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TRANSCRIPT
ALTERNATIVE PROSPERITY GROUP
StakeholderReport
The purpose of th is report i s to show our stakeholders how we create va lue . I t a lso prov ides an overv iew of whether, in 2018, we were a bus iness that made a pos it ive contr ibut ion to our country, whi le c reat ing va lue for our peop le and shareho lders .
CONTENTS
04 // OVERVIEW
08 // CEO'S VIEW
10 // CHAIRPERSON'S REPORT
12 // OUR PURPOSE
14 // WHAT WE DO
18 // HOW WE DO IT
20 // ORGANISATIONAL STRUCTURE
21 // OUR STRATEGIC OBJECTIVES
22 // OUR AREAS OF INFLUENCE
24 // OUR PERFORMANCE
34 // TRIBUTE TO OUR COLLEGUES
36 // KEEPING OURSELVES ACCOUNTABLE
37 // CONTACT INFORMATION
2017 was the first year in which we functioned as a proper holding and investment company.
During 2017 we worked to give better structure to a significantly larger business. This included
streamlining, setting clear targets and leadership responsibilities at each operational entity.
We believed that the improved structure would set us up to do more work with the most
influential private, public and investor organisations in the Southern and Eastern African region.
We also wanted to work across a range of related EESG1 themes, and therefore focused
on ensuring we can deliver well defined services and products in transformation/B-BBEE,
sustainable development, economic research and policy work, retirement fund trustee
development, and responsible investment.
What we said in 2017
OVERVIEW
1 Economic, Environmental, Social and Governance.2 This report relates to the financial year ending 30 September 2018. Data used covers the period 1st October 2017 to 30 September 2018.
For ease of reading we just refer to 2018 throughout the report.3 According to the Alternative Prosperity Group consolidated financial statements for year ending 30 September 2018.4 The internal valuation was completed in September 2018 and considers both 2018 results and future budgets. Please note that whereas
operating profit excludes associate and minority holdings, the valuation includes these holdings at fair value. 5 Clients in attendance include amongst others: ARC, JSE, Old Mutual Insure, Santam, Stefanutti Stocks, Energy Partners, Mergon and the JSE.
What happened in 20182
In 2018 we could see how our newly structured organisation fared in the field. As in 2017,
this document provides a view of what went well and what did not. We will again look at three
indicators:
1. Our reach 2. The quality of our solutions3. How we created prosperity for our shareholders and people
How each business contributed to our financial performance is set out in more
detail in Section 6, but in summary:
• The core transformation business (Alternative Prosperity Advisory) had a stable
performance in 2018, but is set up for expansion through the Johannesburg office in 2019.
The mandated investment product has performed exceptionally well during 2018 as a
result of good client service and substantial client value. It is worth noting that our B-BBEE
ownership work has increased significantly, providing us with a beachhead against B-BBEE
advisory competitors (due to the complexity of ownership related work).
• Although it is early days, the newly established Six Capitals, our Responsible Investment
(RI) advisory business, demonstrated an ability to attract the right profile clients from
which to grow.
• We have unlocked synergies with DNA Economics, that include work for the B-BBEE
Commission and tendering for a variety of assignments.
• The Alternative Prosperity Foundation also hosted two diversity living and leadership
workshops bringing together 33 young peer-leaders form the poorest communities and
senior people from our clients5. We also continued training labour representatives of
trustees, during 2018 four cohorts were trained.
For 2018, the Alternative Prosperity Group increased revenue year-on-year with
30.2%3, resulting in a significant improvement on our financial performance from
2017. The Group's latest valuation is R47 million4, having managed an annualised
return of 31% since 2013.
6 // Stakeholder Report 2018 Alternat ive Prosper ity // 7
What concerned us in 2018, and are therefore being actively managing in 2019 include:
• During 2018 we struggled to secure large transformation strategies with clients. These large
strategies generally provide us with significant implementation work in the following years.
This has been offset by a growth in clients that use our advice. We have also provided
substantial implementation support on historic strategy clients. We have added 45
influential clients in 2018.
• Our main challenge in 2018 was in Kenya where inability to secure sufficient work has
forced us to change the business model and scale down the office. We now work from an
associate model. Under the new model, the Kenyan business is now turning a profit. In
2019 we will need to work with AP Kenya to scale using the associate model.
• Currently in the Today’s Trustee business, in which we hold a minority interest, leadership
issues are hampering the success of the business. In 2019 we will work tirelessly to ensure
the success of a business with immense potential.
To support the underlying businesses APH is invested in, APH now offers support services that
include: a tender office, a senior sales and marketing resource, B-BBEE structuring support,
financial management and reporting, support in strategic planning and synergy events where
people from the different business can interact. The level of awareness of opportunities
amongst the different businesses in APH’s portfolio has significantly increased. It is our
philosophy that leaders in the various organisations need to take the initiative amongst each
other to work together.
We have improved the diversity of our own business, albeit that we are still challenged at board
and top management level (25% black only). We are currently 46% female and 38% black
as defined by the B-BBEE Codes of Good Practice. Two of our staff members achieved post
graduate degrees in sustainable development, and one will finish her thesis for her masters in
2018.
In summary, the business is in a better place than a year ago. Despite losing some much-loved
colleagues, our people are more focused and content. A lot of the uncertainty that came with
the structure changes of 2017 has been worked out of the system.
During 2018 we have also expanded our research and advisory work with sector and
national bodies to find better solutions to issues of diversity and responsible investment.
During 2018 we worked towards:
• An alternative finance model for agricultural enterprise development programmes
in partnership with Distell.
• A transformation index for the JSE Top 100 companies in partnership with 27four Investment
Managers.
• An online learning platform and quarterly education supplement for South African retirement
fund trustees in Today’s Trustee.
• An ESG due diligence toolkit for investors currently being used by the KZN Growth Fund
• A diversity living and leadership curriculum for organisational leadership used with,
for example the Mediclinic Southern Africa Executive team.
8 // Stakeholder Report 2018 Alternat ive Prosper ity // 9
CEO's View
Alternative Prosperity Holdings has had a good 2018 financial year in relation to its expected
financial and impact performance. Many operational structural changes have started bearing
fruit, and improved human resource management positions the business favourably for the
new financial year. We managed to position ourselves strongly in our niche financial and impact
focus areas, moving away from the traditional BEE scorecard work. A more diversified product
offering and investments into other disciplines such as economic research and policy work
(DNA economics), responsible investment (Six Capitals), Consumer Education (Today’s Trustee)
and smaller incidental investment opportunities (the AHG group) mitigate our BEE exposure to
some extent.
Some of these successes have come at a cost and required great effort, with the loss of people
who have been part of the group for a number of years being tough on team dynamics and a
shift in focus towards our financial competency putting pressure on individuals to upskill for
our future positioning.
The 2018 financial year created the platform for a promising 2019 year, with products and
service offerings that could add substantial financial value while broadening our impact in
society in general.
We can truly say that we have grown as a business in 2018.
Christiaan van der Merwe – CEO
10 // Stakeholder Report 2018 Alternat ive Prosper ity // 11
Chairperson's Report
In reflecting on the 2018 Financial year, we proved that we have developed certain capabilities
at holding company level, that have added value across the group. First 2018 proved that the
key acquisitions we made in prior years have added value (DNA and AHG), and second, we
proved that through working synergies in the group, we were able to successfully tender for
and execute on a number of key assignments, that none of the individual companies could
have won on their own.
At the same time, we also started the APAP JHB offering, and this has already achieved good
traction that can be scaled relatively quickly. The “build” as opposed to “buy” strategy was with
hindsight, the right decision. The same can be said of our ESG offering – Six Capitals.
It is also true, that 2018 was a year of tough decisions and during which the APAP Cape Town
as well as the Kenya business’, were scaled back quite significantly in terms of people. Despite
this, commendable growth in turnover was achieved across the Group, and a positive impact on
Operating Profit, started coming through in the third and fourth quarters. This was all achieved
in a challenging operating environment.
2019 will amongst other things, require specific focus on capitalising on the potential of the
Todays Trustee Member Education offering.
Trevor Chandler - Chairperson
12 // Stakeholder Report 2018 Alternat ive Prosper ity // 13
OurPurpose
A challenge of our time is the role organisations should
play in addressing damaging Economic, Environmental,
Social and Governance (EESG) practices that are eroding
prosperity and enhancing inequality. In South Africa the
issue of persistent race-based inequality is an example
of such a social challenge.
In this context our purpose as a Group is to help shape organisations that contribute to a more prosperous society.
1514 // Stakeholder Report 2018
We are in the business of enabling organisations to make decisions that will build trust and
create wealth for its stakeholders. We do this through the services and products offered by the
businesses we are invested in.
WHAT WE DO
Works with South
African executives and
transformation managers
to address B-BBEE6 and
transformation in a manner
that creates shared value.
Works with asset owners
and asset managers offering
EESG advisory services.
Works with retirement fund
trustees strengthening their
ability to be effective and
active stewards of public and
workers’ capital providing
trustee education and EESG
investor information.
AP Advisory Six Capitals Today’s Trustee
Works with Government, DFIs
and other organisations on
issues of social and economic
research, social impact and
policy.
Works with private and
development institutions
on issues of sustainable
development in the
East African region.
Works with youth, women
and fiduciaries to become
transformation and diversity
leaders.
DNA Economics AP Kenya AP Foundation
The delivery of these services and products are guided by:
We cover the following themes:
A value based7 culture that constantly reassess our relevance
and impact (value based)
Creating prosperity for our own organisation and stakeholders8
6 Broad-Based Black Economic Empowerment7 Our work and governance are anchored and informed by six core values. We are people centred and our values are focused on the potential and well-
being of individuals and the environment in which they function. We believe in a pioneering spirit and the power of diversity, personal responsibility and
accountability to our clients and other stakeholders. 8 Key stakeholders include shareholders, staff and AP Foundation beneficiaries.
16 // Stakeholder Report 2018 Alternat ive Prosper ity // 17
Our Prosperity • A much-improved financial performance at Group level compared to 2017.
• AP Advisory, Six Capitals and DNA are healthy businesses and set up for growth
• Strengthened investments through:
• APH marketing, sales representative and tender office
• Refining operational structures and people allocation across the Group
• Financial management and related back office support
• Our employees have generally adjusted well to the structural changes and loss of
team members during 2017. This can be attributed to clear operational level CEO
leadership and better role clarity and KPIs for staff.
Reach• Expanded the number and quality of our client base significantly
• Doubled B-BBEE ownership related work
• Secured substantial RI clients and contracts
• Significant increase in industry representation and research
Solutions• Development of at least 5 products for use beyond hourly based consultancy
• 33 youth peer-leaders trained through the AP Foundation programmes
18 // Stakeholder Report 2017 Alternat ive Prosper ity // 19
We are a majority black owned holdings company (54%) that invests
in entities that assist large public and private entities to address
EESG issues. The entities in which we invest offers advisory
services, research and products to entities with a substantial EESG
footprint.
Our investments are run by highly qualified and experienced people
that understand complex societal challenges. They are typically
able to move from policy/legislative requirements to practical
implementation and are passionate to address these issues. We
can therefore offer clients a range of competencies that include
compliance, financial acumen, sustainability, strategy and project
development competencies.
To ensure we have viable and profitable businesses we appoint
and support seasoned CEO's that can run our enterprises
independently, fostering clear purpose, values and a performance
driven culture. In other words, we want to work with as many
influential organisations as we can to drive solutions that will
create prosperity for all in an unbalanced system.
HOW WE DO IT
Lowlights
Our Kenyan operations have continued to struggle, resulting in a
change to the business model and reducing the office size. Currently
the business is profitable, but not set up to scale in the short-term.
Today’s Trustee has been successful in adding a trustee/member
education business alongside the original magazine. Ineffective
leadership and operations have delayed the progress that is possible.
We see a lot of value in this investment.
We have not managed to secure the targeted pipeline of large
transformation strategies. Although the financial effect of this has
been off-set through more general advisory work.
Our own diversity is still a work in progress.
Although we have significant black shareholding,
our board and top management are still predominantly white male.
We have marginally improved performance since 2017.
20 // Stakeholder Report 2018 Alternat ive Prosper ity // 21
ORGANISATIONAL STRUCTURE
Figure 1
Figure 1 below sets out our latest organizational structure and focus.
Group Holdings
Investments, Research, Products
Executive
65% 100% 90% 30% 26%
Alternative Prosperity Advisory
(Kenya)
FOCUS:
ESG and SustainabilityIntegrated Reporting
Alternative Prosperity Advisory
(South Africa)JHB | CPT
FOCUS:
B-BBEE and TransformationBespoke ESG
and Sustainability
Six Capitals(South Africa)
FOCUS:
Responsible and Impact Investment Advisory
Today’s Trustee(South Africa)
FOCUS:
Trustee Publishing andTrustee Training
DNA Economics (South Africa)
FOCUS:
Economic DevelopmentResearch and Policy
CLIENTS: CLIENTS: CLIENTS: CLIENTS: CLIENTS:
HEAD:
Cecilia Bjorn-Murai
HEAD:
Erosha Govender
HEAD:
Adrian Bertrand
HEAD:
Allan Greenblo
HEAD:
Matthew Stern
Government, DFI and Large Companies
Retirement Fund Fiduciaries
Asset Owners and Managers
Listed, Large and QSECompanies & Non-Profits
Kenyan Government, DFIand Large Companies
Although each underlying company in the Group has its own strategic focus, from a Group
perspective we aim to achieve our purpose through the following Holdings/Investment level
objectives.
Our Strategic Objectives at AP Investments Level
Reshape organisations
contributing to a
prosperous society
Unlocking value
through strategic
positioning of
investment portfolio in
terms of ESG
Be a preferred BEE
investment partner
(balance sheet &/or
strategic input)
Growing the
investment portfolio
by 30% per annum
OUR STRATEGIC OBJECTIVES
Reshape organisations
contributing to a prosperous
society
Being a fully empowered
player and partner, as
underscored by our charter
Achieve value growth of at
least 30% per annum for the
next five years
Diversify business – more
than advisory – targeting
investment space
Lower cost of capital
through utilisation of black
owned status
Optimise the utilization
of capital
Our Strategic Objectives at AP Holdings Level
22 // Stakeholder Report 2018 Alternat ive Prosper ity // 23
We assessed9 our impact through the following methodologies:
Our Performance in Key Impact Areas
The adjacent table provides stakeholders with a self-assessment of our performance over
the past year. We cover three themes as per our impact framework. Under each theme
three key indicators are used for measurement.
- Business data analysis (Client; Financial; Employee)
- Client EESG performance (E.g. B-BBEE levels)
OUR PERFORMANCE
9 This assessment is not supposed to be scientific, but rather an honest reflection of our impact. Areas where we performed well or had a positive
influence is listed in the “Good” column and in the adjacent column are areas where we would need to focus (“Neutral / Bad”) in the year ahead. 10 Assessment of impact exclude DNA Economics and Today’s Trustee due to investments APH being minority shareholders. 11 For 2018 reporting we focused on Transformation/B-BBEE transformation strategies as it makes up a significant part of our work and spearheads
our ability to influence transformation. For 2019 we will change this to measure significant assignment and projects. For APAP this includes
Transformation/B-BBEE strategies as well Black ownership Strategies. For Six Capitals this includes RI Strategies/Policies, ESG Due Diligence.
THEME WHY THIS FOCUS AREA KEY INDICATORS
Greater Reach • Greater Reach of our services, research and products will lead to a broader understanding and response to the complex challenges faced around Transformation (incl. B-BBEE), Responsible Investment and Sustainable and Economic Development.
• % Growth in strategies10 delivered to influential organisations11 (Quantitative analysis).
• Strategic application of new capital (Narrative).
• Reach of our research and policy work (Narrative).
Better Solutions
• Consistently improving our solutions will ensure that clients and society can solve their problems, but not in a superficial manner that carries reputational (and in the B-BBEE context criminal fronting risk) for clients. It will also allow us to work more efficiently at the right speed and price preventing employee non-performance and burnout.
• Improvements in client transformation/ESG performance (Quantitative analysis and Narrative).
• Client Offering (Narrative). • Staff Productively and Project
profitability (Quantitative analysis).
Satisfied Stakeholders
• Satisfied Stakeholders which speaks to the value created for employees and shareholders as well as our own diversity.
• Strong performance on these aspects will ensure we stay relevant to these stakeholders ensuring the commitment and passion for the Group.
• Shareholder return (Quantitative analysis and Narrative).
• Employee return (Quantitative analysis and Narrative).
• Our Diversity (Quantitative analysis and Narrative).
24 // Stakeholder Report 2018 Alternat ive Prosper ity // 25
REACH 2018 ACTUAL 2017 ACTUAL
Year-on-year Sales Growth 30,2% 17.5%
% of Sales budget - Group 93% 84%
New clients added 45 33
REACH 2018 ACTUAL 2018 TARGET
Number of strategies 17 36
OUR PROSPERITY 2018 ACTUAL 2017 ACTUAL
Value of the Business (Rm) R47 R36
Performance at a Glance (These numbers are explained in the tables below)
Transformation Strategy Impact
Average clients at level 4 or better
Strategies resulting in implementation support
Average clients beyond scorecard
2018 Actual 2018 Target 2017 Actual
58% 80% 66% 55% 51% 42% 44%
Employee Productivity 2018
Annualised Return Since 2013
Productivity
Group Annualised Return
2018 Actual 2018 Target 2017 Actual
2018 Actual 2018 Target 2017 Actual
57%
31%
70%
30%
56%
27%
26 // Stakeholder Report 2018 Alternat ive Prosper ity // 27
TRIBUTE TO OUR COLLEGUES
Nomnikelo showed us what it means
to be people centred. She cared for
Thembi, AP’s previous cleaner that
passed away unexpectedly, when
she realised that Thembi did not have
any family that would look after her.
Nomnikelo Mhlauli
People Centered
Delene Taute
Delene was the first intern we hired.
Delene was always willing to go the
extra mile to get things done. She
brought a strong work ethic to work
with her every day. Dependable
Honest
Zani Malan
As one of the founders, Zani will
remain close to the business. Zani
always asked “is this right?” questions.
She was able to challenge thinking. We
wish her all the best with the time as
a full-time mom.
Ciska has a wonderful passion for life.
She introduced shared value thinking
to our business, which remains a
fundamental part of how we look at
transformation and ESG issues. Ciska
remains an associate with AP.
Ciska Kruger
Pioneering
Each of the operational entities (See Figure 1) has a dedicated executive officer and
management team who are incentivised through bonus and future employee share schemes.
Performance against impact and budgetary targets are measured through a set of KPIs
contracted annually. A back-office committee comprising leaders of each subsidiary as well as
support functions (e.g. Marketing; Strategy; IT and Finance) are in place. A risk framework is also
maintained at Group level.
Alternative Prosperity Holdings’ governing structure consists of a Board of Directors and key
committees that oversee certain aspects of governance and reports back to the board. Key
committees are; Remunerations committee and Investment committee. The AP Holdings board
will function as the main board for majority held subsidiaries. Only in the case of Today’s Trustee,
AP Kenya and DNA will boards be different.
Management Structure
Governance
KEEPING OURSELVES ACCOUNTABLE
Alternative Prosperity Holdings (Pty) Ltd
Registration nr: 2015/040144/07
Vat nr: 4120279924
Group financial director:
Dawie Malan
Tel: +27 21 851 0091
The Sanctuary, 2ND Floor,
c/o Broadway Blvd (R44) & De Beers Ave
Somerset West, 7130
Group managing director:
Christiaan van der Merwe
Tel: +27 21 851 0091
www.alternativeprosperity.com
Please direct all Stakeholder
Report queries and comments to:
CONTACT INFORMATION
30 // Stakeholder Report 2018 Alternat ive Prosper ity // 31