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R44.00 (incl. VAT) Other African Countries R38.60 (excl.tax)December/January 2014/2015 Vol. 19 No.6

YOU CANNOT USE TODAY’S THINKING FOR TOMORROW!

OUR DISRUPTIVE ERA!

PATERNITY LEAVE PAINS?UNSEATING THE PALE MALE!A WORLD WITHOUT ADVERTISING...?

UNLOCKING AFRICA’S AVIATION

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1

25

3 4

CONTENTS

Subscribe to BusinessBrief online: www.bbrief.co.za follow: @bbrief1

REGULAR SECTIONS

LEGAL 40

TAX 44

n CASH CRUNCH CONTINUES!

n FAMILY BUSINESS FINANCE!

ASSETS & INVESTMENTS 52

n THE SCIENCE & ART OF VALUING SMEs

MANAGEMENT 18

n FISCAL CLIFF LOOMS!

n THE URBAN INCENTIVE

FINANCE & EQUITY 48 PROCESS & OPERATIONS 72

n ENERGY EFFICIENT BUILDING BENEFITS

BANKING & INSURANCE 56

VIEWPOINT 14

n BANKS MUST RESTORE TRUST!

n LEGITIMATE DEBIT ORDERS?

n OUR DISRUPTIVE ERA! YOU CANNOT USE TODAY’S THINKING FOR TOMORROW!

n UNSEATING THE PALE MALE!

n DANGER BENEATH THE WATERLINE!

MARKETING & SELLING 60

n A WORLD WITHOUT ADVERTISING...?

n BRAND MARKETING’S FUTURE?

EDUCATION & TRAINING 36

n E-LEARNING STEPS UP A NOTCH

n FAMILY FRIENDLY MBA?

HUMAN CAPITAL 64

n PATERNITY LEAVE PAINS?

INFORMATION TECHNOLOGY 68

n THE FIBRE LAND GRAB IS ON!

n YOUR SECURITY’S FUTURE

n THE CATALYST FOR STABILITY!n POSTAL SERVICE REDUNDANT?

FEATURE

ENTREPRENEURSHIP: START-UP SUCCESS 22

n YOUTH UNEMPLOYMENT SHOCK!

OTHER SECTIONS

n ALL THE LATEST GADGETS, GIZMOS AND OFFICE MUST-HAVES

BRIEFCASE 6

n EXQUISITE LOCAL DESTINATIONS

TRAVEL & LEISURE 10

n ALL THE LATEST EVENTS

n CONSULT OUR CONTRIBUTORS DIRECTLY FOR PROFESSIONAL ADVICE

SEMINARS & CONFERENCES 79

CONTRIBUTORS 80

n VERBATIM MEDIASHARE WIRELESS

n NUTRiBULLET NUTRITION EXTRACTOR

GIVEAWAY 6

n AN ARM & A LEG?

n ONE ENVIRONMENTAL SYSTEM REQUIRED!

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Innovate Stay ahead of the times by sharing and exploring cross-sector innovations with the industry pioneers.

Sustain Play your part in crafting the foundation for an industry that takes care of future generations’ environmental, social, political and economic interests.

ContributeBe part of the search for solutions to the challenges confronting manufacturing in the region, but especially the metals and engineering sector.

Electrical sector

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Product and service providers to the above

sectors

Government and private sectors

WHO WILL ATTEND? Decision and policy makers, current and potential investors, captains of industry, business owners, senior executives, managers, industry suppliers and other affected or interested stakeholders in the following sectors:

4326 BusinessBrief_275x210.indd 1 2014/11/17 11:07 AM

4 EDITOR’S NOTEE

Collapsing municipalities. Deteriorating infrastructure. Rife corruption. Petty squabbling. Rudderless leaders. Squalid CBDs. Rampant crime. Increasing murders. Violent strikes. Excessive force. Fallen heroes. Slaughtered rhinos. Enraged labourers. Burning streets.

Will the madness end? What will disrupt the status quo? Where can we invest for our future?

The smart money is on Africa. Everywhere, entrepreneurs are springing up and building businesses. Ideas spread exponentially as competition heats up, but the opportunities are vast and there is enough room for savvy individuals with the spark to make things happen.

Knowing what to do and how to do it isn’t enough. You need to do it. Too many ideas lie on dusty shelves. We can moralise and complain from armchairs or we can use our wits to

outsmart challenges, find opportunities and build businesses.

The world is a bizarre beast. Some of us are making money and living comfortable lives while others of us are in dire need of assistance. There is always inequality within society but below-the-breadline poverty is intolerable and outrageous. It can be eradicated if we

implement good governance and figure out how we can employ the most people without compromising efficiency and profitability.

To begin a venture is like nurturing a child – it is exciting and daunting daily – but the rewards are worth it when your child excels. Entrepreneurs require a healthy balance of passion,

patience, creativity, expertise, leadership and discipline. They must delegate effectively, have the initiative to act decisively with empathic understanding and be inured to

failure. Our feature, Entrepreneurship: Start-Up Success offers advice from experts with first-hand knowledge on what is required when running a business. The aim of your business must to be to fulfil a need in society – once this is accomplished the cash will follow.

The pace of change is picking up – it is exciting to be alive during such a tumultuous period in history as we can watch new technologies unfurl

and disrupt the status quo. The tsunami of technology will continue to steamroll old systems and process – it is imperative that we keep up. In

our cover story, Our Disruptive Era! You Cannot Use Today’s Thinking for Tomorrow! Graeme Codrington explains what can be done in

order to surf the biggest wave of modern times.

The future is hazy – will it be bleak or will it be sublime? The answers to our problems are readily available; we already have enough technical know-how to overcome just about anything. What we lack is the leadership to take us forward – we are forever stalled by endless roundtable discussions where fat-cats

deliberately deliberate drivel while people suffer. If we’re too arrogant to see our shortcomings and act only in our own interests,

there will be no salvation.

There is a lot to be thankful for to be sure and there are signs aplenty that we’re about to experience truly remarkable leaps forward. Many

good people are contributing to society in fantastic ways and sharing their knowledge for the benefit of others. Businesses of all kinds are represented in these pages with thought leaders who have insights that can help you take your business to the next level.

Please enjoy the read!

BusinessBrief December/January 2014/2015

Nicholas

5PUBLISHER’S NOTE PTHE TEAM

PUBLISHER James Scott [email protected]

EDITOR Nicholas Harland [email protected]

TECHNOLOGY & GADGETS Steven Ambrose [email protected] Tel: 083 601 0333

OFFICE MANAGER/ SUBSCRIPTIONS Jenny Horsman [email protected]

PRINTED BY United Litho (JHB) Tel: (011) 402 0571

ADVERTISING SALES Janine Levy [email protected] James Scott [email protected]

DESIGN & LAYOUT Bryan Maron Design Bandits [email protected] Tel: 083 460 3633

COVER DESIGN & CONCEPT James Scott Bryan Maron Cover image: Shutterstock

CONTRIBUTORS Please see our list of contributors on page 80

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EDITORIAL:Articles are published at the editor’s discretion, and are not linked to the payment of any consideration or to any obligation to place advertising. ADVERTORIAL:Published for a consideration, this material is provided by the client and does not necessarily reflect the views of the publication. It includes profiles, features, white papers, case studies, and thought leadership pieces. SPONSORED EDITORIAL:Written by an independent journalist, this material is published for a consideration, and includes profiles, features, white papers, case studies, and thought leadership pieces.

Editorial contributions are welcome, but the publisher cannot accept responsibility for unsolicited material. The editor reserves the right to alter or cut copy. Copyright: BusinessBrief Publishing (Pty) Ltd. All rights reserved. Requests to lift material should be made to the editor. While every effort has been made by the publisher to ensure the accuracy of the information contained herein, the publisher and its agents cannot be held responsible for any errors, or loss incurred as a result. The publisher advises that readers consult their financial and professional consultants before acting on any information. All material used has been submitted with the understanding that it is original, and the publisher accepts no responsibility for any misrepresentation in this regard. No consideration is accepted for any editorial published. Published articles are not linked to the placement of any advertising.

A COMMITMENT TO PROFESSIONAL PUBLISHING The publishers of this magazine are members of the Magazine Publishers’ Association of South Africa. They have made a commitment to: • Conduct business professionally and ethically at all times • Not misrepresent their experience or capabilities, or those of their

employees and agents. • Not make misleading claims or use terms which may be misunderstood • Treat as confidential all off-record information learned about the customer • Publish the magazine timeously • Open their distribution records for audit by the Audit Bureau of Circulation

PUBLISHING POLICY @bbrief1

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Compliance InstituteSouthern Africa

Financial Planning Institute of Southern Africa

Institute of Credit Management of South Africa

The Institute of Certified Bookkeepers

Institute of Management Consultants of South Africa (IMCSA)

Institute of Directors Southern Africa

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The Institute for Public Relations and Communication Management

(South Africa)

South African Auditor & Training Certification

Authority

Southern African Institute for Business Accountants

South African Institute of Professional Accountants

South African Board for People Practices

South African Institute of Tax Practitioners South African Payroll Association

Southern African Society for Quality

BusinessBriefDecember/January 2014/2015

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BusinessBrief

7BRIEFCASE

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By Alex Dube

How you cocoon yourself from the ravages of onerous tax obligations while you build your property empire is not a topic that many would dare delve into openly. Alex Dube explains what he calls the NO Tax, Free Money concept and how you can grow your wealth on an ever-expanding spiral of property wealth…Find, Create, Preserve, Grow.

Drawing from over 15 years of property experiences that have consistently yielded great returns for the author, this book imparts detailed and extremely practical advice, as well as tricks of the trade on how to create a property empire from nothing. Zero Investment Equals Zero Return: Seek, Find, Invest and begin your Spiral of Property Wealth.

Available at all good bookstores, Amazon.com, Barnes & Noble, Apple iStores, Kobo, Kalahari and Loot or www.notaxmoremoney.com

By Carl Bates

In business, an avalanche could be a sudden or unexpected business catastrophe that threatens to destroy everything you have created. Or it could be the potential for disaster that you face when trying to reach the next level of success: a step up that perhaps requires more than you can currently give.

Traversing the Avalanche takes you on a journey to understand what it means to practically use the foundations of governance to move through and over the risk of business failure, while maximising the opportunities for reward and growth. Through this book you will develop a deeper understanding of what SME governance entails, how to maximise its benefits and who you will need with you on that journey.

Available from all good bookstores or from [email protected] or [email protected]

By Songezo Zibi

South Africa faces enormous challenges brought about by the legacy of its horrible past and the actions of its present. In the twenty years since the advent of democracy the country has come to believe that the ailments of its soul will be solved by state bureaucratic interventions. While at a material level this may be true, at the core of its failure to confront its demons successfully is a missing moral and philosophical foundation to the future it wants to build.

Raising the Bar provides a fresh, unencumbered analysis of the topics that pervade our daily lives, including race, leadership, politics, government, violence, the position of women and the taboos that haunt us. It explores why we are the people we have become and the future our present state is building. Uncomfortable and littered with vulnerabilities and problems, this is a task we can no longer delay. It is the only way to lay a solid foundation to ensure that we become a prosperous nation.

Available from good bookstores or from www.kalahari.com or www.amazon.com

Traversing the Avalanche

Raising the Bar – Hope & Renewal in South Africa

PAY NO TAX GET MORE MONEY – THE SPIRAL OF PROPERTY WEALTH

BusinessBrief

8 BRIEFCASEDecember/January 2014/2015

BusinessBrief

9BRIEFCASEDecember/January 2014/2015

SPITFIRE RECEPTION DESK Our furniture has been designed with the discerning buyer in mind with every item handmade by skilled artisans, to exacting standards with attention to detail and quality that make each piece a work of art. Our furniture range varies from aviation inspired pieces using aero aluminium, stainless steel and vintage Brazilian leather to timeless pieces such as our Eames lounger and luxurious Chesterfield couches.

Contact Spitfire Furniture: +27 (0)11 447 7699 [email protected] www.spitfirefurniture.co.za

HI-COVE CHAIR BY MOLTENI & CThe innovative elegance of the sixties has been revisited by Ferruccio Laviani with a contemporary slant: two modelled shells are enough to lightly design the seat and backrest of this stunning armchair. With removable fabric or leather upholstery with integrated padding and a revolving base of chrome steel, the Hi-Cove will add style to any office.

Available from M Square Lifestyle Necessities: +27 (0)11 447 0807 www.msquareonline.co.za | [email protected]

FOSCARINI DIESEL FORK LAMP The Fork Lamp is inspired by casual fashion, by campsite tents and by an informal, playful and dynamic lifestyle. The stitching on the fabric has been created like that on jeans and the rings are not merely decorative, but respond to practical needs with simplicity and immediacy. The light inside reveals a patchwork structure and the texture of the canvas, a little like when you turn on a light inside a tent. The lampshade is extremely flexible and can be oriented 360°. The stand of the floor and table versions is also very mobile, thanks to its joints: this means you can change the direction of the light as you please, play with the lamp and have fun continually finding new positions for it.

Available from M Square Lifestyle Necessities: +27 (0)11 447 0807 www.msquareonline.co.za [email protected]

The ESSENCE of refined luxury

Designed by Sir Herbert Baker and originally built in 1908, The Andros Deluxe Boutique

Hotel is conveniently located in the lush, leafy southern suburb of Claremont, Cape Town. The hotel is set in 5 000m² of magnificent mature park-like gardens with breath-taking views of Table Mountain. Accommodation comprises 12 luxuriously appointed deluxe bedrooms and an executive suite with its own private swimming pool.

Our garden swimming pool area provides guests with the perfect space to relax and enjoy the magnificence of the Cape in summer. All bedrooms/suites offer typical 5-star guest comforts such as:

Air-conditioning, underfloor heating, flat screen televisions, 12 television channels, complimentary Wi-Fi, mini bar fridges, tea/coffee making facilities, magnificent en suite bathroom facilities, mini safes, etc.

Our incredibly well stocked champagne bar with adjoining very extensive patio terrace provides guests with a wonderfully comfortable and

relaxing retreat to indeed savour the magnificence of the property and surrounds. Our DINE Restaurant is the proud recipient of a coveted Platinum Star Award for the excellence of cuisine and is open every night from 6pm.

The hotel is 18km from Cape Town International Airport, 10km from the City Centre and the V&A Waterfront and a 15 minute walk to Cavendish Square, a large and prestigious shopping centre. Airport transfers are available by prior arrangement.

Our magnificently appointed Herbert Baker Room conference facility is comfortably equipped with air-conditioning and offers easily accessible cloakrooms and offers fully flexible, adaptable open layouts and is indeed ideally suited for:

• Board Meetings• Conferences• Private Luncheons or Dinners• Presentations• Intimate Weddings• Product Launches

The facility comfortably accommodates up to 28 guests seated in cinema style and smaller numbers in other seating arrangements.

The room is bathed in natural light with the doors of the facility opening onto the beautiful gardens, offering exceptional views of the forested slopes of Table Mountain and the world-renowned Kirstenbosch Gardens.

For reservations or general information please contact Charmaine: [email protected] +27 (0)21 797 9777 n

10 TRAVEL & LEISUREBusinessBrief December/January 2014/2015

77161 BusBief.indd 1 2014/11/13 1:59 PM

Africa is a continent with untapped potential, and this is certainly evident in the African aviation industry. We have seen many local carriers come and go, and

the market is fragmented. This needs to change as soon as possible, with partnerships and alliances being the future of all airlines, whether full service or low cost.

Less than 35% of African countries are currently served by daily flights. This rather alarming statistic speaks to the untapped potential of the continent. Local carriers should make addressing this a matter of urgency. Rather than focusing on what competitors from other markets, such as the Gulf State airlines, are doing, African airlines need to take the lead in unlocking potential and prioritising services to local markets. At the same time, there is great opportunity to be had by taking advantage of Africa’s growing business links with the East.

Establishing routes in this market and focusing on improving services to the lucrative business travel trade are key to further developing the aviation industry in Africa. Of course, the local industry, like any other, is not without its challenges. These include high fuel prices, the global economic downturn, and sporadic unrest in some areas. Of course, the recent Ebola outbreak has also had a major impact on the industry. What sets one airline apart from the next is how these challenges are handled. It is essential that the passenger is always prioritised. Invest in market research, find out what your passengers are looking for. It is vital that channels of communication are established and that your clientele is kept abreast of any developments. The passengers must feel confident that their safety and security come first, or they will quickly lose confidence in that airline. Employee satisfaction is also vital, as satisfied employees lead to satisfied customers, thus ensuring the continued growth of the market. Invest in employee training to make sure the people that represent your brand are empowered to do so to the best of their ability.

While the industry is not without its challenges, there is also great potential for growth, and the future is certainly bright for airlines that are able to take the necessary steps, and work in partnership, to unlock this. n

Unlocking Africa’s aviation

By Mbuvi Ngunze CEOKenya [email protected]

12 TRAVEL & LEISURE

Seeing IS believing

BusinessBrief

There are a handful of places on earth where you have to pinch yourself just to be sure that

what you’re seeing is real. The quaint little fishing village of Paternoster, along the Cape West Coast, is one of these places – and Strandloper Ocean Boutique Hotel proudly honours the ancient indigenous travellers of this coastline, while welcoming modern-day discerning guests inspired by its serenity and surreal natural beauty. Here, heaven meets earth on the shores of the Atlantic. It is not another place, it is another world.

The Strandloper Ocean is a fusion of beach style and contemporary luxury; with organic lines, hues and textures with an overall feeling of simplicity. It is a place of wild beauty and wide white beaches washed by an ocean that’s cool and enigmatic.

Take the time to simply be, or if you are feeling more adventurous, set off on an endless beach walk in search of whales and dolphins, hop onto a bicycle for a leisurely ride of take to the waves

on a kayak. Paternoster is a seafood mecca and the plentiful fruits of the sea remain in vast quantities of fresh fish, huge black mussels and the authentic West Coast crayfish, caught by local fishermen.

Here you can completely leave the world behind. Strandloper is a retreat, a place of calm that is completely private and secluded. It is so much more than a hotel; Strandloper is a philosophy

of being in harmony with nature and blending in with the delicate beauty of the surroundings. Interiors are silent so they do not compete with what is outside, but instead showcase the natural splendour of this unique coastline.

To book, contact: +27 (0)21 794 5858 [email protected] www.strandloperocean.com n


New York LoNdoN TokYo

As The Peech Boutique Hotel celebrates its 10th birthday, the establishment sees a renewed

emphasis on eco-driven luxury. Visitors to The Peech know that they’ll find a chic home from home here. Originally a private residence, the small intimate hotel has evolved into a remarkable 16-room venue set in a magnificent and lush garden.

For a bit of time out, guests can stroll around the 1-acre garden, relax by the outside swimming pool or grab a tome from the library. For the more actively inclined, The Peech has an arrangement for visitors to access the Planet Fitness gym next door at a small charge. In-house guests can enjoy delectable bistro fare for breakfast, lunch and dinner, with much of the fresh herbs and vegetables sourced from the hotel’s own kitchen garden. The focus is on flavour and seasonality and the setting overlooking the garden is simply magic. For more intimate meals, there is a private dining room, while the walk-in wine cellar is a must-visit for oenophiles.

Perfectly located in bustling Melrose, The Peech is 10 minutes from business hub Sandton and five minutes from hip Melrose Arch and Rosebank where the nearest Gautrain station is located, making it easily accessible whether

guests are visiting for work or play. The Peech is also a perfect venue for a small conference or business breakaway with a boardroom and green room available for private strategy sessions.

Responsible and eco-friendly tourism is at the heart of The Peech Boutique Hotel. Recent years have seen the addition of solar water heating, extensive recycling practices, use of only recyclable batteries in appliances as well as use of grey water recycling to assist in keeping the gardens lush. Water is bottled on site and rooms have double insulation too. This eco-awareness means the hotel’s footprint

is kept to a minimum with as small as possible impact on the environment. In addition The Peech is a Fair Trade Tourism certified hotel, thereby acknowledging its ethical approach not only to the environment but to its employees, many of whom have been working there since its opening 10 years ago, too. The Peech also supports Little Eden children’s charity as well as Pack for a Purpose.

For reservations and more information contact: +27 (0)11 537 9797 [email protected] www.thepeech.co.za n

A PEACHY HHHHH

13TRAVEL & LEISUREBusinessBriefDecember/January 2014/2015

BusinessBrief

14 VIEWPOINT

In these eras, the rules for success and failure change as the very structures of societies and cultures change. Politics and

economics are shifted. Entire industries rise and fall, and fortunes are made and lost. And in historical terms, it all happens in the blink of an eye: normally taking just two generations, or about forty years.

History-Defining, Disruptive ChangeWe are living through one of these history-defining eras right now. The rules for success and failure in our industries are being rewritten. The orthodoxies (the set of norms, standards and generally accepted approaches to “how things are done around here”) that govern our lives are being upended. We are not just experiencing a bit of turbulence. Life as we know it is being disrupted. Permanently. Irreversibly. Deeply.

Allow me just three exhibits to prove this point – three proofs that we’re living in an unprecedented time of historical change where life as we know it is being disrupted.

Proof #1: Life ExpectancyMy father’s mother was born in February 1914, and her life expectancy at birth was 47.

She has lived to see her 100th birthday. In fact, over 350,000 people are currently older than 100 – a number rising exponentially every year. My oldest daughter was born in 1999, and I wonder if she has the potential to more than double her life expectancy of 87? I think so.

We can currently replace every body part, except the brain. And medical technology may soon assist us to transfer our consciousness

to machines, or at very least augment our own. We have to all plan to live for more than a

century.

Proof #2: Abundant energyThe opening up of shale gas fields

around the world is changing the global energy map. The USA became the world’s leading oil and gas producer in late 2014, and by 2020 will not only be energy independent but also exporting. This is a game changer, both in terms of

the price of energy (which will continue to fall) and global geopolitics.

Add to that the work of ITER, a multinational engineering project in the South of France, building one of the largest man-made

machines ever. When complete in 2027, it will

use fusion technology to fire up atomic plasma that

generates more energy than is used to power it.

Limitless, cheap energy is nearly here.

There’s nothing new about change. Our world is constantly changing. But there are moments in history when all the forces of change combine together to create an era-defining period- eras like the Enlightenment, the Renaissance, the Reformation or the Industrial Revolution.

You cannot use today’s thinking for tomorrow!

OUR DISRUPTIVE ERA!


The leap isn’t as scary when you’re working with the right peopleLeaders in engineeringconsulting

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Proof #3: Smart devices for everyoneThe “Internet of Things” is connecting everyone and everything together, and smart devices in our hands give us control of this smart world. And when you start selling these devices for less than $50 and provide free wifi, as is happening right now in many emerging markets, you have a game changer.

What’s To Be Done?At least three responses are urgently required from every business leader everywhere:

1. Spend more time on the “balcony”. Too many people are stuck on the “dance floor” of their businesses. Spend more time working ON your

business rather than merely IN your business.

2. Experiment more and create disruption. Don’t wait for your industry’s iTunes or Uber to change the routes to market and the rules of the game. Have big and small experiments on the go all the time, and be prepared to try and fail, and learn and try again.

3. Unlearn and relearn. The way it’s always been done isn’t the way it always has to be done. Question your orthodoxies continually. Listen to new voices, and encourage especially the younger generation to see your industry with new eyes.

As management guru, Peter Drucker once said, “In times of turbulence, the greatest danger is not the turbulence itself. Rather, it is facing tomorrow’s world using yesterday’s logic”. However much you think the world is about to change, you’re probably under-estimating. And that means the future is going to be more scary – and more exciting – than you can possibly imagine. Only the most adaptable are going to survive. n

By Graeme CodringtonFuturist, Researcher & Keynote Presenter [email protected]

@futuristgraeme

15VIEWPOINTBusinessBriefDecember/January 2014/2015

The leap isn’t as scary when you’re working with the right peopleLeaders in engineeringconsulting

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BusinessBrief

16 VIEWPOINT

The internet has enabled new business models that have disrupted and even destroyed incumbent models. From

travel agencies to video rental stores, the ability to go online has transformed industries, resulting in higher productivity, greater consumer choice, and lower prices. These industries have one thing in common: they provide information-based services. It should come as no surprise then that the South African Postal Service (SAPS) is facing massive challenges. For, like many other industries whose business models made sense in an analogue, paper-based era, SAPS’s business model makes much less sense in today’s digital era and, as such, is in need of fundamental reform.

Couple this with an almost three month post office strike by the South African Postal Service (SAPS) – one of five since 2011 - and the situation is looking very dire indeed. Given the lack of outcry from SAPS’s customers, it must mean that they are finding alternatives to snail mail and going online.

Snail mail frequently gets lost, torn, bent and delivered late – this does not happen with electronic communications. On the other side of the coin, the time wasted to get statements and invoices delivered often impacts a company’s ability to collect its revenue. Given this landscape, electronic distribution delivery companies must be smiling.

What is electronic distribution delivery?Electronic document delivery refers to the management and punctual distribution of a company’s service statements, customer invoices and associated collection letters, payslips, contracts and policies, while providing an easy electronic payment solution for customers. Its automation of such tasks, along with ability to reduce costs and increase document security, means that electronic document distribution poses a significant threat to the postal service.

Businesses all over the world are converting to

electronic document delivery as their primary means of sending documents. Getting vital financial documents out to customers quickly, and payments in just as quickly, is critical to business survival. When a company is awaiting an invoice payment, they are losing money in the form of interest. Therefore, the faster that money can be obtained, the more efficient that company will be. Often the time and cost to process the data for print or to send these documents is too high. The development of simple business invoicing and document management solutions means that the task of using electronic document delivery is easier than ever before.

How does electronic distribution delivery work?The system of electronic document delivery works by automating the sending of customer statements and invoices, by interacting with a customer information database. This database lets the electronic document delivery system know when to send a document, and allows it to use mail merging technology to create that document. With intelligent archiving and document linking, quick access to customer records for real time response to customer queries is easily achieved.

Given the important role the post office plays in today’s society, it will exist well beyond its economic viability; but (and it’s a big but) at some point in our future, the trends all seem to point to the inevitable disappearance of mail.

Given the ease and speed of electronic delivery and payments, plus the obvious environmental incentives of going paperless, the future for the world’s post offices does not look rosy. n

Postal service REDUNDANT? There’s no

question that post offices, the world over, are struggling. And

quite simply, the reason for this is the internet.

As more people move on-line, standard mail volumes drop.

Every electronic bill, online

payment or e-mail puts

another nail in the standard

letter’s coffin. And this trend will accelerate,

not decline.

By Gavin [email protected]


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Research into the qualifications and diversity of directors, CEOs and CFOs of JSE-listed companies was conducted by the South African Institute of

Chartered Accountants (SAICA) earlier this year – for the first time encompassing all 475 companies listed on the JSE, rather than the Top 200 companies (by market capitalisation) surveyed in previous years. Although this broadening of the sample base means that no meaningful comparisons between this and previous years’ results can be made, this year’s data on its own reveals a trend in racial and gender transformation that should boost optimism and business confidence.

SAICA surveyed all the companies listed on the JSE; there were 4 035

directorships in all, of which 1 025 – 23.8%– are held by Chartered Accountants South Africa [CAs(SA)]. That’s almost a quarter of the total; the CA(SA) is the most predominant

business qualification represented. When we look at CFOs or financial

directors, CAs(SA) constitute 74.3% – and 21% of CEOs or managing directors

are CAs(SA). Almost two-thirds of the companies run by CAs(SA) are in fact in the Top 200, which implies that CAs(SA) are better than average at running companies.

75% of directorships are still held by whites at present, and 87% by males – so obviously a lot of work

still has to be done on transformation. But if

you look at gender and race together, it

can be noted that 71% of these

directorships are held

by white

males compared to 5% by white females – while 17% are held by black males versus 8% by black females, which are a lot closer. Clearly the gender gap is closing amongst black directors. And while on average CAs(SA) make up 23.8%of the directors, there is a higher percentage of CAs(SA) among female directors (28%) than among males (22%). This is evidence that SAICA’s commitment to gender transformation of the profession, which was rolled out ten years ago, is beginning to bear fruit. We actually produce slightly more female than male CAs(SA) every year already. We’ve broken the back of the gender transformation issue at that level; it’s just a matter of time before these numbers reflect at the directorship, CFO and CEO levels.

Racial and gender inclusivity may be “better” when considering the percentage of younger directors, but it is nowhere near a reflection of the actual make-up of our population yet. But the indications are encouraging, and with the continued support of business and government, we can successfully transform the CA(SA) profession – and the JSE. There’s no point in discarding skills that people have spent 30 or 40 years mastering – purely because those people are white and male – until you have successors with the experience to replace them. As the growing number of black and/or female CAs(SA) mature, we expect to see the racial and gender mix of older directors – and CEOs and CFOs – change to reflect the country’s true demographics. It’s clear the CA(SA) profession is having an effect, and that we need to continue our efforts to create more black and female business leaders. n

UNSEATING the PALE MALE!A survey of all 475 JSE-listed companies has revealed that South African company directors, CEOs and CFOs are still predominantly white and male – but indicates hopeful signs of transformation within the younger generation. Specifically, this is as a result of young black CAs(SA) being appointed as directors below the age of 40

By Dr Terence NombembeCEO [email protected]

@saica_ca_sa

”There’s no point in discarding skills that people have spent 30 or 40 years mastering

– purely because those people are white and male”

BusinessBrief

EDUCATION & TRAININGMANAGEMENT18


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Joseph Campbell was a philosopher who studied stories across different cultures. He discovered that there was one universal theme underlying all great

stories – “the hero’s journey”.

The hero’s journey offers a map to transformation leaders. Organisational transformation has the same storyline as the hero’s journey. It is an adventure and a quest.

The journey starts with a potential hero who lives in a familiar world. He becomes aware of a “call to adventure”. There is a growing sense that change is required. The hero has to step out of the “run of the mill world” on a quest. Stories often start with an unwilling hero. The hero tries to refuse the call to adventure. Usually the call becomes more intense. In organisations the call to adventure may be the increasingly competitive landscape or the poor results on the climate survey.

There is a point when the hero can no longer refuse and he departs into the unknown. Change leaders at some point take a decision to start the journey because they hear the call to action, and have the courage to timeously respond. In stories we find monsters and dragons that the hero needs to slay. Slaying dragons is about facing fears and limitations. In all stories struggle is a given, but also splendour.

In the context of business transformation, the hero’s journey takes place on various levels.

The leader’s personal journeyExternal change requires inner change. The heroes in stories undertakes a quest to achieve something in the external world, but this result is typically dependent on a parallel process of character transformation. If leaders do not change, the organisation will not change.

The leadership team journeyOrganisation transformation is a complex endeavour that

LEADING organisational changeBy Marlene de LangeDirector Grow [email protected]

@TrainingRoomZA

does not need the dynamic of leaders pulling in different directions. Leadership teams need to slay dragons relating to politics, mistrust and silo functioning.

The organisational journeyThe third journey is the most complex – leading the organisation into the forest to change individual and collective behaviour. Often the people are very comfortable in their own space of “run of the mill” disengaged functioning. The leader needs to paint a simple vision which is convincing enough so people will be prepared to take up the call to adventure. Leaders also need to play a key role as story-tellers. They reframe set-backs as temporary challenges and discomfort as growth. They engage and involve their people as they know that negotiating the dragons will take collective wisdom and responsibility.

The frame of the hero’s journey helps us to reinterpret the difficulties of change as essential ingredients rather than distractions. It reminds us that transformation cannot be managed by executing a recipe.

After the journey, the hero returns to normal life, but as a changed person. The hero will now use the new abilities to serve the community in a more profound manner.

Campbell says “We’re not on our journey to save the world but to save ourselves. But in doing that you save the world. While we undertake corporate transformation to “save the world”, it offers an opportunity to every leader for personal transformation. n

19MANAGEMENT BusinessBriefDecember/January 2014/2015

Traditional offices OUTDATED...The traditional “nine to five”

office environment could soon become outdated and be a thing

of the past in many organisations, according to a report issued by PwC. PwC’s The future of work: A journey to 2022 report, shows that only a minority of workers want to work in a traditional office environment in the future. One in five people say they want to work in a “virtual” place where they can log on from any location or use collaborative work spaces.

The report discloses a number of projections for what the future of work might look like based on a survey of 10 000 workers and 500 HR professionals globally. Professional staff’s desire to break free from the traditional office environment suggests that the way they may work in the future could change significantly and organisations need to prepare themselves for this shift.

It is clear from the research that traditional nine to five office working could soon become resigned to history for many workers. People feel strongly that they no longer want to work within the constraints of the typical office environment and advances in technology mean that workers no longer have to be

shackled to their desks.

We predict that many organisations will embrace these changes and use them to their own advantage. We can see the rise of organisations that have a core team that embodies the philosophy and values of the company, but the remainder of the workforce is not fixed and come in and out on a project-by-project basis. These companies will make extensive use of technology to run their business, coordinate a largely external workforce and support their relationships with third parties.

Staff are also more likely to see themselves as a member of a particular skill or professional network, rather than as an employee of a specific company. People will be categorised and rewarded according to their specialist expertise, which will create increased demand for people to have a personal stake in the organisation’s or project’s success. Options such as project-related bonuses are therefore going to become more common.

The report points out that a key challenge is ensuring that the people being hired really do possess the expertise required or claimed.

This will demand a combination of effective verification and watertight contractual agreements, possibly with penalties for poor and non-delivery. It is going to require a high degree of relationship building and business trust. Many contractors and partners will adopt “eBay-style” rating of past performance to assist in landing the next contract.

Tremendous forces are significantly reshaping the world of work. Economic shifts are redistributing power, wealth, competition and opportunity around the globe. Disruptive innovations, radical thinking, new business models and resource scarcity are affecting every sector.

Business across the world are beginning to understand that they need a clear and meaningful purpose, and mandate for the decade ahead if they are to attract and retain employees, customers and partners. n

By Gerald SeegersHead of Human Resources for Southern [email protected]

@pwc_za

BusinessBrief

EDUCATION & TRAININGMANAGEMENT20


Leaders tend to focus on obvious issues and often fail to account for the underlying ones that

cause irreparable damage. Strategy sits above the waterline, everyone in an organisation is aware of it, however it is what lurks beneath the waterline that should be concerning management.

An organisation’s capacity to perform is a function of individual human behaviour and it is the invisible challenges related to this that need to be addressed. Strategy, integrated processes and operating models are clearly defined and leaders tend to spend significant time over communicating these elements and implementing scorecards to ensure adherence. It is not wrong to focus on visible perils but it is important that an equal amount of time is taken to focus on the elements that aren’t. What can leaders do to address the

organisation’s culture and the elements below the waterline?

1. Scan below the surface – Capture the current employee experience. Collect stories from employees at all levels on incidents where things have gone wrong, as well as have senior leaders conduct structured interviews with a spectrum of employees to gain insights as to what is happening on the shop floor. This yields rich data and exposes leaders to the often unseen challenges faced by employees.

2. Search for vital behaviours – Identify a few vital behaviours that can have the most impact on these challenges. Identifying the right vital behaviours will stop self-defeating and escalating behaviours and instead start a chain reaction that leads to good results.

3. Design a powerful influence strategy – The right influence strategy can demonstrate meaningful results in as soon as three to six months.

The challenge that is often avoided by leaders is to strategically and systematically influence the behaviour of employees. Behavioural challenges can hinder an organisation’s progress, yet many leaders do not focus on this as they lack the visibility of looming behavioural threats and the skills to respond quickly and effectively. Leaders need to scan below the surface, assess threats to the company’s internal capacity and develop strategies to build confident, engaged employees. n

DANGER beneath the waterline!21MANAGEMENT


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Start-up Success

Feature:ENTREPRENEURSHIP

Whatever venture you wish to begin, it is essential that you love doing it. This will enable you to get

through the hard times and appreciate the good times even more. LIGHT THE FUSEJim Devote, Head of Tax at EY Africa, notes that youth unemployment can easily lead to the creation of a “lost generation” of people without experience, who eventually become completely unemployable. The real question then is: how can these entrepreneurs, together with corporations and government, find the common ground required to turn entrepreneurial potential into true economic growth?

The entrepreneurial ecosystem has five pillars, believes Devote. The first of these is access to funding. When 73% of young entrepreneurs say that access to funding is severely limited, it is imperative that new platforms for funding be created.

Secondly, coordinated support is vital, through a range of networks, incubators and mentors. There are some 150 incubators in Johannesburg alone, but very few talk to one another – better communication between these entities clearly needs to be facilitated.

The pillars of education and training, along with more business-friendly tax regulations are the third and fourth vital pillars in stimulating entrepreneurship.

The fifth pillar is that of entrepreneurial culture. There is a fear of failure that can be reduced by eliminating the stigma around bankruptcy. We need to encourage youngsters to consider entrepreneurship as a career choice and to instil a positive attitude towards risk.

HOLDING BACK?Shanduka Black Umbrellas CEO, Mark Frankell, believes that the context of doing business in SA is like no other. We are truly a unique

Being an entrepreneur takes courage; it means having the ability

to create , to network, to engage, to work hard, to have discipline, to

recognise and grasp opportunities, to be rigorous, to be passionate, to be

adaptable and tenacious, to take the initiative, to be able to negotiate and

to be able to sell yourself and your idea. You need to be able to do it all!

society, and as a result, our solutions must be tailored to our needs. Where existing trends are copied, these must be tweaked for cultural resonance as well as geographic nuances and idiosyncrasies. This inward orientation means SA cannot employ generic tactics if the intention is to cater to our unique environment. Frankell maintains that there are a number of elements holding back entrepreneurship development in SA:

• Poor quality of the education system• High levels of unemployment (most sustainable businesses

are created by people who have a few years work experience)

• The needs of small businesses are largely ignored by policy makers

• Small business support initiatives are fragmented and lack sufficient scale

• Entrepreneurs are largely unaware of the support mechanisms available to them

• There is no standards assessment for government and other business development programmes to ensure the required quality of the intervention

• Tough economic climate• Restrictive labour legislation and labour unrest • Excessive regulatory compliance requirements for small

businesses• Lack of start-up funding

CALCULATED RISKSCraig Steven-Jennings, Partner at KPMG South Africa, says that while it’s good to be entrepreneurial, one should take calculated risks in business. Taking risks often returns reward but also has the potential of a significant failure. Entrepreneurs should consider the realities of the local small business environment and accept advice from specialists, as running a business requires understanding of many key areas. Commercialising any business is challenging. It requires a balance of technical, sales, and finance people. A good idea

is a suitable start; however, entrepreneurs should make sure they are able to sell it – that is the key.

BE AGILE Nick Bell, CEO at Decision Inc., says operational management takes you further away from strategic planning. To retain your entrepreneurial ability to thinking strategically, and be innovative and agile, it is imperative that you have employees that are empowered to make effective decisions. Your challenge as a leader is to enable your employees to make sound decisions based on achieving the organisation’s goals.

In order to achieve this, you need to determine what decisions must be made within particular roles, how those decisions drive performance, and whether your staff have both the skills and capability to make the required decisions.

Once the link between performance and capability is understood, you need to develop clear processes and routes to organisational goals that ensure that success is not only linked to the individual in the role. Your teams need to be given the information that the organisation finds important, and be provided with clear insights into the problems and opportunities that the organisation faces.

A clear action plan for each individual, within each team, will allow them to understand their part in driving performance. Key to this is providing a solution that allows you and your executives, and individuals, to monitor and identify their success. The process of linking your people directly to the measurements that impact success is pivotal to gaining better improvement within the organisation.

APPROPRIATE FUNDING?David Lewis, CEO of Retail Capital, recommends that business owners institute a three-step approach when planning for any application for funding – evaluate, plan and reassess.

Evaluate your needs for funding in terms of why it is needed and how this impacts the business in both the short and the long term. Any initiative that requires funding should add more value to the business than the cost of funding, or should solve a problem that would have more serious implications, costs or lost revenue than the cost of funding.

Planning for your capital requirements will ensure that you have the most options available and have time to secure funding before the need to pay. Banks may be uncomfortable if you cannot provide the required levels of security, or wish to use the funds to help you through a downturn in the trading environment.

Continually reassessing your business’ needs for funding, balancing the ability to plan, convenience, flexibility and

24 ENTREPRENEURSHIP

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speed of accessibility makes it easier to determine the most appropriate funding option. Longer term, larger commitments like large scale refurbishments may be serviced best by a long term bank loans with fixed instalments, whilst the need for general working capital, specific opportunities and unexpected emergences will be better supported by other products and lenders.

BANKSOscar Siziba, Provincial Head of Absa Business Banking, says that accessing funding from financial institutions includes two options, business as usual and non-traditional funding. The combination of these two options provides easy access to financing. There are various ways one can finance their business and each way has its own application and approval criteria.

Some of the financing solutions are: • Business Revolving Loans• Working Capital• Business Overdrafts• Term Loans• Development Credit Funds• Women Empowerment Fund• SMME Fund

Each business is unique and applications are looked at on a case by case basis, based on the requirements of the business. One must have certain documents, i.e. business plan, cash flow projections, financials, FICA documents, etc. When there is poor record keeping, no audited financial statements, no management accounts and when cash flow projections are not readily available, there will be delays that negatively impact turnaround times.

PRIVATE EQUITYPrivate equity is, according to Garry Sharp (Head of Private Equity) at AfrAsia Bank Limited, fundamentally, about enabling a business to transition from its present state to one with significantly higher value. This transition can take

one of two broad forms.

The first is when private equity buys an entire company, either from its parent, from the state in the case of a privatisation, or from its stock market shareholders. The company’s operating management team will be motivated by being able to purchase (at a fairly nominal cost) a meaningful percentage of the equity. These transactions are referred to as management buyouts because the management team, in the best of all scenarios, works in close partnership with their new co-shareholders to deliver a mutually agreed and developed business plan.

The second is where an established private company, which might be owned by its founder entrepreneur, a group of private shareholders, or indeed a family, needs additional finance in order to affect a major strategic advance. If

they are unable to raise this finance through borrowing they may raise equity finance, selling new shares in the company at an agreed valuation to a private equity investor. These deals are referred to as Growth Capital or Minority Stakes investments.

There are other categories, such as Venture Capital (broadly speaking, investing in companies that have not yet proved they can generate profits), Replacement Capital (funding to buy out a minority shareholder) or turnaround investments. What unites them is what the investor wants to see, which is a degree of value creation that allows them to achieve their target return (typically 25% - 40% per annum), and their co-shareholders to achieve greater financial rewards than they would have done without private equity involvement. It is, when it works properly, a true

EXECUTIVE EDUCATION | KNOWLEDGE AT WORK

Entrepreneurship and Innovation

Entrepreneurship and New Venture Creation10 May - 28 August 2015

Entrepreneurship and New Venture Creation for Advisors and Consultants17 August - 27 November 2015

Business Planning for Entrepreneurs7-21 April 2015

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Social Entrepreneurship27-29 April 2015

Technology and High Growth Entrepreneurship 6-8 July 2015

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27ENTREPRENEURSHIP

and open partnership where everybody gains more than they would have otherwise, which is the essential point about private equity.

ALTERNATIVESSteven Cohen, Managing Director at Sage Pastel Accounting, says that entrepreneurs have become accustomed to banks and venture capital firms slamming the door in their face.

The Sage Business Index for 2013 found that 63% of South African businesses agree that banks aren’t doing enough to make funding available to small businesses. 53% of South African businesses say they need to look at alternative funding sources. There are a number of alternatives to bank loans for financing to grow your business. Bootstrapping, government grants and crowdfunding could all play in filling the gap left by the banks.

Go it aloneYou’ll need to budget carefully, manage cash flow aggressively and possibly save up some capital for your business before you quit your day job, but it may well both possible and desirable to do so, especially if your business isn’t especially capital-intensive. The benefit is that you won’t need to dilute your ownership and control of your business by taking on a

shareholder, and you won’t need to repay loans with heavy interest. Another benefit is that you will build a lean business right from the start, because you’ll learn how to make do with minimal resources.

Ask the crowd Crowdfunding is starting to become popular worldwide as a funding mechanism, notes Cohen, but it is not yet common or well understood in SA. It is essentially about raising small amounts of money from a large number of people, often via the Web. For example, the Kickstarter website enables businesspeople, games developers, inventors and filmmakers, among others, to pitch their ideas to the public in an effort to raise cash for their projects and products. This concept is far from mainstream, but it’s worth keeping an eye on.

Government grantsA more conventional approach – but one that may work if you have the patience for the red tape – is to seek government grants and funding. The South African Department of Trade and Industry (DTI) has a range of incentives, loans and funding schemes for emerging businesses.

UMBRELLA COVER?Walter van der Merwe, CEO of FedGroup Life, says that for

EXECUTIVE EDUCATION | KNOWLEDGE AT WORK

Entrepreneurship and Innovation

Entrepreneurship and New Venture Creation10 May - 28 August 2015

Entrepreneurship and New Venture Creation for Advisors and Consultants17 August - 27 November 2015

Business Planning for Entrepreneurs7-21 April 2015

Corporate Entrepreneurship14-16 September 2015

Social Entrepreneurship27-29 April 2015

Technology and High Growth Entrepreneurship 6-8 July 2015

Wits Business School Executive Education offers a wide range of management programmes for executives and entrepreneurs. We combine the finest academic faculty with in-company insights and industry expertise to create high-performance in the world of business. Our entrepreneurship and innovation courses are conducted in association with the Wits University Centre for Entrepreneurship, using Wits Business School faculty and associated experts to provide education that proves itself in practice.

Contact: 011 717 3377 | [email protected] www.wbs.ac.za/exed

28 ENTREPRENEURSHIP

entrepreneurs and small business owners, deciding when and what cover best meets the businesses needs is sometimes tricky. In a country where entrepreneurship and SME development play a pivotal role in alleviating high unemployment rates, umbrella funds meet a very specific requirement. Faced with changes to legislation that require investment administrators to apply for and obtain the approval of the Registrar of Pension Funds, in accordance with section 13B of the Pension Funds Act, along with more onerous compliance and capital reserve requirements, a number of players have pushed larger companies into umbrella funds to create “super funds”. Smaller companies don’t have employee volumes, nor the expertise or the luxury of hiring dedicated resources to take for standalone funds – umbrella funds are often a better option. Umbrella funds offer great benefits and value. They are still more cost effective than standalone funds, and companies don’t

need to worry about the administrative burden and legislative compliance requirements. Umbrella funds also spread risk and remove the burden of managing that risk in a field that the employer is not an expert in. This doesn’t absolve an employer of being proactively involved as they need to constantly communicate fund-related information to employees, particularly where money is being invested, fund performance, and the associated costs. SURE THINGCraig Steven-Jennings from KPMG, Partner KPMG South Africa, notes that entrepreneurs must note that taxes are split into two broad categories; direct and indirect taxes. Income tax is a direct tax on the company and the entrepreneur should understand the regulations governing company tax and comply with them, or face significant penalties. Indirect taxes include VAT, PAYE

and others. The entrepreneur must understand how these works, such as when the company must be registered as a VAT vendor and what that entails, to ensure that they are following the required procedures. This is often an onerous process and it should be noted that it does not simply mean 14% should be charged and paid over to SARS. Other indirect taxes can include Employee’s Taxes such as PAYE, UIF and Skills Development Levy. These taxes should be fully understood and payments must be made on the right dates or the company may face penalties and interest.

COACHING ActionCOACH Business and Executive Coach, Greg Mason, believes that there is a vast difference between an entrepreneur and someone who is self-employed and runs his own business. People who start their own businesses are quick to call themselves entrepreneurs, but in reality, they are just working for themselves, or running a small business.

These business owners are first and foremost “technicians”. They are good at what they do, or they have a great product, but they are not necessarily good at running a business. They don’t have the innate entrepreneurial characteristics to grow their businesses.New generation business owners need to “acquire” these skills to succeed, which is why the concept of business coaching has become so popular.

Start-ups are usually cash strapped in the beginning, and coaching is not always an affordable option in the early stages of launching a business. There are a number of affordable programmes and seminars to attend that provide a framework for the key business principles that need to be implemented. Coaches are generally not in the business of “saving” failing businesses, or getting new businesses up and running. There needs to be a foundation on which to build.

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30 ENTREPRENEURSHIP

ACCELERATOR PROGRAMMES Alexander Mehlhorn, CEO of Framework One, says that while many of the accelerator programmes available to local companies focus on unlocking investment opportunities, you may be after a different kind of value from participating. Accelerator programmes hold the potential to become a mirror to your company, highlighting shortcomings in processes and procedures that often hold smaller businesses back from becoming more mature, settled companies.

Don’t expect an easy ride. One of the most important questions you’ll likely face is: What processes do you need to put in place in order to become an established, mature company? Many organisations don’t have these processes in place. As a small but growing company, the focus largely rests on staff retention, client acquisition, and getting work done. But this won’t enable you to grow sustainably and become more successful. Taking part in an accelerator programme can help you develop a more refined business strategy, which then translates into a focused sales strategy. And you’ll quickly start seeing the benefits.

Be prepared to do some serious self-reflection, though. The hosts of accelerator programmes aim to take high-growth companies out of their comfort zones and assist with

packaging them for scaling up as a business. You’ll learn to identify and understand growth gaps, with the objective of becoming more sustainable in the long term.

MENTORSHIP CAPITALClive Butkow, Non Executive Director at Grovest Venture Capital Company, says that mentorship capital, as opposed to financial capital, is the most important ingredient towards entrepreneurial success. This success is also as a result of matching the right mentor/s with the right entrepreneurs. The mentor/entrepreneur relationship needs to be built on mutual respect and trust and for the mentor to be intrinsically motivated to make a difference to the entrepreneur’s well-being, whilst expecting nothing in return.

Some of important steps an entrepreneur must take between having an idea and launching a business:

• Find the A team• For most products use the lean start up approach by

ensuring product-market fit before spending too much effort and cost on product development, i.e. confirm that your idea/product solves customer problems and customers will purchase the product at a price that you can make a profit before building the product.

ORT JET, a division of ORTSA and a training and

education NGO, recently announced the winners of the gripping six month launch your business competition - Eureka, sponsored by Liberty.

The Eureka Business Competition encourages individuals to unleash their entrepreneurial potential by working with a team of experts to create business plans

and models out of ideas. Four prize winners, out of seventy eight business entrants, were given an assortment of business-related prizes valued at hundreds of thousands of Rands.

With Eureka, everyone is a winner! All Eureka

applicants are invited to join the ORT JET Mentoring Programme.

The mentor programme is unique with its ability to assist small businesses and establish self-sustainability, by using the skills and expertise within the community.

The programme matches business owners with volunteer mentors who have the time, skills and commitment to helping these small businesses overcome challenges, and assists them to reach their fullest potential.

The Mentoring Programme provides a platform and drives the process for individuals who want to turn their dreams into a business reality.

Small Business Big Reward

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31ENTREPRENEURSHIP

• Get early adopters/early customers for your product to prove the viability of your idea – get paying customers not just customers that tell you how wonderful your idea/product is.

• Focus, focus and even more focus on solving customer problems and not trying to hedge your bets and becoming a jack of all trades and a master of none.

• Don’t spend time trying to raise capital too early before you have customers and product/market fit – time is an entrepreneur’s most valuable, non-renewable resource.

Butkow advocates the lean start-up methodology to confirm an idea will solve a customer’s business problems or satisfy a customer’s needs. Build, measure, learn and continue iterating until the idea finds acceptance in the market. This approach enables entrepreneurs to learn that their initial idea is not going to solve problems and

can pivot and change their solution without having spent too much time and money. They need to get out of their building and into their potential customers buildings to confirm their hypothesis.

EDUCATIONProfessor Boris Urban, Director and Chair: Master of Management Degree (Entrepreneurship) at Wits Business School, say that transfer of knowledge is highly important for entrepreneurs. At times, it is their only competitive advantage considering their businesses are new and small. Human capital such as education helps owners to acquire utilitarian resources, such as financial and physical capital, and it assists in the accumulation of new knowledge and skills. Quality education will empower the entrepreneur to apply this knowledge to their specific context and differentiate themselves from competitors. A lot of businesses without

valuable knowledge follow the herd and become part of the “cluster of followers”.

Parts of entrepreneurship can be seen to be learned behaviour. One often hears that entrepreneurs are school dropouts and have no formal education. Despite some truth in these anecdotes, the turbulent changes in the business environment – specifically the growth of knowledge economies – have made it essential for entrepreneurs to obtain some formal education to be able to compete successfully. So despite early notions that entrepreneurs are less well-educated than the general population, empirical evidence suggests that entrepreneurs have a higher level of education than non-entrepreneurs. Moreover, education is central to high-growth opportunity entrepreneurs, as expressed by positive relationship between education (normally some tertiary) and venture success.

32 ENTREPRENEURSHIP

Research by Urban consistently shows that entrepreneurs display a particular creative capacity for sensing and actualising emerging futures. Successful entrepreneurs see the world as open, dynamic, interconnected and full of possibilities. They are both committed and willing to change course if the “idea” is not working. They are able to observe, learn and act in an instant to bring forth the new into reality. Entrepreneurs do better with business ideas that are embedded in human capital rather than physical capital because budding entrepreneurs are flexible and adaptable and can move relatively easily to pursue ideas; physical assets are much less mobile.

FREE THINKING FOR RADICAL INNOVATIONProfessor Walter Baets, Director at the University of Cape Town Graduate School of Business, believes that innovation is now firmly recognised as the key driver for growth in both developed and developing economies – but the reality is that the take-up of innovation in Africa, as a way to tackle socio-economic and environmental challenges, is low.

So why are organisations and individuals not lining up to cash in on these opportunities? Partly because the way we think about innovation – and the way it is taught perhaps in many business schools – is misguided.

The fuel to innovate is created when individuals who are deeply committed to changing things for the better and who have the right expertise, life experience, passion and ideas, come together and are given free rein in an environment unconstrained by set cultures and poised to support new possibilities.

There is much that business schools can do to support, resource and network talented individuals and thinkers; to provide a space for them to work with others and develop their ideas, as well as to ensure they develop an entrepreneurial mindset: an attitude of taking action and responsibility, and challenging the status quo to find new ways to do things.

We do not even need to invent new stuff all the time, there is enough out there, we only need to get people to think differently about how to use what we have, purposefully, to create new businesses, solve problems and build economies.

GOOD GOVERNANCE Munier Damon, Director in Risk Advisory at Deloitte, maintains that the National Development Plan (NDP) forecasts that 90% of new jobs created by 2030 will be from SMEs. The key to a sustainable SME is the incorporation of good governance practices.

Many SMEs rightfully focus on making profit; however, this cannot be the only measure of success for a sustainable

business. Often a solid foundation in the form of comprehensive business plans, organisational structure and management information systems is ignored. Governance is often wrongly thought of as the domain of the corporate. Yet when practically applied, governance can unlock the true value of a business and deliver sustainable growth.

Governance is about structuring, operating and controlling a company with a view to achieving long-term growth for shareholders, employees, clients, suppliers and stakeholders. Despite this being the cornerstone of small business success and longevity, many SMEs perceive cost and having the know-how to implement governance as barriers to implementing structures and policies. Good governance leads to better decision-making within a business, which essentially increases the bottom line.

MARKETING MUSTSDonna Rachelson, CEO at Branding & Marketing You, says that marketing is a conundrum for entrepreneurs. They understand that it’s necessary, but they don’t know where to begin or how to make their marketing effective. Instead, they often let it fall by the wayside, missing out on valuable business growth opportunities.

Some marketing must-do’s:

• Identify your ideal customers, and those you don’t want Consider what makes your top clients your favourites. Also look at the work you hate, why you hate it or why it’s not profitable. Once you understand these things, you will be better able to target profitable work that you will enjoy, as well as being able to say “no” to bad clients.

• Don’t fall into the trap of ad hoc marketingTake time out right in the beginning to develop a marketing strategy. Websites, brochures, social media, email campaigns and billboards can be brilliantly designed, but they won’t fulfil their purpose unless they are aligned with an effective strategy. • Measure your marketingUnderstand what works, what doesn’t and where to spend your money wisely. Have marketing metrics in place. Get feedback from your customers through a survey or tracking your newsletter statistics to see which information is of most interest to your readers.

WEB GIVES THE EDGECandice Winterboer, Online Marketing Expert and Owner of Alfalfa Content Generator, says research shows that many small-to-medium-sized businesses are not benefiting adequately from their presence online. A well-designed, informative website just doesn’t cut it anymore and with so much online content out there, entrepreneurs need to look

Bulelani Nxumalo stood up when he realised that there is no infrastructure development without steel. That’s why, in 2007, he used his skills to start the Umzungulu Steel Projects, a company that supplies steel window and door frames to the construction industry.

Bulelani tried different avenues to expand his venture, but had a hard time finding support, until he approached the IDC. The support he received from the IDC included funding, business mentorship, as well as HR and engineering consultants. Thanks to this partnership, Umzungulu Steel Projects could supply their SABS approved products to a 25 000 housing project in the Msunduzi Municipality. The enterprise now has 22 employees.

The IDC is calling on you, the young entrepreneur, to stand up and act on your business plan and lead industrial development. Take the lead by applying for funding of R1 million or more. Call the Johannesburg regional office on 0860 693 888 or visit idc.co.za to learn more about the funding criteria for the sectors that the IDC supports.

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34 ENTREPRENEURSHIP

at ways to reach their target market regularly, and through content that is relevant and concise. So how do budding businesses succeed in achieving this constant, useful online presence, despite numerous other pressures?

The answer often lies in outsourcing their social media and email newsletter requirements, as well as the supply of slick, cutting-edge content for their website, to a professional content-generation team. This will free up the business owner to run their enterprise, while skilled copywriters, online marketers and/or PR professionals concentrate on the written word and their online brand management, often taking into consideration the importance of search engine optimisation.

MOBILE Wanda Matandela, Head of the SME business unit at Vodacom, believes that mobile technology, particularly,

is cited as a key driver for business growth. The influx of smartphones in business has created a new generation of constantly connected workers. Customised business applications have driven adoption, too, with a vast array of products on the market which are enabling everything from fleet management and sales force support, to document management and mobile marketing.

Mobile working can help SMEs work smarter to embrace and adapt the 24/7 nature of today’s working world.

CHIEF OF EVERYTHINGMeggan Liebenberg, Director and Co-founder of Orange Ink, says being an entrepreneur means having the job title of “Chief of Everything” – no limits in day-to-day responsibilities. You have to be prepared to get your hands dirty in every aspect of your business. Here are some tips for becoming a successful

“Chief of Everything”:

• Never let someone else run any part of your small business independently

• Decide on a main “chief main aim” and stick to it

• Never think you are finished learning• Invest• Never underestimate culture fit –

internally and externally• Have some key “non-negotiables”.

Never chase the money. Never sign on a client/brand that makes up 50% or more of your bottom line. Never be afraid to walk away from a client

• Be aware of your statutory, financial, legal and HR process requirements

• Try and manage today for today• Don’t fear failure

Building a business in SA is one of the most rewarding and demanding ventures. Remember that the only constant is change – so be open to change but never change your

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35ENTREPRENEURSHIP

CONTRIBUTORS@bbrief1fundamentals or the core of why you want to own and run your own business – there is a significant distinction, and getting this balance right will set you on the path to success.

GET STARTEDBeing an entrepreneur means never being static – you have to react quickly to the changing circumstances around you in order to take advantage of the opportunities that come your way. There is no substitute for hard work; you have to be prepared to sacrifice your time so that your business can survive and thrive. The rapidly evolving landscape of SA makes for an exciting environment in which entrepreneurs can establish themselves in new niche markets. The trick is being able to spot the gaps and be the first to react. n

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There is no doubt that in

the last 10 years there has been a

phenomenal growth

internationally in the use of

e-learning (or online learning)

for training purposes, and this trend has

also started to take off in South Africa

more recently with the

improvement in technological

integration, network access

speeds, and general internet

accessibility.

In schools and universities, e-learning is being used mainly to support lectures or tutorials with notes,

readings, assignments, and forum debates. In some Universities, it is also being used to expand attendance at lectures by filming them and broadcasting them live or allowing later streaming access.

From our experience, the growth in e-learning in corporates has thus far been largely in training for compliance/legal purposes or to meet needs like induction, health and safety, and process and product knowledge – what can be referred to broadly as “skills training”. Management training on the other hand, still seems to be provided mainly face-to-face to small groups, on the basis that there is a need for interaction and discussion with an instructor or coach, as opposed to the person learning on their own online.

This is all changing however, with the realisation that ‘blended’ learning - that is, an appropriate mix between online and face-to-face training - not only has a number of obvious benefits, but can actually improve the learning experience, knowledge retention, and practical application in the work place. It can also save costs, by cutting down on the face-to-face instructor-led time, travel costs, and time away from work which is a cost which is not often calculated.

By having access to study materials beforehand, whether these are in the form of reading, videos, interactive e-learning courses, and assessments, the delegates can learn the theory online before they attend the workshop, leaving a lot more time for discussion and practical case studies in the workshop itself. The delegates can also be assessed on their knowledge gained during both the online

study and during the workshops , to see how much they understood and where the gaps still lie.

One of the other major benefits is that once the formal learning program is complete, the staff can continue to access the course content online, refreshing their memories and embedding the knowledge further.

Where they have particular management tasks to carry out, for example running a meeting, delegating, disciplining, planning, etc., they can easily look up this semi-familiar information for just-in-time performance support.

In this way e-learning also becomes the basis of a corporate “e-resource” or toolkit, which not only embeds the management principles they learnt, but also enhances their productivity day-to-day.

So, if you are still stuck thinking of e-learning and face-to-face training as mutually exclusive, think no further – they both work together, and the value that ‘e’ adds takes learning and performance to a new and more productive level. n

E-LEARNING steps up a NOTCH

By Frank SmitCEOBridgewater [email protected]

@frankbridge52

“‘Blended’ learning... an appropriate mix between online and face-to-face training”

36 EDUCATION & TRAININGBusinessBrief December/January 2014/2015

Invest in the global currency of success – quality education and training Education and training is an investment in yourself. A quality qualification that enjoys global recognition is the only capital you need to build a successful career in South Africa or abroad.

That’s why you have to insist on a NQF-registered qualification. The South African Qualifications Authority (SAQA) oversees the development of the National Qualifications Framework (NQF) – a set of principles and guidelines that assists in the creation of a qualifications system for South Africa.

In turn, the NQF ensures that you have access to reputable education and training establishments that provide you with qualifications that are recognised locally and internationally.

Finance your future with the currency that will always add value to your life – a NQF-registered

qualification.

“The SAQA stamp of approval gives me the assurance that my education enjoys international recognition and my future knows no boundaries.”

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qualification.



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Invest in the global currency of success – quality education and trainingEducation and training is an investment in yourself. A quality qualification that enjoys global recognition is the only capital you need to build a successful career in South Africa or abroad.



Finance your future with the currency that will always add value to your life – a NQF-registered qualification.





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Working towards an MBA for further education and career advancement is a commitment that requires significant sacrifice. Relationships and family life

should not be one of these sacrifices. Many a pathway to a MBA has been strewn with broken relationships that fell victim to the stress. Classes, extracurricular activities and recruitment events keep MBA students away from home and, when they do get home, they have to study and do their coursework.

The average age of an MBA student in SA is about 34, a life stage when responsibilities at work are very demanding and there is invariably a young family at home. These factors can be a source of real stress when coupled with the rigorous demands of the course, creating a potential breeding ground for discontent. Recognising this pitfall, leading business schools of the 21st century are now designing MBA studies that centre around family relationships and aim to produce leaders who take family values into account. Schools like this respect their students’ aspirations to develop personally and professionally, transitioning from company executives to respected business leaders, but are very aware of the importance of nurturing family relationships and maintaining students’ quality of life over the protracted study period.

These forward thinking business schools have started working with the partners of their MBA students from the start to ensure they know exactly what lies ahead. Partners are frequently invited to let management know of any issues that cause conflict along the way, allowing for adjustments to the process to make it more family-sensitive. An approach that is also working very well is creating a “community” among the partners that allows them to support each other.

Many students with young families choose to pursue their MBAs on a part time basis, which enables sufficient flexibility to balance studies with other life commitments. Whether they need family time or are committed to an inflexible business schedule, a part-time MBA can allow students to study in their own time and at any location. This blend of workshops, flexible assessments, teamwork, online and offline self-study remains in step with the realities of most students’ lives as full-time businesspeople, professionals, partners and parents. n

Family friendly MBA?By Jon Foster-PedleyDean Henley Business [email protected]

@HenleyAfrica

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T: +27 11 608 1331I: www.davinci.ac.zaE: [email protected]

Contact Details

A TOTAL OF 384 CERTIFICATE 203 DIPLOMA 156 MSC

55 PHD students have graduated during the first 10 years

OF ENROLMENTS ARE STUDENTS FROM BEYOND SOUTH AFRICA’S BORDERS7%

STUD

ENTS 1543

497

undergraduates

postgraduates

A mature student population with

students older than 35 years of age

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software, intranets and more, and formulate their strategies to include knowledge management, but the actual knowledge transfer needs to happen with people.

Goman has also found that people tend to withhold information and only disclose on a “need to know” basis. In her research, Goman identified the following reasons as to why people withhold information:

• People believe that knowledge is power• People are insecure about the value of their

knowledge• People don’t trust each other• People are afraid of negative consequences• People work for other people who do not tell

them what they know

For key resources a competency framework or specific deliverables where knowledge sharing plays an important role should be developed. This ensures that should any member of the team move on, the knowledge remains within the organisation or team.

For knowledge sharing to become the norm it needs to become part of an organisation’s culture. Leaders need to become accountable for the sharing of knowledge, they need to drive the process and only then will employees start seeing the benefits and follow their lead. n

Gaining knowledge is empowering and creates vast opportunity for improvement and growth.

Unfortunately, not many people are willing to share their knowledge. Corporate South Africa is currently facing a skills shortage and it is vital that a culture of knowledge sharing is created within individual organisations to combat this.

The resources spent on having to formally educate teams on knowledge that should have been passed down from longer-term employees and leaders are substantial and unnecessary. The International Data Corporation developed a metric measure referred to as the ‘knowledge deficit’. It captures the costs and inefficiencies as a result of intellectual rework, substandard performance and inability to find knowledge resources. The knowledge deficit among fortune 500 companies is estimated conservatively at $12bn annually. Knowledge sharing gives employees and leaders valuable insights into their business, helps to foster a trust relationship and empowers others to learn. The advantages and richness of translating what we know to others and then what others share with us is invaluable.”

Research by Carol Kinsey Goman entitled ‘5 reasons why people don’t tell what they know’, states that knowledge management resides with people. Organisations invest millions in technology to support knowledge management with the likes of shared portals, collaborative

By Seugnet van den Berg Managing [email protected]

Many of us have attended a strategy session or listened to an impressive speaker and longed for a method to absorb all of the knowledge presented in an efficient manner.

38 EDUCATION & TRAININGBusinessBrief December/January 2014/2015

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The

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Inst

itute

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Man

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duca

tion

T: +27 11 608 1331I: www.davinci.ac.zaE: [email protected]

Contact Details

A TOTAL OF 384 CERTIFICATE 203 DIPLOMA 156 MSC

55 PHD students have graduated during the first 10 years

OF ENROLMENTS ARE STUDENTS FROM BEYOND SOUTH AFRICA’S BORDERS7%

STUD

ENTS 1543

497

undergraduates

postgraduates

A mature student population with

students older than 35 years of age

CUR

REN

T ST

UDEN

TS20

40

0

10

20

30

40

50

DEM

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58% MALE

86%

Blended learning points the WAY

In South Africa and the greater African continent, the demand for high-quality accredited education radically exceeds supply. The best residential universities can only service students living within their immediate areas, or those willing to relocate to attend on-campus programmes.

Delivering university courses online offers a viable solution to increase access to first-tier

education with Africa’s highest ranking universities.

Distance learning has been around for as long as technology has permitted it, and the global hype around online education is gaining strength. Over 6 million students worldwide are pursuing a degree online. Yet, the unfortunate reality is that for economies of scale and ease of administration, most correspondence and online course providers have sought to replace the role of people in the learning process with insufficient technological alternatives.

Until recently, traditional correspondence courses have been the most feasible option for working professionals to further their studies. In truth, these forms of learning are immensely challenging for most participants. Many experience an ongoing sense of isolation, struggle with the self discipline required to manage their own time, lack motivation and have restricted engagement with their teachers and fellow students. As a result, the statistics for traditional correspondence studies indicate that only a small percentage of learners who start correspondence courses actually end up completing them.

In contrast, participants of blended learning programmes see a near flawless completion rate. Blending learning is new to South Africa, and adopts the use of an interactive online education platform combined with elements of traditional learning.

The success of blended learning lies in the recognition that for most participants, significant learning

cannot occur without support from, and in collaboration with, other people. With advances in digital technologies, it’s now possible to replicate the best elements of the

face-to-face classroom we all grew up in, and

enhance the efforts of people in the learning experience – not replace them.

This design

fosters a vibrant community of

learners who have the opportunity to forge lifelong networks through collaborative project work, extensive debate and social interaction. n

By Rob PaddockChief Academic Officer [email protected]

the private health sector. The other aspect of the inquiry, which is curious is that it commences with an understanding that all South Africans are entitled to access healthcare pursuant to rights contained in the Bill of Rights. This has ramifications for members of the private healthcare sector in so far as constitutional rights are usually exercised as against the Government and not private persons and it is the Government’s obligation to ensure that rights are fulfilled within the means available to the Government to do so. But what is this inquiry intended to achieve? Well, if one accepts that there is a concern about how much healthcare costs in the private sector in South Africa, then one may be driven to the conclusion that the inquiry is to reveal how costs are determined in the hopes of influencing that determination and bringing the costs down. Seems to be rational and logical – not so?

However, the role of the Commission cannot be to determine how much healthcare should be or impose a formulation for the determination of applicable tariffs for healthcare services. In any event, how does one assess healthcare? Is one supposed to determine whether a healthcare system is efficient by the number of people it treats and who enjoy positive outcomes or is itits accessibility based on how much the services it offers cost. The inquiry may reveal much about the private healthcare sector but before we grab our pitchforks and light our torches and head up the hill to confront a monster, perhaps we should be reflecting on what healthcare is as a commodity and, like any other commodity, whether or not you are prepared to buy a high-end or low end-version of it and wish to retain that choice. n

Broadly, commentators and the man or woman in the street fall into two general categories: those who think healthcare

is too expensive in South Africa and those who believe that the quality of private healthcare is commensurate with its cost. Depending on your view, you either fall into one of these categories but sometimes that R1 800 consultation fee for a specialist makes one think about the costs of healthcare in South Africa.

The Commission’s inquiry is to take place on a level more esoteric than necessarily what the average consumer pays for healthcare daily. The Commission has proposed various “theories of harm” pertinent to the private healthcare sector in South Africa. These theories of harm are to be used to examine whether or not the private healthcare sector operates in an anti-competitive manner. The inquiry will also focus only on the private healthcare sector and not what occurs in the public healthcare sector. This is due to the provisions of the legislation governing the inquiry as well as the terms of reference applicable to the inquiry.

This is an interesting aspect of the inquiry in a South African context bearing in mind the significant impact that the public healthcare sector has on decisions by consumers as to where and how they wish to obtain healthcare

services and perceptions concerning the quality of healthcare in the public sector.

Such perceptions drive many consumers to purchase private healthcare in the belief or fear that services available in the public sector are inadequate or beneath acceptable levels and standards. Unfortunately, such motivations are underscored by frequent media reports concerning

a lack of equipment, expertise and infrastructure within the public

healthcare sector in South Africa. That having been said, the Panel governing

the enquiry is not adverse to receiving submissions concerning the role of the public sector and how it affects competition and access to healthcare in @Werksmans

By Neil KirbyDirector: Healthcare & Life Sciences Law [email protected]

The Competition Commission has

commenced with its market inquiry

into the private healthcare sector

in South Africa. The Commission is

proceeding in terms of a statement of issues published

on 1 August 2014. The statement is designed to

explain why the Commission is

interested in examining the

private healthcare sector from a

competition law perspective.

LEGAL40BusinessBrief December/January 2014/2015

An ARM & a LEG?

BLA

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ON

136

14

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In 2011, nature photographer David Slater was in Indonesia with the aim of obtaining a winning shot of

a crested black macaque. It really was a case of “lights, camera and action” when one of the animals grabbed a camera and took a host of “selfies”, resulting in the winning shot Mr Slater was after.

The curious case of the “monkey selfie”As to be expected, most of the monkey photographer’s photographs were out of focus and not aimed at anything in particular, but a few fantastic shots were captured when the budding photographer/model gazed playfully into the lens. The incident has recently received much media attention, particularly in light of popular culture’s current infatuation with the “selfie”.

The legal issueWikimedia has added the rather intriguing image to its online collection of royalty-free images and has refused Mr Slater’s requests to remove the image and not use it without his consent. Wikimedia argues that the image is in the public domain as it was taken by a monkey, who is therefore the author of the copyright work but, being a monkey, cannot be said to own it (legal ownership is, after all, a human concept). Mr Slater argues that he made all the necessary arrangements that resulted in the image being taken, incurred significant costs to travel to Indonesia in the first place and should therefore be compensated for the use of this image. He claims that he owns the copyright.

Copyright is an automatically subsisting right. As soon as the work in question

is reduced to a material form, copyright exists, and it is not necessary to obtain a registration for the copyright. Generally, the author of a work, being the one who made it, is the owner of the copyright.

However, the question of authorship can often be more complex than merely considering who “made” the work.

The Copyright Act of 1978 designates the author of a photograph as being the person responsible for the composition of the photograph. This would mean, for example, that it is not necessarily the person who took the photograph by clicking a button, but rather the person who directed the content of the photograph (and therefore whose artistic vision it embodies), who is the “author”.

Although we might have sympathy for him, and empathise as he describes the difficulties faced by nature photographers who might labour for an entire year and come out of it all with just one winning image, there is an argument that the particular work that ensued was not a result of his artistic vision and efforts, but rather what one might call a “happy accident”. Mr Slater did not hand his camera to the monkey, sensing her talent as photographer/model, and did not foresee that a superb selfie would ensue.

Interestingly, in an extensive report of the US Copyright Office discussing federal copyright law, the US Copyright Office has indicated that it will not register works “produced by nature, animals or plants” and, as one of the examples of such works, it mentions “a photograph taken by a monkey”. As the report comes a few weeks after the media storm surrounding this matter, one might conclude that this reference has been made specifically with Mr Slater’s case in mind. n

Copyright in PHOTOGRAPHS?

By Nicole SmalbergerSenior AssociateAdams & [email protected]

@cr8tvedesignlaw

@DLACDH

LEGAL42BusinessBrief December/January 2014/2015

The Proposed Environmental Impact Assessment Regulations and

Environmental Impact Assessment Regulations Listing Notices 1 to 4 of 2014 were published under Government Notices in Government Gazette 37951 (Proposed Regulations) for public comment on 29 August 2014.

Investors have conveyed that South Africa has one of the most cumbersome and over regulated environmental law systems, with a clear need to streamline environmental applications. The Proposed Regulations’ objective is therefore laudable.

They were published in furtherance of an Agreement, the “One Environmental System for South Africa” (the Agreement), in which the Ministers of Environmental Affairs, Mineral Resources and Water Affairs agreed to streamline the environmental legislation.

In line with the Department of Environmental Affairs’ intention that the environmental authorisation process should be completed within one year, the Proposed Regulations include dramatically reduced timeframes for various application processes. Whilst these shortened timeframes could fast-track development, they have been

criticised by various environmental non-governmental organisations. Their concern is that the Proposed Regulations threaten to erode South Africa’s environmental management, as it may be difficult to fully assess potential environmental impacts in the required scientific investigations conducted as part of an application for environmental licences. This could have a knock-on effect on the quality of the mitigation measures proposed by specialists.

Despite the shortened timeframes, the Proposed Regulations do make allowance for extensions of time to be granted. If the scope of work must be expanded, based on an environmental impact assessment’s outcome and which could not be anticipated prior to their compilation, or if an applicant can demonstrate exceptional circumstances, the competent authority may extend the prescribed timeframe to an agreed period.

Amendments to the National Water Act (NWA) and specific Environmental Management Acts (SEMA)s have, however, not yet been promulgated to give effect to this intended streamlining. Any delays by the legislature in effecting these amendments could undermine the effectiveness of the Proposed Regulations. n

By Sandra GoreDirector: Environmental DepartmentCliffe Dekker [email protected]

By Gareth HowardCandidate AttorneyCliffe Dekker [email protected]

One ENVIRONMENTAL system required!

Further draft Regulations have been published under the National Environmental Management Act, 1998 (NEMA), aimed to streamline and expedite the applicable time frames for environmental licensing requirements.

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Opportunities abound for offering their companies cutting-edge technology which places them far ahead of their competitors.

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Israel technology...

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Public and private entities creating partnerships is gaining strength. Typically,

public-private partnership (PPP) arrangements are structured in one of four ways: the management of existing public facilities by a private entity for a predetermined time; a private entity receiving concessions in return for a substantial investment in an existing public service and entering into an operation contract for its provision and sale to the public; a private entity financing, constructing, operating and managing a utility for a long period before transferring it back to a public authority; and a private entity taking an equity stake in a state-owned utility through part-

ownership with other companies and/ or the state, or owning the utility outright.

The private sector helps to fill a vacuum in the provision of public services, the need for which has inexorably increased as a result of the current economic growth of certain African states. The public sector may need foreign investment from international operators providing the required capital to build and run public utilities at a reduced cost to the state.

Advantages for the state are that risks of delivery are transferred to the private partner and the state is able to fund more infrastructure projects.

The private partner benefits from full government support and approval, the certainty of long-term economic activity, an assured client base and an enhanced profile through its association with the state.

PPPs depends on the success of initial projects, the proper development of the regulatory environment and private sector investor confidence in the political stability of a country. n

POTENTIAL in PARTNERSHIPS

By Spencer NaickerSenior associate

[email protected]

@webberwentzel

BusinessBrief

LEGAL 43December/January 2014/2015

BusinessBrief

TAX44December/January 2014/2015

The MTBPS states that: “Government proposes a structural increase in revenues over the medium term. Policy

and administrative reforms will raise at least R12bn in 2015/16, R15bn in 2016/17 and R17bn in 2017/18. The details of proposed changes will be announced by the Minister of Finance in February when he tables the 2015 Budget in Parliament”.

It is not clear whether these increases were calculated in nominal or real terms, i.e. as nominal amounts for each of the next three years, or to be adjusted for inflation in the period to the relevant fiscal years.

According to research, the South African fiscal cliff is described as the point where civil service remuneration plus social grant expenditure equal government revenue.

If the amounts in the MTBPS are stated in nominal terms to be adjusted for inflation over the three fiscal years, the funding need increases considerably (assuming an inflation rate of 6% per annum): R12.4bn (rather than R12bn) in 2015/16; R16.4bn (rather than R15bn) in 2016/17; and R19.7bn (rather than R17bn) in 2017/18. The total funding need then amounts to R48.5bn, rather than R44bn as stated.

For purposes of the analysis, the amounts stated in the MTBPS are the actual amounts required in the next three fiscal years, for a total funding need of R44bn. A combination of tax increases and adjustments can deliver an increase of R44bn in tax revenue.

The three main sources of tax revenue are personal income tax, company tax and value-added tax (VAT). Increasing the government’s tax revenue should therefore focus on these three sources, although other tax revenue sources can also make a contribution. Tax increases are not favoured and a reduced expenditure to avert a fiscal cliff in South Africa’s fiscal position is preferred. There is an unwillingness on the part of government to make the necessary

expenditure cuts. Such spending cuts should include a reduction in the size of the Cabinet and the number of Deputy Ministers, as well as a reduction in employment numbers in the civil service.

As an alternative, the ability of the government to raise taxes was assessed. In the calculation of an increased tax burden, a 10% elasticity in the reduction of the tax base owing to the increased tax burden was assumed. In respect of personal income tax, two additional marginal tax brackets were introduced: 45% for taxable income above R1 million per annum and 50% for taxable income above R2mn per annum.

Based on the revised tax structure and a number of assumptions about other tax sources, tax revenue increases were assumed. These increases include the raising of the company tax rate to 30% and increasing VAT by one percentage point to 15%. However, in each instance a reduction of 10% in the tax base is assumed, which reduces the extra tax revenue collected. On this basis an additional R44bn in revenue in nominal terms can be raised.

The exception is customs duties. In this instance practically the whole amount collected is paid to Botswana, Lesotho, Namibia and Swaziland, South Africa’s partners in the Southern African Customs Union (SACU). This is one area where a revision is called for. Given South Africa’s own fiscal needs, it is clear that this subsidisation of South Africa’s SACU partners can no longer be afforded.

The analysis shows that the government can use the approach to raise an amount of R44bn. This will not be sufficient to avert a fiscal cliff. A fiscal cliff can only be averted if government restricts growth in civil service employment with the objective of reducing employment numbers over time and limits civil service remuneration adjustments to the rate of inflation. The trade union demand of an increase of 15% can simply not be afforded. n

Fiscal cliff LOOMS!

By Prof. Jannie RossouwHead, School of Economic

SciencesUniversity of the

[email protected]

In the 2014 Medium Term Budget Policy Statement (MTBPS)

the intention to increase the tax

burden in the next three fiscal years

was announced.

@WitsUniversity

Dividends Tax has been payable since 1 April 2012. Prior to this, resident companies that

declared dividends were subject to Secondary Tax on Companies (STC). Under the Dividends Tax regime when a company pays a dividend it is, subject to certain requirements, allowed to deduct unused STC credits from the dividend amount in calculating the amount subject to Dividends Tax. Some changes are in the pipeline though, but for those who need a better understanding, here are some points to note;

1) What is STC credit?If a company had an open “dividend cycle” at the inception of Dividends Tax the cycle was deemed to have ended on the day before such inception and that cycle is known as the “final dividend cycle”. This meant that at the end of the “final dividend cycle” a

company could have had a deemed dividend accruing from the penultimate “dividend cycle” together with other dividends which accrued to it in the “final dividend cycle” which had not been set off against dividends declared. This unutilised balance is referred to as an “STC credit”.

2) How is STC calculated?The period between two successive dividends declared by a company is referred to as a “dividend cycle”. STC is paid on the company’s “net amount” of dividends in a “dividend cycle” where the “net amount” was the amount of the dividend declared by the company less the amount of dividends that accrued to the company in that

“dividend cycle”.

Group company dividends on which no STC was paid could not be deducted in establishing a “net amount”. Where the amount of dividends accrued exceeded the dividend declared in a “dividend cycle” the excess could be carried forward to the company’s next “dividend cycle” and was deemed to be a dividend that accrued to the company in that next cycle.

3) What about Dividends Tax exemptions?Where a company’s shareholder is an individual this is fair and equitable but where the shareholder is a resident company it is exempt from Dividends Tax in any event. This means that where a dividend paying company utilises an STC credit and the dividend is paid wholly or partly to a resident company, the STC credit, or portion of it, would have effectively been lost. For this reason the recipient resident company is allowed, subject to certain conditions, to add the STC credit that was applicable to its dividend portion to its own STC credit balance.

4) What’s coming?On 1 April 2015 a company’s STC credit will be deemed to be nil. Companies are therefore reminded to calculate their STC credit balance and use it before this date. Companies should also consider whether companies in which they own shares should pay dividends and pass STC credits up the line. n

BusinessBrief

TAX 45December/January 2014/2015

By Mike DingleyNational Head of [email protected]

@Mazars_SA

Understanding STC credits

However, as African markets offer exciting growth and investment opportunities for

investors, there are also a number of common challenges faced by inbound multinationals with regards to Compliance and Reporting advancements.

Broadly these challenges are the reliance on manual tax compliance, the lack of precedent (and consistent application thereof), language barriers, local accounting requirements and an increase in tax

audits.

Whilst there is a shift to electronic tax compliance (for example in Kenya) there is still a strong reliance across Africa on manual filings, where taxpayers or their representatives have to physically complete and file returns. Added to this would be the physical payment process where cheques need to be drawn and handed in at a Revenue Authority office. This becomes particularly challenging when a multinational does not have a physical presence in country, a growing trend as businesses transform their finance functions and move resources to Centres of Excellence or low cost shared services centres.

The second category would be the lack of available court precedent to manage a complex dispute with cross border legislation.

Thirdly, language barriers are often difficult to overcome and in many instances financial statements and tax returns need to be filed in local languages. Coupled with this

is the fourth challenge, namely that many countries in Africa have different financial statement reporting requirements (such as OHADA and local GAAP).

Companies starting to operate in a new country need to open sales and marketing operations in country, while outsourcing non-core finance and tax functions to a reputable in country service provider, which can protect a company’s brand in country by ensuring compliance with the local laws and regulations.

A good mantra for companies that are transforming their finances to fit the new globalised economy is “standardise, digitise, globalise.” This process should include making all components of compliance and reporting global and efficient, not just the income tax returns. Almost two-thirds of companies’ surveyed by EY have established global processes for tax accounting, but many have omitted income tax compliance, value added tax returns, financial statements or some other important filings.

Fortunately, most finance executives are aware of the risks. The survey shows that 69% think that failing to globalise compliance and reporting will lead to incomplete or inaccurate data, 68% think it will add to the cost of compliance and reporting, 57% think it will result in missing deadlines and incurring penalties, and 50% think it will lead to an increased tax burden.

The practical challenges of operating across Africa are there, but can be overcome using local knowledge and lessons learned. n

Compliance & reporting IMPACTS

According to EY’s 2014 annual Africa Attractiveness survey, Executing Growth, Africa’s share of global foreign direct investment (FDI) projects reached the highest level in a decade.

By Warren TaylorGlobal Compliance & Reporting Leader for [email protected]

BusinessBrief

TAX46December/January 2014/2015

@warren_taylor40

“Standardise...Digitise... Globalise”

South Africa, like many countries around the world, has areas which suffer from urban decay. In 2003 the Urban Development Zone (UDZ) tax incentive was

introduced under section 13 of the Income Tax Act, 1962 to promote urban renewal in demarcated areas. The UDZ incentive provides for an allowance for the taxpayer which when claimed, reduces his taxable income. This deduction was initially only available until March 2014 but has now been extended to March 2020.

Any person who meets the requirements of section 13 is eligible to claim the UDZ incentive. Firstly, the person must have erected, extended, added to or improved a commercial or residential building. If only part of a building is erected, extended, added to or improved then the floor area must be at least 1 000m2 to qualify. The person may, subject to certain requirements having been met, also qualify if the building was purchased from a developer who has not previously claimed the UDZ deduction.

The building in question must be located in a demarcated UDZ area. The demarcated areas have been published in the Government Gazette and are available on the National Treasury website. Furthermore, the building must be used by the taxpayer solely for the purpose of trade. The deduction only commences once the building has been brought into use by the taxpayer and no longer applies when the trading activity ceases. The person claiming the UDZ incentive must own the building. A lessee would therefore not usually qualify for the deduction unless the lessee was responsible for the improvements or extension.

If the taxpayer meets the UDZ requirements an allowance is then determined in accordance with subsections (3) or (3A). For example, where a new building is erected, the incentive will be calculated at 20% of the cost. In addition 8% of the cost can be claimed in each of the 10 succeeding years of assessment. Therefore, if an investor purchases land in a UDZ area for R5mn and constructs a commercial building for R100mn in 2012 but commences trade in 2014, then the investor may claim 20% of the construction costs in 2014 (i.e. R100mn x 20% = R20mn). In addition, the investor can claim 8% (i.e. R8mn) for each of the next 10 years of assessment. The R10mn for the purchase price of the land will however, be disregarded when calculating the incentive. n

The urban INCENTIVE

By Graeme PalmerDirector in the Commercial Department Garlicke & Bousfield [email protected]

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FINANCE & EQUITY48


CASH crunch continues!The average South African’s disposable income has declined for the first time since January, while de-population of the ranks of the lower middle class continued over the past three months. This is according to the latest BankservAfrica Disposable Salary Index (BDSI).

2014 has had two negative months of take-home pay so far. The average disposable salary

came in at R12 224 in August. While slightly lower than July, it remains 6.1% up on a year ago. With inflation at 6.4% in August, the actual salaries are weaker after the catch-up of pay increases from general government and state-owned enterprises. The BDSI shows that real salary increases are once again becoming constrained.

Tighten the belts even moreThe BDSI indicates retail sales may in the next month or two, be lower than July. The formal sector employee is less likely to afford as many or as expensive new cars as before. Wages may be increasing, but are not going to increase at the same rate as before.

The total value of salaries (including pensions and ultra-high income individuals) saw an increase of just over 7% to R44.8 billion. This, along with credit data, suggests that South Africans are not increasing their debt levels and are rather concentrating on paying the debt back. Confidence in low interest rates is also probably declining. In addition, the financial sector has become more careful in granting loans to the lower end of the market.

More people get more, but fewer blue-collar salariesThe number of people receiving between R50 000 and R100 000 in disposable income per month, grew by 24.5% year-on-year. The next highest category (between R25 000 and R50 000) grew by over 18%.

Those receiving less than R4 000 in

their bank account grew by 10.8%, but the largest category, those earning between R4 000 and R10 000, again declined by nearly 2.5% year-on-year.

An interesting fact is that the number of people earning between R4 000 and R10 000 per month now makes up 42.6% of the total, while those earning between R10 000 and R25 000 currently makes up 35.3% of the sample in the BDSI.

The category of those who earn between R25 000 and R50 000 is estimated to be 8.1%. Those taking home over R50 000 and up to R100 000 make up 1.5% of the total BDSI.

The lowest income category, namely those earning below R4 000, now reflects just over 13% of the estimated number of people in the BDSI. This means that more than 55% of South Africa’s working population, as reflected by the BDSI, earn less than R10 000 per month.

More people are earning higher salaries, while the bottom end of the middle class – those earning between R4 000 and 10 000, is de-populating. It is also quite clear that the growth in the number of accounts receiving over R10 000 is growing in double digits.

Although the BDSI does not include individuals earning over R100 000, it is interesting to note that this category has grown by 27.2% in August, year-on-year. This category has now seen growth of over 37% for the first eight months of 2014, over the same eight months of 2013. The trend of more people entering the higher income brackets is partly due to above-inflation increases within these categories.

An interesting trendA trend that needs further investigation over the next year is the decline in the number of employees earning between R4 000 and R10 000 as take-home pay, while categories above and below this range continue to see actual growth.

However, the fact that the category including those with a take-home salary of over R10 000 has grown from 34% to 44% in less than two years must be an indication of wealth creation in the South African formal sector. n

@mikeschussler

“More people are earning higher

salaries, while the bottom end of

the middle class – those earning between R4 000 and 10 000, is de-populating”

By Mike SchüsslerChief Economist Economists.co.za [email protected]

NEW PRINCIPLES for FINANCIAL instruments


49FINANCE & EQUITY

The International Accounting Standards Board recently released a new accounting standard on financial instruments. The new standard is

expected to have a significant impact on how entities classify and measure financial instruments. It includes a new approach to impairment as well as a fundamentally revised method of hedge accounting.

Financial instruments are found on the balance sheets of most companies from the corner café to the large corporates. Examples of financial instruments include loans, trade receivables and trade payables, share investments, cash, bank overdrafts and more complex instruments such as interest rate swaps and forward exchange contracts.

The new standard, called IFRS 9: Financial Instruments, addresses all financial instruments and is applicable to entities who prepare their financial statements using IFRS.

Classification and measurement (excluding impairment)While the classification and measurement of financial liabilities has been left mostly unchanged, IFRS 9 has resulted in significant changes to the categories and categorisation of financial assets. The new categories for financial assets under IFRS 9 are: Amortised Cost, Fair Value through Other Comprehensive Income, and Fair Value through

Profit or Loss.The categorisation of financial assets has shifted to a principle-based system which centres around 2 principles: the business model the entity applies in managing its financial assets in order to generate cash flows and create value and whether or not the cash flows are solely payments of principal and interest.

ImpairmentThe new approach to impairment contained within IFRS 9 is known as the expected credit loss model. Under

the expected credit loss model it is no longer necessary for an impairment event to have occurred before credit losses are recognised. Rather, entities are required to continuously account for expected credit losses.

The expected credit loss model applies a three stage approach to recognising expected credit losses: Stage 1: 12-month expected credit losses; Stage 2: lifetime expected credit losses; Stage 3: credit impaired lifetime expected credit losses. The model is expected to result in more timely recognition of credit losses.

Hedge accountingHedge accounting has been fundamentally revised in IFRS 9. The revisions align hedge accounting more closely with risk management practices of an entity. Like the categorisation of financial instruments, the new hedge accounting is a more principle-based method.

Effective dateThe new standard is effective for years beginning 1 January 2018 and is available for early adoption. If an entity elects to apply IFRS 9 early, it is required to apply all its requirements simultaneously. n

By Colin WheelerIFRS Manager [email protected]

@Mazars_SA

NEW PRINCIPLES for FINANCIAL instruments

This will affect balance sheet ratios that are often used by banks both for pricing loans and as the basis

for debt covenants.

The US Securities and Exchange Commission has estimated the undiscounted value of future lease payments among US listed companies alone at more than US$1.25 trillion.

The implication is that restated balance sheets could result in companies breaking their debt covenants, in which case such loans may have to be repaid on demand. The exact nature of the final changes is still unclear, but what companies with business loans need to acknowledge is that this is a very real threat.

The uncertainty stems from differences of opinion between the two accounting standards bodies over how leases are to be reported on the balance sheet. The IASB has proposed a single model in which assets and liabilities are amortised on a straight-line basis using the effective interest rate, while the FASB has suggested separating between purchases and operating leases.

The latter method would result in a distinction between operating leases - defined as type-A leases - and loans on assets – type-B leases - in the income and cash flow statements. Current accounting rules allow companies to keep operating leases off the books, or to account for capital leases as debt.

These substantial changes could place companies in a difficult position if their balance sheets are significantly weakened.

Grant Thornton’s International Business Report (IBR) showed that 69% of South

Africa companies surveyed were aware of the proposed changes. This was up from the 52% in the first quarter of 2013.

Grant Thornton’s International Business Report (IBR) provides tracker insights specifically presenting perceptions into the views and expectations of over 12 500 privately held businesses surveyed in total per year across 44 economies on an annual basis. Data relating to Lease Accounting draws responses from more than 3,000 businesses globally in 45 economies in February 2014.

Despite the heightened awareness by SA business executives, the data indicates that 79% of local companies believed the changes would have no effect on their ability to comply with debt covenants which is rather concerning. This might be due to the belief that capitalised lease loans would possibly fall outside the computation of covenant ratios.

However, with nearly 67% of respondents having business loans and with 49% of them having debt covenants that could be payable on demand if they break these covenants, this is not a trifle matter.

As we don’t yet know which way this will go, it’s hard to refute the proposition that all businesses will be affected. If their borrowings or definitions of their borrowings will be affected by a new accounting convention, then most certainly the business will be affected. This talks to the point that each component of financing – capital goods, expansions, working capital, leases – will all require specific attention in financing agreements and not simply a blanket financing facility. n

Proposed changes to accounting standards that may have a material impact on company balance sheets threaten to catch unprepared companies off guard. The changes being mooted by the International Accounting Standards Board (IASB) and Financial Accounting Services Board (FASB) will require that all leases other than short-term leases be reported on the balance sheet.

By David ReubenPartner and Head of AuditGrant Thornton [email protected]

@GrantThorntonZA

FINANCE & EQUITY50

BusinessBrief

LEASE accounting changes threaten!


A new KPMG International survey has found that 58% of family businesses are currently seeking external financing to fund their investment plans, but finding

the right strategic investment partner can be challenging.While family businesses create more than 70% of global GDP many say they find their fundraising options limited. Private Equity funding often requires the entire business to be sold to maximise value in the event of an exit, and corporate strategic partners often see any investment as part of a longer-term plan to secure full control. As a result of these limitations, many family businesses may not be maximising their growth potential.

It is estimated that there are up to 14mn High Net Worth Individuals around the world with around $53tn of wealth. Survey results show that the top priorities of HNWIs and Family Owned Businesses align, making this underutilisation surprising: HNWIs name long-term capital appreciation (37%) as their top driver for investment, while family businesses name long-term orientation towards investment returns as their top investor characteristic (23%).

Relations between family businesses and HNWIs in South Africa are exceptionally strong. Four out of five family businesses have already obtained direct investment from HNWIs – and all of them were positive about the experience.

The survey also found that family firms, in SA, were not just looking for a silent partner. All respondents were prepared for investors to offer advice and expertise – even offering a seat in the boardroom in one case. From the survey, education and awareness on the potential benefits of these partnerships have emerged as important first steps to link these two groups. This report has revealed some important misconceptions on the sides of both family members and HNWIs.

While there are challenges on both sides, Family matters: Financing family business growth through individual investors reveals that both family businesses and HNWIs have an appetite for investment and could prove to be highly compatible partners. n

Family BUSINESS finance!

By Craig Steven-JenningsPartnerKPMG in South [email protected]

@KPMG_SA

There will always be two opinions when evaluating a business – that of the seller of the business,

and that of the buyer. A seller of the business, who may have spent many years, and put much blood, sweat and tears into building it, will try to emphasise the most positive aspects. If he cannot find much to be positive about in the last set of financial statements, he will find it in the future prospects of the business and build it into his price.

The buyer, on the other hand, is almost always skeptical about what is under the hood of the business, more wary about the future of the industry on which he is about to place a sizeable bet, and,

if nothing else, keen on a

bargain. His

valuation will inevitably be lower than that of the seller.

Net Asset Value, the sum of the market value of each of the business’s assets, was a method commonly used in the past. This however has largely fallen by the wayside because it does not take the potential of the assets to generate an income as a fully functioning business into account. In contrast, the Price Earnings method (p/e) think is most often used today, uses the ability of a business to generate a profit as the starting point of the valuation. The p/e ratio indicates how many years it will take to pay off the selling price of the business with the profits generated by it. A p/e of five, for example, means the selling price can be paid off in five years.

There are many aspects to consider, such as whether the business has just emerged from a less profitable year, yet showed excellent profit the previous two years. The parties involved then have to agree on how to weight each year to determine the profit potential of an ‘average’ year.

Often the record-keeping is neglected or, just as often, income is under-declared and personal purchases disguised as business expenses in order to pay less tax. While the business owner may enjoy a slight tax benefit for a while, when it comes to selling a business, it is almost impossible to convince a skeptical buyer that the profits were actually much higher.

Further factors, such as such conditional clauses, can also complicate the buying and selling of owner-managed

businesses. Small business owners often resist conditional clauses that don’t influence the price, but these can provide some level of assurance to the buyer which can be a selling point. One very sensible arrangement is to insist that the previous owner remains on in the business for a few months to help with the handover.

It is advisable for both the buyer and the seller to seek the professional services of an accountant and lawyer to help guide them through the difficult terrain in search of a fair compromise. Any well-qualified professional accountant should be able to provide good advice on how to value the business.

Sellers should strive to present their price on real facts and figures as much as possible, the basis of which is a complete and verifiable set of books. Buyers are right to be wary, not only about the financial statements presented to them, but also about the fact that track record is no guarantee for future performance of a business.

Occasionally the price paid for a business can be off-balance with any valuation done on paper because of some strategic consideration, such as to minimise the competition in the market. Such strategic moves are only for the most experienced of entrepreneurs – those who have learned both the science and the art of valuing a business. n

The science & ART of valuing SMEsAccurately evaluating how much a business is worth is the most challenging part of the buying and selling process for both the current small business owner and prospective business buyer, as the question: “What is the value of this business?” is one of those best answered by another question: “Who wants to know?”.

52 ASSETS & INVESTMENTSBusinessBrief December/January 2014/2015

By Gerrie van BiljonExecutive director Business Partners [email protected]

@BizPartnersLtd

FedGroup is an authorised financial services provider

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Act on misselling & malpractice

A new CFA Institute study, Redress in Retail Investment Markets, makes six recommendations for how retail investors can help to address malpractice in the

financial markets. The recommendations improve upon the traditional approach to supervision. Regulators should focus on punishing misconduct through fines by empowering retail investors and users of financial services to seek compensation when they are harmed by misconduct.

Effective mechanisms for investor redress have a central role to play in the revised Markets in Financial Instruments Directive (MiFID II), which the European Commission and the European supervisor (ESMA) are currently working on implementing. The new Commission and Parliament will be called to pay increasing attention to this dossier, at a time when the policy-making agenda shifts from financial stability to investor protection.

Convergently, SA’s Financial Services Board tabled the “Treating Consumers Fairly” (TCF) regulations recently. TCF is an outcome based regulatory and supervisory approach designed to ensure that specific, clearly articulated fairness outcomes for financial services consumers are delivered by regulated financial firms. One of six tenets specifically highlights that products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly, which indicates that market integrity and misselling is an issue agnostic of geography. Misselling remains a top concern for investors and in many countries, supervision has so far largely ignored redress and focused only on fining misconduct. Redress is central to market discipline, investor trust and participation in the financial markets.

The study sets out recommendations for European and national authorities to increase the availability and quality of redress mechanisms in retail financial markets:

• Ensure retail investors can access “out-of-court” alternative dispute resolution (ADR) by setting up industry-wide schemes with the ability to issue binding decisions and where participation is compulsory for services providers.

• Provide guidance on the application of the consumer ADR Directive to financial markets.

• Increase transparency to foster awareness and comparability between schemes and jurisdictions.

• Strengthen the financial dispute resolution network (FIN-NET) with the capacity to monitor ADR schemes across the EU and to aggregate and publish all relevant information.

• Enable the relevant public authorities to set up special-

purpose ADR schemes in cases of mass detriment to investors.

• Develop a common supervisory approach in Europe regarding the monitoring of complaint handling, cooperation with ADR schemes, and the exchange of information.

A financial industry that better serves society must provide effective tools for investors to enforce their rights when faced with malpractice — especially as individuals increasingly rely on market solutions for their retirement incomes. The future of finance hangs, to a great extent, on delivering effective redress mechanisms for investors. n

By Nerina Visser Beta ExpertCFA South Africa [email protected]


53ASSETS & INVESTMENTS

@nerina_visser

With the debt burden increasing and interest rates rising, the need for sound

financial planning has become critical. Fortunately, people are starting to see the benefits of financial planning and the value of a competent financial planner in helping them achieve financial independence. As a result, a growing number of South Africans are looking for a professional who will act in their best interest, a fact highlighted in the recent global Comparator Research Survey, conducted by Financial Planning Standards Board (FPSB).

What companies are saying about the benefits of a competent financial planner?

According to the survey, 78% of companies surveyed in South Africa expect an increase in the number of people seeking professional financial planning advice in the short term, which is refreshing news for the economy. Consequently, the need for competent financial planners has awoken businesses to the value of a Certified Financial Planner professional with 50% expected to support their existing advisors in attaining CFP certification. This trend has been evidenced in the recent FPI Corporate Partner agreements between the Financial Planning Institute (FPI) and four of South Africa’s leading financial services institutions.

The CFP mark has become the business’ assurance that the professional is the most capable person for the job, due to their rigorous certification standards of qualification, experience and ethics. Accordingly, the CFP professional’s ability to competently address client needs was recognised by 80% of

companies who found that they have a positive impact on client satisfaction and benefit from increased client retention.

Not surprisingly, 80% of firms also indicated that these professionals:• have a higher rate of growth of assets

under management, • generate higher levels of revenue (and

profit) than advisors without the CFP accreditation, and

• present lower compliance and legal risks compared to those not certified.

How exactly are CFP professionals achieving such success?

CFP professionals understand the individual needs and financial situation of each client and offer a tailored approach, ensuring client satisfaction – a central goal of any business. This approach includes a comprehensive view of the person’s finances, advice on how to better manage these finances, and being instrumental in keeping them on track with their financial goals – which is probably the most difficult area to be disciplined in.

Not only can CFP professionals provide people with a much-needed roadmap for financial security, they are also able to support the business in better managing its own financial position. For example, there are a host of financial elements associated with business continuity that are often neglected and as such, could compromise the resilience of the business.

Financial planning is the most significant tool in lessening the impact of the economic downturn on both the consumer’s and business’ purse strings. Ultimately, financial independence will be the greatest contributor in relieving widespread financial pressures and uplifting the South African economy. n

As much as South African’s place emphasis on goals, they are generally bad at planning to meet their financial goals. In the context of an economy that is growing below its potential, a reality for most is that neglecting this aspect could result in undue financial pressure.

By Godfrey [email protected]

@FPI_SANews

The CATALYST for stability!

54 ASSETS & INVESTMENTSBusinessBrief December/January 2014/2015

MONEY

BEYOND

At SBV we don’t see ourselves merely as a cash-in-transit company. How could we when everything we do goes beyond just money. From the innovative and progressive technologies we engage, to the added-value services we provide and the market-leading tools we use, SBV is not the industry standard, we surpass it because beyond money, we’re safety, we’re support, we’re peace of mind, we’re forward thinking, we’re considerate.

For more information visit us atsbv.co.za, or call us on 011 283 2000.

Smart thinking. Secure solutions.

SBV FMCG Reatiler 275 mm x 70 mm_Beyond Money.indd 1 2014/10/17 1:53 PM

the exchange where it has a primary listing. The fast track listing process seeks to significantly reduce the time it takes to attain a secondary listing on the JSE.

The streamlined process means that a secondary listing on the JSE gives companies the opportunity to access South Africa’s deep pools of capital at a lower cost by eliminating a second round of administrative preparation for listing.

The process will also make it easier for multinational companies already operating in South Africa and the rest of the continent to list here. Companies can use a listing on the JSE as a springboard into other countries in Africa. International investors trading on the JSE are looking the opportunity to stock pick top African listings and companies operating in Africa can showcase themselves better on the JSE than on a large international exchange where they run the risk of disappearing in the crowd.

The JSE has satisfied itself with the disclosure and regulatory approach of the accredited exchanges. The World Economic Forum (WEF) has ranked South Africa in first place for the regulation of our securities exchange for the past five years and we believe the fast tracking listing process does not compromise the high standard of regulation we have set for ourselves in any way. n

JSE listing requirements

As part of the amendments to the Listing Requirements, it has also introduced a fast track listing

process to make it quicker and easier for companies already listed on certain international exchange to secondary list on the local bourse.

The new fast track listing process allows international companies, who have already been admitted to certain other major stock exchanges for a period of at least 18 months, to place a secondary listing on AltX or the JSE’s Main Board. The following exchanges are accredited by the JSE for the fast track listing process:

• Australia Stock Exchange • London Stock Exchange • New York Stock Exchange (NYSE) and

NYSE Euronext • Toronto Stock Exchange

Companies listed on the above exchanges and making use of the fast track listing process do not need to produce a prelisting statement and, instead, will only release a prelisting announcement. This announcement contains certain disclosure items pursuant to the Listings Requirements and details of the actual listing on the JSE, which is then read in conjunction with the company’s latest published information (including its annual report) which has been prepared in accordance with the requirements of

The JSE has made global amendments to its Listings Requirements which were announced to the market on 29 August 2014. These amendments will result in the issue of a whole new service issue, Service Issue 18.

By Donna OosthuyseDirector: Capital [email protected]

@JSE_Group

Banks MUST restore trust!The recent failure of African Bank, and the subsequent Moody’s downgrading of all South African banks, indicates a serious lack of trust in the compliance culture of our banking system.

Realistically, no other South African bank suffers from the systemic rot that seems to have

been in play at African Bank over the last several years. According to a recent exposé in Die Burger, African Bank has been guilty of over two hundred transgressions of the National Credit Act. Why was the failure of the bank not predicted, whether by the auditors, the National Credit Regulator (NCR) or the South African Reserve Bank, and why was meaningful action was not taken to stop these practises?.

Moody’s downgrade is harsh, and arguably, uncalled for. It will add significantly to the cost of capital for the banks, and for government – costs that will be passed on to the tax payer and the borrower. One must assume that it is based on their belief that African Banks’ lending practises, and the lack of any significant consequence prior to the collapse may be replicated in other lenders.

Compliance projects are grudge purchases. Executive management has a fiduciary responsibility to minimise unnecessary costs and, in some cases, this may lead to a culture of compliance with the bare minimum letter, rather than the spirit of the law. The complexity of risk management, combined with the need to allow each bank to adapt to their unique circumstances, means that the specifics of compliance, particularly related to the specifics of risk reporting, are open to interpretation.

For many banks, data governance and data quality are still seen as tactical solutions, delivered by IT in the data warehouse, rather than as strategic initiatives designed to ensure trust in

the banking system. Once trust has been lost, these disciplines may be part of the solution to winning trust back.

Documented and shared data policies define the culture of the organisation. Under what circumstances may a loan be granted and what data must be captured to ensure these circumstances have been met? Data quality rules can be implemented to identify and deal with transgressions immediately, or to prove compliance and reduce the monthly reporting burden. The failure of African Bank may herald an increased focus on enforcement of legislation, as both auditors and regulators seek to regain the trust of the international community. For banks, customer data quality may need to be improved to ensure accurate total exposures can be measured, and to ensure accurate daily reporting to the credit regulators. New international legislation such as Foreign Account Tax Compliance Act (FATCA), Dodds Franks and the Basel III BCBS 239 “Principles for effective risk data aggregation and risk reporting” are adding to the compliance burden.

An international trend being replicated in SA is the appointment of a Chief Data Officer (CDO) to take responsibility for data compliance. Yet, this role may prove to be a poisoned chalice if the CDO has to rely on IT for data quality and governance support. Data management is a specialist skill that is not often a characteristic of the typical IT professional. Internationally, the CDO drives Data Governance and Data Quality as a business function that relies on key business stakeholders to define and implement data governance policies, data quality rules and the like. The CDO cannot afford to place her success in the hands of IT but must find tools that are accessible to business data

owners and stewards. External reporting burdens require flexibility, agility and, most importantly, urgency. Business must be able to interpret changes in risk results on a month-by-month basis, adapt existing reports to meet changing circumstances, measure and report on risk data quality, and explain variations to regulators in order to regain trust.

South African banks are well regulated and we should not expect another catastrophic failure similar to African Bank any time soon. However, the reputation of the South African banking system must be restored. The data management aspects of compliance can no longer be regarded as surplus to requirements. Banks must improve the way in which they govern and manage the quality of key risk data if they are to restore international trust. n

By Gary AllemannManaging DirectorMaster Data [email protected]

56 BANKING & INSURANCEBusinessBrief December/January 2014/2015

@gary_alleman

BusinessBrief_Menu137x210.indd 1 18/09/2014 11:35

The South African Institute of Chartered Accountants (SAICA) encourages people to familiarise

themselves with the Second Draft Demarcation Regulations before they are finalised.

The draft demarcation regulations seek to address concerns that certain health insurance products in the long- and short term insurance markets could be harmful to medical schemes by enticing younger and generally healthy members to opt out of medical scheme cover. The health insurance products under contention include hospital cash back plans, where the insurer pays out a certain cash amount per day spent in hospital and medical expenses shortfall for expenses not covered by the medical scheme.

The draft demarcation regulations recognise the role that health insurance products play, and support the continued sale of gap cover and hospital cash plans, provided that the design, sale and marketing of these products are complementary to medical schemes.

The SAICA medical schemes project group submitted its comments to the National Treasury, saying they “remain strongly supportive of the objective to avoid further destabilisation of the medical schemes environment, and is appreciative of the introduction of regulatory changes to ensure that health insurance products do not compete with or undermine medical schemes.”

The draft demarcation regulations

still contain certain ambiguities and areas for clarification. This is crucial to ensure undesirable products from entering the market and equally preventing desirable health insurance products from market penetration.

If the regulations are implemented in their current form, the design of medical aid schemes will be such that members do not have the benefit of life-long cover, and have to top those up with health insurance products provided by long- and short term insurers to fill this gap. n

What product are YOU buying?

By Tshegofaco RametsiProject director of assurance [email protected]

@saica_ca_sa

57BANKING & INSURANCE BusinessBriefDecember/January 2014/2015

The key to ensuring that debit orders are correct is by using written mandates that

authorise a company to process debit orders on a client account on a regular basis.

It is important to note that banks fulfil the function of a payment facilitator. A debit order is therefore not a contract between the customer and the bank, but an agreement between the account holder and

an external company.

Typically, debit orders are instituted against accounts when a company has agreed on dates and amounts that are to be deducted from its accounts. An agreement is put in place with the collector of the debit order, and a debit order name is placed on the account. Deductions then begin.

The recent attention paid to unauthorised debit orders appearing on customers’ statements does not make this form of payment untrustworthy or inefficient.

Although the spotlight has recently been placed on unauthorised deductions through questionable debit orders, these incidents make up a small percentage of debit order transactions that are processed by banks.

Disputes about debit orders often arise because there is no written mandate from the customer authorising the service provider to deduct a set amount for a certain period. Against this requirement, is the reality that more and more instructions for debit orders are being placed verbally with businesses that contact

customers directly.

The first port of call for a customer disputing a debit order should therefore be directly to the company providing the service. This company should be able to prove, through a recorded conversation, that the debit order was verbally authorised. If the company originating the debit order cannot provide the necessary proof, the customer should then declare a dispute and request a refund of the money paid out. The Payments Association of South Africa (PASA), responsible for managing payment systems in South Africa, alone, monitors about 30 million debit orders, with a value of about R72 billion, on a monthly basis.

The best course of action, however, is to stress that a verbal exchange is not enough to authorise debit order transactions. Customers should insist that a written debit order mandate is sent through so it can be authorised in writing with both parties holding copies of the agreement. It is important to note, however, that the easiest way of ensuring that disputes do not occur is for the beneficiary of the debit order and their customers to have written, mutually agreed mandates in place. n

Although recent actions taken to tighten up debit order rules will undoubtedly reduce the incidence of disputed deductions from accounts, there is still a mutual responsibility for both the service provider and the customer to ensure that debit orders are correctly authorised.

By Ethel NyembeHead of Transactional Products & Services Business Banking Standard Bank [email protected]

58 BANKING & INSURANCEBusinessBrief December/January 2014/2015

Legitimate debit orders?

“Disputes often arise because

there is no written mandate from the customer”

@SB_BizConnect

Are YOU ready for SAM?

S ince the Financial Services Board (FSB) first published their roadmap for the Solvency and Assessment Management (SAM) in 2010,

traditional insurers have dedicated resources to develop their systems and processes in preparation for the SAM regime. But as captive and niche insurers typically have little to no full time employees, skilled or available outsourced service providers play an important role in the development phase and providing continuous support in implementation. This begs the question of whether captive and niche insurers are keeping pace with the onerous requirements of SAM implementation.

As a board member of a captive or niche insurer you need to be circumspect as to whether you are realistically on track to meet the deadlines contained in the SAM roadmap. The size and complexity of the insurer obviously plays a role and proportionality is taken into account by the FSB, but compliance with SAM is inevitable. Whether the FSB or the Reserve Bank will be the one with the stick, penalties will be levelled against non-compliant companies. And ultimately the board members will carry the can for risk governance. As a board member you should start asking yourself some of these questions:

• Do you understand what the drivers are to determine SCR and Technical Provisions (TP) based on the QIS?

• Do you know the difference between the standard model and simplification method contained in the QIS?

• Do have a risk rating methodology and risk register

to evaluate the material risks and can you project the future impact of these risks on your SCR?

• Have you developed and implemented your risk management policies?

• How your selection of assets affected the SCR?• Do you have a governance framework with control

functions and resources to execute, monitor and report the results of ORSA?

• Are the people that fulfil head of control functions qualified and experienced to provide assurance?

• Have you embedded the results of the QIS3 to prepare for the SAM parallel runs?

• Are you comfortable that you have the right resources to complete and submit the QRT’s?

If your answer is ‘no’ to some of these questions, it could mean that you might not be ready for implementation and the fast tracking of your activities is critical. n

59BANKING & INSURANCE BusinessBriefDecember/January 2014/2015

By Magda KendallHead of Risk Advisory and Captive Solutions Aon South [email protected]

@Aon_SouthAfrica

The problem is that this idea perhaps isn’t wrong. There definitely is some truth to this

and a lot of agency work adds to this perception; we’re sometimes our own worst enemy. Start by imagining a world without advertising. The true and compelling reason marketing and advertising exists in the modern day is that companies, new start-ups or large behemoths, believe they have or offer something better or more interesting than their competitors.

Once they have it or find it, they would like to tell people about it. (Companies that waste, yes waste, money on advertising vanilla products blow my mind every day; rather spend the money on designing products the customer wants).

With the amount of information available online through social media, forums and general reviews, anyone who does the slightest bit of research can protect themselves from buying a bad product, and poor companies are no longer able to hide behind good advertising. So, a good product is fast becoming a hygiene factor. A great product tends to sell itself (Apple) and we often say, the best form of advertising is product.

The sad truth, though, is almost everyone advertises. And the bigger companies spend a lot more money doing so than the innovative little companies can afford. So, and this is where it gets interesting, the little companies are forced to innovate and push the boundaries and grow interesting challenger brands and build niche communities and ambassadors and brand loyalists.

In other words, advertising is a result of competition. The more competition there is in an industry, the more big companies need to advertise and the more the smaller companies need to innovate to gain a share

of the pie. So what about a world without advertising?

Let’s look at the flipside, and amazingly, there is a real world example of this. Cuba, because of governmental control in what goes on the shelf, has no or very little competition for most products. And because of it, there is very little need to advertise and there is hardly any advertising in Cuba.

Without competition, we find a world with no advertising. And without advertising, we would find a world with no competition. Advertising is the result of healthy competition. And healthy competition, in the consumers’ world, is a fantastic place to be.Competition drives entrepreneurship, innovation, interesting products and new designs. Competition forces everyone to try make things different and better.

Without competition, only the big brands would survive. And they would very likely become lazy and fat and rich. And the little guys would suffer. And innovation would slow down. And consumers would be a lot worse off because of it. A world without advertising would be a horrible place to be. Now, what I would really like is a world without bad, wasteful advertising. n

A WORLD without advertising...?

There is a misconception around advertising where it is seen as a marketer sitting in an ivory tower engaged in a supreme form of psychological trickery to fool the unsuspecting consumers into buying a product they don’t need.

By Dean Oelschig Owner [email protected]

60 MARKETING & SELLINGDecember/January 2014/2015BusinessBrief

@deanoelsch

“Without competition, we find a world with no advertising. And without advertising,

we would find a world with no competition”

IMM_GSM_BusinessBrief C.indd 1 11/13/14 11:15 AM

Fewer and fewer consumers believe the messages that are being put out by traditional

advertising messaging.

Marketing is neither transparent nor authentic by nature. Consumers are starting to care less about what companies are selling and more about why they are selling what they do. This purpose-driven trend paired with more astute consumers, has resulted in the move towards more honest marketing

– authentic marketing.

Unlike traditional advertising, authentic marketing looks internally to determine what the organisation stands for beyond just making profit; what is its purpose? To determine organisational

direction and core values, business partners and key company executives need to define; ‘what is it we stand for that will never change, even if it proves to be a disadvantage at times’?

This approach gives communication direction in terms of what is ‘right’ or ‘wrong’ for the organisation. It also creates long-lasting relationships with consumers, which ultimately paves the way for a successful and sustainable business. Authentic marketing is less about the touch-points weaved into an organisation’s marketing strategy or campaigns, and more about the stories that are told by the organisation. To this point, these stories should not be artificial, but rather an extension of the businesses’ self-expression.

With the boom of social media the power has shifted from the organisation to the consumer, which is why it is very hard to hide behind unauthentic marketing, because the truth will always reveal itself. Sustainability through authentic marketing requires businesses to reward loyal followers, and to be consistent, charitable and honest, with proof of what the organisation claims. n

Sustainability through AUTHENTICITY

61MARKETING & SELLING BusinessBriefDecember/January 2014/2015

@dot_good

By Michael BarettaManaging director[dot][email protected]

TIPS for a SUCCESSFUL sales teamAny company that wants to run a successful sales

team that delivers sustainable results needs to create an environment where employees feel

positive, motivated, empowered and confident.

Top tips for running a great sales operation:

• Choose the right people from the start Create a set of formal assessments based on experience that help separate strong candidates from less promising ones early in the interviewing process. Given the costs of training and the risks of sharing your intellectual property, you don’t want to only identify a culture mismatch after you have hired and trained someone.

You want people who can foster deep, lifelong relationships with customers and who are willing to work as if they are working for themselves.

• Create a culture of learningSalespeople want to feel that they have a career. They also want to develop in their positions and grow as people. Invest continuously in employees’ growth and development. Many become interested in eventually moving into management or into other roles in the organisation. It’s important to provide opportunities for them to mature as business people.

Formal and informal learning programmes have a major impact on commitment, performance and retention of sales staff. Spend a lot effort on training, coaching and mentoring.

• Measure performancePerformance management is also important - and this goes beyond tracking how salespeople are performing

against their sales targets. Track many elements of your sales team’s performance on dashboards - this gives us insight into where they are doing well and where they could improve. The measurement of performance is possibly the most important element of running a great sales operation.

• RecognitionIt is important to give lots of recognition to sales staff. Give public and personal recognition for the behaviours that exemplify culture and values. Examples of such behaviours include going the extra mile to care for someone going through a difficult time, being innovative, providing amazing customer service, or over performing against targets. Hold monthly one-on-ones between salespeople and their managers. Direct feedback and positive recognition is invaluable to career progression.

Running a good sales team is about finding the right talent, nurturing it - and here’s the hard part, retaining it. It’s important for salespeople to be driven and have an entrepreneurial spirit, yet we mustn’t lose sight how important it is for them to fit into the company’s culture. Look for that mixture of ambition, with an eagerness to embrace a culture of learning. Furthermore, customer knowledge and business flair is what make a sales team world-class. n

By Sandra SwanepoelSales directorSage [email protected]

@SageVIPpayroll

62 MARKETING & SELLINGDecember/January 2014/2015BusinessBrief


The future of brand marketing – if it has one – has been put up for debate following a recent marketing industry event called to examine key frustrations and controversies affecting the professionals who bring goods and services to the South African consumer.

BRAND marketing’s future?

Potentially explosive topics were deliberately tabled by the Brand Council of South Africa

(BCSA). There’s an opportunity to explore hot issues such as the pace of transformation in ad agencies and marketing departments, the perceived lack of marketing industry thought-leadership, marketing’s capacity to drive societal change and whether marketing even warrants discussion.

Does marketing have a future? Is it a business function with limited scope and value or does it matter? Clearly, the BEE context has the potential to sharpen any discussion of marketing’s role and importance. Twenty years after black South Africans got the vote, do they have a voice in how marketing and advertising businesses are directed?

The involvement of black South Africans at every level in brand development and strategy represents a huge opportunity to add value by getting as close as possible to our market. But the question

must be asked ‘Is the value-add being realised or even pursued?’ A review of progress is warranted and some would say long overdue. Another industry controversy centres on branding in the boardroom. Some question whether the discipline is even understood by main board directors let alone properly discussed.

Certainly, the annual Brand Barometer survey reveals a growing perception that marketing lacks thought-leaders who can ensure marketing becomes a business driver rather than a bolt-on accessory. The post-recession corporate priorities appear to be operational efficiency, cost-savings, job cuts and the return on funds employed.

In this environment, does marketing’s capacity to drive top-line growth, jobs growth and economic growth get enough attention? Do South African businesses – and marketers – do enough to drive growth, job creation and economic revival? These are big

issues and it’s a hopeful sign that marketing professionals are widening the discussion.

An internal conversation within the marketing ‘family’ hardly moves us forward. It was therefore encouraging that the Brand Council decided to open the forum to CEOs, managing directors and executive directors from some of South Africa’s leading companies. To get South Africa working at full capacity we need to optimise marketing’s contribution to national growth. If we’re to move forward it’s important to initiate a high-level exchange of views involving decision-makers from the corporate sector as well as marketing professionals. n

By Ivan MorokeCEOTBWA\Hunt\Lascaris & Chairman of the Brand Council of South [email protected]


@TBWAAfrica

While families are increasingly progressive and gender neutral, SA law has not yet caught up by allowing fathers to take paternity leave.

Our law provides for maternity leave in order for a mother to bond with and care for her newborn child, but what does it say about newborns bonding with their fathers? Nothing at present, but this may change in the near future due to Capetonian Hendri Terblanche and his petition to the National Council of Provinces (NCOP) regarding the introduction of paternity leave for fathers of newborns.

The law as it stands does not permit fathers to take paternity leave when their children are born. Terblanche petitioned the NCOP to amend the current law, which provides for no official paternity leave, and to grant them ten day’s paternity.

Terblanche’s twin sons spent a lengthy period of time in intensive care due to a premature birth and he was not permitted to take leave during this period, aside from the family responsibility leave provided for in section 27 of the Basic Conditions of Employment Act 75 of 1997. Fathers have recourse to the family responsibility leave provision only by way of the Basic Conditions of Employment Act, and this

provision is limited in that fathers may take only three days’ leave.

The three days’ leave are to cover both the birth of a child and to attend to any illness any of their children may have during a one year employment cycle. In Terblanche’s case, he could not be present for the lengthy period his twins remained in intensive care due to the limiting leave provisions.

There has been growing support for the law to be amended

in order to provide fathers a reasonable opportunity to bond with their new born children. Non-profit organisation Sonke Gender Justice (SGJ) has come out in full support of amending the law to include ten days’ paternity leave for fathers as requested by Terblanche.

South Africa appears to be lagging behind in its laws regarding paternity leave in Africa. Numerous African countries have already acknowledged the significant role of fathers in the early stages of childhood by offering paternity leave. Ghana, Kenya and Cameroon all provide for paternity leave with Kenya providing for up to 14 days’ paternity leave.

Three years ago The University of Cape Town (UCT) set the precedent for paternity leave when it granted its employee, Douglas Newman-Valentine, paternity leave in order to bond with his adopted daughter. Douglas’s partner, Marlow Newman Valentine, also had his paternity leave approved by his employer. Unfortunately for Terblanche, the granting of paternity leave in this instance was by way of employer discretion.

There appears to be some progress since the petition by Terblanche to the NCOP. A white paper on families has been drafted by the Department of Social Development with input from Sonke Gender Justice and recommends that paternity leave should be included in the Basic Conditions of Employment Act. It has been signed off by the Cabinet and is accordingly assumed to be coming up for discussion. The final draft of the paper recommends that fathers be involved in their children’s upbringing, and that the introduction of paternity leave by law be considered.

Despite the apparent progress relating to paternity leave, there are other noteworthy lacunas in the law surrounding parental rights. Paternity leave for adopted children should also be considered, as well as family responsibility leave for parents who are in the process of adopting but officially only foster parents to the children to be adopted. There presently exists no family responsibility leave afforded to parents who are fostering children. If parents, whether they be biological or not, want certain areas of the law relating to parental rights to be considered for amendments, it is recommended that they adopt the approach by Terblanche in order to bring light to the issues not yet up for discussion. n

By Fadia ArnoldSenior Litigation Associate & HOD of Employment Law TNK [email protected]

Paternity Leave PAINS?

64 HUMAN CAPITALBusinessBrief December/January 2014/2015

South Africa has the third highest unemployment rate in the world for people between the ages of 15 to 24, according to the World Economic Forum (WEF) Global

Risk 2014 report. 50% of young South Africans between 15 and 24 are unemployed. There are around 600 000 unemployed graduates in SA. Whilst 25% of the country is unemployed, Gill Marcus, stated that 53% of youth are unemployed but this excludes discouraged work-seekers. That figure is closer to 70%.

Only around 12% of South Africans have a tertiary education. One would imagine that in a skills-starved economy they are in high demand, but unfortunately finding an internship can be an extremely frustrating experience for both employers who get many requests and for the students who often have to contact each company individually.

Traditionally corporates have been the main employer of interns with structured programmes which help to maximise the experience for the intern, and to meet the long term HR requirements for the company. According to the revised BEE codes of good practice which are to be implemented in 2015, the hiring of interns will now contribute skills development points. Increasingly, small and medium sized businesses are also making more use of interns. These businesses are able to get more done at a lower cost, while giving graduates the opportunity to get practical experience.

Internship positions may be paid or unpaid. Sometimes an employer offers only an allowance for food and/or travel which is around R2 000 – R3 000 a month. Those that are paid are offered in the region of R8 000 to R10 000. The amount paid and whether to pay depends on the sector and what the intern has studied. Businesses can take advantage of the Employment Tax Incentive. The incentive is to employ young people aged between 18 and 29 by offering a government subsidy of up to 50% on salaries of R6000 or less.

An internship is a way that a final year student or a recent graduate can gain work experience and learn to implement what he or she has studied. Companies benefit because they are able to hand pick talent. n

Youth unemployment

SHOCK!By David [email protected]

@internfit

Employees being BULLIED?

Executive officers have a legal – as well financial and moral duty – to ensure

that their employees feel safe at work. Dismissing rumours or direct complaints are not options.

Bullied or just over-sensitive?Bullying refers to repetitive and offensive unreasonable conduct by one or more people against another person or group of people, which results in a deliberate hostile working environment.

Corporate bullying can manifest itself in a number of ways, including unreasonable expectations, humiliation in front of others, exclusion, intimidation, removal of responsibilities, physical assault or threats and spreading malicious rumours.

If someone is being bullied at work, others will know about it, but won’t report it for a variety of reasons, including fear of being the bully’s next victim. Victims are too scared to lodge a grievance and the bullying becomes difficult to address.

Instead of waiting for reporting, companies should work proactively to prevent that it happens in the first place.

The best way to deal with any form of harassment or bullying, is to try and prevent it through good policies and an induction programme that makes it clear that bullying and harassment are taken very seriously.

Although employment equity

training about fairness in the workplace is mandatory, many companies don’t train their staff because of time restrictions, which created the demand for e-learning courses employees can do in their own time.

The best way to deal with bullying is to prevent it happening in the first place. Employers can do this by:

• Making sure that all employees are regularly trained on how to uphold dignity and respect of others and not infringe on their rights.

• Making it clear that bullying will not be tolerated in the company

• Ensuring that, should a case of bullying arise, all steps are followed precisely.

The steps are: • Employees must be encouraged to

lodge grievances about bullying. During this process, companies should take great care to protect the employee from further victimisation.

• If allegations of harassment are found to be true, the company must either rehabilitate the bully or punish him or her.

Coaching the bully is often very effective. If the behaviour is entrenched, regular coaching and counselling for both bully and victim are often very effective.

However, if the bully refuses to take responsibility for their actions, then punishment is sometimes necessary. In this case, the company

disciplinary code should be evoked and the bully punished in line with the disciplinary process.

When a victim is too afraid to lodge a formal grievance, he or she can be offered professional counselling to help them deal with the bullying until they are ready to lodge a grievance.

Workplace bullying is exceedingly expensive to companies, while causing victims emotional difficulties sometimes for years after the bullying has passed.

Both employers and employees must know – by law – that bullying is out of line and that there are legal ways of dealing with this age-old scourge. n

@TrainingRoomZA

By Marleen PotgieterExpert & Designer The Training Room [email protected]

Bullying in the workplace often takes place right under managers’ noses and they don’t know about it until it blows up. This is not because they’re wilfully ignorant or dismissive, but because workplace bullies have a special talent for terrorising their peers or juniors while buttering up their bosses.

66 HUMAN CAPITALBusinessBrief December/January 2014/2015

South African P a y r o l l A s s o c i a t i o n

FA_VDW_SAPA_Bus brief Mag.indd 1 2014/03/14 1:24 PM

67HUMAN CAPITAL BusinessBriefDecember/January 2014/2015

SKILLS RETENTION: a moving target

Consulting engineering firms face the same skills shortages as related industries and within public sector bodies such as local and provincial

government. To say that these firms are in a crisis is not overstated – but one that is ongoing and now just appears to be the norm. Skills shortages becomes more acute when the economy is in a boom phase and less so during recession, but the problem never completely disappears because the fundamentals still need to be addressed.

A lack of skills is severely impacting the country. This is particularly relevant to technical skills where the Engineering Council of South Africa (ECSA) statistics state that South Africa has one engineer for every 3,100 people, compared to Germany with one engineer for every 200 people and in countries like Japan, UK and USA, this ratio is about one to 310.

In South Africa’s developing economy, the ratio should be better, not worse than in developed countries. The effects of supply and demand are no more apparent than in the labour market, especially where sought-after technical skills are in demand.

One cannot look at the issue of skills in isolation. Companies need to take a comprehensive view focusing on attraction, development and retention – a holistic approach, but no one wants to work for a company with a bad image, so their reputation and integrity is paramount.

Attracting mature talent is of course necessary to get current jobs done and this is usually by way of advertising or through recruitment agencies – convenient but not the best way as it doesn’t tackle the fundamental problem of too few engineers and technicians. Talent development is also central to retaining high performing individuals and is designed to offer aspiration to individuals who want to be the best.

Providing the opportunities for academic advancement and working on different, challenging projects – often in other parts of the world – are all attractive incentives for the ambitious employee. As with others, mentoring plays a key role in steering individuals in the right direction and to where the firm wants them to go.

Retaining talent is paramount. Companies need to focus on retaining staff by focusing on rewards and remuneration. While remuneration is often a reason why people leave any firm, it is one of the easier challenges to address. Understanding what motivates individuals to perform at

their best requires deeper understanding of the human psyche and recognition of one’s abilities is a strong motivator. Promotion is also not only good for the individual concerned but serves to inspire others who want the same recognition.

Many companies don’t recognise the importance of ensuring that the workplace becomes a place where employees actually want to be on a day-to-day basis. A company’s culture, in essence meaning the way they do things, the work environment, site conditions, the office space, the way people are treated, and the one-on-one relationship between managers and staff are all factors that determine a person’s decision to stay in a company. n

By Muzi SiyayaGroup Business Development Executive [email protected]

@GIBB_Africa

F ibre broadband Internet access is widely acknowledged as a foundation for digitally-

enabled prosperity, as it “creates the platforms upon which users experience the Internet, and entrepreneurs and businesses innovate” (McKinsey & Co, Internet Matters). In addition, the Broadband Commission, a joint body of UNESCO and the ITU, found that for every 10% increase in broadband penetration, additional growth of 1.3% in the national GDP can be expected.

Market supplyTraditional telcos and new fibre specialists alike are contesting this game of one-upmanship, with infrastructure deployments coming thick and fast.

Currently there are about 10 key players investing into fibre infrastructure, with just over 200 000 km of fibre capacity deployed in South Africa – and growing. Telkom dominates with more than 70% of the national fibre footprint under its control, but new market entrants have had a significant impact on reducing the price of Internet access.

The winnersThere’s no catch. Business and residential customers are walking out winners in this instance.

This is true high-speed, lowly contended local access at excellent prices, which will kick the converged services game into a higher gear.

For many years the supply side of the market dominated prices and service offerings, and the demand side of the market had to accept what came their way. At the network level, this has

meant paying for artificial scarcity created by suppliers, for example Telkom withdrawing its highly profitable low-speed [sub-1Mbps] Diginet services from the wholesale market to minimise the impact this has had on the company’s voice services.

With increased access to affordable fibre services, users can properly converge voice, video, Internet, private network and video-on-demand services on the same access network, and totally remove their reliance on old PSTN infrastructure.

CompetitionThe ‘land grab’ opens the market up for true competition. A plethora of providers are in on the act, providing great customer choice. The price that links are going at makes it a numbers game – the more traffic a provider can attract, the better. Providers offering wholesale as well as retail access under the same roof will inevitably find themselves feeding the retail competition. Pricing will be less decided by who owns the infrastructure and more by the kind of service experience customers want.

Looking aheadIn a competitive landscape such as this, things can only get better. It will be fascinating to see what offers will come up next, how widespread it will become, and what enablement is likely to result. Not only is it good for South Africans’ Internet experience, but it will contribute to improved economic growth. n

The fibre rollout race has been hotting up properly of late. Connectivity providers are falling over themselves to cover as much ground as possible with increasingly high-capacity fibre access at aggressive prices and with minimal lead times.

By Dave MeintjesCEOConnection [email protected]

The FIBRE land grab is ON!

December/January 2014/2015BusinessBrief

68 INFORMATION TECHNOLOGY

“Pricing will be less decided by who owns the infrastructure

and more by the kind of service

experience customers want.”

Research, analysis, and advisory services.In technology, online,

and social media.Tel: +27 11 782 0045 ✱ www.Strategyworx.co.za

Business is increasingly looking to technology to drive the modern business transformation agenda, and not simply implement it. The good news is that for the first

time, the technology actually has the tools to deliver.

Emerging technologies like in-memory databases, mobile devices, cloud computing and social media are all creating new possibilities so far removed from our current reality that they’re being dubbed “disruptive technologies”.

Welcome to the real-time world, where working from gut feel and general trends just doesn’t cut the mustard any more. Business intelligence is becoming less about looking backward and more about predicting and optimising the future. Businesses need more precise, real-time objective data for decisions.

There’s a greater of level of appreciation for insights and data and a realisation that the volume, size and complexity of today’s data just can’t be handled by traditional means. The phenomenal successes of internet companies such as Google, Facebook and LinkedIn have helped make this approach more real for many in their private lives. A lot of their success is simply based on effectively leveraging their data: spotting patterns, making predictions and adapting their business to take advantage in real-time.

While the prospect of becoming a real-time enterprise can seem daunting to some organisations, those companies that have embraced such real-time transformation are outperforming their peers in many areas.

The current reality is that many African organisations are still struggling to deliver real-time information to their business users. According to a 2013 survey by the Hackett Group, while more than half of companies (57%) could provide their cash positions in real-time, far fewer had other types of information at the ready. Only 43% could provide customer information in real time, just 28% could deliver supplier data in the moment, and less than a quarter (24%) could provide an instant snapshot of financial performance.

A 2013 global survey of 400 large companies by Bain & Company found that firms using advanced analytics were twice as likely to be in the top quartile of financial performance within their industries; three times as likely to execute decisions as intended; twice as likely to use data very

Real-time BUSINESS a REALITY

frequently when making decisions and five times as likely to make decisions much faster than market peers. That Hackett Group study found that 70% of leading firms—those with mature, tightly-integrated operations—had access to financial, customer and supplier information in near real time, or within one day. Likewise, Accenture found that nearly half of top performing companies deliver key information to business users in real-time. And those organisations that have embarked on the kind of large-scale integration of people, processes, data and technology required for real-time transformation realise key operational benefits, according to Accenture: 46% capitalise on their customer insights, 63% are able to analyse costs and benefits in real-time, and 38% deliver critical information across devices. The results speak for themselves.

The important thing about this innovation journey is that it’s not just about real-time technology alone; it’s about real-time transformation. That requires more than new systems and it demands a cultural shift. And that usually doesn’t happen with a big bang. Real-time transformation is incremental—targeted prototypes and projects, metrics setting and gathering, work and rework—and it rapidly delivers increasing value over time.

It’s clear that organisations with the most advanced real-time capabilities will win in the data-driven future. And the time to begin the real-time transformation is now. n

By Pfungwa Serima CEO SAP [email protected]

December/January 2014/2015 BusinessBrief

69INFORMATION TECHNOLOGY

Pfungwa2

booked and paid for on the corporate’s account, so not only had the fraudster cheated the travel agency, but also cheated the passengers. They had set up a fake travel agency, sold ‘cheap’ flights for cash, fraudulently booked the flights posing as the UK office and then disappeared with the cash, leaving a trail of cancelled tickets, stranded passengers and a huge financial loss for the travel agency and the corporate to fight over.

The best course of action when receiving a request to change any company details, and especially banking details, is to pick up the phone and verify that your supplier did, in fact send the email. To avoid becoming a target, it’s essential to run monthly virus scans on computers for spyware. If you have staff, make it a policy to change their user names and passwords on a regular basis, and make your staff aware of fraud and not to open any suspicious emails.

Another protective measure is to install more stringent IT systems or to take out insurance against fraud. Both can be costly, particularly insurance, but then again, the money that can be lost if fraud is committed and not discovered in good time, can be even more expensive as well as costly to your reputation. n

There are various ways a fraudster can gain knowledge of your business dealings and payment activities. A

collusive employee could download spyware unknowingly on to your laptop with a flash drive or you could click on a link of a phishing email sent to your inbox. Phishing emails typically request you to verify personal details by clicking on a link that directs you to a page that looks legitimate, perhaps a banking page, but instead downloads malware on to your computer. This gives the fraudster access to your emails. The fraudster would then monitor your email activity for a period of time to gauge the tone in which you correspond with someone you make payments to.

The fraudster would then create a fake email address, posing as one of your suppliers. This could be done through a fake mailer website (such as www.fakemailer.net) that allows you to create and send emails using someone elses email address. It seems above board because you know the person who sent the email, and it sounds like the normal tone used between you. The corporate travel industry has been a fraud target all too often. In one recent case, someone posing to be from a sister company in the UK made contact with

a South African company from the same group requesting details of their corporate travel agency as they were having trouble

booking flights through their UK agency. Without thinking twice, a PA put

this person in touch with the agency, which began to book flights as requested by the UK office.

The scam was only discovered some time later, when the agency grew suspicious of how many flights were being booked to and from the West African region. Of course, the flights were

@Mazars_SA

By Christo SnymanHead: [email protected]

Recently a new fraud alert has gone out warning both business owners and individuals to be vigilant of seemingly legitimate emails requesting a change in bank details. What has been a prevalent scam in the corporate travel space is something that today anyone who deals with vendors in any industry should be wary of.

December/January 2014/2015BusinessBrief

70 INFORMATION TECHNOLOGY

“It’s essential to run monthly virus scans on computers, for

spyware”

Protecting yourself AGAINST fraud

YOUR SECURITY’S future

It is predicted that within the next 15 years, the vast majority of the world will be connected to the

Internet via their smartphones. Wi-Fi networks are being established in even the poorest countries to get everyone online. In a world where everyone is online the possibilities are endless, but so are the threats.

The invasiveness permitted by the digital world cannot be underestimated. One of the effects of the apps era is that we are virtually carrying our friends and acquaintances around with us in our pockets. Through various applications, you can see exactly where they are, what they are doing, how they are feeling, what they like. In the wrong hands, that information is incredibly valuable to people who want to target others for their own nefarious purposes.

When people know where you are, then they also know where you are not. If you are away on a long holiday, criminals could use this information to target your house.

But more than just monitoring you on social media, criminals are also targeting more sensitive information on your phone, such as your banking details. In 2012, global online shopping exceeded US$1tn for the first time. Online has proven itself as a reliable shopping channel to access anything from anywhere in the world. A subsequent report has found that online shopping is migrating from personal computers to mobile phones.

However, new technology also offers new ways to keep safe. In a country like South Africa, mobile technology has the ability to offer an extra barrier against many of the country’s social ills, including hijackings, violent crime

and assault. Because we have unique challenges in our country, there is an opportunity to create unique solutions to meet these challenges with the introduction of appropriate applications.

Humans often do not recognise that they are entering a hazardous situation before it is too late. Applications that use certain algorithms can be turned into early warning mechanisms. The data is there; all that is needed is a device to mine that data and turn it into useful information.

For instance, your smartphone could identify that you are alone, you are away from where you usually are, you are an a high-risk area, it picks up from your smart watch that your heart rate is elevated, and you say a safe word. All these elements combine to create an alert and your app sends a message to the police and lets them know where you are and that there is a distress.

This is just one example of technology that is already with us, applied in a new way to keep you safe. n

By Greg ForbesMDLion’s Wing Brand [email protected]

“Mobile technology offers an extra barrier against many of the

country’s social ills” INSERT YOURMEETING

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The rate at which technology is progressing has an effect on us all, even those who don’t particularly care for the newest developments.

The study investigated 461 commercial buildings and found that the top quartile EE properties delivered a

15.9% total return, 170 basis points higher than the remainder of the buildings which delivered a total return of 14.2%. In addition, while the income returns generated by the two samples of properties were the same, the EE properties achieved a higher capital growth of 8.1%.

Implementing a holistic EE plan is often simpler than expected and will essentially always yield immediate and sustainable returns on investment.

The energy saving potential is dependent on the financial return on investment that the owner would require. With a long-term investment view, a saving of 50% is quite achievable. There are also innovative financial support instruments available to make the initial investment into EE solutions easier. In most cases the initial interventions could have very little capital investment requirements; we have even seen savings of up to 15% from improved behaviour and corrective maintenance of existing systems. However, this is not guaranteed for any owner, and this is where the understanding

of the energy use baseline is an invaluable tool.

Transforming an existing building for optimal energy use requires an in-depth understanding of the energy use profile and its components. It is important for business and property owners to focus on the areas that have the greatest impact on energy use at the best return on investment. The first

step is measuring the energy use (be it electricity or other sources) and creating a baseline of consumption for the whole as well as its subcomponents.

The results can vary significantly depending on the occupants of the building and the energy requirements, but usually these subcomponents include lighting, climate control, and operational equipment such as IT and data processing. The information gathered by the measuring process must be evaluated by an experienced energy advisor to identify key saving opportunities.

Often the interventions could be as simple as reinstating existing systems to full functionality. However, in some cases the building envelope must be altered to reduce energy intensity. The functionality of most systems deteriorates over time due to poor maintenance and aging components. As a result, a strategy must be designed to implement the changes to the building and monitor and maintain its continued efficiency from implementation onwards.

The financial benefit of an effective EE plan is a direct saving on the bottom line that will just increase over time as the cost of energy inevitably increases. The longer owners wait to start the process of managing energy use, the larger the potential losses will become, which can be prevented with the introduction of targeted interventions. On top of this, the CO2 emissions negatively impact our environment and an opportunity is lost by the owners to position their buildings as a premium address in terms of responsible business. n

Energy EFFICIENT building benefitsA new study conducted by Investment Property Databank (IPD) and the Green Building Council of SA (GBCSA) has found that energy efficient (EE) commercial buildings in South Africa deliver better financial returns that non-EE buildings for their owners.

By Dawie KrielHead of Engineering Energy [email protected]

PROCESS & OPERATIONS72


Global Partner Associations:

Conference Date31 May - 2 June 2015

Sun City

www.sapics.org.za+27 (0) 11 023 6701

Discover end-to-end supply chain solutions at the 37th

Annual SAPICS Conference

the pulse of africa’s supply

chains

@CipherWave_SA

Whether or not to outsource non-core business functions is an increasingly important question up for debate by growing businesses worldwide.

The concept of Business Process Outsourcing (BPO) is often misunderstood. Many perceive it as being the outsourcing of their “call centre” to an external service provider. This is a parochial notion and undermines the broader aspects and value of what BPO entails. In the context of accounting and finance, BPO is the outsourcing of accounting and finance functions within an organization.

With growth, efficiencies are challenged as the inevitable bottlenecks settle in. This is the perfect time for a business to do some “housekeeping” and ascertain whether there are certain tasks that could be handled better and more efficiently by an external service provider. Outsourcing often helps a business avoid a premature internal transition from the informal entrepreneurial phase to a more bureaucratic mode of operation. A few examples of functional processes that can be outsourced:

• Accounting system set-up and bookkeeping• Revenue and cost accounting • Expense and cash management • Accounts payable and received • Payroll • Fixed asset accounting • Bank operation authority • Account reconciliation and analysis • Month-end close• Financial reporting and consolidation• Outsourced hr functions• Company secretarial services There are many benefits and drawbacks that are linked to BPO services, although benefits often surpass the drawbacks.

It is essential to know the advantages and disadvantages of business process outsourcing before entrusting any task to a service provider. There are many companies that offer a vast and full range of outsourced services. This needs to be carefully considered and evaluated and should not be accepted at face value, finding the right fit between an outsourced service provider and an organisation is crucial in ensuring that potential exponential growth is realised, value unlocked and continued sustainability is achieved. n

Get into OUTSOURCING!

By Rivaaj KalidinHead of BPO Accensis [email protected]

This isn’t great news for tenants because increasing costs are often passed on to them. South African

electricity prices have increased more than 300% since 2007 and are still on an upward trajectory, with the National Energy Regulator of South Africa (NERSA) approving a 12.69% electricity price increase for 2015.

It’s hard to believe that in 2007, South African electricity prices were among the cheapest in the world at around 43 cents a unit. Fast forward to today and they are now among the highest. For businesses, a 20% increase in energy costs has a similar effect on the bottom line as a 5% drop in sales.

The good news for commercial properties already using energy supplied by solar PV – and for those considering it – is that the more expensive grid electricity gets, the

more cost-effective and affordable solar power becomes. This is because the pay-back period becomes shorter, giving end

users a better return on investment.

Solar PV systems offer an attractive internal rate of return (IRR),

especially considering solar electricity is free after

the initial payback period, presenting an effective cost-saving alternative. In addition, it’s much easier to budget for the monthly solar PV system instalments than to dig deeper into company profits to pay for fluctuating

and unpredictable fossil energy bills. Solar also offers commercial properties a way to cut their carbon emissions and environmental impact. Further, reducing reliance on grid-supplied fossil energy by using solar electricity to meet part of their energy needs – up to 50% over the 15- to 20-year lifespan of the system – means that commercial properties can be less impacted by the spiralling electricity prices or the impending carbon tax.

South Africa’s reliance on fossil fuels is economically and environmentally unsustainable. Aside from releasing climate-warming carbon into the atmosphere, fossil fuels are also getting more expensive. In contrast, the cost of solar is getting cheaper and it makes financial sense in the long term because the sun’s energy is unlimited and free. And that surely appeals to every profit-making business while offering commercial properties a way to stabilise some of their long-term electricity costs. n

SOLAR: the smart energy option

By Gareth WarnerManaging Director Solarcentury in South [email protected]

Energy costs are one of the most significant and unpredictable business expenses. Fluctuating electricity usage over the years, coupled with constantly rising electricity prices, make it difficult for managers of office blocks, schools, hospitals, hotels and other facilities and commercial properties to budget for energy spend.



@solarcentury

“In 2007, electricity prices were among the cheapest in the

world. Fast forward to today and they are now

among the highest.”

IS waste to ENERGY FEASIBLE? South Africa’s power supply is taking strain and with the country’s grid nearing peak demand, an intervention is needed. To this end, several alternatives are being explored but there is a growing need for more sustainable methods of power generation and demand side management.

PROCESS & OPERATIONS 75


@GIBB_Africa

By Dr Urishanie GovenderGeneral Manager GIBB [email protected]

bbrief.co.za is a portal where business decision makers can access business resources in South Africa that effect their decision making ...

According to the National Waste Information Baseline Report, of the total 108mn tonnes of

waste, 90% goes to landfills.

As a result SA’s landfills quickly run out of space and a viable solution presents itself in the form of waste to energy.

Waste to energy presents a crucial opportunity to address the energy gap. Waste to energy is a proven and environmentally sound process that provides sustainable recovery of energy.

SA’s Integrated Resource Plan (IRP) 2010, allows for approximately 1% of alternative sources of energy, of which waste to energy can play a role.

The process includes generating energy in the form of electricity and/or heat, generally through the combustion of waste that powers a steam-driven turbine.

This is usually the first port of call, but another popular method is through landfill gas to energy, which involves capturing gases

(primarily methane) produced from decomposing buried waste.

SA looks to the East and West for working examples of Waste to Energy programmes.

The technology is used extensively in Europe and developed nations in Asia such as Russia, Japan, Singapore, and Taiwan.

Interestingly, every ton of solid waste processed in a waste to energy facility avoids the mining of one third ton of coal and its associated impacts.

While there is a strong case for waste to energy in South Africa, before any projects get underway, a bankable feasibility study needs to be conducted.

At the moment, our landfills don’t tend to recycle, which is always the first step. So once you have reused and recycled what you can and implemented a system to do that continuously, only then can you determine what kind of waste you

have to work with, and thus, which technology is most suitable to produce energy. The issue is that most private firms and municipalities have hurdle rates for their capex projects, so due diligence needs to take its course. n

In as much as technology has become an important enabler, an effective way of achieving successful

improvements is to focus on your business requirements. The ways in which organisations address these requirements can be twofold – reactively or proactively. This is largely dependent on the urgency of the opportunity, the capacity to address the improvement and the value-add it brings to the business.

Improvement techniques typically identify and align opportunities to organisations’ goals, and develop plans for improving business delivery through efficiency and effectiveness. The output of this promotes consistency, quality and increases the likelihood of success.

In our global economy, organisations are continually faced with a wide range of demands that need to be managed in order to maximise stakeholder value. Whether that is driven by the internal pressures of operational excellence and capital efficiency or the external pressures of regulation and direct competition, organisations need to focus on what really matters the most.

Organisations that apply a reactive approach to business improvement are invariably seen as responders to problems statements – seeking to understand the concern, performing root cause analysis and deploying remediation plans for

correction and improvement. On the other hand, organisations with

a proactive approach devise large-scale improvement

programmes across their functions to provide better levels of assurance and ongoing optimisation. These programmes are usually supported by

dedicated, in-house Business Improvement Offices.

Irrespective of being reactive or proactive in your mind-set, the golden thread to any successful improvement plan is having the executive leadership and management commitment. This allows for a transparent statement of why continuous improvement is necessary, and paints a clear vision of how the organisation will be different after the changes.

Improvement initiatives should be delivered upon sound implementation plans with comprehensive recommendations. With these initiatives further strengthened by assigning adequate resources with clearly defined roles and responsibilities, the likelihood of improvements to quality, timeliness and costs are heightened.

There is no silver bullet. Both approaches are equally effective, but the viable alternative ultimately comes down to the improvement efforts required in execution. The Six Sigma doctrine asserts that continuous efforts to achieve stable and predictable results are of vital importance to business success. In order to achieve sustained quality improvement, commitment from the entire organisation, particularly from senior management, is required. n

REACT PROACTIVELY?

By Craig Scott-Rodger Associate Director:

Finance and OperationsAdept Advisory

[email protected]

In the face of today’s competitive landscape, the continuous improvement of business operations and processes is a prerequisite for maintaining an advantage over your corporate peers.



@adeptadvisory

“Improvement initiatives should be

delivered upon sound implementation plans with comprehensive recommendations”

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