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WealthWise magazine

www.wealthwisemag.com

Vol II/No. 12 FREE

South Africa/Africa region April/May 2012

THE FUTURE OF AFRICAN LUXURY

Plus: CAREER Special Wealth and Happiness Investing in Coal

Your bi-monthly guide to wealth Click to read more


Contents

April/May 201 2

Coverstory

BusinessWise

Agenda

40 Profile of an Entrepreneur 足 Starting an online niche business

64 Books

10 The future of Wealth in 37 Why ECM offers South Africa sustainable solutions

LifeWise 20 Three Happiness

Secrets

to

42 The GAP Marketing Turnover Boost Model Part 22 How to break free from III consumerism chains 46 The Top 10 Qualities of Business Leadership

MoneyWise

24 JSE Sectors 足 Cheap or Expensive? 27 Calling for Coal

CareerWise

49 Facebook at the office

52 Employee Recognition 足 easy guide for 31 The Crisis of Developed An managers Economies 足 Is It Over? 55 Monitoring Absenteeism

58 Green living at Edenhof Conservation Estate

68 Events

Regulars 3 Contents

4 ForeWord 5 Get in touch 6 Contributors 70 Last Word 71 In next edition WealthWise magazine 3


ForeWord

Defining African Luxury

S

hould we advocate forAfricanluxuryand over the top brands in countries where unemploymentandpovertyare serious issues? With the risk of being misunderstood, I say a resounding yes. In this issue we advocate for African luxury, trends in the high­end market and the habits oftherich(andfamousorbetter said, infamous). Our cover story touches on why African luxury has a great potential and why this is good news for African countries – case in study, South Africa, the continent’s largest economy.

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We then debate the wealth and happiness issue and why money and heavy consumerism are not the key inachieveahappy,fulfillinglife. We look at the international and developed markets and their influence in African economies and current trends on JSE. Investors would be thrilled to find an extensive report on commodity investing (coal).

We talk about Enterprise Content Management (ECM), business leadership qualities and career management and employee issues in our extended career section.

We hope that our publication will inspire you to make every day, long­lasting changes to a wealthier future. Wishing you all the best, Denisa Oosthuizen Managing Editor WealthWise magazine www.wealthwisemag.com


Get In Touch

Contact us Email: denisa@wealthwisemag.co.za editor@wealthwisemag.co.za Mobile: +27(0)82 819 2820 +27(0)81 326 1579 Skype: denisa.oosthuizen Facebook: WealthWise magazine Twitter: @WealthWisemag LinkedIn: www.linkedin.com/company/wealthwise足magazine

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Copyright

All content and information within WealthWise publication is property of the Publisher and should not be reproduced, copied or entirely quoted without the prior approval of the Publisher, being protected under copyright laws. Should you wish to make use of any of the content displayed please contact us at denisa@wealthwisemag.co.z a or editor@wealthwisemag.co.za . For editorial contributions, comments and suggestions, email our editor at

editor@wealthwisemag.co.za . For technical issues and other website related comments, email us at admin@wealthwisemag.co.za

April/May 2012 Cover: dreamstime.com Contributors: Yasin Ebrahim, Paul Stewart, Adrian Saville, Andrew Morton, Lana Conlyn, Hendrien van Zyl, Johan Mouton, Michelle Momberg, Denisa Oosthuizen Photos: dreamstime.com and contributor's photos where stated WealthWise magazine 5


Contributors

Paul

Stewart

is managing director of Plexus Asset Management. Founded in 1995, the Plexus group of companies is an independent financial services provider that specialises in providing financial planning and investment management solutions and services. Plexus has a strong culture of being research driven, having developed the PlexCrown Fund Ratings (used as the basis for the annual Raging Bull Awards for the unit trust industry) and the Plexus Unit Trust Indices. Read Paul's opinions on the JSE markets in MoneyWise section, page 24. 6 WealthWise magazine

Dr. Adrian Saville

is CIO of Cannon Asset Managers. He holds a Visiting Professorship in Economics and Finance at the Gordon Institute of Business Science. Cannon Asset Managers is a niche investment management company, based on the philosophy and principles of value investing.

Read Adrian's debate on the developed countries' crisis in MoneyWise section, page 31.

Johan Mouton

is the owner and marketing specialist at Online Systems. He has been involved in marketing research projects, consulting work and developing people for business. He has an Honours degree in marketing and has developed a marketing boost model to help companies increase their turnover by implementing and focusing on adequate marketing strategies. Read Part III of Johan's 18 GAP Marketing Turnover Boost Model in BusinessWise section, page

42.


Contributors

Andrew

Morton

is Managing Consultant at The HR Hub, South Africa’s first HR Service Centre, offering a number of HR products and services under one roof, covering the complete HR spectrum. Read his articles about business leadership and monitoring absenteeism in BusinessWise and CareerWise section, pages 46 and 55.

Hendrien van Zyl

is learning solutions consultant at Optima training. Her expertise lies in the design and deliver learning solutions in support of strategic business objectives, on time and within budget. She has over 25 years experience in education, training and development, including design, development, facilitation, coaching, and management of training projects in various industries. Read Hendrien's article about employee recognition in the workplace in CareerWise section, page 52.

Michelle Momberg

is is the Managing Director of NokusaEI. She has been involved with document management solutions and ECM consulting for more than 15 years, heading up the SAP Consulting Division within the organisation as the Consulting Director. Before joining NokusaEI, Michelle had six years of experience in consulting, administration and sales at Absa, Unnovens and Kennedy & Donkin. She is an experienced public speaker on SAP ECM functionality. Read Michelle's article on ECM importance in BusinessWise, on page 37. WealthWise magazine 7


Contributors

Yasin

Ebrahim

qualifications; Financial Risk Manager (GARP), Chartered Alternative Investment Analyst (CAIA); Investment Management Certificate (CFA UK) provide him with a sound background to explore Alternative Investments.

is an investment professional, with an honours degree in Actuarial Science from University of Kent, a Post Graduate Diploma in Islamic Banking & Finance and a CFA candidate, researching developments in the Alternative Investment space through exposure in traditional and social media.

Read Yasin's opinion on the coal investing opportunities in MoneyWise section, page 27.

His background in Risk and Investment Management coupled with leading industry

Lana Conlyn

is a writer, public speaker and life coach. Her work is aimed at people who are looking for a new perspective on conventional topics. Her anthology of poems ‘Am I Enough’ was nominated for the Olive Schreiner Award by the Academy Awards for English in 2009, she has been a frequent guest on Great Expectations with Sam Cowen and is a writer for The HR Hub. Read Lana's funny story about Facebook at the office, CareerWise section, page 49.

Want to contribute to our publication with an article, feature or analysis? Contact us at editor@wealthwisemag.co.za

.

WealthWise magazine 9


CoverStory

The Future of Wealth in South Africa by Denisa Oosthuizen

W

e live in a country of contrasts: extreme poverty and immense wealth, toxic greed and bountiful generosity, desperation and hope”. This is how Silvana Bottega, founder of Southern African Luxury Association (SALA) started her written message to the hundreds of guests who participated at SALA’s first Wealth Summit on 7 and 8 March 2012, at Sandton Sun, Johannesburg. In a country full of contrasts, with a rampant unemployment rate of 25% and nearly 16 million South Africans dependant on government’s social grants to survive, one would wonder the scope and purpose of such a conference, where African 10 WealthWise magazine

luxury was on everyone’s lips, from leaders in wealth managements and senior executives of luxury businesses across the country, from Cape Town to Johannesburg. In the words of Bottega, “the luxury industry has the capacity to inspire innovation and generate employment”. Not only the luxury market is a provider of growth opportunities for Africans, but the hope and aspirations of the burgeoning middle class on the continent is an indication of better things to come. Moreover, the high­ end market has a promising future, with strong growth potential especially in the most developed African economy, South Africa, the focus of the conference.

Designed to explore both the state of wealth in the specifically South African market and to identify the obstacles and the opportunities for growth, the two­day Summit was comparable to an educational manual in understanding how the wealthy think, live, spend their money and create an impact in Africa.

The Wealthy Elite Marcia Klein, editor of the Business Times and Money and Careers section of the Sunday Times, who has been involved in the compilation of Sunday Times’ annual Rich List in South Africa, which takes in account the assets owned by the wealthiest, notes that “most of those who made


Photo: Africa's richest people, including South African magnates Patrice Motsepe and Nicky Oppenheimer Compiled Wikipedia

the list are self­made billionaires and increasingly multi­racial”. Out of a top 100, with names already entrenched in the SouthAfrican’sbusinessmedia – Patrice Motsepe (R23bn), Lakshmi Mittal (R20,9bn – only his South African assets) and Nicky Oppenheimer (R11,1bn), the first twenty billionaires, cumulating around R112bn, represent 75% of the wealth distributed on the Rich List. Only 28 are listed as billionaires (over R1bn). There are three fundamental things that we notice when reading the “Rich List” of a country. Firstly, the concentration of wealth, which in Africa is still in the hands of fewer than in similar emerging markets

(India and China are very good examples). And second, the weak presence of women millionaires. Only 4 women made it on the Sunday Times’ Rich List, lead by ABSA group’s CEO Maria Ramos. Thirdly, when looking at some of the biggest earners in South Africa, we cannot help but decry the high inequality in the earning capacities of men and women. Shoprite’s Whitney Basson tops the list at more than R600 million annual earnings – sixty times more than Maria Ramos’s R11 million annual income. South Africa’s business environment is still very much male­dominated and it will continue to be so for some good decades, unless women empower themselves

by

Forbes.com

and

with financial intelligence, knowing how to create wealth through investments and businesses. One of the most interesting topics discussed at the event was the importance of cultural and semiotic insights on the value of status in South Africa. Dr Inka Crosswaite, semiotics analyst at Added Value, looks at the different ways in which people give meaning to the world, in this case luxury. She analyzes how material objects, such as brands, acquire meaning in different cultural contexts. “We found luxury has a variety of meanings for each person – it is rare, unique, exclusive; magical, of dream value, flamboyant; ultimate; powerful; highly sensorial.

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Some see something something relationship Crosswaite.

luxury as not they own, but they build a with”, says Dr.

Her findings have taken the wealthy South Africa elite even further in terms of cultural relevance and aspirations. If Sunday Times’ Rich List showcases the asset value of millionaires in the country, Dr. Crosswaite’s analysis reveals the real person behind the millionaire. So who is the South African luxury consumer and what makes him tick? And what does this reveal about the country’s luxury segment? AccordingtoresearchbyAdded Value, the luxury consumer belongs to one of these four categories: the traditional money aristocrat, the established business magnate, the self­made rich and the deluxe aspirer. The traditional money aristocrat has always lived a luxury lifestyle. He is privileged, loves classic brands and prides himself in cultural, history and heritage. The established business magnate has built family wealth and a career in banking, mining, law, retail and other sectors. Luxury is, in his view, a way of life and the focus is on personal pleasure. His status is an expression of power. Moving on, the self­made rich show an ambitious side and the advent of new wealth from 12 WealthWise magazine

humble beginnings. The self­ made millionaire prizes high quality that is worth paying for. He has educated himself in luxury brands and his consumption of luxury items brings his best desired individualism. He prizes distinction and exclusivity. The deluxe aspirer or the go­ getter is on the route to enter the world of luxury. He favours luxury premium goods, thrives on success, recognition and bold displays of wealth. In this case, luxury is not about knowledge, is about showtime. The African luxury consumer is more about the status display that the simplicity and discreetly wear of luxury. Understatements and simplicity form a minor part in the behaviour of African luxury consumer. This is a result of the African culture, where displaying and mobilizing was used to show the status or rank of a person. In Africa, luxury is an expressionofpride,ratherthan excessiveness. Unlike many otherpartsoftheworld,sharing luxurygivesblackcommunities a sense of pride that other nations find difficult to understand. If wealth displaying found itself deeper in African communities, surely this could mean more possibilities of wealth motivation, sharing and empowering, if done for the right reasons.

Luxury in South African Property Samuel Seeff, Chairman of Seeff Properties, acknowledges that around 50% of the worldwide wealth stays in property investments. South African luxury property, representing the top 5­10% listed properties in the market, with a price tag of R20 million and above, offers an attractive investment picture compared to the international markets. “Worldwide, around 40% of the most exclusive residential properties increased in value during 2010; over 60% of these properties were in Asia. Core city centers like Manhattan, New York or London City hold their strong value; however luxurious properties in developing markets are catching up fast – South Africa included”, affirms Seeff. And the value for money is not bad either. In London’s expensive neighbourhood, Kensington Palace, investors pay as much as R650.000 per square meters for an ultra luxurious apartment. In South Africa, whether we are talking about the Atlantic Seaboard or Johannesburg’s skyline, a high end property tops R100.000 per square meter, at least six times less.


Photo: An ultra luxury residence on Nettleton Road, Clifton, Cape Town (homedsgn.com), by SAOTA and OKHA Interiors

Photo: Sandthurst Towers luxury penthouse in Johannesburg (homedsgn.com), by SAORTA and OKHA Interiors WealthWise magazine 13


A penthouse on V&A Waterfront in Cape Town could go as far as R100 million. Beyond Africa, penthouses get sold for at least $100 million – and yes, India’s Mumbai has seen billionaires splurging $1bn for the ultimate luxury property. So, who is buying these properties and where? According to Seeff Properties research, the luxurious real estate belongs to the foreign buyers and Africa’s new wealthy elite, the so­called “Black Diamonds”. Foreign buyers are more likely to head to Cape Town’s Clifton and Bantry Bay, while the black elite will splurge in Johannesburg’s Sandton and surrounds. What is interesting to note is that “the number of foreign buyers has decreased dramatically” in the past two years, partly due to the global recession phenomenon, which puts the number of foreign property buyers at only one of five. The most coveted properties in Cape Town area are in Clifton, Nettleton Road (averaging between R40 million and R70 million), V&A Waterfront (R30­R40 million), while Sandhurst – Coronation Road (R50 million), Michelangelo Towers in Sandton CBD (R20 million), Hyde Park (R20 million) and Morningside – Clouds End (R30 million) are the most popular choices in 14 WealthWise magazine

Johannesburg. “In Bantry Bay, Cape Town, a property we sold in 1989 for just R2,5 million is now worth at least 50 times more, around R100 million”, said Seeff. It is easy to see that, for the high net worth individual, which often owns more than one property, the residential real estate market is his playground – such properties can become much more than an expensive liability/own residence, but highly­ regarded investments to keep for years to come.

"South African luxury property, representing the top 5-1 0% properties in the market, with a price tag of R20 million and above, offers an attractive investment compared to the international markets"

Should the wealthy splurge on the property market this year? It’s definitely not the perfect time to sell now, according to Seeff, who says the past years brought a more sophisticated buyer, able to firmly negotiate in the upper luxury residential market. Beyond 2012, the average luxury property transaction will be around R20 million, giving the projections in the rising number of South African USD millionaires, from 71.000 to 250.000 over the next five years, as estimated by Credit Suisse.

Service, the cornerstone of Luxury Retail

Consumer spending is a strong indication of the economic growth of a country. In South Africa, despite the recession start in early 2008 and the million jobs lost as an effect, the retail sector has not been taken aback and the luxury shopper is certainly one of the reasons. “Shopping malls still remain the ultimate way to attract customers, with the online shopping experience catching up in South Africa”, explains Nicole Greenstone, Group Asset Manager at Hyprop Investments Ltd, the company which owns various regional shopping centers across the country, including the high­profile Hyde Park Corner and Canal Walk, with


premium brands for the high­ end shopper. Greenstone adds that the way going forward for the luxury retail market will certainly be dictated by the level of service and the high­end experience offered to the high net worth individuals. “Service is at the forefrontofeveryluxurybrand, both in­store service and after sales service”, she adds. Beyond 2012, luxury shopping is expected to move towards the all­round experience, with concierge services replacing the information desks, applications (apps) to locate wish items in the stores and body scanning to show the best fitting clothing size. “Innovation is expected to enhance customer experience. Time is the ultimate luxury; by 2020 we willbebusierthanwearetoday; shopping will be designed around saving time, from quick access to parking and shops to express checkouts and other facilities, such as concierge”, says Greenstone. Interestingly enough, the spending habits of the South African wealthy elite are bound to shift from conspicuous consumption to conscientious spending. This reflects an increase in the awareness of the high­end consumers towards quality, environmental protection, origins of sourcing and manufacturing, as well as the value and worth of a luxury item.

Photo: View of Sandton City, Johannesburg's ultimate shopping destination, with luxury brands Louis Vuitton, Gucci, Boss and Salvatore Ferragamo among others South African luxury retail needs to move towards promoting more aggressively local designers and retailers, as well as enhancing the social experience, given that “money only makes people happier if it improves their social rank” – the very truth with the luxury consumer.

Growing African Millionaires

Obviously, the African continent needs to see more and more people getting out of poverty, growing the middle class numbers and preferably reachingthemillionairestatus. Even so, a raise in the number of millionaires will open opportunities for growth through investments and businesses that can generate

further jobs and growth in the local economy. South Africa has not had a very good start – the cost of living is increasing yearly, the tax burden on individuals is mounting. On top of that, the average citizen’s personal savings rate, as percentage of the total disposable income, is a shameful 0%. Sadly, less than 10% of South Africans will be able to retire comfortably. Daniel Kriel, CEO of Sanlam Private Investments, believes thereareseveralcriticalfactors to play in how the population decidestosaveandinvesttheir money. In a country with an oversupply of wealth managers and independent financial advisors, it is not surprisingthatmakingtheright decisions when it comes to WealthWise magazine 15


Photo: Africa needs more investments in socially responsible venture and businesses one’s money does not come easy. There are common themes when choosing a wealth manager – excellent service, effective management, specialized advice, trust, personal relationship, transparency, understanding the client’s needs and personal values. As for the high net worth individuals, the feel of exclusivity, the affinity to the brandandtheconnectivitywith the organization would probably weight hard in the equation. Kriel is prompt to add that a study by an executive consulting company revealed “significant differences between what clients want and what wealth managers consider important”. This is a 16 WealthWise magazine

wake­up call for the thousands of asset management companies and financial advisors out there, telling that today’s most relevant factor in choosing a wealth manager is client service, slowly replacing investment performance as the critical quality. Financial awareness, education and trust are necessary for the customer to choose to invest in assets and build wealth under the guidance of a wealth manager. Thankfully, high net worth clients are well aware of the implications of investing to build their wealth; but this is not necessarily the Holy Grail, since most forget that past performance does not guarantee future performance.

The choice of asset mix, or the asset allocation, as well as a balanced and diversified portfolio –including equities, bonds, property and commodities ­ are one of the most important aspects of investing. According to Kriel, equity exposure is estimated to increase from 33% in 2010 to 38% in 2012. Property and bonds remain a strong component of the wealthy elite’s portfolios. In choosing an asset mix, Michael Jordaan, CEO of First National Bank (FNB), adds that country selection and currencies have the biggest impact on one’s portfolio. Sector selection is paramount, since any industries, not just the riskier technological start­ ups, can be disrupted.


Understanding income needs versus capital desire is another critical factor. As Jarred Glansbeek, CEO of global independent financial analytics provider and investment consultant RisCura, points out, wealth preservation is the number one priority of the wealthy. “The asset class one picks is very important. One has to understand the difference between income and capital and be careful with inflation, which is the real enemy of building wealth”. Wheninterestratesandincome are dropping (meaning an increase in capital), one should invest in bonds, not cash and keep an eye on inflation; When capital is decreasing, investors should buy cash and be careful on asset price inflation. Capital should be protected with cash. In managing wealth, Jordaan’s formula works best: “Embrace diversity, partner with specialists and be involved”. The latter is, in fact, the differential factor. “Investing is an expression of your individual philosophy, your own world view. Don’t outsource all the fun of it. Have some fun, be involved in the process, but cultivate disciplined emotions”, he says.

The Ultimate Frontier: Social Investing Wealth is both a privilege and

a responsibility. It is also an avenue that can be usefully channeled to enrich the lives of the less fortunate ones. In South Africa, around 16 million people live on social grants of just under R2000 per month, while the country has only 6,3 million taxpayers. Over 200.000 NGOs and philanthropic organizations are registered with CIPRO, doing their bit in improving the country’s poverty levels. However, the question still remains: what is needed for a more effective “social investing” – something that social investor Marc van Olst calls “impact investing”? Impact investing exceeds charity and giving by providing a strategic philanthropic plan, which has to be financially self­ sustaining for the receivers and havealong­termsocialimpact. Van Olst refers to a “philantro­ capitalism” through social ventures and community enterprise incubators, much like the successful measures taken in Brazil to lift out people from poverty. “Reactive philanthropy has an isolated social impact. Social grants are social and financial value destructive and kill entrepreneurial ideas, creating dependency on the government to survive and market failures”, says van Olst. He sees social ventures as the only way out for poorer African communities. Actively involved in impact investing in the past five years

in South Africa, Namibia, Botswana and Tanzania, van Olst has spent through his ventures R10 million a year to create a R600 million business generating regular income to more than 100.000 households, while more than R5 million were annually allocated to a health mapping project benefiting the communities and reducing disease related costs. Other investments included an electricity plant, which would generate electricity (and income!) for nearby communities. His projects deliver results because he treats social investments the same way as regular business investments. “Build a pipeline, do your research, invest with head and heart. Build platforms. Favour simplicity. Always hold people accountable. Be obsessed with the impact you are making. Work together with the community, but be prepared for the exit. Do it for the people, the real beneficiary is not the person you are funding”, says van Olst. What is successful impact investing made of? A shared community agenda, pooled management funds, a coordinated implementation mechanism, a shared management system, measurement and backbone support organizations. And most importantly: understanding that philanthropy is not a hobby or an accessory. WealthWise magazine 17


Are wealthier South Africans born givers? According to the 2010 Barclays Wealth Global Giving: The Culture of Philanthropy report, South Africans are the second most generous nations in giving money for good causes and on the fourth place in volunteering for worthy causes. The survey, in which about 2000 high net worth individuals from 20 different countries participated, showed that philanthropy is one of most important priorities. 41% of US citizens, 37% of South Africans and 32% of Saudi Arabians surveyed echoed their support for good causes.

Wealth and the Road to Happiness

Poor financial health is an indication of behavioural psychological issues, short term versus long term versus thinking, living for the day and constantly wanting to “keep up with the Jonesses”. The wealthy elite think and act differently. “The most important benefit of wealth is the freedom and financial independence. Wealthy people have the freedom to understand what really makes them happy”, says Andrew Bradley, Chief ExecutiveofOldMutualWealth, adding that, contrary to what most people are led to believe, true wealth is not money. Happiness is rather a pre­ requisite of building wealth, rather than money being the paved route to happiness.

The “Happiness Index” by OECD research, also known as the “Better Life Index”, is a good indicator of what makes people happy, by comparing nations across the world in terms of their citizens’ well­ being and happiness. Designed to “measure” a possible correlation between wealth and well­being, the highly controversial survey suggests that lifestyle, relationships, health and careers are more valuabletocitizensthanmoney in itself. This could explain why New Zealand, a country with less GDP per person than Norway or United States, scoredhigherinthe“Happiness Index”. There are other similar examples, showing that the wealth of a nation does not necessarily indicate a happy nation. What makes the wealthy elite happiest? Bradley refers to pleasures and the skills to amplify these pleasures, engaging activities, the satisfaction of giving with meaning and leaving a legacy to children, including teaching themthevalueofmoney,which is of utmost importance. “Enjoying wealth is an art”, agrees Jordaan. He believes that wealth and happiness are correlated up to a certain degree,sincehappinessinitself can be identified as a result of our reaction to external circumstances, rather than external circumstances themselves. The science of happiness is not

"The most important benefit of wealth is the freedom and financial independence. Wealthy people have the freedom to understand whatreallymakes them happy" complicated. In doing things for other people, humans find satisfaction and a sense of contentment more than anything else. The richest people in the world would certainly agree – helping and uplifting others to achieve similar results and changing lives is certainly more personally rewarding than a Lamborghini.

The Future of Luxury in SA

In truth, luxury was never unknown to South Africa, one of the top sourcing countries for platinum, diamonds and gold globally. Major internationalluxurybrandsand retailers have already invested in Africa’s most forefront WealthWise magazine 18


economy. According to Andrew Tymms, Partner at Bain & Company, South Africa is an attractive place for investors, encouraged by favourable macro­economic drivers: a steady GDP growth, an increasing urbanization (currently at 62%), premium retail infrastructure, the emerging of a high­end class with strong appetite for status products and the easiness of doing business in the country. The Global Wealth Report released last year estimated that the number of dollar millionaires in the country would triple over the next five years, to around 250.000. It was also reported that around 116.000 wealthy members of the top 1% households in the country would own 38,5% of global wealth, placing South Africa as the 17th largest contributor to global wealth growth. Furthermore, household wealth in Africa will increase by more than 90% to $5,8­trillion in 2016. Last year, Europe surpassed North America, with 37,2% of all millionaires worldwide. It would not be surprising to see African millionaires growing in numbers in the footsteps of their Asian counterparts, exceeding European and American counterparts in the immediate future. Until then, African millionaires will have to step up their game and live by the dictum “Manage wealth, cultivate happiness and leave a legacy”. The last part might not be as easy as it seems.

Photo: The road to happiness goes through uplifting others and changing lives, not by driving the latest Lamborghini

Photo: The ultimate benefits of wealth: freedom and legacy

WealthWise magazine 19


LifeWise

Three Secrets to Happiness Why money is not one of them by Leo Babauta

W

e know that money can’t buy happiness … but many times we act as if we’d be happierwithabitmoremoney. We are conditioned to want to be rich (when we know the rich aren’t necesarilly happy either); we are trained to want the latest gadget or style that television tells us to want; we want to earn more money because then we’ll have the good life. But none of that will bring us happiness. No matter how much we earn, no matter how much we have in the bank, no matter how nice our clothing or cars or toys, none of it will make us happier. And the sad thing is that it could take us decades of pursuing wealth and luxury items before we realize this.

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So what will bring us happiness? Luckily, it’s three things that don’t cost a thing. These three things have been proven by research — surveys of hundreds of thousands of people about what they have, what their lives are like, and how happy they are. Here they are, Three Secrets to Happiness:

Good Relationships

We have a human need to be close, to be intimate, with other human beings. Having good, supportive friendships, a strong marriage or close and loving relationships with our family members will make us much more likely to be happy.

Action steps: Take time, today, to spend time with your loved ones, to tell them what they mean to you, to listen to them, and develop your relationship with them.

Positive Thinking I’m obviously a big proponent of positive thinking as the best way to achieve your goals, but it turns out that it can lead to happiness too. Optimism and self­esteem are some of the best indicators of people who lead happy lives. Happy people feel empowered, in control of their lives, and have a positive outlook on life. Action steps: Make positive thinking a habit. In fact, this should be one of the first habits you develop.


Get into the habit of squashing all negative thoughts and replacing them with positive ones. Instead of “I can’t” think “I can”. It may sound corny, but it has worked for me, every time.

Flow This is a popular concept on the Internet these days — the state we enter when we are completely focused on the work or task before us. We are so immersed in our task that we lose track of time. Having work and

leisure that gets you in this state of flow will almost undoubtedly lead to happiness. People find greatest enjoyment not when they’re passively mindless, but when they’re absorbed in a mindful challenge. Action steps: Find work that you’re passionate about. Seriously — this is an extremely important step. Find hobbies that you’re passionate about. Turn off the TV — this is the opposite of flow — and get outside and do something that truly engages you.

Now that you’ve been given the Three Secrets to Happiness, don’t waste them! Leo Babauta is the creator of writer of Zen Habits, a blog focused on finding simplicity in the daily chaos of our lives. Zen Habits was named one of the Top 25 blogs and Top 50 websites in the world, with more than 240.000 readers worldwide. Visit www.zenhabits.net.

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LifeWise

How To Break Free From Consumerism Chains by Leo Babauta

W

e are not consumers. We are people.

We are not living lives meant to earn money in order to support a shopping habit, or a large home and two cars, or lives of luxury eating and entertainment. We are not living to support the corporations. And yet, if you were to take an objective, outsider look at our society, it would seem that we are. We spend our childhoods — precious years that are far too fleeting — in schools geared to give us the best chance at getting a job. We then graduate and are highly pressured to go to college (getting into large debt in the process) so we can have the best chance at getting a good

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paying job. Then we claw at each other for the coveted but limited good paying jobs, andthewinnersarerewarded with big homes and SUVs and nice clothes (and lots of debt to go with all that). The losers are stuck in menial jobs they hate, envious of others they see on TV with luxury lives, eating cheap fast food and consigned to shopping at bargain outlets. Either way, we find our path as consumers. And everything is solved by consumption — when we’re stressed, we shop. When we want to be entertained, we buy the entertainment. We buy our food in packages, we fix our failing health by buying exercise clothes and equipment. We fix our debt by buying personal finance books and taking out a second

mortgage. Our lives are beholden to our shopping habits. We are slaves to corporations, doing work we loathe for stuff we don’t need. Whatifwecouldbreakoutofit?

What is the Alternative? The funny thing is, there are millions of alternatives. But we’ve been so trained to believe there is only one way, that we can barely imagine something different. What would life be like without advertising, shopping malls, online shopping, working for large corporations, wearing large logos all over our clothing, having Apple logos over every device we own,


watching movies and television shows developed by large corporations and made for the masses? It would be quieter, maybe, with more free time. Without having to buy so much, we would work less. What a revolutionary concept! And yet it is: developments in technology have not resulted in less work, but more (a must read: Bertrand Russell’s In Praise of Idleness). It would be more focused on peopleinsteadofstuff.Itwould be healthier, as we would (likely) move more, get outdoors more, eat less fast food and more real food. That’s all idealizing, of course, but it’s an alternative I could see happening. We’d have to break free of the consumerist mindset first.

Steps to Freedom We must first become more aware of what has been done to our minds. When we watch an ad on TV, in a movie, on the web, what urges does this bring up in us? Why are we watching the ad in the first place? Can we avoid it? Watch less TV. Avoid malls and shopping. Block ads on the web (and yes, I’ve heard the arguments about stealing money from content producers, and I’m not convinced — I make money without ads). Buy less. When you have urgestobuy,considerwhether it’s a true need or just a desire. Learn to be content with life as it is, rather than wanting to buy things to make it better. If there’s something you truly

need, also consider borrowing it, or making it yourself, or finding it used. If you buy it new, try to buy it from a real person rather than a corporation — a small businessperson or craftsperson. It might be more expensive but cheap turns out to be the most costly of all. Get creative. Find free forms of entertainment. Form a cooperative of creatives and workers rather than a corporation. Pool resources, form libraries for everything. Learn to build things and sew things and cook and grow. It’s ancient technology, but it still works. It’s simple and it’s all we need. Eschew the values of the corporations, of consumption and desire. Become free. You deserve it.

Leo Babauta is the creator of writer of Zen Habits, a blog focused on finding simplicity in the daily chaos of our lives. Zen Habits was named one of the Top 25 blogs and Top 50 websites in the world, with more than 240.000 readers worldwide. Visit www.zenhabits.net.

WealthWise magazine 23


MoneyWise

JSE Sectors - Cheap or Expensive? by Paul Stewart

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n the current global economic climate, solid growth is a rare phenomenon. And where growth exists, it tends to be more prevalent in emerging­ market economies. The accommodative monetary conditions in the developed world should result in G3 nations’ currency depreciation over time and lend support to global growth. However, it may be a while before the economic scale becomes more balanced between the developed and developing world.

Although the South African economy has come under some pressure of late due to the global situation, it has still managed to produce positive GDP figures. While this growth may be somewhat behind 24 WealthWise magazine

that of the higher­growth emerging economies such as the BRIC countries, it is in sharp contrast to many developed economies that are all struggling with either sub­par growth or even looming recession. However, the performance of the domestic stock market, which recently made new highs, compares favourably with other emerging­market stock indices. The main driver behind the latest surge on the JSE has been the recent spate of strong results from both industrial and financial companies, with financials actually pleasantly surprising market participants. In stark contrast, resources companies (see Graph) have had a difficult time, as commodity prices have

experienced a very volatile period. Some commodities are still struggling to regain lost ground from the sell­off experienced in mid­2011. This bout of underperformance from the resources sector has led to these companies currently looking very attractively priced at one standard deviation below the long­ term average based on normalised PE calculations. The normalised PE ratio is based on a rolling seven­ year arithmetic average for earnings. Currently this sector is only slightly more expensive than the previous record low reached in mid­ 2008 during the global financial crisis. Looking at the resources sector relative to its financial and industrial


Graph: FTSE/JSE All Share Index versus sectors counterparts, the story supporting good value seems all the more compelling as this sector is currently trading at record low relative levels. Although the PE ratio of the industrial sector might seem very expensive at current levels, the longer足term normalised PE ratios for the industrial sector suggests that, while somewhat above its longer足term average, it still has room to move to the upside. In summary it looks likely that the resources sector, which constitutes almost 50% of the FTSE/JSE All Share market cap, is the one you should currently own.

But then there is also a reason for this low relative PE. The market is concerned about a Chinese hard landing and the negative impact on commodity prices. These current normalised valuations of the domestic JSE sectors might indicate that resources are waiting for a catalyst, possibly in the form of better global and emerging足market economic data, to ignite them once again and keep driving the JSE to yet more record levels in the coming months.

investment managers who are currently underweight resources shares relative to the All Share Index. Paul Stewart is managing director of Plexus Asset Management. For more information visit www.plexus.co.za.

If and when this happens, we can probably expect a very abrupt upward move into the resources sector by WealthWise magazine 25


MoneyWise

Calling for Coal:

Cheaper 'Toxic Rock' May Represent Opportunity for Investors by Yasin Ebrahim

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espite statistics released by the U.S. Energy Information Administration (EIA) supporting an increase in the long term usage of coal as a form of energy, both delivered coal prices and coal stocks have experienced declines over the past year. This article seeks to explore the potential investment opportunity presented by cheaper ‘toxic rock’. It reflects not only the challenges and potential benefits of investing in coal but also aims to inform investors how exposure to the coal industry can be achieved. A rocky ride for coal demand in the past year has lowered coal prices to attractive levels. Several factors are exerting downward pressure on the average delivered coal price.

This includes; lower demand for coal to generate electricity, lower natural gas prices causing utility companies to switch from coal to natural gas power plants, and concerns regarding an energy cap that seeks to limit carbon emissions. However, coal is cheap, easy to extract and ample in supply. The World Coal Association states that coal currently provides 29.6% of global primary energy needs and generates 42% of the world's electricity. It is widely expected that demand for coal will rise in the long term. Population and income growth arethemaindriversofdemand for energy. Both population growth and income growth is expected to increase in the

coming years; A larger populationcoupledwithhigher levels of income results in an increase in the production and consumption of energy. Furthermore, demand for the coal in the long term is supportedbycurrentstatistics released by the U.S. Energy Information Administration (EIA). The EIA expects coal consumption to increase from 139 quadrillion Btu in 2008 to 209 quadrillion Btu in 2035 (See Chart 1). Primary drivers for an increase in expected demand of coal are Asian countries, more significantly China – the world’s largest energy consumer, consuming close to half of the world’s coal. China’s annual coal demand is expected to reach 3.9 to 4.3 billion tonnes by 2025. WealthWise magazine 27


Despite China’s attempt at adopting a more diverse energy diet, investing heavily in renewable energy resources such as hydro, wind, solar and biomass power. It still relies significantly on coal fired powered plants to provide approximately 80% of its electricity. However, China is not alone in its preference for coal as the main provider of energy. Australia, Poland, India and South Africa use coal as a major fuel to generate electricity. India is expected to increase it’s use of coal fired power plants from 99 gigawatts in 2008 to 172 gigawatts in 2035, representing an increase circa 60%. South Africa, the world’s fifth largest coal exporter relies on coal to

28 WealthWise magazine

produce 93% of its electricity needs and coal is the country’s third largest source of export revenue. Environmental conservation efforts such as the proposed U.S. Waxman­Markley Energy Bill, aka the American Clean Energy and Security Act, gives rise to the use of clean­coal technology. Clean­coal technology seeks to reduce harsh environmental effects by using multiple technologies to clean coal and contain its emissions. Acceptance of this bill will increase preferences towards the use of clean­coal technology, inevitably raising demand for coal. These facts point favourable towards the demand for coal and is

supported by analysts at UOB­Kay Hian Ltd ­ The largest listed securities company in Singapore, engaging in stock broking, investment trading, commodities and research services; believe China’s “strong demand and supply tightness should continue to support coal price uptrend in 2012.”

Coal Supply ‘Stuck Between A Rock and A Hard Place’ China relies largely on domestic energy resources to develop its economy. Coal represents China’s largest form of energy resource. The Chinese domestic market for coal is more than three times the entire international coal trade. As a result, a minor shortage in


supply of coal would increase the world’s coal prices. On the domestic front this shortage could be caused by China’s inadequate rail capacity, resulting in a dramatic increase of road transportation via truck which is costly and already strained. This is likely to increase production costs and remain a constraint to further expansion. Australia – The largest exporter of coal has recently approved the use of a carbon tax, to be implemented in mid­2012, with a smooth transition within three to five years to a cap­and­trade system. Cap and trade is an environmental policy tool that delivers results with a mandatory cap on emissions. As a result any coal mine expansion plans are expected to be axed, further pressuring coal supply. The notion of a shortage of coal is frowned upon given the widely held misconception that current coal reserves will last for another century. Mainly due to poor reserve estimates as countries seldom update their estimate of coal reserves; indeed, the previous update which occurred in 1997 resulted in significant downward revision in amount of coal in the ground deemed as recoverable.

The U.S. known as the ‘Saudi Arabia of coal’ has experienced peak extraction of the high quality coal such as anthracite since the early nineties. Higher quality coal produces more energy and is easier to mine.

In addition to the factors limiting supply, the vast reserves of the world’s coal are mainly of the lower­ quality bituminous coal, more difficult to mine in terms of time and cost, further gives rise to the importance of a long term investment in coal.

"The Chinese Your Hands domestic market Getting Dirty With Coal. . . The ‘Pure Play’ for coal is more play’ involves investing than three times ‘Pure in a company devoted to one line of business or a the entire company whose stock price highly correlated with the international coal isspecific business. For example – Investors seeking trade. As a result, exposure to coal market could purchase shares in a minor shortage Peabody – The U.S. largest coal mining company in of revenue, thereby, in supply of coal terms making a pure play in the would increase coal mining business. exchange traded fund or the world’s coal An ETF, can also be used as a pure play on the coal mining prices" business. ETFs are passive The Energy Watch Group – A German organisation that undertakes studies about the actual worldwide availability of fossil and nuclear energy resources and the possibilities of renewable energy developments with the aim of enhancing energy policy decisions, has estimated that China will experience peak coal by 2015.

investments that track index, a commodity or basket of assets like index fund and trade on exchange.

an a an an

ETFs can be purchased via a single transaction. The advantages of this include cost effectiveness since there is only one transaction per trade. Furthermore, ETFs require minimal management as its aim is to WealthWise magazine 29


Photo: Coal, a stable commodity investment for years to come track an index rather than outperform it; therefore, risk and management fees are lower. An ETF such as Market Vectors Coal ETF (KOL) or PowerShares Global Coal ETF (PKOL) provides investors with exposure to a global universe of listed companies engaged in the coal industry. Some of the top holdings in these Coal ETFs include Peabody Energy, Alpha Natural Resources and CoalCorp Mining. Coal ETFs will not only provide exposure to the coal industry but help investors achieve diversification as a result of lower systematic risk.

Coal to Stand the Test of Time 30 WealthWise magazine

Given that the last year 2011, was difficult for coal stocks, evident by dramatic falls in a number of coal mining company stocks such as Peabody which is down over 50% as of Feb 2012 from its 52 week high of $73.95. Therein may be the entry point for investors with a long term outlook. The challenges the coal industry faces in the long term will be determined by the expansion rate of environmental conservation efforts, improvements in the production and mining in the coal industry and the adoption rate of renewable energy resources. Despite these challenges, the benefits of coal such as; ample supply, cheapest form energy, ease of extraction and contribution towards the labour market

should not be underestimated. The expected tightening of supply and raising demand of coal coupled with a more positive macro outlook only strengthens the appeal of coal as a long term investment. In any investment portfolio, an allocation towards a stable investment should always be considered – Commodity investing is no different. Investors’ seeking a stable commodity that will stand the test of time; may ‘call to coal’ as a way to maintain some stability in a portfolio. Be it coked or thermal, a long term investment in coal could help maintain investors’ portfolios in the black for years to come and may emerge as the ‘black gold’ of our generation.


MoneyWise

The Crisis of Developed Economies Is it Over? by Adrian Saville

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ith a global economic environment that has been in turmoil for a large part of the 21st century, many analysts are wondering when the financial and economic pain in the advanced world will come to an end. Sadly, our assessment is that the end of tough times in the developed economies is not in sight. After two years of weak recovery in 2009 and 2010, growth in the advanced economies slowed considerablyduring2011,and threatenstostaylowin2012. Thus, five years after the onset of the global financial crisis, and notwithstanding the massive policy stimuli adopted, the advanced economies are the same size today as they were in 2007.

For five years, these economies misguidedpolicy,otherfactors have gone nowhere. have served to drag Japan’s economic welfare lower, most Werefertothislistlesseconomic notably demographic decay, state of the advance economic with the median age of the world as a “PAFTOTY scenario”, populationrisingfrom38years where the rude, but pointed, to 45 years between 1990 and acronym stands for “pissing today. This triple cocktail of aroundfortenortwentyyears”. vast indebtedness, demographic decay and policy The PAFTOTY scenario borrows inadequacy is a sad result for directly from Japan’s the Japanese. experience of the last twenty years, which has seen furious But, because Japan’s stimulatory policy efforts on economic stagnation is numerous occasions, including explained by the same factors their government borrowing that appear in many other rising by $10 trillion over the advanced economies today, it period to fund spending and an also is a clear warning to policy aggressive zero interest rate makers in other advanced policy (ZIRP) adopted during economies: if they want to the noughties decade. avoidtheJapaneseexperience they will need to break away Despite these substantial from the policy path that Japan initiatives, Japan’s economy pursued. Sadly, the mould is the same size today as it has not been broken. was in 1990. Aside from WealthWise magazine 31


Already the US and Europe have experienced economic stagnation since 2007, but they now are burdened with additional debt of $11 trillion. Rock­bottom interest rates also have not translated into a surge in economic activity. Instead, the additional debt has been used to fund ineffective government spending programmes and ultra­loose monetary policy has helped prop up stressed householdbalancesheets. The futility of policy – and the sad social outcomes – is evidenced by soaring unemployment in European economies where in the case of Greece, for instance, the unemployment rate amongst the youth is in excess of 40%.

Guided by the evidence of Japan’s experience and that of other advanced economies over the past five years, we expect the developed world, in aggregate, to spend the next decade or two drifting listlessly as they cast around for quick solutions to long­term, structural problems. However, while the economic prospects of the developed world are poor, many other economies have seen swift growth since 2007. China and India – the clear drivers of the emerging economies – have grown by 60% and 45%, respectively, over the last five years. Other emerging champions, such as Nigeria and the Philippines, have grown by similar amounts. At this rate of growth, these

economies are doubling in size every decade. This dynamism in emerging markets gives rise to a second scenario of “SINFOOH”, where the acronym stands for “the sky is not falling on our heads”. More to the point, in spite of the gloom surrounding many of the advanced economies in 2012, there is a raft of countries which boast excellent fundamentals in six factors which correlate highly with improving socio­ economic welfare over broad sweeps of time, namely access to savings that fund productive investments which, in turn, lead to economic growth; a favourable demographic structure with more people entering the workforce than

Photo: Italy, next in line after Greece 32 WealthWise magazine


leaving the productive sector; animprovementinthenation’s relative physical health and healthcare infrastructure, which leads to enhancements in socio­economic welfare; rising education levels which support healthcare, bolster labour productivity and give risetoahigherrateofeconomic growth and better quality of life; sensible national policy including transparent policy making and policy stability; and country “openness” which fosters the free movement of goods, people, services, capital, information and ideas that collectively contribute to better economic growth and higher standards of living.

suspects of China and India. All five of the BRICS – Brazil, Russia, India, China and South Africa – which represent a combined population of three billion people, are rich in different ways in the six factors. However, there are others countries, like Peru, Chile, the Philippines, Vietnam, Iraq, Egypt, and, more recently, Mongolia that also are able to tick the six boxes with rising confidence and conviction. What this means is that, with a wealth of success factors and proper engagement of these factors, these countries are positioned to do well.

As already noted, the rich countries of the developed world are failing on at least three counts, namely dis­ savings, represented by extremely elevated levels of debt; demographic decline which has more people moving out of the workforce than into the workforce; and questionable macroeconomic policies, including social welfare benefits and spending promises that are simply unaffordable. Whilst this result is sobering, there is reason for hope and optimism, which finds root in the fact that there is a raft of countries that are rich in the six factors identified.

" The cumulative economic growth of the BRICS over the past decade totals $1 2 trillion, equivalent to the size of the US economy"

Notably, this is about much more than the usual

Early evidence of the implications of this shifting worldeconomicorderisreadily available. The cumulative economic growth of the BRICS over the past decade totals $12 trillion, equivalent to the size of the US economy.

Assuming the same growth rates hold for the next ten years, the BRICS economies would replace Italy ten times over or Greece 40 times over in the next decade. As an aside, the Chinese economy builds the equivalent of the South African economy every 241 days. In short, whilst the advanced world is in a quagmire, the sky is not falling on our heads. In terms of the implications for South Africa, the structural headwinds facing the advanced world have a direct implication for our economy in the form of, inter alia, weakened trading partners, softer tourism markets, and lower commodity prices. Yet, the challenges at home have encouraged companies located in the advanced world to look at investment destinations, such as South Africa, with new eyes. OverthepastthreeyearsSouth African firms have enjoyed high levels of interest from their developed world counterparts:in2010USretail giantWalmartacquiredcontrol of Massmart; in 2011 Japan’s NTTacquiredDimensionData; and in 2012 the acquisition of O­Line Holdings by Germany’s OBO Bettermann was announced as well as a major investment into Litha Healthcare by Paladin Labs Inc of Canada. In the same breath, South Africa has many “SINFOOH WealthWise magazine 33


positives” going for it. The country has a successful tourism industry, superb fiscal and monetary policy discipline and a potential massive stimulus from the R1 trillion infrastructure spending pipeline which will boost jobs and skills. In addition, many positive prospects are right on our doorstep, giving South Africa vibrant neighbours. Angolahasenjoyedthehighest rate of economic growth in the world over the past decade; Mozambique is amongst the fastest­growing non­oil economies in the world; and since the time of Botswana’s independence in the 1960s, it isthefastestgrowingeconomy in the world. This wide opportunity in our neighbourhood has seen South Africa’s eight mainline retailers establish more than 500 stores in sub­Saharan Africa. Other examples of rising economic integration abound, including listed transport and logistics company Grindrod seeking to triple the coal handling capacity of its Maputo harbour facility to 20 million tons per annum; and South African building and construction firms growing their order books with great success in neighbouring countries. As the SINFOOH countries go from strength to strength, we expect this to contribute to South Africa’s prosperity. By stepping back and giving ourselves a clear perspective 34 WealthWise magazine

on this PAFTOTY and SINFOOH world, we are equipped to effectively interpret the fast­ changing information being thrown up by the new world order; find opportunities that others are missing; and take sound investment decisions. The landscape painted above points to four key investment arguments. First, in any setting, tactical asset allocation has a fundamental bearing on investment outcomes. However, the uncertainty of the shifting world economic order has disrupted asset markets; in places the disruption has been dramatic. Importantly, then, successful tactical asset allocation is not just about selecting the correct asset classes, but also about identifying areas within the asset classes that are well priced – witness the seduction presented by Greek government bonds which recently offered a yield of more than 200% just weeks before Greece defaulted. To this end, our assessment of the different asset classes suggests that, whilst government bonds have performed exceptionally well overthelastyear,fromaglobal perspective, gilts are expensive and risky. Equally, whilst the dynamic markets present exceptional business growth opportunities, this is already in the price of the underlying shares. Investors

will need to navigate this environment carefully. By drawing on tools such as cyclically­adjusted price­ earnings (CAPE) ratios and through­the­cycle yields, Cannon Asset Managers has built a successful global and domesticassetallocationtrack record. The Cannon Allocator Portfolio, for instance, has matched equity market returns over the last three years but with half of equity market volatility. This toolkit, and our experience, equips us welltodealwiththechallenging environment. Second, whilst bad news has brought about risk aversion, bad news does not render equities an ineffectual investment; this is especially the case in PAFTOTY markets. With price inflation likely to feature in the coming years, and yields likely to stay “lower for longer”, investors will need to look away from cash and bonds to achieve and protect acceptable income yields. Critically, given the turbid setting, investors need to look for sustainable yield, not just high yield. As noted, traditional savings accounts and government bonds offer poor opportunities inthisenvironment,withultra­ low yields or interest rates and a high chance of capital losses because of deep government indebtedness, rising price inflation and tax­hungry governments.


As intimated, equities present the potential for investors to earn a healthy, sustainable income yield. A good example of this is Deutsche Post DHL. The well足established German firm offers investors an attractive and stable dividend yield, currently equal to 4.8%余 the business is financially robust and has good business growth prospects. Notably, Deutsche Post DHL is just one of twenty足five companies that make up the Cannon Global High Yield Portfolio, each of which satisfies the strict criteria we lay down in terms of quality and value in our search for yield. Currently the portfolio offers a total dividend yield of 6.5%, underpinned by high quality and, as in the case

of Deutsche Post DHL, the potential for capital growth. Third, excellent opportunity is offered in the form of PAFTOTY assets that have SINFOOH exposure. True to form, because of poor economic growth prospects, most investors are neglecting the PAFTOTY areas while having chased assets in the SINFOOH regions. As a result, many SINFOOH assets have become overpriced, making them poor investments that carry a high risk of capital loss. By contrast, we find a number of assets that are priced for recession but that are exposed to high economic growth drivers.

For example, luxury motor firm BMW is on a price足 earnings ratio of 7.5 times and trades at a modest multiple to net asset value with a substantial cash pool on its balance sheet. Yet, BMW has considerable exposure to the rapid growth of new, dynamic economies. As such, BMW represents a fine opportunity. As evidence of its health, the company enjoyed its best year ever in 2011 in terms of units sold and bottom line profit. BMW expects this trend to continue, helped by Asia becoming its largest market within the next two years.


Fourth, and drawing attention close to home, with most capital having been directed to growth and large stocks over the last three years, there are some investment gems that have been overlooked and that offer remarkable prospects. Metair, trading on a price­ earnings ratio of 8.3 times is such an example. But it’s not just about being attractively priced. Metair is a high quality business as evidenced by exceptional balance sheet metrics, property that is understated by three times, and a neat vote of confidence in the form of 106 of the last 120 directors’ corporate actions being share purchases. Metair is held in all of our

domestic portfolios, including our SuperDogs portfolio, which has the enviable result of having outperformed the FTSE­JSE All Share Index over the last three years, but with less volatility. This has been achieved through our relentless pursuit of companies that have excellent prospects but that are out of favour or out of fashion. This result points to the outcomes that investors can enjoy when combining good quality firms bought at the right price.

The concept of SINFOOH investing in a PAFTOTY world captures the challenges that face investors in a world with mixed fortunes and rapidly shifting economic plates. Notably, whilst the landscape is changing rapidly, the factors that govern socio­ economic advance and the rules that stand behind successful investing remain unchanged. This perspective equips investors with the ability to make effective decisions in a fast­changing world.


BusinessWise

Why Enterprise Content Management offers sustainable solutions by Michelle Momberg

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large organisation places a routine order to its manufacturer: the specs for the product are retrieved from the company’s computerised database by an engineer, the order is authorised by a manager, and it is sent off to the manufacturer. When the product is delivered, the sizes are wrong. The fallout is horrible – the loss has to be writtenoff,aprojectisdelayed, the relationship with the client is damaged, the CEO wants heads to roll. But whose fault is it? The engineer’s? The manager’s? The systems’? The data capturer’s? The Gremlins’ in cyberspace? Thisisatypicalchallengefaced by organisations that disseminate large quantities of information through their workflow processes.

Increasingly, companies are learning that, without an efficient content management system, their sustainability is at risk. We are operating in a knowledge economy that is being fuelled by a veritable explosion of digital data. A study conducted in 2010 by US market research company IDC, estimates that the size of the digital universe was then around 800,000 petabytes (at 1 million gigabytes per petabyte) and is expected to reach 35 zettabytes (35 million petabytes) by 2020. With the scale of electronic information required in a modern organisation, the way in which that information is captured, stored, accessed and used will determine the effectiveness and

sustainability of the organisation. We deal daily with a barrage of emails, invoices, orders, records, complaints, minutes, memos, reports, results, findings; the list goes on. How do we store thiscontent?Howdoweensure that it gets to the right people and is used to build value? These are the questions being addressed in the growing practice of Enterprise Content Management (ECM) which looks at how we use our knowledge to build sustainability in the business process. Not to be confused with ERP (enterprise resource planning systems), in a nutshell, ECM implements systems that streamline the flow, accuracy and accessibility of data, enabling organisations to share their knowledge efficiently and put WealthWise magazine 37


Photo: Values and benefits of an ECM system it to work in the correct context. A well conceptualised ECM system can manage any flow of content, from documents, e­mail and records, to scanning, imaging and capturing, content collaboration, workflow processes, compliance, search and retrieval and data capturing, resulting in improved efficiencies. Awareness that knowledge is an asset is growing in South Africa and many companies now recognise that the repository of knowledge within an organisation constitutes its intellectual property. In addition, the way in which that asset is used may be integral to an organisation’s corporate governance. Typically, a small enterprise will introduce ECM with a 38 WealthWise magazine

simple file plan set up on a server where users can store and retrieve documents. Medium­sized businesses may move to an affordable cloud­based system, Microsoft Sharepoint or an open source product like Nuxeo or Alfresco. However, movement to cloud­based applications of content management remains slow as a result of concerns about access to bandwidth and the costs of connectivity, as well as issues around security and control of data stored in the cloud. As the complexity in workflow increases within an organisation, it will eventually require a more flexible routing of content between people. This is when a customised ECM system is called for. Decision makers and users are also

starting to see that content management does not evolve organically. You have to plan for it. And when you plan for it and apply it correctly, it can help to solve business problems and impact on all areas of the business. ECM involves implementing a customised system of knowledge retrieval that optimises business processes. Before you think of implementing ECM you need to know what you have, what you need, how you will use it, who will use it, etc. Thus the ECM consultant will always start by developing an understanding of your business and its strategic objectives. The system that is developed should focus on preserving your knowledge, ensuring that it is easy to


find and can be optimally harnessed to add value and make an impression going forward. For an ECM system to be effective it must be integrated with an organisation’s existing structures and systems, and there must be correct functionality to allow for such integration. The result of a properly designed ECM system is optimum capture of content, speed of processing it and ease and accuracy of use.

ECM can be a costly investment. To get the full value and benefit from a customised ECM system, training the practitioners who will be involved is integral to the development of the system. Ultimately, an organisation needs skilled content managers who can apply the functionality of a system to support any business processes that arise. Any organisation that is planning to embark on an ECM initiative is advised to

do its homework – think, plan, understand and get advice. The cost of failing to implement a sound content management system will be costly. Michelle Momberg is the Managing Director of Nokusa Engineering Informatics (NokusaEI), a leading international ECM consulting company. For more information, contact NokusaEI at +27(0)11 791 1028 or visit www.nokusaei.com.

Photo: Do you know your information flow in your company?

WealthWise magazine 39


BusinessWise

Starting an online niche business Profile of An Entrepreneur

Nathan and Dan van Zyl, Wesley Rossley-Smith Kiph.co.za

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n the first of March this year, the three man team consisting of twin brothers, Nathan and Dane van Zyl, and their best friend, Wesley Rosslyn­Smith, celebrated the launch of their newmen’sonlinedesignstore. Kiph.co.za(pronounced“kiff”) is an online platform that makes niche designers and brands available to South African males. Products are sourced both locally and internationally with the focus being on creating a way for niche brands and independent designers to get more mainstream exposure, as well as making these products more easily accessible to South Africans. Their journey started in January 2011. After 40 WealthWise magazine

completing their Honours in Business Management, they leftthesafetyofSouthAfrica’s shores for the vibrant cultures of Asia. “We left because we wanted to get a different perspective on business and how it should be done. As three young entrepreneurs wefeltthatwehadbeenpretty muchshelteredbylifeinSouth Africa and so we decided to go to Asia, the place that we thought would be the polar opposite to what we knew and were comfortable with,” said Nathan. Their first port of call was Taipei, the capital city of Taiwan, which is an island two hours south of mainland China. “Taipei was a great place for us to start,” commented Wesley, “the people are incredibly friendly, the public transport

is great and as a first world country it had all the comforts that we were used to back home. It gave use a gentle introduction into the Asian culture which allowed us to find our feet without being completely blown away.” The trio spent their first couple of months evaluating and testing a number of ideas they hoped to pursue. “It was a sort of trial period for us. We went through a number of ideas, but nothing really stood out. One of the things we did pick up on in those first few months was that people want to be more individualistic. Even though most people still choose big, well­known brands, there is a big shift towards independent designers and


Photo: Kiph.co.za founders share the same passion for cool brands

niche brands. People have started to move away from mass produced commercial gear and fashion in search of things that are more unique. The main reason for this trend is because these designers and their products have become more accessible, which gives people an alternative to corporate stores and mass produced products,” says Dane.

In June 2011 Kiph was born with the simple idea of making great design accessible to South African male audiences. “When we first discussed the idea, it was really broad. As we started going through the process of properly defining what Kiph would be we realised that we needed to focus our market. We felt that the men’s market was definitely underserved and held the biggest opportunity for a new player,” says Nathan. “We also realised that we didn’t want to be just

another online store. We wanted to help designers become real players in the SA market so we created a platform that would introduce them to the market as well as develop opportunities to make their products more accessible through distribution,” he continues. With this in mind they set about building the business. Wesley began building and designing the website, Dane took over all the marketing activities including running the blog while Nathan began sourcing their products. In January 2012, the team returned to South Africa to make final preparations for their launch. Kiph has had a fair few obstacles to overcome in their first few months. None of them had the technical know how to put together an e­commerce platform. Wesley spent a majority of his time teaching himself to program and how to deal with the

complications that come with an e­commerce site. Kiph is completely self­funded. They chose to follow the lean start­up model which has forced them to innovate and get rid of any unnecessary features. “It was a good learning curve for us,” comments Dane, ”we had to cut out a lot of features that we wanted to include initially but the end result is that we have developed a platform that is a lot more focused on its key functions.” “It has been an interesting couple of months getting everything ready but now that we are finally up and running we are really excited to see what the year has in store for us,” says Wesley. For more info on Kiph.co.za, call Dane van Zyl at +27(0)827871548, email dane@kiph.co.za or visit www.kiph.co.za. Share your story at editor@wealthwisemag.co .za.

WealthWise magazine 41


BusinessWise

The 1 8 GAP Marketing Turnover Boost Model Part III

by Johan Mouton

I

n the previous two editions we have touched on the importance of getting your marketing automated and having the right systems and processes in place in order to boost your marketing efforts. The 18 GAP Marketing Turnover Boost Model does just that. We have identified 18 strategies to drastically improve your marketing efficiency and results, as seen below: Gap 1: Cost Per Client Gap 2: Marketing Measurement Gap 3: Training Gap 4: Systematic Marketing and Sales Gap 5: Testing Marketing Gap 6: Unique Selling Proposition (USP)

42 WealthWise magazine

Gap 7: Feature, Advantage, Benefit Gap 8: Ideal Client Gap 9: Customer Information Gap 10: Buying and Selling Process Gap 11: Marketing Matrix Gap 12: Making the world a better place Gap 13: Continuous Improvement Gap 14: Socially Responsible Gap 15: Working on Your Business Gap 16: Getting More Clients Gap 17: Increasing Frequency Gap 18: Increasing Purchase Amount The first 15 Gaps are the foundation of your marketing strategies (see Figure 1). This foundation needs to be

working and in place. The foundation lays out the structure and processes for all of your marketing efforts. The next 3 Gaps focus on getting more clients, getting clients to buy more frequently and getting clients to make bigger purchases. The 18 GAP Marketing Turnover Boost Model is based onsoundprinciplesandproven marketing strategies that are easy to apply in any business. In the previous edition, we have carried on a couple of exercises on the first three GAPS. Now let's put the next five 18 GAP Marketing TurnoverBoostModeltowork.

Exercises


Figure 1: The four sections of the 18 GAP Marketing Turnover Boost Model Gap 4: Systematic Marketing and Sales. This gap addresses constant marketing activities. In order to be successful at marketing a business is required to establish sound continuous marketing activities. Step 1: Complete the source. This could be training, marketing,

newsletters, house cleaning

and so on

Step 2: Indicate the frequency of the activity Step 3: Indicate how the activity will be measured Step 4: Indicate the resource who is allocate to do the work

See Figure 2 for guidance. Gap 5: Testing Marketing. This gap is overlooked by many businesses. Before launching a full campaign it is required to test the marketing message and medium first. Step 1: Indicate marketing activity

the

Figure 2: Determining marketing strategies needed to be done WealthWise magazine 43


Figure 3: Determining marketing activities to be tested

Step 2: Indicate the testing method that will be used to test Step 3: Indicate the sample Step 4: Indicate what is being tested Step 5: Indicate responsible person Step 6: Indicate feedback is required See Figure guidance. Gap

6:

3

the when

above

Unique

for

Selling

Proposition (USP). The USP is one of the most critical aspects for marketing in a business. This is what makes a business different to competitors. The USP could be one aspect or many, depending on the business. Step 1: Describe how the industry is delivering the service or product Step 2: Describe how you are delivering the service or product Step 3: Highlight the difference between the two.

Figure 4: Determining your USP. 44 WealthWise magazine

That is your USP. See Figure guidance.

4

below

for

Gap 7: Feature, Advantage, Benefit. People buy benefits. By closing this gap the business truly understand the reason clients are spending money with them. Step 1: Indicate the feature Step 2: advantage

Indicate

the

Step 3: Indicate the benefit


Figure 5: Determining FAB for each product See Figure guidance.

5

above

for

Gap 8: Who is your ideal client? By understanding this you will be able to create more effective marketing strategies. The ideal client can be defined in various ways. There could also be more than one ideal client. Step 1: Detail the target market Step 2: Describe the target market

Step 3: Indicate what makes this target market unique Step 4: Detail the USP for the target market

Read more similar exercises in the June/July 2012 edition of WealthWise magazine.

Step 5: Describe the FAB for the target market Step 6: Indicate communication method

the

See Figure guidance.

for

6

below

Figure 6: Determining your ideal client WealthWise magazine 45


BusinessWise

The Top 1 0 Qualities of Business Leadership by Andrew Morton

M

ount Everest. What comes to mind? Edmund Hillary, danger, exhilaration, death and for some – accomplishment! Anyone considering climbing a mountain such as Everest spends months, if not years, preparing and equipping themselves and their team with the skills, the stamina and the tools to survive hazardous conditions: avalanches, inclement weather and unforgiving terrain. They know that team work and a strong, committed bond is critical to both the safety and the success of the team in these dangerous conditions. When referring to her climb up Everest, Alison Levine (a mountaineer who has conquered the Seven 46 WealthWise magazine

"You have to react to the environment around you. Complacency will kill you" Summits) said “You have to react to the environment around you. It is continuously shifting and changing. Complacency will kill you.” As with the weather on Mount Everest, the current business environment is dynamic and often unpredictable. Technological development and advancement is accelerating the pace of

change at a phenomenal and unprecedented rate. Business leaders at all levels are under intense pressure to decide and deliver! They are like mountaineers eyeing the summit ­ so near, yet so far ­ wind and snow whipping around them, nervous and excited at the same time – they are required to make decisions that will impact themselves and the entire team! Of course, environmental conditions impact whether or not one will reach the destination, but a critical factor is the level of trust in the leader to make appropriate decisions in the interest of the team; the strength and stamina of the team as well as a shared passion for the vision that


Photo: Mountain Everest, the ultimate frontier of leadership skills and endurance the leader has developed. Imagine hovering 350m above the ground as you attempt to cross a deep gorge. You carefully place one foot in front of the other, each step dangerous but necessary, to get you safely to the other side, when unexpectedly you step on a link that is weak and unsteady. You pray that it will hold just long enough to get you to the next step when ‘boom’ and in an instant you are heading to the bottom of the crevice. As you falter, it causes a domino effect and the rest of the team is down with you. Knowing team members very well and using this

insight and acceptance to build strong relationships is the key to team success. The leader needs to observe and read the dynamics of the individuals and the team in order to anticipate, well in advance, what will positively or adversely affect the achievement of the goal. An effective team leader in any business environment, recognises the impact that s/he has on the team but knows that organisational results can only be achieved through the combined efforts of competent people working towards a common purpose and shared goals. Strive to build strong relationships as though you are building a bridge. Without each block firmly in

place, neither you, nor your team, can reach the destination or achieve the goal. Establish strong relationships that will ‘weather the storm’ using the Ten T’s (read on next

page).

The Top Ten T’s will help to ensure team success by building strong relationships, trust and resilience so that your team will not only ‘weather the storm’ on their journey, but will reach new and great heights.

WealthWise magazine 47


The Top 10 Ts of Business Leadership 1. Trust – When trust is

low, suspicion is high, which works against the team and the team leader. Acknowledge that mistakes do happen and forgive and help team members to learn and grow from them. Team members are more likely to respect team leaders they trust and can count on for support.

2.

Transparency

– Sharing information openly, honestly and timeously enables everyone to make relevant, rational decisions.

3. Tenacity – In highly­ pressurized, tough times when everyone’s motivation and strength is flagging, you have to have a strong will and stay the course.

4. Temperance – Just as

complacency will kill you, so will emotionality. Keep a level head, make sound

WealthWise magazine 48

decisions based on rather than emotions.

fact

5. Team­work – It takes a

competent, committed team to achieve organisational results and it is the job of the leader to develop and nurture strong, independent and inter­dependent relationships throughout the team.

6. Time bound – Time is

money. Money is a scarce resource in a shrinking economy so as soon as you have made your decisions, execute the plan and meet the deadline.

7. Thoroughness – The

details are important. Tardiness results in project delays, increased expenses and missed deadlines and it also sends a message that the task at hand is not important.

8. Two­way communication – Team

members have a higher degree of commitment when they are encouraged to participate in decisions that affect them and that their suggestions are recognised and valued.

9. Tenderness & Empathy – “Team

members are not a commodity. They have stuff going on in their lives” said Dave Ramsey, “good leaders seek first to understand.” Understanding of individual needs, strengths and weaknesses enables leaders to guide and support team members in a meaningful way.

10. Talent focused­ retention – Being able to

identify and keep your winners will help others in the team become winners.


CareerWise

Facebook at the Office by Lana Conlyn

W

elcome to the office, where bandwith is endless and Facebook is a mere mouse click away. Where office staff gets lost in Facebook activities and bosses are perplexed at the steady decline in productivity.

Personally I think Facebook is just wonderful and so darn useful. In fact, just this weekend the chef at my most favourite restaurant posted a message that said fresh fish had just arrived from East London and he would be serving it for dinner and lunch the next day. No matter which way you try to dissect it though, equilibrium must be maintained, so although Facebook is great in certain aspects, there are some

very definite downsides, one of which is that EVERYONE knows what you’re up to. How you may ask does this relate to the office? Quite simply, you may not be Facebook friends with your boss, however you can be pretty much guaranteed that you have a friend of a friend of a friend that is friends with your boss, and your boss will have an inside track as to what is potting in your life, from the drunken party photos, to your unexpected trip to Thailand, when you supposedly had measles and was booked off sick with a bogus sick note. Yup, your boss will know EVERYTHING! Case in point, I have a rather fancy treadmill. Well, my dad does, but he doesn’t use it, so I do. I could not

find the heart rate monitor strap that went with it, and I had just located the bloody thing. I just knew that my dearly beloved maid had done something with it. So I set off a rant on Facebook, about her and how annoyed I was and frustrated and peeved. PS. She actually is a darling and I would not trade her for anything. I was just having a lousy day. Back to the case study, next thing I know I get a call from my maid asking me why I’m being so mean about her on Facebook. She actually put the monitor strap in the washing basket in my bedroom because she thought it might need a wash. EPIC FAIL! Maid one, Lana nil.

WealthWise magazine 49


Photo: Young employee checking Facebook at work (source: digitaltrends.com) Facebook has come to be known as the biggest time thief at work. And if you’re honest with yourself, you would admit that it’s addictive. Amazing how you log on for just five minutes to just see how Lucy is doing after her post break­ up boob job and four hours later you’ve found all your nursery school buddies, you’ve accepted friend requests from your aunt's old age home nursing staff, you have commented on at least 60 photographs (and I’m being lenient here) and you’ve updated your status no more than 7 times. Phew! Exhausting, incredible 50 WealthWise magazine

that your boss pays you to sit at the office and chow up bandwidth! I’m the last person to tell you to shut down your Facebook account. I am as much of an addict as you are. However, I would suggest a few steps to manage it better. Make Facebook time like a tea break, allow yourself 10 minutes and that’s it, be strict about it. Take time, at HOME mind you, to clean up your facebook account. Ask yourself if you are really

friends with that person, or if you are just being a voyeur. Delete them, do you actually care what happens in their lives or do you just think their life is cooler than yours and are living your life vicariously through their photographs and status updates? Clean it up. It’s not that difficult, it’s like coming up with a wedding guest list. If you haven’t spoken to that person in a year, cut them out, delete them. The logic behind this move is that the fewer friends you have, the less time you can waste going through photographs and status updates.


We all like to believe that our Facebook friends don’t judge us. Realistically however, they do. Your photographs, status updates and comments are judged. And in some cases less is more. There’s a lovely saying “better to keep your mouth shut and be thought a fool, than to open it and confirm it”. Work colleagues are not stupid. They look at how often you are on Facebook and they note how often you update or change things and so the rumour begins: “Can you believe how often John is on Facebook, it’s amazing he hasn’t been fired for not doing his work, he is always online”. You get the picture. What’s more, most companies

have the luxury of banning certain sites. Facebook is at the top of the list, along with Youtube and dating sites. I won’t even start on the adult entertainment sites. But not to worry, right? You have your trusty Android, Blackberry or iPhone and you can check your account there. Wrong again! I recently did some work for a company where it was policy for employees not to touch their phones until their tea breaks or lunch breaks. When I say touch I mean no phones allowed on desks during working times. As a mother of two small children, I thought this was completely absurd. I need to be contactable, since being a mom means I’m on

duty 24/7. Since abuse of anything can cause an absolute knee­jerk reaction and you might find yourself internetless, phoneless and friendless, my advice would be to rather tone it down a bit and keep your privilege. And if in doubt, post amessageaboutitonFacebook and see what the feedback is. Lana Conlyn is a writer, public speaker and life coach. Her work is aimed at people who are looking for a new perspective on conventional topics. For more information and assistance, contact Lana at +27(0)82 327 9145 or lconlyn@live.co.za.

Photo: Facebook and its thousands of apps and games are very popular even in the office (source: digitaltrends.com)

WealthWise magazine 51


CareerWise

Employee Recognition

An easy guide for managers by Hendrien van Zyl

F

ormal recognition programmesarenot enough. “Employee of the month” sounds like such a great idea, but most of us have been part of or heard stories about the failure of such programmes. In the end many of them achieve exactly the opposite of what was originally intended: • • • • •

Rivalry Disappointment Negative attitudes False accusations and Wasted time and efforts

This is not the type of employee recognition that we are referring to in this article. Business owners are dealing with deadlines to be met, targets to achieve, customer complaints, maybe even a labour related court case. 52 WealthWise magazine

As a business owner, can you remember when last have you made a real conscious effort to notice the value that each individualaddstoyourbusiness or team? Recognition is a way of living. Recognition should never be just another item on the business owner's to­do list – and one probably NOT being looked forward to. It is not about the employee of the month award or some kind of certificate issued at the end of the year ceremony. Employeerecognitionisastyle of management, a way of being, of treating people and noticing opportunities to put a smile on someone’s face every day. If a business has a formal employee recognition program, it does not need to

be expensive and with a little imagination companies can get great results by making sure the program is highly visible and perceived by everyone as a fair system appliedinaconsistentmanner. The actual reward does not have to be expensive BUT should be something that the RECEIVER will regard as a reward. Receiving tickets to the ballet may not exactly be a treat for me, but a pizza party for my team, a reserved parking space for a month or an extra paid day off, might be a seen as a great reward. The following list offers some suggestions on how should employees’ contribution to business success be recognized without spending any money. If these become management practices,


companies would very soon witness the increase in motivation levels of all employees. 1. Give purpose. When an employee feels s/he has a purpose and is making a difference, they feel a sense of pride. Employees must understand how their job contributes to achieving the organisation’s mission and goals. They must see and feel the alignment between their individual job’s goals and deliverable and that of the team and organisation. 2. Praise effectively. The dictionary defines praise as “the expression of approval or admiration for someone or something”. Every employee wants praise, but

not everyone is comfortable with being praised in public. In business? Get to know each employee’s personal preference and treat them the way they prefer. Simply saying “well done” is not good enough. You need to be specific in the expression of your admiration. “The way you dealt with that difficult customer this morning was a real eye­ opener to all of us. You set a great example of how to be patient in a situation when many of us would have lost our cool. I am proud to have you in my team”. Be specific and sincere. 3. Say: “Thank you”. Many managers believe there is no need to thank an employee if they are just

doing their job, but everyone works harder for a manager who expresses sincere gratitude. Managers need to be sincere in thanking their team or team members, when for example they did something that made their job easier, or when they did something beyond what is expected. Remember to be specific and sincere with the people

you manage.

4. Put it in writing. Gratitude and praise would have even more impact if put it in writing. A short e­ mail or even a handwritten note will give the experience lasting impact. People keep these notes and refer back to them when they need a confidence boost.

Photo: Employee recognition is esential for a healthy business WealthWise magazine 53


5. Build a culture of giving recognition. Building a culture where an employee recognises and values the different forms of recognition starts on their first day. Everyone in the team should be prepared for their arrival. Having their business cards printed, a buddy assigned to help them find their way around and answer all their questions when the leader is not around, a welcome card and the HR employee handbook on their desk make a huge

difference.

6. Create opportunities. This is a very powerful way of giving recognition. By assigning jobs or assignments based on past successes, the management is continuously rewarding results and recognising people’s achievements. Opportunities may also include learning opportunities, for example attending a course or being part of the task team that will develop the strategy for improving customer service. 7. Give freedom. What a great way for management to demonstrate the trust it has in an experienced employee or team! Having reached an agreement on the end result or deliverable, the rest is left to the employees to decide. Management should be available for questions and to show support by asking 54 WealthWise magazine

for feedback on their progress. When things go wrong – management should make sure they are on their side, and not against them. 8. Show respect. Without mutual respect, no form of recognition will be perceived as having any value. Management should know each employee well enough to understand what form of recognition they will value. Let them know they are valued and their efforts are appreciated. Treat them with the same respect that you expect to be treated. 9. Build the team. There are many recognised ways in which one can celebrate team success, recognise contribution to the success of the project or business and help employees understand and grow as a team. Peer review and feedback is one technique that is often neglected. Do you encourage your team members to recognise each other? Making sincere feedback and recognition a habit in your team will quickly build the team and establish a culture of recognition. 10. Focus on the ‘right’ thing. The continuous pressure on every manager to deliver, perform and improve often results in a situation where they focus on “catching people doing

something wrong” before it gets out of hand and becomes a problem that impacts on the bottom line. To establish a culture of recognition, managers need to start “catching people doing something right.” Following this with a show of gratitude and a form of praise that the employee prefer will change the level of commitment and engagement of every employee or team member. Recognition is not always about receiving something, sometimes it means something gets taken away, e.g. a task I find tedious. Other times recognition means getting more work, e.g. the opportunity to take on a difficult client because I proved that I can deal with them successfully. Think back to a time when you felt appreciated. Can you remember the feeling? Can you remember how far you were prepared to go for the manager who made you feel valued? Do the people in your team know what this feels like? Employee recognition is not a limited resource like time and money. It cannot be used up and you cannot run out of recognition. The only limit to employee recognition…. how far can you stretch your imagination.


CareerWise

Monitoring Absenteeism by Andrew Morton

E

mployees certainly will get ill or injured during the course of their employment, and it is only right that they do not attend work when they are genuinely hurt or sick and need to recover. A workplace requires people to be at work as much as possible, and even if employees are not abusing their sick leave with genuine illness, understanding how much time has been lost is a useful tool to manage staff productivity.

Why monitor? It’s much easier to manage what you can measure. Proactive absence monitoring provides an overview of what’s going on with productivity in your work place and also provides an early warning system.

By the time you get the impression that an employee has been absent often – you are usually right and you could have lost a lot of money by that time. Monitoring helps the employer realise that an employee may be incapable of doing their job and consider interventions such as adapting the job or the work place. If necessary, incapacity can be considered. What does absenteeism cost? Losses are both tangible and intangible. The tangible losses include the direct cost – what you pay to hire the employee and in the indirect costs, which could include temp replacement costs, or overtime for other employees to get the job done. Research has shown that these indirect costs

range from 150 to 300% of direct costs. The intangibles are more difficult to measure, but are certainly felt – such as your frazzled nerves while you try and plug gaps caused by the non appearance of an employee. As important, is the potential of losing clients who are not getting service or products at the promised time and expected quality. Here is an example. An employee whose package is R10.500 and works 21 days a month earns R500 per day. As far as you are concerned as the employer, that’s R500 which has to come out of the sick leave budget, for which no work is done by that employee. If we now add the indirect costs, for example, by

WealthWise magazine 55


bringing in a temp, your indirect costs for the day can easily reach R1500 per day. That adds up to R2000 off the bottom line for one day.

How do you monitor? Two methods work well. 1. Calendar method. An excellent tool for the small business or small department. This tool is great when you want to track individuals. An annual calendar which covers an A4 page is a useful tool. (Photostat this from an A4 page­a­day diary, or download from Microsoft Office Templates). When an employee is absent, highlight the days absent. If you provided with a diagnosis or a symptom (you can ask!), write this in. This helps greatly in pattern recognition, and often acts as an indicator of a future incapacity. Note the Thursday/Friday pattern starting to emerge in the

Picture: Calendar method. 56 WealthWise magazine

pay day week and in an instant you can see the number of incidents which have been taken. 2. Use of simple calculations and using benchmarks. How do you as an employer know when absenteeism is excessive, genuine or abusive? There are some tools and benchmarks which provide guidelines to help you make your decision.

Sick Absence Rate (SAR). This includes all days lost due to an employee informing you that they were sick and if it exceeds the 2 consecutive day rule, a doctor’s note. • SAR = Number of sick absence days x 100 divided to Potential working days • A desirable rate is 2% or less. • Threshold of concern is 4%. • The SAR provides a rate and can inform you if the amount of absence is

excessive or not. By the time the threshold of concern is exceeded, the employer should understand what is causing the absence so that it can be appropriately dealt with.

Absence Frequency Rate (AFR). It provides the average number of incidents of sick leave per employee over a period of time (usually p.a.) expressed as a number. Can be performed monthly. • AFR = Number of incidents of sick leave over a period * 100 divided to Average number of employees for that period • The “Ideal Employee” takes 2 or fewer incidents per employee per year. • Ideal AFR, based on the calculation is 200 or less p.a • Ideal AFR is 17 (200/12) or less per month. Not all employees are fortunate to be healthy all the time, and therefore a threshold of concern is set at 4 incidents per year, (AFR of 400) or an AFR of 34 per month.


• To keep things simple, if you are tracking one employee over a year, then the number of incidents is the indicator of choice. • Absence Severity Rate (ASR). The average number of days sick leave per incident expressed as a number. • ASR =Total number of days sick leave taken divided to Total number of incidents of sick leave • Three or less suggests abuse having crossed the threshold of concern; Seven or more suggest genuine illness. The area in between is a grey area, and on­going monitoring is required. It is important to stress that it is the combination of the three indicators which gives you the comprehensive picture of excessive absenteeism.

Picture: Using benchmarks

Case study. Ms M worked as a senior admin clerk at an insurance broker. The majority of her day is spent in front of a computer and answering queries on the telephone. About a year ago, she was involved in a minor motor vehicle accident and sustained a whiplash injury. She was off from work for 3 days and then returned to work. Unfortunately, she developed a pattern of neck spasm and serious headaches, and she claims they are so severe, that she cannot work. In the 12 months since the absence the following information is available. • Days potentially worked in the past year = 240 • No if incidents of absence =7 • No of days lost = 21 • Package = R10.500 per month, R500 per day

• Sick certificates are provided which refer to neck pain/whiplash/headaches Data cannot determine whether the employee used the history of the motor vehicle accident as an excuse to take off excess time, or whether this is a genuine complication associated with the accident. What the data does tell you is that this is clearly a case of excessive absenteeism and both the employer and employee should be concerned. What to do with the information is the subject of another article. Andrew Morton is Managing Consultant at The HR Hub. Contact him at +27(0)11 475 8915, andrew@thehrhub.co.za or visit the website www.thehrhub.co.za.

WealthWise magazine 57


Agenda Lifestyle

Green living at Edenhof Conservation Estate

A

cross the globe, more home designers and owners are confirming that employing green strategies can be both cost and environmentally effective. The Edenhof Conservation Estate is a sustainable eco­friendly residential development near the historic town of Tulbagh, situated in a Nature Reserve on an impressive 1000 hectares of pristine Fynbos overlooking the picturesque Tulbagh Valley. Comprising of just fifty plots across the entire estate, each with a 500 meter square maximum footprint, the development grants individuals with a unique investment opportunity that combines

58 WealthWise magazine

sustainability with financial viability, green luxury living with exclusive architectural guidelines. Edenhof Conservation Estate was granted planning permission on the basis that it had minimum physical and visual impact on the environment, making way for a ‘green’ development using sustainable architectural design. Green building can be done with little or no added cost and with budgets within the cost range of non­green buildings. When building with an eco­conscious mind, a number of sustainability issues are highlighted in the Architectural Guidelines and Requirements, one of which being the importance of

water recycling, which offers both financial and environment advantages. By making collection of rainwater and water­saving equipment compulsory, Edenhof aims to help conserve a valuable natural resource, while benefiting from the monetary savings. Also, all infrastructure for the project aims to tread the earth as lightly as possible with a three­step approval process ensuring adherence to the Architectural Guidelines and Requirements. The document also addresses a number of sustainability issues with emphasis on factors such as control of sunlight, creation of micro­ climates and thermal properties of materials.


Photo: Edenhof Conservation Estate According to architect Joe de Villiers, the estate will be self足sufficient in terms of the provision of fresh water, recycling of grey water, harvesting of rain water and the on足site treatment of waste water by means of a wetland system, as well as conserving the significant amount of energy used for lighting, heating and cooling in residences.

Each home will be built to exacting standards without compromising the environment of the natural landscape, according to the architectural guidelines.

Most importantly, the building of the luxury eco足 conscious residential area will rely on local and low足 impact materials, such as high tech glass and steel, with energy saving and pollution limiting measures.

From both a financial and environmental standpoint, longevity is the main feature of sustainablility. The reinforcement of innovative and conscious design is a key factor in upholding this principle.

What we like about Edenhof is the wholistic approach to the development. However, it is the details of the design of the homes which make them truly sustainable.

Edenhof Conservation Estate not only aims to provide financial opportunity for investors, but also the opportunity to invest in the future of sustainable living in South Africa, advocating that profitability can be obtained through energy conservation. For more information on Edenhof Conservation Estate, visit website www.edenhofestate.co.za or email sales@edenhofestate.co.za.

WealthWise magazine 59


Photo (above and below): The strict arhitectural guidelines with eco building materials, wood and glass

60 WealthWise magazine


Photos: The eco lounge (above) and living area (below)

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What to do in Tulbagh The estate is only minutes away from the historic town of Tulbagh, just an hour and a half drive from Cape Town. With its national monuments, restaurants, shops, and theatres and one of the lowest crime rates in South Africa, Tulbagh is definitely a charming country getaway in the Western Province of South Africa. When in Tulbagh, a visit to the historical centre in Church Street, restored to its original glory reminding of the 18th century

European settlers, is a wonderful opportunity to see the largest street concentration of the country’s National Monuments (Cape Dutch­ style). Exploring the beautiful environments of Tulbagh valley, surrounded by mountain ranges reaching over 2000 metres above sea level, is a must for nature lovers. The region is renowned for its wild and diverse flora, including Proteas and Buchu herbs, as well as its fruit trees and vineyards.

Photo: Charming old Cape­Dutch style house in Tulbagh 62 WealthWise magazine

Indulging in Tulbagh’s best wines, olive oil, plums, pears and peaches is just one of the various ways of celebrating the local culture. Pair your wine of choice with fabulous hand crafted farmhouse cheeses from local Kimilili Farm, Tulbagh’s certified organic dairy farm or enjoy decadent meals with local produce in one of the town’s numerous restaurants, coffee shops and farm stalls. For more information, visit www.tulbaghtourism.co.za.


Books

Greg Mills, Why Africa Is Poor And What Africans Can Do About It Penguin Books, R140,00

D

rawing extensively from his own experiences and countless visits while running presidential­ levels advisory teams across the continent, Greg Mills, director at Johannesburg­ based Brenthurst Foundation (established by Oppenheimer family in 2005 to assist in strengthening African economic performance) and former director of the South African Institute of Foreign Affairs has certainly produced a remarkable, passionate and controversial argument for Africa’s battle against poverty, corruption and poor governance. “Why Africa is Poor” takes a very objective look at the 64 WealthWise magazine

economical and political situation in Africa, as opposed to other emerging economies in Asia, Europe and beyond, seeking frank answers behind the country’s poverty, aid­ dependency and bad leadership, with the realization that, ultimately, Africa’s people are poor due to the choices made by their leaders. The book opens with the way in which global economy works and the most important factors to be considered in economic development of countries, showcasing the real development achieved by countries like Singapore, Vietnam, Costa Rica and Cambodia, among others. It continues with Africa’s record

byillustratingthecurrentstate in various countries, notably Rwanda, Congo, Eritrea or Zambiaandaseparatechapter on the global aid regime and why it is not the definite answer to Africa. More than advocating for a dramatic change in Africa, Mills assesses the odds in Africa’s favour, identifying the areas where African leadership could make better choices and comingupwithviablesolutions for African development, some which were successfully implemented in other economies in similar, if not worse circumstances. A bold andconvincingcaseforAfrica’s future, Greg Mills’ book is a winner and a serious must­ read by African reformers.


Richard L. Brandt, One Click

A

Penguin Books, R165,00

uthor of the insightful “The Google Guys”, Richard Brandt continues to portray the ingenious minds behind some of the most successful businesses on Earth – and Jeff Bezos, founder and CEO of amazon.com, is certainly worthy of his praise. A gifted man and Princeton graduate with a keen interest in computer science and technology, Bezos found its entrepreneurial dream in amazon.com, embarking on the powerful quest to build the world’s biggest online retailer with a strong focus on customers. (The book’s title, One Click, refers to amazon.com’s infamous “one click” order processed, patented and debated in the e­commerce industry, a move that won customers’ hearts, by streamlining the online buying experience). Armed with lots of guts and previous experience in working for risky and challenging companies taking advantage on the booming era of Internet and intra­networks (mostly banks, trading and investment firms at the

time, including the famous D.E. Shaw computer trading company on Wall Street), Bezos left numerous high­promising careers to cash on the world’s youngest, but biggest and fastest growing market: e­ commerce or online retailing. Brandt’s biography of Bezos follows the latter’s life from growing up on a Texas ranch with his grandfather, his first role model, a former US defense Department employee to his school years in Florida and his entrepreneurial quests, starting with the DREAM Institute, a summer learning camp for gifted fifth­graders, started with then high­school sweetheart Ursula Werner and moving to the almost probable venture with Halsey Manor (who later founded CNET.com and became a millionaire). It was Jeff’s grandiose plan for an online retailer, amazon.com, started as a bookstore, that would gain him the reputation of a visionary whochangedtheretailindustry forever (and not without causing havoc for the major bookstores and retail chains

of the times, most notably Barnes and Noble, Borders and Wall­Mart). Started in 1994 in Seattle, Washington and officially launched just a year later, amazon.com has grown to phenomenally proportions and record sales, despite not turning a profit until late 2000, even surviving the dot.com stock crash of the early 2000s (although not untouched by it). The company has continuously reinvented itself, shipping various products and services, thanks to Jeff’s monumental acquisitions of other retailers. The book does not only offer a glimpse into the birth and rise of amazon.com, but provides enough practical and valuable insights into the advantages of an early­mover business and an out­of­the­ ordinary vision, wonderfully executed, although not always flawlessly. WealthWise magazine 65


Heidi Holland, 1 00 Years of Struggle Mandela’s ANC Penguin Books, R150,00

H

eidi Holland is a well­ know South African columnist, journalist and author of several books concerning African politics, including the internationally acclaimed Dinner with Mugabe. Her latest release (published around the time ANC celebrated its centenary anniversary) is a carefully penned history of South Africa’s ruling party, the African National Congress (ANC), from its early beginnings ten decades ago to its current less certain popularity.

Opening with the early days of the country’s most iconic freedom fighter and former ANC President Nelson Mandela, the book takes a general approach on ANC’s struggle for freedom rather than just acknowledging Mandela’s vital role in ending the apartheid.

66 WealthWise magazine

Based on a series of writings and interviews with past iconic leaders involved in the country’s liberation movement, thestorycaptures keymomentsinANC’shistory: thebirthofAfricannationalism and ANC party in 1912 by Zulu­born Dr. Pixley Seme (its founding father) and its peacefulpropagandainitsfirst three decades, supported by leaders such as Dr. Albert Xuma or Anton Lembede; the radical change from passive action to armed resistance underANC’sreformistsWalter

Sisulu, Oliver Tambo and Nelson Mandela;the fight against racial discrimination and white domination in the country leading to the birth of armed wing Congress Youth League (CYL) in the ‘40s; the bittersweet relations with the Pan African Communist Party and the Pan Africanist Congress; the infamous mass mobilizations, riots and protest, followed by Rivonia Trail and imprisonment on Robben Island; the students’ uprising in Soweto, 16 June 1976; the Sharpeville Massacre on 21 March 1960; the rise of Umkhoto we Sizwe (Spear of the Nation), the

armed wing of ANC; the constant township turmoils and violent deaths, culminating with Mandela’s release from prison on 11 Feb 1990 and the first democratic elections in April 1994; Separate chapters follow ANC’s under Mandela, Thabo Mbeki and Jacob Zuma’s leadership and, most importantly, a reflection on Mandela’s legacy and what is still to come.

After 82 years of struggle for a non­racial society, ANC’s struggle does not appear to end. Perhaps this is the book’s most important message. More than just casting an objective reflection of the past, the author invites the reader to analyze and question the country’s future under its current leadership, which looks much less certain than in its glory days of struggle against apartheid. We were left with a sour taste of things to come, but again the book is not intended, in our opinion, to dismiss ANC’s future evolution, but to rather look at today’s staggering unemployment,


income distribution, corruption, inferior education and lingering racial tension in the country and think of ways of transforming our future in a positive way – whether ANC will remain the ruling party or not. Highly detailed, educational and informative, “100 Years of Struggle – Mandela’s ANC” deserves its place in every South African home (and beyond, for those who want to familiarize with South Africa’s history).

continues from page 61, One Click Jeff, described by both colleagues and competitors as a strong, stubborn, focused and obsessed with consumer experience (much like Apple’s founder Steve Jobs), continues to innovate, automate and surprise all of us – most recently with cloud­based Amazon Web Services and its space­research company started in 2000, Blue Origin, which aims to make spaceflight an affordable,

wonderful and safe experience for customers willing to explore the solar system. If you are looking for fresh ideas to start­up business or reinventing your existing venture, Jeff’s ambitious goals and ability to stay ahead of the game will put that kick back in your dream – an absolute must read for passionate entrepreneurs and an inspiration for the rest of us!

Robert Kiyosaki with Sharon Lechter, Rich Dad’s Escape from the Rat Race

B

Little Brown and Company, R100,00

est­seller author of Rich Dad, Poor Dad book series, Robert Kiyosaki is a powerful professional investor, entrepreneur and educator who has dedicated part of his life to becoming financial free and teaching other individuals, in an accessible and fun way, financial and investing strategiesthatbuildconsistent wealth. Written in a fun comic book style, “Rich Dad’s Escape from the Rat Race – How to become rich by following Rich Dad’s advice” educates the reader about money management in

order to achieve “financial intelligence”. The book demystifies the concepts of assets, liabilities, job/work, investments and business, in plain language, using story­ telling and graphics to capture the audience. Suitable for both children and adults, the story teaches the basics of making money and creating assets, how to make money work hard for you instead working hard for the money and how “working to learn, not to earn” paves the way to moneymaking opportunities.

A recommended read (it takes a maximum half an hour to read it!) for everyone: those already familiar with the Rich Dad, Poor Dad series; those who want to be introduced to a wealthy life; those who want to teach their children the basics of making money. Do not miss this one! WealthWise magazine 67


Events

April/May Events

Photo: SA Cheese Festival

Shows and Events

SA Cheese Festival, Stellenbosch When: 27 to 30 April 2012 Where: Sandringham Farm, Stellenbosch

The festival features a marquee brimming with cheesy delights, good food, best wines and a live music area – a must for cheese­ lovers. Visit the website www.cheesefestival.co.z a for more information or book online through www.computicket.com. 68 WealthWise magazine

Decorex Cape Town When: 26 to 29 April Where: CTICC, Cape Town

For decor updates,

trends

and

DIY tips, innovative products and brilliant design, head to Decorex. Go to www.decorex.co.za for more info.

A Midsummer Night's Dream

When: 10 to 21 April Where: The Artscape Theatre, Cape Town Shakespeare's A Midsummer

Night's Dream brings back romance, mystical creatures and humour in Cape Town. Book online through www.computicket.com.

Taste of Cape Town

When: 19 to 22 April Where: Green Point

Cricket Club, Cape Town

One of Western Cape's most extravagant food festivals with award­winning wineries, finest restaurant and greatest chefs, is sure to entertain your tastebuds. More info at www.tasteofcapetown.co .za.


Conferences and Expos Marketing Conference Expo

Indaba and

When: 9 to 10 May Where: CTICC, Cape Town The second annual Marketing Indaba, Conference and Expo aims to inspire, inform, focus and connect the marketing and advertising fraternity. The two­day event will feature a conference and exhibition showcasing the latest trends in advertising and marketing. Conference delegates can expect an exciting line­up of speakers and workshops, covering a range of topics from management and strategy, to e­marketing and media,

improved and more efficient learning as well as development policies for a multi­generational workforce. Go to www.terrapinn.com/2012 /learning­and­ development­ africa/index.stm for more info.

while networking with like- The International minded professionals. For Franchise EXPO – more information visit www.marketingindaba.co m.

The Learning and Development Show Africa When: 7 to 10 May Where: Sandton Convention Centre, JHB

The Learning and Development Show Africa is a meeting point for heads of marketing, human resource, corporate training dedicated to the strategies and technologies to utilize upcoming technologies, grow

IFE 2012

When: 17 to 19 May Where: Sandton Convention Centre, Johannesburg The expo has grown into the biggest franchise exhibition on the African continent, dedicated to developing franchising, encouraging small business development and entrepreneurship. Network, get business ideas, look ot for franchise opportunities. For more info, go to www.ife.co.za or www.fasa.co.za.

SatCom Africa 2012

When: 21 to 24 May Where: Sandton Convention Centre, JHB The largest satellite conference and expo focusing on the needs of the African continent, SatCom brings together end­users and suppliers of satellite technology to find cost effective & reliable communication solutions. For more info and related conferences, visit www.terrapinn.com/exhib ition/satcom­africa/ Event page compiled by Abram Molelemane, Tshepo Ntsoelengoe and Sihle Masuku. Want to see your event promoted on these pages? Email editor@wealthwisemag.co .za with your event.

WealthWise magazine 69


Last Word

Calling for a WEALTHY Africa

W

e have been online for over one year now and it has not been an easy road. The next phase in our development is to create greater awareness, both viral and word­of­mouth, on the most important issues challenging the African citizens today: financial awareness, money management, personal development, business and career guidance. Africa cannot prosper without knowledge and education, which forms the basis of wealth creation and management – an education that, sadly, we don’t find in schools.

This way, you will be an active player in spreading our message, helping us reaching our goals to inform, educate, connect and change lives across the continent. For any questions, comments and suggestions on how we can improve our digital platform, email editor@wealthwisemag. co.za

We would like to thank all our readers for supporting WealthWise magazine to enter its second year of publishing and continue its mission of empowering Africans to live a happier, wealthier life.

We want our readers and supporters to be the first in spreading the wealth Denisa Oosthuizen message in their environment, families, Publisher WealthWise friends and colleagues. The magazine fact that our publication is free and accessible online to enjoy should add to this excitement.

70 WealthWise magazine

Share the

wealthwise message now!

­­­ Forward our link www.wealthwisemag. com to your peers ­­­ Add our website to your blogroll, blog, website with similar interests ­­­ Connect with us on Facebook (search for WealthWise magazine) ­­­ Follow us Twitter @WealthWisemag

on

­­­ Connect with us on LinkedIn ­­­ Interested in other social media? Share our website and articles with others!


In next edition

June/July 201 2 Redescovering negativity and failure

T

une in to our next issue and learn how todealwithbusiness failure, negativism and being wrong 足 while using them in your advantage! Retirement annuities have seen a great comeback in the past months, which is why we look in depth at retirement vehicles in our next issue. We also uncover the legalese behind trusts and give you some good advice as to why and how you should consider starting a trust today!

Don't miss our next issue, out in June! WealthWise magazine 71


WealthWise April-May 2012  

WealthWise magazine is your free bi-monthly digital guide to wealth creation and management in Africa. Visit us and subscribe for free at ww...

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