Banker SA 15 - The Banking Association South Africa

Transcription

Edition 15
BANKER SA
EDITION 15
solutt ions
FOR SA’s
SMALL
BUSINESS
SECTOR
PICASSO HEADLINE
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BANKERSA | Edition 11
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Edition 12 | BANKERSA
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ADVERTORIAL
Making a
positive difference
Sasbo – The Finance Union is an organisation making a positive difference in the lives of
our members by influencing the sector and stakeholders, providing a professional service,
protecting members in the workplace and enhancing their lives.
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S
asbo – the pulse of the finance
sector. We care about our
members and we care about
our sector. Through our
dynamic service excellence,
professionalism and integrity, we strive to
protect our members’ interests and to make
a positive difference in their lives.
Finance is a global sector and Sasbo is
fully engaged as a global player through its
membership at international level.
We monitor developments in the
finance world and we use our influence
on the sector and stakeholders to promote
a successful, well-run and sustainable
financial system. The sector’s strength is
also Sasbo’s members’ strength.
We are an organisation with solid longstanding experience and in 2016, we will
celebrate our centenary – a milestone we are
all proud of. Sasbo was established in 1916
by banking-sector employees who needed
a voice to enhance their collective goals.
Over the years, various finance and banking
unions were consolidated into one strong,
democratic union, making Sasbo the major
player in the finance sector that it is today.
With approximately 68 000 members,
we are respected throughout the sector for
our apolitical views, the protection and
benefits we provide to our members, as
well as our commitment to our members,
South Africa and its economy.
We do not promise or promote unrealistic
settlements. We promise a negotiated settlement
that is fair, equitable and sustainable.
Recently, we successfully represented a
‘Sasbo – The Finance
Union strives to make
a positive difference
through responsible,
sustainable and healthy
labour relations.’
Sasbo – The Finance Union strives
to make a positive difference through
responsible, sustainable and healthy
labour relations.
We strongly encourage ALL finance
workers – regardless of their seniority, race
or political views – to join Sasbo for the
benefits of collective bargaining, as well as
for their individual protection against any
and all unfair labour practices.
senior manager at one of the major banks
by not only having him reinstated, but
also ensuring compensation to the value
of R1.945 million.
Through our involvement in the
Financial Sector Code, Bankseta, Inseta,
Nedlac and other industry bodies, we
play a positive role in enhancing our
members’ prosperity.
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CONTENTS
B
CONTENTS
10
Regulars
06 EDITOR’S NOTE Investigating
the state of South Africa’s SME
environment
09 MD’S MESSAGE Looking at the
importance of SMEs in SA
10 LOCAL AND INTERNATIONAL
BANKING NEWS New head
at African Development Bank,
Kenya sells treasury bonds via
mobile, and FNB wins Gauteng
government banking tender
Features
14
18
25
26
31
44 TECHNOLOGY Seeking success
in migration to cloud
SA’S STARTUP UNIVERSE Insights into
SA’s tech startup landscape
46 REPORT BACK Africa is on
the brink of a major shift towards
mobile banking
TAKING THE LEAP Local entrepreneurs
share their business lessons
COMPLIANCE FOR SMEs A look at
regulatory requirements for SMEs
A CALL FOR BOLD ACTION SA’s need for
the promotion of strong entrepreneurship
18
BEE FOR SMEs What SMEs need to know
about the Revised Codes of Good Practice
39
40
SMALL BUSINESS TAX: WHAT YOU NEED
TO KNOW Understanding tax implications
54 OPINION Are multinationals at a tax
advantage in SA’s digital economy?
57 OPINION Why outplacement is
a smart strategy
SME FINANCE: FROM AVAILABILITY TO
ACCESS Examining the SME ecosystem
and how it can be strengthened
DEVELOPING TOWNSHIP ECONOMICS
Are townships the next market for banks?
50 TRAINING Working towards financial
literacy for small businesses
53 CHILDREN AND YOUTH Encouraging
entrepreneurialism in SA’s youth
INNOVATION IN SME FUNDING
REQUIRED How startups can access
funding, and what channels are available
34
36
49 INSIGHTS The Banking Association
reports back on its study tour to
Malaysia, plus lessons for SA
58 OPINION Creating successful
customer loyalty programmes
59 CSI Improving corporate social
investment practices
44
63 CLOSING OPINION Looking back
at the global economy over the first
half of 2015
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B EDITORS’S NOTE
W
hen we decided to
tackle the topic of
small and medium
enterprises (SMEs)
for this edition of
Banker SA, we knew we would not be short
of content. SMEs are a hot topic globally,
but especially in South Africa, where
the National Development Plan (NDP)
stipulates that 11-million jobs need to be
created by 2030 – 90% of these by SMEs.
Quite frankly, we are not on track. In
fact, earlier this year, local media reported
widely on the release of some sobering stats
produced by the Endeavor jobs calculator,
a global tool developed by the International
Labour Organisation (ILO), National
Statistics Agencies and Endeavor Insights,
which takes into account the different
factors that are essential for job creation.
According to the Endeavor calculator,
South Africa needs more than 49 000 SMEs
growing at a rate of 20% per annum to make
the NDP target, or no less than 8.2-million
small and micro-enterprises to create the
same number of jobs. Sadly, research by the
Global Entrepreneurship Monitor (GEM)
shows that up to 70% of new businesses in
South Africa fail in their first year.
The pressure is on to improve our
SME success rates. Ultimately, more
collaboration is needed between
government, financial and academic
institutions, business and support agencies
to create an enabling environment.
In this issue, we look at the challenges
facing SMEs and other stakeholders involved
in the SME ecosystem, and what can be done
to address them. Topics we’ve investigated
include funding, economic policy,
governance and compliance, tax, BEE and
the need for an integrated approach.
We’ve also profiled entrepreneurs at various
stages of their business journeys, gleaning
their lessons and celebrating their successes.
It’s been a thought-provoking edition to
work on, and my hope is that you find the
articles as interesting and challenging to
engage with as the editorial team has, and
that the content drives us all forward in
striving for a more inclusive economy.
PS. Banker SA would like to issue an apology for an
error in the closing opinion piece of Edition 13 by
George Herman, Head of South African Portfolios at
Citadel, titled “2015 local outlook”. Gremlins in our
system resulted in the words “external reporting”
being added at the beginning of each bullet point.
We are sincerely sorry for any confusion caused,
and we apologise to the author for the error. Visit
www.banking.org.za to view the edited article.
6
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EDITORIAL
Banking Association Editorial Board
Cas Coovadia
Thenji Nhlapo
Editor
Tamara Oberholster
[email protected]
Content Manager
Raina Julies
Copy Editor
Lynn Berggren
Content Co-ordinator
Michéle Jarman
Contributors
Lauren Barbour, Cara Bouwer, Septi M Bukula, Rose Cohen,
Cas Coovadia, Trevor Crighton, Charles de Wet, Delia du Toit,
Yule Edwards, Lindsay Grubb, Georgina Guedes, George
Herman, Fikile Kuhlase, Thami Mazwai, Muzi Mhlambi, Kim
Novick, Tamara Oberholster, Rianné Potgieter, Craig Spalding,
Helen Ueckermann, Lisa Witepski
Head of Design Studio
Jayne Macé-Ferguson
Designers
Anja Hagenbuch, Mfundo Ndzo
SALES
Project Manager
Andrew Green
[email protected]
Sales Consultants
Stephen Crawford, Alec Rompelman,
Gregory Sirmongpong
Business Manager
Lodewyk van der Walt
[email protected]
PRODUCTION
Production Editor
Shamiela Brenner
Advertising Co-ordinator
Merle Baatjes
OPERATIONS
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Deidre Musha
Subscriptions and Distribution
Shihaam Adams
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General Manager: Magazines
Jocelyne Bayer
Copyright: Picasso Headline and The Banking Association
South Africa. No portion of this magazine may be
reproduced in any form without written consent of the
publishers. The publishers are not responsible for unsolicited
material. Banker SA is published quarterly by Picasso
Headline Reg: 59/01754/07. The opinions expressed are not
necessarily those of Picasso Headline. All advertisements/
advertorials and promotions have been paid for and do not
carry any endorsement by the publishers.
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SME ecosystem in
need of a shake-up
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MESSAGE FROM THE MD
B
We must acknowledge the
importance of SMEs
T
his edition of the Banker SA
looks at the importance of the
small and medium enterprise
(SME) sector in SA. There is a
danger that progress towards
growing this sector sustainably continues
to be clouded by the ongoing commentary
on aspects of the challenge, because we talk
about it too often.
Yet, there can be no doubt that the growth
of SMEs is a crucial element in the growth of
an inclusive economy that creates sustainable
jobs. We must, in order to develop SMEs,
agree on the critical ingredients and work
together to provide these. There is often a
view that the only impediment to the growth
of SMEs is a lack of debt finance. However,
this is but one link in the chain that must
be weaved to support SME growth. Other
links are non-financial support, venture
capital, own contributions through savings,
regulations and markets. All of these
must be addressed in a co-ordinated way
if we are to make a substantive impact on
development of SMEs.
The Small Business Project has been
tracking a panel of 500 SMEs annually
since 2011. The results of the survey in
2014/2015 demonstrate that the SME
sector in SA is stagnating. If one compares
2014/15 to the base line of 2011, a further
20% of SMEs surveyed reflected no growth
in turnover. The number of businesses
reporting a decrease in staff spiked to 21%,
the highest since the tracking started.
Another startling finding is that 61% of
businesses believe the regulatory burden
has increased in the last year.
If one goes by this data, which is the
only set of data derived from a consistent
tracking of a panel of SMEs, one must
conclude we have a serious problem in
developing SMEs in SA. The data indicates
the sector we are relying on to make a
significant contribution to economic
growth and employment is contracting in
these critical areas. It is also evident that
the regulatory environment is a critical
inhibitor to the growth of SMEs.
So what do we do? I would be so bold as
to postulate the following interventions:
• A clear message from government that
it will address, decisively, the critical
regulatory issues affecting the growth
of SMEs. These include registration of
businesses, tax matters, labour issues,
guarantees and others. This message
must be within the context of a clear
indication from government that we will
promote a market-based economy in SA.
• An appreciation by large businesses
that SME growth is critical to inclusive
economic growth and the long-term
Cas Coovadia
sustainability of business in SA. Such
appreciation must translate into
interventions that deliberately include
SMEs in the procurement value chains
of large businesses and in the enterprise
development strategies of large businesses.
• Effective and optimal utilisation of
government resources and institutions
earmarked for non-financial support of
SMEs.
• Recognition that everybody will not be
an entrepreneur. We must be careful
not to look at SMEs as the silver
bullet for addressing unemployment.
Every unemployed person will not be
an entrepreneur. We must identify
those with the skills and drive to start
businesses and develop and support
these, while also addressing the broader
economic issues inhibiting job creation.
• A real partnership between government,
the private sector, SME representatives
and labour to do the above. A “real
partnership” means clear roles and
responsibilities, and agreement on
objectives and sanctions for not
delivering on roles and responsibilities.
The Board of The Banking Association
SA has identified SME development as
one of the National Development Plan
deliverables for the sector. We are very
keen to work with all relevant stakeholders
to ensure SA encourages and grows
SMEs. Banks currently finance around
94% of SME financing in the country, so
are already doing business in this sector.
However, I believe we can make an even
greater impact, including in those sectors
of the SME environment which have
been under-served, if we can collaborate
constructively with other stakeholders,
particularly with government.
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Adderley Street Standard Bank building
becomes home to Cape Town Museum
Capitec tops SA
social media scores
The old Standard Bank building in Adderley Street, Cape Town, is home to the new Cape
Town Museum, launched by the Department of Cultural Affairs and Sport and the Department of
Transport and Public Works on 1 September 2015 to kick off Heritage Month. The building dates
back to the 1880s and was known to many as the “Queen of Adderley Street”. It has now been
given a contemporary purpose that reflects the diversity of the city and its heritage.
According to the recently released 2014/2015
Ubiquity Social Intelligence Report: SA Retail
Banking, Capitec is South Africa’s best
bank according to consumer opinion on
social media, while Nedbank is the worst.
The report measured opinions expressed
on social platforms for 12 months ending
30 June 2015, and considered customers’
(and other stakeholders’) opinions across
social platforms. It revealed that credit-related
issues, followed by customer service, costs
and savings, are the most important bankrelated issues, accounting for more than 90%
of issues raised by the market. Absa was the
only bank to score a net positive opinion on
credit-related issues, while Capitec fared best
in terms of customer opinions on bank fees.
Customer service overtook banking fees
and costs in the second quarter of 2015
as the second most prevalent issue, with
opinions expressed about customer service
being more negative than any other banking
issue. Some 59% of all comments on social
media were negative about customer
service, while only 14% were positive. FNB
and Nedbank scored the worst at customer
service, while Capitec was the only bank
with a net positive rating. Absa, Nedbank
and Capitec all scored an overall net
positive rating on savings, while FNB and
Standard Bank scored an overall negative
rating. More FNB customers engage on
social media than any other bank, but FNB
received more negative recommendations
than any other bank in SA, closely followed
by Standard Bank and Absa. Yet more
prospective customers were looking into
banking with FNB than any other bank.
Altech Card Solutions launches MobileForms
Altech Card
Solutions (ACS) has
launched a new
tool to eliminate
the need for paper
forms, aptly called
MobileForms.
ACS is one of
only two South
African partners for this UK-developed
solution. Derek Chaplin, Managing Director
of ACS, explains that eSAY, the company
that developed the MobileForms technology,
specifically wanted partners in Africa. “They
realised that as we already host banks’ data,
this would open doors for them in this highly
regulated sector,” he says. MobileForms is
currently in pilot phase in various stages of
implementation in three of SA’s major banks,
although banks were not the first adopters of
MobileForms. The solution was first welcomed
by the facilities management industry.
Gauteng government to bank with FNB
On Tuesday 4 August 2015, Gauteng’s second open tender pilot was finalised, with First National
Bank (FNB) beating its three main competitor banks to become the provincial government’s
preferred banker. The bank will retain its status as the Gauteng provincial banker for the next five
years. The terms of the contract will see FNB administering the payment of salaries to 200 000
staff and paying more than R3-billion a month to suppliers, as well as investing R200-million
into township enterprises through its Vumela Enterprise Development Fund. The open
tender system is part of an attempt by the Gauteng province to improve
transparency, following a report in 2014 that found almost 90% of the
province’s residents viewed corruption as a threat to democracy.
10
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B LOCAL BANKING NEWS
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INTERNATIONAL BANKING NEWS
SAA and Ecobank
launch travel credit
card in Ghana
South African Airways (SAA) and
Ecobank Ghana launched a co-branded
SAA Voyager MasterCard credit card
in Accra, Ghana, in August 2015.
This strategic partnership offers two
credit card options: Gold and Platinum
MasterCard credit cards, which include
benefits ranging from lounge access
to excess baggage allowance, bonus
Voyager Miles and premium check-in, among others. SAA Voyager members and Ecobank
customers who apply for the card will be able to earn SAA Voyager Miles for everyday
purchases by swiping their credit card when purchasing goods or services. They will then be
able to use the earned miles to fly with SAA, Star Alliance partners or other airline partnerships.
“This customer-value proposition reflects our confidence in Africa, and our resolve to become
Africa’s leading world-class loyalty programme,” says Suretha Cruse, SAA Executive for Customer
Loyalty. “The SAA Voyager Gold and Platinum MasterCard credit cards will be the catalysts for
African growth; strengthening the landscapes for two iconic African leaders within our respective
industries here in Ghana and across the continent.”
B
Dr Akinwumi Adesina
takes the reins at
African Development
Bank (AfDB)
As of 1 September 2015, Nigerian-born
Dr Akinwumi Adesina has formally
taken up the position of president of
the African Development Bank (AfDB).
Adesina is a development economist and
agricultural development expert with 25
years of international experience and
becomes the first Nigerian to serve as
president of AfDB.
Previously, he
served as minister
of Agriculture
and Rural
Development in
Nigeria.
Chinese currency payments on the rise in SA
IMAGES: ISTOCK.COM, SUPPLIED, FILE IMAGES
Kenyan government
selling mobile-based
treasury bonds
In their June 2015/16 budget speech,
the Kenyan government announced
the launch of the first mobile-based
treasury bond, M-Akiba, with a
minimum investment of 3000 Kenya
shillings (roughly R385). Designed to
promote financial inclusion among ordinary
citizens, the bond gives purchasers access
to government debt securities through their
mobile phones. M-Akiba was developed
by Kenya’s Capital Markets Authority, the
Central Bank of Kenya, ICT Authority and
National Treasury.
Recent SWIFT data shows that the number of
South Africa’s renminbi (RMB) payments increased
by 33% over the last 12 months and by 191% over
the last two years. In June 2015, 31.3% of direct
payments value between South Africa and
China/Hong Kong were in RMB, versus 10.8%
in June 2014 and only 4.6% in June 2013. In
addition to direct flows between South Africa and
Greater China, SWIFT data shows that nearly 70%
of the number of payments between the latter is
still intermediated by the United States, mainly in
USD. “The rise of RMB usage in South Africa is
another good indicator of the cross-border use
of the currency,” says Hugo Smit, Head of SWIFT
South Africa. “Much of this growth has to do
with the strengthened bilateral relations between
South Africa and China, which were renewed at
the end of 2014 to include trade co-operation and
sustainable investment opportunities between
the two countries. As a result of this effort, RMB
usage in South Africa should continue to grow at
a good rate.”
Evolution of number of RMB payments with South Africa
RMB payments sent and received in volumes with rest of world
1200
+33% campared to June 2014
+191% compared to June 2013
1000
800
600
■ Other countries
■ CN and HK
400
200
0
20
0
13
1
20
11
11
01
01
07
07
05
05
03 505
03
03
09
09
13 013 013 013 013 014 014 014 014 014 014 015 015
1
2
2
2
2
2
2
2
20
2
2
2
2
2
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SA’s startup universe
The Ventureburn Startup Survey, released in June 2015, has added an interesting twist to SA’s
entrepreneurship-focused research by focusing on technology startups. By Cara Bouwer
A
ccording to Ventureburn’s
Jacques Coetzee, the survey
defines a tech startup as
a company with annual
revenue below R20-million
and staff numbers between one and 100. The
survey sample size assumes a population of
5 000 tech startups in South Africa.
The research – undertaken in partnership
with First National Bank, investment
advisory firm Clifftop Colony and analytics
company Qurio – polled just under 200 tech
startups. Each firm was asked 42 questions,
ranging from funding to founders, revenues
and everyday challenges.
The data echoes issues raised in terms
of the broader entrepreneurial universe, by
studies such as the Global Entrepreneurship
Monitor, which notes that entrepreneurial
activity in South Africa dropped by 34% in
2014, from 10.6% to 7%.
Q&A
with Ventureburn’s
Jacques Coetzee
Starting with funding, the survey
shows most tech startups are looking
for R50 000 to R500 000?
Most of these IT-based startups usually
need startup money for about a year or two.
In that time, they can build a viable product
and prove the concept. They need roll-out
money to burn through. Unfortunately, we
find that a lot of companies in our survey
don’t make it past the two-year mark; either
because they haven’t proved their concept
or they don’t have the funding to continue
to try and build their product. Those are the
companies we need to support. They are the
future Facebook companies; because when
they make it, they make it big.
14
Jacques
Coetzee is a
Reporter at
Ventureburn.
The survey showed that 56% of tech
startups relied on bootstrapping to raise
initial funds, followed by investments
from family and friends (11%). Very few
were funded via the banks (2%), venture
capitalism (3%) or private equity (1%),
and none by crowdfunding (raising
monetary contributions from a large
number of people, typically via the
internet). Why?
That was an odd one for me. The local
crowdfunding scene is very small. The
kind of people who fund like this are more
design focused, mainly because a design
business can offer perks to those who fund
it. So for R200, you might get a copy of a
book or something. But a startup that tries
to build a payment platform doesn’t have
the same incentives to get the public to
help it create a product.
to support entrepreneurship, but many
aren’t focused on technology. You do
see programmes like the Western Cape
Premier’s Entrepreneurship Recognition
Awards; they are giving away almost
R2-million to businesses across categories
such as Most Innovative, or Best Social
Enterprise, or Best Student Business.
Government funding, at 1%, was also low?
There are a lot of government initiatives
What is it about the Western Cape that
inspires technology entrepreneurship?
The Western Cape (59%) leads the country
in terms of tech startups, with Gauteng at
29%. Do you think the tech focus skews
the entrepreneurship picture?
I definitely think the statistics would have
been different [if the focus was broader],
especially in terms of the demographics.
The Western Cape is the leading province
in terms of tech startups. In terms of
overall entrepreneurship, Gauteng would
probably have been more.
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SPECIAL FOCUS
There are a lot of theories. One is that the
universities (Western Cape University,
Stellenbosch, UCT) have a good dialogue
and are in close proximity. I think that plays
a major role in terms of developing skills
and research and development. But also the
lifestyle in Cape Town has been compared
to Silicon Valley; that laidback culture. And
we have programmes like the Silicon Cape
Initiative. Plus there’s a lot of money, which
also helps! That’s the biggest driver.
B
WHAT DO SA’S TECH
ENTREPRENEURS LOOK LIKE?
Of course, funding is only one issue. Do
startups need to adapt their offerings more?
If companies can’t find funding from
outside, then one thing we saw in the
survey was that more profitable companies
were service orientated. So either they are
consulting or lending their skills in the
business-to-business environment. There is
space for companies to realise that they can
have a two-pronged business approach in
order to keep the engines running. So they
have valuable skills to outsource to other
companies while, at the same time, they’re
working on an product in-house, which
they eventually scale and move to market.
Finally, 70% of founders had a corporate
background, but 66% said they wouldn’t
return to corporate. What does that tell
you about motivation?
A lot of entrepreneurs were motivated by
lifestyle choices and personal development,
and being their own boss and having a
creative outlet. They are forward thinking
and innovative. These kind of lifestyledriven individuals would definitely struggle
to go back to corporate. ›
Ventureburn surveyed a total of 237 tech startups of which 197
responses are included in the analysis. Assuming that there is a
population of 5 000 tech startups in South Africa and that the sample
size is random, we believe that we have achieved a 95% confidence
level and a 7% margin of error with the remaining responses.
15
2015/09/17 4:16 PM
“The Western Cape is the leading province in terms
of tech startups. In terms of overall entrepreneurship,
Gauteng would probably have been more.”
WHAT DO STARTUP
EMPLOYEES
LOOK LIKE?
WHERE ARE SA’S STARTUPS?
16
2015/09/17 4:17 PM
SPECIAL FOCUS
IMAGES: VENTUREBURN.COM IN PARTNERSHIP WITH QURIO, FNB AND CLIFFTOP COLONY
HOW ARE SA STARTUPS
GETTING FUNDED?
WHERE ARE THE WOMEN?
The Ventureburn Startup Survey highlights,
at least within the startup tech sector in
South Africa, a worrying lack of female
entrepreneurs. According to the research,
just 6% of women were founders of nascent
technology firms in South Africa, compared
with 68% with male founders and 27% for
firms founded by both genders.
The reasons for this are difficult to
answer, says Ventureburn’s Jacques
Coetzee. “It comes down to grassroots level
and about getting women interested in things
like engineering, technology or computers.
But you are seeing women making awesome
strides in the industry and a lot of the time,
it’s them doing so with a co-founder who is
male. That combination is significant and it
has a lot of impact.”
Coetzee points to the case of Aisha
Pandor, daughter of Minister Naledi Pandor,
as a shining example. “Her company Sweep
South (a domestic services and cleaning
products company) has been accepted into
Silicon Valley’s 500 Startups Accelerator
Programme. It’s the first South African
company to be picked for that programme.
Stories like that should be celebrated.”
According to the Global Entrepreneurship
Monitor 2014, there was a slight uptick
in women’s entrepreneurship in 2014,
largely due to greater government support.
The survey showed that early-stage
entrepreneurial activity among women rose
from 64% in 2013 to 71% in 2014. But, as a
percentage of the total population, women
still lag men. This is reinforced by the findings
of incubator Seed Academy’s first startup
survey results (2015), which takes a look
at business startups in South Africa across
the spectrum. The survey said that at 35%,
women entrepreneurs “are still in the minority
in a largely male dominated startup culture”.
It seems this gender bias permeates SA
business. While not entrepreneur specific,
the 2015 South African Women in Leadership
Census, released by the Businesswoman’s
Association of South Africa in July, notes that
only 8.79% of JSE-listed companies have
25% or more women directors, only 9.2% of
women hold chairperson positions and only
2.4% women are appointed in CEO positions.
B
17
2015/09/17 4:17 PM
Taking the leap
Whether you’re founding a start-up or your company has become an international
superpower, running a business is never easy. But, as these entrepreneurs in different
stages of their business journey can attest, it’s always worth it. By Delia du Toit
Dr Thandi Ndlovu, founder of
Motheo Construction Group
As a young girl growing up in Soweto,
Dr Ndlovu couldn’t have imagined
that she would one day be the CEO of a
construction company. But she’d always
shown a desire to help others, and this
would become her motivation to leave
a successful doctor’s practice and build
houses for those less fortunate.
“I was running a private medical practice
in Orange Farm, an informal settlement
South of Johannesburg, before starting
Motheo,” she says. “I noticed that a lot of
my patients had illnesses that related to
poor living conditions, and I wanted to find
a way to help.”
She partnered with Chris Cudmore and
Tim Potter, two seasoned professionals
in the construction industry, in 1996.
Together, they grew Motheo to what it is
today – a hugely successful company that’s
seen her winning the Businesswoman of the
Year Award in the Entrepreneur Category
from the Businesswomen’s Association
of South Africa (BWA) in 2013, among a
string of other awards.
Though she admits taking the leap from
medicine to construction was a bold move,
she didn’t let fear hold her back. “After
running my own medical practice, I had
picked up a few business skills along the
way. But starting a construction company
was obviously out of my scope of expertise.
So I surrounded myself with experts and
I asked a lot of questions.”
The bigger challenge, she says, was being
a black woman in a white male-dominated
industry. “I was a clear minority and I
wasn’t welcomed with open arms,” she
18
“I was, and am, 100%
equal to any man and
have the right to be in
the position I am in.
I don’t need to apologise
for anything.”
recalls. “But I didn’t back down, I didn’t try
to fit in, and I certainly didn’t try to hide my
femininity by dressing like a man. I stood
tall and I made my presence known. I did
not for one second allow the thought that
I did not belong to enter my mind. I was,
and am, 100% equal to any man and have
the right to be in the position I am in.
I don’t need to apologise for anything.”
Her resilience has earned her some serious
respect. “Men and women are different
creatures – we do life, work and family
differently. But we can learn to respect each
other enough to play off each others’ strengths.
I think we’ve done that well at Motheo.”
Making her mark and bringing others
into the spotlight too, was her aim from
the beginning. “I decided early on to leave
a legacy. At Motheo, we’re serious about
developing women leaders and have a trust
allocated to the training and development
of women. I also run a foundation that
supports more than 20 students financially.”
But, she counsels, even opportunities like
these won’t matter if you’re not willing to
put in the work on the road to success.
“I am where I am today because I put in a
lot of effort, but I also started out as a young
girl with hope and dreams. Don’t compare
someone else’s highlight reel to your own
behind-the-scenes reel, and put in the hours
to make your business work.”
TOP TIPS
It starts in your head. If you don’t believe
you’re worth it, how do you expect anyone
else to believe it?
Know who you are. You will have challenges
and you will have to stand firm by reminding
yourself who you are.
Remember that it’s a journey. It’s not pretty
sometimes, and your nails might get chipped
while a few wrinkles surface, but when you
look back on the struggles and joys, you’ll see
it was worth it.
Do your job well. Don’t complain about
starting out on the back foot, rather prove
disbelievers wrong.
www.motheogroup.co.za
Banker15_Sme_profile_and_success .indd 18
2015/09/17 4:21 PM
SPECIAL FOCUS
Annabel Dallamore, co-founder
and CEO of Stock Shop
The best ideas are always of the ‘why didn’t
I think of that’ variety, and Stock Shop is
no different.
As the company’s rapidly expanding
client base shows, Dallamore’s business
model neatly fits into a huge and glaring
gap in the financial market. “I was working
as a derivative specialist at the JSE, and
realised that one of our biggest time drains
was the huge number of queries we got
from people wanting to get involved in the
stock market in their personal capacity,
but not knowing who to talk to or trust,
where to access information and how to
make sense of it.”
Stock Shop is the answer to that need
– a one-stop portal with loads of useful,
well-organised and easy-to-understand
information about the stock market and
other financial topics.
“We’re like a PA to the stock market,”
she says, “and [we] ease the process of
getting into it. We’re a centralised platform
with information about service providers,
the products available, and how everything
works. We also allow users access to
everything in one place, so they don’t have
to visit multiple websites and spend hours
hunting for the right info.”
Dallamore’s own learning curve was
much steeper than those who use Stock
Shop. “I had absolutely no entrepreneurial
experience,” she says. “I literally just left
the corporate world one day, and started
my business the next, in 2013. But I also
“A startup is like a
newborn. It’s never
asleep and needs
constant attention. So
you have to learn to
balance your work and
personal life.”
did my homework. I used a multitude of
tools, books and online information to
create a good business plan and to think
very hard about the concept and whether
it could work.”
And, of course, the real work hadn’t
even started. “I learned to make the most
of every single day, getting the business
known, bringing the product to the market
as soon as possible and testing it. Time,
I soon saw, really is money.”
Her more pressing challenge of late
is finding the right employees as the
business expands. “I think most startups
face this problem,” she says. “Few skilled
TOP TIPS
Stick to your promises. Have integrity and meet deadlines. It separates good businesses
from the bad.
Don’t flood yourself. Sure, you want to build the business, but you’ll end up feeling
overwhelmed if you take on too much, which is counterproductive.
Learn to communicate with clients, and your team. This will help everything in your business
run more smoothly.
Rely on friends and family. Vocalise your journey so that you don’t feel alone. Just remember
that not all advice is good, but sometimes you’ll gain valuable insights from an outsider’s point
of view.
www.stockshop.co.za
individuals are willing to work for a
brand-new company, and even less at rates
you can afford.”
With nearly 3 000 active users on
their site, another 1 000 enrolled in
their online academy (which provides
beginner and advanced fi nancial courses
in text, audio and video format), and their
newly launched Daily News section, it’s
clear that Stock Shop’s staff of six will
need to expand soon. “A startup is like
a newborn. It’s never asleep and needs
constant attention. So you have to learn
to balance your work and personal life,”
advises Dallamore.
She does this by scheduling time for
herself and marking it in her diary, so she
sticks to it. “Even if it’s just taking myself
out for lunch or going for a walk with the
dogs, alone time refreshes you.”
No matter how tough the going
gets, Dallamore has never looked
back. “I’m most proud of having built
something that people truly needed.
There was a huge black hole in this field
and I think we’ve helped a lot of users
take control of their fi nancial future, and
that’s very rewarding.” ›
B
19
2015/09/17 4:24 PM
Sanego Motsweni, founder
of Fashion Church
Even as a small child, it was clear that
Motsweni had an entrepreneurial spirit.
From selling sweets to his peers in primary
school, he upgraded to selling cigarettes
in high school, while washing cars on
weekends and even selling fireworks around
New Year’s Eve and other festivities.
“No one in our family had their own
business,” he says, “and I would watch
them get downtrodden by working for
someone else. On some days, they would
complain about not wanting to go to work
in the mornings, and I didn’t want that for
myself. Our neighbour had a spaza shop,
though, and I often admired that way of
life – doing your own thing and being your
own boss.”
But tough times would follow.
Motsweni, after studying music
production, started an events company
that would soon go belly-up. “It didn’t
work because I had some great ideas, but
no experience in the field to back it up,
and so clients weren’t convinced to take a
chance on me.”
“I met amazing
designers at fashion
shows and shoots, but
many of them were
struggling. So I wanted
to build a platform to
help them – a place
where they could sell
their products without
hefty shop rental fees.”
Luckily, it led to him starting an online
lifestyle magazine under his company GP
Media. “The magazine is still an ongoing
passion project, but lately there hasn’t been
much time to work on it,” he adds.
20
That’s because, while visiting fashion
shows for the magazine, Motsweni had
the bright idea for Fashion Church. “I met
amazing designers at fashion shows and
shoots, but many of them were struggling,”
he explains. “So I wanted to build a
platform to help them – a place where they
could sell their products without heft y
shop rental fees.”
Fashion Church was called GP Store at
fi rst, and the idea even won him R10 000
start-up capital in a YFM competition. He
enrolled in business classes to learn the
basics, built the platform in two months,
and has been playing catch-up for the last
two years.
“After about a year, it got so busy
that I couldn’t keep up. I got freelance
contractors to help me and dropped
everything else to focus on this. I also
rebranded the website and named it
Fashion Church, because while I tried
to sell other products on the platform
in the beginning, fashion was the clear
best-seller.”
While the focus is still on local
designers, Fashion Church has started
selling international brands, too.
Eventually, the plan is to connect designers
from all over the world, he says.
Even though the concept was an almost
immediate success, he’s had to make a few
changes along the way, such as reworking
the logistics. “It often happened that
designers forgot to tell us when their stock
was sold out, and then we had to apologise
to customers who had paid for the item on
the site. We’ve had to iron out those issues
as we went along.”
Despite the learning curve, and a few
hiccups along the way, Motsweni loves his
‘job’. “Even though I work all the time,
there’s freedom in controlling your own
destiny, and I love every second of it.”
TOP TIPS
Do what you love. When you own a business, you really work all the time, so you have to love
it. And don’t do something you don’t understand, because people are attracted to enthusiasm.
Never, ever give up. It’s going to be tough, but usually things start happening right when
you’re about to throw in the towel.
Know that life will change. You won’t have much of a personal life and I’ve lost some
friends. But the ones worth keeping will stick around.
Understand the business basics. A great idea won’t work if you don’t know the basics of
running a business. I hate it, but I make a point of staying on top of financials and admin.
www.fashionchurch.co.za
2015/09/17 4:21 PM
SPECIAL FOCUS
B
Ian Lester, CEO of
Beyond Wireless
After little more than a decade in
business, Beyond Wireless, a local
specialist wireless machine-to-machine
(M2M) communication solutions
provider, already operates in 35 countries
on four continents.
That’s even more impressive when you
consider that Lester had no technical
background, entrepreneurial experience
or startup funding when he founded the
company. “I worked for a large mobile
network operator before this, and all
I knew was that I couldn’t do it anymore,”
he says. “I was spending 70% of my time
fighting the organisation, and I knew my
time could be better used. But I’d been
interested in the M2M industry for a while
and understood the overall concept of
remote monitoring, even though I didn’t
have the technical skills. I was really just
a regular kid with a matric certificate, but
I’d identified a business opportunity and
could see the big picture. And I think I had
the type of agile personality required to
start a business.”
He cashed in his pension fund, maxed
out his credit cards, took all the available
funds from his bond and threw himself
TOP TIPS
Abandon all fear of failure. Once you see
failure as a stepping stone to success, you’ll
embrace it as part of the process. You’ll try
things that don’t work every day, and you’ll
have to keep trying.
But know when to let go. If something
doesn’t work despite your best efforts, fail
fast, get it done, and move on.
Don’t plan too much. Too many people
over-plan and go into analysis paralysis. Set
your sights on a goal, jump off the cliff, and
learn as you go along. Keep an open mind
and listen to the market.
Find your purpose. Many businesses are
only about the numbers, and there’s nothing
wrong with that, but purpose drives you
more. People today want fulfilment.
www.beyondwireless.co.za
“Huge projects don’t need an army of 500 to run
efficiently. But it’s been difficult to grow something
that started out in my own flat to a business that
now operates across multiple time zones.”
into the business. “I also had to explain to
my wife why I was leaving a well-paying
job for poverty! I couldn’t give myself a
salary for way too long,” he laughs.
But through hiring the right technical
experts and offering them shares, the
business soon pulled in some valuable
clients. Today this list includes names like
UNICEF, The International Committee
for the Red Cross, The Harvard AIDS
Research Institute and the US Government
Centre for Disease Control. “At first, we
faced an uphill battle to convince the
market that remote monitoring wasn’t just
science fiction,” he says. “This was 2003
and being able to monitor assets like cold
storage or even foot traffic sounded like
something from a Terminator movie. But
after we landed the South African National
Blood Service as a client in 2006, other
people started taking us seriously.”
Today, the bigger challenge is
operational, he says. “We still only have
14 employees, which is a testament to the
scalable nature of the technology. Huge
projects don’t need an army of 500 to run
efficiently. But it’s been difficult to grow
something that started out in my own
flat to a business that now operates across
multiple time zones.”
That’s why he believes agility is key
in entrepreneurship. “We started out
with a solid plan, of course, but we’ve
changed it multiple times already.
Markets change, technologies change, you
make some mistakes along the way, and
you have to think on your feet to adapt.
There is no paint-by-numbers plan for
any business.”
Despite the obstacles, Lester couldn’t
be happier. “Our temperature-control
solutions opened up a massive new world
in public healthcare. Kids in third-world
countries could get safe vaccines and it’s
amazing to know we have a role to play in
making the world a better place.” ›
21
2015/09/17 4:23 PM
B SPECIAL FOCUS
“I re-evaluated my career to figure out which
sectors I wanted to work in. For each idea,
I asked myself whether I had adequate
knowledge of the field, and what my
weaknesses and strengths would be.”
After working as an advocate at Absa,
Standard Bank and Transnet, among other
large companies, Advocate Hassan realised
that she needed to do something different
with her life.
“I was very young when I decided to
go into the legal profession and soon
realised that what you see is not what
you practice,” she says. “It certainly isn’t
like the TV shows! I’d become passionate
about entrepreneurship as a career
choice, and about growing women and
empowering them, and knew I had to
make a change.”
She’d built a solid understanding of the
worlds of finance, project management,
mining and logistics as an advocate,
which equipped her with the right kind of
knowledge to investigate entrepreneurship
in these fields. “These are all environments
that are traditionally male dominated, and
I wanted to change that. I re-evaluated
my career to figure out which sectors I
wanted to work in. For each idea, I asked
myself whether I had adequate knowledge
of the field, and what my weaknesses and
strengths would be.”
She started WOA in 2003 in KwaZuluNatal, at fi rst focusing on logistics. It
was a roaring success and with WOA
as the holding company, the group has
since expanded into fuel and oil, mining,
pharmaceuticals and even construction.
For Hassan, timing – particularly in
the South African context – was allimportant when she decided to embark
on her new career path.
22
“It was still a relatively new democracy
at the time and people were actively
trying to create new opportunities.
I think we had great timing, and that
was part of our success. But after that, we
made sure to constantly grow our skills
and explore new opportunities to ensure
we keep that competitive edge.”
But, as in any business, there were
numerous challenges and obstacles to
overcome along the way. “Access to
funding was, and remains, the biggest
challenge,” she says. “And, unfortunately,
no matter how badly you want to make
a difference, leave a legacy or build a
brand, initially a business is about profit.
You can’t help anyone else unless you’re
fi nancially stable yourself.”
She was turned down again and again
when she fi rst applied for fi nance, but she
did not give up on her dream to make a
difference. “I had so many doors slammed
in my face,” she recalls, “but I never
stopped knocking on them. And, fi nally,
I got what I needed.”
And now, Hassan is making the same
happen for countless other women
around the country. “My biggest
achievement is our Future Leaders
development workshops, which we’ve
been running for nine years. The women
who attend often come from truly
impoverished backgrounds and are
despondent about their futures. When
they walk out of the workshops, they
feel powerful and hopeful about the
future. It’s wonderful to see someone’s
outlook change like that. Having a
purpose and helping others is what drives
your own success.”
TOP TIPS
Have a solid plan. Women often set out
in business and think they’ll nurture it as
it goes along, but you need to have an
idea of how you’ll develop and expand it.
I still make a vision board every year for
this reason.
Never compromise on integrity. It’s so
easy to trade your values in for money, but
it’s essential to remain true to who you
want to be. Sometimes, when your bank
account grows, your passion stops.
Know that failure is the price of
success. Never apologise for failing. It’s
not about how many times you fall, but
about how many times you start again.
Don’t try to do it all at once. Don’t
feel guilty about not being able to be
everything to everyone at the same time.
You can’t be the best wife, daughter and
mom and run a successful business every
day. Sometimes some areas of your life
will fall behind, but balancing it out again
is key.
www.woaonline.com
IMAGES: SUPPLIED
Advocate Pria Hassan,
CEO of Women of Africa
(WOA) Group
2015/09/17 4:22 PM
“When wireless is perfectly applied the whole
earth will be converted into a huge brain.… We
shall be able to communicate with one another
instantly, irrespective of distance... and the
instruments through which we shall be able to do
this will be amazingly simple… A man will be able
to carry one in his vest pocket.”
Nikola Tesla, Inventor and Visionary
Predicted the smartphone and the Internet in 1926
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Principa Decisions-NEW_fcp.indd 1
2015/09/07 10:36 AM
Untitled-6 1
2015/07/16 2:44 PM
SPECIAL FOCUS
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Compliance for SMEs
To minimise the risk of damage to an SME, all stakeholders, employees and employers
need to be kept up to date with regulatory requirements. By Rianné Potgieter
O
ver the past few years,
the business world has
seen various financial
crises, corporate collapses,
scandals and an increase
in regulatory activities, followed by a
barrage of new legislation. These important
drivers led to a heightened interest in
formalised frameworks and codes relating to
corporate governance, risk management and
compliance, albeit mainly focused on large
corporations or listed entities.
However, the expectation is that SMEs
should also be managed and operated
on good business practice and ethical
principles corresponding with their larger
counterparts. Having said that, it is commonly
acknowledged that the implementation of these
principles may be difficult, cumbersome and
costly for an SME. Compliance should then be
tailored to the SME’s particular circumstances.
IMAGE: SUPPLIED
Existing frameworks and
leading practice
Some of the current leading practice
frameworks from which SMEs could take
guidance are:
• King Code of Governance Principles
and the King Report on Governance
(King III) – a non-legislative code
on principles and practices by which
organisations are controlled and directed.
• Generally Accepted Compliance Practice
framework of the Compliance Institute
Southern Africa, which sets out a riskbased approach to compliance.
• ISO standards (the world’s largest
developer of international standards).
• ISO 9001 – Quality Management Systems.
• ISO 19 600 – Compliance Management
Systems.
• ISO 31 000 – Standard on Risk
Management.
RIANNE
POTGIETER
is Director
at EXP
Regulatory
Compliance
Consulting
(Pty) Ltd.
Common challenges
The above frameworks are an overkill for
many SMEs, but SMEs are subject to the
same laws and regulations as similar larger
companies. Ignorance of the law is no excuse
for breaking it. Penalties and other sanctions
(such as imprisonment) for non-compliance
have an adverse effect on the SME.
SMEs may have acute shortages of
knowledge, experience and capabilities
in governance, risk and compliancemanagement practices. Employees are
typically required to perform a range of
tasks, including looking after governance,
risk and compliance, which leads to a loss of
independence, but it is almost impossible to
keep up to date with legislation and to ensure
compliance thereof.
Additionally, while risk management may
be embedded in day-to-day processes, it is
often informal and unstructured. SMEs also
often lack transparency and frequently do
not disclose financial and tax information.
The knowledge of accounting procedures,
accountability and responsibility may also
be very limited.
Benefits of a structured
compliance programme
Implementing a risk and compliance
programme protects directors against personal
liability and helps the SME to comply with
legislation. Good business practices, such as
formalisation of governance and compliance,
lead to employee, client, regulator and other
stakeholders’ satisfaction, and make SMEs
more ‘bankable’ and credible.
Good business practice also allows
SMEs to strengthen their marketing pitch
– customers know and understand that the
SME is working to high standards, providing
quality products and services.
How banks and financial
institutions can assist
Financial institutions can incentivise
customers’ adoption of corporate governance
principles by making it a condition for
financial support and linking transactions
and risk-adjusted pricing to such principles.
They can also educate SME customers on
accounting standards to ensure transparency
and the availability of financial statements,
and develop awareness programmes
regarding their compliance responsibilities.
What SMEs can do
SMEs need to create a culture where
governance, risk and compliance are
all-important. The next step is to identify
and prioritise risk. Compile a risk register
highlighting the top 10 risks facing the SME.
Once identified, SMEs need to manage
these top risks, build risk-management
capacity in employees and add it to their
performance contracts.
SMEs should also report on risk by
ensuring the top risks are a standing item at
senior management meetings, and allocate
sufficient time for discussion and review.
Banker15_Governance and compliance .indd 25
25
2015/09/23 9:16 AM
A call for bold action
South Africa, with its high unemployment level, should be courageously
stepping into business creation and promoting strong entrepreneurship to
boost the economy. By Septi M Bukula
J
im Clifton has laid down a
challenge that demands that
leaders everywhere pay careful
and urgent attention, and
respond with equal urgency. In
his book, The Coming Jobs War, the CEO
and chairman of global performancemanagement consulting company, Gallup,
boldly asserts that job creation and
successful entrepreneurship are the world’s
most pressing issues, ranking ahead of
what most consider the top-ranking threats
of today: excessive government spending,
environmental degradation, and even
the threat of global terrorism. Promoting
entrepreneurship and job creation, Clifton
asserts, must be the sole mission and
purpose of leaders everywhere. “Winning
the jobs war requires all hands on deck, and
failure is not an option,” he says.
We in South Africa should have no
difficulty at all relating to this call and
SEPTI M
BUKULA
is the
Founder
of Osiba
Management.
26
responding to it with the urgency and
seriousness it demands. With one of
the world’s highest unemployment and
inequality rates, South Africa needs to take
bold and courageous actions to stimulate
much higher levels of entrepreneurship and
business creation.
Since 1995, when the post-apartheid
government introduced its comprehensive
White Paper on Small Business
Promotion, significant strides have been
made to create a policy and supportive
environment that encourages and enables
entrepreneurs to start and grow successful
businesses. A number of institutions and
programmes have been introduced across
the country to lend a helping hand to
those who want to venture out on their
own. It is generally acknowledged that
compared to its peers, particularly on
the African continent, South Africa has
an advanced and comprehensive support
system for entrepreneurs. Much progress
has indeed been made since the dawn of
democracy, and the nation’s entrepreneurs
are generally much better for it. This
progress should be acknowledged.
However, the country faces a paradox.
With an entrepreneurial support system
that is on par with those of many of its
peers around the world, by available
statistics, South Africa still ranks poorly
when it comes to many measures of
entrepreneurial performance. In its 2013
Entrepreneurship Report, the South
African Institute for Professional
Accountants (SAIPA) shows that on
three important measures of the
entrepreneurial environment,
the majority of respondents
rated the country’s performance poorly
(see figure 1+2).
The Global Entrepreneurship Monitor
(GEM), which has conducted annual
entrepreneurship studies for 16 years
in more than 100 countries around the
world and has been conducting similar
studies in South Africa since 2001, has
consistently shown that the country rates
poorly compared to other nations on
several key measures of entrepreneurial
activity. Its 2012 study, specifically,
compared South Africa with several SubSaharan countries, and the results were
far from encouraging.
In its 2014 report, GEM reveals that
compared to Sub-Saharan Africa, which
performed at an average of 58% over
the same 11-year period, a rather dismal
number of South Africans reported future
entrepreneurial intentions, the highest being
in 2010 when 19.6% of respondents reported
positive entrepreneurial intentions.
The report concludes, rather sombrely,
that “South Africa’s rate of entrepreneurial
activity is very low for a developing nation
– a mere quarter of that seen in other SubSaharan African countries.” Some dismiss
the GEM reports by raising questions about
its methodology. This is not helpful and
does not address the real issues raised by
GEM’s research. It amounts to shooting the
messenger, which is unfortunate.
The fact remains that over many years,
researchers in the small business field have
been raising concerns about the poor data
on entrepreneurship and small business
in the country. Without such data, it does
not help shooting down the only credible
source of information we have.
Banker15_special report_Economic_policy.indd 26
2015/09/21 9:56 AM
SPECIAL FOCUS
What accounts for this poor
performance? In my view, several key
factors explain why we consistently turn
out such a disappointing showing. First,
with all the efforts by various actors in
both the public and private sectors, our
field still lacks clear thought leadership.
Fields of practice that make advances do
so because there are clear thought leaders
who shape the direction of the field through
analysis, challenging existing paradigms
and pursuing system-wide innovation. The
field of entrepreneurship and small business
promotion has no clear thought leader
in South Africa. There is a lot of activity,
but no thought leadership. Hopefully
the relatively new Department of Small
Business Development will step forward
and provide this much-needed leadership.
But leadership is urgently needed not just
from government alone but from other
players too, particularly in the business
and academic sector. I often hear from
leaders in the private sector that there is no
meaningful conversation among them on
what it will take to move entrepreneurship
forward in South Africa.
Many are quick to point accusing fingers
at the government. This is not helpful. The
entrepreneurship promotion field will
be much better off with clear leadership
coming from all players that matter –
government, business, academia, sector
education and training authorities, and
organised business formations. The latter,
in particular, which should be leading
efforts to drive entrepreneurship and small
business growth in the country, have been
largely silent. It does not help that they are
so divided and can hardly speak with one
voice on any issue.
Second, for reasons that are hard to
fathom, the different actors in the field
find it incredibly difficult to work together.
This has created a collaboration gap that
weakens the entire support system. In an
effective support system, different players
in government, academic institutions,
business, and various support agencies and
intermediaries work together in a connected
system where each part reinforces the
rest, resulting in what I call whole-system
success. The World Economic Forum
(WEF) has offered a useful framework to
depict an effective entrepreneurial support
system (see Figure 3). The core emphasis
of the framework is on the importance of
multi-stakeholder partnerships.
In South Africa, the system operates in a
highly fragmented manner, with very little
effective collaboration. Many across the
support system have lamented this problem,
but still little progress is being made in
resolving it. Somehow there appears to
be a multiplicity of invisible barriers that
prevent the types of partnerships envisaged
by the WEF from coming into existence.
Figure 1
Figure 2
These barriers exist within government,
horizontally and vertically, and between
government and its agencies and the rest
of the players in the business and academic
sector. Perhaps we are all too focused on
achieving individual success instead of
ploughing our collective energies into
ensuring whole-system success that will
make the country achieve more.
Third, in a country where the majority
of would-be entrepreneurs have not had
much exposure to entrepreneurship
early on in their lives, either within their
communities or through the formal
education system, strong mentorship
is an absolute requirement for business
success. There have been a few false ›
EARLY-STAGE ENTREPRENEURIAL ACTIVITY
NASCENT ENTREPRENEURSHIP RATE
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27
2015/09/21 9:57 AM
B SPECIAL FOCUS
procurement and access to
starts in attempts to get
Individuals &
finance. For many years, there
significant, high quality
Intermediaries
has been ongoing wrangling
and sustainable mentorship
Entrepreneurs
Business
Entrepreneurial
Champions
over the constitutionality
schemes off the ground. Those
Entrepreneurs
Academic
Foundations
SMEs
Insitutions
of small business-specific
programmes that have managed
NGOs and others
High-growth
Schools
procurement by the state, a
to survive have either suffered
companies
Higher Education
Large companies
Informal Education
practice that is followed in many
from quality challenges or lacked
economies around the world,
the scale necessary to reach a
including industrialised ones. A
large number of entrepreneurs
considerable amount of time was lost on
Figure 3
who sorely need them. South Africa needs
arguments about this instead of searching
a large-scale, professional and sustainable
for innovative solutions to resolve the
issue and the fourth point above, in
mentorship programme that reaches
issue. Now, finally, the government’s plan
order to formulate and implement
entrepreneurs and business owners, not
to direct 30% of its procurement to small
effective entrepreneurship policies and
just in urban and metropolitan areas, but
businesses is a salutary step. We just took
programmes, South Africa needs to
in smaller towns and rural areas as well.
unnecessarily long to get here.
address the ongoing problem of poor data
Notable examples of existing programmes
On the issue of access to finance,
on entrepreneurship and small business.
include Shanduka Black Umbrellas,
South Africa is world-renowned for the
The problem has been identified and
Business Partners Mentors and ORT JET,
sophistication of its financial-services
lamented by many, but to date no concrete
but these programmes are still limited in
industry. Yet the problem of access to
scale compared to the need. A much larger, action has been taken to resolve it once
finance for small businesses, particularly
and for all.
high-quality and professional programme
new ones, persists. There are practical
The National Development Plan
is urgently needed.
captures the situation thus: “State efforts to small business challenges, for sure, that
Fourth, our small business development
explain the problem of access to finance.
assist the [small business] sector have had
efforts somewhat lack power because they
But how can such a sophisticated industry
limited success. Moreover, partly due to
are not sufficiently focused on growth
not be able to look beyond whatever
the lack of robust data, the debate around
sectors and industries, and are not
barriers exist and innovate new solutions
small and medium-sized enterprises
adequately intelligence driven. I recall
to respond to what is clearly a real need
and their ability to assist in employment
visiting an institute in Italy many years
that holds so many small businesses back?
growth has become heavily weighted with
back whose sole focus and specialisation
Is it perhaps due to lack of interest? How
ideology, assumptions and anecdotes.”
was on gathering intelligence on
can that be the case in a country with such
This cannot be a correct path to success.
emerging fashion trends around the
high levels of unemployment and poverty?
Lastly, innovation within the support
world, packaging and disseminating
How can we not put aside whatever
system has fallen short of expectations,
that intelligence to the region’s small
differences we may have on what we may
although there have been instances of it
businesses, and then providing specialised
consider the best approach, and work to
here and there. A leading US expert in
technical assistance to these small
find a solution that will help the country
the field of innovation and technology
businesses to become leaders in the
move forward?
commercialisation, who spoke at an
fashion field globally. Our efforts need
South Africa has achieved much in the
international small business conference
to be guided by a clear understanding of
field of small business development over
held in Cape Town in May this year,
growth opportunities across our national
the past 20 years. We have much to be
observed that it was difficult to explain
economy and globally. This requires a
grateful for and to celebrate. What is now
how South Africa, with its well-developed
thorough analysis of where real growth
required is to correct the deficiencies in
small business support system compared
opportunities exist, packaging that
order to close the gaps that continue to
to many countries with similar levels of
information and making it available to
socio-economic development, had what he hold back the progress of our collective
entrepreneurs in a cost-effective manner.
efforts. We have what it takes to succeed.
saw as a relatively under-developed small
Then customised support programmes
We know what is holding us back from
business sector.
can be crafted and implemented to enable
achieving what we are capable of as a
Part of the answer clearly lies in
entrepreneurs to take advantage of the
nation. Let us close these gaps and see our
limited innovation in addressing the
identified opportunities to start and grow
efforts soar to greater heights and deliver
most pressing challenges facing small
successful businesses.
the results we all aspire to.
businesses. Take the examples of state
Fift h, picking up on the GEM research
28
IMAGE AND GRAPHS: SUPPLIED
Government
Funding and
Transport
2015/09/21 9:57 AM
Rural Housing Loan Fund –
the muscle behind incremental housing finance
What is the Rural
Housing Loan Fund
The Rural Housing Loan Fund (RHLF) is a
South African government-owned entity,
established in 1996 by national government.
The RHLF was established to empower
people in rural areas to maximise their
housing choices and improve their living
conditions through access to housing credit
and government housing-subsidy funds.
Our mandate
The mandate of the RHLF is to facilitate
access to incremental housing finance for
low-income earners, in order to enable them
to improve their housing conditions in
rural areas and small towns in South Africa.
The RHLF operates as a wholesale finance
institution and achieves its mandate through
retail financial intermediaries, who then
access funds from the RHLF and lend them
to individual borrowers.
• To improve sanitation conditions;
• To purchase residential land for
building a home; and
• To fence homes.
How we deliver on our mandate
We work with microfinance institutions
that are registered with the National Credit
Regulator, and are willing and able to grant
incremental housing loans to the general
public in our target market. We also work
with community-based organisations that
operate along with stokvel or co-operative
principles by granting funds to enable them
to lend to their members only. Using both
types of intermediaries, we are able to deliver
incremental housing loans in all provinces
of South Africa.
Our achievement
The RHLF has built a long track record of
delivering incremental housing loans to
low-income earners. For the year under review:
• Cumulatively, since inception in 1996, just
over 455 319 loans have been disbursed
nationally for incremental housing as of the
end of March 2015.
• 40 185 incremental housing finance loans
were granted to our end users through our
intermediaries as of the end of March 2015.
• We have disbursed more than R1.3 billion
since inception to deliver on our mandate.
If you want to become a Rural Housing
Loan Fund approved partner, contact us:
Postal Address:
Rural Housing Loan Fund
PO Box 645
Bruma
2026
Tel: 011 621 2500
Fax: 011 621 2520
Email: [email protected]
Website: www.rhlf.co.za
Accepted usage of our funds
The RHLF loans can be used for the
following mandated purposes:
• To build a house, in most cases after
adding a loan to personal savings;
• To improve the quality of a home;
• To extend existing homes;
• To connect to services, such as
electricity and water;
RHLF.indd 3
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2015/09/02 2:11 PM
SPECIAL FOCUS
B
Innovation in SME
funding required
The funding is out there. Startups just need the support to access it, and funders need to
find new ways of supporting them in the realisation of their ideas. By Georgina Guedes
A
ccording to the Global
Entrepreneurship Monitor
(GEM), as many as 70%
of small businesses fail in
their first year. Research
conducted by the Seed Academy has shown
that in addition to this, very few businesses
survive more than five years.
At the same time, the National
Development Plan (NDP) demands the
creation of 11-million jobs over the next 15
years, and expects 90% of new employment
to be created by small, medium and
micro-enterprises. According to the Seed
Academy’s First Startup Survey, released
this year, “job creation should be a key
outcome of entrepreneurial activity”,
but the results highlight “the proportion
of businesses that employ five or more
employees are still in the minority”.
“South Africa does not currently feature
the levels of innovation, knowledge and
R&D supported by a healthy triple-helix
relational ecosystem, which is typically
associated with the type of sustained, longterm economic growth and competitiveness
the NDP’s targets require,” states a report
by SiMODiSA (a collaborative research,
stakeholder engagement and policy design
effort by stakeholders from both the public
and private sector in South Africa) titled,
“Accelerating the growth of SMEs in
South Africa”.
It is clear then that the country has big
expectations of small businesses, but the
support and funding seems to be lacking.
The Seed Academy report also showed that
only a small percentage of entrepreneurs
have funded their businesses from vehicles
formally established to support them. Of
the respondents, 83% were self-funded,
while 4% accessed a bank loan, 3% secured
funding from a development funding
agency (DFI), 2% from angel investors and
1% from venture capital.
Innovative solutions necessary
In light of these figures, it is evident that the
South African startup funding ecosystem
needs innovative solutions to provide
startups with the funding that they need, but
also awareness of that funding.
“Government has the funds to support
startups,” says Donna Rachelson, Chief
Catalyst at the Seed Academy. “It is within
their interests to look at incubation. They
just need the right funding and the right
approach to get a real return on investment.”
She says that many incubators and funds
only provide support for small businesses
in certain stages of their life cycle, without
providing the necessary support to get them
to the next stage. “We see serial incubatees
who jump from one incubator to another,
instead of getting the support that they need
to help them to scale their business.”
“Government could encourage angel investors to
support small businesses by providing them with
tax breaks for doing so.”
She also believes that while government
has many programmes in place to support
entrepreneurship, there are some approaches
that they could take that would significantly
benefit the ecosystem. “Pension and provident
funds contribute nothing to startup funding,
and there is no legislative imperative to force
them to do so. Can you imagine the impact
on the economy if they were mandated
to put a portion of their 10% of allowable
funding towards venture capital?”
In addition, she says, government could
encourage angel investors to support small
businesses by providing them with tax
breaks for doing so.
Bridging the startup support gap
According to McLean Sibanda, CEO of the
Innovation Hub, there isn’t a solid pipeline
of funding in the startup space. “Where the
money is missing is the smaller amounts,” he
says. “So if you’re looking for anything from
R50 000 to R1.5-million, you’ll struggle. If
you’re looking for more than that and you
have a good value proposition, you will get
the money, but it will take longer.”
He says that in addition to the good
pipeline, the ecosystem lacks entrepreneurs
with the skills to package their ideas so that
the value proposition is highlighted.
The crowdfunding challenge in SA
For companies in this boat, he raises
crowdfunding. “We’re seeing this coming up
internationally, but also within the African
continent, largely in Kenya,” he says.
Startups that require R100 000 to
R1-million in funding can use a
crowdfunding platform to approach ten ›
Banker15_innovation in funding .indd 31
31
2015/09/18 8:56 AM
people, who could come in with R10 000 to
R100 000 each, and with proper marketing,
easily fund their businesses.
For example, a Kenyan initiative called
Farm Capital Africa won second place
in the Innovation Prize for Africa this
year with its risk-sharing, agri-business
funding model that draws in investors for
a share of farming profits. It identifies,
screens and shortlists full-time farmers
with smallholdings and helps them devise
farming plans to attract potential investors
who earn profit over time. This both
supports small-scale African “agripreneurs”
and benefits investors who can realise
returns from this untapped market.
However, there is a snag standing in
the way of widespread adoption of this
funding mechanism in this country. “It’s
questionable whether it’s legal in South
Africa,” Sibanda says. He explains that
32
“We’re seeing the rise
of competition
entrepreneurs who
win one, then go on to
win the next one, but
their business doesn’t
really grow.”
once you are opening a company up for
public investment, it is regarded almost
as if the company is a listing, and in his
understanding of the law, this then requires
that the call for investment is carried out
in accordance with how a listed company
would do it. Nonetheless, he believes ways
around this can be found.
The drawback of competitions
Another innovative mechanism that
Sibanda has observed in the funding
ecosystem for startups is competitions.
However, despite the fact that they
provide finalists with publicity and
winners with funding, Sibanda believes
that the competitions are causing their
own problems.
“There are far too many and we’re
seeing the rise of competition
entrepreneurs who win one, then go on
to win the next one, but their business
doesn’t really grow,” he says.
Added to this is the fact that a lot of the
competitions are internationally run, and
the local winner goes on to compete in the
global competition. While this presents
an incredible opportunity for the winner,
it doesn’t keep the entrepreneur in South
Africa, delivering local solutions.
2015/09/18 8:58 AM
SPECIAL FOCUS
Trying out new approaches
“It seems that while there are great expectations
on entrepreneurs, and the funding exists to support
their enterprises, what continues to hold them back
is that the dots are simply not being joined.”
needs to provide more, readily accessible
funding through various mechanisms,
with funding earmarked for research
and development and tech funding, and
with mandates put on corporate social
investment initiatives to fund startups.
“They should be looking at the ideas that no
one else wants to fund because the returns
aren’t that great. But if it’s going to depend
on government funding or ongoing grants,
it’s just not viable,” he says.
It seems that while there are great
expectations on entrepreneurs, and the
funding exists to support their enterprises,
what continues to hold them back is that the
dots are simply not being joined. They are
unaware of funding, unable to access it, it
takes too long, or they are unable to present
their idea in a consumable business plan.
At the same time, there is an abundance
of incubators out there, and entrepreneurs
must look for those that provide the services
that they need. If South Africa is to get the
growth it wants out of this segment of the
market, those dots need to be connected
pretty quickly.
IMAGES: SEED ACADEMY; STARTUP SURVEY RESULTS 2015
Another innovative approach Sibanda has
been seeing is the provision of services in lieu
of funding. “Someone I know is developing
an application in the medical sector, but he is
not a techie himself – he’s a medical specialist
– but he’s teamed up with a group of techies,
raised money to fund himself, and has got to
a point where there’s a proof of concept before
someone else can put in the money.”
He says that this approach is useful as it’s
important to have “skin the game”. “This
way, it’s structured. The group of developers
invest their time in the development, so that
they can become part of the team. I believe
that what they are doing is strengthening the
proper value of the team. Investors look at
the idea, but also at the team: does the team
have what it takes to take the idea forward?”
Broadly speaking, Sibanda agrees with
Rachelson when he says that government
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2015/09/18 8:58 AM
BEE for SMEs
Positive takes for small businesses from the Revised
Codes of Good Practice. By Lindsay Grubb
T
he Revised Codes of Good
Practice (RCoGP) have set off
alarm bells for many SMEs
which are concerned about
the impact that these codes
will have on their businesses, most notably
the controversial compulsory minimum
ownership score. In terms of ratings, the
Exempt Micro Enterprise (EME) will receive
an instant Level 1 status for 100% black
ownership, Level 2 for 51% and Level 4 for
all others. The Qualifying Small Enterprise
(QSE) requires significantly more changes,
as ownership is just one element out of five
against which they are judged.
Amanda
Dambuza
is the CEO of
Uyandiswa
Project
Management
Services.
34
Deciding whether to look at potential
partnerships, and giving up a percentage of
their company could be daunting for SMEs
and QSEs, but there are many enterprises
who have successfully transitioned.
A successful partnership
In 2014, Johannesburg Stock Exchange (JSE)
listed company, Adapt IT, acquired a 49%
stake of Uyandiswa Project Management
Services, a 100% black woman-owned,
project-management consultancy founded
by CEO Amanda Dambuza.
Dambuza says her company shares
similar values to those of Adapt IT. Prior to
the 49% acquisition by Adapt IT, she says
she had made a personal choice to partner
with an entity. “I believed there was strength
in having a more established partner,” she
says. “Majority ownership was, of course,
very important for me in order to still retain
elements of independence and credentials as
a black women-owned enterprise.”
The acquisition formed part of Adapt IT’s
commitment to enterprise development.
CEO Sbu Shabalala said at the time that
there were excellent synergies between the
two businesses, both of which were firmly
established and committed to being
leading Broad-Based Black
Economic Empowerment
(B-BBEE) companies.
Adapt IT retained its
Level 3 B-BBEE status
and is ranked as the
28th most empowered
company on the JSE,
and ranked sixth
within the Information
and Communications
Technology (ICT) sector.
Uyandiswa is a Level 1 black
woman-owned company, which favourably
influences its customers’ B-BBEE scorecards.
Dambuza says there has been a big shift
in the way Uyandiswa operates today,
compared to before the acquisition. “We are
operationally more structured and more
astute,” she says. “We have a competent
team of shared-services people who take
the load off the executives of the company.
They help us with proper governance and
adherence to the Companies Act. We can
therefore focus on building a commercially
viable and sustainable business. We have
been afforded the opportunity to focus on
attracting the right talent and giving them
exciting employment opportunities.”
She says the real value realised thus far is
the level of governance that Adapt IT brings to
Uyandiswa. “As an experienced business, they
lead the way for us and we are learning through
this,” she says. “Furthermore, the association
with an established JSE-listed company affords
Uyandiswa the opportunity to be seen as a
stable entity, albeit a fairly new one.”
Dambuza says Adapt IT benefits from
doing business with highly networked
professionals who come from established
corporates, adding to the strategic thinking
and operational efficiencies. Adapt IT has
also been able to positively influence its
B-BBEE scorecard through this partnership
with a majority black women-owned entity.
Her advice for SMEs who are looking
into potential BEE partners in order to
become compliant with the new codes
comes from personal learning. “It is very
important to understand you will struggle
to be successful on your own, regardless
of your B-BBEE status,” she warns. “There
are so many operational and governance
matters that need to be taken care of that you
only learn on the job. Also, you need to have
access to investment funding and working
capital for growth if you are to achieve
anything worthwhile. When you have made
the decision to partner, choose your partners
very carefully. Make sure you share similar
values and that there are real synergies
between your companies or complementary
service offerings.”
Banker15_spcial report_bee for SME.indd 34
2015/09/18 9:01 AM
SPECIAL FOCUS
“When it comes to skills development requirements,
there are interesting options for those SMEs that are
in a position to capitalise off this requirement.”
IMAGES: UYANDISWA PROJECT MANAGEMENT SERVICES, TRANSCEND CORPORATE ADVISORS
The compliance journey
While owners of EMEs and first-year
startups might not be ready to look into
BEE partnerships just yet, there are other
ways to ensure that their organisation is
more appealing to their customers and
current and potential employees.
Dr Robin Woolley, Transformation
Facilitator at Transcend Corporate Advisors
and author of Everyone’s Guide To Black
Economic Empowerment And How To
Implement It, says that successful growth
in the SME sector will all depend on how
companies work with the tools. He believes
that if companies seek ways to ensure their
business is in strategic symbiosis with the
environment of business, then everyone will
be better off. The key, however, is for business
owners to understand their options.
When it comes to skills development
requirements, for example, Woolley says
there are interesting options for those SMEs
that are in a position to capitalise off this
requirement. He says there is a need for SMEs
to significantly invest in not only current
employees, but future employees or future
customers. The main challenge for many
SMEs appears to be that they are in survival
mode and not able to plan ahead.
In his guide, Woolley states that there is a
desperate need to develop the broad base of
skills in the country. He says the issue South
Africa faces in many ways is opposite to that
of the advanced economies, where there are
not enough people to fill the skills gap.
“In South Africa’s case, we have too many
people and too few jobs,” he says. “This is
exacerbated by the fact that many South
Africans are structurally marginalised
as a consequence of a lack of basic skills
training. The focus is therefore not just
on employment per se, but rather on
employability. This is where the skills
development section of the transformation
scorecard can now have a big influence
on the future of the South African
economy. It just makes business sense to
equip your resources with the skills and
ability to do their jobs. The shift in the
RCoGP to include non-employees opens
up this opportunity and is a positive and
interesting development in the country’s
journey, given the size of the education
crisis we’re currently facing as a nation.”
Woolley suggests that learnerships form
an ideal mechanism for developing a career
path where there is a scarcity of skills, and
act as a structured approach for vocational
competence through ‘learning while you
work’. While companies will be responsible
for a sponsored salary (stipend), training
fees, coaching fees and administrative
costs for the learner, they will be able to
receive government grants for undertaking
the learnership, which takes the form of
a tax incentive and placement incentive
(depending on the SETA).
SMEs should treat learnerships as an
important business tool in talent attraction
and retention, as there are five bonus points
awarded for the retention of learners, if the
company fully intends hiring the learners
that they take on, if the courtship process
works and if their performance is at the
desired level. Woolley shares a number of
critical success factors, but recommends
starting the process by being clear on
your organisation’s business needs
by identifying where the specific
skills gaps occur. Then ensure your
development strategy is clearly linked
to your organisational strategy. “The
human capital section requires a
long-term strategy of talent attraction
and retention, and not just a quick
fix,” he says. The question that
companies need to be asking is: How
can I influence these attraction and
retention factors to ensure my organisation
is the best place to be?
It will be those SMEs that look at their
business holistically and take concrete steps
to comply with the revised codes that will
catch the eye of the bigger corporates, who
are looking to expand their list of current
suppliers to include new ones. Companies
in the past might have used specific
suppliers due to a common shareholder,
regardless of whether they were the best
option for them or not. This makes it
difficult for new suppliers to get a foot in
the door and it means there might be less
competitiveness and growth within the
supply chain.
Supplier development is used to
drive change in this area. It is focused
on the development of the capacity of
black companies, and contributions to
these companies are measured based
on a target of 2% of net profit after
tax, invested annually. The aim is not
simply to expose these organisations to a
structured development
programme, but to
support them in
the future.
Dr Robin
Woolley is the
Transformation
Facilitator at
Transcend
Corporate
Advisors.
Banker15_spcial report_bee for SME.indd 35
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35
2015/09/23 9:20 AM
B SPECIAL FOCUS
SME finance: from
availability to access
Muzi Mhlambi, drawing from a recent study commissioned by The Banking Association
South Africa, examines the South African SME ecosystem and the challenges it faces.
SME accessing finance: lack of collateral;
poor financial management/lack of proper
financial records/poor record keeping; lack
of required management competencies/
lack of business skills; and lack of access to
markets/poor linkages to market access.
There is nothing new in the above, yet
we continue to decry the lack of finance.
Although some effort has been made to
address these issues, the problem with
current efforts is that they are fragmented
and fail to take a holistic approach.
Muzi Mhlambi is Manager Programmes:
Financial Inclusion Division at The
Banking Association South Africa.
FACTORS INHIBITING SME ACCESS TO FINANCE
1
2
36
Some suggested interventions are SME
risk self-assessment tools and partnerships
with corporate/government procurement
programmes to offer supply chain finance.
Encouragingly, National Treasury is also
working to improve credit infrastructure
aimed at closing information asymmetries
between banker and entrepreneur.
SOURCE
ACCESS IMPEDIMENTS IDENTIFIED
2014 GEM
South Africa Report
• A lack of sufficient collateral on the part of the entrepreneur
• The inability of the entrepreneur to produce a business plan
that is acceptable to the financial institution
• Poor market research and the absence of a viable business
idea that has demonstrable benefits
• Lack of access to markets
Financial Sector
Program Survey
• Financial status / cash-flow
• Accurate financial records or statements
• Collateral
• Over-indebtedness
• Business plans and business skills
Tendai Chimucheka and Ellen
Rungani study 1
• Lack of financial deposit (17%)
• Lack of collateral (37%)
• Poor business plans (7%)
• Business idea not viable
USA study
• No relationship with lender (14%)
• Weak / missing financial documents (14%)
• Weak business performance (23%)
• Insufficient collateral (30%)
• Low credit score (35%)
African Development Bank
East Africa study
• Lack of quality information
• Business informality
• Inadequate guarantees / collateral
Small Enterprise Finance
Agency 2
• Lack of required management competencies
• Poor financial management
• Poor linkages to market opportunities
INFOGRAPHIC: THE BANKING ASSOCIATION OF SOUTH AFRICA
T
he issue of access to finance
tends to dominate the talk
on barriers limiting SME
success. This challenge is not
limited to the South African
market, but is a global phenomenon. The
Banking Association South Africa recently
commissioned Osiba Management to
look at the SME funding ecosystem to
understand where the gaps are, identify the
stakeholders and, if possible, quantify the
amount and type of finance available. In
total, 85 institutions were identified with an
array of products targeting SMEs.
While it was not possible to quantify
available funding (as organisations do not
specify the size of their funding pools), it
is safe to estimate the collective funding
pool could be several billions of rands each
year. It would seem, therefore, that there is a
surfeit of funding available to SMEs.
If you consider that enterprise
development and supplier development
have been designated by the Broad-Based
Black Economic Empowerment Act 2013
(Act No. 46 of 2013), with Codes of Good
Practice as one of the priority elements, this
funding pool is about to get much bigger.
If funding is not in short supply, then why
is access an issue? Research indicates various
factors are to blame and attributable to the
SMEs themselves, providers of finance,
and the business environment, particularly
government regulation.
According to the study commissioned by
The Banking Association, the issues of SME
access to finance seem to be similar around
the world. Across all studies, these are the
most persistent issues that are obstacles to
“The impact of inaccessibility to bank finance and lack of financial management knowledge to small, medium and micro enterprises
in Buffalo City Municipality, South Africa.” African Journal of Business Management Vol. 5(14), 18 July, 2011, pp. 5509-5517.
Small Enterprise Finance Agency, “Request for proposal: Evaluation of Khula Credit Guarantee Limited”, May 2014
Banker15_Ecosystem.indd 36
2015/09/21 9:55 AM
Untitled-1 1
2015/08/28 10:39 AM
ADVERTORIAL
Ké Concepts unlocks MFI
growth in Africa
Using creative
partnering to
boost scalability
“MFIs generally score
high on their agility and
understanding of markets
and their needs, but they
often lack the ability to
scale,” explains
Green. “As
competition
Gary
becomes
Green is
Managing
Director at
Ké Concepts.
38
increasingly fierce, keeping ahead of the
curve and speed to market becomes crucial.”
Fortunately, technology can enable smaller
players to operate responsively. Softwareas-a-service offerings and cloud-based,
hosted solutions are easy to scale up or down
as the business requires. They also free up
time and capital for product development
and improved service delivery that would
otherwise be invested in IT.
“We’ve been operating a hosted service
out of Johannesburg almost since our
inception 15 years ago,” says Green. “We
enable microlenders to focus on what they
do best, while we use our technology savvy
and scalable skills to tackle challenges such
as managing big data, evolving analytics,
creating an intuitive user interface and
reporting. It’s a win-win all round.”
Do more with less
Africa poses some obstacles that first-world
operators would not have encountered on
their home turf, including less than optimal
connectivity and a shortage of financial and
technical skills. “Doing more with less takes
on a whole new meaning in Africa,” says
Green. “Innovation needs to be tempered with
relevance and that is exactly Ké’s approach.”
In emerging Africa, 99.99% of uptime
is elusive and costly. “Although greatly
improved,” says Green, “connectivity
remains a key inhibitor to service delivery
in remote areas. We’ve explored a number
of workarounds when it comes to tricky
connectivity and infrastructure. Our offline
functionality is geared to reduce reliance
on uninterrupted connectivity. We also
create clearly defined, pre-determined,
workflow-based processes that require
very little technical or financial skill to
navigate. This means MFIs can tap into an
existing skills pool, lowering the cost of entry
and presenting an attractive case for social
upliftment.”
Driving down cost to serve
while boosting engagement
Creating an offer that is attractive yet
still financially viable is a precise art –
particularly in riskier frontier markets.
“Although microlending is perceived as
offering high returns, the monetary value
earned per transaction is low,” explains
Green. “This makes the cost of acquisition
an important variable. Unwieldy processes,
tedious administration and growing
data requirements hinder growth. Our
automation, particularly of origination,
disbursement and rehabilitation processes
drives these costs down significantly.”
While MFIs leverage tech for a leaner
business model, intelligent automation and
the operationalisation of credit policies also
build in fail-safes and address governance
requirements. Not only can MFIs process
more volume in less time, but they will also
experience fewer errors and lower overall risk.
Finally, engaging with clients on their
terms has become critical. The only thing
growing faster than digitisation in Africa is
consumer awareness. “Technology is making
services more accessible and financiers need
to do more than offer a range of instruments
if they hope to be competitive,” says Green.
“We work with our clients to ensure they
are equipped to offer a choice of distribution
channels that goes beyond the branch
network: mobility; agents in the field; or
through the web.”
Contact Details: Gary Green
Tel: 011 514 5900
Website: www.ke.co.za
IMAGE: SUPPLIED
F
inancial inclusion should
be about reaching as many
individuals as possible,
regardless of geography or
economic standing. This is no
small feat in Africa, where each of its 54
nations presents a rather unique landscape.
And while microfinance institutions (MFIs)
enable much-needed business development
and personal upliftment, they are often
exposed to all manner of risk.
South African-based Ké Concepts has been
enabling a growing base of clients to gain a
foothold in Africa for more than a decade. Its
credit-management solution, CreditEase, has
been successfully deployed across a number
of African countries. Managing Director
Gary Green explains how Ké Concepts
leverages technology to assist MFIs in
competing successfully on the continent.
“Our solutions are developed specifically
for Africa,” says Green. “This means we
keep prevailing technological and economic
conditions top of mind. Flexibility is the key.
We continually reassess client needs and
seek workable solutions that incorporate
world-class microlending technologies, yet
remain relevant and applicable within the
African context.”
KE_Concept_Advertorial.indd 38
2015/09/23 11:10 AM
SPECIAL FOCUS
B
Small business tax:
what you need to know
Small business owners may find themselves at a loss when it comes to tax, especially the
when and – most importantly – how much. Here’s a simplified guide. By Lisa Witepski
IMAGE: SAGE PASTEL PAYROLL AND HR
S
tiaan Klue, Chief Executive of
the South African Institute of
Tax Professionals, agrees that
paying tax can be a baffling
matter. “Often, business
owners aren’t aware of the laws, or they don’t
understand them,” he says. “They may also
be unsure of the types of tax they should be
pay.” Making the situation more complicated
are the varying time scales for different types
of tax, with SMEs required to submit returns
monthly, bimonthly and annually.
Acknowledging these difficulties, SARS
established specialist desks to assist SMEs.
Klue says these structures help SMEs ensure
tax compliance, and because they have
specific knowledge and experience in the
small business arena, they are able to educate
and empower business owners appropriately.
Madelein van der Watt, Development
Manager at Sage Pastel Payroll & HR, agrees
that these desks are a valuable resource for
business owners who are unable to afford
an in-house tax practitioner, or even a
professional who can give regular assistance.
What are the basics an SME owner needs
to know about paying tax? For a start, Van
der Watt explains that different tax brackets
may apply to small businesses. “If your
business has a turnover of less than
R1 million per annum, you should register
for turnover tax with SARS. In this case, the
first R335 000 of your annual turnover will
be tax exempt, and thereafter you can expect
to pay 3% of your annual turnover in tax,
instead of having to administer multiple tax
obligations like VAT, income tax, provisional
tax or capital gains tax,” she explains.
On the other hand, if your business is
classified as a small business corporation
Madelein
van der Watt is
the Development
Manager at
Sage Pastel
Payroll and HR.
(SBC), clearing a maximum turnover of
R14-million per annum, you should expect
to pay 28% of taxable earnings. But the first
R73 650 of your earnings will be tax free.
It’s therefore important that SME
owners investigate the types of tax they
are required to pay. Unless they qualify
for turnover tax, as Van der Watt suggests,
they will have to comply with several
other tax types, depending on the type of
business they own. These tax types range
from VAT (because if a business owner’s
company delivers goods and services at an
annual turnover of at least R1 million, he
or she will have to comply with periodic
reporting requirements) to PAYE, UIF and
SDL. These latter three tax types are paid
by people with employees who earn above
the annual tax threshold – and this is where
things start to get complicated.
PAYE must be deducted, reported
and paid on a monthly basis, and annual
and biannual reconciliations must be
submitted to SARS. Meanwhile, UIF and
SDL contributions are made at monthly
intervals. If a company has shareholders
that earn dividends, it will also be required
to withhold an amount for dividends tax,
which will be paid over to SARS. And, if
a business operates in the import/export
space, it will need to comply with customs
and excise regulations. Transfer duties
must be paid by companies that acquire or
dispose of properties. Finally, a company
may also be liable to pay income tax.
Although these may seem like an onerous
burden for a small business to bear, Van der
Watt notes that small businesses are given
some relief. “Where companies with large
turnovers have to pay a flat rate of 28% of
their taxable earnings in income tax, SARS
has provided a different tax scale for SMEs,”
she explains.
Turnover tax is another solution offering
SMEs relief. As Van der Watt points out, it
enables business owners to pay a low rate
calculated on annual turnover, instead
of paying many different types of taxes –
plus, rates are more favourable in order to
accommodate a lower annual turnover.
Banker15_spcial report_sme-taxing report.indd 39
39
2015/09/18 9:03 AM
B SPECIAL FOCUS
Developing township
economics
T
he focus on township
economies provides new
and expanded markets for
banks. Given the emotions
involved, however, traditional
banks will face more intense pressures to
assist, where in reality they might prefer
to do otherwise. This is an unintended
consequence of the expectations created by
the hype around the initiative.
The focus on township economies is
most welcome as it directly stimulates
local economic development (LED)
in township and rural communities.
Stimulating economic activity gives them
the wholesomeness found in other areas.
LED is also educative as it results in local
communities being more au fait with
entrepreneurship and economic realities.
The elephant in the room is that
townships were a direct creation of a
carefully and ruthlessly thought-out policy
of apartheid; it made them hostels in which
black people sleep and then work in the
towns. In a Pavlovian sense, we are still
gripped in the tentacles of this design.
Communities usually have two types of
entrepreneurs: opportunity entrepreneurs,
who identify an opportunity in the market;
or necessity entrepreneurs, who are forced
by circumstances to become entrepreneurs.
Our environment
is pockmarked
by necessity
entrepreneurs,
the ‘forced by
DR THAMI MAZWAI
is the Executive
Chairman at Mtiya
Dynamics.
40
circumstances’ elderly entrepreneurs, and
are direct victims of the system. Hence the
burgeoning informal sector.
Worse still, these entrepreneurs are
still affected by inner processes in the
human mind that have been inculcated
by our past. Apartheid resulted in the
current entrepreneurial destitution in
many communities. While this destitution
is a global phenomenon, as not everyone
responds to entrepreneurial stimuli
in the same manner, in our situation it
was enforced.
Black people could not, by law, be
entrepreneurs, nor did their education drive
them in this direction. This is today staring
at us in the face and will affect strategies
to revitalise township economies. The
recent xenophobic attacks on foreigners
are an expression of the entrepreneurial
destitution, as our informal businesses
come second to foreigners. This is aptly put
by Gordon Institute of Business Studies
academic, Tashmia Ismail, who points
out that the economic migrants from
Pakistan, Ethiopia, Somalia, Mozambique,
Zimbabwe and Bangladesh have long
histories and cultures as traders in stark
contrast to locals who, under apartheid
legislation, experienced severe restrictions
on commercial activity.
As the demise of apartheid meant a
reversal of the economic discrimination of
the past in terms of business loans, rightly
or wrongly, black people now believe that
getting loans should be much easier. Thus,
when anybody wants to be an entrepreneur,
he or she will be assisted even if the idea is
simply not viable.
On the other hand, black people or
communities cannot be blamed as the
struggle against apartheid was about
eradicating apartheid. As apartheid denied
people access to banks as entrepreneurs, its
removal must make that access much easier.
Thus, when banks assess individuals and
reject applications for loans, it becomes a
sore point. The sins of the past are still with
us, yet there is no doubt that banks have
moved away from where they were in 1995.
Banks have bent over backwards and
virtually changed the way they do business.
They account for 95% of loans in the small
business world, despite the presence of state
agencies. But still, they are constantly under
fire. And this is only going to worsen as the
revitalisation of township economies gains
momentum. To overcome this, banks must
find ways to participate in the “valleys of
death” when it comes to entrepreneurship
in the townships and rural areas.
The first valley of death is the post-startup
phase in which entities that barely survive
want funds to grow. The second is mostly
in the R500 000 to R3-million demand
for loans bracket. The third valley is in the
informal sector – the micro-loans sector.
A period of innovation and creativity
must now come into play in the banking
sector. The re-emergence of the new
institutional economics has ushered in
new economic analysis: that it is not only
exogenous factors that drive economic
behaviour; but endogenous pressures also
play a part. An understanding of these
pressures enabled Muhammad Yunus to
create the Grameen Bank in Bangladesh.
Perhaps the time has come for our
institutions to move away from their
Eurocentric traditionalism and operate in
terms of local systems and understandings.
Lending is not new in black communities. It
is as old as the hills and people understand
the surplus and deficit units interaction.
It is time for banks to leverage on this
understanding in the townships.
IMAGE: MTIYA DYNAMICS
The township economy has been touted as a new
market for banks. By Dr Thami Mazwai
Banker15_develop_township_economics.indd 40
2015/09/21 10:29 AM
ADVERTORIAL
Reducing economic
crime through integrity tests
This approach is not only preventative,
but also corrective. It acknowledges that
economic crime is perpetrated internally
and that while screening out ‘bad apples’
is critical, it is not sufficient, given that the
Global Economic Crime Survey reports that
56% of fraudsters are already on the inside.
Additionally, it sends a strong message to
both internal and prospective employees
that the organisation values integrity and
that CWBs will not be tolerated. Further, it
helps build a culture of integrity, which goes
a long way to reducing the perpetration of
economic crime.
assets and financial statement fraud.
The bottom line is that economic crime
poses a serious challenge to organisations.
According to PwC South Africa Director
Louis Strydom, several respondents to their
survey reported a loss of more than
R1-billion each through fraud. The statistics
are alarming and, importantly, not restricted
to any specific industry, though research
does reveal that economic crime is most
prevalent in the financial services, retail and
consumer and communications sectors.
So how do organisations reduce the risk
associated with CWBs? One solution is
through the use of a holistic approach to
integrity assessment. This means using
integrity testing from three perspectives:
1. Pre-employment assessments to ensure
that one reduces the risk of employing
the ‘wrong’ people.
2. Post-hire assessments to assess
reliability, personal values and
organisational commitment among
employees, pre-promotion or job transfer.
3. Organisational development assessments
to identify counterproductive behaviours
and weak links in the organisation at
group level.
IMAGE: SUPPLIED
T
he use of psychometric
assessments for the selection
and development of talent
is a billion-dollar industry
globally. In the war for talent,
organisations need to ensure they select
the ‘best’, and that the ‘best’ will stay and
add value to the organisation for many
years to come. The most widely assessed
psychological constructs are cognition,
personality and emotional intelligence.
While these are vital constructs, there
has been a substantial increase in the
assessment of candidates’ ‘integrity’, as a
part of the pre-selection screening process.
Most organisations have created a set
of core values, which help drive their
organisational culture. More and more we
are seeing the value of integrity on this list.
Additionally, integrity has made its way
into many organisational and leadership
competency models, according to which
these companies systematically select and
develop their talent.
While it has been acknowledged that
high levels of organisational integrity
are critical to long-term organisational
success, a lack of integrity, which can result
in a number of counterproductive work
behaviours (CWBs) such as theft, fraud,
unproductiveness, absenteeism, vandalism,
and even violence, is no less important. In
fact, research has revealed that CWBs cause
significant financial losses.
The situation in South African
organisations is comparable to the global
trends and, in many cases, is a lot worse.
Specifically, the PwC Global Economic
Crime Survey 2014 revealed that South
African organisations experience high
levels of economic crime, including fraud,
bribery, corruption, misappropriation of
From Potential to Preformance
For further information, please contact:
Paul Leibowitz
Tel: +27(0) 11 450 2434
Cell: 083 262 7230
Website: www.bioss.co.za
Bioss Southern Africa Advertorial_fcp.indd 41
41
2015/09/23 11:23 AM
Untitled-1 1
2015/08/31 11:23 AM
Untitled-1 1
2015/09/02 12:06 PM
Not all clouds
are created equal
Agility, flexibility, cost-saving and standardisation –
why wouldn’t you opt for a cloud-based platform for
your business? By Trevor Crighton
“T
he single biggest
reason for failure in
cloud services is not
the software – it’s
the person operating
it,” opined Darrel Orsmond, Industry
Head Financial Services at SAP Africa,
at the recent Banking Tech conference in
Johannesburg. “The average person inside an
organisation’s sole obligation is to make the
software behave like the thing they’re doing
today. They try to remove the constraints
they have and deliver the upside they desire –
and that’s not the reason you buy software.”
Orsmond believes that the key to
successful migration to cloud services is
the acceptance that all the hard work has
already been done by a team of developers,
and that organisations simply need to plug
into the existing functionality. “There have
been 100-million man days put into the
44
development of our software, utilising best
practices from all the organisations that
SAP works with around the world,” he says.
“The chances are pretty good that your
origination process for a savings account is
no different to the 200 000 other processes
developed in conjunction with our partners
around the world. Pricing structures
for South African banks – ad valorem,
e-wallets, prepaid services – are similar
to those in the rest of the world and it’s
unlikely that any bank will have a unique
pricing permutation that doesn’t fit. And
yet, I’ve never met a bank that doesn’t think
their processes are absolutely unique!”
Organisations still want new soft ware
that does what their current soft ware does,
which Orsmond cites as worst practice.
“The thing you’re doing evolved over
40 years of incremental amendments to
processes which weren’t standardised,
were never documented and not
maintained properly – with permutations
overseen by an actuary who is probably
no longer with the organisation,” he
says. “Thinking about cloud is the same
as thinking about industrialising an
organisation. It’s not about maintaining
code and upgrading, it’s about
standardising processes for efficiency.”
The mindset change required to go for a
‘vanilla’ product is the biggest stumbling
block – an industry driven by business
cases means that negotiation is required
every step of the way, which is something
cloud minimises, due to that level of
standardisation. As it is, every single
transaction via SWIFT, InterBank, ATM
or through MasterCard and Visa goes
through the cloud, so it makes sense for the
processes that enable those transactions to
be based on the same system. Cisco’s Global
Cloud Index forecasts that the Middle East
and Africa are expected to have the highest
cloud-traffic growth rate – a 57% combined
annual growth rate – from 2012 to 2017.
Global cloud traffic is expected to increase
four-and-a-half times over the same period.
Banker15_tech.indd 44
2015/09/18 8:52 AM
IMAGE: ISTOCK.COM
TECHNOLOGY
This standardisation allows product
managers to generate business cases far
more rapidly. “We had one client who made
a business case on one deal in a matter of
months – the complete standardisation of
the required processes made it easy to adopt
and match the procurement requirements,
delivering an immediate upside,”
says Orsmond. “It almost completely
removes the intricacies like payment and
disbursement processes, and the integration
of paper flow. As the cloud grows,
investments in legacy systems will shrink
and banks will focus on reducing the costs
associated with hardware, infrastructure
and other legacy technologies that consume
resources but don’t drive innovation.”
He also says the uptake of cloud products
is normally implemented in lower-risk areas
such as procurement and HR, rather than
critical areas where it could make a major
impact. “It’s seen as a hassle, rather than
a value-add – which is a major mistake,”
says Orsmond. “Procurement processes
in financial institutions are extremely
customised and have evolved with their
organisational structure and requirements
for accountability and governance.
Everything is managed by the bank in the
back office, and reported on. On the flip side
is fraud; many banks actually don’t know
how much downside risk they’re carrying.”
The shift to not having a machine in the
building to run processes is also a big leap
for some organisations. “A major advantage
to not having to maintain your own backend is that you can move people into more
productive areas or allow them to focus
on more important things, meaning your
company can innovate and evolve instead
of getting bogged down in the details,”
says Orsmond. “And obviously, there’s
no comparison between the overheads
associated with running a cloud service
versus maintaining your own software. The
SAP software is cheap compared to in-house
development and comes with the benefit of
best practice on the back of international
experience, and the shared knowledge
gained across clients and industries.”
Another SAP innovation which removes
many traditional barriers is FSN – a system
that allows one corporate to pay another,
anywhere in the world, without software.
“The payment is generated in the banking
system and delivered to any other corporate
client’s bank without a cent of development,”
says Orsmond. “It’s currently a P2P solution
in use by companies like MTN, FNB and
Standard Bank. Normally every single step
in that process is customised and unique, but
the cloud option has changed the business
model completely.”
“A client needs to
calculate whether
they’d be better off
doing it themselves,
which is where cloud
always wins.”
SAP itself has had to completely reinvent
its pricing model to keep up with cloud.
“When you’re using software that’s based
and maintained somewhere else, you have
someone else managing it and making tradeoffs on usage and volume against other users,
which also saves costs,” says Orsmond. As
an example, organisations have to structure
and budget for peaks in usage requirements
– the 31st and 1st of the month when most
transactions take place, for one. “You have
to fund that in development costs and ROI
over time – but in cloud, none of that applies.
Usage models allow you to incur costs as you
incur volume – it’s a shift from a Capex to
an Opex model. If you need more, you pay
more – and if you need less, you pay less.
Having a server installed in an IT shop can
take forever – you need to order it, install it
and configure it before you start working.
With cloud, everything is ready to go
immediately.” The shift means that product
managers don’t have to secure a set budget,
and the risk trade-off comes right down, too.
It comes down to a decision between the
cost of licensing software versus the cost
of the institution’s individual back-end. “A
client needs to calculate whether they’d be
better off doing it themselves, which is where
cloud always wins,” says Orsmond. “If it
wasn’t cheaper, we wouldn’t have a product!”
He says that for any period over two years,
cloud will always be the preferred option
because the development cost is distributed
across the platform, rather than incurred by
one entity. “The development is documented,
constantly upgraded and complies with
security and regulatory requirements,” he
says. “Your banks don’t comply with all
those things – I promise you!”
Cloud has also opened new business
opportunities on the back of ease of use,
lower implementation time and cost
savings. “People who want to get into the
business can do so really easily without a
massive outlay on premises or equipment – it
gives startups the opportunity to try something
and see if it works,” says Orsmond. Banks like
Atom and CivilisedBank in the UK are the
latest challengers to the establishment, making
use of cloud and mobile technologies to deliver
a different customer experience. Atom exists
solely as an online and mobile service and relies
on biometric security measures. A partnership
with an as yet unnamed traditional bank will
open up ATM access to clients and customer
service will be run via telephone, email and
social media. CivilisedBank will also operate
as an online-only service, but will utilise a
network of local bankers to serve small- and
medium-sized enterprise customers, using a
cloud-based technology backbone.
Orsmond says that the choice to make the
switch to cloud from the traditional model lies
with the organisation, and should be based on
the organisation’s business case. “What was
true is true and it’s their choice to play it out or
not,” he says. “Cloud offers you the flexibility
of pricing and usage-based fees, as well as
license-exchange options for migration from
existing products. You’re not starting again
when you make the shift to cloud or incurring
upfront costs. You already own licenses and
have incurred a cost, so a good provider will
build a pricing structure that helps you.”
Banker15_tech.indd 45
B
45
2015/09/18 8:52 AM
B REPORT BACK
Ready for a surge in
mobile banking
M
obile banking will
soon enable millions
of financial institution
customers to conduct
a number of digital
banking transactions, including account
balances, transferring funds between
accounts, pay bills and locating ATMs by
simply using a smartphone or another
cellular device such as a tablet.
Gary Allemann, Managing Director of
Master Data Management, says the shift
to digital is more pronounced in central
Africa than in South Africa, mainly due to a
combination of convenience and cost.
“Mobile allows banks to franchise their
services to individuals who, armed with a
mobile phone and a small cash float, can
act as the bank branch for their village or
region. This allows banks to offer banking
services at a far lower cost than that required
to cover a branch infrastructure, and allows
banking services to penetrate into previously
unbanked communities,” Allemann says.
Mobile banking solutions targeting
Africa need to be different to those targeting
Europe or the US. Mobile in Africa is
not the same as internet banking on a
smartphone. Successful approaches make
use of technologies, such as Unstructured
Supplementary Service Data
(USSD), which are available
on any feature phone.
The African middle
class is defined as a
segment of the population
spending between US$2 and
US$20 a day. These are
not wealthy people,
Arthur Goldstuck
is the CEO of
World Wide Worx.
46
Banker15_report_back_1.indd 46
and cost is very relevant to them.
“One model to overcome the cost factor
is to look at a transaction-based approach to
mobile banking – this may suit unbanked
consumers who are happy to pay a relatively
high fee for convenience for once-off
transactions like transferring funds to a
distant family member,” says Allemann.
“An alternative approach is to provide
banking transactions at a low cost in
exchange for the customer keeping deposits
with the bank. The bank then makes its
profits off the investment of capital.”
The African banking market is ripe for
consolidation. Mobility may well contribute
to that drive, as only the larger banks can
scale to handle the volumes of transactions
that are generated by mobile. However, the
surge in mobile banking is also contributing
to an increase in the number of parties
entering the formal banking sector.
Allemann says banks will have to invest
in IT infrastructure to support the growth
in customers as well as transaction volumes.
Mobile operators do not require a banking
licence and therefore, in most cases, see
themselves more as a middle man.
“Mobile operators see mobile banking
as an opportunity to drive network
traffic, and possibly to take a fee for each
transaction. But they are not typically
trying to establish themselves as
banks, and the majority of the
processing burden will sit with
the bank. Therefore the biggest
investment must come from the
banks,” he says.
Arthur Goldstuck, CEO
of World Wide Worx, says
mobile service providers, banks and other
role-players are up for the challenge.
The banks have been driving the mobile
banking revolution for almost a decade
now, starting with FNB and its cellphone
banking in 2005, and evolving to the current
situation where the big four (as well as
Investec) have full mobile banking capability
on smartphones and tablets. It’s one sector
where the industry has led the consumer
rather than the other way around, he says.
Goldstuck also doesn’t view transaction
security as a problem. “Mobile banking is
one of the safest forms of mobile activity,
and certainly safer than using ATMs in
isolated areas or carrying money around,”
he says. “There are very few cases on record
where mobile banking itself has been
compromised by hacking… But we have
always had equivalents of those kinds of
fraud, and it has not been exacerbated by
mobile banking.”
Allemann says while mobile banking
is creating new revenue opportunities
for both banks and mobile operators, the
question is: who will own the customer?
“I believe that the organisation that owns
the customer data will ultimately gain the
most from these new revenues,” he says.
“Banks, on the other hand, typically hold far
more information about their customer
– information that can be used not
only to sell transactions, but to add
additional revenue streams such
as loans and insurance. We are
seeing mobility drive an investment
in data management from those
organisations that want to
dominate in this space.”
IMAGES: SUPPLIED
With more cellphones than people in Africa, it should come as no surprise that the continent
finds itself on the verge of a seismic shift towards mobile banking. By Helen Ueckermann
Gary Alleman
is the MD of
Master Data
Management.
46
2015/09/21 9:54 AM
ADVERTORIAL
Taking the fire out of fraud:
the credit card of the future
As ecommerce grows, so does online fraud. The new Dynamic Code Verification solution
from Gemalto, with its ever-changing security code, is set to quell cyber theft.
IMAGE: SUPPLIED, JEAN-NOËL LANTHIEZ @GEMALTO 2015
T
hink back to your last online
purchase. You probably
invested quite some time
picking out the perfect clothes,
the perfect books, or the
perfect electronics. You painstakingly put
together a shopping cart, and then proceeded
to check out. Time to enter your card details.
Did you hesitate? Did you think to yourself,
I really don’t want to put my card details
online, and ditch your cart all together?
If you did, you’re not alone. The shopping
cart abandonment rate worldwide is
impressive: 68.53% of online transactions
initiated are not completed. The reason? Well,
some just get distracted or find other offers,
but most of us are worried about online fraud.
These fears are hardly unfounded
and the latest survey conducted by
PricewaterhouseCoopers showed that 38%
of South Africans did not want to transact
online because of a lack of trust.
Still, ecommerce presents a tempting
prospect – do all your shopping with a few
simple clicks, gain access to shops nestled
in the far reaches of the globe, and get
everything conveniently delivered to your
doorstep. Ecommerce in South Africa grew
by more than 34% last year and although it is
only representing less than 1% of total retail
in the country as of today, a recent report by
McKinsey & Company revealed that it could
account for 10% of retail sales in the African
continent’s largest economies by 2025.
Fortifying the weakest link
“Unfortunately, with the increasing volume
of online purchases and the beefing up
of card-present security using smart
The new
Dynamic
Code
Verification
card.
FRANÇOIS
CHAFFARD
technology with a PIN code, it is only
natural that payment fraud is migrating
to the next most rewarding and weakest
link in the chain: card not present, or CNP,
transactions,” said François Chaffard,
Director Banking Solutions and Services for
Middle East and Africa at digital security
firm Gemalto. “In South Africa, the South
African Banking Risk Information Centre
(SABRIC) reported a +21% increase in CNP
fraud committed within South Africa,
jumping from R56.7 million in 2013 to
R68.9 million in 2014.”
He added: “This is where the Gemalto
Dynamic Code Verification smart card
comes into play. Instead of a printed card
verification value or CVV code – also
known as ‘the three-digit number on the
back of your card’ – this solution features
an embedded chip that will display this
code, and change it at pre-selected intervals.
Because of the frequency of the Dynamic
Code Verification changes, capturing one
static CVV wouldn’t help thieves.”
Chaffard further noted that by virtue of
its heightened security levels, the Dynamic
Code Verification solution could boost the
volume and value of CNP transactions,
and help build both the average transaction
value and the number of transactions per
user per year. This solution also has the
potential to help issuers instantly cut the
cost of managing CNP fraud. Another
attractive feature of this solution is its ease
of implementation: there is no merchantside integration and cardholders will
continue to go through the exact same steps
they always did when making a purchase
online or over the phone.
“The introduction of this technology
should severely cut down CNP fraud,
which, incidentally, is set to rise by 20%
this year globally,” asserted Chaffard.
“The enhanced security level reduces costs
associated with CNP fraud management
and delivers higher customer retention.
The Dynamic Code Verification card
helps banks maintain their digital vision,
while ensuring ease of deployment
and minimising impact on existing
infrastructures.”
Essentially, in the online payment world,
the Dynamic Code Verification card has
become a key weapon against fraudulent
transactions that might otherwise deter this
growing payment technology.
Gemalto_Advertorial.indd 47
47
2015/09/22 4:04 PM
2015/09/17 2:42 PM
INSIGHTS
B
What SA can learn from
Malaysia’s SME support
Facilitated by the SA High Commissioner to Malaysia, Ms Samkelisiwe Mhlanga, The Banking
Association’s May 2015 study tour proved an insightful experience. By Fikile Kuhlase
The Association of
Banks in Malaysia
The Banking Association South Africa’s
counterpart in Malaysia, the Association of
Banks in Malaysia (ABM), has 27 member
banks and is currently chaired by Maybank.
Lobbying is the main role of the ABM. Its
cornerstone is the tripartite partnership
between regulators, member banks and
consumers. The SME agenda is driven by all
banks and it is estimated that 80% of SME
financing comes from banks.
With 97.3% businesses in Malaysia
being SMEs (about 90% in the services
sector), SMEs truly are the backbone of the
country’s economy. The key driver of SME
development in Malaysia is SME Corp,
which reports into the prime minister
(PM), but falls under the International
Relations Ministry. We have learnt that
SME Corp and the ABM have come up with
a simplified version of financial statements
and that the Credit Guarantee Corporation
(CGC) in Malaysia works very well.
IMAGE: SUPPLIED
SME Masterplan 2012 to 2020
Malaysia expects SMEs to assume a greater
role in the economy, not only as enablers,
but as key drivers of inclusive and balanced
growth as well.
In Malaysia, 15 ministries and 65
agencies deliver on SME development. The
institutional framework that ensures all
these entities cohesively pull together is
the National SME Development Council,
chaired by the PM with SME Corp as the
Secretariat. The SME Masterplan has been
formulated to accelerate the growth of
SMEs and to take SME development to the
next level. It is anchored on the national
Malaysia’s SME Bank
The SME Bank of Malaysia is 100% owned by
the Ministry of Finance, and a member of
the ABM. Eligibility for finance from the
SME Bank is 51% or more ownership/Malay
equity. The role of the SME Bank is to provide
finance and provide advisory services to its
unserved or underserved target markets.
SMEs in the ASEAN region
FIKILE KUHLASE is the Senior General
Manager, Financial Inclusion Division at
The Banking Association South Africa.
policy goals as articulated in Vision2020,
the New Economic Model and the
Economic Transformation Programme.
Malaysia’s Vision 2020 aims for a more
enhanced contribution of SMEs to GDP,
employment and exports, mainly through
a new breed of innovative and globally
competitive SMEs. The Masterplan
adopts an outcome-based approach
to SME development, monitoring and
evaluation (M&E), private and public sector
partnerships, and an enabling environment
and ecosystem that allow SMEs to thrive
through entrepreneurship, innovation and
investment.
The key challenges faced by SMEs in
Malaysia are innovation and technology
adoption, human capital development,
access to finance, market access, legal and
regulatory environment and infrastructure.
These challenges are similar to those faced
by SMEs in South Africa.
The Association of South East Asian
Nations (ASEAN) SME Conference in
May 2015, themed “One Business One
Community”, hosted the ten ASEAN
member states and other stakeholders. It
focused on efforts towards better regional
economic and financial integration and
the role of SMEs. The ASEAN SME Portal
was launched at the conference – a robust
directory of ASEAN SMEs. There is also
talk of an ASEAN bank to address the
challenge of financing.
What SA can learn
from Malaysia
Malaysia’s population size is 28-million
and South Africa’s is 52-million. South
Africa would gain a great deal in learning
from the enabling institutional framework
and ecosystem of SME development
in Malaysia by locally customising the
Business Accelerator Programme (BAP)
and Enrichment Enhancement Programme
(E²), and favourably considering SME
Corp’s SCORE rating tool.
An ongoing partnership and knowledgesharing with SME Corp would go a long
way in deepening and strengthening SME
development efforts and frameworks in
South Africa.
Banker15_Malaysia_Story.indd 49
49
2015/09/23 9:23 AM
B TRAINING
Financial literacy for SMEs
G
overnment has recognised
the importance of SMEs by
creating the Department
for Small Business
Development in 2014.
Since its inception, Minister Lindiwe Zulu
has highlighted the need for entrepreneurs
to be guided and supported. One key focus
point is that of financial literacy.
The National Development Plan proposes
that 10-million jobs should arise out of
entrepreneurial business models by 2030.
This is a tall order and can’t happen if small
businesses are not sustainable.
Ben Bierman, CFO at Business Partners
Limited, says financial literacy is a critical
component if this target is to be met. “A
strong correlation exists between low levels
of financial literacy and poor financial
management, therefore it’s essential to
have sound knowledge of broad financial
concepts.” Bierman points out that financial
literacy implies both awareness and an
attitude that informs behaviours required
to ensure financial wellbeing. “Adequate
financial knowledge does not guarantee
prudent financial management; the right
kind of prudent decisions and prudent
attitudes are essential too,” he says.
Indeed, many small businesses in SA
fail due to poor financial knowledge and
planning. Annette Francke, of Nedbank
Retail Relationship Banking, says new
entrants often lack understanding of the key
financial elements of running a business.
“These include basic financial tools such as
VAT, cash-flow management, costing, and
various financial controls required when
running a business,” she says.
Bierman says the financial literacy
required to successfully manage an SME
is more onerous than personal financial
literacy. “It requires an understanding of a
50
Lindiwe Zulu,
Minister of
Small Business
Development.
range of additional financial concepts, such
as the particular business’ cash conversion
cycle, working capital management, the
effects of gearing, foreign exchange-rate
movements etc.,” he says. To this extent,
in South Africa, there has been increased
focus on financial literacy over the past
decade. Initiatives include the National
Youth Financial Literacy Day, organised by
the JSE, the National Credit Regulator and
the Reserve Bank, where youth are provided
with sound financial literacy education.
Several financial and business
institutions have developed mentorship
programmes of this nature. Last year,
the Gordon Institute of Business Science
(GIBS) launched the GIBS Enterprise
Development Academy (GIBS EDA), a
centre of excellence for the growth of new
and existing SME businesses. One of the
key components of this programme is the
involvement of multinational organisations,
including Massmart, Transnet,
GlaxoSmithKline, SAB and the National
Home Builder Registration Council
(NHBRC). These organisations bring a
wealth of knowledge to SMEs, with the aim
to set them up to operate successfully in
both local and global markets.
Financial institutions have a particularly
important role to play in assisting SMEs.
Currently, only about one third of South
Africa’s financial institutions operate in
the SME space. This means that fewer
points of learning and access to SMEspecific information are available. “Clearly,
improving the client’s knowledge of
financial concepts and products as well as
assisting in making financial decisions will
enhance the core components of financial
literacy,” says Bierman.
Franke says Nedbank invests a
considerable amount in initiatives assisting
SMEs. “We have the SimplyBiz Seminars,
a flagship offering that spans over 10
years and provides training, practical
advice and financial education to over
30 000 small business owners across the
country,” he explains. “In addition, the
Enterprise Development programme
assists qualifying black-owned enterprises
with financial and non-financial support,
both in urban and rural areas, to grow
sustainable businesses.” Nedbank offers
supportive tools including the Simplybiz
website to network and access useful
articles, and the free financial management
tool, Money Manager, for budgeting and
preparing basic financial statements.
Supporting small businesses with
necessary and practical skills like financial
literacy is undoubtedly a national
imperative. South Africa needs creative
young guns to bring their brilliant ideas to
the market, and simultaneous support to
keep translating those ideas into workable
businesses. As Minister Zulu has stated, if
South Africa is to make an impact on the
job creation front, the common problems
faced by SMEs must be addressed.
IMAGE: ANTONIO MUCHAVE
SMEs are a key component to developing business opportunities and job creation in South
Africa, and financial literacy plays an important role in their success rates. By Kim Novick
Banker15_Training_financial_literacy.indd 50
2015/09/21 9:50 AM
BANKER_ad_placing_smalls.indd 48
2015/09/22 11:14 AM
Ensuring that our clients make better
informed financial and credit decisions.
To download the information
go to www.bankseta.org.za
BASA_fcp.indd 1
2015/09/09 3:56 PM
CHILDREN & YOUTH
B
Encouraging young
entrepreneurs
Upskilling South Africa’s youth is vital if we are to move forward in the global
economic climate. By Yule Edwards
IMAGE: SUPPLIED
D
espite being a developing
nation with an alarming
40% adult unemployment,
our entrepreneurial activity
is disturbingly low, and
decreasing. South Africa has 75% less
entrepreneurs than other Sub-Saharan
African countries and although there was
a slight increase over the last 10 years,
numbers dropped by 34% in 2014 (from
10.6% to 7%). This is according to the Global
Entrepreneurship Monitor (GEM).
Poor education has been blamed for our
high level of youth (between 14 and 24 years
old) unemployment, which is sitting at
around 60% and third highest in the world,
says the World Economic Forum 2015 Youth
Unemployment Survey. The economic future
is not bright and the only way to ensure
growth is to focus on the development of
our youth, in particular to give them the
practical skills to become employable or
entrepreneurial, preferably both, says Dr
Taddy Blecher, CEO of the Community
Individual Development Association and
Maharishi Institute and Chairman of the
government’s task team on entrepreneurship,
education and job creation.
“The future of any country will be
determined by how well the youth are able
to think on the higher levels of Bloom’s
Taxonomy, because the world needs people
who can create,” he says.
Bloom’s Taxonomy divides educational
objectives into three domains: cognitive
(knowing/head); affective (feeling/heart);
and psychomotor (doing/hands) respectively.
Within the domains, learning at the higher
levels is dependent on having attained
prerequisite knowledge and skills at the
Dr Taddy Blecher is the CEO
of the Community Individual
Development Association and
the Maharishi Institute.
lower levels. For example, the lowest form
of learning would be recalling information;
followed by understanding; then applying
knowledge; analysing and evaluating
patterns and recognising trends; followed by
design and invention; and finally, assessing
theories, problem-solving and judging.
GEM says that globally youth are 1.6
times more likely than adults to want to
start a business, placing youth in the ideal
position to be developed into entrepreneurs.
The government recognises this, as well
as the urgent need to develop young
entrepreneurs, and is assisting a number of
initiatives. Blecher is working closely with
the Department of Basic Education on a 15year programme to create an entrepreneurial
culture in South Africa, in which all schoolleavers will be employable, studying further
or equipped to start their own business.
“Furthermore, it aims to create a culture of
empathy and social responsibility, in which
school-leavers are actively concerned with
engaging South Africa’s socio-economic
problems on multiple levels,” says the
blueprint document, which has been drawn
up to define the practical steps of rolling out
the programme.
The idea is certainly not to interfere with
the matriculation process, says Blecher.
“Literacy and numeracy skills are vital
and need to be systematically and urgently
strengthened. Over and above the basic
skills, from a pedagogical approach, we
need to ensure relevance to the students’
real lives, by teaching kids how to address
community issues through creative
problem-solving and through the disciplined
implementation of solutions. It’s not about
getting it right, but rather, about trying
creatively to solve problems.”
Part of this initiative, which has already
been incorporated into the curriculum, is
that Grade 7s have to develop an assignment
that will leave a legacy or gift for their
primary school. The students are teamed
up and need to generate ideas for a suitable
project, such as painting the school hall,
creating a feeding scheme or raising money
to buy IT equipment. The plan is that
eventually this will be a nationally run,
televised competition to be piloted next
year. “This will be the first of many such
competitions to generate excitement across
South Africa around entrepreneurship and
the brilliant application of the programme.”
Blecher’s team is involved in research to
find the best ways of putting this programme
into practice. “Our aim is to reach 12-million
learners … providing them with experiential
learning to ensure they go into the world
and are able to think creatively and solve
problems critically,” he says.
Banker15_children&youth .indd 53
53
2015/09/18 9:08 AM
B OPINION
Multinationals have the edge
in SA’s digital economy
A
s it becomes increasingly
possible for banks to
outsource various functions
to offshore service providers,
and indeed to provide
financial services to ‘out of region’ clients
through better technology, questions arise
about where such revenues should be taxed,
and which party should pay. Filling the gap
between technological advances and existing
domestic tax legislation in South Africa
requires the implementation of tax laws
that are malleable enough to keep up with
technology and associated developments in
the banking industry it seeks to tax.
Marking a significant change in South
Africa’s approach to taxation, National
Treasury introduced legislation on
1 June 2014 to levy value-added tax (VAT)
on foreign entities providing ‘electronic
services’ to local consumers within the South
African marketplace. In order to achieve
this, the VAT Act was amended to require
foreign entities providing certain electronic
services to register for and charge VAT.
Currently, the scope of the legislation is
limited to a handful of electronic services
listed in accompanying regulations to the
VAT amendments (e.g. educational services,
games, auction services, e-books, audiovisual content, still images, music and
subscription-based services). It has, however,
been proposed that these regulations be
expanded to include software.
Although the introduction of the
legislation has resulted in additional
revenues to National Treasury and, to some
extent, a ‘rebalancing’ of the South African
marketplace as local and foreign suppliers of
these services now compete on equal terms,
54
CHARLES
DE WET
is Head of Indirect
Tax at PwC Africa.
the application of the regulations raises
many questions for various industries, most
notably the financial services space.
The supply of many financial services
is currently exempt from VAT under the
VAT Act. Prior to amendments to the VAT
Act, members of the financial services
industry receiving services from foreign
suppliers were required to self-account for
the VAT on the imported services acquired
from foreign service providers, where such
services were used for purposes other than
making taxable supplies.
The introduction of the electronic
services provisions, however, has resulted in
shifting the burden of levying VAT from the
recipient (i.e. self-accounting) to the supplier
in respect of certain, but importantly not
all, electronic services. Where applicable,
the financial service recipient in South
Africa would then be able to claim an
input tax deduction for the VAT paid to
the extent that such electronic services are
used for the purpose of making taxable
supplies. Examples of services supplied by
foreign businesses not currently subject
to the legislation include software, online
advertising, information system services and
maintenance services.
While in the past, financial services
organisations could set up their accounting
and other systems to appropriately identify
and self-account for VAT on foreign
imported services, in the current mixedtreatment environment, more rigorous
identification measures and controls
surrounding such transactions need to be
implemented to ensure that VAT is correctly
accounted for, and not overpaid.
Another aspect worth considering is
whether National Treasury could, or indeed
should, include financial services within the
ambit of electronic services, such that foreign
businesses supplying financial services to
SA consumers should also be required to
register and pay SA VAT in line with local
providers. The introduction of the legislation
was intended, at least in part, to protect
SA suppliers in the SA marketplace, and to
address the perception that services could be
acquired more cheaply from abroad.
As banking becomes more global and the
need for traditional branches in-country
dissipates towards electronic-banking
platforms, it may be worthwhile to address
the need for such legislation to protect the
South African financial-services industry.
While the industry itself seeks to keep
pace with the shifts in technology and how
its customers interact with these advances,
the introduction of tax legislation for
electronic services that affect the financial
services industry is something the industry
urgently needs to come to terms with.
IMAGE: SUPPLIED
The growth of the digital age has given rise to a number of complex tax issues in this
environment. By Charles de Wet
Banker15_Opinion_multinationals .indd 54
2015/09/18 9:10 AM
ADVERTORIAL
Certified to protect
Altech Card Solutions safeguards its customers against fraud
A
IMAGE: SUPPLIED
The Payment Card Industry Data Security
Standard (PCI DSS) certification is a
protective measure to optimise the security
of credit and debit card transactions, and to
protect cardholders against the misuse and
abuse of personal information.
The PCI Security Standards Council
was launched in 2006 by the five founding
global payment brands, namely American
Express, Discover Financial Services, JCB
International, MasterCard and Visa Inc.,
and is a requirement for all paymentsolutions providers.
a user’s name, address, phone number
and date of birth.
• Restricting and monitoring access to the
system internally.
• Ensuring a formal IT security policy is
instituted, revised and circulated among
all employees to ensure compliance.
“Receiving the certification demonstrates
that we embrace compliance. Our
customers can trust us with the sensitive
information and trust means our customers
have confidence in doing business with us,”
concludes Van der Linde.
As one of South Africa’s leading
providers of payment acceptance terminals,
card personalisation and financial
transaction services, ACS has supplied
payment terminals to the banking and
retail industries since 1993, and undertakes
regular internal policy and procedure
audits to ensure the company is able to
mitigate the level of fraud attempted against
its customers.
“Our foremost priority is to protect the
sensitive payment-card information of the
cardholders by equipping ACS’s systems
with the correct software to safeguard
against vulnerabilities such as malware or
spyware,” says Van der Linde.
To gain certification, ACS was required
to undertake specific measures such as:
• Ensuring the networks used in the
production and processing of card
transactions are protected with reputable
firewalls.
• Encryption of cardholder information,
including sensitive personal data such as
What is PCI DSS?
Managing Director: Altech Card Solutions Derek Chaplin, General Manager: Integrated Transaction
Solutions at Altech Card Solutions Attie van der Linde, and Deputy Managing Director: Altech Card
Solutions Keith Wrede.
larming statistics recently
released by the South
African Banking Risk
Information Centre
(SABRIC) indicate that
credit card fraud is on the rise locally,
resulting in losses of R454 million to the
banking sector in 2014 alone. A portion
of this fraud is as a result of increasingly
sophisticated cyber attacks. According
to Verizon, a global leader in wireless
telecommunications, many criminals still
rely on techniques such as phishing and
hacking to steal and utilise the personal
information of cardholders.
Recognising the danger that fraud
brings to its customers, Altech Card
Solutions (ACS) has proactively embarked
on renewing its Payment Card Industry
Data Security Standard (PCI DSS) V3
certification, in an effort to position the
company at the forefront of card fraud
prevention.
According to Attie van der Linde,
General Manager: Integrated Transaction
Solutions at ACS, it has become an
operational and strategic imperative to
invest in becoming PCI DSS certified in
order to protect cardholders against fraud.
Contact Details:
Attie van der Linde
General Manager
Integrated Transaction Solutions
Tel: +27(0) 11 879 5700
Direct: +27(0) 11 879 5712
Altech Nuplay Advertorial_fcp.indd 55
55
2015/09/22 9:44 AM
Untitled-1 3
2015/09/08 3:02 PM
OPINION
B
Why outplacement
is a smart strategy
Developing a strategy to assist retrenched employees could go a long way in
protecting a company’s brand equity and reputation. By Craig Spalding
IMAGE: SUPPLIED
F
ew could argue that today’s
world of work is radically
different to what it was even
10 years ago. Sophisticated
technology, shifting
demographics and tighter margins are
forcing business leaders to change their
strategies. In South Africa, while small- and
medium-sized businesses are transforming
within our financial services sector, the rapid
changes are unfortunately having the largest
impact on the large corporate structures and
business models that exist, which are being
forced to make some radical shifts.
Ironically, these are the very organisations
that have pioneered innovation and have
been recognised globally for excellent
governance. They have also in the past
presented attractive employee value
propositions (EVPs) to top talent, both at
senior and graduate levels. Sadly, this shift
is often translating into higher rates of
retrenchment. While retrenchments used to
be a fairly rare occurrence in major South
African financial services organisations,
it is becoming far more commonplace.
This trend is impacting senior and highly
qualified professionals, although junior
employees are also facing the threat of
retrenchment more often than before.
There have been several high-profile
examples of widespread retrenchments
in recent months. Worryingly, many
companies implementing cuts are
neglecting to put processes in place that
take into account the needs and wellbeing
of the outgoing/retrenched employees.
Often, these processes are simply seen as
compliance to Section 189 of the Labour
Relations Act, in order to mitigate the
risk of legal action by employees. As a
result, major brands within the highly
competitive financial services industry
are being tarnished by severe reputational
damage as retrenched staff members go
out into the world armed with a negative
sentiment towards their former employer.
In addition, the media picks up on stories
of unfair dismissals and current employees
start to fear for their own futures, further
impacting the internal EVPs.
This is not only a great pity, but a critical
business risk that requires a lot more
attention than it’s currently being given.
Although retrenchments cannot be
avoided in today’s corporate world,
there are strategies that can mitigate
the negative side effects – for both the
departing staff members and the company
doing the retrenching. One strategy is
the implementation of an outplacement
programme. Outplacement is essentially
the provision of assistance to retrenched
employees in finding new employment.
It is important to note that the public
and press only hear about retrenchments
within a company when they have been
poorly managed. Business leaders often don’t
recognise that it is far more difficult to repair
a tarnished reputation as an employer than
it is to plan ahead and protect their brand
equity. Outplacement initiatives can be
invaluable with regards to this.
From a commercial point of view, an
outplacement programme also reduces the
cost of labour action through the CCMA
and large out-of-court settlements. It must be
stressed, however, that it is the longer-term
impact that needs to be the focus.
Smart outplacement initiatives can also
help people to understand and recognise
the need to reinvent themselves in the
workplace, and how to go about doing so.
They also provide invaluable feedback to an
organisation about culture, values and its
leadership practices. Our advice is also to
pay attention to the feedback received and
start implementing changes immediately,
instead of waiting for the dust to settle.
The key elements of a successful
outplacement programme will thus include:
• A formal debriefing, during which the
retrenched worker is encouraged to take
stock of his career;
• A profile assessment, covering technical
skills, experience and personal factors;
• A re-evaluation of goals and ambitions;
• An understanding of what drives change
and new ways of working;
• A focused plan, which could include
acquiring new skills/education,
personal branding, CV writing, interview
and negotiation training;
• Learning effective career management;
• Doing what you want to be doing –
because it inspires you; and
• Doing what you should be doing –
according to your strengths.
While it should be one element of a
larger strategy, effective outplacement
can provide companies with a valuable
way in which to nurture trust and
spread goodwill among both former
and current employees – as
well as within the broader
business community.
CRAIG SPALDING
is the Director at
Tuesday Consulting, an
executive search firm.
Banker15_Opinion_outplacement .indd 57
57
2015/09/21 10:31 AM
B OPINION
Customer intelligence
refuels retention and loyalty
As the banking industry pursues improved customer engagement, unlocking the value of
data becomes critical in designing a successful loyalty programme. By Lauren Barbour
A
Four factors for success
When we look at the leaders in loyalty in
South Africa, we can see that there is no
single secret recipe to success for driving
retention and loyalty. However, there are
some distinct commonalities among the
most successful loyalty programmes,
with the highest satisfaction, engagement
and retention rates forming the basis of
a successful model. It is interesting that
despite these programmes operating across
vastly different industries, these traits
remain consistent, indicating a must-have
list for creating customer loyalty.
58
They build a consistent customer
experience. Their data-derived customer
insights and understanding are used
to consistently provide customers with
experiences that are relevant, timely,
convenient, and seamless across all channels.
LAUREN BARBOUR
is Head of Customer Engagement
Solutions at Principa.
The four things successful loyalty
programmes all share are:
They commit to data-derived customer
intelligence and decision-making.
According to a recent Harvard Business
Review paper, businesses have 95% of
the data that they need to build a robust
understanding of their customers, but only
36% of businesses have any idea of how to
extract any value from this data.
Building your business proposition and
strategy based on data-derived customer
insights that reveal customers’ needs,
motivators and expectations allows you
to prioritise and invest in what is most
important to your customers. It also
allows you to accurately predict what your
customers will do in the future.
They have a business-wide commitment
to data-driven customer centricity.
For the leaders in loyalty, factual
understanding based on data forms the
basis of everything they do, and this leads
to shared vision, top-down commitment,
customer-centric KPIs that drive customerengagement improvements, and a common
understanding of their customers.
They innovate. There is another
significant benefit to better understanding
your customers and being able to craft
experiences based on their needs: it
creates an environment that supports
and fosters innovation.
Data-driven decisions
drive profitability
A focus on understanding, connecting
with and engaging customers in a relevant
and personalised manner has an impact
on a company’s bottom line. Multinational
management consulting firm McKinsey
& Company states in its research that
businesses that are considered customer
analytics champions improve profits
by 126% on average compared to their
competitors. They are also over seven
times more likely to up-sell and cross-sell
to existing customers, and 21 times more
likely to migrate an above-average share of
customers to profitable segments.
The winners of the battle over customers
will be won by banks that successfully
make the mind shift from relying on
traditional marketing methods to
investing in customer analytics and datadriven marketing. The speed and accuracy
through which banks can derive and
action data-derived customer intelligence
will soon mean the difference between a
market leader and a follower.
IMAGE: SUPPLIED
ccording to leading industry
analysts, Forrester Research,
we are in the age of the
customer. What customers
expect, how they want to be
serviced, what information they are prepared
to share, and how loyal they are have all
changed radically. This realisation has led
successful banks to drastically change the
way they do business. The most significant
and most successful change is undoubtedly
the growing focus on extracting value from
their most valuable commodity – their data
– in order to extract value from their most
valuable assets – their clients.
This is both a science and an art, which
we refer to as ‘customer engagement’, or the
deliberate efforts of a business to sustain
positive customer experiences with their
brand, in order to drive behavioural changes.
Regardless of whether this is driven through
a loyalty programme or more subtly through
client-experience optimisation strategies, it
is no longer a differentiator for banks, but a
table stake to remaining competitive.
Banker15_Opinion_customer intelligence .indd 58
2015/09/18 9:12 AM
LIFESTYLE
B
How can banks be better at
corporate social investment?
When it comes to effective CSI, there are no easy answers on what to
do or how to do it. Rose Cohen tackles these tough questions.
W
hat we know is that
approaching CSI as
a feel-good or
quick-fi x exercise
runs the risk of
missing out on opportunities for both
business and society at large. In Trialogue’s
primary research – undertaken with 100
companies – corporate respondents were
asked to share their experiences and advise
on how to better contribute to sustainable
social and economic growth. What emerged
were some basic, but astute, suggestions
on implementing, communicating and
monitoring CSI practices, regardless of
industry.
To improve CSI implementation:
• Make resources (people and time)
available.
• Collaborate with reputable organisations
already established in the geographical or
developmental areas you are interested in.
• Ensure that the skills of your
implementing team correspond with the
project and beneficiary requirements.
• Establish a strategy to guide
implementation.
• Encourage ownership and accountability
among implementers and beneficiaries
alike.
• Approach CSI with the same businessdriven mentality as is common in other
corporate functions.
IMAGE: SUPPLIED
To bolster CSI communications:
• Communicate openly and encourage
beneficiaries to communicate for you.
• Communicate honestly – don’t take credit
for changes that aren’t attributable to you.
• Leveraging existing communication
channels can be effective within budget
constraints.
• Make success stories and case studies
part of your ongoing practice to ensure
that you have intent to communicate and
don’t underestimate the importance of
powerful images for your projects.
Monitoring the
effectiveness, effectively:
• Define and communicate metrics with
implementation partners and beneficiaries
at the project’s outset. Review and update
key performance indicators (KPIs) as
required.
• Identify your goals and objectives from
the beginning.
• Securing independent verification from
specialist agencies can add cost but it
improves the quality of information.
• Quantitative data is important, but
qualitative information such as scale
studies is also valuable.
• Ensure monitoring and evaluation is
proportionate to the level of investment
and strategic value of the project.
• Ad-hoc donations are unlikely to require
the same oversight as flagship projects.
• Ask only for what you need. Do not
overburden your partners or beneficiaries
with unnecessary requirements.
• Communicate findings transparently.
and future generations: “We look for CSI
programmes that have a track record
of sustainable impact – particularly
programmes that go beyond strong skillsbased training interventions – and link
these interventions with an opportunity,
for example, working with organisations
that place individuals in their first job
or internship.”
As a leader in wealth creation and
protection, Sanlam’s CSI vision aligns
with their business vision to support
people to live their best possible life.
The Sanlam Foundation implements
CSI initiatives that aim to facilitate
equitable participation in the economy by
those communities that have previously
been prejudiced.
Old Mutual looks to do business in a
way that can also grow societies. Staff
volunteering is seen as an important
way to integrate the company and its
employees into the social fabric of local
communities. The ethos is embedded
in the culture of Old Mutual, with
approximately 35% of staff actively
engaged in one form of volunteering
or another.
* As shared in The
Trialogue 2014
CSI Handbook,
17th edition.
CSI and financial institutions
A few financial institutions share on the
subject of their CSI practices*:
Barclays Africa notes that becoming
the ‘go-to’ bank means facilitating greater,
more inclusive prosperity for current
ROSE COHEN
is Managing
Editor at
Trialogue.
Banker15_sed_financial_education.indd 59
59
2015/09/21 10:32 AM
2015/09/22 10:15 AM
2015/09/22 10:15 AM
ADVERTORIAL
How do apps, authenticated early
debit orders (AEDOs), application
program interfaces (APIs) and
BlockChain fit together?
Mobile apps for retail and business banking
have now been around for a few years and
the catch-up game is pretty much over. One of
the areas still to mature is mobile point-of-sale
(POS) apps and the use case of these devices.
We believe that the business of payments
and collections is going to see some new
applications that do much more than just
take a payment. This factor is our critique of
the current app payment space – they just
do the payment. It’s great for consumers,
but ‘meh’ for merchants. To quote my
favourite coffee shop: “Zapper is just
another card for me.”
Our view, tested with customers during
the last 12 months, is that payment
collection via card on mobile needs to do
more than just take the payment. It needs to
serve up product and price information on
the mobile device, record the sales person
doing the transaction, and capture the
information of the customer.
Why? Well, because this is all broken
from a digital perspective currently. We are
taking mobile payments from consumers,
but are still doing manual reconciliations
and using paper for invoices and receipting!
Sound complicated? For sure, as it requires
62
a system and application architecture
that combines data from the merchant’s
enterprise resource planning (ERP) or
customer relationship management (CRM)
software, mobile applications and the
banking back-ends for payments. These
worlds are still separated, giving one receipt
from the POS and another from the card
machine and so forth.
So integrated payments, stock and ERP
will take a combined effort from banks,
integrators and merchants, and it will require
more creative use of the API technology.
What is an AEDO*?
According to the PASA site: “An authenticated
early debit order enables the accountholder to
mandate the contracted, future-dated early
debit orders through the use of their bank
card (e.g. debit card) and PIN.”
The coming regulations around AEDOs
are due in February 2016. This provides
more fuel for the argument that the use of
secure APIs between the seller and bank
will be needed, including collection of
customer mandates to protect debit order
integrity. It will also need chip and PIN and
card-present systems to be used over the
quick payment wins seen by the QR code
payment crowd.
It will not be feasible for conventional
card machines to be used in all collections
What is BlockChain?
BlockChain is the underlying system of
transaction technology behind the world’s
most famous crypto-currency, Bitcoin. The
Reserve Bank has apparently been quite
clear with our local banks that Bitcoin is
a no-go area due to its FICA and AML
issues, but we’re looking at BlockChain
and capability in this area very closely,
expecting new key technology pieces to be
built in this area by new FinTech start-ups,
both here and offshore.
Our prediction is that SA will embrace
BlockChain for non-payment transactions,
contracts and store credit, or loyalty rather
than via Bitcoin usage.
How it all comes together
All of the above rests and relies on better
and more elegant use of APIs. APIs are
just ‘geek speak’ for how systems talk
to each other. Enterprise organisations
from Amazon to banks and payment
processors have long realised they have to
open up their value chain to developers
and integrators to build new systems that
connect their stakeholders.
The ability to extend and build value for
merchants via an API is something we are
working on with MasterPass, which will
soon pop onto the consumer radar and
offer improved security and counter fraud
for mobile payments.
* AEDOs are supported by many banks. Mandates are registered on the
AEDO database using a card and PIN authorisation from issuing banks.
These authorisations may not be disputed by account holders. AEDO
collections greatly assist in reducing the risk of fraud for the merchant.
For more information, contact
Tel: +27(0) 11 658 8500
Website: www.ovationsgroup.com
TEXT: CRAIG LEPPAN, OVATIONS DIRECTOR OF BUSINESS DEVELOPMENT; IMAGE: DUKELONG.COM
Apps,
AEDOs, APIs,
BlockChain…
and debit order transactions, and the
ability of a connected PC/tablet or phone to
provide a managed experience for the seller
and purchaser will be a key differentiator.
Again, from our view, new systems will
emerge to address this space and it will be
in mobile devices for collections, sales and
payments.
Ovations_Advertorial.indd 62
2015/09/22 4:09 PM
CLOSING OPINION
B
Half-time report
Globally, this has been an interesting year. George Herman looks back at the first half
of the year, the lessons it has yielded and what they mean for the financial climate.
T
he first half of 2015 can best
be described as a period
of scepticism. Many were
dubious about economic
growth in the United States,
China and (in what now seems a customary
concern) Europe. During this period, the
sentiment of most investors in financial
markets also turned sceptical. In light of
this, the returns achieved by most asset
classes can be described with a single
digit. The mantra ‘low rates for longer’
seems to have given way to ‘a low-return
environment’. But is this true? Have all the
potential negatives caught up with us and
are we really in for a prolonged period of
low returns? Let’s look at the regions one by
one and then decide.
The United States of America
The United States started 2015 off
slowly due to a variety of reasons. Some of
these impediments had a more significant
impact on growth than was originally
anticipated. That caused many to suddenly
doubt the virility of the United States’
recovery and, in turn, the ability of the
Federal Reserve (the Fed) to hike interest
rates as expected. This caused the US dollar
to take a breather from the phenomenal
bull run it has been experiencing since the
middle of 2014 and, in the process, allowed
some commodity prices to lift their heads.
However, don’t underestimate the United
States’ recovery for one moment!
Jobs have been created for three years
on the trot, and consumers are in a healthy
position due to growing incomes, low debtservice costs and lower energy costs. GDP
growth will be in excess of 3% early in 2016
as job creation, the housing market and
earnings growth all expand in sync. Housing
Jiang Jianqing is
the Chairman of
the Industrial and
Commercial
Bank of
China.
data has improved materially and new and
existing homes are trading at volumes last
seen in 2008. Look for a resurgence of the
American consumer and remember the old
adage: “As goes the United States consumer,
so goes the global economy.”
“Bond yields have
brought an age-old
debate to the fore. What
moves first: the economy
or the bond market?”
The Eurozone
As the end of June rolled around, the
world again feared that Greece would quit
the euro currency (and thereby exit the
Eurozone). Since this ‘Grexit’ tragedy has
been on the horizon for three years, how,
you may ask, did it manage to cause
such jitters and concern around the
negative effects of such a move? Certainly,
despite all the naysayers, Europe is well
prepared for this crisis – both mentally
and practically. Unfortunately,
the only real victim is Greece, as the
country faces a very uncertain and
extremely difficult period ahead.
That said, with all the energy and focus
going into preventing the weakest link from
breaking, the overall European chain has
not been able to gain in strength. Economic
growth, although positive, is tepid and bound
to stay that way for some years to come.
There are positives to the European story,
however, including: the unity created by
the Greek crisis within the Eurozone; the
strength of the United Kingdom’s economy;
and the European Central Bank’s (ECB’s)
monetary stimulus. The negatives are: the
uncertainty around the Greek fallout; high
unemployment; rising political instability;
differences around handling of immigrants/
refugees; and rising bond yields.
Bond yields have brought an age-old
debate to the fore. What moves first: the
economy or the bond market? Ten-year
bond yields in Germany suddenly rose from
0.06% to 0.85% very soon after the ECB
announced its quantitative easing (QE)
programme. This is not a textbook reaction
and caught many off guard, despite every
man and his dog calling the bond market a
bubble. What caused this rise in yields?
1. A belief that the European economy
would speedily gain traction post-QE?
2. Fears of inflation?
3. Doubts about a Grexit?
4. Valuation normalisation?
Probably all of the above, but the fact is the
bond market moved first, as it usually does.
Look for any or all of these four factors to
come into play in the near future. ›
Banker15_ClosingOpionion.indd 63
63
2015/09/18 9:15 AM
B CLOSING OPINION
The Japanese economy is growing;
although at a slower pace than was hoped
for. While the economy still requires
immense monetary stimulus, for once it’s
not detracting from global growth. Look
for further stimulus measures to try and
maintain this positive momentum.
China
The best way to describe the Chinese
situation currently is that Beijing is on an
economic diet. Balance is currently the
name of the game. After gorging on fi xed
investment spending to induce and support
growth, China’s policy makers now need
to pull back state intervention and let the
consumer economy develop and maintain
itself. This is a multi-decade process, which
requires major adjustments to the economy.
Being as strict as the regulators are, and
with central government firmly in control,
China is much better equipped and more
likely to succeed than any Western nation
attempting the same feat.
China is managing down the excesses
in credit growth and the housing market,
while selectively supporting other industries
to keep the economy expanding. The
country’s growth slowdown to 7%
is seen as catastrophic by many
but, in reality, this growth
should decline to no more than
5% over the next few decades.
The world and specifically
commodity markets are not
yet on this page; hence
there’s quite a bit
more pain ahead
for those who
are dependent
on Chinese
infrastructure
spending.
The Chinese
Lesetja
Kganyago is the
stock market
Governor of the
doubled
South African
between late
Reserve Bank.
2014 and
June 2015. The
64
market showed signs of obvious bubbling
behaviour as retail investors piled into
the market in the absence of institutional
support. This market was thus perfectly
set up for the spectacular 40% decline
that ensued during the third quarter.
The country’s central bank, the People’s
Bank of China, was quick to respond by
reducing interest rates and also devaluing
the currency peg against the United States
dollar. This action caused the world to
suddenly doubt the veracity of Chinese
growth, which then caused global financial
market turbulence. Commodities linked to
China, as well as all other emerging markets,
were sold off aggressively.
The question now is: how weak or strong
is Chinese growth really? In the meantime,
the markets got caught in a snowball of
weaker Chinese expectations, leading to
weaker global markets, resulting in weaker
Chinese expectations.
South Africa
There’s no different way in which you can
pronounce ‘current account deficit’ that
could soften the issue or detract from the
discussion around its existence and the
strategies for reducing it. Therefore, in true
head-in-the-sand style, no discussion is
taking place. International investors
don’t care about pronunciation,
but they do care about political
risk and deteriorating relative
competitiveness.
South Africa has declined in
– and even dropped
off of – some global
ranking lists of
competitiveness
and ease of doing
business. These
factors, combined
with unique new
visa regulations
which are
decimating our
tourism industry,
are eroding the
investor base
supporting the rand. The latest current
account data showed that the deficit
decreased somewhat, but this was on the
back of interest flows, not trade flows.
In fact, exports declined further during the
last quarter, according to the South African
Reserve Bank (SARB) Quarterly Bulletin.
Even with the Reserve Bank actively
intervening in the currency to lend support –
something they haven’t done for a long time
– the rand weakened. This poses significant
second-round inflation risks to the SARB as
consumer price index (CPI) is expected to
be well above 6% early in 2016. Look for the
SARB to hike the repo rate regularly into the
latter part of 2015 and 2016, despite being
caught in a stagflationary bind.
Outlook
The world is totally focused on two
unknowns right now:
1. When will the Fed hike interest rates for
the first time?
2. How low will Chinese growth go and
what will the knock-on effects be?
The onset of rate normalisation poses
a severe risk to countries dependent on
financial flows to support their deficits,
countries such as Turkey and South Africa.
As the global interest rate universe
starts rising, but at different speeds, expect
major dislocations in many markets that
previously basked in the comfort of cheap
capital. Uncertainty regarding China has
unsettled the markets, but those fears are
exaggerated as the Chinese slowdown is
now seven years in the making.
Commodity, bond and currency
markets are bound to experience further
turbulence during this period of interest
rate normalisation. Equities won’t escape
the volatility, but they don’t carry the
same level of overvaluation and hence risk
as bond markets do. This period should
provide many opportunities for long-term,
well-diversified investors to add beautiful
assets to their portfolios.
George Herman is Head of South African
Portfolios at Citadel.
IMAGES: RUSSELL ROBERTS, ©FINANCIAL MAIL, ERIC FEFERBERG
Japan
Banker15_ClosingOpionion.indd 64
2015/09/18 9:16 AM
4
2
2015/09/17 3:36 PM
Untitled-3 1
2015/05/12 11:08
10:45 AM
AM
2015/09/22
Edition 15
BANKER SA
EDITION 15
solutt ions
FOR SA’s
SMALL
BUSINESS
SECTOR
PICASSO HEADLINE
Untitled-2
1
1
2015/08/19 3:24 PM
2015/09/23 9:11 AM

Banker SA 15 - The Banking Association South Africa

Transcription

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