WealthWise magazine www.wealthwisemag.com
No. 17 Feb/March 2013
South Africa
7 Michael Eilertsen's (LIVE OUT LOUD)
Business and life lessons
Books to Up Your Game in business, career and even politics
Dianna Games on Doing Business in Africa Equities versus Bonds Top Tips for Buying Medical Cover
Our last free issue!
ForeWord The End of a Chapter (and a New Beginning)
T
wo years have passed since the launch of our first issue of WealthWise magazine in February 2011. It has been a challenging journey for us with good
developments during this time and a positive feedback from you, the readers. For two years, we have brought quality free information, articles and opinions on topics related to wealth creation and wealth management, and we are ready now to move on to the next level. The FebruaryMarch 2013 edition is our last free alternatemonthly issue, as we prepare to venture further into the digital publishing market with a brand new re launch of WealthWise magazine in April 2013. The new magazine will not only bring a new look and enhanced exclusive content, but will also further engage you, our readers, through digital multimedia interactive experiences. Going forward, our editorial will strongly follow a motivational and inspirational focus, showcasing the technical, emotional, spiritual and financial factors behind wealth creation, achieving financial freedom and living one’s dream. We hope that our publication will continue to inspire you to make every day, longlasting changes to a wealthier future.
Denisa Oosthuizen Publisher Managing Editor denisa@wealthwisemag.co.za 2 WealthWise magazine
February/March 201 3 CoverStory
6 Michael Eilertsen's Business and Life Lessons
LifeWise
12 Build Up Habit Investments
MoneyWise
16 The Value of Financial Planning 20 Make Your First Foray into Property a Success
24 Are Equities Riskier than Bonds? 27 Top Tips for Buying Medical Cover
BusinessWise
30 Doing Business in Africa (Q&A with Dianna Games) 36 A Dire Consequence 足 The Demise of the African NGO
CareerWise
40 DreamWorker 足 Getting South Africa Working 46 The Evolving Role of the CFO
WealthWise magazine Publisher REO Media Solutions
Managing Editor Denisa Oosthuizen denisa@wealthwisemag.co.za Editorial editor@wealthwisemag.co.za Advertising sales@wealthwisemag.co.za Graphic Design REO Media Solutions On
the
Eilertsen
Cover:
Michael
Photos: dreamstime.com and contributors' photos Web www.wealthwisemag.com Copyright
Please contact us at editor@wealthwisemag.co.za.
Lifestyle 50 7 Books 55 Events
to Up Your Game WealthWise magazine 3
Contributors
JP Farihna is General
Manager at Property24. He was also managing Director of iafrica.com. JP has worked for the JHB Stock Exchange and Deutsche Bank London. JP is the founder of the Online Publishers Association. He set up the Nielsen//Netratings system in SA. JP joined Korbitec as General Manager of Property24 in 2010.
Andrew Dittberner is
Senior Investment Manager at Cannon Asset Management and portfolio manager of the Cannon Flexible Fund. Cannon Asset Managers is a niche investment management company based on the philosophy and principles of value investing as an investment management approach.
Read JP's article about making Read Andrew's comparison your first property deal in of equities vs bonds in MoneyWise section, page MoneyWise section, page 20. 24.
4 WealthWise magazine
Mark Arnold is Principal
Officer at Resolution Health Medical Scheme. He is a registered and accredited healthcare consultant with more than 14 years experience in the Employee Benefits and Healthcare Industry. He is a member of the Financial Planning Institute Special Committee on Health Benefits (FPI Health). Read Mark's top advice to consider before buying into a medical scheme in the MoneyWise section, page 27.
Contributors
Chiara Baumann is the
CoFounder of Change Collective Cape Town, a platform for socioeconomic and environmental development professionals in the City. She is currently doing consultancy work for DreamWorker. Chiara’s academic background includes concentrations in politics and philosophy. Her interests lie in issues of local economic development, social entrepreneurship and advancing links between community, public, and private development initiatives. Read Chiara's pledge for a working South Africa in CareerWise section, page 40.
Catherine Wijnberg is
is an enterprise activist and CEO of Fetola, an enterprise development and economic empowerment agency with a vision to change lives for the better. Read Catherine's opinion on the state of the NGOs in South Africa in BusinessWise section, page 36.
Van Zyl Botha specialises
in forensic auditing and actively participates in management and strategic decision making at FinFive Incorporated, an established firm of Chartered Accountants, Business Consultants, Auditors and Tax Specialists. Read Botha's feature on the evolving role of the CFO in CareerWise section, page 46.
Facebook: WealthWise magazine Twitter: @WealthWisemag
LinkedIn: www.linkedin.com/company/wealthwise magazine WealthWise magazine 5
Michael Eilertse Business and Life Lessons from The Breakfast Boy
F
rom early beginnings as a teenage waiter足turned足entrepreneur to the founding of LIVE OUT LOUD media group comprising of luxury
publishing, travel and events, South African Michael Eilertsen's entrepreneurial journey delivers great lessons about determination, starting up, passion and courage to succeed. Here Michael tells how he learned from his past experiences and his biggest mistakes in business when starting up. Read and learn!
The vegetarian meal that would change my life forever
"Is entrepreneurship inherent or does circumstance open this door of opportunity? For me the answer is both, as I had many small businesses that ran through my days at school to the captive market of fellow scholars, but the decision to never work for someone again came down to a single moment. I was a waiter at a world足renowned meat restaurant in Sandton, spending Sunday evenings and Monday lunch serving various affluent individuals, while I studied at then RAU (now University of Johannesburg). After four months of learning the ropes, I had a good handle of how things worked, and had even contributed a couple of ideas that made our order taking more efficient. The moment arrived unexpectedly one Sunday evening in April of 2001. I had a big table of even biggerspenders, some local businessmen entertaining guests. The table was mainly men, which meant custom steak cuts were going to be the meal of choice, and when the Meerlust Rubicon 1988 was requested, I knew it was going to be a great evening for me. When it came to ordering, a lady at the table informed me that she was vegetarian, and nothing on the menu catered for her preferences. With her being the wife of the man who was clearly going to pick up the tab,
6 WealthWise magazine
en
no request was too big, and I suggested she order a variety of side dishes. A quick negotiation with the chef later, and avegetarian platter like no other had been created, and I proudly exited with the train of other waiters heading to my table. Metres from the table, the owner walked by, and did a quick turn when he spotted the vegetarian splendour. I beamed from ear to ear, as impressing him meant a promotion was soon to follow, but instead I was stopped dead in my tracks by the look I was given. “What is this?” The words spluttered out his mouth as his face turned deep red. “Our vegetarian dish,” was my less confident answer. “WE ARE A MEAT RESTAURANT ,” he said, as I was steered back to the kitchen. At this point the head of the table came to my rescue, cutting us off on our way back to the kitchen. He explained his wife was vegetarian, but he didn’t want to turn up the opportunity to serve his guests a fully South African experience. As they say, this was the straw that broke the camel’s back. The owner said his dishes were not up for discussion and if a vegetarian wanted to eat at a meat restaurant, then what did they expect? I was instructed to bring out the veggie dishes as sides, as they appeared on the menu. An altercation ensued between the guests and the restaurant owner, and minutes later they left, outraged at what had transpired. I couldn’t believe what had happened. Surely businesses were built on innovation, professionalism and meeting the expectations of your customer? Surely those who work for you, who differentiate your offering and represent the essence of your brand should be acknowledged and retained, not ostracized and made to conform? As I watched my table of guests leave the restaurant, I felt no anger, but rather an excitement to a calling I had felt all my life. I knew it was time, and as my hand untied my apron and my mind raced thinking of what my future held, I knew I would never work for anyone again. Another South African entrepreneur had just been made."
The Breakfast Boy
Busy schedules usually mean commuting business executives rarely have time for healthy breakfasts. The meal gets sidelined, to ensure kids are ready or deadlines are met. Given my varsity commitments and an accessible market, The Breakfast Boy was started on the corner of Jan Smuts Avenue and Conrad Drive. R10.00 got commuters driving to Sandton a breakfast bag containing a muffin, fruit, yogurt, Snacker bar, mint and a napkin. But having a great product wasn’t enough, as all good entrepreneurs know, you need something that sets you apart and communicates directly with your target market. So I made a fold over pamphlet, telling my story and giving weekly updates to the lessons I was learning while trying to run a business of my own. The standard opening line was: “I am a first year BCOM Entrepreneur student at RAU and I believe only so much can be learnt in the classroom without firsthand practical 8 WealthWise magazine
Mike's company was voted the second most innovative in South Africa at the SMME Africa Awards 201 2
"Surely businesses were built on innovation, professionalism and meeting the expectations of your customer?"
experience. So I present you the Breakfast Boy, and you will be given weekly updates of the trials, tribulations and successes of running your own business.” My mobile number ended the week’s learning, and allowed Sandton’s commuters to communicate directly with me for pointers, advice and new opportunities. At 3:00am every morning I began baking muffins, so that by 6:00am I could be on the road at the intersection I had selected. My outfit included a chef’s hat, for easy identification and my signature basket with 10 breakfasts, enough to service every robot change. Within two months I was at maximum capacity selling 60 breakfasts a morning. The R300 per morning I was making made me a millionaire in student terms, but I was loving the interactions even more, as daily messages flooded in from both those who purchased and who had just received a pamphlet. I will never forget the morning my former high school headmaster pulled up at the intersection. I greeted him with a cheery “Good morning, Sir” and what I got back was a look that seemed to read as: how can a private school education amount to selling food on the side of the road. But I was just beginning, and I never let those disapproving looks get to me. By the end of the fourth month, four other students were employed and The Breakfast Boy could be spotted at crowded intersections across the Northern Suburbs. WealthWise magazine 9
Five Bigges
1. Overemploying. Dream
think of opening a business. As a result, e better for the company as a whole. I had turnover dropped. An organization’s emplo overheads are what kill a business, and ev Lesson: Rather employ fewer, but more profit and by outsourcing skill sets outside
2. Effective financial c
you might move forward for a while, but s bookkeepers. They were not wellinformed being put into projects that were doomed Lesson: Employ a highlyskilled, welles numbers, they will give your business sec
3. Celebrating a deal p A call came in one morning from a lady who worked at Discovery asking if I could get her promoters for her launch. That next week’s story in The Breakfast Boy pamphlet spoke of our promoters at the Discovery launch, and opened the flood gates for hundred of promoter bookings, as local business owners found other ways to support The Breakfast Boy. S.H.O.U.T Promotions (Student House of Unbelievable Talent) was opened soon after to deal with the demand, and inevitably first year students from RAU were all in weekend jobs. I am often asked what I learnt from The Breakfast Boy. Two key things stand out. Firstly, there is no space in business for ego, if you have a great idea take the plunge and do it no matter how humbling it may seem, because that courage will be rewarded tenfold when it becomes profitable. The second thing is to find a way to differentiate yourself and connect with your market, because when you do, the rest will take care of itself. 10 WealthWise magazine
worth the paper it is written on.” These wo the story – the meeting that finally results project only to find out your client didn’t h life has taught me to celebrate the signed Lesson: Push for the signature or purch are the pitfalls we, in sales, fall for over an straight away to get you going.
4. Being too involved.
grows you find yourself still doing the thin you won’t have the time for vision, strateg Lesson: Employ people who are leaders required. Two key meetings a week will en owner.
5. Employing your clon
are comfortable around those who are sim Accountants like others with logical and an whose traits you relate too. In my case, I we had a team of six others exactly like m diversified completely, targeting those wh Lesson: Choose your nonnegotiable sk who share these traits, but they have eve
st Mistakes I've Made in Business
ms of having an empire and hiring hundreds of employees fill our heads from the day we first each penny made is reinvested into staff, growing the company and doing what is believed to 47 employees when the market changed and the recession took hold, and overnight oyees are its biggest asset, but they are an even bigger liability when things get tight. High ven if you survive, your morale and productivity is affected by retrenching. e skilled individuals. This will make your business strong and lean. Businesses operate for e of your immediate sphere, you and your business can become the “empires of tomorrow”.
control. Having ineffective financial control is like driving a car with a blindfold on. Yes,
sooner or later you are going to crash. Initially I hired friends with accounting degrees or d on how SARS worked, tax structures and effective financial control. This resulted in money to fail – we just didn’t have the paper work to show us. stablished financial controller. No matter how expensive they may seem for “playing” with curity and direction. After you have employed yourself, your accountant is next.
prior to the paperwork being signed.
“A verbal deal isn’t ords echo in my head as disappointments follow you throughout your career. We all know s in your client saying YES; you allocate resources, time and a good celebration to the new have the jurisdiction or funds have run dry. Despite being an exceptionally optimistic person, d deals! hase order. Don’t settle for an email confirmation or the classic “please go ahead” as these nd over again. Have the contract ready, so when the client says yes, they sign something
Startups require you to be involved in all aspects of your business, but as your company ngs your employees should be doing. By being too handson you are no longer leading and gy and the bigger picture. s in their own right. This will allow you to rest assured knowing they are doing what is nsure the attention to detail is there, and allow you to lead, as that’s the role of the business
nes. You don’t realise you have done it until someone points it out. As human beings, we
milar to us. Gregarious people enjoy the company of other enthusiastic individuals. nalytical personalities. No matter who you are, you tend to be impressed when hiring those am a hunter sales personality with weak administrative skills. Three months after opening, me, and not a contract, procedure or file in sight. Once the “clones” were pointed out, I ho were as different from me as possible. kill requirements. For me, these were loyalty and big dreamers, and I only employ people ery other skill I don’t. This will ensure a strong, adaptable business team.
WealthWise magazine 11
LifeWise
Build Up Habit Investments by Leo Babauta
O
ne of the things I’ve learned in my last seven years of creating new habits is the power of compound habit interest. It sounds really obvious when you say it, but if you do something small repeatedly, the benefits accrue greatly over
time. It’s obvious, but not everyone puts it into practice. Some ways of doing it:
1. Money. Seriously, if you don’t have any savings yet, cut out one or two
small daily expenses (lattes are a good example) and instead, make regular automatic transfers each week (or every payday) to a savings account. Once you have a small emergency fund, pay off debt. Once you’ve paid off most of your debt, start investing. Your finances will improve immensely with time.
2. Healthy eating. Eating just one small healthy thing a day, if you
aren’t eating healthy now, will pay off over time. Just add one fruit instead of an unhealthy snack you might have in the afternoon. Do that for a couple weeks. Then 12 WealthWise magazine
add a veggie to lunch. Do that a few weeks. Each step of the way won’t seem hard, but you’ll eventually get used to each change. Sometimes the veggie won’t be something you love, so just eat a few bites. You’ll learn to enjoy it with time. You change, little by little.
3. Waking early. Wake up just a few minutes
earlier tomorrow (say 7:55 instead of 8:00), and stay at that level for a week, then another 5 minutes earlier for the next week, and so on. In less than 6 months, you’ll be waking up 2 hours earlier, and you won’t have ever really noticed it. It’ll never feel like you’re waking earlier. Most peopletry to do way more than this (say, an hour earlier at first) and when they fail, they never figure out why.
4. Writing. If you haven’t been able to create the
writing habit, just write a sentence today. Then write a sentence tomorrow. Do that for a week. Next week, write two sentences. This sound ridiculously easy, so most people will ignore this advice. But if you follow it, you’ll be writing 1,000 words per day, every day, this time next year. Maybe 2,000 per day the following year.
5. Stretching and/or yoga. I’m the
world’s least flexible person. Now I stretch just a little each day. I’ve started by just doing three yoga poses each morning.
6. Playing a musical instrument. My wife Eva started learning
to play the guitar yesterday. Just a couple cords. If she practices those two cords each day, then another cord or two when she feels pretty confident with the first two, she’ll be playing some Bach and Granados next year.
7. Meditation. I made a vow to meditate at least 3 minutes a day. That’s all I have to do, though sometimes I’ll do more. That makes it super easy to do it every day. What will I get if I keep doing that for years? I’m not sure, but I know I already have a judgmentfree space, with no expectations, and it helps me to be more mindful and focused throughout the day.
8. Decluttering.
Just declutter a few things every day. In a few months, you’ll have a dramatically less cluttered home.
9. Language learning. Study three cards a day with
words/phrases/sentences on them. You’ll be speaking Spanish like "loco" in six months.
WealthWise magazine 13
Less than Great Habit Investments
How to Create Habit Investments
These are just a few examples of not so great habits, but it’s worth thinking about what you’re building up over time in any of these cases. What we repeatedly do grows into who we are.
It’s a fairly simple process that you can repeat with various types of habit investments:
1. Social media sites.
Checking social media on a regular basis builds up not necessarily a desirable skill, good health, mindfulness or new knowledge, with few exceptions. Just think about what you’re building up as you check these sites. The same applies to other things you might do on the Internet on a regular basis.
2. Junk food. When you eat lots of sweets, chips, fried foods, stuff with cheesy sauce and fat, you are not building healthy habits. You’re building up disease.
3. Watching TV. I’m not
completely against television (I love Parks & Rec, Modern Family, the Office, Downton Abbey), but when you watch a lot of it, especially flipping through all the TV channels, you are probably not watching the best stuff (any kind of reality TV is mind junk food, in my opinion). Think about what you’re building up with this time investment.
4. Complaining. Do you regularly complain about other people? Do you regularly dislike people, dislike your job, dislike your life? Are other people the problem? You are building up unhappiness.
Leo Babauta is the founder and blogger of Zen Habits, voted by Time magazine's as one of the Top 25 blogs in the world. Visit www.zenhabits.net. 14 WealthWise magazine
Pick something desirable. If you repeatedly do
this activity, what will it grow into? Is that what you want? Do just a minute or two of it. You can’t build it all up in the next few days. That’s a good recipe for failure. Just do 12 minutes of it today. Smile as you do it.
Set a daily reminder.
Let’s say you want to do it every day at about 6:30 a.m. Set a reminder for that time, and make it a priority to do it each day, just for a minute or two.
Watch it grow. If you just do it repeatedly, it will grow. Don’t force it. Keep the repeated activity as small as possible for as long as you can if you want it to grow (it works).
Don’t worry about doing a lot of it. As you repeat this new habit, don’t
worry about growing it. That’s a good way to fail. Most people fail because they try to do too much too quickly.
Don’t worry about missing a day or two. This is another reason
people fail — they miss a day or two, then just give up. If you miss a day or two or three, just start again. It doesn’t have to be a big deal.
Don’t do a bunch at a time.
Do one per week at the most. One per month is even better.
The Value of Financial Planning
by Financial Planning Institute (FPI) South Africa
W
hat would you do to create an extra 1.8% return in your investment portfolio? Well, according to recent research by Morningstar, receiving some quality Financial Planning advice ought to do it.
Until now the value of a good Financial Planner has been largely intangible leaving some investors questioning whether any fee is “worth it�. Thanks to this new research, from Morningstar Inc., investors now have a quantified figure on how much additional retirement income investors can generate through a more intelligently thought out investment strategy.
While most investors are familiar with the terms Alpha (above market returns achieved by way of manager skill) and Beta (returns generated by the market), the paper 16 WealthWise magazine
MoneyWise
introduces a new investor term, namely Gamma. Gamma, as defined by Morningstar, is “the extra income an investor can earn by making better financial decisions,” and therefore begins to highlight what to expect when working with a professional Financial Planner. The research found that delivery of the “Gamma” return was relatively predictable provided certain steps were observed. This is unlike Alpha, where beating the market is unpredictable and an unreliable strategy to focus solely on. In establishing their findings, 5 areas were key in providing the excess return. They were: 1) 2) 3) as 4) 5)
Total Asset Allocation Withdrawal strategy (specifically postretirement) Tax efficiency (Tax can be seen as investor enemy number 2 with inflation the main villain) Use of guaranteed annuities Liability driven investing (also broadly known as asst to liability matching)
The first three elements accounted for over 85% of the outcome whilst the last two less than 15% and hence we will focus on the three.
Asset Allocation
The process of constructing the right mix of assets (equities, property, bonds and cash) both locally and offshore is vital in driving your investment objectives. A well known study by Brinson, Hood and Beebower (also mentioned in the Morningstar paper) suggests that 94% of the return driver within a portfolio is attributed to asset allocation. The other 6% is due to stock picking and market timing. It is therefore easy to see how important this aspect of your portfolio is. Of course, the most reliable way of establishing what your return objective should be and how hard you money needs to work is through sound Financial Planning. Once a plan is in place, the return target can be set and assets allocated accordingly. From there the all important role of rebalancing needs to begin to ensure an appropriate mix of assets is maintained despite market movements. WealthWise magazine 17
Withdrawal strategy
The study does deal predominantly on postretirement investing and therefore the focus on where and how one draws and income from their investment portfolio. In many regards, it ties into the third aspect of tax efficiency. Most investors will have compulsory funds such as pension and R.A’s, as well as discretionary money such as Collective Investments (Unit Trusts), share portfolios and cash holdings. Because each of these have different tax consequences, splitting out your withdrawals intelligently can bring down overall tax whilst carefully monitoring that capital balances are not depleted unnecessarily.
Tax Efficiency
As briefly mentioned above, one of the key differences between the various investment platforms and products is that of tax. The legislation treats them differently in terms of what contributions you make into an investment, how it will be taxed whilst invested as well as how you will be taxed on any withdrawals taken. With the recent tax changes that took place, specifically, Capital Gains Tax (CGT) and Dividend Withholding Tax (DWT), managing tax within your portfolio has become even more important. Although certain elements of our tax legislation has become burdensome on investments, few investors take advantage of the many tax deductions, exclusions and exemptions that are freely available and in the process leave a “tax drag” on the performance of their portfolio. Morningstar’s researchers found that a hypothetical retiree could generate nearly 30 percent more income using a Gammaefficient retirementincome strategy. David Blanchett, coauthor had the following conclusion: “There’s a significant benefit for retirees or investors in general to having someone make the right decisions. Gamma is something that everyone can do that adds the most value; we call them financial planners or advisers, we don’t call them mutual fund pickers. … It really is worth it to pay someone 1 percent a year to help me figure out how to do this stuff because (the 1.8 percent) is significant value that any (adviser) can achieve.”
Visit www.fpi.co.za to find a CERTIFIED FINANCIAL PLANNER® professional today.
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Make Your First Foray Into Property A Success by JP Farinha
S
o you’ve scraped together enough money for a deposit, carefully worked out your monthly repayments and found a dream property in which you intend to invest. But before signing on the dotted line, it’s vital to make sure that you’ve done your homework thoroughly, as there is far more to consider before taking the plunge into property ownership. Many firsttime homeowners enter the property market largely unaware of the various costs and considerations entailed, falsely believing that monthly bond repayments represent the full extent of their financial obligations. This illinformed approach to such a commitment can often result in significant financial burdens and unexpected obstacles further down the road. Yet by understanding some of the most common pitfalls faced by firsttime property buyers, wouldbe homeowners can ensure that their first foray into the property market is a successful one.
Monthly Expenses
As a firsttime property buyer, it’s likely that you’ve come from a background of living at home with parents, or having rented property from a landlord. As a result, the daytoday expenses of property ownership are not always top of your mind when working out monthly budgets. 20 WealthWise magazine
MoneyWise
Whilst tenants have very little to consider over and above rental, electricity and water costs, homeowners are forced to factor in a number of additional expenses on a monthly basis. Rates and taxes can end up adding significant strain on your monthly finances, and it’s vital that you factor in these payments before taking on the commitment of property ownership. Homeowners insurance is also a necessary consideration in order to protect your home. This type of cover protects both your home and the contents thereof against any catastrophe such as a burglary, fire or natural disaster. When it comes to a purchase of this nature, you simply can’t afford not to take out some kind of insurance cover. The question is, can your bank account take the additional strain?
Transfer Tariffs
Over and above the monthly expenditure that is part and parcel of home ownership, there are a number of additional onceoff costs that you’ll need to plan for before you even set foot through the door of your new home. The actual transfer process can be a costly exercise, and you’ll need to make provisions for bond registration fees, bank initiation fees, Estate Agent commission and property valuations, as well as the reconnection of municipal services. Chances are you’ll also need to hire a moving company to transport your furniture into your new residence, so make sure to factor this in to your budget.
"The actual transfer process can be a costly exercise" WealthWise magazine 21
Protecting Your Home
The new Consumer Protection Act (CPA), introduced into South African legislation in April 2011, shouldn’t be mistaken as an overarching indemnity clause in a property transfer agreement. Whilst the CPA has gone a long way towards protecting consumer rights, it has little jurisdiction over private transactions between consumers, and, as such, it is imperative that you make provision for any potential pitfalls you might face as a property owner. Many South African properties are still transferred under a ‘voetstoots’ clause, meaning that the buyer assumes all liability for the property and any defects therein from the date of transfer. Latent defects and structural damages often go undetected prior to a sale, resulting in costly repair operations further down the road. As a result, it’s essential that wouldbe homeowners conduct a thorough and professional inspection of the property before signing on the dotted line. In some instances, the original owner will arrange to have the property inspected and have the relevant certification issued, but these inspections are not always performed thoroughly. As such, it’s advisable to appoint your own reputable inspector, thus ensuring that you are fully informed of any potential issues that might arise.
Making an Offer
In many cases, properties are purchased conditionally, subject to approval of a bond application or sale of another asset. Many firsttime buyers are not appropriately informed of their right to insist on having these suspensive conditions drawn into the Offer to Purchase, often finding themselves in a tricky situation in the event that the expected windfall fails to materialise. Consequently, it’s advisable to seek legal assistance at the point of signing an Offer to Purchase, in order to make sure that you are sufficiently protected in the event that you are, in fact, unable to finance the transaction.
Planning to Succeed
Ultimately, the most critical pitfall responsible for derailing firsttime property buyers is the failure to plan appropriately. So ensure that you are aware of your legal rights, as well as all additional financial considerations associated with your property purchase, and your entry into the property market should be a smooth and successful one. JP Farinha is General Manager at property search portal Property24, listing properties from South Africa’s top estate agents, as well as uptodate property market news, information and advice for home buyers, sellers, renters and investors. Go to www.property24.com for more info.
22 WealthWise magazine
Are Equities Riskie
by Andrew Dittberner and Rynel Moodley
C
onventional wisdom tells us that bonds are safer than equities, and this argument is generally presented by showing equity to be more volatile than
bonds. However, we have always seen this differently. We believe that true risk in investments is the permanent loss of capital. Permanent loss of capital can occur as a result of the following three situations:
1. Overpaying for an asset 2. An issuer going bankrupt 3. Not being compensated for inflation
Given the events that have taken place in the European Union over recent years, it is evident that despite what we are taught about government bonds being the “riskfree” asset class, at times they can be anything but. Not only is there the very real risk of default, but there is an even better chance that an investor could lose money in real terms if invested in bonds. In other words, bonds do not adequately compensate investors for inflation. In conducting our research, we analysed data on the South African market over the past 50 years, and compared the real and nominal returns over 5 and 10 year rolling periods. Table 1 shows the 5year rolling period results. This reveals that over the past 50 years bonds have produced a negative real return 43% of the time, whereas equities have only done so 11% of the time. However, comparing the volatility over the same period shows that equities are not significantly more volatile than bonds (7.9% versus 5.3%). Over the same period bonds have returned an annual average real return of 1.5%, while equities have returned a real 9.2% per annum. So for taking on a small amount of additional volatility in the form of equities, investors reduce their chances of negative real returns by about 75%. And if we turn our attention to 10year period, then equities are actually less volatile than bonds (4.6% versus 4.3%) yet they still manage to outperform bonds over this holding period (Table 2). 24 WealthWise magazine
er than Bonds? Table 1: Bonds vs Equities (50 years of data, 5足year holding period)
Table 2: Bonds vs Equities (50 years of data, 10足year holding period)
WealthWise magazine 25
Chart 1 shows the frequency of returns over the past 50 years. It demonstrates that, in real terms, bond performance is poorer than that of equities. The vast majority of returns from bonds fall into the 5% or lower categories (including negative real returns) while only a third of equity returns are found in that region. The bulk of real returns from equities lie above 5%.
Chart 1: Frequency of 5year real returns
For longterm investors (as opposed to traders), it is important to understand that if we take a longterm view, risk is actually measured as the permanent impairment of capital rather than the conventional measure of risk: standard deviation of returns. It is evident from the analysis that the probability of losing money (in real terms) is significantly reduced over time for equities whilst the probability of losing money (in real terms) for bonds remains significantly higher throughout the periods under consideration. In fact, the probability of a real loss of capital has been approximately 4 times higher in the bond market when measured over a 5year period and about 9 times higher when measured over a 10year period. There is a general acceptance regarding the riskiness of equities which has led to investors believing that the less risky asset class is bonds. Given this misconception, we believe that it is important for investors to define what really constitutes risk to them over longer time frames, ideally five years or longer. Visit www.cannonassets.co.za for more info.
26 WealthWise magazine
Top Tips for Buying Medical Cover by Mark Arnold
B
uying medical cover can be complex and daunting and many consumers turn to brokers to help them choose the right benefits and plan. Here are some key questions to ask your broker before you sign on the dotted line.
Advisor or salesman?
A broker isn’t acting as a financial advisor if he is just selling medical cover from one medical scheme – he’s simply an insurance salesman. Ask your broker how many members he has placed with different schemes over the past year. If he’s only placed members with one scheme, be suspicious. You need independent, unbiased advice. Brokers who receive commission from a particular medical scheme may not recommend the most appropriate scheme for your financial and medical needs.
Compare different schemes
Your broker should have done his homework and done an indepth analysis of different medical schemes before he recommends products to you. This means not only comparing different options and benefit plans, but also conducting a thorough check of the scheme’s risk profile, membership numbers, growth and premium increases from yeartoyear. A scheme risk profile is related to the average age of its members and the size of its pensioner ratio. You want to make sure that the scheme you are signing up to is financially stable, sustainable and has consistently affordable increases. WealthWise magazine 27
Health and wealth analysis
It’s a no brainer to check that your broker has the necessary qualifications to be giving you financial advice, such as his licence from the Financial Services Board. In addition, it is important to verify what processes he follows in recommending different schemes and products to you. Your broker should not only do a thorough financial needs analysis based on your individual circumstances, but also conduct a background health check. You may find that you have too much life and funeral cover, but can’t afford comprehensive medical cover. Your broker should help you balance your portfolio of cover to ensure that you are sufficiently covered for potential medical expenses.
Understand the plan
Medical schemes each offer different options with a variety of benefits. It’s vital to determine what level of cover you need at each particular life stage. If you are in your twenties and are fit and healthy you’re likely to only need a hospital plan that covers catastrophic events. However, in your early thirties, you’re more likely to start a family and would need more comprehensive cover. As you hit your forties and fifties you’ll need a medical scheme plan that pays generously for chronic medication as this is when most lifestyle diseases start to develop. Ask you broker to explain the benefits of schemes’ different options.
Waiting periods
If you’re new to a scheme, it is entitled to implement a waiting period where you won’t be able to make a claim, even for Prescribed Minimum Benefits. Ask your broker whether you will be subject to a waiting period and rather switch between plans on the same medical scheme than between medical schemes if your cover is not sufficient. Your broker should regularly assess your healthcare needs, look ahead to the next five years and advise you on what plan you should be on.
Networks and limitations
Cheaper premiums may mean that your medical cover limits you to a particular network of hospitals and doctors called designated service providers. Check with your broker to see which healthcare providers you can use and whether this will be convenient if you fall ill. Weigh up the cost difference of moving to a more flexible plan if you would prefer to use your preferred doctor or specialist.
Tariffs and copayments
Very few doctors and specialists charge standard tariffs, so ask your broker whether your medical scheme will refund you at 100% or a higher percentage of the tariff or you could face steep copayments. You could also opt to take out gap cover to make up the difference, without incurring the higher premiums of a more comprehensive plan.
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Be honest upfront
Each medical scheme will require you to fill out a medical declaration before taking out cover. Make sure you go through this with your broker with a fine tooth comb. Even innocent omissions can lead to dire consequences. Schemes use the medical questionnaire to accurately assess your risk and the scheme can terminate your contract on the basis of nondisclosure if you didn’t declare previous medical conditions. If you need authorisation for a treatment within the first 12 months of joining a scheme, they can also approach your doctors to see what you’ve been treated for before you joined the scheme and refuse to cover treatment if you weren’t honest upfront. Some members do omit information deliberately, but the vast majority make a genuine mistake in not disclosing. The best advice is to not fill out this form in a rush and make sure your broker goes through it with you so that you don’t miss anything out. Mark Arnold is Principal Officer of Resolution Medical Scheme. For more info visit www.resolutionhealth.co.za.
"Your broker should help you balance your portfolio of cover to ensure that you are sufficiently covered for potential medical expenses"
BusinessWise
Doing Business in Africa Q&A with South African business consultant, leading commentator, former journalist, author and columnist Dianna Games, CEO of Africa at Work by Denisa Oosthuizen
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er latest book, “Business in Africa – Corporate Insights”, offers a practical viewpoint on the challenges and peculiarities of operating in Africa, from the perspective of some of the continent’s biggest Clevel executives of corporate brands at the forefront of business developments across various African markets. We chatted with author Dianna Games (photo left) about Africa’s business scene, past and future. WealthWise magazine: What is the main focus of your latest book “Business in Africa – Corporate Insights”? Dianna Games: The book focuses on issues related to doing business on the continent, exploring the experiences, observations and predictions of top company executives who have been operating on the continent for a while. Each company is in a different sector to make it varied and broaden the appeal and variety of experiences and insights. They include both South African firms and international companies including some of the biggest and oldest multinationals in the world – GE, The Coca Cola Company and Du Pont. Other companies included in the book are: Actis, Carlson Rezidor Hotel Group, Nando’s, Anglogold Ashanti, MTN, MultiChoice, UBA, Webber Wentzel, Imperial Logistics, TBWA, Liberty Properties, Seed Co, Wilderness Holdings and SacOil. Their views and insights were extracted by means of a series of interviews with myself and responses to a fairly standard list of questions. Some companies that I had also hoped to include could not be in the line up because of time, geographical and other constraints, so it may seem that some obvious contenders are not there, but perhaps next time.
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There is also a selection of articles written by Africa experts and practitioners. Drawing on McKinsey & Associates, the Brenthurst Foundation and the Gordon Institute of Business Science for a picture of Africa’s economic performance and future trends, contributions to the book also come from individuals such as veteran Africa analyst Dr Duncan Clarke, Nigerian business leader Tony Elumelu, economic commentator Greg Mills of the Brenthurst Foundation, South African publisher Khanyi Dhlomo and Africa branding expert Doug de Villiers. These set the scene for the economic and business landscape which is the basis for the interviews in the second, larger, section of the book. Although high growth rates in Africa, among other emerging markets, offer a new investment frontier in an era of declining growth and prospectivity in developed markets, it is wise for investors to remember that there are 54 countries on the continent and even rigorous business plans can run aground on the unique and complex set of circumstances found in each of them. The premise of the book was to move away from the raft of economic statistics that dominate discussion about Africa’s economic trajectory and look at some of the issues on the ground which is where, ultimately, businesses succeed or fail in any market. Who better to elaborate on these issues than people at the coal face? They offer unique insights into the challenges and peculiarities of operating in Africa, and point out trends and likely future opportunities. WealthWise magazine: What sets the book apart in the local business publishing scene? Dianna Games: Books and reports circulating in the local business publishing scene tend to focus on socioeconomic and political discourse or on the statistics, which can be misleading in terms of really showing the reality of markets. A lot of the work is researchbased, rather than experience based, often compiled in offices far from the action by people with little or no experience of travelling and doing business in Africa. As someone who has travelled the continent for decades and seen how the understanding of a market can change by visiting it, I saw the gap for information and insights through stories and articles that would highlight issues through experience. Some of the people interviewed run companies that have been pioneers in their sectors in many African markets, for example, MTN and MultiChoice who were part of forming those markets in terms of corporate structure and regulation, not to mention technology. Carlson Rezidor is driving a fivestar hotel brand – Radisson Blu into countries where there has not been a new hotel in decades. There are many other examples of companies going into challenging markets and overcoming the problems, or retreating from some markets where they believed they couldn’t succeed for a variety of reasons. Their experiences are not captured in the statistics, which, if left unchallenged, create the impression that all is well in Africa when in fact there are significant challenges despite economic growth. WealthWise magazine: You have been at the forefront of Africa’s business and development issues for well over a decade. What business issues, trends and developments are closer to your heart? 32 WealthWise magazine
Dianna Games: I would start by saying the continent is a different place from what it was a decade ago. The improvements are not just in terms of economic growth, but in lifestyle options (which you are very aware of when travelling around Africa) such as good hotels, improved airline networks, availability of goods and service, even restaurants and also improvements in just getting things done. The advent of technology, particularly mobile phones, has been the biggest driver of change in Africa in a decade. It has enabled innovation in solving longstanding problems, in building entrepreneurs and it has made doing business a lot easier. New media is proving to be a handy tool for electorates who have long been disempowered by their governments and it is also a tool for modernising the continent. Rising disposable incomes are another key feature of life in Africa now, certainly in urban areas, and this is drawing a lot of investment and the wave of oil and gas exploration and activity across the continent is very exciting. Hopefully this will not be business as usual and will finally be a real driver of growth in Africa rather than a driver of poor governance, corruption and many other negative trends in the past. Agriculture is another issue of interest but it is moving slowly and it is frustrating that countries are not exploiting this competitive advantage often because of something simple like a lack of political will. With all the upbeat talk about Africa “rising”, it is important to remember that many of the highgrowth statistics still relate to commodity dependent countries and that the improvements are generally being felt in urban areas, while in many countries little has changed in the neglected rural areas. WealthWise magazine: In your writing, you mentioned Africa’s progress from the early ‘90s to the most recent years. Where do you see the greatest business improvements and opportunities – and the greatest challenges?
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Dianna Games: The greatest challenges African countries still face include a lack of political w the future, in lowering the cost of doing business and really driving regional integration. Gover development but without sufficient political will behind development and strategies to drive it,
WealthWise magazine: How would you describe the current African private business your view?
Dianna Games: The growth of the African private sector is one of the biggest changes of the South Africa as was typically the case in the past, and companies growing domestically. Many the structure of African economies changes and becomes more global and efficient and busine increased incomes, merger and acquisition activity across Africa as new investors seek local p greater role in pushing their governments to improve the operating environment to make Afric African markets more efficient and the private sector does have a role here in lobbying govern their company and advantage rather than the private sector as a whole. There is also the insid
WealthWise magazine: What are the most important challenges for businesses looki
The key issue is to make sure both the business plan and understanding of the environment a because of the often opaque nature of these markets and undisclosed interests by partners, o It has become something of a clichĂŠ to say you need to understand that there are 54 countrie cannot just be moved from one country to the next. Companies are still not doing sufficient ho may not have the depth of these markets themselves. WealthWise magazine: Your top advice for doing business in Africa?
WealthWise magazine: There are many tips for doing business in Africa, and the book cove I would give is to do your homework properly by going to the markets in question, taking the sure you integrate properly in order to really understand the business culture.
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Top 5 Tips on Doing Business in Africa
(extracted from "Business in Africa  Corporate Insights" compiled by Dianna Games)
1. Be patient about the extra time it might take. Patience is important when operating in Africa. 2. Find local partners. They provide knowledge, ease entry into a market and, ideally, have influence.
3. Build strong relationships with Africans. If you do not get the relationship right, the deal might suffer.
4. Do not assume that African consumers want cheap products. African consumers are highly aspirational and seek value for money. 5. Be aware that in many countries cash is still king.
Read all of Dianna's 20 tips in the book. See page 51 for a review.
will to effect real change by investing adequately in health and education as building blocks of rnments often talk about funding being their main problem but there is plenty of money for , things won’t happen.
s sector and what can be done to maximize its contribution to the local economy, in
past decade. You are seeing African multinationals emerge from other countries, not just are still family owned businesses but there are also a growing number of large corporate as ess responds to domestic reforms and growing regional integration. This growth is a driver of partners and of jobs and skills development. But more could be done. Companies could play a can goods and services more competitive. There is a lot more that could be done to make nment but there is still a lot of selfÂinterest and companies tend to lobby only for what gives dious presence of politicians with private interests that can frustrate reform.
ing into expanding in Africa, in your opinion?
are right for the market in question. Deep due diligence is required in doing business in Africa officials and others in the chain. es in Africa and while there are similarities, each has its unique make up and business models omework in many cases and are often relying on the opinions and advice of consultants who
ers twenty of those that I believe are important. I would say broadly speaking that the advice required time to get established rather than focusing only on the bottom line, and making WealthWise magazine 35
A dire consequenc The demise of the by Catherine Wijnberg
ce e African NGO
T
he onslaught of antiNGO actions (BEE Code proposal to exclude NGOs that help nonblacks, Lottery shambles, focus on Enterprise
Development over CSI) shows a breathtaking disregard for this essential sector of our country.
South Africa has a huge and, until now, growing civil society network of more than 85,000 NGOs. This vast array of organisations fillin the gaps in a society where care is not being provided by anyone else – from feeding the aged, caring for orphans, saving the rare leopard toad to helping Rape victims. They are the caring face of a society that has become hardened to the suffering of others, and dismissive of those not strong enough, or wealthy enough to care for themselves. Globally the NGO network is suffering, as the economic downturn has led to Corporates and Governments alike reducing funding support. International funders such as the World Bank, USAID and LHL have slashed their budgets and the impact on the social support sector everywhere is dire. Yet here in South Africa, we have gone beyond the simple matter of lack of money due to a reduced economy, to what appears almost to be a deliberate strategy to pull funding from civil society and divert it elsewhere. In South Africa, we have discovered Enterprise as the new utopia, and if not enterprise, its dreamy cousin, Social Enterprise. In practice, this means that traditional funding from sources such as the Lotto is now being denied to reputable organisations like the Highway Hospice in KZN, who provide essential support to hundreds of dying patients annually, on the basis that they “should be sustainable by now”. In other words, the Lotto has decided that the Hospice should be a Social Enterprise – an organisation that makes money while it helps people to die with dignity? Possible perhaps in affluent populations, but completely unreasonable in the poor communities in which it operates. Another onslaught is the proposed emphasis on Enterprise Development in the new BEE Scorecards – whereby Social Developmentor CSI funding traditionally reserved for NGOs will be 5 points in the scorecard, whereas Enterprise Development will score 8times more, at 40 points. If that isn’t an unbalanced pull, I don't know what is. WealthWise magazine 37
"Globally the NGO network is suffering, as the economic downturn has led to Corporates and Governments alike reducing funding support" Catherine Wijnberg is the Director and Founder of Fetola, a fast growing economic development agency and notforprofit organization with development practitioners across Southern Africa. Contact Catherine on cwijnberg@fetola.co.za or call 021 – 701 7466. Visit www.fetola.co.za for more info. 38 WealthWise magazine
I am a fervent champion and supporter of the Enterprise Development(ED) sector, and actively promotethe crucial role it plays in growing our economy and creating much needed employment. However, the millions that have been (and are) squandered through weak and ineffectual Government funded business support agencies, inappropriate opportunities offered to unqualified entrepreneurs through schemes like EMIA, and the general poor performance of most Statesponsored ED initiatives, leaves one feeling that this is a kneejerk response to compensate for their poor results. The reality is that successful Enterprise Development is a specialist task that needs to be carried out by experts and take place in tandem with social development, not in place of it. The proposal that in future only NGOs who support purely black people will gain BEE scorecard points is for many, the final straw. Who will support theother people dying of cancer, the otherschool children who need remedial reading, the other disabled who cannot feed themselves? Certainly not the Government, because if they were doing it none of the NGOs would have been started in the first place. If this comment seems overly harsh, the question is perhaps what strategy has Government got in place to support this essential sector? What tools are there to encourage funds to flow to civil society to balance the overwhelming emphasis on business, and black economic empowerment? It seems that the NGO world is its own worst enemy, for it has been quietly and effectively getting on with the job without fanfare for years. Sadly, as we only value our seatbeltwhen we run into a bus, so too will we only realise theworthof the NGO community when they cease to exist. South Africa is on adisastrous course – as we withdraw our support for Civil Society we risk becoming a country unable to care for our people, andif a country cannot care for and respect their most marginalized citizens, how can it call itself a civilized society?
DreamWorker 足 Getting South Africa Working by Chiara Baumann
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CareerWise
R
onald Bownes, Founding Director of DreamWorker, a NonProfit Organisation, believes that the unemployment rate in South Africa is a crisis and should be declared a state of emergency.
The recent Census places unemployment at 29.8%, while some believe the expanded definition to be closer to 40%.
The current economic bedlam and unemployment increases occurring in some European countries is severely threatening state order, yet the disarray is far more recent and the outcry far more heard, despite unemployment being lower than that of South Africa. In South Africa, we are skirting the severity of the situation. Although the official feelings of South Africans are not necessarily those of a national state of emergency, we must not be deceived. Anyone who follows the news will be aware of pockets of incredibly violent protests across the country. People are very unhappy. We should not ignore these warning signs. We need to urgently shift our focus from the notion of jobs; and shift it to the concept of work. Government continues to highlight the three key issues that need to be addressed, namely unemployment, poverty, and inequality. However, if we focused solely on the issue of unemployment the other two would, over time, start to right themselves. Other countries have done it, why can’t we? Brazil is a shining case in point. Bownes believes we need to shift our perception of unemployment and the solutions thereof. His views are at times unsettling for some people. “We are not going to solve the unemployment issue in South Africa by creating jobs. Rather, we need to get people working, today. We need to place them into work opportunities.” Bownes does not believe that government is going to be able to create enough jobs through largescale infrastructure projects. Let alone, lasting jobs. Nor is the South African business profitmodel geared towards solving the problem. The business sector is not able to absorb the mass of unemployed people at a rate that will have any impact in relation to the growing numbers. WealthWise magazine 41
"The business sector is not able to absorb the mass of unemployed people at a rate that will have any impact in relation to the growing numbers"
The continual emphasis on SMEs and entrepreneurship as the golden answers to solving unemployment are going to make only a minor dent to the unemployment figures.Bownes goes on to say we should not solely be focusing on the youth. That is not to say that they should be neglected. But rather, we need to include the 25 45 age group – the parents of the youth. This is roughly two generations of people who may not have had the opportunity of working since 1990. Although economies are not growing as they should and the process of distributive justice is severely challenged, especially in South Africa, there is still work to be done a lot of it. All across the world, the traditional idea of a job is dissipating, and fast. Economies can no longer guarantee secure, contractual jobs with benefits. Jobs are taking on more temporary natures such as part time, semipermanent, and casual. Bownes states that we need shortterm impacts. “If we get people working, they will start spending more in their communities and the logical process of demand and supply will spurt economic growth”. Getting people to work gives people exposure to new skills, opportunity to improve their CVs, and most importantly a sense of purpose.”
Studies across the globe stress the importance of people’s need for a sense of purpose as it satisfies other fundamental components of the human psyche, such as a sense of worth, dignity and pride. The overall psychology of the individual improves when these feelings are present. Purposeful individuals translate into healthier families and communities. However, there is some light in this bleak scenario. DreamWorker is a social enterprise dedicated to helping unemployed people at the Base of the Pyramid find work and get them into the economic stream. Ronald and his wife, Tania Bownes, started DreamWorker in 2008 as a registered NonProfit and PublicBenefit Organisation with a BEE level 4. The Head Office is based in Athlone, with other offices opening in Atlantis and Port Shepstone. DreamWorker is about inspiring, uplifting and giving hope to the unemployed, thereby maximising their chances of securing work. Oneonone interviews are conducted by the DreamWorker team, which includes worker readiness and mentoring for each work seeker. DreamWorker firmly believes in a personal approach, both towards the beneficiaries and employers. After the interview process, references are verified, CVs are assessed and placements take place. Emphasis is placed on identifying skills gaps, personality traits, and appropriate training referral to enhance employability. Strong ties with the private sector are cultivated and much energy is placed into marketing and networking. 42 WealthWise magazine
DreamWorker director Ronald Bownes and his wife, Tania
The model has been finetuned to function at an optimal level as a professional work seeking placement process and is ready to be replicated across the country. It has been helping unemployed beneficiaries not only find work, but also give each and every one of them tools to empower themselves. Since inception from a single office, DreamWorker has engaged and registered over 7000 unemployed people and continues to engage with an additional 2000 people per year. Work placements of over 300 000 days of work have been recorded, translating into wages of over R40 million. DreamWorker is thorough in recording how many people are registered and how many find work every month. It also created its own work creation programme called Link of Love. A day of work can be sponsored for R100, which enables an unemployed person to work in their community – caring for the sick or elderly, tending community gardens and so on. This programme is geared towards creating work opportunities and uplifting poor communities. Like any NPO anywhere in the world, the biggest challenge facing DreamWorker is the issue of securing ongoing funding to sustain operations and to expand and replicate the model. Government’s lack of understanding about the nature of the problem of unemployment and the solutions thereof is another frustration. If we don’t all approach the issue together, our efforts are going to be fragmented and the impact minor. Additionally, every day DreamWorker staff come into contact with work seekers’ alarmingly low numeracy and literacy levels. This is compounded by the lack of preparedness for the world of work and general life skills. This feeds into the nation wide debate around the level of education in our schools and a need for preparing our youth for what lies ahead, because currently we are failing our children. DreamWorker aims to replicate the business model throughout South Africa through franchise offices and grow the Link of Love programme. In addition to its on the ground operations, Ronald Bownes runs the DreamDiamond programme, which inspires groups and teams in organisations and businesses to create lives of greater purpose and 44 WealthWise magazine
contribution. Through this programme, the idea is to get Corporate SA to contribute to helping DreamWorker help the unemployed. South Africa does not have time and funds to create new, sustainable jobs. The country needs to get people working today. There is work, but we simply need to set about getting people into those opportunities. For further details about DreamWorker, visit www.dreamworker.org.za.
DreamWorker Director, Ronald Bownes, was born and educated in Plumstead, Cape Town. He holds a CIS Business Qualification with Honours and has years of experience in the corporate world, gaining varied and valuable experience in finance, human resources, training and marketing. After a brief spell in management consulting, he teamed up with his wife, Tania and founded Inspiration Sandwich, a design and advertising agency. After 7 years of growth and success they sold it to explore other entrepreneurial endeavours. Ronald and Tania were then given the opportunity to rebuild an NGO based in Hout Bay that was placed to help the unemployed find work. After successfully rebranding and rebuilding the business model over 2 years, provincial government asked them to create similar services in the greater Peninsula. Thus DreamWorker was born and is the vehicle in which Tania and Ronald can pursue their life long dream of helping communities empower themselves. Ronald’s life dream is to envisage zero unemployment in South Africa and to help every individual he meets to explore their potential and live their dream life. He is also an inspirational speaker and is fervent about sharing his views on how we can expand our consciousness to live our dream lives. He speaks extensively at business functions and networks on human potential and possibility. His “DreamDiamond” talk is a much sought after talk at corporate workshops and seminars.
The Evolving Role of the
CFO
by Van Zyl Botha
CareerWise
I
n today’s volatile economic climate, efficient financial management is becoming increasingly critical to any business’s success. With a growing spotlight on cost
efficiencies, the role of the Chief Financial Officer (CFO) is rapidly evolving, adapting constantly so as to be able ensure the longterm financial sustainability of a business. Traditionally, the finance department has existed within its own silo, with CFOs focusing primarily on reporting and daytoday financial management. However, in light of global financial systems’ continuing uncertainty, CFOs are being forced to play an increasingly integral role in the operational side of business. With the web and more sophisticated technology making financial information more readily available to key business stakeholders, the CFO’s value to a company increasingly lies in their ability to guide financial strategy and ensure viability across all departments. As a result, today’s CFO needs to be more involved in all aspects of the business, and to be equipped with sufficient knowledge and expertise to make critical strategic decisions across a diverse range of disciplines.
Measuring Value
With companies placing increasing focus on value as opposed to traditional profitability, today’s CFO is no longer simply able to rely on numeric measures to define success. Cost efficiencies now need to be implemented without compromising a company’s ability to implement effective service delivery, and as such, CFOs are required to have an intrinsic understanding of what constitutes value across all departments. Technology in particular is a growing area of focus for modern CFOs, with IT systems and processes playing an increasingly pivotal role in a business’s sustainability. Understanding emerging technological trends forms a vital component of a CFO’s ability to manage a company’s financial status, with systems like cloud computing able in many instances to reduce costs while at the same time bolstering operational efficiency.
Performance Management
Over and above overseeing the economic efficacy of a company’s systems and processes, today’s CFO is also tasked with managing the efficiency of human resources.
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In order to ensure the growth and improved productivity of an organisation, the CFO needs to be able to successfully measure and manage staff performance. For the majority of enterprises, salaries represent a major expense, and, as such, this is an area that needs to be closely overseen by the CFO. This requires not only a comprehensive understanding of the various roles and responsibilities within the organisation, but also the implementation of effective performance management systems, incorporating targets and measurement standards, that accurately assess productivity levels.
Operational Accounting
Whilst traditional financial accounting duties remain under the CFO’s jurisdiction, the scope of the role is being progressively broadened to incorporate elements of operational accountancy. So while the CFO remains responsible for the enforcement of compliance and control mechanisms, they are now being relied upon as valued contributors to strategic discussions, with their specific brand of expertise helping to drive savvy financial decisionmaking at an executive level.
LongTerm Vision
Shortterm budgeting and forecasting also remain integral to the CFO’s current role, but emphasis is steadily shifting to longterm scenario planning, incorporating contingency plans based on market conditions and potential longterm risk factors. A CFO’s success in implementing a longterm vision lies in their ability to recognise changing trends, and to understand the impact that these might have on all levels of the business. Today’s CFO needs to be both flexible and adaptable, so as to be able to anticipate factors that might compromise a business’s longterm financial sustainability.
Ethical Considerations
In light of the financial scandals of the past decade, the importance of business ethics and financial transparency has also been brought to the forefront of public consciousness. A CFO’s ability to effectively enforce compliance measures is becoming increasingly vital, as is their ability to drive integration of ethical values into senior management’s decisionmaking processes. The implementation of a strong ethical culture is not only critical in terms of building a company’s reputation, but can also prove invaluable in the creation and maintenance of relationships with suppliers and investors.
JackOfAllTrades
Today’s CFO is a no longer simply a ‘bean counter’, but rather a jackofalltrades, performing an essential management function across all levels of a business. CFOs now need to ensure that they are integrally involved in all functions of a business, as it is their ability to proactively drive strategy and promote operational efficiency that can mean the difference between financial prosperity and ruin. 48 WealthWise magazine
in Business, Career, Economics and Politics
7 Books to Up Your Game
Lifestyle
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n this issue we look at books on corporate Africa, American politics and economics, business strategy and digital trends, as well as how to's on building a business with less and learning the ropes of online trading.
Business in Africa – Corporate Insights, compiled by Dianna Games, Penguin Books There is plenty information to assimilate in business commentator and author Dianna Games’ compilation of articles written by high powered executives at the forefront of business developments across the African continent. The book gives readers unique insights into the challenges and opportunities for businesses operating in Africa, as well as a look into future trends and growth, drawing on research by McKinsey & Associates and GIBS. Particularly interesting to read are the insights from global companies and leaders in their field such as GE, CocaCola, MTN, Nando’s, TBWA, MultiChoice and others.
A valuable resource for anyone looking at doing business in Africa, “Business in Africa – Corporate Insights” proves to be a useful guide to the business executive and entrepreneur, as well as the investor interested in African markets.
Going Global, Insights from South Africa’s Top Companies, compiled by Moky Makura in association with GIBS, MME Media In “Going Global”, author Moky Makura compiles a series of articles featuring South Africa’s global champions, from Anglo American and SABMiller to MTN and Tiger Brands. The top 12 companies featured are powerhouses who have set a major footprint outside SA, in places as far as the UK, USA, Australia and even Russia, China or Brazil. Each story, written by experienced journalists well versed in corporate affairs, explores new frontiers in business and tells the story of the
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corporate SA landscape from a historical perspective. A must read to expand your global vision and go behind the scenes of some of the world’s greatest companies, born in South Africa.
That Used to Be US – What Went Wrong with America – and How it Can Come Back, Thomas L Friedman and Michael Mandelbaum, Little, Brown What valuable lessons can we learn from America’s setbacks in the past years? Written as a powerful manifest by Thomas L Friedman, one of the world’s most influential columnists and author of the smashing bestseller “The World is Flat”, and one of America’s leading foreign policy thinkers, Michael Mandelbaum, the book looks into globalization, education, politics, technological revolution, energy consumption, financial deficits and such global challenges to analyze America’s frustrations, its past and current “mistakes” and rediscover the country’s power. A great insightful reading into the investigation, building and rebuilding of a nation, with lessons that can be replicated elsewhere.
Become your Own Stockbroker – the Definitive Manual to Online Trading, by Jacques Magliolo, Penguin Books Bestselling author and Africa’s best stockbroker Jacques Magliolo continues to assist traders in becoming successful in global markets and his latest book, “Become your own stockbroker” , confirms his practical approach from basic definitions to different types of securities and technical advice on equipment required for successful trading. An indispensable guide for both beginners to seasoned investors – don’t plan your trading strategy without reading this first!
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Books Velocity – The Seven New Laws for a World Gone Digital, Random House Struik Founder of innovation agency AKQA, Ajaz Ahmed, and Vice President of Digital Sport at Nike, Stefan Olander, have been working together for over a decade on forward thinking strategies in an increasingly digital world. Their best advice and key truths to success are shared in “Velocity”, which defines itself as a positive force that gives the mindset and tools to create a better future. The book has everything to capture the attention of both business people and individuals who want to thrive in world dominated by rapid change and digital technology: it is fastpaced, easy readable, written in conversational tone, thought provoking and very practical. We particularly liked the viewpoints on digital innovation and advertising, as well as the numerous insights in Nike’s successful campaigns, courtesy of Stefan. Highly recommended by one of the world’s most innovative entrepreneurs, Richard Branson, “Velocity” is a mustread account of crafting an inspired new future.
The $100 Startup – Fire Your Boss, Do What You Love and Work Better to Live More, Pan Macmillan A life of complete independence, purpose and wealth? American writer and entrepreneur Chris Guillebeau has inspired millions of people to live fulfilling lives and start building on their dreams. In “The $100 Startup”, Chris shows how to transform your idea into a successful business, in a straightforward, effective and practical way. WealthWise magazine 53
Using countless examples of people who did it with a mere hundred dollars or less, the book proves that each of us has more than enough to get started. Whether you are a solopreneur, a small business owner or thinking of starting a business, this is a valuable reading to make it happen, launch and grow. The universal ideas and concepts are definitely a gold mine for African entrepreneurs too – so get started today and enjoy a new way of living!
Strategy That Works – A Practical Guide for Executives and Managers That Gets Results, Random House Struik Forget what you learned about strategy and follow Ian Mann’s “nononsense” approach to strategy, resulting in an easy applicable, accessible and implementable unique strategy for your organizations. Fans of annual strategy meeting retreats, strategy documents SWOT analysis and Porter’s famous strategic model will be disappointed to find out how really simple it can get. South African Ian Mann, founder of Gateway Business Consultants, and author of “Managing with Intent”, is a popular choice for business talk shows. We are convinced that his workable business strategy model will become not only highly popular, but a vital todo for executives and managers of all levels.
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Events February/March 2013 Travel Expo CocaCola Dome, Johannesburg 1617 February www.travelexpo.co.za/travelexpo/
2013 Gauteng Homemakers Expo CocaCola Dome, Johannesburg 28 February 3 March www.homemakersonline.co.za
Design Indaba Expo International Convention Centre, Cape Town 13 March www.designindaba.com
HobbyX CocaCola Dome, Johannesburg 710 March www.hobbyx.co.za
Future Bank World Africa Sandton Convention Centre, Johannesburg 1112 March www.terrapinn.com/exhibition/future bankafrica/index.stm
My Business Expo Joburg Gallagher Convention Centre, Johannesburg
Want to see your event promoted on these pages? Email editor@wealthwisemag.co.za with your event.
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