MoneyMarketing August 2020 by Media24 B2B

31 August 2020 | www.moneymarketing.co.za @MMMagza

First for the professional personal financial adviser

WHAT’S INSIDE

YOUR AUGUST ISSUE

KEEPING MOMENTUM DURING A CRISIS

TECH OPPORTUNITIES RISE IN THE EAST

It has been a tough couple of months for both financial advisers and their clients Page 6

China’s Alibaba has a lot in common with Amazon

Page 13

INVESTING IN GOLD THROUGH ETFS This year alone has seen the price of gold soar around 19%

Page 17

Pages 21-27

Ability of households to save will be limited

he ability of households to save will be limited. That’s the view of Izak Odendaal, Investment Analyst at Old Mutual Wealth, who was speaking at the release of the 2020 Old Mutual Savings & Investment Monitor. “When the COVID-19 virus arrived in South Africa, we were already on a very, very weak footing, and the pandemic just compounded a whole bunch of problems that will limit the ability of households to save,” he told the webinar. Odendaal believes that savings behaviour will play a big role in how the global economy recovers from the coronavirus pandemic. “This is the first time that the whole world has been in lockdown and the impact on economic activity has been absolutely staggering. While we’ve had several forecasts [as to how economies will recover], they should, at this stage, be treated with a pinch of salt because there is still so much uncertainty. If one looks at the direction of the forecasts, both for the world economy and for South Africa, one can see that the pandemic is unprecedented – in

fact, far worse than the global recession of 2008 and 2009. The good news is that I think the worst is over.” Most countries have emerged from lockdown, and even in SA economic activity has been resumed to a large extent – but the shape of the recovery has still not been determined. “I think a V-shaped recovery assumes that basically after a couple of months of people sitting at home watching Netflix, life just returns to normal and we just pick up where we left off, which seems a little bit unrealistic. In terms of a U-shaped scenario, the main thing to take into account is how consumer behaviour has changed. How ready are people to go out and do the things they did before the pandemic? How comfortable are people to go to restaurants, or to packed bars or busy nightclubs? Are people prepared to get into a plane to fly off on holiday? So far, the evidence suggest that some people are willing to do all of this, while some people are unprepared. How this plays out will be a key determinant in how quickly

Women’s month

economic activity rebounds.” Odendaal again emphasised the importance of savings behaviour. “We have data from advanced economies, including the US, where we’ve seen a massive spike in savings levels. This is largely because people weren’t able to spend. They were working from home and still earning an income, but unable to go out and spend it.” As a result, savings rates increased massively. “In the case of the US, the savings rate went up to more than 30% of disposable income, and a record $2tn ended up in people’s bank accounts not having been spent – that is what we call involuntary savings. However, you would expect this to decline as life returns to normal and as people get more opportunity to

spend their income – but there is also a strong chance that savings levels will remain elevated, even as life slowly returns to normal.” Odendaal added that people may decide to set up buffers against a future shock should more pandemics occur – and even if the savings rate declines, it may remain elevated. When households increase their savings in response to economic distress, they are obviously behaving in an appropriate manner. However, if all households do this at the same time, it becomes a drag on economic recovery because there’s more savings and less spending. “This could be an interesting element to watch going forward in order to gauge how the economy recovers both globally and also in SA.” Another determinant of economic recovery will be policy support. “The policy response we’ve seen has been out of the ordinary on the fiscal side where it relates to government spending and government tax policy. Continued on page 3

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NEWS & OPINION

31 August 2020 Izak Odendaal, Investment Analyst at Old Mutual Wealth Lynette Nicholson, Head: Research & Insights, Old Mutual

Investment Monitor, an alarming consequence of the financial pressures South African households “There has been massive support across the are experiencing is that just over 50% are currently world and you can see this in the projected budget dipping into their savings just to make ends meet, deficits for 2020. While the word ‘stimulus’ has 37% have fallen behind on paying household bills been used, I don’t think we’re really in the stage and 23% have cashed in a savings/investment of stimulating economies yet, but rather in the policy. “Another indicator of the distress the stage of preventing absolute collapse. South Africa, crisis has caused is that only one in two credit unfortunately, came into the pandemic with a very card holders are able to comfortably make their large budget deficit, so the additional support for repayments every month,” she added. the economy is actually relatively small.” The levels of dependency have also grown, as in However, the increase in government debt is 2015 those with other adult dependents (excluding not a South African story alone. “In fact, the IMF spouse/partner) was at 35%. This year it spiked reckons that public debt as a percentage of GDP at 52%. The Old Mutual Sandwich Generation will rise to levels above that seen in Indicator shows that those who are the aftermath of the Second World sandwiched between supporting their War. In South Africa’s case, what JUST OVER 50% own children and helping to care for limits the ability of government to parents or relatives increased ARE CURRENTLY elderly respond fiscally is that borrowing from 34% in 2019 to 42%, the highest DIPPING INTO costs remain elevated, unlike the figure recorded for this category. US, Japan and European countries “Debt and loans are also a THEIR SAVINGS where they can essentially borrow concerning sign of the financial JUST TO MAKE for free. Our government has to pay pressure households are under: ENDS MEET a huge amount to borrow, and that 43% are taking personal loans from limits its ability to spend.” financial institutions (up from 21% The Reserve Bank has cut interest rates by 275 in 2019), 19% of respondents are taking loans from basis points so far this year*, Odendaal noted, family or friends (up from 13% in 2019) and 12% and for those who save in a bank account, the are borrowing from micro-lenders (up from 5% in lower repo rate will result in lower investment 2019),” Nicholson said. returns. “Those investors will need to consider Another interesting finding relates to SA’s informal whether they have to accept the low returns or savings. “Although membership of stokvels has take on a little bit of more risk.” He added that declined from 44% to 34% this year, there are now the ability to save comes out of the income one more people contributing to grocery schemes (from earns – and clearly that income has come under 9% in 2019 to 23% in 2020) and burial societies pressure, even before the COVID-19 lockdown (from 23% in 2019 to 38% in 2020),” she added. took place, while South Africa’s massive level This year, in light of the COVID-19 pandemic, the research for the of unemployment puts pressure on even those Old Mutual Savings & Investment Monitor was conducted online households who do earn an income, as they need with just under 1 500 respondents from 29 May - 23 June 2020 to look after extended families. (i.e. during lockdown level 3). Lynette Nicholson, Head of Research and *Just before MoneyMarketing went to print, the Reserve Bank cut Insights at Old Mutual, told the webinar that the repo rate by another 25 basis points according to the 2020 Old Mutual Savings &

Continued from page 1

EDITOR’S NOTE

o say that I’ve been extremely busy at work is an understatement, and I’m sure I’m not alone. What is happening is that some South Africans are able to keep calm and carry on with their lives and livelihoods in spite of the COVID-19 lockdown. I’m fortunate in that I live in a house with a garden and that I’m able to work from home, just as easily as I’ve worked in the past from the office. I am privileged, but there are some who aren’t as lucky. Around three million people in SA have already lost their jobs as a result of the virus pandemic and lockdown, according to a study released last month. This is just the tip of the iceberg. The ban on alcohol and tobacco – puzzling if one considers the tax losses that SARS is suffering – has worsened the job losses, while the reports of the looting that has taken place in the health services departments are alarming. And in spite of the commitment government made to support the unemployed during lockdown, it appears that aid has not been evenly distributed. COVID-19 has truly highlighted the issue of inequality in SA, named by the World Bank as the most unequal country in the world. The virus has torn through our poorest communities, leading to many deaths in places where shacks predominate, and where people cannot afford to social distance. This dire situation has to change. Turning to a brighter issue: August is Women’s Month in SA, and the MoneyMarketing team extends its best wishes to all its female readers. Once again, we’ve taken the opportunity (pages 21-27) to focus on some wonderful women in financial services. Janice janice.roberts@newmedia.co.za @MMMagza www.moneymarketing.co.za

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NEWS & OPINION

PROFILE

31 August 2020

FATIMA VAWDA MANAGING DIRECTOR, 27FOUR GROUP OF COMPANIES

How did you get involved in financial services? Was it something you always wanted to do? I’m a 70s child that grew up during the apartheid era. I come from a very humble background and I went to public primary and high schools in Lenasia. I received a bursary to study at university, where I completed a BSc degree and an honours degree in financial mathematics, followed by a master’s degree in applied mathematics. This was during the period when Wall Street and the financial markets were aggressively employing people with analytical skills because of the growth in the derivatives markets, as well as the growth in complex financial instruments that were making waves – at the time it was the Black Scholes Merton model of option pricing brigade. The traditional skills of just accounting weren’t good enough to price a lot of these financial instruments. Given my degrees, and being particularly intrigued by the mechanics of the financial markets that I had studied from a theoretical perspective, I felt that I needed to know what my practical skills were in that space. That’s when I entered the financial markets. I joined the old Standard Corporate & Merchant Bank investment banking’s treasury

and started pricing interest rate derivatives and loan from an external party and I didn’t bring in currency derivatives, as well as doing research an external shareholder. and pricing portfolios. That’s really where I kicked off my career and I haven’t looked back. What have been your best and worst I worked in the private sector for about 12 years financial moments? before deciding to go on my own – and in 2007 My worst financial moment is what we are that’s what I did when I set up the first business, going through now. I’ve been in the financial 27four Investment Managers. Since then, we’ve markets for 25 years and I’ve never experienced grown organically and we’re now the 27four what we’re experiencing now. I’m really, really Group, employing over 60 people between concerned about the state of the South African Johannesburg, Cape Town and Durban. economy. We have this fantastic ability to model The majority of investment team members I solutions, but we just do not have the capacity employ have very strong analytical to implement those skills. I think that’s because of my solutions. I DIDN’T HAVE THE background and my belief that I think my best to be able to efficiently analyse PERSONALITY NOR THE financial moment the financial markets and gain an happened in the period PATIENCE TO WANT advantage, you’ve got to have the just before the global TO PURSUE A PURELY skills to be able to filter through financial crisis (GFC). and analyse information adequately. From 2003 to 2007 ACADEMIC CAREER I had a short stint in academia. was really the golden After completing my master’s degree, I lectured age of investing in South Africa. We saw a lot of at Wits for a year and started a PhD degree. I innovation with the establishment of boutique didn’t have the personality nor the patience to investment houses. We saw competition rise want to pursue a purely academic career. But I when new service providers not associated think the benefits of having come through that with any bank or insurance companies came academic process were critically important. What to market. Financial markets performed really I find with a lot of young people these days is strongly during the period just before the GFC. that while they’re very It was a time when we saw a lot of foreign direct energetic, they do not investment come into the South African markets, have the patience or skills as we were suddenly part of the global playing to conduct research. field, following our journey to democracy. People wanted to invest in the country. What was your first investment and do Are we heading in the right direction you still have it? when it comes to including women in My first investment was the country’s financial services and a home to make sure that businesses? my family had a roof over If you compare the participation of women on their heads. My second the boards of JSE-listed companies, you’ll find investment was to take that our numbers are much better than a lot of every cent of my money the numbers in developed economies. If you that I had at the time look at government ministries and a lot of the and deploy it into the state-owned enterprises, as well as the boards of establishment of 27four. I trustees of retirement funds, increasingly we’re put my entire risk capital seeing women play a part. I think we’re heading forward. I didn’t take a in the right direction.

EARN YOUR CPD POINTS The FPI recognises the quality of the content of MoneyMarketing’s August 2020 issue and would like to reward its professional members with 1 verifiable CPD points/hours for reading the publication and gaining knowledge on relevant topics. For more information, visit our website at www.moneymarketing.co.za

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NEWS & OPINION

31 August 2020

TANYA VAN ASWEGEN General Manager, Compli-Serve SA

Compliance in the time of COVID-19

avigating compliance requires some outof-the-box thinking, given so many of us are still working from home. Some of the compliance officers (COs) at Compli-Serve SA have shared how it has been and where compliance may be heading. Compliance meets creativity and agility Updates to legislation in response to COVID-19 are ongoing (and were significant before) and with physical visits to an FSP premises a key part of getting compliance done, Theresa van Diggelen notes that more “creative and agile” ways to monitor compliance are needed. “The fact that we can’t visit to check on the operational ability of an FSP, for example, means we need a way of evidencing compliance without actually being there.” The time it took a client to respond to queries was a good measure of this (within reason, as some clients play the role of teachers, nannies and general ‘home managers’ too). “Clients able to adapt to telecons or video meetings as opposed to face-to-face, qualifies as evidence too.” The influx of new and ever-changing regulations, notes Nadia Verappen, has highlighted the need for a robust regulatory framework to ensure resilience and greater transparency within firms. “Maintaining

communication and company culture makes a firm’s ability to demonstrate clear reporting lines that are operationally effective, even more important. In addition to this, compliance needs to have direct access to the board, should any issues need escalation.” The changing CO Anel Naude feels the CO role could expand to include training or coaching clients to provide digital evidence of compliance. Examples include client proposals or record of advice documents. “Assessing evidence in digital format allows COs a greater opportunity to apply their minds,” she says. Riana Grobler hopes for more cost-effective ways to do compliance. “If we can find the balance between occasional onsite visits and more frequent online meetings, it is simply more efficient for all parties.” Elzabe Botha now takes the possibility of Teams/ virtual meetings instead of physical meetings into account, when determining fees for new clients. The extra time she has out of traffic means she is always on top of her inbox too. “Working remotely also means I can test client’s data security and uploading methodology. Many clients save their client files in soft copy, but their naming methodology is confusing. By doing remote monitoring, I can test

Change makes us determined

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these processes and procedures.” Riana feels lockdown has been a good test for clients and whether they have an effective business continuity plan with effective systems, procedures and access to records in place, to ensure that their business activities can continue. The personal touch While working from home is going well, it does not replace human interaction. “I believe that to maintain key relationships you need to physically meet with people from time to time, and this is especially true for most South Africans. It’s a matter of balance that will be different for everyone as things evolve. It is a dynamic, exciting time,” says Catherine Cooper, CO and Director of CompliServe KZN. With the majority of our correspondence with clients and service providers being online and with the ability to report on various regulatory compliance matters via video conferencing, online portals/reporting and email, embracing the new working world is possible, but there are rules to follow. This is made easier with the assistance of dedicated compliance support, because the regulations are only going to keep coming.

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NEWS & OPINION

31 August 2020

WOUTER FOURIE CEO, Ascor Independent Wealth Managers

Keeping momentum during a crisis

t certainly has been a tough couple of months for both financial advisers and their clients. The time spent at home during the COVID-19 lockdown drove many to the Internet and social media for guidance on what the future holds. There they were met with a barrage of bad economic news, public panic, armchair commentators, and the inevitable stream of contradicting advice – that they were left to stew over in the confines of their homes. In my conversations with colleagues, this toxic mix of time, turbulence and terrible information led to panic among many clients and it forced financial advisers to double down on the reasons for their chosen investment strategy for the person on the other side of the phone. In our practice, we have monthly digital check-ins with every client, so the frequency of calls is very low. There are, however, a couple of actions you can take if you have been overwhelmed by panicking clients. Show understanding It is important to understand what lies at the heart of any call from a panicking client. People are uncertain and this leads to fear about their future. It remains the financial adviser’s primary job to address their uncertainty. By empathising with frightened clients, before you give advice and hopefully tell them to stay the course, you create rapport and prevent them from feeling that you are talking down to them – or that you do not understand their situation. This will, in turn, increase the chances that they will listen to your advice. Communicate, communicate, communicate You may feel, like I often do, that every market panic or political scandal is the same story, dished up at a different time. But to your clients, who are engrossed in their own minutiae and life dramas, this is very serious. We try to remind clients at the first sign of alarm why and how we chose their personal investment strategy. We also share examples of past crises and how people who pulled out of the market lost out on most of the subsequent growth, thereby compounding their losses by moving when their investment was worth less and trying to buy back into the market at a higher rate. Pre-empt the call from the panicking client In step with the previous point, a short BCC-ed email to all your clients that shows them you are on top of things, or a quick call to that needy client that you know is always worried about his/her retirement, may save you many hours in later consultations or many thousands in locked-in losses for those anxious clients.

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VERY BRIEFLY

You may also want to check in with those same clients, or send a note, after the panic has subsided. It should never have the tone of an ‘I told you so’ reprimand, but rather serve to inoculate your clients against similar fright when the next inevitable crisis happens. As an aside, it is clear that the rate of market panics is increasing as more people are plugged into global news sources and are therefore exposed to events across the world and the often ill-advised financial columns that predict doom at every turn. Keep track of trends and calls Let no good crisis go to waste. Use this time to track the concerns you received at the start of the anxiety and how the market has played out afterwards. There is no better argument for staying the course than referencing the most recent past event and how it would have impacted on your client’s investment if he or she did the rash thing that is now being proposed in this crisis. This is also an excellent way to justify your investment strategy in future and to emphasise to current and new clients how important independent financial advice is. Market and cross-sell It is true that selling additional products or pushing for greater representation of your client’s portfolio may be unwise during a crisis. Perhaps you do not do it during the first panic call or even in your communication to your entire client base. But when reviewing your time sheets and calls, it may become apparent that some clients are simply more easily spooked than others. Could you perhaps help these clients by offering them a product that would put their minds at ease, such as additional life insurance or an income protector? At the same time, you could use this increased level of contact (remember the point about communication) to grow your pipeline of prospects and products to existing clients. Did the worried client receive his or her advice from an equally fearful colleague or neighbour? Could you assist the latter with some advice? We also make a point of marketing our industry affiliations during this time. We are proud members of the Financial Planning Institute (FPI) and use every opportunity to highlight the external validation and additional protection that our Certified Financial Planner and FPI Affiliation give us as financial planners and our practice. It may sound trite to paint every crisis as nothing to worry about and rather as an opportunity to cement client relationships and grow your book, but trust me, as a veteran financial adviser I still find it much more difficult to grow my business when all is going well, the economy is growing and no-one sees the immediate need for financial planning or for preparing for the unexpected. In closing, we should acknowledge that we are not above all the current economic, social and political turbulence. A bit of self-care never hurt, and you should do what is necessary to help you maintain your drive and energy, and the level of optimism needed to keep your business going. Having said that, use what is left of this current crisis to touch base with clients, set their minds at ease, and perhaps even market additional services. You will find that this will help you stay the course, as well as maintain momentum.

Old Mutual has announced the appointment of Iain Williamson as Chief Executive Officer. “This appointment concludes an extensive process initiated by the Board to appoint a permanent CEO for the Group,” the company said in a Iain Williamson statement. With nearly 30 years’ experience built across the Old Mutual Group, “Williamson has long played a strategic role in shaping the business into the premium Pan-African financial services giant that it is today – championing mutually positive futures for its more than 13 million customers,” the statement added. An actuary by profession, Williamson joined Old Mutual in 1993 and, following various roles across employee benefits and personal finance, he relocated to London to a Corporate Development role at the then Old Mutual plc. In 2003, he returned to South Africa, serving in a number of roles across distribution, technology and finance before being promoted to CFO: Retail Affluent and subsequently Managing Director of the Retail Affluent segment. He was appointed as Old Mutual Emerging Markets’ Finance Director in 2015, and then as Chief Operating Officer in 2017. He has twice acted as Interim Chief Executive Officer. Chief Investment Officer Andrew Lapping will be leaving Allan Gray towards the end of this year, as his 20th year at the firm comes to a close, the company said in a statement. Duncan Artus will take over the reins as chief investment officer from Lapping, effective 1 September 2020. “Artus is well known to those familiar with Allan Gray – enjoying the respect and trust of his colleagues and our clients. He joined the firm in March 2001 and has been managing a portion of client equity and balanced portfolios since January 2005. With 20 years’ experience – 15 of those as portfolio manager at Allan Gray – he is a well-versed and worthy successor,” the company added. Mark Dunley-Owen, who manages a portion of the Allan Gray clients’ stable and fixed interest portfolios, will hand over some of his responsibilities as he joins sister company Orbis. Leonard Krüger, who manages a portion of the stable portfolios, will be leaving Allan Gray to pursue other opportunities. Three new portfolio managers have been appointed to the company’s equity, balanced and stable portfolios: Rory Kutisker-Jacobson, Tim Acker and Sean Munsie. An additional three have been appointed to focus on Africa ex-South Africa and frontier market equities: Varshan Maharaj, Rami Hajjar and Kamal Govan. All are long-serving members of the investment team. On the fixed interest side, Londa Nxumalo and Thalia Petousis will assume full responsibility for the Allan Gray Bond Fund and the Allan Gray Money Market Fund, respectively, which they currently co-manage with Dunley-Owen.

NEWS & OPINION

31 August 2020

BOBBY WESSELS Consultant, AJM Tax

n increased need has developed among South African individuals to hold offshore investments. While a variety of reasons exist why this would be beneficial, the tax considerations of such investments are often overlooked. While offshore investments are often made with tax motives in mind, these are often guided by a false understanding of the tax implications. Thus, in considering the appropriate offshore structure, which complements an existing local structure, certain risks need to be borne in mind to prevent the realisation of unintended tax consequences. In this regard, a foreign trust can be an effective mechanism through which to hold foreign investments, as opposed to holding such investments directly in an offshore company. Unlike offshore companies, a foreign trust is not subject to the tax rules that govern a so-called ‘controlled foreign company’ (CFC). Generally speaking, the South African CFC rules apply to foreign companies where

The benefits of an offshore trust

more than 50% of the shares in that foreign company are held by South Africans. Where the CFC rules find application, the net income of the foreign company is attributed to the South African in the same ratio as the shareholding held by that person in the foreign company. There are some exceptions to the application of the CFC rules, but broadly speaking, their application means that the use of a foreign company to hold your offshore investments will still be subject to tax in South Africa: while the company is not subject to tax in South Africa, the company’s income is taxable in South Africa and directly as though earned by its South African shareholder. Accordingly, where offshore entities are held through a discretionary offshore trust, no CFC imputation to South Africans can be made, simply since no South Africans can be said to hold a direct or indirect interest in that offshore company, which would otherwise have been a CFC. Furthermore, a general misconception exists that foreign

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investments will not be subject to estate duty in South Africa. The South African estate duty regime levies estate duty on South African individuals’ worldwide assets. Although there are exceptions to this rule, the common position is that individuals who are ordinarily resident in South Africa will be liable for estate duty on their investments, even when these investments are situated in another country. The use of a foreign trust would be a more effective mechanism through which to hold these investments. The assets of a discretionary trust do not form part of any individual’s estate. Besides estate duty, the offshore trust structure further allows for the investments held to be managed for the benefit of the beneficiaries on a continuous basis, and uninterrupted by death. It is in any event recommended that the trust instrument should not be used solely as a mechanism to avoid or frustrate estate duty exposure, even though this admittedly serves as an additional benefit. Finally, the offshore trust presents the

further benefit in that it truly removes assets from the at times onerous South African exchange control regime. Assets held ultimately through a corporate structure comprising only of companies are ultimately held by those individuals who are subject to the South African exchange control regime. This is not the case where assets are held by a discretionary offshore structure, where the ultimate beneficial owner would be the offshore trust, rather than individuals who are exchange control resident in South Africa. Caution needs to be exercised when settling a ‘foreign trust’ to ensure that such a trust is not effectively managed in South Africa. If this is the case, that trust will be tax resident in South Africa. Furthermore, investors should familiarise themselves with the tax consequences of a trust in the foreign jurisdiction in which they wish to establish their investment structure. Failure to properly consider the foreign tax regime’s disposition towards trusts could also lead to unintended tax consequences.

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NEWS & OPINION

B4SA’s plan to improve South Africa’s economic future

usiness for South Africa for an accelerated economic recovery (B4SA), a group that was set strategy. “This harnesses South Africa’s up as local business’s response potential in the shortest possible time to COVID-19, has a plan to increase by leveraging all resources – across GDP by R1tn, create up to 1.5 million government, business and civil jobs, and increase tax revenues by society – to address the economic R100bn per annum. The group released and social challenges we face. This its detailed accelerated economic unique collective can only succeed if all recovery strategy last month. The plan constituents work in unison to address includes a secure electricity supply, the these economic and social challenges.” implementation of Transnet’s road-toB4SA believes that a coherent rail strategy, expanding ports and road economic recovery strategy, infrastructure, as well as exploiting SA’s which is clearly articulated as well digital spectrum. as competently and efficiently “SA entered a technical recession implemented and led with visible last year and, with the urgency, will enable a arrival of COVID-19 new narrative to be B4SA SEES SA’S at the beginning established around GDP DECLINING of March 2020, it SA’s macro-economic is clearly evident potential and, in BY BETWEEN 8% that the associated doing, improve AND 10% IN 2020 so economic and social confidence, investment, ramifications for South Africa are more inclusive growth and unemployment severe than previously anticipated.” levels. The strategy prioritises 12 key B4SA sees SA’s GDP declining initiatives, from a list of over 50 – some by between 8% and 10% in 2020, of which can be launched immediately recovering in the next two years to pre– across 11 high-impact sectors. B4SA COIVD-19 levels, with muted growth has also identified 12 policy focus areas. thereafter. It forecasts a budget deficit of The detailed assessment identifies and 13.3% for this fiscal year. addresses key issues and constraints, “Meanwhile, government debt is many of which predate COIVD-19 and escalating to record levels in both have now been exacerbated. It also sets absolute terms and as a percentage out recommendations and proposals of GDP. In the absence of growththat business, government, labour and enhancing structural reforms, budget civil society can discuss and, potentially, deficits are expected to remain high and implement as partners in order to reset government debt is expected to exceed SA’s economic and social development 100% of GDP in 2023 (vs. 26% in 2008), path, and to enable the nation to enjoy a as annual budget deficits remain above better future. 13% of GDP.” “The COVID-19 crisis represents In B4SA’s view, the country has an opportunity for all stakeholders to arrived at a fork in the road. “Protecting consider what is required for the country the status quo with only marginal to move ahead successfully and with changes locks in an accelerated conviction,” Martin Kingston, head of downward trend, while a committed the economic workgroup at B4SA said. leadership willing to make difficult, “This will require ruthless sometimes unpalatable choices focussed prioritisation and difficult decisions. A on appropriate policies, which enable new social and economic compact must investment and thus inclusive growth, be forged in parallel, and a cohesive plan can decisively improve the economic will need to be jointly developed and and social trajectory of the country.” implemented by government, business B4SA represents the vast majority of and other social partners. Committed SA business, working in partnership leadership is needed to drive decisions to and supported by the Association conclusion with speed,” he added. for Savings and Investments South Africa, the Black Business Council, Banking Association of South Africa, Business Unity South Africa, Business Leadership South Africa, and the Minerals Council of South Africa. Martin Kingston, Together, these organisations have Head: Economic adopted a multidisciplinary approach Workgroup, B4SA

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31 August 2020

ASISA commits to B4SA compact for economic recovery

he Association for Savings and Investment South Africa (ASISA) and its members are firmly committed to the new social and economic compact being forged between the private sector under the banner of Business for South Africa (B4SA), government and other key social partners with the purpose of addressing South Africa’s economic and social challenges with urgency. Confirming the support of the savings and investment industry for the B4SA Accelerated Economic Recovery Strategy announced last month, Leon Campher, CEO of ASISA, says while the strategy is ambitious, it is achievable provided all stakeholders commit to this partnership. “We are hopeful that this is the beginning of a completely inclusive partnership between business, government, labour and other key stakeholders, with the common goal of helping SA achieve its full potential for the benefit of all its people. It is important to recognise that the strategy put forward by B4SA is not an end in itself, but rather the start of a journey towards economic recovery.” Campher points out that this journey started when the private sector rallied together earlier this year to assist government in the response to COVID-19. B4SA was formed as a united business platform in March 2020 to coordinate a flood of offers from various businesses to contribute towards navigating the coronavirus crisis by making specialised skills available pro bono. “Various workstreams were established at great speed and very senior people from Government and the private sector have been working tirelessly in partnership to find solutions to problems that often seem insurmountable.” Campher adds that the country’s response to COVID-19 has highlighted the power of public-private partnerships. “Together, we have managed to conceive, conceptualise and implement projects in a matter of weeks that would have taken months and often years to realise under normal circumstances. Based on what has been achieved over the past four months, we believe that this solidarity will enable us to address the legacy problems of this country with the same urgency and goodwill.” B4SA’s strategy prioritises a number of initiatives, which were identified as part of a detailed assessment of key issues and constraints. According to Campher, ASISA members and the banking sector will play a crucial role in devising funding strategies and mobilising local funding. “We recognise, however, that the demand for funding will be great. Therefore, our ability to position SA as an attractive domicile for foreign capital will be key to the success of the economic recovery strategy.” Campher also points out that existing successful public-private partnerships, such as the Public-Private Growth Initiative (PPGI) and the Investment and Infrastructure Office (IIO) in the Presidency, must be acknowledged for laying solid foundations from which to launch some of the initiatives prioritised by the B4SA strategy. He says the formation of the IIO by the President, under the insightful and strategic leadership of Dr Kgosientsho Ramokgopa, has removed many of the blockages that previously hampered infrastructure investment in SA. “In just over six months, the IIO and its technical working groups managed to review 276 projects and fast track 55 of them for delivery.” Campher adds that ASISA and its members have always maintained that they are willing to support bankable projects. “We are encouraged by the progress made and we are committed to playing our part in this new all-encompassing plan for SA.”

Leon Campher, CEO, ASISA

NEWS & OPINION

31 August 2020

ANC releases framework for reconstruction, growth and transformation

he Economic Transformation Committee (ETC) of the ANC, headed by Enoch Godongwana, last month released its framework for Reconstruction, Growth and Transformation, with the objective of building a new, inclusive economy. “The first pillar of the new policy framework is to mobilise society around an infrastructure-led recovery with new investments in energy; water and sanitation; roads and bridges; human settlements, health and education; digital infrastructure and public transport,” the ETC said. “To achieve significant job-creation multipliers, the emphasis will be on localisation, including maximising the use of South African materials and construction companies, as well as labour-intensive methods.” While it is an urgent priority that state capacity to plan and monitor the execution of infrastructure

JANINA SLAWSKI Head: Investment Consulting, Alexander Forbes

t is heartening to see such alignment in views across Business for South Africa’s paper A New Inclusive Economic Future for South Africa: Delivering an Accelerated Economic Recovery Strategy, and the ANC’s discussion paper Reconstruction, Growth and Transformation: Building a New, Inclusive Economy, both of which were released on Friday 10

projects should be strengthened, there will also need to be expanded use of public-private partnerships, including build, operate and transfer project-delivery methods. “The establishment of an infrastructure development agency in the Presidency will play a useful role in complementing the pockets of excellence that currently exist within the state and state-owned companies with regard to project management capabilities,” the ETC added. As a second pillar, the new policy framework will promote investment in key productive sectors, such as agriculture, manufacturing, mining, tourism and other services. Decisive progress will be required in telecommunications reform, including expediting digital migration and spectrum allocation to reduce data costs for households and firms. “Similarly, the growth and job-creation potential of energy-related investments, including green industries, must be fully harnessed, including through local production linked to the country’s energy investment programme, as required in the Integrated Resource Plan. Industrialisation and the expansion of South Africa’s productive sectors will be accelerated though increased international trade, especially with other countries on the African continent.” While working to restore fiscal sustainability, South Africa needs to deploy macro-economic policy instruments that are compatible with the reconstruction of its economy, the ETC said.

“Reconstruction programmes must be sufficiently financed and financially sustainable. The National Treasury, South African Reserve Bank, development finance institutions (DFIs) and private financial institutions all have a role to play. The mobilisation of funds for increased investment in infrastructure and key productive sectors will inevitably require a combination of public and private resources.” The ETC added that sustainable financing of SA’s economic recovery plans will require close coordination of fiscal and monetary policy to ensure ongoing access to capital markets and to reduce the cost of borrowing, as well as strengthening the role of DFIs. “Changes should be made to Regulation 28 under the Pension Funds Act to enable cheaper access to finance for development. Furthermore, regulators should be vigilant to ensure increased competition in the banking sector, which frequently displays the kind of oligopolistic tendencies that limit access to finance, particularly for SMMEs and for households in historically disadvantaged areas,” the ETC stated.

Enoch Godongwana, Head: Economic Transformation Committee, ANC

Success of infrastructure plans depends on policy certainty and discipline in implementation

July. Both papers highlight a key need for investment into infrastructure in order to generate growth for South Africa, with the resulting increase in employment and uplift of communities that would follow. Both papers recognise that the fiscus alone cannot cover the scale of the investments envisaged, and therefore the need to encourage private sector investment. For some time, there has been concern that investment by investors into developmental projects, and in particular by pension funds, would be forced by prescription. The implication of prescription is that investments are in some way unattractive for voluntary investment by investors. After all, if investments have an attractive risk/ return profile, investors will be keen to invest and prescription will not be required. Many private sector players have emphasised that it has not been the absence of keen capital, but rather the absence of investible assets, particularly in the infrastructure space, that has retarded investment. It is therefore encouraging that there is no reference to prescription in the ANC document. The reference to changes being made to Regulation 28 of the Pension Funds Act to “enable cheaper access to finance for development” is, however, concerning. Why would finance from pension funds

be cheaper than finance from other equivalent investors? Pension funds will be seeking returns on infrastructure assets that are commensurate with the risks taken on. This is a key part of the investment decision as to whether to invest into these assets versus other potential investments. A second issue with respect to the reference to changes being made to Regulation 28 is a practical one. Very few retirement funds can invest into the current maximum allocations to unlisted and ‘alternative asset classes’, including unlisted debt, private equity and hedge funds. Many infrastructure investments are traditionally structured as unlisted debt and equity investments. Few pension funds can invest substantially into unlisted assets due to their illiquid nature. Most retirement funds in SA are defined contribution in nature, with individual members allocated their own share of assets or ‘fund credit’. This fund credit must be available for members to withdraw its value, particularly during the current COVID-19 crisis when many fund members are losing their jobs. Other issues with defined contribution funds investing into illiquid investments include a need for daily pricing, and the ability for members to switch in and out of underlying assets when they wish to. Substantial allocations to unlisted assets

are problematic due to the infrequent updates to investment values, and the need to hold assets until the pay-out date, which could be in excess of twelve years from the date of investment. A change to Regulation 28 that allows for greater investment into the various asset classes that will facilitate greater infrastructure investment is desirable for funds that are constrained by current Regulation 28 limits. In practice, though, this is not likely to generate significant additional flows from retirement funds. There is a need to seek new sources of funding for the envisaged infrastructure assets, in particular large international infrastructure funds, international pension funds, sovereign wealth funds, foundations, endowments, etc. These international investors will review potential infrastructure investments in South Africa if returns are attractive versus perceived risks. However, investment will only be considered by international investors if the risk and return profile, as well as the overall regulatory environment, stacks up versus alternative investment opportunities across the world. The need for policy certainty and discipline in implementation thus continues to be paramount for the success of the planned infrastructure programme, as well as its ability to attract investors.

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TECHNOLOGY

31 August 2020

BEN KLEYNHANS 20Twenty and FSA, Tied Broker, Liberty Life

he COVID-19 pandemic has fast-tracked the world towards inevitable changes in the way we live and work, at a time when the insurance industry is already experiencing dramatic challenges and demands. On one hand clients are moving ever closer to self-help, with a myriad of online tools to assist with financial planning and decisions. Brokers and advisers, on the other hand, are facing RDR, compliance audits, CPD points, fee for service, and succession planning, to name but a few issues. It is also getting harder and harder for new entrants in an underserviced industry. The market is quickly filling up with all sorts of programs and software for brokers, while the big assurance companies steam ahead with direct client applications, intentionally or not effectively side-lining the broker. Self-service has become the norm. With all the ‘noise’ it is hard for most brokers to make sense of the situation. We feel threatened, with some saying there is an urgent need to simplify matters. Insurance is, after all, sold and not bought – or is it? Some five years ago, while RDR was the hot topic of conversation, we asked the following questions: • What if you, as a broker, could have constant contact with all your clients? • What if you could find out when your clients are checking their own portfolios, and while they are doing it? • What if the client could tell you what they want in a ‘live’ financial needs analysis (FNA)?

Rethinking brokering in the age of mobile self-service

• What if you could do away with emails? • What if you could be in your client’s pocket? (cell phone) • What if technology can assist you to get ready for ‘fee for service’? • What if you could manage your sales from a programme that is linked to your clients? In partnership with IQbusiness (www.iqbusiness.net) an answer to these questions was born in January 2019. A South African first, 2-in-1 ‘Broker Hub - Client App’ solution. We call it 20Twenty. 20Twenty allows brokers and their office staff to access a ‘Broker Hub’ that offers simple practice management functions on one end, and at the other end, the ‘Client App’ focuses on the client’s portfolio and needs. The 20Twenty Broker Hub allows brokers to manage their sales targets, sales ‘pipeline’ and all other related activities. Organising clients and running targeted campaigns has never been easier, while replacing long email chains with on-line ‘chatting’ is now possible – all from one place. Instead of mailing documents to your clients, just post it in their personal ‘vault’. The live FNA, editable by both the client and the broker, can be ‘approved’ to create a date stamped and compliant FNA with its own comments section. Clients can, by using the inapp chat function, make servicing requests without a telephone call or an email. Broker unavailable? No problem, simply ‘chat’ to a staff member in the brokers office.

20TWENTY BROKER HUB

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Brokers have immediate and constant access to relevant client information to ensure tailored and up-to-date advice. Those brokers with hundreds of clients will be able to ‘bulk-upload’ all clients instantly. Clients are notified by email when a broker ‘invites’ the client to download the app. 20Twenty has been white-labelled to allow brokers to brand their business from within the Hub. When clients log in, the broker’s selected logo can be seen on the client app. The 20Twenty Client App is simply downloaded from the app-store at no cost to the client, either on a broker’s invitation or even without the client having an active broker. The 20Twenty Client App can be used to organise personal financial portfolios and can be linked to multiple brokers. No broker? No problem! A client request to be linked to a broker is built into the application. The client vault contains two sections: A private vault for personal use, and a shared vault where brokers can upload documents such as

SHARED DATA

quotes, records of advice (ROAs) and brochures etc. for a client to view at their leisure. 20Twenty’s in-app chat function allows for a direct line of communication with the broker’s office, which can even form part of advice given by the broker. Clients can manipulate the inapp ‘FNA’ on their own, or in collaboration with their broker to ensure proper advice. The in-app broker disclosure can be viewed and acknowledged by the client, while the broker may use this acknowledgement and authority by the client to obtain the client’s policy information. Ben Kleynhans is a Tied Broker and has been associated with Liberty Life for more than 30 years. Empie Strydom, a Technology Strategist, boasts more than 20 years’ experience in Enterprise Software. IQbusiness is the largest South African independently owned Management Consulting firm. Welcome to the future of broking: www.20twenty.life

20TWENTY CLIENT APP

TECHNOLOGY

31 August 2020

atWORK 6 integrates Finametrica into its Wealth Module

PIERRE DIPPENAAR Head: Software Development, Finametrica

Cloud-based software solution atWORK has scored a coup by integrating Finametrica’s awardwinning risk-profiling toolkit into its newest financial planning software.

dvisers who weren’t already convinced of the value of risk profiling have surely had their minds changed by COVID-19. The pandemic has taught both advisers and investors the true meaning of risk. And it’s underscored how vitally important it is to not only be aware of risk profiles, but also to measure them properly and to use these findings as one of the cornerstones of a comprehensive investment strategy. Which is why atWORK is thrilled to announce the integration of Finametrica’s industry-leading risk-profiling toolkit into its newest Wealth module as of 1 August 2020. What is atWORK? atWORK is a cloud-based solution for the financial services industry. Their latest version, atWORK 6, combines client and practice management, data gathering and import, compliance management and financial planning tools in one super-secure package. atWORK has over 9 000 users in South Africa.

ROSS SIBBALD Commercial Director, Striata Africa

ver the years, banks, retailers and telecommunications have embraced new technologies such as Artificial Intelligence (AI) and Machine Learning (ML) to enhance their customer communication and, ultimately, customer experience. While there may have been a time to sit back and see what works and what doesn’t, these are now proven technologies. Organisations in the insurance space need to adopt this thinking or risk being left behind. Not only is today’s customer more tech-savvy than ever and expects the same high levels of convenience from their insurers as they do from other companies, but the last few months have put a spotlight on the need for a better digital communication customer experience. By meeting and, hopefully, exceeding these expectations, insurers can ensure customer loyalty in an increasingly competitive market. That, in turn, comes with several major business benefits, including increased revenue.

Why risk profiling matters Risk tolerance is a measure of how emotionally comfortable someone is with taking financial risk. Knowing a client’s risk profile can help an adviser assess whether the client will be willing to allow their portfolio to diminish in the short term, in return for the chance of bigger long-term returns. Being a psychological trait, a client’s risk tolerance is best measured with a psychometric tool. Having a clear idea of how comfortable a client is with investment ups and downs allows an adviser to make sure a client doesn’t panic or, worse still, blame the adviser when a risk is realised. Why Finametrica? Developed by Organisational Psychologists at the University of New South Wales, Finametrica is not only more accurate than other risk-profiling tools, it’s also much quicker. In only 15 minutes, an adviser can ascertain a client’s risk profile and compare it to over a million other profiles. Finametrica was recently crowned both Best Risk-Profiling Solution at the WealthBriefing Swiss Awards 2020 and Best Risk-Profiling Service for Advisers at the 2020 Professional Adviser Awards. How it works The integration will be welcomed by advisers

who are already using Finametrica and by those who’ve never used risk-profiling software. • atWORK has negotiated a discounted rate, which means atWORK 6 users will pay less than they would if they signed up for Finametrica directly • Advisers will be able to access all their planning tools from within atWORK 6, eliminating the need to fire up multiple programs • The profiling results are included in the atWORK 6 reporting function, which will make advisers’ lives much easier. In other words, the integration will save both time and money. This is just the start “atWORK 6’s embrace of ‘open systems’ allows seamless integration with third-party software from risk profilers, commission systems, antimoney laundering providers and much, much more,” explains Pierre Dippenaar, who heads up software development for the firm. “We’ve got several new tools in the pipeline, including one that will make it a whole lot easier for clients to manage signing documents online.” To set up an interview with atWORK’s Group Business Development Officer, please email trevor@work.za.com or call 0861 ATWORK.

Why insurers must embrace AI in customer communication

Catching up Of course, this kind of transformation won’t happen overnight. Historically, insurers haven’t done well when it comes to customer communication. Within the last few years, more than 90% of insurers did not communicate with their customers even once a year, and many customers did not receive a single communication all year. Of those interactions, many were limited to claims and related advice.

THE LAST FEW MONTHS HAVE PUT A SPOTLIGHT ON THE NEED FOR A BETTER DIGITAL COMMUNICATION CUSTOMER EXPERIENCE In a world where highly personalised products and services, supported by relevant, easy-to-understand and contextual information have become the norm, that’s no longer viable.

In order to overcome that deficit, it won’t be enough for insurers to simply retrain their staff and hope for the best. Instead, they need to embrace the kind of technologies that will have an immediate positive impact on customer experience. Using AI and ML Enter AI and ML. While some insurers have adopted these technologies to great effect in the back office – to speed up claims processes and in fraud detection, for instance – they haven’t been used to anywhere near the same effect when it comes to customer communications, which is a missed opportunity. AI improves customer experience through the analysis of data on hand in order to decide the next message that is best suited to each customer, based on actions taken with the insurer or changes in life-stages that changes their needs. By delivering the right message to the right person, at the right time, an organisation can dramatically improve the customer

experience. That relevance and timeliness, meanwhile, is most likely to result in the response the business wants: a policy renewal, an upsell or a new sale. As a subset of AI focused on automating tasks, ML can help decide which content is suited to a customer based on data on hand, such as past behaviour, demographics and location, making it easier to deliver truly hyperpersonalised communication. There are several ways organisations incorporate AI in their customer communications beyond hyper-personalisation and nextbest-action messaging. These include customising customer journey touchpoints (ensuring the tone is appropriate when the customer has suffered a loss, for instance) and allowing customers to interact with communications using voiceenabled tech (such as smart devices). Integrating chatbots into customer communications additionally allows for one-way communication to become a conversation.

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INVESTING

31 August 2020

Investors still lack complete and consistent ESG data A new study by Morningstar shows that investors still lack complete and consistent environmental, social and governance (ESG) data. MoneyMarketing takes a look at the study and its recommendations.

ver the past half-decade, standard-setting organisations have produced volumes of recommended ESG indicators, disclosures and metrics but, in spite of this, investors still lack complete and consistent ESG data. This is one of the findings of the recent Morningstar paper entitled Sharpening the Tools of the ESG Investor. Morningstar notes that public companies produce voluminous sustainability reports, but they often pick and choose indicators from a variety of standard-setting organisations. “These reports may not contain information that is material, given the firm’s business context, and do not help investors meaningfully understand a company’s ESG risks while impeding comparisons between companies.” The study finds that many of these reports read more like marketing documents than clear discussions of material ESG risk, or areas of investment in green technologies, leading to some cynicism on the part of asset managers and financial advisers about sustainable investing in general. “Environmental, social and governance disclosures need to focus on critical, material issues that are relevant to a company’s business strategy and products.” Fewer than 30% of stock issuers around the world disclose ESG factors in a comprehensive and consistent fashion, Morningstar notes. The study found that more than 50% of new capital is being raised in the private markets in the US, which are exempt from most disclosures. “These private issuances have minimal ESG disclosures at best. Indeed, only two out of 45 questions in a recent European consultation about standardised disclosure asked about applicability to non-listed companies. This lack of data is particularly problematic because some exempt investments, such as private equity funds, have begun to attract policymakers’ interest for poor labour practices and possible price gouging.” As more investors gain exposure to private firms, it will be increasingly important to consider the role of ESG data for non-public companies, Morningstar adds. In the fixed-income market, the available disclosures are inconsistent and incomplete to an even greater

degree. “For example, sometimes a bond’s ESG rating is based on the ESG risk the issuer faces. Sometimes the ESG rating is based on the bond’s use of proceeds – whether they are used to fund greener activities. A lack of consistency has made it difficult for investors interested in green bonds, arguably the most important way investors could achieve positive impact with their investments. The reason is that if investors eschew bond issuances that do not meet their sustainability standards, it will raise the cost of borrowing for those companies, perhaps forcing them to adjust their business approach to be more sustainable.” Some measures have been taken to improve the situation, with the International Capital Market Association’s green bond principles and the drafting of an EU Green Bond Standard, but ultimately, green bonds need to be comparable regardless of where they are issued, Morningstar states. When it comes to mutual fund asset managers, the study finds that they inconsistently disclose ESG information about their holdings. “Third parties can analyse a fund’s holdings to present an impartial estimate of the degree to which a fund is sustainable or meets various ESG measures. However, such an approach may not align with the definition the asset manager uses to define an ESG holding or how their strategy reflects an ESG approach. This sustainability data is valuable for investors, and asset managers should present sustainability information in a way that helps lay investors understand a fund’s sustainability objectives.” To some extent, this is a problem caused by inconsistent disclosures from issuers, Morningstar notes. Given the present situation, the study has made some policy recommendations, including that: • Regulators should embrace standard-setting organisations’ existing metrics and require issuers to disclose these metrics when they are material to a company’s business or to their broader stakeholders • Regulators should coordinate with each other so that investors in different jurisdictions have access to comparable ESG metrics

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• For pooled investments, regulators should set a minimum standard so that investors know whether a fund considers ESG factors at all as part of its investment process and if a fund considers ESG criteria, sustainability assessments, or impact assessments as central to its investment approach. It’s clear from the study that there is a mismatch between investors’ needs for clear, comparable and material ESG data and the current state of ESG disclosures. Morningstar concludes, “Investors need this data because they increasingly want to evaluate the ESG risk and its impact in their portfolios.

The data these investors need can be standardised, although their motivations may be highly varied. Whether they are avoiders, eschewing investment in certain businesses, or amplifiers, seeking out positively influential companies, we believe that investors should have the right to incorporate ESG preferences into their investing approach. Similarly, financial professionals need to be able to meet investors’ needs and financial professionals have a responsibility to manage ESG risk, just as they would manage any other investment risk.”

Morningstar completes acquisition of Sustainalytics

ndependent investment research provider, Morningstar, Inc. (Nasdaq: MORN), has completed its previously announced acquisition of Sustainalytics, a globally recognised leader in environmental, social and governance (ESG) ratings and research. Sustainalytics offers data on 40 000 companies worldwide and ratings on 20 000 companies and on 172 countries. The company’s security-level ESG Risk Ratings are a well-known benchmark among institutional asset managers, pension funds and other financial market participants integrating ESG factors into their investment processes and decisionmaking. Sustainalytics’ ESG research and ratings are relied upon by investors globally and also underpin numerous indexes and sustainable investment products, including Morningstar’s Sustainability Rating for funds and Morningstar Indexes. “Investor demand for stakeholder capitalism is driving a profound transformation in the global investing landscape. We’re excited to have our sights on this next horizon alongside Sustainalytics, a leader that has been on this road since the beginning,” says Kunal Kapoor, chief executive officer, Morningstar. “Together, we will lead investors of all types through this transition, empowering them with ESG insights that allow for the personalisation of portfolios across asset classes.” To mark the close of the acquisition, Morningstar published a primer on sustainable investing, Sharpening the Tools of the ESG Investor. ESG has become an essential part of long-term investing, and the paper provides background on the importance of sustainable investing and ESG factors, how investors are using ESG data, as well as its limitations, and how policymakers can help or hurt sustainable investing.

INVESTING

31 August 2020

JOHN CHRISTY Investment Counsellor, Orbis

STANLEY LU Investment Analyst, Orbis

Tech opportunities rise in the East Technology stocks have performed remarkably well in recent years and particularly so amid the COVID-19 pandemic. John Christy and Stanley Lu, from Allan Gray’s offshore partner Orbis, compare and contrast the opportunity offered by the well-known US tech stocks with their peers elsewhere.

reminiscent of the dotcom bubble of the late 1990s. We have, at times, found the FANGAM stocks attractive and own Facebook and Alphabet today as their valuations look undemanding. We have owned Apple, Amazon and Microsoft in the past, and it is now clear that we sold them too early. With a broad global research capability, we can compare the FANGAMs with their technology peers elsewhere. China’s Alibaba has much in common with Amazon, yet it

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he largest US technology shares, Facebook, Amazon, Netflix, Google (Alphabet), Apple and Microsoft (known as ‘FANGAM’) have together outperformed the US market by 19% per annum over the past five years and now account for more than 20% of the S&P 500’s market capitalisation. When it comes to the FANGAM stocks, you either look brilliant if you own them or foolish if you do not. One side will argue they are ‘must-own’, while others claim they are overvalued and

is growing faster and trades at around earnings, if we adjust for the value of its half Amazon’s valuation. When we incubated and related businesses. This stack up the individual stocks in this is a reasonable multiple, considering way, several companies exposed to the the growth it has delivered over the Chinese internet sector look like the past 10 years. During this period, its more attractive investments and, most revenue has compounded at 32% per importantly, each trades at a significant annum and operating profits at a rate of discount to our assessment of intrinsic 21%. Alibaba has also been ahead of its value. Collectively, these companies, competitors in strategic new businesses including NetEase, such as cloud Alibaba and Tencent computing, fintech (through Naspers) and omnichannel THE LARGEST account for more POSITION, AT 10% retail. At a valuation than 15% of the Orbis of around 30 times its OF THE PORTFOLIO, free cash flow, Alibaba Global Equity Fund. The largest position, is not only attractive IS NETEASE at 10% of the portfolio, but also compares is NetEase. As a provider of online favourably to Amazon. games, education and entertainment Looking at the shares we own today, in China, NetEase is made for a we remain excited about the portfolio. quarantined world. Its online gaming The performance from our Asian business, which accounts for nearly 80% technology shares has offset the limited of revenue, is highly cash generative. exposure to FANGAM. The lesson The company is now expanding globally, here is that by focusing on the price we which should extend its long-term pay, we are still able to find shares that growth potential, yet still trades at represent compelling value, without about 24 times our estimate of 2020 requiring heroic assumptions.

Why limit yourself to only 1%? Discover the full picture by investing offshore with Allan Gray and Orbis. Most investors tend to focus their attention on seeking opportunity locally, but with South Africa representing only around 1% of the global equity market, we understand the importance of seeing the full picture and unlocking investment opportunities beyond the local market. That’s why Orbis, our global asset management partner, has been investing further afield since 1989. Together we bring you considerably more choice through the Orbis Global Equity Fund and Orbis SICAV Global Balanced Fund.

Invest offshore with Allan Gray and Orbis by visiting www.allangray.co.za or call Allan Gray on 0860 000 654, or speak to your financial adviser.

Allan Gray Unit Trust Management (RF) Proprietary Limited (the ‘Management Company’) is registered as a management company under the Collective Investment Schemes Control Act 45 of 2002. Allan Gray Proprietary Limited (the ‘Investment Manager’), an authorised financial services provider, is the appointed investment manager of the Management Company and is a member of the Association for Savings & Investment South Africa (ASISA). Collective Investment Schemes in Securities (unit trusts or funds) are generally medium- to long-term investments. Except for the Allan Gray Money Market Fund, where the Investment Manager aims to maintain a constant unit price, the value of units may go down as well as up. Past performance is not necessarily a guide to future performance. The Management Company does not provide any guarantee regarding the capital or the performance of the unit trusts. The Orbis Global Equity Fund invests in shares listed on stock markets around the world. Funds may be closed to new investments at any time in order for them to be managed according to their mandates. Unit trusts are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees, charges and maximum commissions is available on request from the Management Company.

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INVESTING

31 August 2020

MEL MELTZER Co-Owner, Platinum Portfolios

Business valuations vs stock market valuations

n today’s bull market, liquidity $19bn profit in the past fiscal year, provided by the Federal Reserve is worth $176bn, excluding treasury keeps stocks rising and bad shares. Tesla’s market cap is currently economic news doesn’t appear to $258bn – which doesn’t make sense. provide a barrier to this feeding Tesla was first to market in the frenzy. The S&P500 had its best electric vehicle category, but the 50-day gain from its March lows company does not have patents. The to Wednesday the 24th June 2020. technology is easy to replace, and the New highs on the Nasdaq-100 index other auto manufacturers are catching help too. The S&P500 is now just 2% up fast. It’s our view that the stock down this year and less than 7% off price is in a speculative bubble driven its all-time high. The fear of missing by short sellers being squeezed, out, momentum algorithms, and day momentum investors and gamblers. traders drive the market higher and The bubble will eventually burst, as Tesla’s meteoric share price is a classic history has shown. It took Microsoft example – it’s up 483% year-to-date fifteen years to regain its record highs on a p/e we can’t measure. of 2000, when investors believed the Let’s look at Tesla and the stock price would just keep rising. automotive industry objectively. It’s interesting to note that Microsoft Over the last 15 years, auto sales have had both strong fundamentals and a not kept up with economic activity. dominant market position at the time, Recently, vehicle sales in China while Tesla does not. We don’t know have levelled off. With economic when Tesla’s rise will come to a halt growth slowing in that country and but as we’ve learned, the end is swift worldwide, the and vicious. demand for autos Currently THE BUBBLE BURSTS will remain weak. Warren Buffet is SWIFTLY, AND IT CAN Baby boomers are slipping down retiring, hence the the charts of the TAKE UP TO 20 YEARS demand for autos uber-wealthy, FOR INVESTORS TO GET as technology is slowing. The new generation THEIR MONEY BACK – IF stocks surge don’t buy cars – upwards. AT ALL but rather take Buffet has been Uber rides. Currently, Tesla’s sales extremely critical of the gunslinging, are only 2% of vehicle manufacturing promotor-driven market that pushed worldwide. However, this company technology stocks to delirious levels has a market cap bigger than all the in 1999. At that time, Berkshire major auto companies combined, Hathaway stock looked ordinary and excluding Toyota. pedestrian, very much the same as it On the 2nd of July, Tesla overtook does today. The idea that ‘Buffet has Toyota as the world’s most valuable lost his mojo, and is old and over the automaker, when excluding the hill’ has been around since 1968. Japanese company’s sizeable pool In his speech at Sun Valley in July of treasury shares. The 82-year-old 1999, Buffet reminded the audience vehicle manufacturer, which had a that the stock market surge was not

the first time that a new technology had created a market bubble. The widely held opinion at that time was that ‘this time it’s different’, as tech stocks were trading at extravagant valuations and the audience felt that the stock prices were justified. It seemed that Buffet was out of touch. In the same speech, he highlighted past technologies, automakers and airline companies and he made his point succinctly, “Imagine if you could see the future of the airline industry back there at Kitty Hawk*. As of a couple of years ago, there had been zero money made from the aggregate of all stock investments in the airline industry. So I submit to you: I really like to think that if I had been down there at Kitty Hawk, I would have been farsighted enough and public spirited enough to have shot Orville down. I owed it to future capitalists.” We know that Tesla’s rise will end. The business may continue but the share price will return to normalised levels over time, as was the case with Microsoft. The bubble bursts swiftly, and it can take up to 20 years for

investors to get their money back – if at all. When we invest, we are taking our clients’ money that they would have spent – and we are making longterm investments that should generate a real return over time. This saving by clients enables them to postpone today’s spending by providing for their living expenses in later years. There are only two questions: What return will we generate, and when? Today the p/e ratio of the S&P500 based on analysts forward earnings is approximately 25.6, just shy of the record of 27 set in December 1998. On the whole, US stocks are expensive. Valuations are the best tools investors have to determine future returns, and at this juncture in the market, it’s important for investors to determine the business valuations of companies they own, instead of focussing on the daily market noise. *Kitty Hawk became famous after the brothers Orville and Wilbur Wright made the first controlled powered airplane flights at Kill Devil Hills, six kilometres south of the town, on December 17, 1903.

Northstar Global Flexible Fund (USD) The best of both worlds Equity beating returns with less downside. Our obsession with research delivers better performance. 7.1%* annualised since inception.

Closer to the truth www.northstar.co.za

*At 30 June 2020, the Fund placed in the following percentiles: 6th (3 years), 5th (2 years) and 17th (1 year), since inception (1 June 2017), in the EAA Fund USD Flexible Allocation category. Annualised return is the weighted average compound growth rate over that period. Highest annual return over a 12 month rolling period is 21.35% (Dec 2018 - Dec 2019). Lowest is -3.60% (Dec 2017 - Dec 2018). The benchmark for the fund is the EAA Fund USD Flexible Allocation category. The annualised returns for the benchmark over the same period is 1.6%. Reflects the charges of the most expensive fee class available to members of the public. Source: Morningstar. Past returns may not be indicative of future returns and an investor should seek independent professional financial, legal and tax advice relevant to their individual circumstances before making any investment decision. To view the performance of this fund visit our website. Northstar Asset Management (Pty) Ltd is authorised in terms of the FAIS Act (FSP 601). There are risks involved when buying, selling or investing in any financial product and the value of these can increase or decrease over time. A schedule of fees is available on request and the Fund is a sub fund of and administered under the Sanlam Global Funds PLC (Section 65 approved fund). The manager is Sanlam Asset Management (Ireland) Ltd. No offer to purchase securities will be made or accepted prior to receipt by the offeree of all appropriate completed documentation. Contact Northstar Asset Management for full details.

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INVESTING

31 August 2020

RORY SPANGENBERG Director of Global Equities at Northstar Asset Management and portfolio manager of the Northstar Global Flexible Fund

But how, you will ask, does one decide what’s ‘attractive’? In answering this question, most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth’. Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking (in which, it must be confessed, I myself engaged some years ago). In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive. - Berkshire Hathaway Chairman’s Letter – 1992

ong before factor investing enjoyed the prominence it does today, Warren Buffet eloquently dispelled the notion that the concepts of value and growth, not to mention quality, momentum and low volatility, could somehow be decoupled from one another, only to be resold to investors as a neatly packaged product. Northstar Asset Management’s proprietary research process is focused on identifying companies with a sustainable competitive advantage, which can be bought at a discount to a conservative estimate of intrinsic value, consistent with our mantra: “Long-term exposure to quality assets, where value exceeds price.” We believe an integrated approach, which combines our fundamental assessment of competitive advantage (‘quality, growth’) with a disciplined valuation framework (‘value’), results in a more holistic view of the businesses we invest in, the risks inherent in the investment case we

Why an integrated approach to fundamental value, informed by competitive advantage, offers better risk-adjusted returns

discern for each, while avoiding the peril of falling into a dogmatic trap of your own making. Equally, we believe that an active and forward-looking assessment of the dynamic ‘factors’ determining a company’s prospects and valuation is imminently superior to the backwardlooking and often simplistic criteria utilised in the construction of passive and/or style-driven products. How competitive advantage drives value We believe the practice of disaggregating quality, growth and value, which Buffett refers to as ‘fuzzy thinking’, can result in a significant disconnect between the theoretical value derived by investors and the manner in which corporate value is created in reality. More often than not, this disconnect is compounded by the fact that the majority of investors tend to approach valuation in a very linear fashion, guided by investor relations practices, which are, in turn, informed by the typical three- to fiveyear corporate strategic plan. No surprise then that a large part of the stock market return or shareholder value, often over fairly meaningful time periods, is unexplained by earnings growth, interest rates or any of the other socalled ‘drivers of value’. As professional investors, charged with allocating our client’s savings in a prudent manner, the significance of this residual value component, often dismissed as sentiment, cannot go unexplained. At the same time, the duration mismatch – which exists between how value is theoretically held and how it is derived in practice – creates a time arbitrage opportunity for patient investors.

Source: Northstar Asset Management, MSCI and Bloomberg Northstar Global Quality & Value Model – Top 50 MSCI AC World (Ex-Financials & Real Estate) constituents ranked on proprietary Quality & Value criteria, equally weighted, rebalanced annually.

Our fundamental belief is that a relatively small group of companies benefit from certain strategic competitive advantages, which affords them the ability to stave off competitive forces, in order to generate returns on capital above their cost of capital, for an extended period of time. In a world with perfect information and foresight, investors would accurately determine the timeframe within which returns fade to cost of capital – Miller & Modigliani’s Competitive Advantage Period – which would then be efficiently reflected in share prices. Often, because of the substantial duration mismatch between a company’s competitive advantage period and investor’s shorter analysis timeframe, or due to strategic action by management to lengthen the competitive period, a significant amount of value creation occurs beyond the initially determined competitive advantage period. Determining the competitive advantage period and valuing companies accordingly As students of competitive advantage, our departure point is generally to consider industry structure and the competitive landscape a company finds itself in. Industry concentration, relative market share and barriers to entry can contribute meaningfully to competitive advantage, as well as its duration. Other company-specific forms of competitive advantage may come in the form of a license, a patent or an established brand or distribution network or scale advantage often built up over decades. Taking a view on the source, strength, durability and trend in a company’s competitive advantage, as well as the likely rate of change or delta, directly informs the competitive advantage period and

‘fade’ rate of returns relative to cost of capital, which is then integrated into a discounted cash-flow valuation. Taking a more explicit approach to the intermediate period of a typical three-stage model, with fade and duration directly informed by competitive advantage, results in greater sense of tangible value and sensitivity than would otherwise be the case. In this way, the residual value that often resides beyond the initial assessment of the competitive advantage period is not lost in lessnuanced assessment of terminal value. Helpfully, the implied competitive advantage period can also be ‘backed out’ from the current market valuation and be considered in a conceptual framework, relative to a subjective assessment of the likely competitive advantage period or to the market and industry peers. Lengthening timeframes and avoiding point estimates The nature of competitive advantage is such that it requires time and an informed but subjective view. By lengthening analysis and investment timeframes, we ensure that more of the value ‘lost’ in the residual is brought to the fore, to be explicitly considered. By doing so, we recognise the quest for accuracy in valuation is futile and exchange a point estimate approach to valuation for a scenario approach, incorporating a probability-weighted Bull, Bear and Base case investment thesis and valuation, which more fully accounts for the potential delta in competitive advantage periods. Taking an integrated approach to traditional factors, such as quality, growth and value, has resulted in far greater nuance in our analysis and valuation, while our scenario-driven approach to valuation has meant that inherent risk and sensitivity to fundamental drivers of value are better understood.

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INVESTING

31 August 2020

DEBRA SLABBER Business Development Manager, Morningstar Investment Management, South Africa

The role of cash in a portfolio requirements and tax position. Cash is an important piece in that puzzle and should be considered when looking at a client’s holistic financial plan. Cash has many advantages: it serves as a buffer by mitigating the total portfolio impact if other asset classes experience large drawdowns, and it provides liquidity and yield (an essential when you have income withdrawal needs). It can be used as a safety net in the event of a client needing immediate access numbers simply don’t lie. Let’s take recent market to funds (for example, if they lose their job or need events as an example. If an investor switched their a lump sum withdrawal during tough markets), and entire equity exposure to cash after the sharp sell-off cash can be kept in reserve and deployed when a good in March, it would have had a devastating effect on investment opportunity presents itself. their wealth, as presented in the graph. There are many ways in which cash exposure can If an investor with roughly R100 000 invested in be obtained. Historically, most investors opt to keep South African equities at the beginning their cash investments in their bank of the year switched everything to cash savings accounts or a money market NOBODY when markets bottomed in the middle account. More recently, income funds EVER GOT of March, he/she would be worse off have become popular as well. Multiby about R16 000 compared to if he/ RICH BY JUST asset funds also hold a decent allocation she remained invested throughout the to cash instruments. Cash is, therefore, REMAINING bumpy period. It is much more difficult probably already part of your portfolio to recover losses of 28% (caused by to begin with. Investors must also be IN CASH switching to cash), compared to the 12% cognizant that the term ‘cash’ covers drawdown the investor would have suffered if he/she a variety of instruments, each unique in term of decided to remain invested. characteristics and riskiness. When confronted by fear, the first step is to ask whether an investor’s actions are causing them to It does not come without risk completely change their investment plan. Any good While cash serves as a buffer, it also introduces investment strategy is already built to protect their inflation risk. Recent aggressive interest rate cuts money. When investors veer off course and sell out of by the South African Reserve Bank resulted in the fear, they put other areas of their portfolio at greater returns from money market funds being slashed by risk. So, their plan shouldn’t be abandoned at the first 40% compared to a few months ago. To put his into sign of distress. With this as a backdrop, cash should perspective, this time last year, you could easily keep not be the enemy either. your investments in your money market account and generate a before-tax return of between 6 to Reminding investors about the role of 7% per annum. Fast forward to the present and you cash in their long-term investment plan will be lucky if you receive a 4% return on that same Asset allocation is a complex puzzle that requires investment over the next 12 months. constant solving, as well as a deep understanding It is also important to note the tax differential of each client’s unique circumstances, their risk on returns from cash compared to returns from tolerance, return objectives, time horizon, liquidity equities. Opportunity cost is another risk to be aware of. So, investors should use their cash allocation wisely. Remember, nobody ever got rich by just remaining in cash.

Popular headlines such as ‘the dash for cash’, ‘don’t give up on equities just yet’ and ‘is switching to cash the right move?’ have left many investors questioning their exposure to cash. During times of market volatility, cash is often questioned first, leaving investors wondering whether they should be jumping on or off the cash bandwagon. In this article, we take a step back and examine the role of cash in a portfolio.

he role of cash in a diversified portfolio is often misunderstood. One of the least covered topics when it comes to investing, is how cash plays a role in your portfolio. The saying that cash is king has some truth to it, but it’s not without its risks either. Investors often use cash as a flight mechanism. As the saying goes ‘when the going gets tough, the tough get going’, but when it comes to cash, this is rarely the case. More than often, investors will run to cash for safety instead. Trying to time when to get in and when to get out of the market is a never-ending battle, especially when there are big shocks to the system, as we have seen recently. It’s often because of their short-term risk profile and reaction to sudden market moves that investors want to change their investment plan by switching to cash for its so-called safe-haven appeal. This move is then justified with phrases like ‘it is just temporary’ or ‘I just want to miss some of the volatility’ and ‘I will get back into the market when things have settled’. The fact that investors enjoyed better returns from cash than other investments, such as South African equities, over the past couple of years makes the argument to run to cash even more appealing. They have also enjoyed the benefit or real returns (returns in excess of inflation) by being in cash instead. What happens when we use cash as a flight mechanism? Investment professionals may sound like broken records when they advise investors to sit tight when it comes to the topic of switching to cash, but the

Remain calm and don’t get caught up in the so-called ‘cash conundrum’ Many investors are feeling disappointed with equity markets and their investment portfolios at the moment. It has, after all, been an incredibly tough five years for South African investors. Add the global pandemic to our already long list of woes and, understandably, the feeling of surrender and doing something ‘safe’ and predictable is appealing. There’s an old adage among investors during downturns: ‘Don’t catch a falling knife’. Using cash as a flight mechanism when things get tough is detrimental to long-term portfolio returns. Instead of chasing performance, investors should take this time to assess if their asset allocation is appropriate given their liquidity needs, time horizon and investment goals. Remember, cash can be a very valuable tool when it is used as part of a holistic financial plan. If your investment horizon and goals haven’t changed, then neither should your investment plan.

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INVESTING

31 August 2020

CLYDE ROSSOUW Co-Head: Quality, Ninety One & Manager: Ninety One Global Franchise Fund

arkets and the economy are likely to remain fragile for some time to come. The case for quality investing – building a portfolio of companies with competitive advantages, strong market positions, healthy balance sheets, sustainable revenues and low sensitivity to the economic cycle – is obvious when markets are stormy. Less discussed is the potential for quality companies to grow robustly in a recovering market. Amid the wreckage of weaker businesses as the dust settles, they often get a head start on growth that can propel them through the next cycle. A key attribute that helps quality companies not only survive a downturn but continue to expand in the aftermath, is their strong cash positions; or, more specifically, the fact that they tend to be both cashflow resilient and have cash on hand. They say cash is king. After a crunch, possessing these twin cash advantages can be a kingmaker, helping quality businesses increase their market dominance. History suggests they have helped some quality companies

Why cash flow can be a kingmaker after a crunch

outperform as a recovery gets underway. Whatever the economic backdrop, revenues usually keep flowing for quality companies – or, if extreme circumstances do interrupt them, the hiatus would be expected to be brief before structural growth resumes. This is partly because they offer products and services that people need, which may sometimes be sold via subscription or as recurring purchases. They also tend to operate in growing industries where they have competitive advantages. Consequently, they aren’t as vulnerable when the economy slows. Because they often have dominant market positions, quality companies may have pricing power, which gives them additional protection in a downturn. Quality companies tend to have low operating expenses, especially low fixed costs. They are also capital light, meaning they don’t need to spend a lot on maintaining, say, factories or sophisticated machinery just to stay in business. Strong balance sheets are another feature of quality companies. As well as having relatively little debt,

they typically have significant levels of cash and ready access to liquidity/ funding on good terms, due to their strong credit ratings. Together, these attributes give quality companies more flexibility in allocating capital – that’s an advantage not only in challenging times, but also when the storm passes. During a crunch, quality companies can make productive use of share buybacks or temporary dividend cuts to ensure they remain resilient and to prepare for a changed economic environment. That is to say, they can suspend buybacks if required, as they have not been reliant on borrowing to buy back shares in order to drive earnings-per-share growth. When conditions improve, they can spend on growing their businesses or on acquisitions – at what may be a very advantageous time to do so, as some weaker rivals may have been eliminated or may be available for purchase at a low price. With a clearer field, the potential for robust growth is higher, which is why quality companies can be quick out of the blocks in a recovery. They are also likely to restore dividends sooner, if

they reduced them at all – something income-seeking investors will particularly appreciate. Simply put, after a shake-out, the strong tend to get stronger. The performance of Ninety One’s Global Franchise Fund – which seeks to identify quality companies through in-depth research – suggests as much, with generally above-benchmark returns in the year immediately after a market downturn. Or course, those seeking to follow a quality investment style need to maintain valuation discipline, buying shares in quality companies at reasonable prices. With an active, research-intensive approach, that can be done at any time. But it is at times like the present, after largely indiscriminate sell-offs when shareprice moves detach from fundamentals, that the opportunity to build a quality portfolio at low valuations is often the greatest. And whether what follows the current turmoil is a prolonged slowdown or a swift bounce back, a quality portfolio’s combination of resilience in hard times and strong growth potential in recoveries could stand investors in good stead.

Investing in gold through ETFs

n times of uncertainty, investors typically flock to safe-haven assets like gold. This year alone has seen the price of gold soar around 19% as investors seek diversification from more traditional assets like stocks, bonds, or property. Buying gold for many investors is a daunting prospect – one which is too often believed to be the sole purview of specialists, fund managers and banks. This is, however, not the case and gold is a lot more accessible to investors through avenues like gold coins, gold mining shares (which have the underlying performance risk), or ETFs. 1nvest – backed by Standard Bank, STANLIB and Liberty - offers investors access to 15-unit trust vehicles and 13 ETFs, including a range of precious metals ETFs with strong and impressive track records. “Precious metal ETFs are designed to offer investors alike a secured, simple and cost-efficient way to procure direct access to the precious metal market. Because the precious metal ETFs hold the actual underlying metal in secure vaults, gold in the case of the 1nvest Gold ETF, it provides investors a return equivalent to the movements of the rand gold price less the management fee. As each ETF represents about 1/100 of an ounce of gold, it provides investors the opportunity to acquire gold exposure for as little as R300 per ETF, allowing you to take large or small investments,” adds Johann Erasmus, Executive Director at 1nvest.

Advantages to adding a precious metals ETF to an investment portfolio include: • Convenience: An easy way to gain exposure to rand spot returns of the underlying precious metal in small or large quantities • Liquidity: Liquid and traded intraday during exchange hours with Standard Bank providing intraday market making • Minimal tracking error: Returns of the ETFs are equal to the rand spot return of the underlying metal priced in rand minus low management fees • Physical ownership: Each ETF unit is secured by the corresponding physical metal held in a custody vault • Transparent to value: Precious metal prices and the USD/ZAR exchange rate is published daily • Segregated: The physical metal is stored in secure vaults and each ETF is guaranteed and has security over specific metal held by the custodian • Costs: The precious metal ETFs have some of the lowest management fees in the market. “1nvest Gold ETFs are backed by physical gold, stored, and insured in secured custodian vaults. Each gold ETF will have recourse to good delivery gold bars. The gold is segregated, individually identified, and allocated. 1nvest ETF is not allowed to introduce any outside risks into the gold ETFs, including leasing of the precious metals,” explains Erasmus. He adds that by adding gold to a larger investment portfolio, investors will gain wider

diversification of their assets, which ultimately works to offset market risks. “Gold and other commodity ETFs are risky but are generally good alternative asset classes to add to your portfolio because they often perform at an inverse correlation to more tradition assets like securities and add another liquid asset class that can easily be transacted.” The recent growth of the 1nvest Gold ETF highlights the staying power of gold in volatile climates. From 2019, the fund has grown from holding 5,912 oz of gold valued at R112m to holding 111,674 oz of gold valued at R3,4bn, in less than a year.

Johann Erasmus, Executive Director, 1nvest

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INVESTING

31 August 2020

CHRISTO LINEVELDT Investment Specialist, Coronation Fund Managers

Do not underestimate the value of active asset allocation in crisis times

t’s hard to believe how dramatically 2020 has changed our lives, in some ways permanently. Financial markets have already seen their quickest sell-off and subsequent recovery to date, yet the economic outlook remains murky. It is not surprising that investors are left asking, “What’s next?” However, we continue to believe that a disciplined commitment to long-term valuation-based investing, coupled with deploying an appropriate risk budget, remains the correct approach. The former is what we as asset managers focus on every day on behalf of our clients; the latter is what investors need to decide in the process of selecting the right mandate for their needs. Beating inflation However, one of our key take-outs is that now, more than ever, inflation protection should be a priority when constructing long-term investment portfolios. This may require investors to take some action by reviewing their current asset allocation and ensuring they are invested in an actively managed, welldiversified multi-asset portfolio. Prioritise real assets To protect against the risk of inflation, real assets (see text box) should form the cornerstone of an investor’s portfolio. To gain exposure to these assets, they need to be invested in a fund with a mandate that allows exposure to the most appropriate combination of real assets and longer duration income assets, given their ability to take risk. With the impact of multi-decade low interest rates (that are still decreasing) on cash returns, many investors who have de-risked their portfolios over the last five years, or who may have invested too conservatively to begin with, need to consider

How do we define real assets? Real assets consist of growth assets such as equities and property (businesses with pricing power that can grow earnings at or above inflation) or inflation-hedged asset classes such as inflationlinked bonds and precious metals. taking action to increase the risk in their portfolio to an appropriate level. Do not underestimate the value of active asset allocation in crisis times Asset allocation is the most important decision you make when investing. While significant value can be added by focusing on the selection of individual securities, it is critical to have appropriate exposure levels to specific risk drivers and to blend different assets together in a way that increases the probability of optimising your outcomes. The de-risking trend favoured by many South African investors can have a profound impact on

long-term investment outcomes if left unchecked. By moving their portfolios out of multi-asset funds and into low-risk cash-heavy alternatives, investors have effectively assumed the asset allocation responsibility themselves. This means they need to make the second leg of the timing decision – when to re-risk– themselves. But market timing is a very risky strategy and during crisis periods, elevated volatility levels mean that market prices move rapidly. Much like the GFC, the current crisis has required us to implement dynamic and meaningful active asset allocation decisions on behalf of investors in our multiasset funds. We fully expect to continue making meaningful asset allocation changes in the months and quarters ahead. An example of the benefits of active asset allocation and security selection can be found in the track record of Coronation Balanced Plus, our flagship multi-asset fund aimed at those saving for retirement within the pension system (via a Retirement Annuity, Pension or Provident Fund). The chart illustrates the average monthly return of the Coronation Balanced Plus versus the JSE All Share Index (ALSI), as well as the specific outcomes during up and down months. With the Fund delivering roughly three-quarters of the upside of the ALSI, but only half of the downside, it was able to provide a return slightly ahead of the market, but with significantly lower volatility. It is this asymmetrical pay-off (more of the upside and less of the downside) that adds significant value over time and makes a well-managed multi-asset fund an enduring cornerstone of any investment portfolio. For comprehensive fund information, please download the minimum disclosure document from coronation.com

JSE lists first China-focused ETF

he Johannesburg Stock Exchange (JSE) last month listed its first China-focused Exchange Traded Fund (ETF), the Satrix MSCI China ETF. This ETF will track the MSCI China Index, which will provide investors access to the broader Chinese equity market. The Satrix MSCI China ETF offering exposes investors to an array of Chinese industries, ranging from online commerce, financials, communication services and many others.

NEARLY 20 YEARS AGO, SATRIX BECAME THE FIRST TO LIST AN ETF ON THE JSE “Our global ETF range has been very popular with investors seeking to diversify their portfolios,” says Helena Conradie, Satrix CEO “We track the

MSCI World, MSCI Emerging Markets IMI, S&P 500 and Nasdaq-100 indices. The investor interest in the initial public offering for the Satrix MSCI China ETF has far exceeded our expectations – it is the most successful IPO since the Satrix 40 launched in November 2000.” The listing of the Satrix MSCI China ETF adds one more thing for the JSE to celebrate this year in the ETF

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space, as the exchange observes the 20th anniversary of ETFs listing on the JSE, and ETFs recently surpassing the R100bn market cap, which is a great milestone for the sector and investors. “With global markets experiencing increasing volatility, ETFs provide alternative investment options with varying diversification, hence we are thrilled to add the Satrix MSCI China ETF to our mainboard,” says Valdene

Reddy, Director of Capital Markets at the JSE. “This new ETF really extends the growing presence of ETFs on the JSE, offering investors an increasingly wider ETF selection to choose from. Nearly 20 years ago, Satrix became the first to list an ETF on the JSE and today the ETF market is an integral part of many investors’ portfolios,” she adds. With 75 ETFs now listed on the JSE, the bourse continues to be a pioneer in the investment field by providing innovative and diverse investment options for the benefit of retail and institutional investors.

Helena Conradie, CEO, Satrix

BRAVE/6088/MOM/E

It’s good to ask us about investments. But not so good to question yourself.

Get invested, and stay invested. Volatile markets increase the risk of buying and selling at the wrong time. Why? Clients get anxious and pay for emotional comfort with future returns. Our goal-based investing approach aims to take the stress out of trying to time the market and keep clients focused on their long-term goals. Sometimes the best approach is simple: don’t question yourself – get invested in a solution focused on your goals, and remain invested. Speak to your Momentum consultant or visit momentum.co.za Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.

INVESTING AFTER COVID-19 FEATURE

31 August 2020

SONJA SAUNDERSON Chief Investment Officer, Momentum Investments

Recipe for successful investing stays the same post COVID-19

obody knows precisely how the COVID-19 pandemic will affect the world. Even asking how it will affect investments is akin to looking into a crystal ball and trying to foretell the future. What we do know is the secret for successful investing will stay the same – having patience (and therefore staying invested) and having a long-term perspective focused on specific goals. We do not need to know the specifics of how investing has changed to navigate the current environment and manage investments prudently. There are enough general trends from history and a rational analysis of the current environment that can provide us with direction. In general, we should expect a lower return environment in the medium term, as the world gets through this crisis. However, after we have gone through a reset, growth should pick up and allow for better returns in the medium to longer term. Clearly, from a business perspective, there will be winners and losers. Those businesses that are best at adapting and leveraging the accelerated trend to digitisation, those that enable this trend, and those that can survive and win the relative game, will be well placed to return value to shareholders in the future. Markets are leading indicators and they reflect expectations of the future. The consequence is that sentiment often has a disproportionate effect on the market, which leads to volatility. Volatility provides investment opportunity and skilled investment managers can sieve through the noise and pick those companies that will deliver more value in the future, and thereby outperform the market. Volatile markets also often overreact to short-term events, presenting investment opportunities at a deep discount to the fundamental value of the investment. Here, time is of the essence and eventually rationality will return to TO NAVIGATE market pricing and the investment will reflect the longer-term value. UNCERTAINTY, Alternative investments, including AN INVESTOR’S credit, private equity and direct BEST FRIEND IS property, present an opportunity to step DIVERSIFICATION away from the excessive volatility in the markets. Through their fundamental valuation approach, which better represents longer-term and stable value, investments in unlisted assets may present attractive opportunities. COVID-19 has shown how interconnected we are and led many of us to re-evaluate how we engage with the world and what our purpose is. Even before the virus, the theme of environmental, social and governance (ESG) was becoming increasingly important. The pandemic will lead even more investors to focus on the moral imperative and purpose of their investments. A focused drive on infrastructure investment, globally and locally, is one of the key initiatives to get economies going again after the pandemic. South Africa has a significant shortage of infrastructure, which will offer some compelling investments going forward. To navigate uncertainty, an investor’s best friend is diversification. Sensible diversification provides you with protection from the unknown (where mistakes do not dominate your investment outcome). This gives you enough access to those investment opportunities that will result in real tangible growth in the future. Nobody can be entirely sure what the world will look like after COVID-19. The key to successful investing, however, will still require investors to stay invested and focused on their long-term goals.

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SAMANTHA STEYN Chief Investment Officer, Cannon Asset Managers

YANGA NOZIBELE Investment Associate, Cannon Asset Managers

A better – and very different – tomorrow

n the 1900s, around two thirds of the Dow Jones Industrial Average was made up of railroad stocks. Today, a large portion of the US index is instead made up of technology and healthcare companies – companies whose roles have become even more prominent amidst new social distancing norms and the hunt for a COVID-19 vaccine, and whose agility, scalability and automation lead us into the future. By contrast, it will come as no surprise that stocks in ‘BEACH’ industries (booking, entertainment and live events, airlines, cruises and casinos, and hotels and resorts) have declined by more than $332bn this year. While no one knows exactly what the future may hold, seeking to identify broad themes may offer investors a powerful advantage in decision making, as long-term investment success is all about having a view of the direction in which you think the world may be headed. To this end, we see a future dominated by more people – as people live longer due to improvements in healthcare – and more machines. And given the changes brought on by COVID-19, it is especially worth considering the rapid digitisation of industries worldwide. In terms of investment trends, digitisation of sectors is key. One local example of this, tucked away in the mid-cap sector of the JSE, is Altron. As people rush to work and socialise remotely, Altron’s security and digital transformation services will likely be much in demand for the foreseeable future. And their acquisition of Ubusha Technologies – the largest identity security company in Africa — in 2019 has proven prescient. The group is on an undemanding price multiple of 11 times, and with increased opportunities in a post COVID-19 world, this is an example of a great investment case and an attractive price. The payments sector is also ripe for

digitisation. For instance, Al Kelly, CEO of Visa, notes that 56 countries have lifted contactless payment limits this year to support social distancing measures. While ecommerce has traditionally comprised 14% of retail spending, we expect this to increase dramatically around the globe. And while Visa faces some headwinds due to a slowdown in economic activity, it is well positioned to capitalise on the digitisation of payments. With the limelight on healthcare, these shares have generally enjoyed the benefits of share price appreciation, a streak of bullish earnings growth, and high priceearnings ratings. Boston Scientific, on the other hand, has not quite shared in the uplift. This is mainly due to the deferment of many elective procedures and surgeries as healthcare workers respond to a rise of critical patient care. These companies have collaborated with hospitals, universities and industry peers in an attempt to find innovative ways to meet the urgent demand for personal protective equipment (PPE) and ventilators. With an undemanding multiple of 14 times, a gross operating margin of 70% and ROE of 41.6%, Boston Scientific is a great investment opportunity. Crucially, the sweet spot of investing remains unchanged: investing in good companies at great prices. For instance, Amazon is a great example of a company which will likely see increased, or even exponential growth. However, this is a widely acknowledged fact, and therefore the prospects are very much priced in. Ultimately, then, the search for investment returns will be found in those companies that are able to benefit from the structural drivers that will shape tomorrow’s investment landscape, without paying for years of sometimes inflated and – pandemic or no pandemic – always uncertain, forecasted earnings.

WOMEN’S MONTH FEATURE

31 August 2020

‘I didn’t choose insurance, it chose me’

enzile Ndlozi has been Business on new business and chased new Development Manager at Allianz accounts – we had to get in front of Global Corporate & Specialty the client and sell. When you’re a big Africa for three years. It’s a role, she corporate, that’s an easy thing to do says, that has allowed her to grow in as you have the backup, the logo and leaps and bounds. “Sometimes people the systems. Imagine being a midsay ‘I didn’t chose insurance – it chose sized broker, promising to deliver me’, and to be honest, I fell into the better service. We did just that – and industry,” she adds. I found that I really enjoyed business Just after finishing high school, development.” she was invited to attend the IMF’s Three years later, Allianz knocked Future World Leaders Conference in on the door. “It was one of the scariest Washington, D.C. as a representative opportunities of my life! I told them of South Africa. “It was a fantastic, that I needed to think about their eye-opening experience for me. offer and slept on it. I then decided On my return to SA, I was given that it was what I needed to do – and the chance to work I took the opportunity for Alexander Forbes PUTTING MORE that essentially Financial Services. changed my life.” WOMEN INTO I debated whether or Her role means that not I should take this she has to travel a lot LEADERSHIP opportunity or whether and she’s seen most of POSITIONS IN I should study. I decided the African continent. SA STARTS WITH “Allianz has bought that I would work, as well as study at UNISA 13 entities in Africa, EQUALITY via correspondence.” outside of SA. In 2019, The company wanted her to make we opened up Allianz in Nigeria her way through most of its divisions and that was a fantastic experience. to understand what products it sold Every now and then we also travel to and how it looked after its clients, and Munich in Germany where we meet for 24 months she did exactly that our colleagues to share ideas.” under the mentorship of Stuart Cox. In the sixteen years that she’s “Eventually, I found myself in the been in insurance, Senzile has seen client servicing division where I had more women enter the industry – an to engage with clients on matters of industry that is still male dominated. insurance and risk management. I also “I’ve sat in many boardrooms where spent time with Emerald Risk Transfer, I’ve been the only woman. I’ve had one of the biggest underwriting the experience in meetings where managers in SA. I went on my first site my voice wasn’t heard. I had to visit with Chris Potter to MonteCasino learn to be confident in who I am when it was being built.” and feel as though there’s a purpose Senzile then had the opportunity to and there’s a reason for me to be in work for a mid-size brokerage. “My that boardroom.” boss and mentor at the time, Tony Women, she says, are definitely Webster, presented me with a task moving into the industry. “This that enabled me to find my passion is fantastic – the industry has for business development. I worked progressed when it comes to gender

transformation, as far as I’m concerned.” Senzile credits the men that have been in her life to provide support and mentorship. “As I mentioned earlier, I was mentored by Stuart Cox at Alexander Forbes. He was my inspiration. When I moved to the mid-sized broker, it was Tony Webster. At Allianz, I moved in to join a team that included our CEO Thusang Mahlangu.” Putting more women into leadership positions in SA starts with equality, Senzile adds. “I believe that first and foremost, women need to be treated as equals. We can also do a lot more in terms of supporting women with young families who may need to leave work to attend events like the school’s sports day or ballet recitals, amongst other things. That should be allowed. Fortunately, Allianz is very open minded about things like that and very much in the 21st century.” In the past she wasn’t open to mentoring, because she believed that she needed to do and learn so much – but that has changed. “I’ve reached a point where I want to engage in conversations, especially with the younger generation, to understand their challenges and how to assist them. We need to get people to move away from being one dimensional about their careers. Not everybody is going to be a CEO or CFO. There’s a lot that people can achieve within the financial services sector without always chasing the top two positions.”

She believes that young women considering a career in insurance should seize all opportunities. “Don’t only think about the administrative side or the client servicing side. Think about things like risk engineering. I toured sites with risk engineers in my career and what I saw was spectacular. The insurance industry attracts doctors, accountants, just about anybody. It’s a wonderful industry to be part of.”

Senzile Ndlozi, Business Development Manager, Allianz Global Corporate & Specialty Africa

DO YOU WANT TO GROW YOUR BUSINESS? Allianz provides risk consultancy and insurance solutions to enable you to grow your business. From JSE listed and Fortune 500 companies to medium sized businesses. We provide smart answers to your largest and most complex risks. To expand your business, speak to your broker or visit agcs.allianz.com or call + 27 11 214 7900. Allianz, Dare To. We’re with you.

Terms and conditions apply. Allianz Global Corporate & Specialty (AGCS) SA Ltd, (Registration no 1961/000150/06), is an authorized financial services provider, FSP 16722.

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WOMEN’S MONTH FEATURE

CLAIRE SHERWOOD Head: 27four Umbrella Fund, 27four Group

31 August 2020

Women and COVID-19 – the most affected and the most effective

he COVID-19 pandemic is having farimpacted through the local and global lockdowns reaching consequences on every aspect of and will be slow to restart. These jobs are often on life globally, and the pre-existing inequalities the lower end of pay-scales and open to exploitation across society are being highlighted like never and job insecurity. before. One of the significant societal gaps being While women may make up a significant portion exposed is the gender gap. of the workforce in many sectors, they are most often This vulnerability stems from a number of factors under-represented in the leadership structures, with and historic norms. Gender-based violence has little to no input in the policy or decision-making increased due to the lockdown, with processes. In a 2019 survey by Credit little help available for vulnerable Suisse of 3 000 companies over 56 GENDER-BASED countries, it was found that only 5% had groups. Women are at an increased risk of infection from the virus as VIOLENCE HAS female CEOs. In government leadership, they make up approximately 70% of women only make up 7% of this INCREASED the healthcare workforce1 – putting group worldwide (Inter-Parliamentary DUE TO THE them at the frontline of the response Union, 2019). The skills, expertise and to the pandemic. The long-term viewpoints of women are being left LOCKDOWN closure of schools, the additional unheard in much of the world. childcare and home-schooling responsibilities for In stark contrast to these vast groups of vulnerable most mothers (with South African women spending women with little voice, is the highly effective way up to eight times more time on childcare than men2) that leaders like Prime Minister Jacinda Arden, in conjunction with working from home, is placing Chancellor Angela Merkel and Prime Minister Sanna substantial pressure on the household. Marin have managed the crisis in their countries, Women also make up a large portion of the compared to many of their male counterparts. informal employment sector and the travel and Their success has been attributed to their ability tourism sector, both of which have been severely to enlist advice from a diverse group of experts

and employ more participative approaches to discussions and decisions. In an interview with IG.com, speaking about why women are succeeding through this crisis, Savannah Maziya, founder and executive chairperson of Bunengi Investment Group, said it best: “Women are meant for this” and “when crises come, that’s when you really see us, and we don’t really look for any kind of credit, we just get on with it and get it done and make sure everyone is acknowledged.” If so few women in power can have such an impact, imagine what can be done if we allow more female voices to be heard. Let us throw out the traditional rule books and look for solutions from those on the ground. Women at the core of the fight against COVID-19 crisis – Organisation for Economic Cooperation and Development 2 Women-headed households and COVID-19 – Elena Moore 1

Claire Sherwood is Head of the 27four Umbrella Fund, helping employers match expert and independent advice for employees and developing individualised plans for achieving best possible retirement outcomes, as well as covering life event risks using the most appropriate insurance products.

Men vs women: Who’s better prepared for unexpected expenses?

recent survey by the UK-based financial services company Aegon shows that men are more prepared for unexpected expenses than women. According to the survey, 30% of men are confident that they can cope with a surprise expense compared to just 21% of women. However, the reverse appears to be the case in South Africa. A Budget Insurance survey revealed that 54% of women save for emergencies or unexpected costs, compared to 46% of men. The current COVID-19 crisis has highlighted the importance of emergency savings and savings in general. With businesses closed or operating at reduced capacity under lockdown, millions have been forced to draw on their savings or go into debt just to make ends meet. Prem Govender, chairperson of the South African Savings Institute (SASI), notes that those who had an emergency fund at the beginning of the year have weathered the lockdown storm better than those without. “Our focus has to be on building financial resilience to help during such times and helping people learn how to stretch their funds,” she says. Susan Steward, Senior Marketing Manager: Budget Insurance

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Susan Steward of Budget Insurance says that while saving in the current environment may seem an impossible task, there has never been a better time to sanitise your budget so that you can start building up emergency funds. “Your budget may be stretched to the maximum but you can start building good money habits now that will form the foundation for a secure financial future,” she says. Money habits you can adopt now • Budget, budget, budget. Use a notebook or even an Excel document to keep track of your expenses and income each month. Note down every single time you spend money – including small purchases such as coffee or chocolates. • Review your budget. A budget is not a static document but needs to be reviewed regularly. Look at which costs can be cut to save money. As you pay off one debt, for example a store card, divert that repayment to your next debt, such as your credit card. Pay off the debt with the highest interest rate first. • Why pay when you can get it for free? Cut out unnecessary expenses. For example, join your local library so that you don’t have to buy as many books. Buy a filter jug and drink tap water instead of paying for bottled

water. Carry a packed lunch from home rather than buying an expensive sandwich at work. • Curb the lifestyle creep. This is sometimes easier said than done and will require discipline on your part. For example, you don’t need takeaways when there’s nothing wrong with a home-cooked meal. Rather allocate the extra funds towards your savings. • Pay yourself first. It is a common mistake to think you can pay all your expenses and then save what is left. Nine times out of ten, there will be little to nothing left because you have used the money available to you. Rather set up a debit order for your savings. R100 a month becomes R1 200 over a year and you can increase the amount gradually. • Tax-free savings accounts. Take advantage of these savings vehicles that encourage you to save by reducing your tax. The current limit is R36 000 per tax year and R500 000 over your lifetime that can be invested tax-free. These accounts are available at banks and investment companies. “It’s never too late to learn good money habits. While the current environment may not be conducive to saving, changing your financial behaviour can easily set the tone for successful saving,” Susan says. Prem Govender, Chairperson, SASI

WOMEN’S MONTH FEATURE

31 August 2020

A ‘happy accident’ provided a start to a successful investments career

EO of PSG Asset Management, Anet Ahern, CFA, tells MoneyMarketing that she got into the investment industry by accident. “We didn’t have the kind of career counselling forty years ago that we have today,” she says. Anet studied business science. “I had a fantastic economics tutor, Gigi van Zyl, who, forty years later, is still a good friend. She was my first boss as well, so we’ve had a longstanding connection.” Anet wasn’t sure about what she wanted to study at university. “I had so many choices – weighing up music, languages and commerce. I registered for something quite general and after chatting to my economics tutor, I realised that a general degree seemed a bit ‘directionless’.” She changed to business science in her first few weeks, taking courses in economics and marketing, but ironically not finance, and graduating a year before the Rubicon speech. “Things were awful at the time. Politically, South Africa was in a bad way and the financial winds were blowing. I didn’t find a job until well into the year after I graduated, much like the graduates now. To be honest, I would have taken anything just for the sake of finding a job.” Anet’s father was interested in investments, but as he was an architect, there was little stock market talk at the dinner table. “I had to make a choice between merchandising and a job as the assistant to the assistant in the trading office at Allan Gray,” she says. Anet took the job in the trading office and immediately found it

exciting. “I’ve been fortunate as I’ve never really had the same role for more than a few years because there are so many opportunities in the industry.” One important bit of advice she has for anyone entering the working world is the value of sticking to one industry. “The investment industry in particular is not a career path you can easily ‘dip in and out of ’, but this is true of many other vocations. Your real value comes to the fore after about ten years of establishing yourself in one industry. She became aware of the CFA qualification around 1989. “It seemed to be the qualification needed to get ahead in the industry, so I registered but initially didn’t tell anybody at work in case I failed.” She nevertheless started studying and three years later became a CFA charterholder. She says the qualification is particularly difficult due to the volume of work, especially if one is studying and working at the same time. “Companies have become a bit more lenient in terms of study leave. I certainly didn’t have very much at all – two days per year. It was really three years of not taking a proper holiday. I was on the trading desk at the time and we would often trade overnight in New York. The only time I could study was very early in the mornings, on weekends and when I was on leave. I often felt as if everybody was on holiday except me! But it was worth it in the end.” Anet believes that the investment industry attracts certain personality types. “You need to be quite assertive and open to both scrutiny and criticism.

You need to be very resilient. It’s something that may come naturally to some people, both men and women, but I know lots of people who have tried to get into the industry but haven’t lasted.” She says that she’s been fortunate in that most of the bosses she’s worked with have been supportive and willing to give her opportunities, “right from my very first boss, a woman, to Allan Gray himself.” Anet doesn’t think that most investment principles will change much after COVID-19. What may change is how economic growth in South Africa is funded: “There may be a broader spectrum of instruments that we can invest in.” She cautions those investors who recently opted out of the market during the March crash. “Getting out may look right for a while, but reentering the market is something that many investors get wrong. When we look back in a couple of years, some investors may have done better by doing nothing during the coronavirus market panic. Taking some risk off the table is one thing, but making radical changes, especially during volatile times, is fraught with danger. Rather think long term and focus on managing Anet Ahern, your behaviour.” CFA, CEO, PSG Asset Management

LET’S MAKE THE WORLD OF FINANCE AS DIVERSE AS THE ONE WE LIVE IN. LET’S MEASURE UP. Diversification is a hallmark of an effective investment strategy, but too often the investing profession fails to apply that approach to building teams. Through our Women in Investment Management initiative, scholarship programs, and other efforts, CFA Institute advocates for diversity in our industry. Let’s stop talking about diversity and actually be more diverse. Demand the best. Demand a CFA charterholder. ®

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WOMEN’S MONTH FEATURE

31 August 2020

Analysing the numbers leads to forward-thinking strategies

ne often hears the phrase by Oprah Winfrey, “Create the highest, grandest vision possible for your life, because you become what you believe.” Tiffany Boesch, Chief Financial Officer (CFO) at PPS, tells us more about how being a forward thinker has contributed to her becoming a force to be reckoned with in the financial services industry. Choosing finance After discovering at school that accounting came naturally to her, Tiffany pursued a Chartered Accountant qualification and completed her articles. “Apart from the required number crunching, the accounting concepts and financial reporting, I was most intrigued by the analysis of what the numbers had to say. They tell a story, influence decision-making and make you think differently when it comes to strategic foresight or analysing a project’s credibility.” Tiffany was employed by an insurance brokerage as a junior accountant in 2000 and by 2004 she was promoted to a financial director, making her one of the youngest

directors of a JSE-listed company at 29. In 2007, she joined PPS as a CFO. “My career goal was to become a CFO for a reputable company. I did not expect to achieve this within five years of qualifying, though!” says Tiffany, laughing. Being a determined person, she is making the CFO role a real meaningful contribution to the business; more than just the person responsible for the numbers. What resonated with her about PPS was the ethos of mutuality, being able to make a difference to the members through her role and contributing to the financial sustainability of the business. Getting the mindset right While the traditional role of a CFO does not necessarily incorporate legal, risk and compliance management, what appealed to Tiffany’s passion was developing a greater understanding of each. She elaborates that being able to advise the CEO, Executive Committees and Boards takes courage and confidence in one’s abilities, because at times one may need to be the dissenting voice. “It is also important

Economy can be transformed through women’s involvement

ntil women have access to equal opportunities, representation and gender transformation will remain issues that are close to my heart. It is through the involvement of women in every aspect of society, including the financial industry, that South Africa’s overall economy can truly become inclusive and transformed. The current generation, and those to follow, are fortunate to have gender equality embedded in our Constitution. The captains of industry that have inspired me, such as Gloria Serobe, Wendy Lucas-Bull and Monhla Hlahla, are a reminder that the future looks promising. They remind us that women can take advantage of South Africa’s leading legislation in boldly chartering their futures. As an increasing number of women gain access to the economy, we are going to need targeted products and services for this untapped segment of the market. The financial services industry, as intermediaries in all aspects of the economy, is well placed to lead the development of products and services targeted towards women. My advice to young women starting out in the financial industry, is to seize the exciting opportunities rearing their heads in our sector, by influencing the products that will be consumed by arguably the largest and most under-serviced demographic in our society. Reflecting on my own career, STANLIB has invested heavily in my journey as a credit portfolio manager. Making it possible to utilise my home-grown skillsets Thuli Kumalo, to raise and direct more funds Portfolio Manager, towards the upliftment of women Credit in society and the economy. Alternatives, STANLIB

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to remember that, as a CFO, you must hold the line and interrogate what the numbers are telling you, while balancing this with forward thinking to see the opportunities that an innovative thought, a new business idea or product represents to the company.” To succeed, you need to be passionate about what you do, take initiative and carve out your place. “Ultimately, this leads to innovation and creating the opportunities for the business to grow, as well as developing your own capabilities.” Since joining PPS, Tiffany has been actively involved in multiple roles, including the development of the efficiencies and high governance standards of the finance division, introducing group risk and compliance units, and heading up the local team that started PPS Australia. Breaking barriers Whether you are an established career woman or breaking into the financial industry, having the desire and earning the trust of your colleagues will pay dividends. Here are some lessons Tiffany has learned over time that will help

readers manage their careers wisely: • Work hard. Completing tasks to the best of your ability will reward you in future • Don’t take your gender as a weakness or a ticket to get you where you want to be • Embrace your diversity. Women bring inherent qualities such as intuition and a different way of thinking to the table • Put your name in the ring. You can proactively ask to take on a project if you believe you are able, or want to develop your capabilities in other areas of the business • Take accountability and responsibility • Remember, ask for the promotion if you believe you are worth it • Most importantly, be you. Too often we limit ourselves by trying to be accepted or trying too hard to fit in.

Tiffany Boesch, CFO, PPS

Diversity adds strength Business is becoming increasingly committed to gender equality, but progress will remain slow unless subtle blind spots are acknowledged and actively altered, contends Liz Kolobe of Agile Capital.

espite strides in gender equality in the workplace, considerable challenges remain for women to advance in business, particularly in the finance sectors. “Women are still up against a considerably daunting historical legacy,” says Liz Kolobe, principal deal maker: Agile Capital. A concerted drive and genuine commitment to deliberately prioritise diversity in senior positions is required. “Contrasting such perceptions, numerous studies verify the improved performance of companies enjoying the leadership of diversity candidates, both regarding race and gender,” says Liz. As research has shown that companies with greater gender diversity perform better, it makes financial sense that businesses look at strategies of how to best attract and retain female talent. The practice of hiring on qualifications only has long been superseded by a real regard to bringing a different set of skills and strengths to an executive team. Women bring a different perspective to business. “Unless we make a concerted and collective effort to develop the industry’s next generation of female talent and simultaneously encourage

women to enter our space, it’s going to take far too long to entrench a more inclusive industry and ensure that gender diversity is implemented,” says Liz. Historically, the collective finance industry has been slow in this area, but things are changing. This is something that needs to be driven not only by the finance sector itself, but also by clients. “Ensuring that women are part of the executive team and in leadership roles is not just about making business sense, it also makes sense on a socio-economic level. It makes a difference in the lives of the women in your immediate circle – at home, at work and in your community,” explains Liz. Additionally, with more women-managed and -owned solid successful business emerging in South Africa, it’s important that they are able to find financing partners they can work with – ones that have a clear understanding of what diversity can bring to the board.

Liz Kolobe, Principal Deal Maker, Agile Capital

WOMEN'S MONTH FEATURE

31 August 2020

A problem solver with a passion for financial planning

elane Bezuidenhout, CEO of the Financial Planning Institute of Southern Africa (FPI), was introduced to the world of financial planning when she took up a job opportunity at Liberty Life. “I grew up in a very poor household and there was no money for me to study after I matriculated,” she tells MoneyMarketing.” My parents did try to put me through Technikon where I began a PR course, but six months into my first year I had to leave because there were no funds for me to continue my studies.” Lelane says she hopes that her story will give encouragement to young women hoping to make a career change. “If your parents don’t have money, it doesn’t mean that you’re going to get nowhere in life. There’s always an option, as long as you have the will,” she adds. As she is artistic, Lelane then became part of an art team, decorating hotels, but there was little work in the artworld in the mid-90s so she started a job in the motor industry, but was retrenched. “That was a good thing, as the motor industry was never my passion – it was just a job.” In 1998, Lelane took up an opportunity at Liberty Life. “That’s when my love affair with the financial services industry began.” She found her willingness to solve problems helpful, as she was very soon dealing with complaints and handling regulatory matters. “People thought I was crazy when I said that I liked handling FAIS Ombud complaints, but being artistic, I would always look at a problem and ask: How can we resolve this? How do we learn from this? And how do we put controls in place to make sure that the problem doesn’t recur?” Lelane is – to this day – thankful to Liberty Life, where she was able to start studying through the SETA system, in order to move up the pathway to becoming the Certified Financial Planner® professional that she is today. She adds that she had the help of two wonderful women: her manager at Liberty Life, Famida Singh, a CFP® professional, as well as former chairperson of the FPI board,

and Prem Govender, who did some training at the FAIS Ombud’s office. “I was then finishing off my postgraduate diploma in financial planning. Prem talked to us about becoming a CFP® professional and motivated me into becoming an FPI member. The rest is history.” Initially, Lelane found the financial planning industry very male dominated. “As a woman, I had to continuously speak louder to get attention, but that has changed.” Today, over 30% of the FPI’s members are women. “There’s a greater awareness amongst women who work in, for example, administrative roles in the financial services industry, that they can become CFP® professionals. It’s about aligning your mindset and just getting on that journey. And you need to make sure you have a calling and a desire to deal with people, because at the end of the day, you’re a financial coach. You need to have empathy.” Lelane is excited about the FPI’s 2020 Financial Professionals Convention on 27 and 28 October, when several women will address the virtual gathering, including the FSCA’s Caroline Da Silva; Michelle Hoskin (also known as Little Miss WOWW!) from the UK’s Standard International Ltd; international business speaker, Juanita Vorster; Robyn Clay and Nine Lowes, both of Linktank; and Mary J. Fourie, who is one of the FPI’s professional members. “When we decided on the Convention’s theme, Future-proof your Business, we weren’t in a COVID-19 environment, but the theme has now turned out to be very relevant,” Lelane adds.

A ‘nothing is impossible’ attitude

s an actuary in a male-dominated field, Alisha Corbett, Head of Umbrella Solutions at Liberty Corporate, has applied her unwavering commitment with determination and a ‘nothing is impossible’ attitude to forge a successful career. Having spent the majority of her career as a marketing actuary, Alisha has extensive experience in environments that centre around the customer value proposition. “As a marketing actuary, I have learnt the power of effective marketing and communication, which I have combined with an actuary’s analytical, statistical and mathematical skills to develop strong customer value propositions that really serve clients,” she says. She joined Liberty Corporate in July last year. “Given my passion for serving clients, Liberty Corporate is a good fit as it is committed to partnering with employers to take care of their employees,” she says. “An employer’s business success is largely driven by the success of their employees – therefore, when employees feel cared for, they can help move their employer’s business beyond expectations.” Alisha is responsible for the strategic design, implementation and packaging of Liberty’s Umbrella Fund solutions, including delivering on various functions within the customer journey. Previously, she has held various actuarial marketing roles, including lead actuary for Digital Product Strategy and Head of Technical Marketing at Discovery Invest. She was responsible for product development at Old Mutual Alternative Solutions and has a deep understanding of both the retail investments and risk solutions space. Alisha qualified as a Fellow Actuary in April 2014 and is a member of the Actuarial Society of South Africa. Of the 1 461 actuaries in South Africa, only 105 are non-white females*. *Based on the 2019 Actuarial Society of South Africa demographics

Lelane Bezuidenhout, CEO, FPI

Alisha Corbett, Head: Umbrella Solutions, Liberty Corporate

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WOMEN’S MONTH FEATURE

31 August 2020

Five pieces of advice for any woman wanting to advance in the financial services industry CAROLINE NAYLOR-RENN COO, INN8

resh out of university, I applied for my first job through an advert in the London Evening Standard newspaper. It was to be an admin assistant for a financial adviser who worked out of a dingy office in Kings Cross, but I saw it as a fabulous way to learn about investment products. After six months, my boss sat me down to explain what I needed to know about something called a ‘glass ceiling’ that would no doubt affect women like me. Needless to say, I moved on quickly from that job. Even though I was introduced to the challenges of being a woman in financial services very early, it allowed me to seek opportunities that wouldn’t limit my career growth because of my gender and I was lucky enough to go on to work with many great leaders, both men and women, as I advanced in my career. You aren’t always able to realise your true ability alone, and having colleagues and mentors who believe in you and

I WAS LUCKY ENOUGH TO GO ON TO WORK WITH MANY GREAT LEADERS, BOTH MEN AND WOMEN, AS I ADVANCED IN MY CAREER support your growth are invaluable to your career. I will forever be grateful to one such person who told me that, even though I had great technical and operational knowledge and was a good leader, I would not achieve my career ambitions if I didn’t understand information technology (IT). He gave me the opportunity to move into an IT role, which at the time I had no interest in – but he was right, and it was one of the best decisions I have made. As if changing the status quo was not enough, next came the challenge of children. I took off six months after the birth of my first son and the same when I had my twins. Going back part-time seemed like a good idea but I found it very stressful as a full-time job doesn’t fit into three days, no matter how hard you try! As my offspring grew older and (some) balance was restored, I thought about whether I should just ‘settle’ for an easy life role or

whether I should push on. Career opportunities presented themselves, but I worried I wouldn’t be able to retain the balance between work and home. I said ‘no’ to the first few and, although I was concerned I had missed the boat, when I eventually felt ready again for a new challenge, the opportunities presented themselves. You have to know when to be kind to yourself and trust that eventually you will be strong enough to continue. I, too, have been a victim of some of the fallacies we convince ourselves are important in order to become successful, including: • The need to act like a man – thinking that learning to play golf or keeping up with a relentless drinking and travelling regime would further my career path • Believing that hard work is enough – that just being good at your job is enough to get you noticed and rewarded • Pretending to be invincible – thinking that asking for help is a sign of weakness. Yet we need to remember that, as women, we have our own strengths that add considerable value to companies and their purpose. Some key points of advice for any woman trying to further her career in financial services and IT include: 1. Stay visible. Be brave and speak up in meetings. When you have something valuable to add to the discussion, just say it. Being

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visible is a result of your perceived technical and leadership skill but it also involves access to ‘stretch’ assignments or high-profile projects, which in turn allow you to be recognised by influential senior leaders. 2. Never stop learning. I am not a great fan of formal training courses, but I am a big believer in books and podcasts to feed the mind and expand your skills. 3. Support each other. There are plenty of women around you who are tackling the same challenges and thinking about the same concerns. Life is too short to not try to help and support each other. 4. Stretch yourself. Roles that seem like a sidestep or that take you outside your comfort zone are always an opportunity to learn and progress your career further. 5. Network consciously. I am always looking to connect with inspiring people who I can learn from and, in turn, I love mentoring other ambitious women around me.

challenged and valued. And remember, be yourself! Everything about your past, present and future experience adds to the value you can bring to a business. Do not let anyone make you believe there is a glass ceiling you cannot smash through – and if they try to, prove them wrong.

What inspires me now is working with smart and passionate people who believe in a common vision while building an innovative and dynamic culture where the team can enjoy work while feeling both

WHAT INSPIRES ME NOW IS WORKING WITH SMART AND PASSIONATE PEOPLE

Caroline NaylorRenn COO, INN8

WOMEN'S MONTH FEATURE

31 August 2020

‘It’s womanliness that sets female advisers apart’ Liberty Advisory Partner, Maxine Muller, is also a UCT accounting graduate and, although she was set to become a chartered accountant, she discovered financial planning – and never looked back.

“

Throughout my studies, I felt there was something lacking,” Maxine says. “Although I love numbers and business, I just didn’t understand how I was going to impact those around me. I had thought of teaching but ended up studying accounting because I felt I needed some type of security when it came to my future goals.” When she completed her undergraduate degree and moved on to her honours degree, she needed to find a job, as well as study. She came across financial planning and found that it fitted in well with the flexibility to structure her days where she could both attend class and build her planning practice at the same time. “I then made the decision that this was a godsend, this is what I was supposed to do with my life. I could use my degree and my background in tax and company law to help others.” While more women are entering the financial advice profession, Maxine

says the problem is that some don’t stay very long. “I think they try to fit into a mould of what they think an adviser is supposed to look like, and to be like their male counterparts. For them to stay in the profession, it’s necessary to realise that it’s their womanliness that sets them apart.” Maxine finds that more and more women are asking her how to structure their finances for their families as they have now taken on the role of the breadwinner due, sometimes, to the fact that their husbands are entrepreneurs involved in a start-up business. While there is a lot more that women planners have to do to be taken seriously, she adds that once she has lived up to the promise of being there for her clients at every step in their financial lives, trust has built up and they become clients ‘forever’. Maxine has a family of her own to take care of and she says that over the last three months she’s learned how to handle her five-year-old’s home

schooling, being a full-time mother and a wife, as well as an employee. “It’s definitely challenging, but if you have the support of your family, it works.” She believes that the COVID-19 lockdown has been far more difficult for women given the many roles that they assume. She also finds that the role of the housewife is an undervalued one. “I don’t think that our partners understand the extent of what it is that women in the home do and the planning for eventualities if they fall ill, when a nanny will have to be employed to look after the children and a helper employed to clean the house. I prefer to call a housewife a home executive.” In Maxine’s experience, gender bias still exists in that she is sometimes mistaken for a secretary in her email correspondence. “I have had to ask them if they’ve checked my e-mail signature and to tell them that I’m actually the financial adviser!” She believes that to encourage gender diversity, women must acknowledge that they need to assist and mentor other women. “Once we straighten each other’s crowns, we won’t have to jump through so many hoops. If we have more women at the table, and more

female opinions and contributions, this will normalise our presence in the corporate space.” Maxine is very excited by Liberty’s Blue Table Sessions initiative made up of a six-part video series on Liberty’s YouTube channel. “These are a series of online conversations intended to show the value women bring to the economy in a time of COVID-19 and beyond,” she explains. “Liberty’s Blue Table Sessions will illustrate that Liberty is ever-present in a woman’s journey towards financial freedom. It’s about having real conversations with our clients, making sure that we are there to assist them in finding solutions through these unprecedented times, that will aid them in sticking to their long-term financial plans.”

Maxine Muller, Advisory Partner, Liberty

Boosting financial inclusion for women in a post-coronavirus world Millions of women around the world have lost their jobs due to the shutting down of economies in both rich and poor countries. This is, however, the opportunity for companies to create the foundation for long-term alterations that could assist women to recover from the COVID-19 knock-on effects. According to a new report, Advancing Women’s Digital Financial Inclusion, written for the G20 Global Partnership for Financial Inclusion by the World Bank Group, digital financial services have provided opportunities for millions of women across the globe. However, around one billion women do not have formal financial services. The report highlights ten policy options designed to promote women's digital financial inclusion globally: 1. Support making official identity systems and documents universally accessible to all women and girls. Having an official identity (ID) (either documentary or digital) is often a requirement for obtaining regulated financial and mobile services. Globally, one in five unbanked women say a

and appropriate measures to ensure data privacy and security. Financial consumer protections reduce the risks from digital finance by making it easier to identify whether a given product/service is fit for its intended use, fairly priced and secure. 7. Reform discriminatory laws and take actions to lack of ID is one of the reasons they do not have promote women’s full economic and financial an account. participation. Studies have consistently found that Facilitate women’s universal ownership of mobile legal barriers to gender equality correlate with low phones. Financial services increasingly depend levels of women’s financial inclusion and labour on access to technology, such as mobile phones, force participation. tablets, computers and other devices. However, a 8. Encourage and provide appropriate incentives gender gap in mobile phone ownership exists in for financial service providers that may increase many countries. the representation of women working in financial Promote efforts for deploying infrastructure and institutions and financial access points and in protocols for government digital payments to decision-making positions. Research shows that women that are competitive and interoperable women use financial services more often when with private sector payment systems. Keys to they are served by female bank employees. building an inclusive digital payments ecosystem 9. Support national financial inclusion strategies are competition and interoperability – the ability that address both women’s and men’s experiences to send money to or receive it from another and needs in all aspects. Many governments have person even if they use a different financial adopted policies explicitly aimed at increasing service provider. financial inclusion. These policies can improve Support mechanisms for enabling government access to and use of digital finance, including by payments to women to be directly deposited into women, by taking a comprehensive, inclusive digital accounts that are easily accessible and under approach that involves all relevant stakeholders the women’s control, allowing a range of digital in the public sector, the private sector and financial transactions, including payments to technology solutions. governments as well as firms. 10. Support work towards financial institutions Leverage technology and behavioural insights to providing anonymised sex-disaggregated data strengthen women’s digital skills and financial as part of reporting requirements, make these capability. There are many potential benefits for data available publicly and use these data to women from access to, and use of, digital financial address the needs of women in product design services. At the same time, there are also risks that and/or marketing. To improve women’s financial need to be managed. inclusion, such as holding an account, accessing Support comprehensive consumer protections that credit or increasing savings, sex-disaggregated address women’s needs, including requirements to data may be needed to create a baseline, establish disclose product prices and terms in clear language targets and monitor progress.

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RISK

31 August 2020

TONY SINGLETON CEO, Turnberry Management Risk Solutions

Maximising the value of group gap cover – do you have the right provider?

Group gap cover enables organisations to offer their employees gap cover for medical expense shortfalls and out-of-pocket expenses, at a preferential rate. It is also an excellent way for employers to differentiate themselves from their competition, and is a valuable addition to a basket of employee benefits. However, when it comes to choosing a gap cover provider, it is important to remember that not all gap cover offerings are equal. There are a number of factors organisations should take into account when looking to offer gap cover to their employees. How streamlined is the back-office service? A strong ‘back office’ is critical for effective communication with the gap cover provider. Nothing is more frustrating for employees than dealing with a busy or complicated call centre, missing documentation or a lack of communication around claim status. The claims process also needs to be simple and easy to understand. The gap cover provider should have extensive experience and financial services expertise. If they do not, or they deliver poor back-office service, group gap cover will become an additional operational burden on the Human Resource (HR) department, who will be left to handle their shortcomings. Who is the insurer? All gap cover policies are underwritten by insurers. Organisations should check who underwrites their group gap cover. Insurers are regulated by the FSCA (Financial Sector Conduct Authority). What rates, waiting periods and benefits are being offered to your company? Is the gap cover provider offering the standard rate or a preferential rate for your employees? If your organisation has decided to implement compulsory gap cover and there are more than 20 employees, then a reduced rate should be on the table. Likewise, you should also be offered less stringent underwriting than on individual policies for waiting periods compared to the standard waiting periods. When it comes to benefits, it is crucial to ensure that the gap cover policy chosen supports many different medical aids. If your organisation offers medical aid as a benefit, the gap cover then needs to be able to match with multiple plan types within your chosen medical scheme provider. This is essential to ensure maximum coverage of medical expense shortfalls for all employees. It is essential to review the core benefits on offer, as these are the heart of the offering and where the most value is gained.

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One specific item to look out for is cover for MRI, CT and PET scans. If these are done out of hospital, they are not covered by some medical aid plans. If they are covered, they are often subject to co-payments or sub-limits, which means that in the event of an employee requiring one of these scans, they will immediately be out of pocket for these benefits. In addition, not all gap cover providers will cover these scans if there is not benefit from the employee’s medical scheme. It is hugely beneficial to employees to ensure your chosen group gap cover provider offers comprehensive coverage for a wide variety of different medical aid plans. What added benefits are on offer? Additional benefits enhance the value of the gap cover offering, ease the financial burden on families and provide companies with more ways for them to assist members in furthering their coverage. Some added KEEPING EMPLOYEES benefits HEALTHY SHOULD BE on offer include a A TOP PRIORITY, AS once-off HEALTHY EMPLOYEES payment for the ARE HAPPIER AND first-time MORE PRODUCTIVE diagnosis of cancer benefit and trauma counselling in the event of a critical illness diagnosis, the death of an immediate family member or being a victim of a violent crime. A critical illness benefit pays out in the event of death due to a critical illness other

than cancer. A personal accident benefit pays out in the event of accidental death or permanent and total disability due to an accident. International travel insurance covers travellers for emergency medical expenses overseas. There is also a medical contribution waiver that can cover up to six months medical aid payments in the event of the accidental death or permanent and total disability due to an accident of the main medical scheme member. Similarly, a gap premium waiver pays the premium of the gap cover policy for up to a year in the same circumstances. Group gap cover should be mutually beneficial Keeping employees healthy should be a top priority, as healthy employees are happier and more productive. An additional benefit of group gap cover is that it can reduce or eliminate the need for small staff loans to finance medical expenses. Gap cover is a way of ensuring employees’ health is prioritised, as it eases the potential financial burden that often prevents people from seeking medical attention when they need it. Group gap cover with comprehensive coverage for medical expense shortfalls as well as additional benefits, benefits employees by extending their medical cover, and organisations by ensuring their workforce is healthy and minimising financial stress. Companies should speak to a financial adviser today and find out more about the benefits of this cover and how it could mutually benefit both the company and the employee.

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So ensure your clients’ momentum passes on intact. Contact your consultant today or go to momentum.co.za Terms and conditions apply. Momentum is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider. Reg. No. 1904/002186/06.

RISK

31 August 2020

Consumers and businesses tap into niche insurance solutions as economy bites

s the COVID-19 economy potential in-hospital tariff shortfalls on bites and consumers in-hospital treatment, which occurs scrutinise every aspect of their when specialists charge more than the discretionary spending, specialised rate at which medical schemes pay. and niche insurance products are Without gap cover, these shortfalls seeing a significant uptick in enquiries. would have to be paid directly from Consumers as well as business owners the consumer’s pocket. are looking to cut the fat, but at the “In many instances, these shortfalls same time, they want the absolute breach over R40-R50k, and in more certainty of financial protection in serious circumstances, shortfalls of specific ‘what if ’ and worst-case R100-R150k are becoming more scenarios. common. The same trend is evident “There is so much disruption and in the employee benefits space where uncertainty in every industry right employer groups are having to look at now as the fallout from COVID-19 the affordability of the health benefits is still making its presence felt and offered.” will continue to do so for months Schoeman says that another niche to come,” says Cornel Schoeman, product that has maintained volumes Chief Operating Officer of GENRIC and where he is seeing growth is Insurance Company. mechanical warranty insurance. “Everyone “Millions of South understands that Africans are choosing discretionary to drive their vehicles CONSUMERS AND spending has come for much longer and BUSINESS OWNERS are delaying new into sharp focus given the times we ARE LOOKING FOR vehicle purchases, find ourselves in, and CERTAINTY IN VERY which exposes them that insurance is one to the risks of ‘out UNCERTAIN TIMES of manufacturer area that is getting serious scrutiny in warranty’ breakdowns. household and business budgets. What In such circumstances, a mechanical has been very interesting as a trend, is warranty insurance policy covers the that while broad insurance coverage repair of your car due to mechanical like motor, household and business failures or breakdown once it falls assets covers remain under pressure, outside of its factory warranty period. other specialised insurance products For a low premium from around are seeing growth – notably in areas R150 per month, a major mechanical such as healthcare, including gap cover breakdown such as an engine, cambelt and health insurance, mechanical or turbocharger failure – which can warranty products, goods in transit easily top R20k or more in costs – will cover, as well as personal cybercrime be taken care of and you’re buffered insurance.” from these large and unplanned Consumers and business owners are expenses.” looking for certainty in very uncertain Specialised or niche insurance is times. They are also realising that designed for specific – and in some when budgets are as tight as they are, cases unusual – circumstances and it any sudden knock or loss, especially provides coverage for the completely one that is uninsured, could be a major unexpected. It is interesting to financial setback that they might not note that consumers and SMEs are recover from. specifically looking for solutions and “As just one example, gap insurance added peace of mind where they feel products are seeing significant growth most vulnerable. in enquiries as consumers focus on “Going forward, the value of travel their health and whether they are insurance is likely to see more focus, appropriately covered for a crisis. as a black swan event like COVID-19 There are two drivers here: firstly, has thrown into stark focus just how consumers and even corporates are vulnerable international and business increasingly buying down on medical travel is to a major catastrophe, and schemes and employee benefits due that these events are certainly no to affordability challenges, moving to longer in the realm of the unrealistic. more affordable ‘core hospital plans’. “Likewise, the huge growth in online In doing so, they are being advised shopping and transacting has seen to take up gap insurance to cover any South Africa hard hit by cybercrime

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and online fraud. While cyber insurance solutions exist for commercial entities, protection against cybercrime and fraudulent EFTs and online purchases for consumers is not commonplace.” He adds that GENRIC’s MyCybercare policy is one of the global leaders in personal cyber insurance policies and, as the new normal of online transacting settles in, is seeing a lot more traction from consumers anxious to protect their personal data and bank accounts. “Fraudulent online and in-app purchases, malware or viruses that harvest personal data, fraudulent EFTs and phishing scams are driving home the need for cyber insurance protection as a necessity for individuals, as important as they are for commercial entities,” Schoeman adds. Sasria – which provides insurance cover for losses caused by riots and political upheaval – is another specialised cover that policyholders of personal and business insurance need to ensure they have. Given the growing poverty, unemployment and social unrest that has been amplified by the lockdown, service delivery protests and riots are likely to increase in coming months, leaving property and assets vulnerable to losses that are not covered by traditional insurers. There are many other things that can cause major financial problems for businesses, and if anything, an event like the current pandemic has pushed small businesses to take a serious look at where their vulnerabilities lie. “One example is that of goods-intransit insurance. Thousands of SMEs transport valuable stock and customer orders to sites around the country without the protection of insurance against loss of their goods to accident, theft, hijacking, and the latest trend of truck looting. This overlooked but essential cover for any business that transports goods between sites has gathered a lot more attention over the last few months. A loss of cargo in transit, whether due to accident or criminality, could spell disaster, closure and reputational ruin for many businesses. Recent reports of truck looting and criminality has driven a

significant increase in enquiries for goods in transit insurance from operators who, up until now, have been operating without it.” At the same time, consumers who have bigger assets like homes and vehicles realise the need for insurance to protect their most valuable assets, but may be struggling to pay for it, and are looking at trade-offs. “A product like GENRIC’s Safe Homes policy embraces technology by using the Internet of Things (IoT) to connect to home devices like a geyser, as one example. A smart geyser device – which is provided free of charge with each Safe Homes policy – allows the user to firstly reduce their electricity costs by scheduling their geyser’s heating cycles, and secondly reduces insurance premiums by pre-empting risks such as a burst geyser and water leaks. These direct savings on electricity costs can easily amortise some of the costs of the monthly insurance premiums, and the reduced risk to the insurer typically means increased savings on premiums,” he says. Specialising in insurance gives policyholders a greater deal of comfort and peace of mind. People respect the value and certainty that specialisation provides at a time when everything else seems so out of control and uncertain. “We expect this trend towards specialisation and niche risk solutions to continue in our radically changed world where there is a far greater appreciation of just how unpredictable and far-reaching risk can be,” Schoeman adds.

Cornel Schoeman, Chief Operating Officer, GENRIC Insurance Company

EDITOR’S BOOKSHELF

31 August 2020

#IMSTAYING BY NATASHA M FREEMAN

JOY AT WORK BY MARIE KONDO AND SCOTT SONENSHEIN

In September 2019, Cape Town-based entrepreneur Jarette Petzer posted a video on Facebook. It was an emotional recognition of the difficulties faced by South Africa, as well as a heartfelt plea to nurture everything he loves about this country. Friends suggested that Petzer start a Facebook page to continue the conversation, and #ImStaying was born. Within weeks, 400 000 South Africans of every race, socio-economic and political background joined the page to tell their stories of everyday life – of beauty, of hardship and the magnificence of their fellow citizens – and to share stories across cultural barriers, which many had never crossed before. By the end of December 2019, the page had more than a million followers, and it continues to grow. Adhering to the maxim ‘Good Thoughts. Good Words. Good Deeds.’, this book is about South Africans creating social cohesion through storytelling – reaching out to each other to inspire real change in the country they love and want to see succeed, and shaping a new future out of a painful past. The book also provides another platform for the diverse voices and stories of the #ImStaying movement, as well as giving an overview of how this uniquely South African group came about and why it’s so important.

Marie Kondo’s first book on tidying the home, The Life-Changing Magic of Tidying, sparked a new genre of publishing and became an international bestseller. Now, for the first time, readers will be guided through the process of tidying up their work life. Whether you are working at home or if you have a dedicated workspace or office, if you properly simplify and organise your work life once, you’ll never have to do it again. In Joy at Work, KonMari method pioneer Marie Kondo and organisational psychologist Scott Sonenshein will help you to refocus your mind on what’s important at work, and as their examples show, the results can be truly life changing. With advice on how to improve the way you work, the book features advice on problem areas, including fundamentals like how to organise your desk, finally get through your emails, and find balance by ditching distractions and focusing on what sparks joy. Just as the key to successful tidying in the home is by tackling clutter in the correct order, Joy at Work adapts the inspirational KonMari Method for your professional life, taking you step-by-step through your working day so that you can identify the most joyful way for you to work. Once you’ve found order in your work, you can feel empowered to find confidence, energy and motivation to create the career you want and move on from negative working practices.

THE LAND WARS BY JOHN LABAND Perhaps the most explosive issue in South Africa today is the question of land ownership. The central theme in this country’s colonial history is the dispossession of indigenous African societies by white settlers, and current calls for land restitution are based on this loss. Yet, popular knowledge of the actual process by which Africans were deprived of their land is remarkably sketchy. This book recounts an important part of this history, describing how the Khoisan and Xhosa people were dispossessed and subjugated from the time that Europeans first arrived until the end of the Cape Frontier Wars (1779-1878). The Land Wars traces the unfolding hostilities involving Dutch and British colonial authorities, trekboers and settlers, and the San, Khoikhoin, Xhosa, Mfengu and Thembu people – as well as conflicts within these groups. In the process it describes the loss of land by Africans to successive waves of white settlers as the colonial frontier inexorably advanced. The book does not shy away from controversial issues such as war atrocities on both sides, or the expedient decision of some of the indigenous peoples to fight alongside the colonisers rather than against them. The Land Wars is an epic story, featuring well-known figures such as Ngqika, Lord Charles Somerset and his son Henry, Andries Stockenström, Hintsa, Harry Smith, Sandile, Maqoma, Bartle Frere and Sarhili, and events such as the arrival of the 1820 Settlers and the Xhosa cattle killing. It is essential reading for anyone who wants to understand South Africa’s past and present.

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IRRITABLE

Without this bit itâ€™s just a sudden onset ailment plaguing remoteworking mothers who have to meet deadlines, make lunches and master grade 5 math. The middle matters. Skilled financial advisers like you are not optional. You are a critical part of connecting what we offer, with what graduate professionals need. Visit pps.co.za or contact the regional office in your area.

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