wealthwise magazine feb-march 2013

WealthWisemagazineSouth AfricaNo. 17

Feb/March 2013

www.wealthwisemag.com

Our last free issue!

Dianna Games on Doing Business in AfricaEquities versus BondsTop Tips for Buying Medical Cover

MichaelEilertsen's(LIVE OUT LOUD)Business and life lessons

7Booksto UpYourGamein business,

career andeven politics

The Endof a Chapter(and a NewBeginning)

ForeWord

T

2 WealthWise magazine

wo years have passed since the launch of our first issue of WealthWise magazinein February 2011. It has been a challenging journey for us with good

developments during this time and a positive feedback from you, the readers. For twoyears, we have brought quality free information, articles and opinions on topics relatedto wealth creation and wealth management, and we are ready now to move on to thenext level.The FebruaryMarch 2013 edition is our last free alternatemonthly issue, as weprepare to venture further into the digital publishing market with a brand new relaunch of WealthWise magazine in April 2013. The new magazine will not only bringa new look and enhanced exclusive content, but will also further engage you, ourreaders, through digital multimedia interactive experiences.Going forward, our editorial will strongly follow a motivational and inspirationalfocus, showcasing the technical, emotional, spiritual and financial factors behindwealth creation, achieving financial freedom and living one’s dream. We hope thatour publication will continue to inspire you to make every day, longlasting changesto a wealthier future.Denisa OosthuizenPublisher Managing [email protected]

February/March 201 3

CoverStory6 Michael Eilertsen's Business andLife LessonsLifeWise12 Build Up Habit InvestmentsMoneyWise16 The Value of Financial Planning20 Make Your First Foray intoProperty a Success24 Are Equities Riskier than Bonds?27 Top Tips for Buying MedicalCoverBusinessWise30 Doing Business in Africa (Q&Awith Dianna Games)36 A Dire Consequence TheDemise of the African NGOCareerWise40 DreamWorker Getting SouthAfrica Working46 The Evolving Role of the CFOLifestyle50 7 Books to Up Your Game

55 Events

WealthWise magazinePublisherREO Media SolutionsManaging EditorDenisa [email protected]@[email protected] DesignREO Media SolutionsOn the Cover: MichaelEilertsen

Photos: dreamstime.comand contributors' photosWebwww.wealthwisemag.com

CopyrightPlease contact us [email protected].

WealthWise magazine 3

Contributors


JP Farihna is GeneralManager at Property24. Hewas also managing Director ofiafrica.com. JP has worked forthe JHB Stock Exchange andDeutsche Bank London. JP isthe founder of the OnlinePublishers Association. He setup the Nielsen//Netratingssystem in SA. JP joinedKorbitec as General Managerof Property24 in 2010.Read JP's article about makingyour first property deal inMoneyWise section, page20.

Andrew Dittberner isSenior Investment Managerat Cannon AssetManagement and portfoliomanager of the CannonFlexible Fund. Cannon AssetManagers is a nicheinvestment managementcompany based on thephilosophy and principles ofvalue investing as aninvestment managementapproach.Read Andrew's comparisonof equities vs bonds inMoneyWise section, page24.

Mark Arnold is PrincipalOfficer at Resolution HealthMedical Scheme. He is aregistered and accreditedhealthcare consultant withmore than 14 yearsexperience in the EmployeeBenefits and HealthcareIndustry. He is a memberof the Financial PlanningInstitute Special Committeeon Health Benefits (FPIHealth).Read Mark's top advice toconsider before buying intoa medical scheme in theMoneyWise section, page27.

Facebook: WealthWise magazineTwitter: @WealthWisemagLinkedIn:www.linkedin.com/company/wealthwisemagazine


Contributors

Catherine Wijnberg isis an enterprise activist andCEO of Fetola, an enterprisedevelopment and economicempowerment agency with avision to change lives for thebetter.Read Catherine's opinion onthe state of the NGOs inSouth Africa inBusinessWise section,page 36.

Chiara Baumann is theCoFounder of ChangeCollective Cape Town, aplatform for socioeconomicand environmentaldevelopment professionalsin the City. She is currentlydoing consultancy work forDreamWorker. Chiara’sacademic backgroundincludes concentrations inpolitics and philosophy. Herinterests lie in issues of localeconomic development,social entrepreneurship andadvancing links betweencommunity, public, andprivate developmentinitiatives.Read Chiara's pledge for aworking South Africa inCareerWise section, page40.

Van Zyl Botha specialisesin forensic auditing andactively participates inmanagement and strategicdecision making at FinFiveIncorporated, an establishedfirm of CharteredAccountants, BusinessConsultants, Auditors and TaxSpecialists.Read Botha's feature on theevolving role of the CFO inCareerWise section, page46.

From early beginnings as a teenage waiterturnedentrepreneur tothe founding of LIVE OUT LOUD media group comprising of luxury

Business and Life Lessonsfrom The Breakfast BoyMichael Eilertsen

publishing, travel and events, South African Michael Eilertsen'sentrepreneurial journey delivers great lessons about determination,starting up, passion and courage to succeed. Here Michael tells how helearned from his past experiences and his biggest mistakes in businesswhen starting up. Read and learn!The vegetarian meal that would change my life forever"Is entrepreneurship inherent or does circumstance open this door ofopportunity? For me the answer is both, as I had many small businessesthat ran through my days at school to the captive market of fellowscholars, but the decision to never work for someone again came downto a single moment.I was a waiter at a worldrenowned meat restaurant in Sandton,spending Sunday evenings and Monday lunch serving various affluentindividuals, while I studied at then RAU (now University ofJohannesburg). After four months of learning the ropes, I had a goodhandle of how things worked, and had even contributed a couple of ideasthat made our order taking more efficient.The moment arrived unexpectedly one Sunday evening in April of 2001. Ihad a big table of even biggerspenders, some local businessmenentertaining guests. The table was mainly men, which meant customsteak cuts were going to be the meal of choice, and when the MeerlustRubicon 1988 was requested, I knew it was going to be a great eveningfor me.When it came to ordering, a lady at the table informed me that she wasvegetarian, and nothing on the menu catered for her preferences. Withher being the wife of the man who was clearly going to pick up the tab,6 WealthWise magazine

Michael Eilertsen


no request was too big, and I suggested she order a variety of side dishes. A quicknegotiation with the chef later, and avegetarian platter like no other had beencreated, and I proudly exited with the train of other waiters heading to my table.Metres from the table, the owner walked by, and did a quick turn when he spottedthe vegetarian splendour. I beamed from ear to ear, as impressing him meant apromotion was soon to follow, but instead I was stopped dead in my tracks by thelook I was given. “What is this?” The words spluttered out his mouth as his faceturned deep red. “Our vegetarian dish,” was my less confident answer. “WE ARE AMEAT RESTAURANT ,” he said, as I was steered back to the kitchen.At this point the head of the table came to my rescue, cutting us off on our wayback to the kitchen. He explained his wife was vegetarian, but he didn’t want toturn up the opportunity to serve his guests a fully South African experience. As theysay, this was the straw that broke the camel’s back.The owner said his dishes were not up for discussion and if a vegetarian wanted toeat at a meat restaurant, then what did they expect? I was instructed to bring outthe veggie dishes as sides, as they appeared on the menu. An altercation ensuedbetween the guests and the restaurant owner, and minutes later they left, outragedat what had transpired.I couldn’t believe what had happened. Surely businesses were built on innovation,professionalism and meeting the expectations of your customer? Surely those whowork for you, who differentiate your offering and represent the essence of yourbrand should be acknowledged and retained, not ostracized and made to conform?As I watched my table of guests leave the restaurant, I felt no anger, but rather anexcitement to a calling I had felt all my life. I knew it was time, and as my handuntied my apron and my mind raced thinking of what my future held, I knew Iwould never work for anyone again. Another South African entrepreneur had justbeen made."The Breakfast BoyBusy schedules usually mean commuting business executives rarely have time forhealthy breakfasts. The meal gets sidelined, to ensure kids are ready or deadlinesare met. Given my varsity commitments and an accessible market, The BreakfastBoy was started on the corner of Jan Smuts Avenue and Conrad Drive.R10.00 got commuters driving to Sandton a breakfast bag containing a muffin,fruit, yogurt, Snacker bar, mint and a napkin. But having a great product wasn’tenough, as all good entrepreneurs know, you need something that sets you apartand communicates directly with your target market.So I made a fold over pamphlet, telling my story and giving weekly updates to thelessons I was learning while trying to run a business of my own. The standardopening line was: “I am a first year BCOM Entrepreneur student at RAU and Ibelieve only so much can be learnt in the classroom without firsthand practical


"Surelybusinesses

were built oninnovation,

professionalismand meeting theexpectations of

yourcustomer?"

Mike's company was votedthe second most innovativein South Africa at the SMMEAfrica Awards 201 2

experience. So I present you the Breakfast Boy, and you will be given weekly updatesof the trials, tribulations and successes of running your own business.” My mobilenumber ended the week’s learning, and allowed Sandton’s commuters to communicatedirectly with me for pointers, advice and new opportunities.At 3:00am every morning I began baking muffins, so that by 6:00am I could be on theroad at the intersection I had selected. My outfit included a chef’s hat, for easyidentification and my signature basket with 10 breakfasts, enough to service everyrobot change.Within two months I was at maximum capacity selling 60 breakfasts a morning. TheR300 per morning I was making made me a millionaire in student terms, but I wasloving the interactions even more, as daily messages flooded in from both those whopurchased and who had just received a pamphlet.I will never forget the morning my former high school headmaster pulled up at theintersection. I greeted him with a cheery “Good morning, Sir” and what I got back wasa look that seemed to read as: how can a private school education amount to sellingfood on the side of the road. But I was just beginning, and I never let thosedisapproving looks get to me.By the end of the fourth month, four other students were employed and The BreakfastBoy could be spotted at crowded intersections across the Northern Suburbs.

Five Biggest Mistakes I've Made in Business1. Overemploying. Dreams of having an empire and hiring hundreds of employees fill our heads from the day we firstthink of opening a business. As a result, each penny made is reinvested into staff, growing the company and doing what is believed tobetter for the company as a whole. I had 47 employees when the market changed and the recession took hold, and overnightturnover dropped. An organization’s employees are its biggest asset, but they are an even bigger liability when things get tight. Highoverheads are what kill a business, and even if you survive, your morale and productivity is affected by retrenching.Lesson: Rather employ fewer, but more skilled individuals. This will make your business strong and lean. Businesses operate forprofit and by outsourcing skill sets outside of your immediate sphere, you and your business can become the “empires of tomorrow”.2. Effective financial control. Having ineffective financial control is like driving a car with a blindfold on. Yes,you might move forward for a while, but sooner or later you are going to crash. Initially I hired friends with accounting degrees orbookkeepers. They were not wellinformed on how SARS worked, tax structures and effective financial control. This resulted in moneybeing put into projects that were doomed to fail – we just didn’t have the paper work to show us.Lesson: Employ a highlyskilled, wellestablished financial controller. No matter how expensive they may seem for “playing” withnumbers, they will give your business security and direction. After you have employed yourself, your accountant is next.

3. Celebrating a deal prior to the paperwork being signed. “A verbal deal isn’tworth the paper it is written on.” These words echo in my head as disappointments follow you throughout your career. We all knowthe story – the meeting that finally results in your client saying YES; you allocate resources, time and a good celebration to the newproject only to find out your client didn’t have the jurisdiction or funds have run dry. Despite being an exceptionally optimistic person,life has taught me to celebrate the signed deals!Lesson: Push for the signature or purchase order. Don’t settle for an email confirmation or the classic “please go ahead” as theseare the pitfalls we, in sales, fall for over and over again. Have the contract ready, so when the client says yes, they sign somethingstraight away to get you going.

4. Being too involved. Startups require you to be involved in all aspects of your business, but as your companygrows you find yourself still doing the things your employees should be doing. By being too handson you are no longer leading andyou won’t have the time for vision, strategy and the bigger picture.Lesson: Employ people who are leaders in their own right. This will allow you to rest assured knowing they are doing what isrequired. Two key meetings a week will ensure the attention to detail is there, and allow you to lead, as that’s the role of the businessowner.

5. Employing your clones. You don’t realise you have done it until someone points it out. As human beings, weare comfortable around those who are similar to us. Gregarious people enjoy the company of other enthusiastic individuals.Accountants like others with logical and analytical personalities. No matter who you are, you tend to be impressed when hiring thosewhose traits you relate too. In my case, I am a hunter sales personality with weak administrative skills. Three months after opening,we had a team of six others exactly like me, and not a contract, procedure or file in sight. Once the “clones” were pointed out, Idiversified completely, targeting those who were as different from me as possible.Lesson: Choose your nonnegotiable skill requirements. For me, these were loyalty and big dreamers, and I only employ peoplewho share these traits, but they have every other skill I don’t. This will ensure a strong, adaptable business team.


A call came in one morning from a lady whoworked at Discovery asking if I could get herpromoters for her launch. That next week’s storyin The Breakfast Boy pamphlet spoke of ourpromoters at the Discovery launch, and openedthe flood gates for hundred of promoter bookings,as local business owners found other ways tosupport The Breakfast Boy. S.H.O.U.T Promotions(Student House of Unbelievable Talent) wasopened soon after to deal with the demand, andinevitably first year students from RAU were all inweekend jobs.I am often asked what I learnt from TheBreakfast Boy. Two key things stand out. Firstly,there is no space in business for ego, if you havea great idea take the plunge and do it no matterhow humbling it may seem, because that couragewill be rewarded tenfold when it becomesprofitable. The second thing is to find a way todifferentiate yourself and connect with yourmarket, because when you do, the rest will takecare of itself.

Five Biggest Mistakes I've Made in Business1. Overemploying. Dreams of having an empire and hiring hundreds of employees fill our heads from the day we firstthink of opening a business. As a result, each penny made is reinvested into staff, growing the company and doing what is believed tobetter for the company as a whole. I had 47 employees when the market changed and the recession took hold, and overnightturnover dropped. An organization’s employees are its biggest asset, but they are an even bigger liability when things get tight. Highoverheads are what kill a business, and even if you survive, your morale and productivity is affected by retrenching.Lesson: Rather employ fewer, but more skilled individuals. This will make your business strong and lean. Businesses operate forprofit and by outsourcing skill sets outside of your immediate sphere, you and your business can become the “empires of tomorrow”.2. Effective financial control. Having ineffective financial control is like driving a car with a blindfold on. Yes,you might move forward for a while, but sooner or later you are going to crash. Initially I hired friends with accounting degrees orbookkeepers. They were not wellinformed on how SARS worked, tax structures and effective financial control. This resulted in moneybeing put into projects that were doomed to fail – we just didn’t have the paper work to show us.Lesson: Employ a highlyskilled, wellestablished financial controller. No matter how expensive they may seem for “playing” withnumbers, they will give your business security and direction. After you have employed yourself, your accountant is next.

3. Celebrating a deal prior to the paperwork being signed. “A verbal deal isn’tworth the paper it is written on.” These words echo in my head as disappointments follow you throughout your career. We all knowthe story – the meeting that finally results in your client saying YES; you allocate resources, time and a good celebration to the newproject only to find out your client didn’t have the jurisdiction or funds have run dry. Despite being an exceptionally optimistic person,life has taught me to celebrate the signed deals!Lesson: Push for the signature or purchase order. Don’t settle for an email confirmation or the classic “please go ahead” as theseare the pitfalls we, in sales, fall for over and over again. Have the contract ready, so when the client says yes, they sign somethingstraight away to get you going.

4. Being too involved. Startups require you to be involved in all aspects of your business, but as your companygrows you find yourself still doing the things your employees should be doing. By being too handson you are no longer leading andyou won’t have the time for vision, strategy and the bigger picture.Lesson: Employ people who are leaders in their own right. This will allow you to rest assured knowing they are doing what isrequired. Two key meetings a week will ensure the attention to detail is there, and allow you to lead, as that’s the role of the businessowner.

5. Employing your clones. You don’t realise you have done it until someone points it out. As human beings, weare comfortable around those who are similar to us. Gregarious people enjoy the company of other enthusiastic individuals.Accountants like others with logical and analytical personalities. No matter who you are, you tend to be impressed when hiring thosewhose traits you relate too. In my case, I am a hunter sales personality with weak administrative skills. Three months after opening,we had a team of six others exactly like me, and not a contract, procedure or file in sight. Once the “clones” were pointed out, Idiversified completely, targeting those who were as different from me as possible.Lesson: Choose your nonnegotiable skill requirements. For me, these were loyalty and big dreamers, and I only employ peoplewho share these traits, but they have every other skill I don’t. This will ensure a strong, adaptable business team.


LifeWise

O ne of the things I’ve learned in my last seven years of creating new habits isthe power of compound habit interest. It sounds really obvious when you sayit, but if you do something small repeatedly, the benefits accrue greatly over

time. It’s obvious, but not everyone puts it into practice. Some ways of doing it:

1. Money. Seriously, if you don’t have any savings yet, cut out one or twosmall daily expenses (lattes are a good example) and instead, make regular automatictransfers each week (or every payday) to a savings account. Once you have a smallemergency fund, pay off debt. Once you’ve paid off most of your debt, start investing.Your finances will improve immensely with time.

2. Healthy eating. Eating just one small healthy thing a day, if youaren’t eating healthy now, will pay off over time. Just add one fruit instead of anunhealthy snack you might have in the afternoon. Do that for a couple weeks. Then

by Leo Babauta


Build Up HabitInvestments


add a veggie to lunch. Do that a few weeks. Each step of theway won’t seem hard, but you’ll eventually get used to eachchange. Sometimes the veggie won’t be something you love,so just eat a few bites. You’ll learn to enjoy it with time. Youchange, little by little.

3. Waking early. Wake up just a few minutesearlier tomorrow (say 7:55 instead of 8:00), and stay at thatlevel for a week, then another 5 minutes earlier for the nextweek, and so on. In less than 6 months, you’ll be waking up 2hours earlier, and you won’t have ever really noticed it. It’llnever feel like you’re waking earlier. Most peopletry to do waymore than this (say, an hour earlier at first) and when theyfail, they never figure out why.

4. Writing. If you haven’t been able to create thewriting habit, just write a sentence today. Then write asentence tomorrow. Do that for a week. Next week, write twosentences. This sound ridiculously easy, so most people willignore this advice. But if you follow it, you’ll be writing 1,000words per day, every day, this time next year. Maybe 2,000per day the following year.

5. Stretching and/or yoga. I’m theworld’s least flexible person. Now I stretch just a little eachday. I’ve started by just doing three yoga poses each morning.

6. Playing a musical instrument. My wife Eva started learningto play the guitar yesterday. Just a couple cords. If she practices those two cords eachday, then another cord or two when she feels pretty confident with the first two, she’ll beplaying some Bach and Granados next year.

7. Meditation. I made a vow to meditate at least 3 minutes a day. That’s all Ihave to do, though sometimes I’ll do more. That makes it super easy to do it every day.What will I get if I keep doing that for years? I’m not sure, but I know I already have ajudgmentfree space, with no expectations, and it helps me to be more mindful andfocused throughout the day.

8. Decluttering. Just declutter a few things every day. In a few months, you’llhave a dramatically less cluttered home.

9. Language learning. Study three cards a day withwords/phrases/sentences on them. You’ll be speaking Spanish like "loco" in six months.


Less than GreatHabit InvestmentsThese are just a few examples of not so greathabits, but it’s worth thinking about whatyou’re building up over time in any of thesecases. What we repeatedly do grows into whowe are.

1. Social media sites.Checking social media on a regular basisbuilds up not necessarily a desirable skill,good health, mindfulness or new knowledge,with few exceptions. Just think about whatyou’re building up as you check these sites.The same applies to other things you mightdo on the Internet on a regular basis.

2. Junk food. When you eat lots ofsweets, chips, fried foods, stuff with cheesysauce and fat, you are not building healthyhabits. You’re building up disease.

3. Watching TV. I’m notcompletely against television (I love Parks &Rec, Modern Family, the Office, DowntonAbbey), but when you watch a lot of it,especially flipping through all the TV channels,you are probably not watching the best stuff(any kind of reality TV is mind junk food, inmy opinion). Think about what you’re buildingup with this time investment.

4. Complaining. Do you regularlycomplain about other people? Do youregularly dislike people, dislike your job,dislike your life? Are other people theproblem? You are building up unhappiness.

How to CreateHabit InvestmentsIt’s a fairly simple process that you canrepeat with various types of habitinvestments:

Pick somethingdesirable. If you repeatedly dothis activity, what will it grow into? Is thatwhat you want? Do just a minute or twoof it. You can’t build it all up in the nextfew days. That’s a good recipe for failure.Just do 12 minutes of it today. Smile asyou do it.

Set a daily reminder.Let’s say you want to do it every day atabout 6:30 a.m. Set a reminder for thattime, and make it a priority to do it eachday, just for a minute or two.

Watch it grow. If you just doit repeatedly, it will grow. Don’t force it.Keep the repeated activity as small aspossible for as long as you can if youwant it to grow (it works).Don’t worry about doing a lotof it. As you repeat this new habit, don’tworry about growing it. That’s a good wayto fail. Most people fail because they try todo too much too quickly.Don’t worry about missing aday or two. This is another reasonpeople fail — they miss a day or two, thenjust give up. If you miss a day or two orthree, just start again. It doesn’t have tobe a big deal.Don’t do a bunch at a time. Doone per week at the most. One per monthis even better.

Leo Babauta is the founder and blogger ofZen Habits, voted by Time magazine's asone of the Top 25 blogs in the world. Visitwww.zenhabits.net.

WUntil now the value of a good Financial Planner has been largely intangible leavingsome investors questioning whether any fee is “worth it”. Thanks to this new research,from Morningstar Inc., investors now have a quantified figure on how much additionalretirement income investors can generate through a more intelligently thought outinvestment strategy.While most investors are familiar with the terms Alpha (above market returns achievedby way of manager skill) and Beta (returns generated by the market), the paper

hat would you do to create an extra 1.8% return in your investmentportfolio? Well, according to recent research by Morningstar, receiving somequality Financial Planning advice ought to do it.

The ValueofFinancialPlanning

by Financial Planning Institute (FPI) South Africa


MoneyWise


introduces a new investor term, namely Gamma. Gamma, as defined by Morningstar, is“the extra income an investor can earn by making better financial decisions,” andtherefore begins to highlight what to expect when working with a professional FinancialPlanner.The research found that delivery of the “Gamma” return was relatively predictableprovided certain steps were observed. This is unlike Alpha, where beating the market isunpredictable and an unreliable strategy to focus solely on.In establishing their findings, 5 areas were key in providing the excess return. Theywere:1) Total Asset Allocation2) Withdrawal strategy (specifically postretirement)3) Tax efficiency (Tax can be seen as investor enemy number 2 with inflationas the main villain)4) Use of guaranteed annuities5) Liability driven investing (also broadly known as asst to liability matching)The first three elements accounted for over 85% of the outcome whilst the last twoless than 15% and hence we will focus on the three.Asset AllocationThe process of constructing the right mix of assets (equities, property, bonds and cash)both locally and offshore is vital in driving your investment objectives. A well knownstudy by Brinson, Hood and Beebower (also mentioned in the Morningstar paper)suggests that 94% of the return driver within a portfolio is attributed to assetallocation. The other 6% is due to stock picking and market timing.It is therefore easy to see how important this aspect of your portfolio is. Of course, themost reliable way of establishing what your return objective should be and how hardyou money needs to work is through sound Financial Planning. Once a plan is in place,the return target can be set and assets allocated accordingly. From there the allimportant role of rebalancing needs to begin to ensure an appropriate mix of assets ismaintained despite market movements.


Withdrawal strategyThe study does deal predominantly on postretirement investing and therefore the focuson where and how one draws and income from their investment portfolio. In manyregards, it ties into the third aspect of tax efficiency.Most investors will have compulsory funds such as pension and R.A’s, as well asdiscretionary money such as Collective Investments (Unit Trusts), share portfolios andcash holdings. Because each of these have different tax consequences, splitting outyour withdrawals intelligently can bring down overall tax whilst carefully monitoring thatcapital balances are not depleted unnecessarily.Tax EfficiencyAs briefly mentioned above, one of the key differences between the various investmentplatforms and products is that of tax. The legislation treats them differently in terms ofwhat contributions you make into an investment, how it will be taxed whilst invested aswell as how you will be taxed on any withdrawals taken.With the recent tax changes that took place, specifically, Capital Gains Tax (CGT) andDividend Withholding Tax (DWT), managing tax within your portfolio has become evenmore important. Although certain elements of our tax legislation has becomeburdensome on investments, few investors take advantage of the many tax deductions,exclusions and exemptions that are freely available and in the process leave a “taxdrag” on the performance of their portfolio.Morningstar’s researchers found that a hypothetical retiree could generate nearly 30percent more income using a Gammaefficient retirementincome strategy.David Blanchett, coauthor had the following conclusion: “There’s a significant benefitfor retirees or investors in general to having someone make the right decisions. Gammais something that everyone can do that adds the most value; we call them financialplanners or advisers, we don’t call them mutual fund pickers. … It really is worth it topay someone 1 percent a year to help me figure out how to do this stuff because (the1.8 percent) is significant value that any (adviser) can achieve.”Visit www.fpi.co.za to find a CERTIFIED FINANCIAL PLANNER®professional today.

Sdone your homework thoroughly, as there is far more to consider before taking theplunge into property ownership.Many firsttime homeowners enter the property market largely unaware of thevarious costs and considerations entailed, falsely believing that monthly bondrepayments represent the full extent of their financial obligations. This illinformedapproach to such a commitment can often result in significant financial burdens andunexpected obstacles further down the road. Yet by understanding some of the mostcommon pitfalls faced by firsttime property buyers, wouldbe homeowners canensure that their first foray into the property market is a successful one.Monthly ExpensesAs a firsttime property buyer, it’s likely that you’ve come from a background ofliving at home with parents, or having rented property from a landlord. As a result,the daytoday expenses of property ownership are not always top of your mindwhen working out monthly budgets.

o you’ve scraped together enough money for a deposit, carefully worked outyour monthly repayments and found a dream property in which you intend toinvest. But before signing on the dotted line, it’s vital to make sure that you’ve

Make YourFirst ForayInto PropertyA Successby JP Farinha



"The actualtransferprocesscan be a

costlyexercise"

MoneyWise

Whilst tenants have very little to consider over and aboverental, electricity and water costs, homeowners are forced tofactor in a number of additional expenses on a monthly basis.Rates and taxes can end up adding significant strain on yourmonthly finances, and it’s vital that you factor in thesepayments before taking on the commitment of propertyownership.Homeowners insurance is also a necessary consideration inorder to protect your home. This type of cover protects bothyour home and the contents thereof against any catastrophesuch as a burglary, fire or natural disaster. When it comes to apurchase of this nature, you simply can’t afford not to take outsome kind of insurance cover. The question is, can your bankaccount take the additional strain?

Transfer TariffsOver and above the monthly expenditure thatis part and parcel of home ownership, thereare a number of additional onceoff costs thatyou’ll need to plan for before you even set footthrough the door of your new home.The actual transfer process can be a costlyexercise, and you’ll need to make provisionsfor bond registration fees, bank initiation fees,Estate Agent commission and propertyvaluations, as well as the reconnection ofmunicipal services.Chances are you’ll also need to hire a movingcompany to transport your furniture into yournew residence, so make sure to factor this into your budget.


Protecting Your HomeThe new Consumer Protection Act (CPA), introduced into South African legislation inApril 2011, shouldn’t be mistaken as an overarching indemnity clause in a propertytransfer agreement. Whilst the CPA has gone a long way towards protectingconsumer rights, it has little jurisdiction over private transactions betweenconsumers, and, as such, it is imperative that you make provision for any potentialpitfalls you might face as a property owner.Many South African properties are still transferred under a ‘voetstoots’ clause,meaning that the buyer assumes all liability for the property and any defects thereinfrom the date of transfer. Latent defects and structural damages often go undetectedprior to a sale, resulting in costly repair operations further down the road.As a result, it’s essential that wouldbe homeowners conduct a thorough andprofessional inspection of the property before signing on the dotted line. In someinstances, the original owner will arrange to have the property inspected and havethe relevant certification issued, but these inspections are not always performedthoroughly. As such, it’s advisable to appoint your own reputable inspector, thusensuring that you are fully informed of any potential issues that might arise.Making an OfferIn many cases, properties are purchased conditionally, subject to approval of a bondapplication or sale of another asset. Many firsttime buyers are not appropriatelyinformed of their right to insist on having these suspensive conditions drawn into theOffer to Purchase, often finding themselves in a tricky situation in the event that theexpected windfall fails to materialise.Consequently, it’s advisable to seek legal assistance at the point of signing an Offerto Purchase, in order to make sure that you are sufficiently protected in the eventthat you are, in fact, unable to finance the transaction.Planning to SucceedUltimately, the most critical pitfall responsible for derailing firsttime property buyersis the failure to plan appropriately. So ensure that you are aware of your legal rights,as well as all additional financial considerations associated with your propertypurchase, and your entry into the property market should be a smooth andsuccessful one.JP Farinha is General Manager at property search portal Property24, listingproperties from South Africa’s top estate agents, as well as uptodateproperty market news, information and advice for home buyers, sellers,renters and investors. Go to www.property24.com for more info.


Are Equities Riskier than Bonds?Conventional wisdom tells us that bonds are safer than equities, and this

argument is generally presented by showing equity to be more volatile than

by Andrew Dittberner and Rynel Moodley

bonds. However, we have always seen this differently. We believe that true risk ininvestments is the permanent loss of capital.Permanent loss of capital can occur as a result of the following three situations:1. Overpaying for an asset2. An issuer going bankrupt3. Not being compensated for inflationGiven the events that have taken place in the European Union over recent years,it is evident that despite what we are taught about government bonds being the“riskfree” asset class, at times they can be anything but. Not only is there thevery real risk of default, but there is an even better chance that an investor couldlose money in real terms if invested in bonds. In other words, bonds do notadequately compensate investors for inflation.In conducting our research, we analysed data on the South African market overthe past 50 years, and compared the real and nominal returns over 5 and 10 yearrolling periods.Table 1 shows the 5year rolling period results. This reveals that over the past 50years bonds have produced a negative real return 43% of the time, whereasequities have only done so 11% of the time.However, comparing the volatility over the same period shows that equities arenot significantly more volatile than bonds (7.9% versus 5.3%). Over the sameperiod bonds have returned an annual average real return of 1.5%, while equitieshave returned a real 9.2% per annum. So for taking on a small amount ofadditional volatility in the form of equities, investors reduce their chances ofnegative real returns by about 75%.And if we turn our attention to 10year period, then equities are actually lessvolatile than bonds (4.6% versus 4.3%) yet they still manage to outperformbonds over this holding period (Table 2).

Are Equities Riskier than Bonds?Table 1: Bonds vs Equities (50 years of data, 5year holdingperiod)

Table 2: Bonds vs Equities (50 years of data, 10year holdingperiod)


Chart 1 shows the frequency of returns over the past 50 years. It demonstrates that,in real terms, bond performance is poorer than that of equities. The vast majority ofreturns from bonds fall into the 5% or lower categories (including negative realreturns) while only a third of equity returns are found in that region. The bulk of realreturns from equities lie above 5%.

Chart 1: Frequency of 5year real returns

For longterm investors (as opposed to traders), it is important to understand that ifwe take a longterm view, risk is actually measured as the permanent impairment ofcapital rather than the conventional measure of risk: standard deviation of returns. Itis evident from the analysis that the probability of losing money (in real terms) issignificantly reduced over time for equities whilst the probability of losing money (inreal terms) for bonds remains significantly higher throughout the periods underconsideration. In fact, the probability of a real loss of capital has been approximately4 times higher in the bond market when measured over a 5year period and about 9times higher when measured over a 10year period.There is a general acceptance regarding the riskiness of equities which has led toinvestors believing that the less risky asset class is bonds. Given this misconception,we believe that it is important for investors to define what really constitutes risk tothem over longer time frames, ideally five years or longer.Visit www.cannonassets.co.za for more info.


Top Tips forBuying MedicalCover

B

by Mark Arnold

uying medical cover can be complex and daunting and many consumers turn tobrokers to help them choose the right benefits and plan. Here are some keyquestions to ask your broker before you sign on the dotted line.

Advisor or salesman?A broker isn’t acting as a financial advisor if he is just selling medical cover from onemedical scheme – he’s simply an insurance salesman. Ask your broker how manymembers he has placed with different schemes over the past year. If he’s only placedmembers with one scheme, be suspicious. You need independent, unbiased advice.Brokers who receive commission from a particular medical scheme may not recommendthe most appropriate scheme for your financial and medical needs.Compare different schemesYour broker should have done his homework and done an indepth analysis of differentmedical schemes before he recommends products to you. This means not onlycomparing different options and benefit plans, but also conducting a thorough check ofthe scheme’s risk profile, membership numbers, growth and premium increases fromyeartoyear. A scheme risk profile is related to the average age of its members and thesize of its pensioner ratio. You want to make sure that the scheme you are signing up tois financially stable, sustainable and has consistently affordable increases.


Health and wealth analysisIt’s a no brainer to check that your broker has the necessary qualifications to begiving you financial advice, such as his licence from the Financial Services Board. Inaddition, it is important to verify what processes he follows in recommendingdifferent schemes and products to you. Your broker should not only do a thoroughfinancial needs analysis based on your individual circumstances, but also conduct abackground health check. You may find that you have too much life and funeralcover, but can’t afford comprehensive medical cover. Your broker should help youbalance your portfolio of cover to ensure that you are sufficiently covered forpotential medical expenses.Understand the planMedical schemes each offer different options with a variety of benefits. It’s vital todetermine what level of cover you need at each particular life stage. If you are inyour twenties and are fit and healthy you’re likely to only need a hospital plan thatcovers catastrophic events. However, in your early thirties, you’re more likely tostart a family and would need more comprehensive cover. As you hit your forties andfifties you’ll need a medical scheme plan that pays generously for chronic medicationas this is when most lifestyle diseases start to develop. Ask you broker to explain thebenefits of schemes’ different options.Waiting periodsIf you’re new to a scheme, it is entitled to implement a waiting period where youwon’t be able to make a claim, even for Prescribed Minimum Benefits. Ask yourbroker whether you will be subject to a waiting period and rather switch betweenplans on the same medical scheme than between medical schemes if your cover isnot sufficient. Your broker should regularly assess your healthcare needs, lookahead to the next five years and advise you on what plan you should be on.Networks and limitationsCheaper premiums may mean that your medical cover limits you to a particularnetwork of hospitals and doctors called designated service providers. Check withyour broker to see which healthcare providers you can use and whether this will beconvenient if you fall ill. Weigh up the cost difference of moving to a more flexibleplan if you would prefer to use your preferred doctor or specialist.Tariffs and copaymentsVery few doctors and specialists charge standard tariffs, so ask your broker whetheryour medical scheme will refund you at 100% or a higher percentage of the tariff oryou could face steep copayments. You could also opt to take out gap cover to makeup the difference, without incurring the higher premiums of a more comprehensiveplan.


Be honest upfrontEach medical scheme will require you to fill out amedical declaration before taking out cover. Make sureyou go through this with your broker with a fine toothcomb. Even innocent omissions can lead to direconsequences. Schemes use the medical questionnaireto accurately assess your risk and the scheme canterminate your contract on the basis of nondisclosure ifyou didn’t declare previous medical conditions. If youneed authorisation for a treatment within the first 12months of joining a scheme, they can also approachyour doctors to see what you’ve been treated for beforeyou joined the scheme and refuse to cover treatment ifyou weren’t honest upfront. Some members do omitinformation deliberately, but the vast majority make agenuine mistake in not disclosing. The best advice is tonot fill out this form in a rush and make sure yourbroker goes through it with you so that you don’t missanything out.Mark Arnold is Principal Officer of ResolutionMedical Scheme. For more info visitwww.resolutionhealth.co.za.

"Your broker

should help you

balance your

portfol io of

cover to ensure

that you are

sufficiently

covered for

potential

medical

expenses"

BusinessWise

H er latest book, “Business in Africa – Corporate Insights”, offers apractical viewpoint on the challenges and peculiarities of operating inAfrica, from the perspective of some of the continent’s biggest Clevel


Doing Business in AfricaQ&A with South African business consultant, leadingcommentator, former journalist, author and columnistDianna Games, CEO of Africa at Workby Denisa Oosthuizen

executives of corporate brands at the forefront of business developments acrossvarious African markets. We chatted with author Dianna Games (photo left)about Africa’s business scene, past and future.WealthWise magazine: What is the main focus of your latest book“Business in Africa – Corporate Insights”?Dianna Games: The book focuses on issues related to doing business on thecontinent, exploring the experiences, observations and predictions of topcompany executives who have been operating on the continent for a while. Eachcompany is in a different sector to make it varied and broaden the appeal andvariety of experiences and insights.They include both South African firms and international companies includingsome of the biggest and oldest multinationals in the world – GE, The Coca ColaCompany and Du Pont. Other companies included in the book are: Actis, CarlsonRezidor Hotel Group, Nando’s, Anglogold Ashanti, MTN, MultiChoice, UBA,Webber Wentzel, Imperial Logistics, TBWA, Liberty Properties, Seed Co,Wilderness Holdings and SacOil.Their views and insights were extracted by means of a series of interviews withmyself and responses to a fairly standard list of questions. Some companies thatI had also hoped to include could not be in the line up because of time,geographical and other constraints, so it may seem that some obviouscontenders are not there, but perhaps next time.


There is also a selection of articles written by Africa experts and practitioners.Drawing on McKinsey & Associates, the Brenthurst Foundation and the GordonInstitute of Business Science for a picture of Africa’s economic performance andfuture trends, contributions to the book also come from individuals such as veteranAfrica analyst Dr Duncan Clarke, Nigerian business leader Tony Elumelu, economiccommentator Greg Mills of the Brenthurst Foundation, South African publisher KhanyiDhlomo and Africa branding expert Doug de Villiers. These set the scene for theeconomic and business landscape which is the basis for the interviews in the second,larger, section of the book.Although high growth rates in Africa, among other emerging markets, offer a newinvestment frontier in an era of declining growth and prospectivity in developedmarkets, it is wise for investors to remember that there are 54 countries on thecontinent and even rigorous business plans can run aground on the unique andcomplex set of circumstances found in each of them.The premise of the book was to move away from the raft of economic statistics thatdominate discussion about Africa’s economic trajectory and look at some of the issueson the ground which is where, ultimately, businesses succeed or fail in any market.Who better to elaborate on these issues than people at the coal face? They offerunique insights into the challenges and peculiarities of operating in Africa, and pointout trends and likely future opportunities.WealthWise magazine: What sets the book apart in the local businesspublishing scene?Dianna Games: Books and reports circulating in the local business publishing scenetend to focus on socioeconomic and political discourse or on the statistics, which canbe misleading in terms of really showing the reality of markets. A lot of the work isresearchbased, rather than experience based, often compiled in offices far from theaction by people with little or no experience of travelling and doing business in Africa.As someone who has travelled the continent for decades and seen how theunderstanding of a market can change by visiting it, I saw the gap for informationand insights through stories and articles that would highlight issues throughexperience.Some of the people interviewed run companies that have been pioneers in theirsectors in many African markets, for example, MTN and MultiChoice who were part offorming those markets in terms of corporate structure and regulation, not to mentiontechnology. Carlson Rezidor is driving a fivestar hotel brand – Radisson Blu intocountries where there has not been a new hotel in decades. There are many otherexamples of companies going into challenging markets and overcoming the problems,or retreating from some markets where they believed they couldn’t succeed for avariety of reasons. Their experiences are not captured in the statistics, which, if leftunchallenged, create the impression that all is well in Africa when in fact there aresignificant challenges despite economic growth.WealthWise magazine: You have been at the forefront of Africa’s businessand development issues for well over a decade. What business issues, trendsand developments are closer to your heart?


Dianna Games: I would start by saying the continent is a different place from whatit was a decade ago. The improvements are not just in terms of economic growth,but in lifestyle options (which you are very aware of when travelling around Africa)such as good hotels, improved airline networks, availability of goods and service,even restaurants and also improvements in just getting things done.The advent of technology, particularly mobile phones, has been the biggest driver ofchange in Africa in a decade. It has enabled innovation in solving longstandingproblems, in building entrepreneurs and it has made doing business a lot easier.New media is proving to be a handy tool for electorates who have long beendisempowered by their governments and it is also a tool for modernising thecontinent.Rising disposable incomes are another key feature of life in Africa now, certainly inurban areas, and this is drawing a lot of investment and the wave of oil and gasexploration and activity across the continent is very exciting. Hopefully this will notbe business as usual and will finally be a real driver of growth in Africa rather than adriver of poor governance, corruption and many other negative trends in the past.Agriculture is another issue of interest but it is moving slowly and it is frustratingthat countries are not exploiting this competitive advantage often because ofsomething simple like a lack of political will.With all the upbeat talk about Africa “rising”, it is important to remember that manyof the highgrowth statistics still relate to commodity dependent countries and thatthe improvements are generally being felt in urban areas, while in many countrieslittle has changed in the neglected rural areas.WealthWise magazine: In your writing, you mentioned Africa’s progressfrom the early ‘90s to the most recent years. Where do you see thegreatest business improvements and opportunities – and the greatestchallenges?


Dianna Games: The greatest challenges African countries still face include a lack of political will to effect real change by investing adequately in health and education as building blocks ofthe future, in lowering the cost of doing business and really driving regional integration. Governments often talk about funding being their main problem but there is plenty of money fordevelopment but without sufficient political will behind development and strategies to drive it, things won’t happen.WealthWise magazine: How would you describe the current African private business sector and what can be done to maximize its contribution to the local economy, inyour view?Dianna Games: The growth of the African private sector is one of the biggest changes of the past decade. You are seeing African multinationals emerge from other countries, not justSouth Africa as was typically the case in the past, and companies growing domestically. Many are still family owned businesses but there are also a growing number of large corporate asthe structure of African economies changes and becomes more global and efficient and business responds to domestic reforms and growing regional integration. This growth is a driver ofincreased incomes, merger and acquisition activity across Africa as new investors seek local partners and of jobs and skills development. But more could be done. Companies could play agreater role in pushing their governments to improve the operating environment to make African goods and services more competitive. There is a lot more that could be done to makeAfrican markets more efficient and the private sector does have a role here in lobbying government but there is still a lot of selfinterest and companies tend to lobby only for what givestheir company and advantage rather than the private sector as a whole. There is also the insidious presence of politicians with private interests that can frustrate reform.WealthWise magazine: What are the most important challenges for businesses looking into expanding in Africa, in your opinion?The key issue is to make sure both the business plan and understanding of the environment are right for the market in question. Deep due diligence is required in doing business in Africabecause of the often opaque nature of these markets and undisclosed interests by partners, officials and others in the chain.It has become something of a cliché to say you need to understand that there are 54 countries in Africa and while there are similarities, each has its unique make up and business modelscannot just be moved from one country to the next. Companies are still not doing sufficient homework in many cases and are often relying on the opinions and advice of consultants whomay not have the depth of these markets themselves.WealthWise magazine: Your top advice for doing business in Africa?WealthWise magazine: There are many tips for doing business in Africa, and the book covers twenty of those that I believe are important. I would say broadly speaking that the adviceI would give is to do your homework properly by going to the markets in question, taking the required time to get established rather than focusing only on the bottom line, and makingsure you integrate properly in order to really understand the business culture.


Dianna Games: The greatest challenges African countries still face include a lack of political will to effect real change by investing adequately in health and education as building blocks ofthe future, in lowering the cost of doing business and really driving regional integration. Governments often talk about funding being their main problem but there is plenty of money fordevelopment but without sufficient political will behind development and strategies to drive it, things won’t happen.WealthWise magazine: How would you describe the current African private business sector and what can be done to maximize its contribution to the local economy, inyour view?Dianna Games: The growth of the African private sector is one of the biggest changes of the past decade. You are seeing African multinationals emerge from other countries, not justSouth Africa as was typically the case in the past, and companies growing domestically. Many are still family owned businesses but there are also a growing number of large corporate asthe structure of African economies changes and becomes more global and efficient and business responds to domestic reforms and growing regional integration. This growth is a driver ofincreased incomes, merger and acquisition activity across Africa as new investors seek local partners and of jobs and skills development. But more could be done. Companies could play agreater role in pushing their governments to improve the operating environment to make African goods and services more competitive. There is a lot more that could be done to makeAfrican markets more efficient and the private sector does have a role here in lobbying government but there is still a lot of selfinterest and companies tend to lobby only for what givestheir company and advantage rather than the private sector as a whole. There is also the insidious presence of politicians with private interests that can frustrate reform.WealthWise magazine: What are the most important challenges for businesses looking into expanding in Africa, in your opinion?The key issue is to make sure both the business plan and understanding of the environment are right for the market in question. Deep due diligence is required in doing business in Africabecause of the often opaque nature of these markets and undisclosed interests by partners, officials and others in the chain.It has become something of a cliché to say you need to understand that there are 54 countries in Africa and while there are similarities, each has its unique make up and business modelscannot just be moved from one country to the next. Companies are still not doing sufficient homework in many cases and are often relying on the opinions and advice of consultants whomay not have the depth of these markets themselves.WealthWise magazine: Your top advice for doing business in Africa?WealthWise magazine: There are many tips for doing business in Africa, and the book covers twenty of those that I believe are important. I would say broadly speaking that the adviceI would give is to do your homework properly by going to the markets in question, taking the required time to get established rather than focusing only on the bottom line, and makingsure you integrate properly in order to really understand the business culture.

Top 5 Tips on DoingBusiness in Africa(extracted from "Business in Africa Corporate Insights" compiled byDianna Games)1. Be patient about the extra time it might take. Patience isimportant when operating in Africa.2. Find local partners. They provide knowledge, ease entryinto a market and, ideally, have influence.3. Build strong relationships with Africans. If you do not getthe relationship right, the deal might suffer.4. Do not assume that African consumers want cheapproducts. African consumers are highly aspirational and seekvalue for money.5. Be aware that in many countries cash is still king.Read all of Dianna's 20 tips in the book. See page 51 for a review.

A dire consequence The demise of the African NGOby Catherine Wijnberg

T

A dire consequence The demise of the African NGOby Catherine Wijnberg

he onslaught of antiNGO actions (BEE Code proposal to excludeNGOs that help nonblacks, Lottery shambles, focus on Enterprise

Development over CSI) shows a breathtaking disregard for thisessential sector of our country.South Africa has a huge and, until now, growing civil society network ofmore than 85,000 NGOs. This vast array of organisations fillin the gapsin a society where care is not being provided by anyone else – fromfeeding the aged, caring for orphans, saving the rare leopard toad tohelping Rape victims. They are the caring face of a society that hasbecome hardened to the suffering of others, and dismissive of those notstrong enough, or wealthy enough to care for themselves.Globally the NGO network is suffering, as the economic downturn hasled to Corporates and Governments alike reducing funding support.International funders such as the World Bank, USAID and LHL haveslashed their budgets and the impact on the social support sectoreverywhere is dire.Yet here in South Africa, we have gone beyond the simple matter of lackof money due to a reduced economy, to what appears almost to be adeliberate strategy to pull funding from civil society and divert itelsewhere. In South Africa, we have discovered Enterprise as the newutopia, and if not enterprise, its dreamy cousin, Social Enterprise.In practice, this means that traditional funding from sources such as theLotto is now being denied to reputable organisations like the HighwayHospice in KZN, who provide essential support to hundreds of dyingpatients annually, on the basis that they “should be sustainable bynow”. In other words, the Lotto has decided that the Hospice should bea Social Enterprise – an organisation that makes money while it helpspeople to die with dignity? Possible perhaps in affluent populations, butcompletely unreasonable in the poor communities in which it operates.Another onslaught is the proposed emphasis on Enterprise Developmentin the new BEE Scorecards – whereby Social Developmentor CSI fundingtraditionally reserved for NGOs will be 5 points in the scorecard,whereas Enterprise Development will score 8times more, at 40 points.If that isn’t an unbalanced pull, I don't know what is.



I am a fervent champion and supporter of the EnterpriseDevelopment(ED) sector, and actively promotethe crucialrole it plays in growing our economy and creating muchneeded employment.However, the millions that have been (and are)squandered through weak and ineffectual Governmentfunded business support agencies, inappropriateopportunities offered to unqualified entrepreneursthrough schemes like EMIA, and the general poorperformance of most Statesponsored ED initiatives,leaves one feeling that this is a kneejerk response tocompensate for their poor results.The reality is that successful Enterprise Development is aspecialist task that needs to be carried out by expertsand take place in tandem with social development, not inplace of it.The proposal that in future only NGOs who supportpurely black people will gain BEE scorecard points is formany, the final straw. Who will support theother peopledying of cancer, the otherschool children who needremedial reading, the other disabled who cannot feedthemselves? Certainly not the Government, because ifthey were doing it none of the NGOs would have beenstarted in the first place.If this comment seems overly harsh, the question isperhaps what strategy has Government got in place tosupport this essential sector? What tools are there toencourage funds to flow to civil society to balance theoverwhelming emphasis on business, and black economicempowerment?It seems that the NGO world is its own worst enemy, forit has been quietly and effectively getting on with the jobwithout fanfare for years. Sadly, as we only value ourseatbeltwhen we run into a bus, so too will we onlyrealise theworthof the NGO community when they ceaseto exist.South Africa is on adisastrous course – as we withdrawour support for Civil Society we risk becoming a countryunable to care for our people, andif a country cannotcare for and respect their most marginalized citizens,how can it call itself a civilized society?

"Globally theNGO networkis suffering,

as theeconomic

downturn hasled to

Corporatesand

Governmentsalike reducing

fundingsupport"

Catherine Wijnberg isthe Director andFounder of Fetola, afast growing economicdevelopment agencyand notforprofitorganization withdevelopmentpractitioners acrossSouthern Africa.Contact Catherine [email protected] call 021 – 701 7466.Visit www.fetola.co.zafor more info.

DreamWorker Getting South AfricaWorkingby Chiara Baumann


CareerWise

R


onald Bownes, Founding Director of DreamWorker, a NonProfit Organisation,believes that the unemployment rate in South Africa is a crisis and should bedeclared a state of emergency.

The recent Census places unemployment at 29.8%, while some believe theexpanded definition to be closer to 40%.The current economic bedlam and unemployment increases occurring in someEuropean countries is severely threatening state order, yet the disarray is far morerecent and the outcry far more heard, despite unemployment being lower than thatof South Africa. In South Africa, we are skirting the severity of the situation.Although the official feelings of South Africans are not necessarily those of a nationalstate of emergency, we must not be deceived.Anyone who follows the news will be aware of pockets of incredibly violent protestsacross the country. People are very unhappy. We should not ignore these warningsigns. We need to urgently shift our focus from the notion of jobs; and shift it to theconcept of work.Government continues to highlight the three key issues that need to be addressed,namely unemployment, poverty, and inequality. However, if we focused solely onthe issue of unemployment the other two would, over time, start to rightthemselves. Other countries have done it, why can’t we? Brazil is a shining case inpoint.Bownes believes we need to shift our perception of unemployment and the solutionsthereof. His views are at times unsettling for some people. “We are not going tosolve the unemployment issue in South Africa by creating jobs. Rather, we need toget people working, today. We need to place them into work opportunities.”Bownes does not believe that government is going to be able to create enough jobsthrough largescale infrastructure projects. Let alone, lasting jobs. Nor is the SouthAfrican business profitmodel geared towards solving the problem. The businesssector is not able to absorb the mass of unemployed people at a rate that will haveany impact in relation to the growing numbers.


"The business

sector is not

able to absorb

the mass of

unemployed

people at a

rate that wil l

have any

impact in

relation to the

growing

numbers"

The continual emphasis on SMEs and entrepreneurshipas the golden answers to solving unemployment aregoing to make only a minor dent to the unemploymentfigures.Bownes goes on to say we should not solely befocusing on the youth. That is not to say that theyshould be neglected. But rather, we need to include the25 45 age group – the parents of the youth. This isroughly two generations of people who may not havehad the opportunity of working since 1990.Although economies are not growing as they should andthe process of distributive justice is severely challenged,especially in South Africa, there is still work to be done a lot of it. All across the world, the traditional idea of ajob is dissipating, and fast. Economies can no longerguarantee secure, contractual jobs with benefits. Jobsare taking on more temporary natures such as parttime, semipermanent, and casual.Bownes states that we need shortterm impacts. “If weget people working, they will start spending more intheir communities and the logical process of demandand supply will spurt economic growth”. Getting peopleto work gives people exposure to new skills, opportunityto improve their CVs, and most importantly a sense ofpurpose.”

Studies across the globe stress the importance of people’s need for a sense ofpurpose as it satisfies other fundamental components of the human psyche, such asa sense of worth, dignity and pride. The overall psychology of the individualimproves when these feelings are present. Purposeful individuals translate intohealthier families and communities.However, there is some light in this bleak scenario. DreamWorker is a socialenterprise dedicated to helping unemployed people at the Base of the Pyramid findwork and get them into the economic stream. Ronald and his wife, Tania Bownes,started DreamWorker in 2008 as a registered NonProfit and PublicBenefitOrganisation with a BEE level 4. The Head Office is based in Athlone, with otheroffices opening in Atlantis and Port Shepstone. DreamWorker is about inspiring,uplifting and giving hope to the unemployed, thereby maximising their chances ofsecuring work.Oneonone interviews are conducted by the DreamWorker team, which includesworker readiness and mentoring for each work seeker. DreamWorker firmly believesin a personal approach, both towards the beneficiaries and employers. After theinterview process, references are verified, CVs are assessed and placements takeplace. Emphasis is placed on identifying skills gaps, personality traits, andappropriate training referral to enhance employability. Strong ties with the privatesector are cultivated and much energy is placed into marketing and networking.


DreamWorkerdirector RonaldBownes and hiswife, Tania

The model has been finetuned to function at an optimal level as a professional workseeking placement process and is ready to be replicated across the country. It hasbeen helping unemployed beneficiaries not only find work, but also give each and everyone of them tools to empower themselves. Since inception from a single office,DreamWorker has engaged and registered over 7000 unemployed people and continuesto engage with an additional 2000 people per year. Work placements of over 300 000days of work have been recorded, translating into wages of over R40 million.DreamWorker is thorough in recording how many people are registered and how manyfind work every month. It also created its own work creation programme called Link ofLove. A day of work can be sponsored for R100, which enables an unemployed personto work in their community – caring for the sick or elderly, tending community gardensand so on. This programme is geared towards creating work opportunities and upliftingpoor communities.Like any NPO anywhere in the world, the biggest challenge facing DreamWorker is theissue of securing ongoing funding to sustain operations and to expand and replicate themodel. Government’s lack of understanding about the nature of the problem ofunemployment and the solutions thereof is another frustration. If we don’t all approachthe issue together, our efforts are going to be fragmented and the impact minor.Additionally, every day DreamWorker staff come into contact with work seekers’alarmingly low numeracy and literacy levels. This is compounded by the lack ofpreparedness for the world of work and general life skills. This feeds into the nationwide debate around the level of education in our schools and a need for preparing ouryouth for what lies ahead, because currently we are failing our children.DreamWorker aims to replicate the business model throughout South Africa throughfranchise offices and grow the Link of Love programme. In addition to its on the groundoperations, Ronald Bownes runs the DreamDiamond programme, which inspires groupsand teams in organisations and businesses to create lives of greater purpose and

contribution. Through this programme, the idea is to get Corporate SA to contribute tohelping DreamWorker help the unemployed. South Africa does not have time and fundsto create new, sustainable jobs. The country needs to get people working today. Thereis work, but we simply need to set about getting people into those opportunities. Forfurther details about DreamWorker, visit www.dreamworker.org.za.DreamWorker Director, Ronald Bownes, was born and educated in Plumstead, CapeTown. He holds a CIS Business Qualification with Honours and has years of experiencein the corporate world, gaining varied and valuable experience in finance, humanresources, training and marketing. After a brief spell in management consulting, heteamed up with his wife, Tania and founded Inspiration Sandwich, a design andadvertising agency. After 7 years of growth and success they sold it to explore otherentrepreneurial endeavours.Ronald and Tania were then given the opportunity to rebuild an NGO based in Hout Baythat was placed to help the unemployed find work. After successfully rebranding andrebuilding the business model over 2 years, provincial government asked them to createsimilar services in the greater Peninsula. Thus DreamWorker was born and is the vehiclein which Tania and Ronald can pursue their life long dream of helping communitiesempower themselves. Ronald’s life dream is to envisage zero unemployment in SouthAfrica and to help every individual he meets to explore their potential and live theirdream life. He is also an inspirational speaker and is fervent about sharing his views onhow we can expand our consciousness to live our dream lives. He speaks extensively atbusiness functions and networks on human potential and possibility. His“DreamDiamond” talk is a much sought after talk at corporate workshops and seminars.

TheEvolvingRoleof theCFO

by Van Zyl Botha

I


n today’s volatile economic climate, efficient financial management is becomingincreasingly critical to any business’s success. With a growing spotlight on cost

efficiencies, the role of the Chief Financial Officer (CFO) is rapidly evolving, adaptingconstantly so as to be able ensure the longterm financial sustainability of abusiness.Traditionally, the finance department has existed within its own silo, with CFOsfocusing primarily on reporting and daytoday financial management. However, inlight of global financial systems’ continuing uncertainty, CFOs are being forced toplay an increasingly integral role in the operational side of business.With the web and more sophisticated technology making financial information morereadily available to key business stakeholders, the CFO’s value to a companyincreasingly lies in their ability to guide financial strategy and ensure viability acrossall departments. As a result, today’s CFO needs to be more involved in all aspects ofthe business, and to be equipped with sufficient knowledge and expertise to makecritical strategic decisions across a diverse range of disciplines.Measuring ValueWith companies placing increasing focus on value as opposed to traditionalprofitability, today’s CFO is no longer simply able to rely on numeric measures todefine success.Cost efficiencies now need to be implemented without compromising a company’sability to implement effective service delivery, and as such, CFOs are required tohave an intrinsic understanding of what constitutes value across all departments.Technology in particular is a growing area of focus for modern CFOs, with IT systemsand processes playing an increasingly pivotal role in a business’s sustainability.Understanding emerging technological trends forms a vital component of a CFO’sability to manage a company’s financial status, with systems like cloud computingable in many instances to reduce costs while at the same time bolstering operationalefficiency.Performance ManagementOver and above overseeing the economic efficacy of a company’s systems andprocesses, today’s CFO is also tasked with managing the efficiency of humanresources.

CareerWise


In order to ensure the growth and improved productivity of an organisation, the CFOneeds to be able to successfully measure and manage staff performance. For themajority of enterprises, salaries represent a major expense, and, as such, this is anarea that needs to be closely overseen by the CFO.This requires not only a comprehensive understanding of the various roles andresponsibilities within the organisation, but also the implementation of effectiveperformance management systems, incorporating targets and measurementstandards, that accurately assess productivity levels.Operational AccountingWhilst traditional financial accounting duties remain under the CFO’s jurisdiction, thescope of the role is being progressively broadened to incorporate elements ofoperational accountancy. So while the CFO remains responsible for the enforcementof compliance and control mechanisms, they are now being relied upon as valuedcontributors to strategic discussions, with their specific brand of expertise helping todrive savvy financial decisionmaking at an executive level.LongTerm VisionShortterm budgeting and forecasting also remain integral to the CFO’s current role,but emphasis is steadily shifting to longterm scenario planning, incorporatingcontingency plans based on market conditions and potential longterm risk factors.A CFO’s success in implementing a longterm vision lies in their ability to recognisechanging trends, and to understand the impact that these might have on all levels ofthe business. Today’s CFO needs to be both flexible and adaptable, so as to be ableto anticipate factors that might compromise a business’s longterm financialsustainability.Ethical ConsiderationsIn light of the financial scandals of the past decade, the importance of business ethicsand financial transparency has also been brought to the forefront of publicconsciousness. A CFO’s ability to effectively enforce compliance measures is becomingincreasingly vital, as is their ability to drive integration of ethical values into seniormanagement’s decisionmaking processes.The implementation of a strong ethical culture is not only critical in terms of building acompany’s reputation, but can also prove invaluable in the creation and maintenanceof relationships with suppliers and investors.JackOfAllTradesToday’s CFO is a no longer simply a ‘bean counter’, but rather a jackofalltrades,performing an essential management function across all levels of a business. CFOsnow need to ensure that they are integrally involved in all functions of a business, asit is their ability to proactively drive strategy and promote operational efficiency thatcan mean the difference between financial prosperity and ruin.

7BookstoUpYourGamein Business,Career,Economicsand Politics

Lifestyle


7BookstoUpYourGame

n this issue we look at books on corporateAfrica, American politics and economics,Ibusiness strategy and digital trends, as well

as how to's on building a business with lessand learning the ropes of online trading.

Business in Africa – CorporateInsights, compiled by DiannaGames, Penguin BooksThere is plenty information to assimilate inbusiness commentator and author DiannaGames’ compilation of articles written byhigh powered executives at the forefront ofbusiness developments across the Africancontinent.The book gives readers unique insights intothe challenges and opportunities forbusinesses operating in Africa, as well as alook into future trends and growth, drawingon research by McKinsey & Associates andGIBS. Particularly interesting to read are theinsights from global companies and leadersin their field such as GE, CocaCola, MTN,Nando’s, TBWA, MultiChoice and others.A valuable resource for anyone looking at doing business in Africa, “Business in Africa– Corporate Insights” proves to be a useful guide to the business executive andentrepreneur, as well as the investor interested in African markets.Going Global, Insights from South Africa’s TopCompanies, compiled by Moky Makura in association withGIBS, MME MediaIn “Going Global”, author Moky Makura compiles a series of articles featuring SouthAfrica’s global champions, from Anglo American and SABMiller to MTN and TigerBrands. The top 12 companies featured are powerhouses who have set a majorfootprint outside SA, in places as far as the UK, USA, Australia and even Russia,China or Brazil. Each story, written by experienced journalists well versed incorporate affairs, explores new frontiers in business and tells the story of the


corporate SA landscape from a historicalperspective. A must read to expand yourglobal vision and go behind the scenes ofsome of the world’s greatest companies, bornin South Africa.That Used to Be US – WhatWent Wrong with America –and How it Can Come Back,Thomas L Friedman andMichael Mandelbaum, Little,BrownWhat valuable lessons can we learn fromAmerica’s setbacks in the past years? Writtenas a powerful manifest by Thomas L Friedman,one of the world’s most influential columnistsand author of the smashing bestseller “TheWorld is Flat”, and one of America’s leadingforeign policy thinkers, Michael Mandelbaum,the book looks into globalization, education,politics, technological revolution, energyconsumption, financial deficits and such globalchallenges to analyze America’s frustrations,its past and current “mistakes” and rediscoverthe country’s power.

A great insightful reading into the investigation, building and rebuilding of a nation,with lessons that can be replicated elsewhere.Become your Own Stockbroker –the Definitive Manual to OnlineTrading, by Jacques Magliolo,Penguin BooksBestselling author and Africa’s best stockbrokerJacques Magliolo continues to assist traders inbecoming successful in global markets and hislatest book, “Become your own stockbroker” ,confirms his practical approach from basicdefinitions to different types of securities andtechnical advice on equipment required forsuccessful trading.An indispensable guide for both beginners toseasoned investors – don’t plan your tradingstrategy without reading this first!

Books


Velocity – The Seven NewLaws for a World Gone Digital,Random House StruikFounder of innovation agency AKQA, AjazAhmed, and Vice President of Digital Sport atNike, Stefan Olander, have been workingtogether for over a decade on forwardthinking strategies in an increasingly digitalworld. Their best advice and key truths tosuccess are shared in “Velocity”, which definesitself as a positive force that gives themindset and tools to create a better future.The book has everything to capture theattention of both business people andindividuals who want to thrive in worlddominated by rapid change and digitaltechnology: it is fastpaced, easy readable,written in conversational tone, thoughtprovoking and very practical. We particularlyliked the viewpoints on digital innovation andadvertising, as well as the numerous insightsin Nike’s successful campaigns, courtesy ofStefan. Highly recommended by one of theworld’s most innovative entrepreneurs,Richard Branson, “Velocity” is a mustreadaccount of crafting an inspired new future.

The $100 Startup – Fire YourBoss, Do What You Love andWork Better to Live More, PanMacmillanA life of complete independence, purpose andwealth? American writer and entrepreneurChris Guillebeau has inspired millions ofpeople to live fulfilling lives and start buildingon their dreams. In “The $100 Startup”, Chrisshows how to transform your idea into asuccessful business, in a straightforward,effective and practical way.


Using countless examples ofpeople who did it with a merehundred dollars or less, the bookproves that each of us has morethan enough to get started.Whether you are a solopreneur, asmall business owner or thinkingof starting a business, this is avaluable reading to make ithappen, launch and grow. Theuniversal ideas and concepts aredefinitely a gold mine for Africanentrepreneurs too – so get startedtoday and enjoy a new way ofliving!Strategy That Works –A Practical Guide forExecutives andManagers That GetsResults, RandomHouse StruikForget what you learned aboutstrategy and follow Ian Mann’s“nononsense” approach tostrategy, resulting in an easyapplicable, accessible andimplementable unique strategy foryour organizations. Fans of annualstrategy meeting retreats,strategy documents SWOTanalysis and Porter’s famousstrategic model will bedisappointed to find out how reallysimple it can get. South AfricanIan Mann, founder of GatewayBusiness Consultants, and authorof “Managing with Intent”, is apopular choice for business talkshows. We are convinced that hisworkable business strategy modelwill become not only highlypopular, but a vital todo forexecutives and managers of alllevels.

February/March 2013Events


Want to see your eventpromoted on these pages? [email protected] your event.

Travel ExpoCocaCola Dome, Johannesburg1617 Februarywww.travelexpo.co.za/travelexpo/

2013 Gauteng HomemakersExpoCocaCola Dome, Johannesburg28 February 3 Marchwww.homemakersonline.co.za

Design Indaba ExpoInternational Convention Centre, CapeTown13 Marchwww.designindaba.com

HobbyXCocaCola Dome, Johannesburg710 Marchwww.hobbyx.co.za

Future Bank World AfricaSandton Convention Centre,Johannesburg1112 Marchwww.terrapinn.com/exhibition/futurebankafrica/index.stm

My Business Expo JoburgGallagher Convention Centre,Johannesburg

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