INFOGRAPHIC: 10 things for every eCommerce site

What are the 10 requirements for every eCommerce site? Director and IT specialist from Werksmans Attorneys Wilmari Strachan shares:

ecommerce

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Financial advice to my 20-year-old self

Women’s life expectancy at 83 years is greater than men, who on average will live to 78. Research shows that 33% of marriages end in divorce and 50% of women over the age of 65 are either widowed or divorced. At some stage in their lives, 8/10 women will have to take care of their own finances, but not all of them are prepared for this.

Speaking at the Alexander Forbes Women’s Day event at Summer Place on Thursday 6 August 2015,  Jenny Gordon, Head of Retail Legal Support, says that women should empower themselves with the necessary skills and knowledge to manage their finances. We need fewer “Cinderellas” and more women who take care of their finances, says Gordon.

Most women do not work with financial advisors and those that do have higher assets and greater confidence and preparedness to meet financial goals. Women often wait for crises like divorce, retirement, retrenchment and critical illness. Gordon advises how women can prepare in advance for these events to turn them into “manageable moments”.

Divorce

According to the Sanlam’s Survey on the Retirement Crisis, divorce is the fourth most emotionally devastating event. This is after death, loss of money and unexpected accident other than a motor vehicle accident, says Gordon.

After a divorce, both parties’ standard of living declines, because they have to run two households. If the parties shared a retirement fund, the proceeds that are split may not be enough. Research shows that more women wish to divorce than men, but less women initiate a divorce because they do not have the finances for litigation. “Building up a nest egg for a life crisis is not disloyal to your marriage, it is necessary,” says Gordon. Women should also start taking a more active role in the household’s finances.

Critical illness

“If you have a critical illness, you will survive if you can pay for medical treatment,” says Gordon. Quoting Dr Marius Barnard who developed the critical illness policy, Gordon says that dread disease becomes a probability over the age of 70.

The usual culprits are heart disease, cancer or a stroke, but dementia is the “real scourge”. “Alzheimer’s is a sad disease because it robs a person of who they are,” says Gordon. It is necessary to have conversations with your families about this. Most people appoint a family member to take care of their affairs through the power of attorney, once they are declared of unsound mind. However, this is a fallacy in South African law, as no one will be empowered to deal with your affairs, explains Gordon.

There are three remedies. One can apply for a curatorship, which is a more expensive option, costing between R50 000 and R60 000. There is also a new procedure where a person can apply for an administration order, which takes three months and two medical recommendations. The final option is a Trust fund.

Retirement

On average, people only live off a third of their earnings while they were working. Only 10% of people retire with enough money and 2% retire comfortably, says Gordon.

Another challenge is that money is not enough to make people happy. “One needs to develop a passion for something and that takes one a long way,” says Gordon. Experiences, relationships and hobbies are far more fulfilling than money. These passions are developed before retirement.  Spending money on small luxuries for other people provides a “greater rush” than buying large scale items, like a sports car, for yourself, says Gordon.

Last will

Do not make the mistake of dying intestate, advises Gordon. “Don’t let anyone else have your last word. Your last word is your will.” When dealing with a will, it is important to update it regularly. Let heirs know where to find important documents and passwords in the event of your death.

Assets can also be distributed through a retirement fund or a trust. Marriage is another way to distribute your inheritance. If you have a life-partner, be sure to get a cohabitation agreement to protect your rights.

This article was featured on Finweek.com.

Growing concern for SA’s asset management market

The asset management market is in good shape. In the past seven years since the global financial crisis, markets have improved exponentially, according to Glenn Silverman, Chief Investment Officer at Investment Solutions.

The real concern is the future direction these markets will take. All eyes are on the United States Federal Reserve Bank which may raise rates in September. As a result, commodities, emerging markets and their currencies are under pressure, says Silverman. It takes “gumption and guts” to be an asset manager given the conditions of the macro environment, he says.

Following recent global fund manager, CEO and CIO visits and meetings with local and global asset managers, sentiments about South Africa’s economic performance were mostly negative. The slow economic growth and political economy are discouraging. The energy crisis, low credit agency ratings and government wage negotiations all contribute to accumulating risks, explains Silverman.

Speaking at a media briefing, Ann Leepile, head of manager research at Investment Solutions indicated four dichotomies in South Africa.

1. South Africa as an “unloved”

Emerging markets

Emerging markets performed torridly in 2014, asset managers in emerging markets took a lot of “pain”, says Leepile. “South Africa is in a game where it can win, lose or draw,” says Silverman. However, South Africa has been scoring “own goals”. Citing the new Visa regulations as an example, Silverman explains how South Africa has done itself a disservice through taxing regulations that effectively discourage tourism. “Emerging markets remain the mistress, high beta, high risk… they may look cheap but people are struggling to make the leap,” adds Silverman.

Global managers are withdrawing from emerging markets, which is unfortunate, says Leepile.

Global managers

There are vast differences of perspectives in the global manager landscape. For example, Cape Town and Johannesburg have different “macro” stories, despite both being within the same country, says Leepile. Cape Town- based managers have “strong” negative perspectives of the industry currently, while Johannesburg- based managers have done reasonably well with inflows, despite unfavourable conditions.

Industrials and resources

In their desperate search for value, Cape Town- based managers have underperformed. Johannesburg-based managers have performed better and are not as overweight in resources as Cape Town-based managers.

Johannesburg-based managers have a stronger link and understanding of the global landscape, says Leepile. “They have similar views as global managers which is why they have been saved from the underperformance of heavy resources,” she says. Most Johannesburg-based managers have similar views to foreigners, that is what protected them, she explains.

2. SA’s exposure to Rand hedge stocks

Given political activity, global managers are concerned about South Africa’s macro environment. Managers are comfortable with corporate governance of South African companies and the JSE as an exchange but shares are often bought from companies where earnings are outside of South Africa, says Leepile. “They [managers] don’t like what’s happening in South Africa,” says Leepile. They often choose to buy from companies like Discovery, Steinhoff, Shoprite, Bidvest, Sasol and Naspers. These companies have huge exposure and expansion plans into Africa and the developed market, she says.

3. Staffing complexities

The retention of staff remains an issue. Employment equity issues and immigration concerns are growing. The industry has lost three key financial service professionals at senior levels to the United Kingdom, United States and Canada, leaving gaps in the industry that can’t be easily filled or replaced, explains Leepile. Retention is also a challenge as people move out of the industry.

Cape Town has struggled to recruit employment equity candidates. “Getting black staff to Cape Town is a huge challenge,” says Leepile. As for Johannesburg, asset managers are spoilt for choice when it comes to finding black financial service professionals, she says.

4. Rise of passive

Due to fee pressures, active managers have underperformed. Less than 20% of active managers globally, meet indices, says Leepile. There has been a huge increase of assets going to passive portfolios. The passive strategies competing with each other will ultimately reduce fees, says Leepile. Passive portfolios is attracting strong flows which is a “strong, reinforcing” cycle, says Silverman.

So far, there has been a “pull and push pressure” from the passive management industry. In 2014 alone assets in passive portfolios increased by $200bn, says Leepile. This is accompanied by a 56% increase in passive investment over a five year period. There is room for both active and passive strategies, she says.

This article was featured on Finweek.com.

Mixed feelings about the Retail Distribution Review

The Retail Distribution Review (RDR) is designed to benefit customers, financial advisers and the greater financial services industry. It offers a new approach to market conduct regulation that is pre-emptive and proactive, avoiding the reactionary approach of past regulation. It addresses the cause of complaints and poor outcomes at the source, says Jonathan Dixon, deputy executive officer of insurance at the Financial Services Board (FSB).

Unlike regular “tick-box” compliance, RDR focuses on the delivery of outcomes. It instils a Treat Customers Fairly (TFC) culture in financial services businesses, says Dixon. Existing arrangements have failed to deliver fair outcomes to customers. Customers are unaware of or don’t understand the services they can expect from their financial advisers, he says.

“We want customers to be better able to understand and compare the nature, value, and cost of the device and other services they receive,” says Dixon. Quality, professional, financial advice is critical to deliver on the TCF outcomes. RDR supports sustainable business models and financial advice, says Dixon.

Many of the wholesale market reforms are being addressed. Changes are being made because the current, complex distribution landscape is “fundamentally flawed”, says Dixon. It creates risks, not only to the delivery of fair customer outcomes and effective supervision, but also to the sustainability of financial advisers, he explains.

The current intermediated business model is equally bad for consumers and financial advisers, which is why a new model was necessary, says Dixon. The value of financial services advisers is not properly recognised and they are remunerated poorly, he explains.

The regulatory burden is stunting small- and medium-sized businesses.

With RDR, three-sector performance is required. This means it should address the types of services provided by intermediaries, product supplier and intermediary relationships and remuneration, says Dixon. Many financial advisers will have to take the opportunity to review their business models and consider the extent to which the business models align within the interest of customers. The core value proposition of financial advisers is the delivery of professional advice and service. The proposed reforms of the RDR provide the framework and opportunities to build a sustainable financial advice business, he says.

Feedback on RDR indicates general support for the objectives of the review. However industry commentators differed on the best way to achieve these objectives, says Dixon.

Strategist and economist at Investec Asset Management, Nazmeera Moola, says that South Africa is at a “critical juncture” and overregulation should be dealt with. “The regulatory burden is stunting small- and medium-sized businesses,” she states.

Considering the period of 1 March 2013 to 31 July 2014, government published 2 985 notices. Of these notices, 1 120 applied to Transnet. “How do you run a business wen 1120 notices affect your business on a monthly basis?” asks Moola. The FSB was behind 200 notices, Sars supplied 138 notices and the department of trade and industry produced 456 notices. “The idea of regulating your way to a good business is ridiculous,” she says.

There are good intentions behind the proposals, however the execution is poor because there are skills shortages at local government level that make it difficult to enforce these regulations.

The amount of regulation and compliance has reached fever proportions, says Glenn Silverman, chief investment officer at Investment Solutions. Regulations have had a huge impact on company finances as more compliance staff are required. “The regulatory environment is very tense,” says Silverman. “How is much more regulation going to help anyone though?” More resources will have to be diverted away from hiring staff to comply with regulation. This is impacting on the country’s economic growth and the growth of businesses. “There is a need for regulation, there is no dispute about that. But there needs to be a balance or growth and employment opportunities,” adds Silverman.

This article was featured on Finweek.com.

How business is coping with load-shedding

Written by Buhle Ndweni and Lameez Omarjee

Johannesburg City Power

The entity has started installing smart meters at households as part of its strategy to save costs and manage energy usage, especially during peak hours.

A smart meter enables the exchange of data between the utility or municipality and the customer. One advantage is remote meter reading, which means the utility or municipality does not have to incur the cost of sending someone to a property to do a reading or to turn off the power. The utility can also turn off power remotely, says energy expert Chris Yelland.

From a load-shedding perspective, smart meters allow the utility to inform a consumer to reduce their electricity consumption. This could be through warnings to turn off a geyser or swimming pool motor, says Yelland. “Smart meters are just simply a more modern metering device that can also communicate in two directions, from the utility to the meter and vice versa.”

Customers benefit in that they can manage their electricity consumption better. The smart meter allows customers to keep track of their usage and budget for it. “With a normal credit meter, you get a bill at the end of the month. You have no idea what it’s going to cost you until you get the bill,” explains Yelland.

Although smart meters are more expensive than credit and prepaid meters, the cost is covered by the utility. Currently only customers living within the designated roll-out areas qualify for smart meters.

Gautrain

The Gautrain is still able to operate normally during load shedding, with the exception of a few systems like escalators on the stations above ground which are not operational, says Jenny Roodt, Marketing Manager.

The three main components of the Gautrain system affected by load shedding is the traction power of the trains, station operations and control systems, explains Roodt. The traction power to the trains have two independent feeds directly from Eskom. The feeds are normally not affected by load shedding, says Roodt.

Underground station operations are powered by two independent feeds, via a ring feed, explains Roodt. If one of these feeds are affected by load shedding, the other kicks in automatically. In the unlikely event that both feeds are affected by load shedding at the same time, back-up generators operate most sub-systems for a limited duration. Generators power lighting, ventilation, lifts and escalators, she says.

Stations above ground have an independent feed. This feed has been affected by load shedding before. However, generators are on standby to operate most sub-systems, including lifts but not escalators, explains Roodt.

In the event of load shedding, there will be a short lag, while the alternative power source kicks in which may cause certain systems to stop for a few seconds, says Roodt. Regardless of location, all critical sub-systems like signalling and controls are connected to generators.

Ster-Kinekor

Operations executive of Ster-Kinekor Theatres, Irshaad Mahomed, says their theatres, like many businesses in SA, are also being impacted by the ongoing load-shedding.

He says where possible they check the load-shedding schedules and cancel screenings that could be affected by the power outages before customers can book their tickets.

“If a screening is underway when the power goes off, Ster-Kinekor will issue re-admission tickets to the affected customers to enable them to return to the cinema to watch the same movie, or another film, on another day,” explains Mahomed.

He adds that the decision to install a generator at a particular Ster-Kinekor site is bound by the agreement with the shopping mall in question.

“If a mall is fitted with a generator, in some instances that generator does not generate enough electricity to power the cinema complex. It is an extremely costly exercise to install generators that can generate the amount of power required to run the projectors, cinemas, air con, catering, etc,” he states.

“Ster-Kinekor is currently assessing its sites but obviously the installation of generators at all 56 of its commercial sites across South Africa is an extremely costly exercise,” he says.

Currently three Ster-Kinekor cinemas are fitted with an uninterruptible power supply (UPS), while eight other sites have generators.

Netcare

Private hospital group Netcare plans to spend R150m over the next two years to install generators, stockpile diesel and implement other measures to ensure uninterrupted service delivery within its facilities.

Currently, 54 of Netcare’s local hospitals have UPS back-up generators that kick in within half a second of an electricity outage. Of these, 28 have a second back-up generator and 21 facilities have ‘full island capacity’, meaning they could run independent of the grid for a sustained period.

In the near future, 40 hospitals will have a second back-up generator and up to 28 facilities full island capacity. In the event of a national blackout, critically ill patients and emergency patients will be moved to 11 specially equipped Netcare facilities around the country.

Taste Holdings

Taste Holdings has a national footprint of restaurant chains in the form of both franchises and outlets that the group directly owns. It is the owner of food chains Fish & Chips Co., Zebro’s, Maxi’s and Domino’s Pizza.

CEO of Taste Holdings’ Food Division Jay Currie says load-shedding has had a negative impact on sales at their over 500 franchise stores because less than 20% of these have back-up generators.

Taste Holdings’ franchise stores have a low setup cost, says Currie, and installing a generator relative to the setup cost of the stores is high. He says all Taste can do is discuss the importance of having a generator with the franchisee and inform them about finance options available for this. But in the end, it is up to the franchisees.

Currie says 80% of restaurants Taste owns directly have back-up generators that switch on automatically when the electricity switches off. He says since their restaurants tend to be in smaller shopping malls or complexes they are able to negotiate with landlords to enable them as tenants to install their own back-up generators.

This article was featured in Finweek magazine.

Are exports SA’s solution for economic growth?

South Africa is in a challenging position, with low growth hovering around 2%-2.5% when it should be 5% and above. Exports are very important. If the economy is going to grow, there needs to be an increase in local trade, export trade and support for infrastructure, says Greg Nosworthy, head of Euler Hermes South Africa.

Treasury’s forecasts have downgraded significantly, from 4.5% in 2010 to the current level of 2%-2.5%, says Nazmeera Moola, economist and strategist at Investec Asset Management.

INDUSTRIALISATION: Ludovic Subran, Chief Economist at Euler Hermes says South Africa should manufacture and export finished goods.

INDUSTRIALISATION: Ludovic Subran, Chief Economist at Euler Hermes says South Africa should manufacture and export finished goods. Photo: Provided

The country’s biggest problem is the lack of export earnings, explains Moola. Import expenditure exceeds export earnings. The bulk of GDP is generated by the services sector, not from exports, which has resulted in the current account deficit, she says. More exports are needed to reduce the deficit, says Ludovic Subran, chief economist at Euler Hermes.

There has been a downward trend in export prices since mid-2013, says Moola. Prices have come down by 40% in total. The collapse in oil prices offered some benefit, however this highlights that there is a problem with the items being exported.

The country has been exporting commodities for the past 50 years. In 1964, SA mainly exported farming goods. By 1994 this changed to commodities like gold, platinum and iron ore. Not enough manufactured goods are exported and this is due to the energy crisis. There is limited electricity supply for manufacturing plants, explains Moola. Electricity intensity in the manufacturing sector is down 30%.

Comparing SA to other African countries, Nigeria’s economy has evolved from a soft commodity exports like crude and petroleum in 1962, to purely oil in 2012. Kenya has a more diversified economy. Besides commodities, it exports manufactured goods like clothing and cleaning materials, says Moola.

Other diversified economies like Ethiopia, Zambia and Mozambique are faring well. Given the commodity bust, countries built on commodities like Angola and Nigeria are having a hard time, with less investment and infrastructure spend, says Subran.

SA is a mixed case. It is a diversified economy, but commodities are a big market mover for GDP. There is potential for services and manufacturing sectors to contribute more to GDP, says Subran.

It’s quite a massive investment but they’re cutting the middle man and they’re making huge labour opportunity for thousands of individuals.

There should be more investment in the manufacturing sector. “You have commodities, you have the people who work, you need to industrialise the country,” says Subran. There needs to be a “game changer”. SA has the skills and commodities to develop entire industries downstream, this will equip the middle class through the “rebirth” of the manufacturing sector, he explains. This means developing the extraction and refining processes. “Why export to China to reimport to South Africa?”

This year Indonesia banned the export of raw nickel to China. The refining will take place in Indonesia and then materials will be exported. “It’s quite a massive investment but they’re cutting the middle man and they’re making huge labour opportunity for thousands of individuals,” says Subran. He admits this is not easy and private investment is necessary.

Countries move too fast from a commodity-based economy to a service-based economy. This only works in small countries where there are fewer people to feed and employ. Industrial revolutions are major job providers and they structure the private sector, says Subran.

Ways to Move SA Forward

Ralph Mupita, CEO of Old Mutual Emerging Markets highlights three options to take to move the SA forward.

1. Convert the trust deficit in the country to a trust surplus.

“South Africa is a very unequal society,” says Mupita. The trust deficit emanates from inequality. Government, businesses and the labour sector should engage to solve the problem by promoting minimum wage and improving productivity levels. SA is the fifth-most unequal society in the world, according to the Taylor Commission Report. Moola says that the high inequality does not mean that there has been no progress in alleviating poverty. There have been improvements in education, health and living standards.

2. Implementation of the NDP

“It is not a perfect plan, but no plan ever is,” says Mupita. It is still capable of creating economic growth, dealing with challenges of unemployment and inequality to achieve the 2030 goals. Aspects of the NDP that should be prioritised include resolving the energy crisis, which calls for investment by the private sector. The model in China should be adopted where power generation is handled by the private sector and distribution is handled by the public sector.

Says Subran: “The electricity problems need to be solved stat, it could be a massive disincentive for future investors.” The infrastructure deficit should also be addressed. The private sector should invest long-term capital projects that generate returns to overcome growth challenges.

Mupita says: “Private sector investment will alleviate government’s burden to try and fund everything.”
Lastly, the education system should of good quality and be affordable for accessibility. More people should graduate from the school system with the right skills relevant for the future, which will be digital- and technology-based, says Mupita.
Adds Moola: “If we don’t solve education, we will not solve the other problems that we want to.”

3. Play a meaningful role in the economic integration in the rest of the continent

Intra-Africa trade is lower than it should be and SA needs to play an active role in the effective integration in the SADC region. East Africa’s integration works best in terms of regional business integration. However there is not enough economic interdependency in SADC, says Mupita.
SA is isolated form other markets, which is why it needs to engage with neighbouring countries, and ultimately expand trade across the continent, says Moola.

Subran adds that a lot can happen out of SA, it can be used a springboard to develop the rest of the continent, in turn fostering development in the country too.

This article was featured on Finweek.com

Pharrell with Woolies vs Boycott Woolworths

The announcement of musician Pharrell Williams’ collaboration with Woolworths for sustainability projects was overshadowed by BDS South Africa’s #BoycottWoolworths campaign.

On Thursday 9 April 2015, Williams tweeted: “Proud to collab with retailer @Woolworths_SA. Are you with us, South Africa? See you in September! #PharrellWithWoolies”. But some members of the public reacted adversely and responded with tweets.

The collaboration is part of The Woolworths Good Business Journey and aims to “uplift education in South Africa” and create sustainable food farming.

In a press statement, CEO for Woolworths Holding Limited Ian Moir, says that the collaboration is built on shared values between the parties. “Pharrell is a global icon for social cohesion, advancement through education and environmental awareness – these same values lie at the heart of our business and form the foundation on which this partnership is built,” he says.

In a statement Williams says: “We want to bring together everyone who cares about making a difference. Like Woolworths. They are a global blueprint for how good businesses should do good business.”

However, BDS SA will write to Williams, formally requesting that he postpone the collaboration until Woolworths divests from Israel. The BDS #BoycottWoolworths campaign is inspired by the anti-apartheid boycott movement of the 1980s against companies that traded with Apartheid South Africa.

“Given our history, as South Africans, we call for the boycott of companies, such as Woolworths, who continue to trade with Apartheid Israel. We trust that Pharrell Williams will heed our call,” stated Kwara Kekana National Spokesperson of BDS SA.

This article was featured on Finweek.com.