion of landfill gas from several sites into electricity to power city homes.

CAPE TOWN DECLARING WAR ON CLIMATE CHANGE CAPE TOWN INTENSIFIES ITS BATTLE AGAINST CLIMATE CHANGE

In a nutshell: Of our country’s major cities, Cape Town has the most robust environmental policies of the four major cities. These are underpinned by the Energy and Climate Change Action Plan, which outlines 11 targets for the ‘Mother City’ to achieve its objective: be an energy efficient, low-carbon green economy. Top on the list is reducing the city’s electricity consumption by 10 percent by 2012, followed by a target to source 10 percent of its energy from renewable sources by 2020. At present, only 2 percent of the power the city consumes is renewable. To meet its targets, Cape Town is focusing on three areas: renewable

energy, energy efficiency, and transport efficiency, and has 130 or so projects that are underway already as a result of the plan. These include a drive to install 300,000 solar water heaters across the city by 2015, retrofitting public buildings with energy efficient lights, and developing the Integrated Rapid Transit (IRT) System. On completion, the multi-billion rand IRT will provide Cape Town with a sophisticated transport system that includes a rail plan, a bus rapid-transit (BRT) system, improvements to conventional bus and minibus operations, cycle ways and bicycle parking, and upgraded pedestrian and urban spaces. Cape Town faces a challenge to find a balance between its environmental protection efforts and the prevailing economic and social development needs of its growing population. It has updated its development guidelines to address urban sprawl, for instance, and is encouraging the adoption of green building and design methods to preserve the eco-system. Driving public awareness about the importance of adopting smart living habits is another significant aspect to Cape Town. The city holds workshops to train the public and its employees on the importance of living smartly. These tips are compiled in the Smart Living Handbook that’s updated annually and is made available electronically on the city’s website. The city’s officials have also put forward a proposal for the building of a Smart Living Centre that will not only include exhibits and educational activities for the public relating to sustainability but an organic farmers’ market and a recycling centre as well. Cape Town also has a climate change think tank tasked to design programmes and interventions aimed at understanding and preparing for climate change.

ESG SPECIAL FOCUS SOUTH AFRICA 15

city-guide.indd 3

2012/06/11 11:13 AM


KNOWN FOR Cape Town has the highest literacy rates among the major cities, the highest internet connection rate per capita, and the highest percentage of houses connected to services infrastructure. It also has stringent environmental protection policies evident from the city’s abundance of green spaces; a relatively low percentage of people living in informal settlements; and a relatively efficient public system. WORKING ON Adopting smart energy efficient living habits, enforcing development guidelines to prevent urban decay and promote more sustainable eco-friendly designs and construction habits, while creating a low-carbon and efficient public transport system. THINGS TO WATCH The increase in the number of green buildings.

DURBAN CREATING A CITY EVERYONE WANTS TO LIVE IN

DURBAN’S OBJECTIVE IS TO CREATE A CITY THAT IS NOT HARMFUL TO HUMAN HEALTH. In a nutshell What Durban do you want to live in? That’s the question the city is asking its residents as it embarks on efforts to transform it into a carbon neutral zero-waste city by 2050. Host to the 2011 United Nations Climate Change Conference, better known as COP17, the ever-green city of eThekwini, has introduced several initiatives to improve all aspects of the city from culture and accessibility to safety and environmental sustainability under the Imagine Durban programme. The plan is an integrated, long-term planning strategy that is part of a global campaign, led by Sustainable Cities, a Canadian non-governmental organisation, to improve urban environments and reduce carbon emissions.

In Durban’s case, the city is working on making the Moses Mabida Stadium, one of the 2010 FIFA Soccer World Cup stadia, as energy efficient as possible, and promote the efficient use of natural resources through public awareness and demand management schemes. With an estimated 22 percent of the city’s 3.5 million people living in informal settlements, Durban has introduced a Spatial Development Framework plan to combat potential urban decay. To meet its growing energy demands, Durban has also begun to generate, though on a limited basis, power from local waste by-products. Mobility and accessibility is another focus area of the city as it aims to integrate its transport system. Durban has the longest public transport system comprising an extensive bus system of 1,400 routes and some 200 operators and an extensive mini-bus taxi system. It has introduced People Mover, a new passenger bus network that is servicing areas previously not catered for by existing transport providers. The city is also upgrading its main bus system. In 2011, it spent R180-million on a fleet of 124 new low-carbon emission buses and also launched a smart cards system that will replace traditional bus coupons. This should be fully operational by 2015. Durban is also spending an additional R16-million or so, in the construction of cycle lanes on the bridge over the

cities

summit Conference, Expo and Awards

Special

Early bird special

R7 700

for bookings before 18 June. R8 700 for bookings before 25 June.

SA IS HOSTING A SMART CITIES SUMMIT IN DURBAN 10,11,12 July 2012

16 ESG SPECIAL FOCUS SOUTH AFRICA

city-guide.indd 4

www.smartcities-africa.co.za

2012/06/11 11:13 AM


Umgeni River next to the M4 northern freeway and along the beachfront to the Botanic Gardens. The last few years have also seen Durban intensify its efforts to be a smart city through increased investment in rolling out ICT infrastructure. The city plans to take advantage of the opportunities brought about by SEACOM, the undersea cable South Africa has invested in to improve broadband penetration in the country and the continent. KNOWN FOR Sound environmental policies, an extensive public bus transport system, and a significant informal settlement population. WORKING ON Establishing bylaws to create penalties for pollution, the promoting of low-emission industries, and improving its water, energy and waste management. THINGS TO WATCH There are longer-term plans to have a fully integrated public transport system, so that bus and taxi routes match up with train stations.

PRETORIA SURPRISINGLY AHEAD OF THE GAME FOR A CITY AS SMALL AS PRETORIA, THE CAPITAL IS ACUTELY AWARE OF THE IMPORTANCE OF GOING GREEN TO IMPROVE RESIDENTS’ WAY OF LIFE.

In a nutshell The administrative capital of South Africa, Pretoria is the least densely populated of the country’s major cities with 2.3 million residents. It is administered by the city of Tshwane, which is the first metropolis in South Africa to establish a Clean Development Mechanism (CDM) desk to drive green economic initiatives. In 2005, Pretoria introduced an integrated environmental policy aimed at diversifing the city’s energy supply by encouraging energy efficiency through fostering cooperation between government, business, labour, communities and other stakeholders. The capital’s goal is to reduce the impact of conventional coal-based energy generation on the environment. Like all other cities in South Africa, over 90 percent of Pretoria’s electricity is coal-generated with renewable energy accounting for less than 2 percent. However, the city is working hard to change that. Over the past three years, it has installed more than 15,000 solar geysers in a number of communities in the metropolitan area and has begun installing green technologies in a number of its municipality buildings. It is retrofitting its Pretoria West and Rooiwal power stations to reduce carbon emission and be more energy efficient. Plans are also underway to create of a 20MW solar energy farm where the electricity generated will be fed directly into the grid resulting in very low transmission loss.

Long term, the city of Tshwane wants Pretoria and other neighbouring areas to boast public solar car parks which will have efficient solar power and heat producing devices at carports to supply energy to electrical vehicles, street lights and traffic lights. The vision is for each public building’s car park to resemble your typical petrol station. The city is also working closely with Nissan SA on their planned rollout of the Nissan Leaf, which is the world’s first affordable zero-emission car, a medium-sized hatchback that comfortably seats five adults and has a driving range in excess of 160km. KNOWN FOR Its growing population, which the city is trying to accommodate, its environmental conservationist nature, historical buildings, a good public transport system, and the changing population demographics. WORKING ON Developing its own integrated rapid public transport network, alternative sources of energy, and developing renewable sources of energy across the city. THINGS TO WATCH The construction of solar parks and solar farms, and the adoption of electric vehicles. But that is in the long-term.

ESG SPECIAL FOCUS SOUTH AFRICA 17

city-guide.indd 5

2012/06/11 11:13 AM


SOUTH AFRICA IS OPEN FOR CLEAN BUSINESS

GIVEN THAT COMMODITIES REMAIN THE DRIVING FORCE OF THE ECONOMY, AND THE MAIN SOURCE OF INTEREST FOR INVESTORS, KEEPING ETHICAL BOUNDARIES IN TACT IS A CHALLENGE. GAVIN DU VENAGE REPORTS ON A PROGRESSIVE BUSINESS POLICY THAT IS DRIVING GROWTH. THE END OF APARTHEID, almost 20 years ago brought South Africa in a full circle: a pariah state shunned by ethical investors, it embraced democracy and was once again open to the world for business. In the 1970s, the Sullivan Principles were drawn up as the international community’s response to shame corporate investors who chose to do business with the white regime. They also set the tone for future ethical investing, which resonates today in democratic South Africa, a country with one of the world’s most enlightened governing documents as its constitution. Achieving economic freedom along with political emancipation is no easy task. The black majority embraced democracy with the expectation that their newfound rights would go beyond the ballot box. A chicken in every pot, and a roof over every head was the cry often heard in those heady days after the first election. “Overcoming poverty is not a task of charity, it is an act of justice,” the country’s first democratically elected president Nelson Mandela says in his autobiography, Long Walk To Freedom. Like slavery and apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings.” To meet the lofty goals of sustainable development, South Africa has incorporated the over-arching ideals of environmental, social and governance (ESG) management. Given that commodities remain the driving force of the economy, and the main source of interest for investors, keeping ethical boundaries intact is a challenge. MINING can be a brutal, nasty business if left unchecked – as under apartheid, it frequently was. The industry today is a kinder, gentler version of its forebear. Even as mines go deeper into the earth, their safety record sets world standards. Communities now frequently have a direct stake in the profits, and environmental laws are fiercely protective of the surrounding countryside. Perhaps it’s no coincidence that many of the men and women who now sit in the boardrooms of the country’s mining houses were once revolutionaries themselves, with first-hand experience in battling for justice against corporate indifference. AGRICULTURE, which too was once the preserve of a privileged class of white farmers, is now rapidly being transformed by aggressive restitution policies, that serve to return blacks to the land once worked by their ancestors. The BANKING SECTOR is extremely well regulated by

international standards, so much so that it largely escaped the global credit crisis that rolled over much of the west in 2008. It has however helped to bankroll one of the world’s largest public housing projects; only China is now building more homes than South Africa. More than two-thirds of the population now live in their own houses; more are still being built. The country’s president Jacob Zuma acknowledged that building homes will have a social impact that goes far beyond simply giving people a dry place to sleep.

18 ESG SPECIAL FOCUS SOUTH AFRICA

economy2.indd 2

2012/06/08 12:06 PM


COUNTRY PROFILE

“For investors, the transforming of South Africa is a huge opportunity. South Africa's openhearted embrace of sustainable investing is as much about what it learned from its past, as its desire for a new future.”

“We will proceed from the understanding that human settlement is not just about building houses,” he said in Parliament recently. “It is about transforming cities and towns and building cohesive, sustainable and caring communities with closer access to work and social amenities including sports and recreation facilities.” For INVESTORS, the transforming of South Africa is a huge opportunity. With houses, comes the need for kettles, stoves and refrigerators. Roads are being built and so buses, cars and public transport will follow. Hospitals and schools too, which now take up the bulk of the national budget, which will require bricks, mortar and electrical cabling in their construction. South Africa’s open-hearted embrace of sustainable investing is as much about what it learned from its past, as its desire for a new future.

“Even as mines go deeper into the earth, their safety record sets world standards.”

ESG SPECIAL FOCUS SOUTH AFRICA 19

economy2.indd 3

2012/06/08 12:07 PM


“South Africa is running one of the world’s largest housing and infrastructure projects.” WHAT ARE THE SOCIAL NEEDS?

ALMOST 11 MILLION PEOPLE NOW HAVE A DECENT ROOF OVER THEIR HEADS, WITH 2.3 MILLION FORMAL HOUSES HAVING BEEN BUILT. THIS PLACES THE COUNTRY SECOND TO CHINA, A COUNTRY WITH A VASTLY GREATER POPULATION, IN THE DELIVERY OF HOUSING FOR ITS PEOPLE. MORE ARE STILL TO COME. WHEN THEY LEAVE THEIR HOMES IN THE MORNING, SOUTH AFRICAN WORKERS head for jobs where they have full union representation. At times, labour rights inevitably clash with the expectations of investors. Zwelinzima Vavi, the indefatigable leader of the massive trade union federation Cosatu, says however that protecting hard-won rights is a basic principle that must be defended. “We are building a new society,” says Vavi, “meaning a non-racial, non-sexist, democratic and prosperous South Africa that won’t tolerate and justify current inequalities.” Creating a society where everyone has access to opportunity is not easy. It requires more than laws – it needs bricks and mortar. Recognising this, South Africa is running one of the world’s largest housing and infrastructure projects.

Almost 11 million people now have a decent roof over their heads, with 2.3 million formal houses having been built. This places the country second to China, a country with a vastly greater population, in the delivery of housing for its people. More are still to come. Most of these houses are privately owned, and funded directly through a government allowance. The spin-offs for investors are significant. These new households need everything from kettles to rugs to refrigerators. Within two years, the government hopes to reach its target of every single household having access to electricity. This will include the plush mansions that spring up along the coastline, to isolated rural hamlets where farmers can, for the first time ever, milk their goats in the early dawn by electric powered lamps. Perhaps the most visible sign that life has changed for ordinary South Africans is the curious lack of smog, which once hung like a dirty blanket over Johannesburg during the chilled winter months. Without electricity, most black residents of Soweto would use coal fires, for warmth, cooking and a feeble amount of light. Today those fires are all but gone and instead, the steady, unwinking glow of electric bulbs light up the previously gloomy nights above the city.

20 ESG SPECIAL FOCUS SOUTH AFRICA

economy2.indd 4

2012/06/08 12:07 PM


BALANCING THE NEEDS OF NATURE

A MASS-MOVE TO THE CITIES, RAPID INDUSTRIALISATION AND AN ACUTE ENERGY SHORTAGE THAT REQUIRES VAST INVESTMENT IN INFRASTRUCTURE CHALLENGE THE BEST OF INTENTIONS. ONE IN EVERY TEN PLANTS ON THE PLANET IS FOUND IN SOUTH AFRICA, as are seven percent of all the world’s birds, beasts and reptiles. This staggering natural bounty includes the Cape Floral Kingdom, a World Heritage site with more diversity of plants than any other place on earth, including the Amazon jungle. The country is also Africa’s largest economy, and herein lies the rub: how to balance the needs of nature and money. The country’s Constitution goes a long way to reconciling the two. Every person has a legal right to an environment which is not harmful to their health and well-being. The Constitution does not stop there, however – it also places a mandate on government to protect the environment, prevent pollution and ecological degradation, and to promote conservation. Meeting these requirements will not be easy. A mass-move to the cities, rapid industrialisation and an acute energy shortage that requires vast investment in infrastructure challenge the best of intentions. The legal requirement to protect the country’s natural resources insists that the environment be taken into account, which is why South Africa is now the continent’s leading investor in green technology. Clean energy, for instance, is an ongoing priority: “We want to ensure that the state, through its entities, invests R22-billion (US$3-billion) in green projects with a commitment of R3-billion towards local manufacturing in the next five years,” the energy minister Dipuo Peters said at a recent mineworkers union conference. The country’s first wind farm, on the West Coast, is already operational and more are to follow. Durban, on the East Coast and Africa’s largest container terminal, is exploring offshore wave power generation. Solar power hot water boilers are being installed in houses across the country, heavily subsidised by the state-owned energy company, Eskom.

A RESPONSIBLE APPROACH

SOUTH AFRICA HAS APPLIED A PIONEERING SPIRIT TAKING UP CORPORATE INVESTMENT CODES THAT ADDRESS SUSTAINABILITY. REGULATION 28, PASSED INTO LAW LAST YEAR, MAKES THE COUNTRY ONLY THE SECOND AFTER THE UNITED KINGDOM TO ADOPT A LEGALLY BINDING FRAMEWORK FOR RESPONSIBLE INVESTMENT. AFTER THE ENRON DEBACLE NEARLY A DECADE AGO, South Africa became one of the first countries to adopt the Sarbanes-Oxley set of accounting principles. The no-nonsense embrace of the Act, which set new global standards of corporate governance, skipped much of the debate that undermined its adoption in many western countries. Today, South Africa has applied a similar spirit taking up corporate investment codes that addresses sustainability. Regulation 28, passed into law last year, makes the country only the second after the United Kingdom to adopt a legally binding framework for responsible investment. “Ultimately, as a long-term investor, we believe that a responsible investment approach not only makes sound business sense, but that it’s also the right thing to do as a custodian of our collective long-term future,” says Jon Duncan, ESG analyst at Old Mutual Investment Group. The flood of people into the cities, and mounting pressure on scarce resources are risks that fund managers have to take into account when making long-term decisions. Even hard-nosed bankers, after all, want to leave the world a better place for their children. Regulation 28, and other standards being adopted by the financial industry, places responsible investing at the centre of the decision-making for pension funds and private equity managers. Investment analysts will now sift through not only financial data, but also interrogate a listed company’s own risk exposure to ESG issues. “These are to specifically challenge investors to think about the quality of the environment that their beneficiaries will inherit in 10 to 20 years’ time, as a result of investments being made now,” says Duncan. For offshore investors, the governance framework of South Africa is already in place and provides clear, transparent access to the Johannesburg Stock Exchange, home to a number of world industry leading corporations.

ESG SPECIAL FOCUS SOUTH AFRICA 21

economy2.indd 5

2012/06/11 11:09 AM


FROM JOHANNESBURG TO RIO SOUTH AFRICA HAS MADE SIGNIFICANT STRIDES IN MOVING ITS SOCIETY TOWARDS CONSUMPTION AND PRODUCTION PATTERNS THAT ARE MORE SUSTAINABLE AND IT IS WELL POSITIONED TO LEAD RESEARCH ON THE CONTINENT IN TERMS OF UNDERSTANDING AND PROJECTING CHANGES TO THE PHYSICAL SYSTEM. BUT THE COUNTRY STILL FACES SIGNIFICANT CHALLENGES IN BRIDGING THE GAP BETWEEN THE FIRST AND SECOND ECONOMIES, ERADICATING POVERTY AND IMPROVING THE QUALITY OF LIFE OF POOR SOUTH AFRICANS. WE LOOK AT SOUTH AFRICA’S MOVEMENT TOWARDS A GREEN ECONOMY. THE WORLD SUMMIT ON SUSTAINABLE DEVELOPMENT, which South Africa successfully hosted in 2002 showcased South Africa and Africa’s ability to take up the challenge of integrating social development with economic prosperity and environmental protection. The summit placed poverty eradication at the center of efforts to achieve sustainable development, and reinforced the notion of development that aims for equity within and between generations. As host of the WSSD, South Africa had a custodianship role in advocating and taking the lead in implementation of the targets, and the decade has seen South Africa actively fulfilling this role, internationally and nationally.

A framework for sustainable development is in place, embodied in a number of cross-cutting implementation strategies such as the Anti-Poverty Strategy, the Integrated Sustainable Rural Development Strategy, the Urban Renewal Program and finally in a number of sectoral policy and institutional developments, including White Papers and legislation that have emerged since 1994. The National Framework for Sustainable Development provides a valuable step in defining key sustainable development principles for the country, while being mindful of global challenges and growth ideals. South Africa has complex development considerations, that include the worrying increase in the gap between the rich and poor populations in the country. This has meant that a simple ‘triple bottom line’ approach to sustainable development is insufficient.

22 ESG SPECIAL FOCUS SOUTH AFRICA

rio-DEA-progress copy.indd 2

2012/06/08 1:06 PM


ADVERTORIAL

Changing unsustainable patterns Although South Africa has made significant strides in moving its society towards consumption and production patterns that are more sustainable, the country still faces significant challenges in bridging the gap between the first and second economies, eradicating poverty and improving the quality of life of poor South Africans. Sustainable Consumption and Production (SCP) programmes are relevant in the South African context given the resource-intensive nature of its economy. The SA economy is energy intensive due to the low cost of coal and the historical dominance of primary sector activities such as mining, mineral processing, metal smelting and synthetic fuel production. Increasing global attention on SCP, coupled with the growing scarcity of resources and cost of treating and managing waste in South Africa, has made government (as well as business and society) more receptive to changing unsustainable patterns of consumption and production. South Africa has made significant progress towards developing a framework to promote sustainable consumption and production programmes. This includes: the development of policy and legislation; initiatives to save energy; enabling environments for renewable energy; major moves towards cleaner production piloted and implemented through industry; establishment of mechanisms for funding and sustainable procurement; and increased consumer protection and awareness. The Ten-Year Innovation Plan approved in 2007 indicates that South Africa is well positioned to lead research on the continent in terms of understanding and projecting changes to the physical system; the impact of these changes; and mitigation to limit their long-term effects. Mitigating climate change also provides an economic opportunity for South Africa; therefore the country needs to develop a strategy to take advantage of the ‘Green Economy’.

Greenhouse gas emissions – finding aspirational desired outcomes; Build on, strengthen and/or scale up action; Preparing for the future; Vulnerability and Adaptation; Alignment, Coordination and Cooperation. On the eve of the UN climate negotiations in Copenhagen (December 2009), South Africa announced that it would undertake mitigation actions which will result in a deviation below the current emissions baseline of around 34 percent by 2020 and by around 42 percent by 2025. This was on provision that the necessary finance, technology and capacity building support was received. These Nationally Appropriate Mitigation Actions are viewed as key building blocks towards growing a green economy and have been listed as: ENERGY USE AND SUPPLY Improving efficiency in industry: An aggressive improvement of industrial energy efficiency to meet the existing goal of final energy demand reduction of 15 percent by 2015 and sustained efficiency beyond. This includes the planned Eskom DSM programme, but meeting the 15 percent target requires further action, given current levels of ambition as expressed in the IEP. Making efficient commercial building and public buildings: Mandatory improvements in efficiency measures in new commercial and public buildings. New builds to meet higher standards and retro-fitting of existing buildings. Meeting the existing goal of final energy demand reduction of 15 percent by 2015 and sustained efficiency beyond. Sustainable housing development: Develop housing in more efficient, comfortable and cleaner way. Meeting the existing goal of final energy demand reduction of 10 percent by 2015 and sustained efficiency beyond. Initial lower CO2 electricity supply: Renewable energy technologies and nuclear power. Enhanced lower CO2 electricity supply: Earlier renewables and nuclear technologies. 

Climate change – South Africa is leading and ready While South Africa, like many other developing countries, is under severe threat in terms of climate change, the country is also contributing to greenhouse gas emissions at a rate that is greater than all other countries in the region. In 2008, South Africa concluded the Long Term Mitigation Scenarios (LTMS) process, which provides a longer term view on the country’s emissions trajectory and viable options to mitigate such emissions. The LTMS provided a sound basis for the development of policy direction themes. These were given the themes:

ESG SPECIAL FOCUS SOUTH AFRICA 23

rio-DEA-progress copy.indd 3

2012/06/08 4:55 PM


TRANSPORT AND LIQUID FUELS Sustainable transport development: Passengers shift from private car to public transport, freight from road to rail, and from domestic air to intercity rail/bus. Accelerate the improvement in efficiency of the vehicle fleet. Advanced transport options: Use of hybrid vehicles to replace petrol cars; development and greater penetration of electric vehicles, encourage use of smaller vehicles. Liquid fuel supply options: Incentives for biofuels and carbon tax including on synfuel production, which results in no further coal-to-liquid plants. NON-ENERGY EMISSIONS Reducing industrial process emissions: CCS on new synfuel plants, PFC capture in existing aluminium plant, methane capture at existing synfuel plants and coal mines, clinker reduction in cement. Improved agriculture: Reduced tillage, manure management and improved enteric fermentation. Emission reductions in LULUCF: Reduction in fire episodes in savannah and afforestation of commercial forests. South Africa’s vision for an effective climate change response and the long-term transition to a climateresilient and lower-carbon economy and society is well encapsulated in the 2011 approved National Climate Change Policy. This will guide government’s approach to climate change response and our transition to a climate resilient and low-carbon economy – premised on our commitment to sustainable development and a better life for all. It also aims to ensure that all sectors of the South African society take part in the effort to mainstream climate-resilient development. The Climate Change Policy also describes the overall strategic approach for South Africa’s climate change response as being needs-driven and customised; developmental; transformational, empowering and participatory; dynamic and evidence-based; balanced and cost effective; and integrated and aligned.

WORKING FOR CHANGE

SOUTH AFRICA INITIATED THE WORKING FOR WATER PROGRAMME IN 1995. Since then the programme has been recognised internationally as an effective resource management and job creation initiative within the concept of a green economy. Other ‘working for’ programmes have been initiated and continue to demonstrate the benefits in terms of resource management and job creation. However, there is a need to: • Expand the efforts of the programmes, especially in terms of broader ecosystem rehabilitation and river management; • Ensure that existing programmes are fully functional and adequate to ensure effective outcomes; and • Integrate the planning and implementation of the programmes to ensure that benefits are sustained. In particular, the programme could: Expand the Working for Land Programme to a comprehensive rehabilitation programme in all ecosystems to restore and maintain productive capacity. This should include a broad-based ecosystem assessment and monitoring programme, which would provide employment and develop skills in its own right. Introduce a ‘Working for Rivers’ programme that will address river restoration and law enforcement on river systems, from catchment to point of use. Expand the People and Parks Programme beyond the current infrastructural focus to include the creation of local economic opportunities for the provision of products and services to parks. The key outcome will be improved resource management. The level of job creation could be greatly increased from current levels (an approximate estimation of 30,000 to 40,000, mainly in the Working for Water Programme) to around 100 ,000 (or more) jobs in the combined programmes. However, it should be noted that the programmes are usually not permanent in any specific area, and there needs to be greater emphasis on skills development and enterprise creation so beneficiaries are able to make use of economic opportunities created as a consequence of the programmes.

From the origins of our future, to the future we want! www.environment.gov.za

24 ESG SPECIAL FOCUS SOUTH AFRICA

rio-DEA-progress copy.indd 4

2012/06/11 3:31 PM


MANAGING WASTE

THE GROWTH IN THE VOLUME OF GENERAL WASTE produced highlights the economic potential of the waste management sector, with its estimated total expenditure of approximately R10-billion per annum. Waste collection and the recycling industry make a large contribution to job creation and GDP, and there is considerable potential to expand this further. In terms of the South African Constitution, waste management service delivery is a local government function. Municipalities are obliged to provide waste management services to realise this right. Sanitation infrastructure connects almost 80 percent of South African households, and there already exists a basis for a recycling industry. An example of this initiative is in operation at a pilot project in Mafikeng which services 30,000 households, has created 75 jobs and five SMMEs who now own their own waste collection trucks. Significant opportunities through the beneficiation of waste streams, including creating infrastructure for Materials Recovery Facilities, outsourcing of waste services to stimulate enterprise development, and waste-to-energy, emerge from a high level scan of the waste industry. This can be seen in existing recycling figures: approximately one and a half billion tons of packaging and paper waste (40 percent of the consumption of packaging and paper products) is recycled per annum. While this is still slightly behind developed country statistics, this provides an established base upon which to build and set future targets for the recycling industry. Making it happen – conclusion A core strategy of the New Growth Path is to encourage activities that can generate employment on a large scale and meet basic needs at lower costs in the short to medium term, while sustaining development of more knowledge intensive industries for long run growth. Direct linkages exist with this core strategy in terms of the Green Economy; namely, through technological innovation and development; a local manufacturing base to mainstream environmentally friendly technologies can be established that supports local job creation and regional

integration and ensures that South Africa transitions to a greener growth path. There is growing urgency in the need for South Africa to speed up the adoption of resource efficient production practices and progressively restructure away from energy intensive industries towards new green industries, which are financially viable and internationally competitive in the long run. A move to a more sustainable development path will create new green jobs, which may help to offset employment losses experienced in other sectors; open up new investment opportunities and export markets; support the creation of a knowledge – based economy and allow South Africa to set standards and demonstrate thought leadership.

Greener lighting for World Cup cities A 2010 project, supported by US$1-million in GEF funding, was greening public street lights, traffic lights and billboards in and around the stadiums of the FIFA 2010 World Cup’s six host cities. This was rolled out in the City of Tshwane (Pretoria), Johannesburg Metropolitan Municipality, Nelson Mandela Metropolitan Municipality (Port Elizabeth), Polokwane Local Municipality, Rustenburg Local Municipality and Mangaung Local Municipality (Bloemfontein). Green Passport A second initiative, the Green Passport, was aimed to encourage visitors to make responsible travel choices while visiting South Africa for the FIFA 2010 World Cup. The ‘Passport’ – a 32-page booklet packed with greening tips and information on responsible tourism in each host city – was distributed to 100,000 World Cup spectators.

‘Direct linkages exist with this core strategy in terms of the Green Economy; namely, through technological innovation and development.’

ESG SPECIAL FOCUS SOUTH AFRICA 25

rio-DEA-progress copy.indd 5

2012/06/08 5:08 PM


ADVERTORIAL

GREEN ECONOMY IN SOUTH AFRICA – FINDING OPPORTUNITY IN CRISIS SOUTH AFRICA HAS ONE OF THE MOST COMPREHENSIVE SOCIAL PACTS ON GREEN JOBS IN THE WORLD THE NEW GROWTH PATH APPROVED IN OCTOBER 2010 sets out critical markers for employment creation and growth and identifies and targets 300,000 additional direct jobs by 2020 to green the economy, with 80,000 in manufacturing and the rest in construction, operations and maintenance of new environmentally friendly infrastructure. The National Treasury’s work on the use of market-based instruments to help address environmental challenges and to reform the tax system to encourage a green growth strategy (and a low carbon economy), hence in 2006 the National Treasury (NT) published a paper for public commenton

www.environment.gov.za

environmentally related economic instruments entitled ‘Marketbased Instruments to Support Environmental Fiscal Reform in South Africa’. The aim of the study was to provide a coherent framework in which environmentally-related fiscal instruments (taxes and charges) should be considered in South Africa. A draft Environmental Fiscal Reform (EFR) policy paper was published in April 2006, to provide a guiding framework and criteria for developing and accessing environmentally related tax proposals. South Africa’s Green Economy Accord was launched at the COP17 talks in Durban. The Accord, one of the most comprehensive social pacts on green jobs in the world, builds a partnership to create 300,000 new jobs by 2020, in economic activities as diverse as energy generation, manufacturing of products that reduce carbon emissions, farming activities to provide feedstock for biofuels, soil and environmental management and eco-tourism.

26 ESG SPECIAL FOCUS SOUTH AFRICA

DEA-economy-advertorial copy.indd 2

2012/06/11 11:10 AM


ADVERTORIAL

• Economic development that is just and equitable (within and across geographies) and supports humanity to ‘live well’ or ‘buen vivir’. This means that global humanity (and the rich specifically) should consume in ways that allows all of humanity to have enough, as opposed to current patterns of wasteful materialism and consumption by a few which do great damage to present and future generations. • A different way of thinking about economic policy also means that one must relook at tools for measurement, such as Gross Domestic Product (GDP), which fails to take into account aspects such as resource depletion, unpaid community, women’s work and the erosion of community values. • Restoration of common goods (minerals, fish stock, timber, water, land) to the public, to use for common benefit and defended from exploitation for profit or for benefit by the few. The participants were firmly opposed to any efforts to commodify (put a price to) nature, the benefits it offers humanity (now framed as ‘environmental services’), and trade these services or benefits. • Public services (education, healthcare, transport, water and sanitation, energy) should be rendered and managed by the state in the interests of the public and for public benefit, and not by the private sector, which is only interested in the extraction of profit in the shortest time frame possible.

• Make the shift to affordable renewable energy that is accessible to all. The participants identified the mineralsenergy complex as the most significant challenge to make the shift to renewable energy in South Africa. • Bring water rights to the heart of the GE: The group saw water pollution and the privatisation of water services (with differential and highly unequal cost structures) in a situation of rising water scarcity as one of the biggest threats to the planet and the well-being of its citizens. The group was deeply opposed to water privatisation and the associated water cut-offs. • Restoration, reparations and regulation: Corporations must be held accountable and responsible for ecological damage and negative social impacts of their extraction and production activities. The private sector must restore renewable natural resources to optimal states, and pay full reparations to communities that have been negatively impacted by their production activities. • Socialising public goods to the local/ small-scale. There is an urgent need to scale down – to place power to make decisions about and manage natural resources in the hands of local communities, collectives of workers and groups of women. • A state led transition to a low carbon economy: This process should not be led by the private sector, which is almost exclusively driven by its profit interests.

www.environment.gov.za

WHAT DOES CIVIL SOCIETY SAY?

AS PART OF ITS CONSULTATION PROCESS AHEAD OF RIO+20, THE DEPARTMENT OF ENVIRONMENTAL AFFAIRS HELD A SERIES OF WORKSHOPS WITH SOCIAL CLUSTERS AND NGOS. The results question the current paradigm of the green economy and suggest it is likely to lead to further social inequality. It argues that the weakness of international environmental governance and weak institutions are a consequence of the dominant economic growth model that is promoted by global institutions.

DEA-alternative-advertorial copy.indd 3

2012/06/08 1:20 PM


EDNA MOLEWA –

MINISTER OF WATER AND ENVIRONMENTAL AFFAIRS

THE EXTRA-FINANCIAL THEMES – ENVIRONMENTAL, SOCIAL AND GOVERNANCE are equally challenging for emerging market organisations to manage. It would be self-defeating to elevate one pillar above the rest. The department has seen corporates and big industrial giants collapse, simply because their corporate governance and ethos had diminished. Equally, when social governance and responsibility collapse the financial bottom line shrinks, because companies in conflict with society are companies in conflict with their markets, consumers and workforce. Without environmental governance and a conscience, no sustainable production can take place. Therefore, growth and corporate success must always be viewed from a People, Planet and Prosperity integration. The fundamental objectives of the policies and legislation are to secure sustainability and equitable access to resources. The National Environment Management Act (Act 107 of 1998) notes: “The environment is held in public trust for the people. The beneficial use of environmental resources must serve the public interest and the environment must be protected as the people’s common heritage.” Before 1994, environmental matters had very low profiles in terms of government priorities. That changed rapidly with the advent of democracy and has also seen tremendous progress towards putting South Africa on a path of sustainable development, encompassing economic growth, social development, and the conservation of natural resources and services. After successfully hosting the World Summit on Sustainable Development in 2002, the Department assumed a global leadership role in the promotion of these ideals. Building better communities, creating jobs and fighting poverty is a central part of its global quest for sustainable development. In line with its vision of creating a prosperous and equitable society living in harmony with the natural environment, government’s key strategic priorities in these areas include: • The protection, conservation and enhancement of environmental assets, natural and heritage resources; ensuring a sustainable and healthy environment; contributing to sustainable economic growth,

28 ESG SPECIAL FOCUS SOUTH AFRICA

ESG-interview-DEA.indd 2

2012/06/08 4:54 PM


INTERVIEW livelihoods and social cohesion; providing leadership on climate change action; • Promoting skills development and employment creation through facilitating green and inclusive economic growth; and • Creating a better Africa and a better world by advancing national environmental interests through a global sustainable development agenda. The Department of Environmental Affairs is fully supportive of the smart cities initiative which will help major cities including South Africa’s Johannesburg, Tshwane/Pretoria, Durban and Cape Town better understand and tackle the environmental and city infrastructure challenges they are facing and would encourage that the work be cascaded to smaller municipalities as well. The Department believes that actions to address climate change and sustainable economic development paths are linked. South Africa takes a green economic growth strategic approach to identify actions which allow for sustainable development and climate mitigation and adaptation co-benefits. Climate change is considered to be one of the most serious threats to sustainable development, with adverse impacts expected on the environment, human health, food security, economic activity and investment, natural resources and physical infrastructure. This will disproportionately affect the poor who have not contributed to the causes of climate change but are the least equipped to adapt to the potential effects of climate change. The Government of South Africa considers the United Nations Conference on Sustainable Development (Rio+20) to be a critical meeting that should agree on how to facilitate expeditious implementation of sustainable development agenda. Therefore, the conference should build on the concrete and practical experience of approximately 20 years in the implementation of sustainable development agenda as outlined in Agenda 21 and the Johannesburg Plan of Implementation (JPOI). Rio+20 should reaffirm the Rio principles and establish focus principles for operating the green economy concept. Principle seven of common but differentiated responsibility should form

the cornerstone of the implementation of the green economy concept. This will ensure that countries will design their transition within their policy spaces and take into account their developmental imperatives. The following principles are proposed for consideration: • All states should be allowed a policy space to define their own strategies towards a transition to a green economy as per their national priorities and respective stages of development • In order to maintain the balance of addressing poverty while securing the natural resource base, green economy should be people-centred and inclusive, taking into account the needs of the most vulnerable (women, disabled and youth) • Recognising the special capacity needs of developing countries for transition to a green economy, promotion of finance, research, development and innovation, science and technology, and capacity building measure to developing countries should be upscaled • Promote access to green technologies at affordable cost and work ensures that green economy creates new market opportunities, notably for developing countries • All states should build on existing programmes, indigenous knowledge, initiatives in key sectors and promote information sharing of best practices on policies and programmes that contribute towards the attainment of an inclusive green economy • All states should recognise green economy as a means to achieve a sustainable development agenda and integrate its dimensions Therefore, the conference should build on the concrete and practical experience of approximately 20 years in the implementation of the sustainable development agenda as outlined in Agenda 21 and Johannesburg Plan of Implementation (JPOI). To integrate ESG management effectively and efficiently, the Department poses the following questions: What might a more just and sustainable global economy look like in the year 2025? How can the real economic value of sustainability information be unlocked to create a more caring, trusted and sustainable capitalism? What lessons can be learnt from the

past in constructing a new growth model in which the integration of sustainable development factors becomes a normal part of doing business? What role will technology play? What are the roles of government, business and civil society in this context? What existing or new partnerships must be forged? Increased urbanisation of human society has been an uninterrupted trend since at least the industrial revolution. Each year millions of people are lured from the countryside to the cultural, economic, social dynamism of cities. This trend has been accompanied by significant economic growth and expansion. The State of the Environment Reporting (SoER) has a central role to play in evaluating environmental management and its impact on society. Ideally, the central purpose of SoER is to inform policy and planning by providing decision-makers with up-to-date scientific data in relevant and userfriendly formats. SoER is a relatively new aspect of governance in South Africa. A study undertaken by Chantal Will for the CSIR suggests that considerable scope for improvement exists in the extent to which SoER indicators in South Africa are engaged with during the development of policy and planning processes. To make South Africa a sustainable business destination, guidance on policy related matters is a necessity. Areas of guidance include: government policy and experience; national and regional regulation and guidance; regional sustainability and transparency issues; relations to other international CSR and sustainability tools; advancement of sustainability reporting practices for public agencies; and the role of governments as supporters of global public goods development. The Department of Environmental Affairs strives for continued sustainability. In short, over the years it has made real progress in fulfilling its constitutional commitment to ensuring an environment that is not harmful to health or wellbeing. This, and the steps it has taken to integrate its efforts with those of other countries hold great promise for our nation, the region, and the African continent.

www.environment.gov.za ESG SPECIAL FOCUS SOUTH AFRICA 29

ESG-interview-DEA.indd 3

2012/06/11 9:15 AM


June National Environment Month

GREEN ECONOMY: Does it include you?

As part of Environment Month and Youth Month, South Africa’s young people are encouraged to explore fields of study and career options in the Green Economy. GREEN COLLAR jobs contribute towards conserving our natural heritage. This sector also assists to equitably share the benefits derived from innovations in climate change adaptation and mitigation, climate smart agriculture, eco-tourism, bio-prospecting, environmental quality protection and waste management, amongst others. Visit:

www.environment.gov.za or call 086 111 2468

for information on fields of study and careers in the Green Economy.

DEA-advert1.indd 1

2012/06/08 1:22 PM


INTERVIEW

EMBRACE THE TREND WITH BOLD AND INNOVATIVE LEADERSHIP NAME JON DUNCAN OCCUPATION AND POSITION ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) ANALYST Company snapshot: Old Mutual Investment Group South Africa (OMIGSA) is one of the largest asset management groups in Africa, with R472-billion in assets under management (31 December 2011). We offer a comprehensive range of investment solutions to both retail and institutional investors, across the risk/ return spectrum, including pure equity, asset allocation, fixed-income and index-tracking investments as well as alternative assets like property, private equity, infrastructure and socially responsible investments (SRI). Some say sustainability is just another marketing concept? I believe that sustainability is a mega trend that is shaping the competitive landscape in every sector, and that companies able to respond to this trend and innovate early will reap the benefits of stronger growth prospects, enhanced operating efficiencies, stronger social license to operate, enhanced staff retention, lower cost of capital and, ultimately, stronger and longer competitive advantage

relative to their peers that haven’t adapted. What does it actually mean? At first glance sustainability appears to be a vague and nebulous concept that is difficult to define; the result is that for many businesses it is an issue that is dealt with outside of core business strategy and management. The risk with this approach is that it is merely seen as a superficial add-on to the business model that adds little clear value. Those businesses that take the time to consult with stakeholders and review material impacts and opportunities up and down the value chain will begin to see the business case. They will also see how integrated sustainability issues actually are with business strategy. To embark on this journey, however, requires bold and innovative leadership. It calls for the visioning of new approaches to the provision of goods and services across all sectors of society in a way that is mindful of the tradeoff between natural, social, human, financial and manufactured capital. What is your role in changing perceptions? My role is to educate and instigate new approaches to understanding risk and opportunity in the investment world. As an analyst within an asset management business, I help our investment professionals see the world through the sustainability lens and to better price the environmental, social and governance risks and opportunities that emerge in relation to the assets they manage. How is climate change affecting business? It is resulting in technological, policy and physical changes that create both opportunities and risks. These vary depending on the sector and geographical location of the business. Some businesses are potentially impacted due to policy changes that place a price on carbon emissions, like the potential impacts on smelters in South Africa. Others may enjoy new growth opportunities from technological innovation to address climate issues (like potential for platinum use in the hydrogen fuel cells), while some may be exposed to the physical impacts associated with climate change (agricultural and water sectors). Businesses with an eye on the future will be considering these issues as they develop their 10-year growth strategies.

What are the changes companies and individuals need to make? The magnitude of many of the sustainability-linked challenges is beyond the scope of any one institution or business. To tackle this challenge will require business leaders to collaborate with their competitors, as well as a diverse set of stakeholders, to find practical solutions to such issues. On an individual level, the sustainability challenge can sometimes seem overwhelming, however it is important not to underestimate the power of individual change at the household and community level. What do you think are the key challenges facing South African businesses and the public sector? The lack of a clear, shared vision for a sustainable and equitable economy is a huge obstacle. Our big challenge is to foster collaboration to ensure we build consensus and capacity around a common goal. While the National Planning Commission has started this process, it will require further buy-in and participation from labour, business and all spheres of government. What is your company doing to change perceptions? OMIGSA aims to lead the investment industry in South Africa by providing investment opportunities aimed at addressing key sustainability challenges in South Africa. We have a robust suite of SRI investments that aim to meet socioeconomic needs and complement the efforts of government, while delivering commercially acceptable gains to our investors. These include investments in housing and infrastructure development, agriculture, alternative energy and schools.

Our commitment to this investment approach is summarised in our OMIGSA Responsible Investment Guidelines, which is publically available on our website: www.omigsa.com/about

ESG SPECIAL FOCUS SOUTH AFRICA 31

ESG-interview-mutral-fedral.indd 3

2012/06/08 9:58 AM


OLD MUTUAL INVESTMENT GROUP SOUTH AFRICA’S ALTERNATIVE INVESTMENTS – DELIVERING SOCIAL AND INVESTMENT RETURNS addressed, with a primary focus on developing affordable housing and providing access to quality education through training teachers as educators and as entrepreneurs, as well as upgrading and building new school infrastructure. The knock-on effects of these initiatives are tangible economic development and job creation. OMIGSA’s philosophy is to partner with businesses who are experts with proven track records in their respective fields. This reduces investment risk for our investors, has a positive impact on investment returns through greater efficiency and lower costs, as well as allowing us to provide an end product that is affordable to the target market. FUTURE INITIATIVES Old Mutual Impact Fund for African Housing (OMIFAH) Based on the potency of the current housing development initiative (see overleaf), OMIGSA aims to launch an African low-income housing development fund in 2013.

“Education is the most powerful weapon which you can use to change the world.” Former President of South Africa: Nelson Rholihlahla Mandela

A DYNAMIC AND INNOVATIVE BUSINESS WITHIN THE OLD MUTUAL INVESTMENT GROUP SA (OMIGSA), Alternative Investments is the largest alternative investment manager in South Africa. With assets under management in excess of R37-billion*, it manages investments in private equity, infrastructure, mezzanine debt and a range of development impact funds. The Alternative Investments is widely acknowledged for its contribution to the improvement of South Africa through the provision of affordable housing and access to quality education. In addition, they are active investors in road and rail infrastructure and alternative energy. DEVELOPMENT IMPACT FUNDS (DIFs) In the DIFs team, a division of OMIGSA Alternative Investments, the company shares the view that socially responsible investments (SRIs) are fundamental to national economic transformation, and defines SRIs as those that provide investors with commercial returns while delivering positive social and developmental impacts on scale. The company invests in assets/areas where gaps or backlogs in social infrastructure have not been adequately

• Target fund size: US$450-million • Sector: Unlisted property – housing • Target return: 12 percent a year (excl. costs, currency swaps and country-risk insurance) • Term: 15 years from closing • Commitment period: 5 years from closing • Investment vehicle: Limited Liability Partnership (South Africa) • Minimum commitment: US$50-million The fund aims to deliver commercial debt-type returns from investments in all forms of low-income housing (physical development, ownership of rental stock and end-user finance) across a selection of countries in subSaharan Africa (excluding South Africa). Investors are required to have a long-term view and the investment upside is expected through participation in the project equity. The investment mandate of the fund will also incorporate associated investments, such as local-level infrastructure, urban management support projects and facilitating infrastructure. As with our South Africanbased housing fund, we’ll partner will local developers and businesses in the management and delivery of these investments. If you are interested in investing in OMIFAH, please contact Christine Glover at +27 (0) 21 509 5977 or cglover@omigsa.com

*Dec 2011 32 ESG SPECIAL FOCUS SOUTH AFRICA

ESG-4xadvertorial copy 2.indd 2

2012/06/08 10:03 AM


ADVERTORIAL

CURRENT INITIATIVES We currently have three active DIFs, with the R9.15 billion Housing Impact Fund of South Africa (HIFSA) as our flagship fund. See details below. 1. The Financial Sector Charter (FSC) Fund Inception date: October 2007 • Target: 3-month JIBAR +400 basis points • Key and founding investor: Old Mutual Life Assurance Company South Africa • Type: Closed-ended, unlisted and unrated • Term: Open-ended • Investment vehicle: Fund policy as defined in the Long Term Insurance Act, 1998 The fund provides accessible finance and facilities to disadvantaged people by investing in targeted sectors of the economy in terms of the Financial Sector Charter. The portfolio aims to make commercial investments which will have scale impact in the target area. 2. The Schools and Education Development Impact Fund (the Schools Fund) Inception date: December 2011 • Target: 3-month JIBAR + 430 basis points • Key and founding investor: Government Employees Pension Fund • Type: Open-ended (for 3 years); unlisted and unrated • Term: 17 years from closing • Commitment: 5 years • Investment vehicle: Vesting trust • Minimum investment: R100-million The fund offers investment capital for infrastructure expansion and partners with experienced local school operators who have a track record in delivering high-quality education. It invests in the education sector, with a focus on low-fee, independent schools, targeting households that earn less than R200 000 per annum. We are actively seeking investments for the Schools Fund. Please contact: Lala Steyn at +27 (0)21 509 2913 or lsteyn@omigsa.com 3. The Housing Impact Fund of South Africa: stimulating economic well-being The DIF team has disbursed more capital in the affordable housing market in the last two years than the country’s four largest banks combined, and is currently the most significant single provider of development funding in this market. The model developed by Old Mutual engenders a marketdriven, commercially viable approach to providing solutions for growing markets that harnesses profit for a greater good. Over the next eight to ten years, it is anticipated that these funds will facilitate the development of 75 475 new houses. ZAR1/US$8.27 @ 17 May 2012

+

A new home in an Alternative Investments / Urban Space development in Randfontein, Gauteng, stands ready for its owner

Key investors 1. Old Mutual Life Assurance Company SA 2. Public Investment Corporation (manager of public sector retirement funds; one the largest investment managers in Africa) 3. Development Bank of Southern Africa (mandated to promote economic development and growth) The context: South Africa’s housing challenge Lack of affordable housing has enormous negative socio-economic consequences. It limits opportunities for previously disadvantaged, upwardly mobile households to benefit from the potential financial rewards of owning a home. By maintaining the current status quo, the unsustainable level of wealth inequality is unlikely to decline. The South African government’s housing efforts target households with a monthly income of ≤ R3,500 (US$423+). On the other hand, private sector housing delivery tends to focus on the highest earning 10 percent of households – those earning upwards of R20,000 (US$2,418+) a month. There is therefore a wide gap occupied by households who earn too much to qualify for state assistance, but too little to afford private-sector built units. Fund details • Inception date: October 2010 • Investment targets: 3-month JIBAR +400 basis points • Type of fund: Closed-ended, unlisted and unrated • Minimum investment: R200-million • Term: 15 years from closing • Commitment: 4 years from closing • Investment vehicle: Insurance policy Launched in 2010, the fund aims to fill this significant housing gap and focuses primarily on residential households earning between R3,500 and R16,000 (between US$423 and US$1,935+) per month. Our focus Continues on overleaf

ESG SPECIAL FOCUS SOUTH AFRICA 33

ESG-4xadvertorial copy 2.indd 3

2012/06/08 10:03 AM


partners, Mayibuye Finance, was granted a loan facility of R457-million to provide home loans to borrowers who are unable to access finance from other lenders. Within three years Mayibuye had originated 1,800 mortgages and 24,000 unsecured loans. Rentals: We partner with suitable operators who acquire and develop rental stock to provide rental and student accommodation in SA’s urban environment, providing a much-needed service in this segment while helping to revive decaying inner cities. In addition to inner-city rentals, there is a focus on providing student accommodation to those students falling into OMIGSA’s ‘affordable’ segment. Currently, accommodation is provided to approximately 4,000 students, mainly in Johannesburg, Durban, Pretoria and Cape Town.

Excited homeowners receive the keys to their new house in Randfontein, Gauteng

on affordable housing is therefore not only a commercial response to a real need, but a strategic response to a national priority. Real impact: making a difference one house at a time Research indicates the high impact of owning quality housing on those from previously impoverished circumstances. In a recent survey in one of our new developments, Karino Lifestyle Estate, the overwhelming majority of households felt their lives have improved in terms of safety and access to sanitation and running water. In addition, 87 percent of homeowners have invested in home improvements since moving into their homes. Progress is being made House sales: Urban Space Housing is a joint venture between HIFSA and housing developer Probuild and its sister marketing company Renprop. Old Mutual has approved funding of R721.5-million for the development of 19,996 housing units in eight mixed-income projects over the next five years. End-user finance: Aside from the creation of new stock, approximately 27 percent of the funds are allocated towards improving access to end-user housing finance, including unsecured housing finance and mortgages. This is achieved by providing funding to micro lenders with sustainable models. In 2008 one of our end-user finance

Economic effects While affordable housing is the primary focus of our fund, the economic benefits generated by the construction process are considerable. Many of the projects are still works in progress, rendering total project figures a projection. The tables below are taken from an independent report, conducted by Urban-Econ Development Economists. Capital expenditure (Capex) 2011 (actual)

Total construction period (ends 2018)

Production*

R8.2m

R28bn

Gross geographical product (GGP)*

R2.6m

R9.5m

Jobs created

17,662

64,100

Capital expenditure (Capex) 2011 (actual)

Total construction period (ends 2018)

Production*

R1.4bn

R5.1bn

Gross geographical product (GGP)*

R1.4bn

R2bn

Jobs created

3,591

14,200

* At 2011 prices

In conclusion OMIGSA funds are a unique example of economicallysustainable, developmentally-focused investing. Affordable housing and quality education have a significant social impact and, at the same time, provide an opportunity to generate market-related returns.

Old Mutual Investment Group (South Africa) (Pty) Ltd is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers www.fsb.co.za to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Reg. No 1993/003023/07. These products are sold subject to terms and conditions. Refer to Alternative Investments at www.omigsa.com

34 ESG SPECIAL FOCUS SOUTH AFRICA

ESG-4xadvertorial copy 2.indd 4

2012/06/08 10:03 AM

10001001


10001001JB

UNDERLYING ASSETS. UPLIFTING RETURNS. Imagine a fund that is as kind to your community and environment, as it is to your investment returns. The IDEAS* Managed Fund – established in 1999 – holds true to this ideal. Not only has it become the largest private infrastructure equity investor in the country, uplifting the broader community through economic development, but it has also produced strong returns for its investors. In fact, it has produced benchmark-beating returns** since inception. And with extensive investments into infrastructure assets and renewable energy throughout South Africa, it’s no wonder. After all, long-term, sustainable investments mean long-term, sustainable returns. For more information contact Sean Friend, Fund Manager, IDEAS Managed Fund on (011) 217 1685 or sfriend@omigsa.com, or visit www.omigsa.com/alternative *The Infrastructure, Developmental and Environmental Assets Managed Fund **Benchmark: CPI+7% p.a. over a 36-month rolling period IDEAS Managed Fund is managed by Old Mutual Investment Group (South Africa) (Pty) Ltd. Alternative Investments

The IDEAS Managed Fund is a product of Setsing Financial Services (Pty) Ltd. Setsing Financial Services (Pty) Ltd is a licensed financial services provider, FSP 4262, approved by the Registrar of Financial Services Providers (www.fsb.co.za) to provide advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. The IDEAS Managed Fund is sold through an insurance policy underwritten by Old Mutual Life Assurance Company (South Africa) Ltd, which is a licensed financial services provider in terms of the FAIS Act, FSP 703. Asset management is performed by the Old Mutual Investment Group (South Africa) (Pty) Limited (OMIGSA). OMIGSA is a 35% shareholder in Setsing Financial Services. OMIGSA is a licensed financial services provider, FSP 604, approved by the Financial Services Board (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Reg No 1993/003023/07. All employees of OMIGSA are remunerated with salaries and standard short-term and long-term incentives. No commission or incentives are paid by OMIGSA to any persons. All inter-group transactions are done on an arms lengths basis. OMIGSA is a wholly owned subsidiary of Old Mutual (South Africa) Limited (OMSA).OMSA is a member of Association for Savings and Investments SA. The rights and obligations of the investor are set out in the relevant policy contract. Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance.

ESG-4xadvertorial copy 2.indd 5 10001001JB 276x210.indd 1

2012/06/08 10:04 AM 2012/05/22 11:54 AM


THE DURBAN PLATFORM

DURBAN CONFERENCE DELIVERED A BREAKTHROUGH IN THE INTERNATIONAL COMMUNITY’S RESPONSE TO CLIMATE CHANGE

UNFCCC Executive Secretary Christiana Figueres, COP17/CMP7 President Maite NkoanaMashabane and UN Secretary General Ban Ki-Moon

AFTER MONTHS OF PREPARATION AND A MARATHON TWO WEEKS OF NEGOTIATIONS that ended in the early morning hours of 11 December 2011, the United Nations (UN) Climate Change Conference or COP17/CMP7 came to an end at the International Convention Centre (ICC) in Durban. Parties thanked the COP17/CMP7 President, Minister of International Relations and Cooperation Maite NkoanaMashabane, for her leadership in guiding the conference to produce a positive outcome. This included the African delegation which also thanked South Africa for excellent conference logistical arrangements. The UN Framework Convention on Climate Change (UNFCCC) Executive Secretary Christiana Figueres said: “In honour of Nelson Mandela: It always seems impossible until it is done. And it is done!” Her words were echoed by Connie Hedegaard of the European Union (EU): “We have a roadmap that marks a breakthrough for the international

fight against climate change.” The United States’ chief negotiator Todd Stern said: “I think in the end it ended up quite well. The first time you will see developing countries agreeing, essentially, to be bound by a legal agreement.” Durban expectations There were two main tasks that the UN wanted the conference to accomplish. One related to building the institutions that would help support the developing countries response to climate change. The second pressing task for governments was to answer the question of how they would move forward together to achieve their agreed goal to limit the average global temperature rise to two degrees Celsius, and how to review progress towards that goal between 2013 and 2015. A decision on the future of the Kyoto Protocol was also a central part of the Durban outcome. The Kyoto Protocol is the only legally binding treaty the world presently has to combat climate change, and it is important that

“THE KYOTO PROTOCOL IS THE ONLY LEGALLY BINDING TREATY THE WORLD PRESENTLY HAS TO COMBAT CLIMATE CHANGE.” 36 ESG SPECIAL FOCUS SOUTH AFRICA

DPS-DIRCO-advertorial.indd 2

2012/06/08 11:48 AM


ADVERTORIAL governments safeguard what they had worked on so long to agree and develop, and what has proven effective. The process During the first week of the conference negotiators worked on the technical aspect of the negotiations. The officials were joined by no fewer than 12 Heads of State and Government, as well as 130 ministers, during the HighLevel Segment which started on 6 December 2011. At the opening of the COP17/CMP High Level Segment President Jacob Zuma said: “We are agreed that this global challenge requires a global solution. However, different positions still prevail on some critical points. It is important that there is common ground on the elements that will remain critical in reaching any agreement. These are multilateralism, environmental integrity, common but differentiated responsibility and respective capabilities, equity, and honouring of all international commitments and undertakings made in the climate change process.” Also addressing the High-Level Segment, UN Secretary General Ban Ki-Moon warned that the world was in danger. “It is not an exaggeration to say that the future of our planet is at stake. Science is clear – we are at a point of no return; the world is looking at you for leadership.” He reminded delegates to be “realistic” about a breakthrough in Durban, citing a difficult financial climate currently facing world countries. The outcomes in Durban Highlighting the difficult process of reaching a credible and fair agreement between all 194 Parties of the UNFCCC, negotiations continued until the early hours of the morning on 11 December 2011, after the conference was initially scheduled to close on 9 December. COP17/CMP7 spokesperson Clayson Monyela comforted the tired and impatient media guarding the hallways. “All COPs that ever produced results went into overtime. COP17 will be remembered for having exceeded expectations. The deal is in the bag!” Speaking at 5:10am at the conclusion of the conference, Minister Nkoana-Mashabane thanked all Parties for their dedication, hard work and for the spirit of Ubuntu and compromise that prevailed during the conference. “I applaud you for what you have been able to accomplish here in Durban. You were prepared to show the required political will to move this process forward. It is without any doubt in my mind that we have ‘worked together to save tomorrow, today!’” The Minister said the decisions that had been taken were “truly historical”. Decisions reached at COP17/CMP7 Governments decided to adopt a universal legal agreement on climate change as soon as possible, but not later than 2015. Work will begin on this immediately under a new group called the Ad Hoc Working Group on the Durban Platform for Enhanced Action. Governments, including 35 industrialised countries, agreed to a second commitment period of the Kyoto Protocol from 1 January 2013. To achieve rapid clarity, parties to this second period will turn their economy-wide targets into quantified emission limitation or reduction

UN Secretary General Ban Ki-Moon and South African President Jacob Zuma

objectives and submit them for review by 1 May 2012. This is highly significant because the Kyoto Protocol’s accounting rules, mechanisms and markets all remain in action as effective tools to leverage global climate action and as models to inform future agreements. A significantly advanced framework for the reporting of emission reductions for both developed and developing countries was also agreed, taking into consideration the common but differentiated responsibilities of different countries. In addition to charting the way forward on reducing greenhouse gases in the global context, governments agreed to the full implementation of the package to support developing nations, agreed last year in Cancun, Mexico (COP16/CMP6). This means that urgent support for the developing world, especially for the poorest and most vulnerable to adapt to climate change, will also be launched on time. The package includes the Green Climate Fund, an Adaptation Committee designed to improve the coordination of adaptation actions on a global scale, and a Technology Mechanism, which are to become fully operational in 2012. While pledging to make progress in a number of areas, governments acknowledged the urgent concern that the current sum of pledges to cut emissions both from developed and developing countries was not high enough to keep the global average temperature rise below two degrees Celsius. They therefore decided that the UN Climate Change process shall increase ambition to act and will be led by the climate science in the Inter-Governmental Panel on Climate Change’s (IPCC) Fifth Assessment Report and the Global Review from 2013-2015. “While it is clear that these deadlines must be met, countries, citizens and businesses that have been behind the rising global wave of climate action can now push ahead confidently, knowing that Durban has lit up a broader highway to a low-emission, climate resilient future,” the UNFCCC said.

ESG SPECIAL FOCUS SOUTH AFRICA 37

DPS-DIRCO-advertorial.indd 3

2012/06/08 11:48 AM


INDUSTRIAL ENERGY EFFICIENCY IMPROVEMENT IN SOUTH AFRICA ENERGY IS ESSENTIAL FOR INDUSTRIAL DEVELOPMENT, ECONOMIC GROWTH AND PROSPERITY. However, issues such as climate change, energy security and scarcity, industrial competitiveness and price volatility are challenges to which businesses are exposed to on a daily basis. Time and again energy efficiency within industry has been demonstrated to be cost effective while having a positive effect on productivity. Energy Efficiency is highly cost-effective and smart: smart from a government perspective and smart from a business perspective. However, the successful upgrading of industrial energy efficiency at country level requires sustained support of policy-makers and their constituencies. Energy Management Systems (EnMS) and Energy Systems Optimisation (ESO) Three decades of national and international experiences with industrial energy efficiency programmes have shown that increased energy efficiency in industry is achieved through changes in how energy is managed in an industrial facility, rather than through installation of new technologies. Energy Management Systems (EnMS), through toplevel management engagement on an ongoing basis, provides structured and systematic approach on how

to integrate energy efficiency into the company culture and daily practices. Based on the well-known “PlanDo-Check-Act” Deeming’s cycle, EnMS provides; a framework for understanding significant energy uses; action plans to continually improve energy performance; and documentation to sustain and demonstrate energy performance improvements over time. Energy Systems Optimisation (ESO) considers an industrial energy system as a whole, not just the individual components of which it consists, analyzing both its supply and demand functions along with their interactions. This is because the presence of energy-efficient components in industrial systems, however important, provides no guarantee that energy savings will be attained if the whole system is not properly designed and operated. While efficient components may bring gains between 2 and 5 per cent, ESO can attain average efficiency gains between 15 and 30 percent; very often with payback periods of less than one or two years. The Industrial Energy Efficiency Improvement in South Africa Project (IEE Project) The IEE Project was established after the power crisis in South Africa in 2008 that exposed the country, and the

38 ESG SPECIAL FOCUS SOUTH AFRICA

ESG-2xadvertorial-unido.indd 2

2012/06/08 11:50 AM


ADVERTORIAL

economy, to acute power shortages. It is a collaborative initiative between the United Nations Industrial Development Organiation (UNIDO), the South African Government through the Department of Trade and Industry (the dti), and the Department of Energy (DoE), the Swiss State Secretariat for Economic Affairs (SECO) and the UK Department for International Development (DFID). The IEE Project is being implemented by UNIDO and is hosted by the National Cleaner Production Centre of South Africa (NCPC-SA) under the Council for Scientific and Industrial Research (CSIR). The IEE Project promotes the sustainable transformation of energy usage practices in South African industry through the widespread introduction of the EnMs and ESO concepts. It has the goal of enhancing national energy security, contributing to job creation and reducing national greenhouse gas emissions. The Project currently focuses on five key industry sectors which have the potential to generate significant reductions in the overall energy intensity of the country. These are agro-processing, chemicals and liquid fuels, metals processing and engineering, automotive manufacturing, and mining. The objective is to contribute to the national energy demand reduction target of 15 percent by the year 2015 for mining and industry, and 12 percent for the country as a whole. The project is facilitating the implementation of the new South African ‘Energy Management Standard SAN/ ISO50001’ under the framework of the recently released international Energy Management Standard ISO50001 which provides policy as well as market-driven tools to enable and support trade, disseminate best-practices, stimulate innovation, increase quality and productivity, and facilitate access to new customers and markets. SANS/ ISO50001 aims to enable South African companies to develop management policies for more efficient energy usage, set targets and objectives to give effect to the policies and review their effectiveness, make use of relevant data to enhance the understanding of energy use and consumption, measure results and ensure continual energy efficiency performance improvements. South Africa has also been the first country in the world to develop and release a National Standard for the Measurement and Verification of Energy Savings (SANS 50010). This standard will enable companies to qualify for government’s energy efficiency financial incentives. The IEE Project aims to create an enabling environment for energy efficiency in South Africa so as to facilitate the implementation of energy efficiency through EnMS and ESO. The project is working closely with a number of government departments to support the creation and harmonisation of appropriate policy frameworks. The (IEE) Project is also delivering a set of training workshops and has developed targeted training material on EnMS and ESO. The workshops are regularly delivered in Gauteng,

KwaZulu-Natal and Western Cape by UNIDO internationally acknowledged experts with extensive practical experience on the subjects of EnMS and ESO. The IEE Project will also soon introduce training for auditors to certify companies to the standards SANS/ISO50001 and SANS 50010. Lastly, the project has recently started a programme of offering energy audits and ESO audits to willing industrial enterprises across South Africa. For more information about the IEE Project in South Africa, its EnMS/ESO training programme and how it can help your business, please visit: www.iee-sa.co.za For more information about possible partnership opportunities with UNIDO please visit: www.unido.org

The United Nations Industrial Development Organisation (UNIDO) is the specialised agency of the United Nations mandated to promote and accelerate sustainable industrial development in emerging countries and economies in transition. In the area of Energy and Environment UNIDO promotes the concept of Green Industry through sustainable patterns of industrial consumption and production along the value chain, cleaner technologies and processes in order to de-link economic development from environmental degradation.

ESG SPECIAL FOCUS SOUTH AFRICA 39

ESG-2xadvertorial-unido.indd 3

2012/06/08 11:51 AM


SUSTAINABLE USE OF RESOURCES State of Environment Report (SoER) SoERs describe and compare environmental conditions in different geographical regions through the use of environmental indicators. Such reports have been compiled for many areas in South Africa and on different levels of scale including cities, provinces and countries. Indicators are proxies of environmental status, which can be monitored over time and space. It is compiled to present information to the public about the condition and quality of the environment that we live in, and to inform them about what is being done to improve the environment. A State of Environment Report provides an ‘environmental census’ for the environment at a particular time for a specific area. It is considered to be a Status Quo Report of the Environment and significantly assists the Gauteng Department of Agriculture and Rural Development (GDARD), as well as other spheres of government decision-makers in making informed decisions about our environment. State of Environment Reporting in Gauteng Province The development of SoER reports within Gauteng has a history going back 15 years and is undertaken on five yearly intervals. The previous two versions had

informed the current and will also inform future reports in providing a useful record of environmental trends. The first SoER in Gauteng was initiated in 1997/1998 with the release of a Department of Agriculture, Conservation, Environment and Land Affairs (erstwhile name of Gauteng Department of Agriculture and Rural Development) State of the Environment Preliminary Report. The intent was to “continually identify new issues and priorities, collect information and update old data, this was undertaken with a view to ensuring effective monitoring of the state of our environment”. The report was subsequently updated in 2004 (Gauteng Department of Agriculture, Conservation and Environment, 2004) whereas this is the third report on the state of environment in the province. A SoER, through its use of indicators over time, provides a snapshot of whether environmental conditions are improving or getting worse. Challenges identified Gauteng is faced with a number of challenges to achieve environmental sustainability. Economic development in the province is the engine that helps drive both the national and African economies, but the high levels of development, industrial and mining activities, population growth and urbanisation create both challenges and opportunities for

40 ESG SPECIAL FOCUS SOUTH AFRICA

ESG-2xadvertorial-DARD.indd 2

2012/06/08 11:45 AM


ADVERTORIAL the province to manage and use its natural resource base sustainably. To be sustainable, Gauteng must respond to climate change challenges, establish viable communities and create people friendly urban settings. The relationship between people and the natural environment is important in a fast developing and highly urbanised world and Gauteng is no exception. Rapidly increasing levels of unemployment, the prevalence of HIV/Aids, the widening gap between the rich and poor, and the increasing levels of poverty in the province, all have a detrimental impact on the biophysical environment. This has implications for the provision of infrastructure and services and the sustainable use of natural resources. It has been demonstrated that people become more reliant on the natural environment as poverty levels increase and that their vulnerability and lack of resilience has consequences leading to environmental degradation and increases in pollution. Continued urban development encroaching onto important conservation and agricultural areas along with unsustainable agricultural practices, poor soil management and waste management has resulted in land degradation, loss of productive agricultural land and less effective provision of ecosystem services. The challenge is therefore to set clear and realistic targets for land use preferences in fast developing urban areas coupled with enforceable management strategies. A ‘hot’ issue is climate change, possibly one of the greatest environmental challenges facing society today. Industrialisation, urbanisation and an increase of motor transport, while having social and economic benefits, have resulted in an increase in greenhouse gas emissions, intensifying the natural greenhouse effect. The potential socio-political impacts of the resultant accelerated climate change include public health impacts on poorer communities, particularly on women, children and the vulnerable, as they lack the resources for coping or adapting to shocks. Numerous opportunities are available to respond to these challenges, one of which is the transitioning to a low-carbon or green economy. The Gauteng Province in conjunct with the GCRO has put in place a Green Strategic Programme in response to ever-increasing resource utilisation, population growth, global climate change and unsustainable development. Overburdening and inadequate maintenance of existing infrastructure can have serious impacts on the environment. High urbanisation rates and population growth means a continued increasing need for provision of basic services (like waste removal, housing and sanitation). Inadequate access to basic services can result in poor human health and increasing vulnerability to poor environmental conditions, particularly in marginalised communities. Furthermore, inadequate access to services has an impact on the environment and many lead to problems like increased solid waste volumes or dumping, ground water contamination, high e-coli counts and cholera.

water quality management has significantly improved and Gauteng is currently the top performing province in terms of its Blue Drop rating. Environmental awareness is improving and environmental considerations are an integral part of many development projects. Progress has been made in all environmental areas in developing tools, plans and policies to enable implementation of legislative requirements to ensure improved environmental quality. The challenge going forward is to monitor and implement these tools to ensure continued environmental improvement. State of Environment Report and Outcome 10 Government has agreed on 12 outcomes as a key focus of government priorities between 2010 and 2014. Combined, these agreements reflect government’s delivery and implementation plans for its foremost priorities. Each outcome has a limited number of measurable outputs with targets. Each output is linked to a set of activities that will help achieve the targets and contribute to the outcome. The 12 outcomes are coupled to a delivery agreement with measurable targets. The indicators in the State of Environment Report are relevant to a number of outcomes. The most important Outcome for sustainable environmental management is Outcome 10, namely environmental assets and natural resources that are well protected and continually enhanced. In terms of Outcome 10, there are four main outputs which are enhanced quality and quantity of water resources, reduced greenhouse gas emissions; climate change and improved air/atmospheric quality, sustainable environmental management and protected biodiversity. Enhanced quality and quantity of water resources incorporates water demand, protection and regulation. The findings of the current SoER point mainly towards the grave concern of Acid Mine Drainage as a threat if unmitigated, but also as an opportunity in the form of a valuable water resource if mitigated. The report also identified that recycling and efficient water use are unavoidable, and as a basic human right, it is a challenge for clean water to be provided to a populous province such as Gauteng. In terms of the reduction of greenhouse gas emissions, climate change and improved air/atmospheric quality, there is an inherent need for Gauteng to mitigate climate change which will require a change and emissions profiles of industry and business. Gauteng needs to invest in renewable energy and appropriate technologies. Sustainable environmental management has highlighted the need for active land management to counter urban sprawl and unsustainable land-use. The report has identified that the protection of biodiversity is not a ‘nice to have’, but more of an integral part of the urban system through the delivery of ecosystem goods and services.

Progress made Over the last five years Gauteng has made positive progress on a number of environmental indicators. Most notably is the dramatic reduction in lead concentrations from vehicle emissions due to tighter fuel regulation. Another noticeable improvement is that municipal drinking

ESG SPECIAL FOCUS SOUTH AFRICA 41

ESG-2xadvertorial-DARD.indd 3

2012/06/08 11:46 AM


Investing responsibly for Investing for future: In the age of climate change governments and companies are voluntarily committing themselves to local and international disclosure about what they are doing to not only address environmental concerns, but also social and governance issues before investing and making decisions on investment activities. This is known as responsible investment. In South Africa, Government Employees’ Pension Fund (GEPF) has developed and adopted policies outlining the Fund’s approach to both responsible and developmental investment across its approximately US$130-billion portfolio. The changes that have seen South African investors increasingly required to pay attention to environmental, social and

governance (ESG) issues have been brought about by amendments to Regulation 28 of the Pension Funds Act, voluntary investor codes such as the UN-backed Principles for Responsible Investment (PRI), and the launch of the Code for Responsible Investing in South Africa (Crisa). These developments are a call to action for pension fund trustees and their service providers to align the fund’s investment policy, strategy and reporting frameworks to the new legislation and non-mandatory market-based investor codes, says Adrian Bertrand, ESG manager for the GEPF. The World Wide Fund for Nature, in a discussion paper on how to accelerate South Africa’s transformation towards a more sustainable and equitable economic future

concluded that there was no doubt that sustainable investment “is no longer just an academic exercise”, integration of ESG factors into investment decisions remained a work-in-progress.

Adria n Bert ra Mana ger fo nd, ESG r the G EPF.

The GEPF is a leader in responsible investment in South Africa, and is setting the example for other institutional investors, particularly pension funds, to follow suite in a new approach to investment analysis by including ESG factors into investment decision making and ownership practices.

Who’s Government Employees’ Pension Fund? • The largest pension fund in Africa; • One of the 10 largest pension funds in the world; • A defined benefits fund underwritten by South African government and governed by a board of trustees; • The GEPF was established following proclamation of the Government Employees Pension Law of 1996; • By far the most powerful investor in the South African economy with significant holdings in South African government issued bonds, including more than 50% of the government inflation-linked bond portfolio, corporate bonds, listed equity, including 10% of the Johannesburg Stock Exchange (JSE) All Share Index, as well as unlisted equity, and property; • The GEPF Portfolio of Investments equal a third of South Africa’s GDP; • The GEPF’s Developmental Investment Portfolio is limited to 5% of the GEPF’s total investment portfolio.

GEPF has (as at March 31 2012) • 1.242 million contributing members • 345 000 pensioners and beneficiaries • Net assets of approximately US$130 billion GEPF members include soldiers, policemen and women, teachers, social workers, nurses, doctors, teachers, school principals, clerks, directors-general and all other employees in the South African public service. Important: Any constraints on South Africa’s ability to grow its economy will have a similar impact on GEPF. GEPF is not a charity, donor, patient capital investor, DFI, or government.

GEPF-4pages.indd 2

GEPF board of trustees believes that: Savings are not to be given away or put at higher risk without commensurate reward. Any additional risk should be compensated by additional returns, as the Fund has no intention of mis-pricing risk at the expense of its members and pensioners. Which international initiatives have we signed as a supporting investor? The UN-backed Principles for Responsible Investment (PRI) – and is one of more than 1,000 investors who have signed up and who collectively represent in excess US$30-trillion in assets under management. The Carbon Disclosure Project, an independent non-profit organization holding the largest database of primary corporate climate change information in the world.

We have also signed the 2011 Global Investor Statement on Climate Change which is to advocate for investment grade climate change and energy policies at the national and international level. Bodies that form part of the 2011 Global Investor Statement on Climate Change include the Institutional Investors Group on Climate Change (IIGCC) and the United Nations Environment Programme Finance Initiative (UNEP FI).

2012/06/08 4:49 PM


a sustainable future “GEPF has a duty to set an example to other investors to support developmental investment opportunities.” – Arthur Moloto, Chairman of GEPF Board of Trustees

What is responsible investment? Responsible investment involves understanding and managing the risks and opportunities linked to environmental, social and governance (ESG) issues. The range of techniques for being a responsible investor is developing rapidly. They include: • Conducting new types of research into ESG issues and incorporating these findings into investment decisions across asset classes; • Engaging in dialogue with companies to encourage good ESG management; • Reflecting ESG factors in voting decisions; and • Requiring service providers and external investment managers to demonstrate their own capability in these new areas.

Clim ate impa change a ct is nd it s the n one umb threa e r t to S Afric outh a’s s deve usta inab lo le grow pment, e cono th an m d qu ic ality of lif e.

The RI policy sets out GEPF’s intention to integrate environmental, social and governance (ESG) issues in all investment decisions and ownership practices. The RI policy is a macro-level policy that touches on the entire portfolio and every investment decision. The UN-backed Principles for Responsible Investment (PRI) has become the leading network for investors to learn and collaborate in order to fulfill their commitments to responsible ownership and long-term, sustainable returns. Pension funds, insurance companies, sovereign and development funds, investment managers and service providers make up the global PRI network. The goal is to grow investor interest in environmental, social and corporate governance (ESG) issues, share best practice and support signatories in their fulfilment of the six PRI Principles. The UN-backed Principles have a more important role to play in the way governments and companies do business in future. According to Dr Wolfgang Engshuber, Chair of the UN-backed PRI’s foreword in the PRI Initiative ‘s 2011 annual report, it is clearer now than ever before that effective risk management and corporate responsibility are not only vital in terms of individual investments, but also critical to the stability and health of the financial system as a whole.

UN-ba cked Princ Inves iples tmen for Re t (PRI spons ) 1

ible . We w ill in and de corporate E SG iss cision-m ues into aking investm proces 2. We ses. ent an will be alysis a ctive o our ow wners nership and in policie corpo s and 3. We practic rate ESG iss will se es. ues into e k app entities in whic ropriate disc losure h we in on ESG vest. 4. We issues will p by the Princip romote acce ptance les wit hin the and im investm p 5. We ent ind lementation will wo of the ustry. rk toge implem ther to enting e n h a the Pri nce ou nciple r effec s. 6. We tivenes will ea s in implem ch report o n enting our ac the Pri tivities nciple and pro s. gress toward s

Toll Free Number: 0800 117 669 | E-mail: enquiries@gepf.co.za www.gepf.co.za

GEPF-4pages.indd 3

2012/06/08 4:50 PM


What is Crisa?

The Code for Responsible Investing in

South Africa (Crisa), was launched in July 2011. At the heart of Crisa is the recognition of the importance of integrating sustainability issues, including ESG, into long-term investment strategies. Crisa applies to institutional investors such as pension funds and insurance companies as the owners of assets, and their service providers including asset managers and consultants. Crisa aims to put in place the checks and balances needed to make the King III voluntary governance framework in South Africa successful. Together with the King Report, Crisa seeks to encourage best practice conduct by both shareholders and companies. Crisa has been endorsed by: • the Institute of Directors in Southern Africa (IoD)

GEPF’s developmental investment (DI) policy: The purpose of the DI policy is to earn good returns for members and pensioners while supporting positive, long-term economic, social and environmental outcomes for South Africa. Commitment to invest 5% of GEPF’s portfolio in DI’s and in assets with positive developmental impact, where there is a need for funding, and where appropriate risk-adjusted returns can be earned. Actively investing in return-seeking, sound investments in: • The construction, improvement, and replacement of the economic and infrastructural framework of South Africa, which not only enables the economy to grow, and to be more competitive, but which improves the lives and prospects of South African citizens. • Firms, funds, and projects that improve long-term environmental

• the Principal Officers Association (POA) • the Association for Savings and Investment South Africa (ASISA) • the Financial Services Board (FSB) • the Johannesburg Stock Exchange (JSE) Crisa’s five key principles: 1. An institutional investor should incorporate sustainability considerations, including environmental, social and governance, into its investment analysis and investment activities as part of the delivery of superior risk-adjusted returns to the ultimate beneficiaries. 2. An institutional investor should demonstrate its acceptance of ownership responsibilities in its investment arrangements and investment activities.

sustainability in South Africa, that mitigate against and allow adaptation to climate change, and that foster renewable energy, green buildings, energy efficiency, recycling, and clean technology. • Job creation and new enterprise including small and medium sized enterprises, especially those with high positive social or environmental impact; in smaller cap’ stock exchanges; in sectors in which enterprise growth and the creation of high numbers of new jobs is likely; and in support of broad-based black economic empowerment. GEPF’s commitment to a DI policy is informed by the belief that: Developmental investments suit the investment profile of GEPF. These investments provide large-scale and long-term investment opportunities that are usually not correlated with listed markets, and as such act as an excellent diversifier for the overall GEPF portfolio. Developmental investments are

w for a to gro th Afric u pital o a S c r , “Fo eration n e g t x de in the ne t be ma nt mus e , in re tm s tu e inv struc ic infra in a , re tu econom c u infrastr and in social nomy, o c e r e bs.” green jo f g more creatin irman o a h C , to lo o M s r e Truste – Arthu oard of GEPF B

Arthur Mo loto, Chair ma the GEPF Board of Tru n of stees.

3. Where appropriate, institutional investors should consider a collaborative approach to promote acceptance and implementation of the principles of Crisa and other codes and standards applicable to institutional investors. 4. An institutional investor should recognise the circumstances and relationships that hold a potential for conflicts of interest and should proactively manage these when they occur. 5. Institutional investors should be transparent about the content of their policies, how the policies are implemented and how Crisa is applied to enable stakeholders to make informed assessments.

sound investments: This means that investments in areas where there is an economic need have been shown to generate impressive returns, to compensate investors for both specific and liquidity risk, and are not to be equated in any way with subpar investments. Developmental investment is in the long-term interests of GEPF’s members and pensioners and their families. How does developmental investment work in terms of responsible investment? GEPF’s DI policy is a subset of GEPF’s RI policy. This means it focuses on positive, targeted investments that contribute actively to better social, environmental and economic outcomes in South Africa. The responsibility for implementation of the DI policy rests with the Board of Trustees.

nds ema ew d es n s alike to c la ie tp a tha compan a better w er and mes a ne out s o r c is o e t s ab b “This th inves orld y wa ofits. a w d o r e on b e that th er, yeste more pr oday r ensu Rememb ofits and having. T r . p h e rt ent in plac , profits, ts wo onm ocial ts profi he envir s t u u profi o bo t d ab or t it’s a y it’s ing f oo Toda bout car te. Today about g it’s a e opera oday it’s ce.” an dt hw of whic vance an e govern ’s Head a PF Cris orat rele E p d r G n o , a c nt arial ipha l u t O c A hn r. John Oliph – Jo ents and ee Chai an of Investm t, GEPF’s Head en mitt stm m and Crisa ts and Actuarial o Inve C Committe e Chair.

GEPF-4pages.indd 4

2012/06/08 4:50 PM


• Investment in job creation, new enterprises and broad-based black economic empowerment.

predominantly passive investment strategy enhances this vulnerability.” We commit to taking action on ESG issues in a manner that will deliver longterm investment performance across our entire portfolio. DI will not only shelter the GEPF from future worldwide financial crises, but also ensure greater diversification and longterm returns. Our allocation of 5% of the overall GEPF portfolio towards implementation of this policy is our clearest commitment towards investing in a way that will benefit our members and pensioners in the long-term, while at the same time impacting positively towards addressing some of the challenges that face our country, continent and the world at large. Our commitment to this policy is a bold step towards investing in a more sustainable future.

Why is it important? The GEPF believes that a strategy to assimilate ESG issues and thereby promote the long-term value of the GEPF’s investments is in the interests of its members. This is because investment performance influences the GEPF’s ability to grant pension increases, improve benefits and maintain a stable contribution rate. “We believe that the GEPF’s investments are vulnerable, to varying degrees, to ESG risks across specific investments, sectors and asset classes, and that the GEPF’s long-term, broadly diversified and

How have we made responsible investment a reality? As a very large investor in the South African economy, GEPF can influence companies towards better ESG behaviour and disclosure by making it clearly understood that these issues are considered to varying degrees in all investment decisions. This pushes companies to better manage and think more actively on these issues. The GEPF and its principal asset manager, the South African governmentowned Public Investment Corporation (PIC), have developed a corporate governance rating matrix in conjunction

The DI policy rests on four pillars: • Investment in critical economic infrastructure for energy, commuter transport, water, broadband connectivity, liquid fuels and logistics; • Investment in social infrastructure in the form of affordable housing, education, and healthcare; • Investment in a sustainable future (greener economy) in the form of renewable energy; energy efficiency, storage of energy, clean technology, environmentally friendly construction, recycling and green firms, green buildings and conservation; and

with the Centre for Corporate Governance in Africa, a Centre within the University of Stellenbosch Business School which rates the JSE Top 100 companies on ESG criteria. Poor performing companies as evaluated against the matrix are engaged with by both GEPF and PIC management. In terms of addressing climate change, the GEPF engages companies on sustainable business practices including targets and management incentives to reduce electricity usage, GHG emissions etc. What do we invest in? • Equities • Fixed income • Properties • Isibaya Fund • Pan African Infrastructure Development Fund (PAIDF) The GEPF property portfolio includes investments in retail, corporate, industrial, specialized and residential properties across South Africa. Recently, the GEPF bought the V&A Waterfront, a flagship retail property in Cape Town in a 50-50 partnership with Growthpoint Properties, bringing one of South Africa’s most valuable commercial properties back into South African hands. The GEPF also has other strategic investments such as a 20% share in the Airports Company of South Africa (ACSA). The Isibaya Fund invests in black economic empowerment and infrastructure development projects that help to create jobs, relieve poverty and transform the economy.

Toll Free Number: 0800 117 669 | E-mail: enquiries@gepf.co.za www.gepf.co.za

GEPF-4pages.indd 5

2012/06/08 4:50 PM


SABS Ad.indd 1 upfront-innovation.indd 1

2012/06/07 10:29 AM 2012/06/08 11:27 AM


SABS upfront-innovation.indd Advetorial FA.indd1 1

2012/06/07 2012/06/08 10:33 11:27 AM


Nyalu Communications 270512

We arecommitted committed protecting coastline. Clifton, We are toto protecting ourour coastline. Cliffton, CapeCape Town Town 2012. 2012 South Africa’s ocean real estate is almost 3 times larger than our land mass. The South African Maritime Safety Authority commands a Search and Rescue region which is over 22 times the land area of the country, SAMSA responds to about 40 ship distress calls a month. There are more than 1700 ships transiting in our waters at any given time of the day, with an annual traffic of 5000 ultra and very large oil tankers carrying 30% of the world’s total crude oil production in that traffic mix. Safe ShipS. Clean SeaS.

SAMSA city-guide.indd Coastline 1 Business Day 210mm x 276mm Single Page AD.indd 1

www.samsa.org.za

2012/06/01 2012/06/11 12:50 10:06 PM AM


DO YOU WANT to

MANAGE, June National conserve and protect the environment?

Environment Month DO YOU WANT to

WORK with either plants, wildlife, air, water, soil, as well as people? DO YOU SEE ENVIRONMENTAL PROBLEMS AS OPPORTUNITIES FOR IMPROVING THE ENVIRONMENT AS WELL AS PEOPLE’S QUALITY OF LIFE? If you have answered YES to one or more of the above, then an environmental career could be right for you! You could be employed as a technician, technologist, scientist, or at managerial level in one of the many careers in this exciting sector! If you have a drive for entrepreneurship and innovation, you could be an inventor or pioneer in the sector, leading your own company and creating green jobs. Fresh young minds like yours are needed to revolutionise the way we travel, the energy we use, minimize our waste as well as sustainably feed our people and build our houses and towns amongst others. To pursue a career in the sector, students you would generally need to study certain subjects at Grade 12 level in high school, depending on the specific career you have in mind. Most programmes that are relevant to environmental careers are classified as Science Programmes. Relevant subjects in Grade 12 include Mathematics, Biology, Physical Sciences, English and/or Geography. The required minimum score for each subject is usually adequate achievement. It is however an advantage to have higher scores in your final matric marks, as most universities select students with higher than the minimum scores. Universities and universities of technology will have more information on courses and degrees. Contact the Department of Environmental Affairs for more information as well as the requirements and timelines of the annual internship programme’s intake. The call for applications is usually sent out in September each year.

DEPARTMENT OF ENVIRONMENTAL AFFAIRS Mr Thomas Mathiba. Director: Sector Education, Training and Development Tel: 012 310 3653 Email: tmathiba@environment.gov.za Call Centre Tel: 086 111 2468 Email: callcentre@environment.gov.za Switch Board: 012 310 - 3911 Physical Address: 315 Pretorius street, cnr Pretorius & Lillian Ngoyi Streets, Fedsure Forum Building, North Tower 2nd Floor (Departmental reception) OR, 1st Floor (Departmental information center), Pretoria 0001.

DEA-advert2.indd 1

2012/06/08 3:28 PM


Untitled-2 1

11/8/11 9:31:37 AM


Untitled-2 1

11/8/11 9:32:07 AM


ESG GREEN PAGES - RIO EDITION JUNE 2012