Month: March 2015

Who Pays for Black Advancement in ZA?

I had not planned to tell one of several hundred black people in a room that he was a racist arsehole. But I did.

I was attending the first day of the Black Industrialists’ Indaba, at the invitation of the dti. The speaker at the time was a timid lady, the mike was not working well, and I was finding it difficult to follow her speech.   The problem was compounded by the people sitting right behind me, who were holding an animated conversation.   After many minutes of this, I turned round and asked them to shush. To which the response was: “I don’t take orders from a white man.”   Hence my response. The odds were that they would have been black, but that was not why I sought their silence.

Did I over-react? Possibly.   There were a few dozen whites at the event and – we had been told – around 700 people in total. A good crowd, but then President Zuma was speaking, and there would be news on new funds for black businesspeople.   Although I thought some of the speakers were a bit strident, the basic theme made sense. As Zuma said, there has been political transformation in ZA, but not real economic transformation.   In giving new help to blacks, government was not being racist to whites. It was uprooting the heritage of the racist past.

As well as new funds of R1bn, existing government incentives were to be targeted more forcefully at black industrialists, with companies which have fallen behind the curve on BEE being excluded from the eligibility criteria.

Chatting to one of those closely involved in the empowerment and industrial debate (who is black and has perfect manners) we agreed that while the aim of promoting black industrialists – with at least 100 new ones being “created” in the next three years, this must not be a zero-sum game, with all the benefits being won by black industrialists coming at the expense of, mainly-white, existing firms.  He said: “We must grow the economy, not just shift things around.”

And, of course, we must remember where the money is coming from for any enhanced support of black industrialists. Zuma again gave his (highly disputed) estimate that only 3% of the JSE is in black hands.   And the whole rationale behind the new policy shift is to move the economy into more balance between black and white ownership.   But, currently, the wealth and taxes of South Africa are predominately created and paid by whites, if we accept the government’s own arguments.

So let’s not be taken in by all the hype.   The white knights in this instance are predominately white, for their taxes will foot the bill and they will be pushed further to the back of the line when seeking state incentives.  We no longer expect black people to take orders from us, but they don’t seem too reluctant to take our cash.

ZA Confidential is a subscription newsletter.   For subscription details, invitations to adult events with edible food and drinkable wine, or any other communication, please contact:   zaconfidential@gmail.com     Follow us on twitter: @zaconfidential

Let Us be Proud of Successful ZA Expats, but Learn Why They Left

It is always heartwarming to know that you come from a country of achievers, that some of that magic may have also rubbed off on you. So we are rightly proud to read that Patrick Soon-Shiong, who was born in Port Elizabeth, is the world’s richest doctor and one of the US’ Top-40 billionaires.

Of course, he is not the only ZA expat to be worth a bit. Entrepreneur and inventor Elon Musk, who was born in Pretoria and now operates in North America, has also been in the headlines recently, and there are other South Africans living in Switzerland and in London and in Australia who are not short of a billion or two.

Super. Bravo. Let’s be proud of all of them.

But let us not be complacent.   While these fine men are creating jobs and employing people and spending cash, it may not be doing the ZA economy much good. They may have philanthropic activities in the land of their birth, but their impact on ZA’s GDP may not be very high.

So we need to ask why they may have felt the need to leave this country to secure their success?

We do have to acknowledge that there are pockets of excellence in ZA education and training. We produce excellent accountants and engineers, doctors and entrepreneurs.   But you go to London, or Vancouver or Perth or San Francisco, you will find clusters of super-talented South Africa-trained people who are no longer living in this country.   Meanwhile, you look around this country and you see the millions who have been let down by the education system.

What drove them away?   Was it a fear of high and violent crime which threatened them and their families?   Was it the reverse apartheid of Black Economic Empowerment, which many believe bolsters less-able black people and penalises white (and Chinese?) South Africans?   Was it the kleptocratic culture of corruption which stretches from lowly functionaries to the very top of government? Was it concern that we will soon be unable to rely on basic services such as water and electricity? Was it the collapse of standards in education?

Was it a feeling that the rainbow miracle of Nelson Mandela is being destroyed by his former comrades in arms?

Unless we understand what drives the very talented out of ZA, the drain of those with the best brains is likely to continue. And that will be a very bad thing.

Maybe not so much for them, but certainly for the rest of us.

Tweet of the Day:

Edmund Blackadder (@BlackadderTweet): “There’s an air-raid going on and I don’t want to have to write to your mother at London Zoo and tell her that her only human child is dead”

ZA Confidential is a subscription newsletter.   For subscription details, invitations to adult events with edible food and drinkable wine, or any other communication, please contact:   zaconfidential@gmail.com     Follow us on twitter: @zaconfidential

Die Vine Intervention – Belfield Syrah and Magnifica

Gurulicious food and wine expert Michael Olivier introduces two stylish reds from the same stable – Belfield’s 2011 Syrah and the 2011 Magnifica.

John Fraser is joined in The Die Vine Intervention Jo’burg studio by IT expert Malcolm MacDonald, Corlien Morris from Wine Concepts and Gumtree Auto’s Jeff Osborne.

The tasting is followed by a chat on topical food and wine issues.

You can click on the podcast here:

Accentuate CEO on Business Challenges, Including the Looming Water Tsunami

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ACCENTUATE CEO FRED PLATT

All too many PR people and CEOs get it so wrong.  They fail to engage properly with the media, to chat face-to-face, to build up a relationship.   We receive many news releases which have a glimmer of interest in them, but the best way to really understand a company and its executives is by chatting to them.   Top marks, then, to Accentuate, which not only hosts regular media lunches, but is able to look at the business scene in SA from a wider perspective.   Our last encounter was prompted by their latest results, but also gave an invaluable insight into the company’s views on ZA today.   We spoke to CEO Fred Platt:

ZAC:   You indicated that Eskom’s power cuts are a major headache for you, with a 2 1/2 hour disruption translating into 7 hours of downtime at your flooring factory in East London.   Why is this, and do you think other manufacturers are in the same boat?

 FP:  The situation regarding load shedding with our manufacturing facility extends well beyond the (un)scheduled 2.5  hours of load shedding. As a manufacturer of vinyl flooring, the process is a continuous process, requiring heat as well as energy to power the machines. Load shedding leads to a situation where more often than not the machines need to be cleaned and heat needs to be generated prior to production resuming – resulting in loss of production for up to 7 hours. 

 ZAC:   Is it going to get any better, and if not, what can be done to minimise the harm?

 FP:     The issues around load shedding do not only relate to the lack of electricity,  but also around planning and some degree of certainty as to when power will not be available. Unfortunately, notwithstanding engagement with both Eskom and the local municipality, we still do not see a situation where the agreed load shedding schedules are implemented as published. Adhering to these schedules will go a long way towards alleviating waste and allowing the company to implement proper shutdown procedures prior to load shedding. Currently management is also investigating alternative energy sources to try and mitigate the impact of load shedding.

 ZAC:    Your fastest growing business unit is the one dealing with water treatment.   What are the water challenges facing South Africa, and how can you help with the solutions (every pun intended!)? 

 FP:      If we believe that the current energy crisis is a problem and an inhibitor of economic growth then the looming water crises will unfortunately dwarf this problem. South Africa is facing both a situation where existing water infrastructure is failing as well a very severe shortage of water-  forecast for as soon as 2025. The solution to this problem relates both in the rejuvenation and expansion of existing water infrastructure as well as the responsible recycling, reuse and disposal of water and effluent. As with energy, water has been underpriced and undervalued as a resource and I am of the opinion that over the next decade we are going to see a massive increase in both the price of water as well as penalties for the lack of recycling and irresponsible discharge of effluent. The cost of managing water will need to be factored into the production process of both industry and agriculture and alternative sources of water supply, such as desalination, will need to be actively explored. Drawing on the experience of developing economies such as India, and through our partnership with the leading water treatment company in India, Ion Exchange, Accentuate is able to provide agriculture, industry and government with innovative and appropriate technology, application and funding models to address some of these looming challenges. 

ZAC:    A lot of firms talk about the opportunities in Africa, but you seem to believe many are going about it in the wrong way – by pricing too high.  How is this, and how are you doing it differently?

 FP:  It is sad that South African companies are not taking their rightful place on the African continent and leading economic development on the continent. Certainly I believe that South African manufacturers are underrepresented on the continent. Although huge opportunities exist on the continent, we do not seem to take advantage of these and very often lose these to Europe or China. This is as a result of two major contributing factors, both relating to our past and the global isolation due to sanctions and strained relationships with our African brothers. The first, unfortunately, relates to a certain arrogance that was developed during our period of isolation towards African countries and cultures. The second relates to the fact that due to the restrictions on ownership of foreign currency, Africa gave access to earning hard currency. In addition to this, the risk was perceived to be great and African trade was generally conducted at exorbitant margins. Very often a Rand price was merely converted to a US$ price resulting in product being sourced at much reduced prices and margins from European or Asian companies. Unfortunately this mindset still persists in many costing models when dealing with African trade. Pricing therefore remains one of the major obstacles to effective South African Trade on the continent. 

ZAC:    Your flooring division has important State customers, with schools, hospitals and so on….    There has often been concern in business circles that it is easier for government at all levels to allocate funds than to spend them.  What is your current insight?  Is trade picking up? 

FP:   2014 was a particularly difficult year where we saw Government infrastructure spend slow right down with very little spend in the areas of schools, hospitals and clinics. This was due largely to three factors including the national elections, provincial political battles as well as diversion of capital budgets to operational expenses. Although spending is still constrained due to a lack of efficient and effective delivery mechanisms in some areas, we are currently seeing an uptick in infrastructure spend in the areas of education and healtcare in certain areas, especially in Gauteng and the Western Cape. Government is acutely aware of the lack of service delivery and we remain cautiously optimistic that this upward  trend will continue and accelerate.

 ZAC:    The rand is weak, and has been for some time.  Are you seeing the benefits of this?

 FP:    Although the rand traditionally acts as a hedge against competitor imports, while at the same time increasing the competitiveness of South African manufactures on the continent, we are still seeing an unusually high level of competitor activity within the domestic market. As the only local manufacturer, we remain confident that the prolonged relative weakness in the local currency will ultimately provide our Floorworx business with a sustained competitive advantage in both the local and African markets.

 ZAC:   Your latest financial results were posted this week, and show an impact from strike action.   How concerned are you about labour unrest in SA, noting that we are very badly regarded on this matter in international rankings?

FP:  Industrial action in an economy such as South Africa where there is so much inequality will remain a reality for some time to come. Most of this activity is cyclical and we have periods of extreme turbulence tempered with period of relative calm. What is of greater concern however is the politicisation of the union movement with factions within the movement mobilising workers towards the achievement of political objectives. The potential impact of this on industry is of major concern.

Conclusion:

It is easy to complain about the day to day irritations in life, but when they are happening on a monstrous scale, and when they are having a real and growing impact on business, it is time to sound the alarm bells.

Tweet of the Day:

Mark Twain (@TheMarkTwain):

Such is the human race, often it seems a pity that Noah… didn’t miss the boat.

ZA Confidential is a subscription newsletter.  For any information or subscription details, contact:  zaconfidential@gmail.com

Die Vine Intervention – KWV Earth’s Essence Pinotage

You may have seen the recent articles about wine being made with Rooibos and Honeybush woods, which has the massive benefit of having no added sulphites.   Here is a link to the recent Business Day article on the topic http://www.bdlive.co.za/business/innovation/2015/02/26/rooibos-revolution-for-cape-wine

Michael Olivier has unearthed one such wine – KWV’s Earth’s Essence Pinotage 2014.   He presented it to our tasting panel of Corlien Morris from Wine Concepts in the Bluebird Centre, Jeff Osborne of Gumtree Auto and IT expert Malcolm MacDonald.

Check out our podcast here…..