English - Citadel

Transcription

English - Citadel

T H E C I TA D E L
Issue 2015
INVESTOR
IN THIS ISSUE
MAGAZINE
Message from the Citadel ceo
Africa offers promising opportunities
Creating true wealth
DISCOVER
TH E T R U E
W O RT H
OF YOUR
W E A LT H
C OM PAN Y NE WS
P ERS O NAL FIN AN C E
4
MESSAGE FROM THE CITADEL CEO
5
NOTE FROM THE EDITOR
7
BRAND CITADEL
8
MESSAGE FROM THE HEAD OF WEALTH PLANNING
11
THE WEALTH CORPORATION
32
REACH OUT 2014
76
ANNUAL CLIENT PRESENTATION PHOTO GALLERY
12
The first step towards a better
financial future
14
Low cost passive investing can have
a high price
21
Can Socialism work in South
Africa?
34
THE LOW VOLATILITY ANOMALY
40
54
Your Portfolio
TAX-FREE SAVINGS AND INVESTMENTS
65
Ensuring fair treatment for clients
O UR C OV E R
Inspired by our beautiful country and the endless
possibilities it brings, this striking cover image captures
what many South Africans know as an ‘only in Africa’
sunset.
Dramatically perfect and inspiring to those who gaze at
it, we hope the beauty of this image reminds you, our
reader, of what a remarkable country we live in and the
wonder that is on our doorsteps.
We encourage you to submit an image for our 2016
cover. Please email lizellet@citadel.co.za.
63
Leading the way in marine conservation
18
Diversifying into offshore property
30
Island style
48
Expanding into Africa
50
Africa offers promising opportunities
to local companies
44
Lessons in leadership
56
Home-grown inspiration
69
The Art of inspiration
24
Creating true wealth
26
WOMEN INVESTORS ARE FROM VENUS
67
Post-Divorce financial planning
This publication has been compiled for information purposes only and
does not take into account the needs or circumstances of any person,
or constitute advice of any kind. It is not an offer to sell or an invitation
to invest. The information and opinions in this publication have been
recorded in good faith from sources believed to be reliable, but no
representation or warranty, express or implied, is made as to their
accuracy, completeness or correctness. Citadel Investment Services
Proprietary Limited accordingly accepts no liability whatsoever for any
direct, indirect or consequential loss arising from the use of or reliance
upon this publication or its contents.
The Citadel Investor magazine.
Published by: Citadel Group Marketing. Tel: 011 722 7600.
SP ORT
Whisky: South African style
A member of the Peregrine Group. Citadel Investment Services Proprietary
Limited, registration number 1996/006847/07 is an authorised financial
services provider in terms of the Financial Advisory and Intermediary
Services Act, 2002.
Trav el
LIFE STYLE
43
INSPIRATION
SA wine export
Wome n’s
Int erest
28
O FFSH O R E
© Citadel Investment Services Proprietary Limited, 2015.
38
From a captain’s perspective
52
Team MTN-Qhubeka
61
The business of rugby
73
A car crash a week
74
Best Mtbing around Citadel Hubs
46
Malawi’s Magnificent Majete
Wildlife Reserve
71
The island less traveled
The Citadel magazine 2015
3
MESSAGE FROM
THE CITADEL CEO
Andrew Möller - Citadel Chief Executive Officer
andrewm@citadel.co.za
2014 has been another exciting year for Citadel and its
team. The year seems to have passed in the blink of an
eye, generally an indication that there has been a lot of
activity on all fronts, which has certainly been the case.
The year started with a very strong set of financial results for
Citadel and the Peregrine group as a whole. The foundation
for these strong results was the investment growth that took
place within our clients’ portfolios. In addition, we were able to
continue attracting new clients to join the Citadel community.
This is a strong indicator that our service offering is relevant in
the context of the general market.
Our decision to continue to focus on our core competency of
wealth management was vindicated as was the decision to
raise the profile of our brand through a revised brand and
advertising strategy. These strategies allowed us to move into
the new financial year with confidence, despite the headwinds
of increased legislation, tough local economic conditions and
ongoing competition from local and international brands. The
first six months of the new financial year (April to September)
produced another pleasing set of results, once again on the back
of good client experiences.
There have been a number of highlights for Citadel over the
past 12 months. Some of these have made our ‘headlines’ whilst
a number of others have been more understated. The most
significant strategic development was the outright purchase of
The Wealth Corporation. Citadel initially acquired a 50% stake
in The Wealth Corporation three years ago. This was followed by
a further 20% a year later and the final 30% in April 2014.
The Wealth Corporation business specialises in providing
retirement advice for its clients. This includes planning for
retirement, the transition into retirement, and the retirement
years. The Wealth Corporation’s big differentiator is its
focus on holistic planning, which includes the practical and
emotional side of retirement as well as the financial elements.
The positioning of this brand provides a great foil to the Citadel
business which focusses on a broader range of investment and
fiduciary related needs. As such, each brand has their area of
specialisation, while enabling the group to lend assistance to a
broader network of clients and potential clients.
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COMPANY NEWS
Citadel continues to look for ways to enhance and grow our
business, while maintaining the client intimacy for which we
are known. As such we are pleased to have been selected as the
wealth management partner by Mercantile Bank to provide
solutions to their client base comprising mostly entrepreneurs
and business owners. This offering will take place under the
Citadel and The Wealth Corporation brands, and is great
recognition for our position in the market as a leading provider
of wealth management solutions.
Within the Peregrine group, we have experienced a new
energy and appetite for greater collaboration between sister
companies. At a Peregrine level, stakes have been purchased
in both Cannon Asset Managers and Java Capital. Following
the introduction of these businesses, we have begun to work
closely with each of them, benefitting from the synergies that
exist between us and the relative market leadership positions
of both. We are now also working closely with Stenham Trust –
another group company – to develop our own intellectual
property for offshore structures. I have no doubt that all of
these relationships will benefit our clients in due course.
Internally we have continued to expand our investment
solutions for our clients. We have launched a property solution
as well as a stockbroking platform that will allow for further
client contribution. Through The Wealth Corporation, we
have developed a range of funds that are specifically designed
to facilitate asset allocation and cash flow management in
a cost-effective and efficient manner. We are also exploring
the possibility of making some of our funds available to the
retail market. All of these initiatives are designed to leverage
off the expertise and brand we have built up over the years.
Importantly though, our existing clients and their needs
remain at the centre of these solutions.
From a brand perspective, the 2014 highlights have been
the inaugural Inspiration Indaba hosted in Johannesburg in
September 2014 and the launch of the Citadel App for smart
phones and tablets. The Inspiration Indaba is designed to
provide a platform for South African leaders to share their
inspirational stories. The day started with the first speaker –
Siya Xuza – receiving a standing ovation for his journey
from Umtata schoolboy to Harvard graduate and energy
entrepreneur. His talk set the scene for a great day of sharing
and motivation. The Inspiration Indaba is an initiative we will
look to build on in the coming years.
Our app was launched in September with the focus
being to provide our clients access to information on
their portfolios, as well as communication pertaining
to the company and issues of general interest. The
response to the app has been great and we have
received the honour of being nominated in the top
three business apps across 76 countries by the app
development company, YUDU. It is a great honour for
us to receive this recognition – particularly as it is our
first foray into the app space.
Finally, on the people front, we have managed to retain and
attract top talent in the industry. I believe that one of the main
reasons for this has been our ongoing evolution as a business
and the opportunity it creates for people within the group. Our
human capital has always been key as we work to ensure our
clients continue to discover the true worth of their wealth.
NO TE FRO M THE E DI T OR
Welcome to the first edition of
Citadel’s new-look Investor magazine.
Instead of publishing Investor as a
newspaper twice a year, we decided
to transform it into a glossy, annual
magazine for your reading pleasure.
Communication is important to us. We
believe that to help you realise the true
worth of your wealth, we need to understand
your needs and meet them, which is why
we encourage clients to stay in contact with
us via whichever communication tool you
prefer.
Aside from informative content created
especially for our clients by Citadel, covering
the latest news and developments across
advisory, fiduciary and investment topics,
you’ll also find the new Investor is packed
with lifestyle content sourced from top
freelance journalists. We hope you’ll enjoy
reading stories ranging from sport to travel,
business and more.
Another exciting new communications
development has been the launch of
our Citadel App. Designed as a holistic
communications tool, we hope all clients will
download and use it. We update it regularly
with valuable information from Citadel as
well as lifestyle articles (including fabulous
promotions and giveaways). What’s more,
you can access your portfolio valuations and
get your quarterly reports by accessing the
secure portal section of the app. We’d love
your feedback on your experience of using
the app as we continually work towards
making it everything you need and want.
Please drop me a mail at lizellet@citadel.
co.za with your thoughts.
For those who are digitally wired, you
can also find us on Twitter (@CitadelSA),
LinkedIn and YouTube, as well as our
website (www.citadel.co.za), which
remains a content hub and the home of
thought leadership articles generated by
Citadel’s various business units. We also
showcase our media coverage here.
I hope you enjoy the new-look Investor.
Kind regards
Lizelle Taylor - Citadel Brand and
Communication manager
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At Citadel, we believe that money by itself is merely a
number. It is the meaning and the purpose applied to
that money that interests us, and it is what carefully
managed wealth allows our clients to do and be, that
gives meaning to what we do.
BRAND CITADEL
COMPANY NEWS
Andrew Finlayson - Citadel Marketing Director
andrewf@citadel.co.za
2014 has provided fertile ground for the Citadel marketing
team to grow and develop the Citadel brand. Following the relaunch of our brand in 2013, we have sought ways to entrench
our brand message, and to engage with our clients. The
profile of the brand has been raised through advertising and
communication. We have continued with our TV ad campaign
across the DStv lifestyle channels and complemented this with
print, digital and radio slots. This strategy has seen the profile
of the Citadel brand been elevated substantially.
The highlights of the past year have undoubtedly been the
Inspiration Indaba and the launch of the Citadel App. The
focus of the app has been to provide our clients with up-todate portfolio and market information as well as sharing
important news relating to the company. It has also been
designed to provide our advice team with tools to share with
clients when meeting in person. Included in the app is our
online publication – My Life – which provides content that is
of broader interest with a focus on common passions such as
wine, food, sport and travel.
The Inspiration Indaba 2014 featured a variety of home-grown
speakers who were invited to share their personal stories
and, by doing so, provide inspiration for the audience and the
broader community. The Indaba was preceded by a series of
interviews on radio as well as a podcasts on Moneyweb. These
interviews featured the speakers and other South Africans with
inspirational stories to share. Each speaker brought something
unique to the day and made a special contribution to the
Indaba’s success.
Within the group, we are excited to be establishing a brand
identity for The Wealth Corporation – a subsidiary of Citadel.
The Wealth Corporation partners clients who are preparing
for, transitioning into, or are living in retirement. Retirement
can either be liberating or extremely stressful – depending
on the preparation that has taken place. It is the aim of
The Wealth Corporation to ensure that our clients are well
prepared and that all elements of their retirement have
been considered, the financial, as well as the practical and
emotional. It is our aim that through our thorough planning
process, our clients can take many different scenarios into
account, allowing them to know tomorrow, so that they can
welcome tomorrow.
On the whole, it has been an exciting and busy
year for the Citadel group brands. We look
forward to building on this strong foundation
in 2015.
One of the images used in our ad campaign.
7
COMPANY NEWS
MESSAGE FROM THE HEAD
OF WEALTH PLANNING
John Kennedy - Citadel Director: Wealth Planning and Regional Head: Western Cape
johnk@citadel.co.za
Twenty-one years ago my Citadel partners had a dream to build the leading wealth management
business in South Africa – recognised and respected by our peers and clients alike.
This vision would be realised based on a set of
shared values:
1.
A true partnership ethos; believing that together we
could go further.
2. Intellectual honesty would be the cornerstone of our
relationships – both internal and external.
3. That we would act like owners and advocate an
entrepreneurial spirit.
Grounded in this vision, these values have combined
to build a business which today sees:
•
•
•
Citadel serving more than 4 500 families.
Employing some 375 people focused on all aspects of
wealth management.
Managing family wealth of more than R30 billion,
invested in multiple asset classes all over the world.
Much of the success in growing Citadel has been in having a
specialist team of advisors focused on new opportunities, the
‘growth side of the coin’.
Such growth – rather than being driven by the traditional
‘sales and product centric’ approach is at its heart
motivated by an emphasis on people – and with it a greater
understanding of how to enable prospective clients to make
better decisions about their personal finances. Making
positive decisions compounds positively and it is our ultimate
aim to have an enduring relationship with each client as
sound advice seldom leads to immediate gratification.
Given the world we live in, the benefit of our advice becomes
more relevant in the tougher times and moments of crises we
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tend to face from time to time. Each year brings its own unique ‘worry
on/worry off’ characteristics and so the process we follow is a consistent
and effective one, specifically;
•
•
Key to financial independence is defining, understanding and
managing the various financial and investment risks and forms a
cornerstone to how we go about setting the objectives and planning
the financial roadmaps for each of our clients. This allows people to
move forward by design rather than by drifting from one event
to another.
We assist clients to protect and grow their capital and, in turn,
‘end well’ by recognising that investment capital (whether generated
from the sale of a business, retirement, inheritance, or other) is
often representative of a long and sustained effort.
•
We aim to make life ‘simpler’ by reducing the complexity of
finance and investments – to recognize that less can be better and
furthermore that once a strategy or objective is agreed upon we have
the ability to execute on those decisions.
•
Furthermore we know how to ‘keep score’ and measure whether a
client’s goals and objectives are being met on a continuous basis.
History is a great teacher and whilst our brain’s wiring makes looking
to the past seem less risky than it was, various patterns become evident
over time. Amongst other;
•
•
•
•
•
•
•
•
How liquidity dries up in market pullbacks.
How market volatility increases our anxiety levels and creates
detrimental and unnecessary decision-making.
How the ‘buy’ decision behind investing is as important as the ‘sell’
decision.
How cash flow management is key to a robust financial plan.
That defining a personal exit strategy on your terms allows you to
‘end well’ and translates personal success into financial success.
How the lack of a proper estate plan and a will can cause untold
trauma.
How poor personal financial governance is an unnecessary risk.
How we place too much emphasis on the global and national
economies and too little on our personal economies.
All of the above highlights why Citadel is set up in the way that it is –
including but not limited to financial planning, fiduciary planning, risk
management, philanthropy and investment management. Coming up
with the answers and solutions and where to allocate investment capital
is a collaborative process that is the essence of the advisor relationship
and provides the clarity and certainty that many of our clients seek.
WHAT ARE THE
CHALLENGES AND GOALS
FOR WEALTH PLANNING IN
2015?
With offices in all the main centres around
South Africa we continue to look for and
grow our advisor team both from within the
group as well as looking for the right quality
specialists who fit the bill.
Similarly we look for prospective clients
who are aligned with our targeted approach
and whom seek a long-term advisory and
investment relationship. To this end our
efforts will continue within select corporate
initiatives and we will continue to grow our
presence within the entrepreneurial and
business owner universe.
Our women-focused strategy is working
well and we have an incredible community
that is growing exponentially. We are also
building on the successful joint ventures
currently in place and, over the year, we will
continue to explore new avenues of business
partnerships.
The regulatory environment is becoming
more complex and we will continue to
embrace all its facets and ensure we remain
at the forefront of best practice.
Importantly, what we’ve learnt over the years
is that successful growth comes from the
‘inside out’. Being endorsed by our clients
and broader networks is invaluable and
allows us to continually leverage off our base.
If we continue to get this right we continue to
grow in the right way at the right pace.
Lastly, as 2015 unfolds we’ll enjoy and
protect the culture that makes Citadel the
unique and distinctive business it is.
I hope you’re part of it.
9
With The Wealth Corporation’s expert financial planning solutions,
we make sure our clients are fully prepared for what their future
may hold. Our Integrated Insight retirement programme offers a
360-degree view of our clients’ retirement needs, giving them the
most comprehensive advice. Because we believe that only once
you fully understand what your tomorrow may bring, will you be able
to truly welcome it.
COMPANY NEWS
NEWS FROM CITADEL’S AFFILIATE COMPANY
THE WEALTH CORPORATION
Andries du Toit - The Wealth Corporation CEO
andriesdt@wealthcorp.co.za
The past year has been a busy one for The Wealth
Corporation. It has been a year of exciting change,
growth and development within the business. The
most obvious change has been with regards to the
shareholding and structure of the company. In April
2014, Citadel acquired the remaining 30% of the
shares of The Wealth Corporation with the result
that it is now a wholly owned subsidiary of Citadel
Investment Services.
From a leadership perspective, I took over as CEO from Peter
Nieuwoudt who spent six years at the helm. Peter remains as a
director and a key member of the team, and continues to follow
his passion of advising clients. I have been joined on the board
by Andrew Finlayson – Citadel Marketing Director – who
will take responsibility for the brand and new business
development within the company. Andrew Möller – Citadel
CEO – fulfils the role of Chairman of the board. Bouwer Nell,
one of the founding members of The Wealth Corporation
remains a director.
We have experienced immediate benefits through the ‘parent
relationship’ with Citadel. In the background, the systems,
IT, finance and compliance teams have been working hard to
ensure that the operations of the business have a very solid
foundation. From a client perspective, the marketing and asset
management teams have been focusing on the investment
solution and client experience.
The link to Citadel has also enabled a new growth path to be
developed for the business. Aligned with this is the addition
to the team of a number of quality advisors, as well as the
opening of a number of new offices. The past year has seen our
advisory team grow by 50%. In addition to this, it is our desire
to add further experience to the Sandton office and align our
numbers with the economic opportunity in South Africa.
In addition to the new heads within the team, we have opened
a new office in George. We felt it was a great opportunity to
have a presence closer to our existing client base in the area,
as well as to benefit from the demographic shift taking place in
the country with an increased number of people relocating to
the coast. In other office-related news, the Durban office has
relocated to join Citadel in the La Lucia Ridge office. I have no
doubt the teams will benefit from operating closely together.
Finally, we have opened a satellite office in Stellenbosch, which
will make interactions with our clients in the winelands far
more convenient.
From a solutions perspective, we have benefitted from the
close relationship with Citadel’s asset management team and
have developed the H4 range of funds that our clients have
seen in their portfolios. These have been designed to align
specifically with the financial planning process and ensure a
cost-effective and efficient way of managing portfolios. The
range of funds ensures a globally diversified portfolio that can
be easily rebalanced when necessary.
Another exciting development that you will see more of, is
a refresh in the brand strategy of the business. Our focus
remains on partnering with clients who primarily have a
financial planning need, to ensure that they are retirementready. This includes saving for retirement, transitioning
into retirement and living through retirement. Retirement
is typically one of the most important decisions in one’s life
and we would like to ensure that you are prepared for this
transition, have considered all of the possible scenarios and –
as a result of the considered view – can look forward to the
next chapter of your life with excitement and enthusiasm.
We believe that advice pertaining to retirement can’t apply to
financial matters only and should also include practical and
emotional considerations. We call this Integrated Insight and
it forms a key part of our advisory process. Ultimately, our
considered and robust planning process allows you to know
tomorrow, so that you can welcome tomorrow.
In support of our focus on retirement-readiness, we will
continue to host retirement seminars in all of the major centres
in 2015. We held our first seminars in November 2014 and they
were a great success. These will become the cornerstone of our
marketing efforts as we look to share our message with people
considering their future.
I remain extremely excited by the future of The Wealth
Corporation. I believe we will be able to make the most of
the opportunities presented to us – both by investment
markets and within the business and the industry. We are
well positioned for growth as well as having the team in place
to take care of our clients, who form the foundation of our
success.
11
PERSONAL Finance
THE FIRST STEP TOWARDS A
BETTER FINANCIAL FUTURE
Marius Bester - Citadel Advisory Partner
mariusb@citadel.co.za
The well know saying “failing to plan, is planning to fail” is highly applicable when it comes to personal
finance. Developing a financial plan allows you to see the bigger picture; crucial when mapping out
your financial future. It helps to provide financial security, particularly in the event of unforeseen
circumstances, like disability or death. In addition, it addresses the big concern of having enough
invested to retire independently.
Developing a financial plan can be complex and is best done
by securing the services of an accredited financial planner who
will follow a step-by-step process to really understand your
situation from all relevant angles and help you to produce an
integrated solution, or financial plan, tailored specifically to
your needs.
12
Creating a personal financial plan starts with identifying your
goals. Remember that each goal needs to be achievable within
the context of your situation. This serves as a reality check,
taking into consideration the resources available to achieve
your desired financial goals. If your resources are insufficient,
particular goals must be adjusted to be more realistic. Goals
are usually dependent on your monthly budget.
D E FINI NG Y OUR G O A L S
Each individual’s goals are different. Some people prioritise
risk cover (assets, life and disability cover), which involves a
premium. For other people, retirement is the most important
goal.
When looking at risk cover, the amount of cover needed must
be determined to ensure adequate protection of assets to avoid
financial loss. Assess whether you can afford the premium for
this cover, taking into account your income versus expenses
(your budget). It may sometimes mean making sacrifices to
ensure the attainment of your goal.
When it comes to saving for retirement, the sooner you start
saving, the better. It is important to remember that the returns
of your investment will be determined by the underlying asset
class of your investment. Investing has its own risks, whether
it be institutional, asset class, inflation or cost. This is why it
is beneficial to have a financial advisor who can help you to
navigate the choices available.
If you don’t have a financial plan in place, ask yourself: “What
will the effect be if I die tomorrow? Or what if I become
disabled?” A well structured financial plan protects the
household and your family/dependents from any unforeseen
risk.
Another important question to ask yourself is: “Will I have
enough capital when I retire, or will I be dependent on other
people to survive?” Again, a good financial plan creates
financial security and ensures that all your goals will be met. It
gives direction and meaning to one’s financial decisions.
PR E PARING A FINANCIAL PLAN.
MARIUS’ TOP 10 TIPS:
1
2
3
4
5
A detailed personal budget is a good place to
start. Have a look at your budget and see how any
additional expense for life cover/disability cover/
retirement planning will affect it.
Determine your financial goals and be realistic.
Ask yourself: is it life cover/disability or
retirement/investment planning or all of the
above that need addressing?
6
Be aware of the effects of inflation on investment
values, in particular when planning for retirement.
7
Find a reliable advisor to prepare a detailed
analysis for you and always establish what the
costs will be up front.
8
Get your partner/spouse involved in the process.
9
When it comes to retirement planning, your work
retirement fund will probably not be enough.
Seek financial advice to secure a comfortable
retirement.
Compile a list of your assets and liabilities,
including any current investments and policies.
Include details of the income for both you and
your spouse (if applicable). Include your dreams
or aspirations, such as owning a holiday home or
buying a vintage car.
Consider tax implications, if any. The advice of a
financial planner cannot be stressed enough when
it comes to the complex world of tax.
10
Preferably work with a Certified Financial Planner®
(CFP®). It is a good idea to conduct a background
check by asking for references before enlisting their
services.
13
PERSONAL Finance
LOW COST
PA S SI VE
I N VE S T ING
C AN HAVE A
H I G H PR IC E
George Herman - Citadel Head of South African
Portfolios
georgeh@citadel.co.za
TH E PRINCIPL E S AND ASSUMPTI O NS O F
PASSIVE INVESTING
Passive investment products are relatively new to the
investment landscape. They’re a very welcome addition
to the product universe as a very basic and low cost
vehicle. However, investors should be wary of focussing
only on the simplicity and low cost as the attraction of
passive investing. To make an informed decision, you
must first understand and accept the principles and
assumptions on which passive products are based.
14
The Citadel Magazine 2015
PAS S I V E I N V E S TING H A S V E RY LITTL E
AC T U AL H I S T ORY
C OMPARING T H E AT T RIBUT E S O F
PASSIVE AND ACT IVE PRODUCT S
The Vanguard Group was the first to introduce passive
products when they started offering index tracking products in
1975. These products enabled investors who seek pure access
to a specific market index to achieve that quickly, cheaply and
relatively efficiently, and the products became very popular.
Various new versions of these products soon developed, and
today you can choose between index tracker funds, exchange
traded funds (synthetic or physical), or exchange traded notes.
Investors use these to get pure access to market performance.
To get a better understanding of the merits of active and
passive products respectively, we will analyse and compare the
main attributes of the two styles:
Active asset management has a somewhat longer and more
chequered history – over the last century there have been
many successful active products but also many that failed.
However, since the advances in computer technology became
part of what asset management is today, active management
has exploded.
T H E B E N E F I TS OF A C TIV E
M AN A G EM E NT
Today, no single investment house can do without quantitative
analysts who diligently analyse data and positions, both
before and after investing. Active managers can understand
and monitor risks more effectively as well as test the validity
of investment strategies. In fact, portfolio construction has
become a feat of engineering, as diversification benefits are
maximised based on the degree to which returns of the various
asset classes go up or down together.
The presence or lack of this computational ability and
understanding can make or break an investment house. Many
active managers have failed in their endeavours to deliver
what they promised. However, that doesn’t make active
management a futile exercise. Just think of Thomas Edison,
who, after two years of failed attempts at creating an effective
light bulb, famously declared: “I didn’t fail 10 000 times. I just
found 9 999 ways that don’t work.”
Active managers can understand
and monitor risks more effectively
as well as test the validity of
investment strategies.
1. Passive products are cheaper than actively
managed products, but at a price. Although we
don’t argue that passive products are in fact cheaper than
active products, the relation between the cost and the
benefit achieved must be fair and aligned. Costs should
also be separated to show what investors pay for advice,
what they pay for the administration of their website, and
what they pay for the asset manager. The most important
factor to take into account is that cost is just one of many
metrics that you should use to select the appropriate
investment vehicle. The promise of lower costs distracts
the investor from truly questioning or understanding all
the liabilities and investment risks. When you have to
consider undergoing surgery, you won’t base your choice
of physician only on cost. You will ask questions about the
risks of the procedure, process of the surgery and recovery
alternatives. However, when it comes to investing, it has
become popular to focus on ‘cheapest’ as the only factor
to consider. This is why, to understand the full picture,
it is important to ask your passive provider exactly what
happens to your dividends and what counter-party risks
they assume when entering into scrip-lending agreements
with your stock. It’s also important to ask whether
they achieve their tracking via physical replication or
sophisticated and complex synthetic structures that may
involve derivative counter-party risks (the risk of default
by another party involved in the derivative structure).
Lastly, you should ask about their realised tracking error
(or deviation from the market), which should be zero.
2. Both active and passive managers should be
judged by their actual return track records. Passive
providers often promise that they can provide investors
with the return of a specific index, while pointing out
active managers that failed to deliver what they promised.
It is common discourse in the investment world that you
must show a track record of actual real returns before
claiming any ‘expertise’. In this sense, investors should
be wary of passive managers that take the history of an
index and claim that they ‘could have’ provided that and
will continue to provide it into the future. Just like active
managers, passive managers should be judged according
to their actual track record. There are many sophisticated
systems, people and processes that are required to deliver
accurate, risk-free index tracking, and it’s best that you
see this track record instead of assuming that it can be
generated.
3. Passive and active products exist symbiotically.
The actions of all active managers combined cause
changes in the relative valuations of assets. This transfer
mechanism ensures that markets operate according to
what is known as informational efficiency, where prices
fully reflect all available information. Without active
management, passive instruments would by definition
permanently hold incorrectly or poorly priced assets,
which means passive products would be inefficient
investments that don’t deliver the risk premium they
should. Passive vehicles need active managers for their
survival in a classic symbiotic relationship. In other words,
these styles aren’t enemies, but rather complement each
other.
4. Active managers actively manage risks, protecting
their investors. A passive vehicle provides investors
with the exact performance and risk of the underlying
index. This means there is no interference or management
of the risk/volatility/drawdown that the product passes
onto the investor. On the other hand, active managers will
reduce portfolio risk during times of excessive valuation.
How they do this will depend on the style of the manager
and what’s allowed within the particular mandate. The
fact is that active management is about managing risk as
much as it is about achieving returns and active products
will on aggregate have less risk than passive products.
5. The bottom line is that active management is
not a zero-sum-game. Passive providers have made
bold statements like “The bottom line is: investing is a
zero sum game (ZSG)”*, in other words one person’s
gain is equivalent to another’s loss. They argue that the
underperformance of active managers (after costs) is a
‘mathematical certainty’.
We disagree, for the following reasons:
1) For something to be a ZSG, it has to be an enclosed
universe, with no growth or leakage and a perfect counter
or match to every transaction. This is the case in the
derivative markets and futures markets, where risks are
transferred. For active management or alpha generation
to be a ZSG, every single asset manager across the globe
would have to use the same benchmark for all assets and
should report in the same currency. This is obviously not
the case, which proves active management is not a ZSG.
2) Not all holders of assets actively seek to outperform the
asset’s benchmark. Less than 30% of all assets globally
(and even less in South Africa) are actively managed with
an intention to outperform the market. Other non-index
holders include corporate structures, group holdings,
private ownership, employee incentive schemes and
owners in other currencies. These owners do not compete
for outperformance, but voluntarily contribute to out- or
underperformance as they’re not measured against an
index or benchmark. This means it is theoretically possible
for all active managers to beat the market or core asset
class benchmark. While some active managers fail to
outperform objective market benchmarks, this is not due
to some mystical or mathematical impossibility. Rather,
it is due to poor alignment of interest with the investor,
poor adaptation to a changing environment, incorrect
benchmarks, complacency, and a lack of clear objectives.
Pure asset aggregators are the poorest representatives of
the fine art of active asset management, yet they are often
used to motivate why active management is unsuccessful.
More agile, technologically advanced and diligent
managers have, can and will outperform the market.
ACTIV E AND PASSIV E PR ODUCTS E ACH HAV E
THEIR PLAC E IN THE MARK ET
Passive products are not appropriate for everybody, just as
actively managed products are not appropriate or necessary
for everybody. They fulfil different roles and are, in fact,
complementary. Investors should be very wary of arguments
that disregard active management in favour of passive
management without having the full picture. This is because at
the end of the day, the mere decision of which passive product
to use, is an active decision.
*Moneyweb, 1 September 2013, Opinion: Why the active vs.
passive investment debate is unfounded.
16
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OFFSHORE
DIV E R S I F Y I NG INT O
O FFSH O R E P ROPE RTY
Mike van der Westhuizen - Citadel Investment Analyst - michaelvdw@citadel.co.za
Harold Strydom - Citadel Portfolio Manager - harolds@citadel.co.za
Property investment is often summarised by the clichéd
‘location, location, location’. It may be a well-used phrase, but
this advice couldn’t be more apt when exploring the investment
potential in the global real estate market. Fortunately, you
don’t need to be a real estate mogul like Donald Trump to
access these opportunities.
The most liquid, cost-effective and hassle-free way
to gain exposure to a diverse portfolio of properties
is through listed property stocks (in other words
property-focussed shares that trade on stock
exchanges). Structures called Real Estate Investment
Trusts (or REITs) are a common and globally
recognised way for investors to access incomeproducing, listed property.
A REIT is essentially a company that owns and manages a
portfolio of real estate assets. To qualify as a REIT a company
must have most of its assets and income tied to real estate
investment and must distribute at least 90% of its taxable
income to its shareholders annually.
This income focus means that REITs generally produce a
higher dividend income than ‘regular’ stocks. Also, given that
the underlying revenue (rental income) is mostly contractual
(and, therefore, closely tied to inflation), listed property
income streams are more predictable than most equities and
can provide good inflation-hedging over time. Listed property
also offers decent diversification as part of a multi-asset
portfolio.
Geographical and sector diversification within the asset class
is important, given that the income generating assets (the
buildings) are situated in a fixed location and are affected
by different economic and business cycles. Economies are
not always equally strong at the same time in all regions and
economic growth may not increase the demand for all property
18
types at the same time. It is also important to note that South
Africa makes up about 1.3% of the global US$1.3 trillion listed
property universe (as measured by the FTSE EPRA/NARIET
Global Index), so diversifying into different regions makes
sense.
The South African listed property market is dominated
by large, diversified companies such as Growthpoint
and Redefine, which operate in a mix of retail, office and
industrial sectors. Globally, the picture is a lot different and
specialisation, as far down as subsectors, is common. For
example, certain New York REITS specialise in retail and
office buildings located within a couple of blocks of Central
Park in Manhattan. The investment opportunity set is thus
much larger than in South Africa alone and increasingly we see
locally listed REITs making investments offshore.
As investors we should take cognisance of the fact that the likes of Growthpoint and Redefine
(the true experts in the industry) are finding it increasingly difficult to find good opportunities in
South Africa. While South African REITs have focussed their offshore investments into the United
Kingdom, Australia and Eastern Europe, many other regions offer even better value. The United
States’ market represents roughly half of the global REIT universe and Asia-Pacific makes up another
quarter, making them regions to explore from a valuation perspective.
U N I T E D STAT E S
EUR OPE
AS IA-PAC IF IC
E CO N OMI C G RO W T H
Recovery continues
Recovery fragile
Strong growth
IN T ER E S T RATE S
Historically low
Historically low
Low
SU PP LY- D EM AND
Improved demand
Little new supply
Strong demand
RENTAL G R O WT H
Above inflation
Above inflation
Above inflation
VACA NCI E S
Improving
Improving
Stable
When evaluating listed property on a regional basis, it
is important to consider both property specific factors
(vacancies, rental growth and supply-demand) and macroeconomic factors (economic growth and interest rates).
The overall global picture at the moment is a positive one for
property. The global economy continues to recover, while
interest rates remain close to historical lows.
Few new developments have gone up over the last number of
years, specifically in the United States and Europe, therefore
a supply shortage is developing. Furthermore, many of the
rental agreements signed during the 2008-2009 global
economic crisis are now coming up for renewal and significant
upward revisions are possible. Vacancy rates also continue to
improve.
The last factor to consider is what is already in the price.
Listed property is viewed as a hybrid between bonds and
equity. When bond yields fall, property yields usually follow,
pushing up prices. A key risk at the moment is that bond yields
are expected to rise, however, the property spread (difference
between bond and property yield) is high, providing a
potential cushion against rate increases.
The equity-like component comes through when dividend
growth is strong and that is certainly the expectation in the
positive environment described above.
I N C O NC L U SI O N:
We see global listed property offering great potential at the moment. Since the economic crisis of
2008-2009 started as a housing market crisis in the United States, sentiment towards listed property in
general took on a pessimistic tone. But this is changing. When investing in listed property, it is important
to have a similar mind-set as to ‘regular’ equity investing. It is a long-term investment, markets can be
volatile and drawdowns deep, but over time investors are rewarded with excellent returns.
19
PERSONAL FINANCE
C AN
S OC I AL I S M
W OR K I N
S OU TH
AFR I C A?
Maarten Ackerman - Citadel Senior Investment Strategist
maartena@citadel.co.za
I sat down with journalist Mandy de Waal earlier in 2014 to
discuss the outcome of the national elections and the potential
impact on South Africa’s growth prospects. As we spoke, the
discussion turned to socialism, the economic system of vesting
ownership and control in collective hands. I began to ponder if
this system could work in South Africa.
Of course the starting point for a discussion of this
nature lies in asking the question: Does socialism
work?
Well, it depends who you ask. You get a very different response
depending on which side of the fence you sit when it comes to
ideology. The discussion is being driven – both here in South
Africa and abroad – by the ever-widening gap between the rich
and the poor.
Globally the likes of the International Monetary Fund are
extremely vocal regarding the potential rise of geopolitical
tension given the massive increase in global income inequality.
South Africa is facing similar challenges. We have one of the
highest Gini coefficients in the world, which measures the gap
between the rich and the poor. Given our history we also face a
legacy issue which skews the wealth distribution in the country
towards minorities, rather than the ruling majority. In recent
years this has seen the rise of government social grants.
But this is not just a South African profile. The gap between
rich and poor is widening around the world. In part this
resulted from the economic crisis of 2008, the European
debt crisis in 2011 and the resulting monetary policy that
took place thereafter. Many Western governments are sitting
with excessive debt which they need to repay, and they are
doing this partly by driving interest rates to record lows and
well below the rate of inflation, thus easing the burden. Such
an environment of negative real rates (interest rates below
inflation) assists governments in deflating excessive debt
faster, although it will still take many years to deleverage
the system. By pushing interest rates to below inflation,
governments are basically using future generation’s savings
to repay debt today. Current negative real rates remove the
incentive to save. After all, cash in the bank currently won’t
keep up with inflation so you actually get poorer every day. The
lower-end of the savings community is certainly not benefitting
from such policies.
With no real yield available on cash, investors are searching
for alternative higher yields. This process supports many other
asset classes, particularly the riskier ones. It’s partly why stock
markets around the world are rebounding strongly. And this is
one reason contributing towards the opening up of the wealth
gap. People with only a savings account at a bank get poorer,
while equity owners are getting wealthier as markets rebound.
So how does one solve the gap between the
haves and the have nots? And is there a
regime which could achieve this?
21
The three most common – yet different – globally accepted ideologies are capitalism, socialism
and communism, or a variety of different blends or variations or combinations thereof. From an
economic point of view socialism sounds like a good solution. It promises prosperity, equality and
security; ideal solutions to the problems we face. That said, why, if socialism works, do people in
these countries often flee to capitalistic neighbouring countries? Consider Cuba, Eastern Europe
and Zimbabwe. It seems that the promise of socialism fails to deliver and, over time, only leads to
more poverty and more misery.
This view is reinforced by history which highlights the fragility
of socialism as a structure – be it on the economic or political
side. Take China for example. It’s an interesting case because
the country still has a number of state-owned enterprises
which is essentially a soft form of socialism. But China realised
about 10 or 15 years ago that it can’t solely rely on being a
socialist state if they want to industrialise and become a global
player. They are now making slow progress towards balancing
the economy to include more free market or capitalistic
elements.
Those with a pro-socialism stance will point to Scandinavia
(comprising Norway, Denmark and Sweden) and the Nordic
countries (Denmark, Finland, Iceland, Norway and Sweden)
as examples of a form of socialism that works. Here again one
needs to look at the structures. In Scandinavia they are able
to finance socialism through imposing very high taxes – more
than 70% for top earners. The payoff is that the government
provides most of the welfare services. In Scandinavia tax
payers get ‘free’ education and ‘free’ healthcare. But, of course,
it’s not fully free because this is paid for by high taxes.
In South Africa the tax rate is lower, but because the
government’s delivery of services is inefficient, many taxpayers
opt for private healthcare and schooling. The problem is that
the government cannot provide the same level of service to
all communities, which has resulted in a massive increase in
private schooling and private medical care, as well as private
security.
If you add up what South Africans pay for all these additional
services you pretty much have an implied tax rate as high as
that of Scandinavia.
Another factor which must be considered is that while
Scandinavia embraces socialistic practices it also ensures
that there is a strong free market or capitalistic business
environment. Scandinavia has few regulations that hinder
business, there is no talk of nationalisation, and the market
22
is reasonably free from protectionism. The business side of
Scandinavia is highly competitive and, as a result, they can
create jobs, people earn well and, key to it all, they can afford
to pay higher tax rates. As a result of a healthy economy they
have the income base to provide a broad welfare net to society.
These examples make a discussion about socialism extremely
broad and we have to be very clear about the kind of policies
we are talking about. When you start discussing state
socialism, one can go back to the example of China where you
have state-owned enterprises and where nationalisation is a
common theme. Here the state wants to take control of a big
golden egg, and wants to run it so that government can get its
hands on resources and redistribute this to the majority of the
people.
But there is also a more liberal type of socialism where you
get worker councils or trade unions. In South Africa we
already have many of these elements. We have strong trade
unions, although it is a very different debate as to whether
they are adding value or not in terms of securing a better deal
for labour. And, some of our political parties favour state
ownership and protectionism.
Full-blown socialism would occur when the state nationalises
all resources and, in doing so, removes any incentive from the
population to put in extra hours of work. As a result of that
the marginal benefit reduces over time, and so the society
continually gets poorer. This is the complete antithesis to
capitalism, which is incentive based and profit driven. The
incentive being that if you work hard, and put in more hours,
then you can share in the wealth creation over time. This is a
way that can extract more value for workers and create more
jobs.
Pure capitalism is all about the incentive. One makes profit
and retains that profit. Socialism is about taking ‘profits’ and
sharing equally. I think a fine balance between the two can help
resolve some of the issues that we face in South Africa.
Instead of taking resources and giving them to states (or any
government) which are typically (and this applies anywhere in
the world, not just South Africa) less efficient than businesses,
why not let businesses run resources as they can extract
greater profitability. It makes more sense from an economic
point of view to have an incentive for business to run industry
and to make a profit, and for government to share in this, not
through running the business but through taxing the business
appropriately.
I would argue that instead of nationalisation and
protectionism, one would need to relook at how businesses
pay tax in South Africa. I am not saying pay more taxes, rather
look at more efficient taxes and tax incentives. This would help
create more jobs, and by creating more jobs we would help
alleviate poverty.
Getting this right would require government to be involved in
creating the right environment. But I don’t think government
should be the sole owner of that environment. Government
needs to pull the right strings to create an optimal setting
for business to succeed, but business will only flourish when
there is an incentive model and an environment conducive
to growth and stability. Government needs to create balance
between the services they provide and the taxes that they
charge, so this is conducive to stability and growth.
I think there is a risk if South Africa veers to the left and
increases elements of socialism, particularly in terms of full
nationalisation and protectionism. This could see growth
potential deteriorate significantly. 2014 has been a sharp
reminder that even a little bit of liberal socialism (strong trade
unions) can be a barrier to free market operations and very
detrimental to economic growth.
The balance, I believe, is delicate, but with
the right will it can be achieved. This is the
responsibility of all role players, including
business, government, labour, you and me.
An extract from Maarten Ackerman’s interview with Mandy
de Waal appeared in Finweek magazine on 29 May 2014
(Is a more socialistic South Africa sustainable?)
"
If you add up what South
Africans pay for all these
additional services you pretty
much have an implied tax rate
as high as that of Scandinavia.
"
WOMEN’S INTEREST
C R E ATING
TRUE
W EALTH
Dudu Tembo - Citadel Portfolio Manager
dudut@citadel.co.za
Earning a high salary does not guarantee you wealth. This is
according to a 2012 Australian study, which indicates that only
34% of those Australian households ranked in the top 10%
of household income were, in fact, ranked in the top 10% of
household net wealth.
This is an alarming finding and represents a trend that
seems to affect women more than men. Although women
are receiving greater recognition and higher salaries in the
workplace, I believe they are being handicapped by belief
systems and behaviours that are not wealth creating.
This begs the question: How do we change this behaviour so
that women can effectively make the conversion from simply
being high earners to being truly wealthy and financially
independent?
In my opinion the first step is for women to start
seeing net wealth as the indicator of financial
independence, rather than gross income.
It’s also advisable for women to evolve their income sources,
because statistics tell us that in order for high income
households to fall into the high-net-worth category they need
to build up income sources which are not solely dependent on
salaries and wages.
The next critical step is to reduce debt. This approach,
however, means that women need to make lifestyle changes;
including embracing delayed gratification.
Unfortunately, the longer we delay in making wealth creation
our priority, the more severe will saving in the future be.
However, achieving this state is not as daunting as it sounds.
24
With the right financial education and advice from a qualified
financial advisor, a woman can move from a position of being
cash-rich to taking care of herself in the future.
A good starting point to making the shift from
high income to high-net-worth is to take a quick
lifestyle audit:
•
•
•
•
•
How much do you earn?
What is your monthly spending breakdown?
Are there areas where you are being excessive in your
spending? Can you make cutbacks?
What saving and investments do you have?
What is your debt? Debt can be a drain both in terms of
wealth creation and psychologically.
Then ask the question, how can I invest more?
My recommendation is that, in the short-term,
women aim to save at least 10% of their salaries
and to grow that to 20% in the medium to long
term.
Steps to help you achieve this goal include:
•
•
•
•
Ask your financial advisor to provide different models to
help calculate what you can realistically save.
Build up an emergency reserve of about six months’ worth
of expenses, which should ideally be saved in a money
market account.
Invest any other cash reserves.
Consider how you can create other income streams. For
example, by investing in a rental property.
CLIE N T-LED N O T
PRODUCT-DRIVEN
WHO WE ARE
You are at the centre of everything we do. In other words,
we are client-led, not product-driven. Citadel’s focus is on
providing you with the best wealth management advice you
can possibly get. We do not sell products or earn commision.
It’s a transparent approach that frees us up to offer you
honest and objective advice. It also ensures our interests are
aligned with yours. And because our fees are based on the
performance of your portfolio – the better you do, the better
we do.
Whats’s more, we manage your affairs and treat them with
the utmost confidentiality and discretion. Ours is a unique
value-driven culture that has forged deep and trusted longterm relationships with our clients for over 20 years.
www.citadel.co.za
25
WOMEN’S INTEREST
WOMEN
INVESTORS
ARE FROM
VENUS
Caren Rennie - Citadel Head of the Female Strategy
carenr@citadel.co.za
When it comes to financial security, women really do come from Venus and men from Mars. Research
shows that women think and plan very differently for their financial security than men do, and the two
genders have distinctly different expectations from their investments.
Research tells us that men and women relate to money
differently because their needs and beliefs around investing
are different. For example, men and women have different
appetites for risk; 80% of men die married, while 80% of
women die single. Furthermore, one in three women believe
men are generally better at handling finances than they are,
and women experience higher levels of financial vulnerability
than men.
Understanding these differences is what motivated Citadel to
create a strategy specifically aimed at addressing the needs of
female investors. Five years ago, the company recognised that
as women in South Africa become more financially empowered
they need a different approach and conversation when it comes
to money matters.
I believe our mission at Citadel is to partner
with and empower women to take charge and
ownership of their financial futures and, in the
process, to create their own destinies. They’ve
earned it and deserve it.
Over the past five years we have learnt many valuable
lessons about what our female clients are looking for and
about their expectations. For example, women investors fear
‘losing it all’. They are also aware that they are likely, at some
stage in their lives, to be left alone through either death or
divorce, however, many don’t feel as financially confident or
26
knowledgeable as their male partners. These issues can make
addressing financial issues with women tricky as they are often
not comfortable talking about money and investing. Over
and above these concerns, a female-focused strategy needs
to take into account the fact that women tend to base their
investments on gut feelings or emotions founded on good or
bad past experiences.
Sallie Krawcheck, respected as one of Wall Street’s most senior
women, confirms our experience of female investors. When
she worked at financial services corporation Smith Barney,
the company knew that 86% of its clients didn’t know what a
managed account was. While most clients never asked for an
explanation of what a managed account was, men invested in
them while women avoided them.
Krawcheck says: “Distinctions between men and women
investors often begin with the way the genders think about
money. Men think of money as a stream where money comes
in and money goes out. Women think of money as a pond.”
Other key insights into women’s expectations from their
finances include:
• Women often lack confidence when it comes to making
financial choices. Women, being historically less socialised
in financial matters than men, often require a big event or
goal to be encouraged to invest and save. Conversely, men
may start dabbling in investing from a young age.
•
•
•
•
•
•
•
•
•
Women often feel vulnerable when it comes to managing
their own finances and investments.
Women often make financial planning a lower priority in
their lives; family and career come first.
Women tend to work with their partner when making
household financial decisions: 35% of women with spouses
or partners share investment decision making while 73%
of men claim to be the sole decision makers. These figures
are interesting given that, in the United States, 53% of
women (including single, married or those with a partner)
are primary breadwinners and 22% of women who are
married or living with a partner report being the one who
makes more money.
Women who are high income earners often feel they lack
financial expertise. As a result, many don’t get involved
in financial decision making, claiming a lack of financial
knowledge. On the other hand men who are uninvolved
in financial decisions say they are too busy and have other
obligations.
Women’s biggest financial concerns are household
expenses, levels of household debt and saving for
retirement. Female primary breadwinners also worry
about job security and mortgage repayments. Men tend
to focus their concerns on external factors, such as the
state of the economy, followed by household expenses and
saving for retirement.
Both sexes worry about maintaining their lifestyles into
retirement, but women tend to be more concerned about
not becoming a burden to their families.
Women and men have different appetites for risk: 70%
of women see themselves as savers rather than investors,
whereas 70% of men say they are willing to take risks if
there is an opportunity for greater reward, and 40% enjoy
the game of investing.
Women use a more holistic or long-term approach for
their financial investments, such as planning for their
children’s education expenses.
Women also tend to favour investments that have a more
social and sustainability focus. Credit Suisse, the Swiss
multi-national financial services group, believes wealthier
female investors will raise the demand for these types of
investments.
As a team we are passionate about empowering women
financially and regularly host events that offer communication
and interaction specifically designed for our female network.
These gatherings have afforded us invaluable feedback and
the response has been overwhelmingly positive with each
experience offering the opportunity to gather new insights
from highly influential business women. But it is not all about
work, we also like to take a lighter approach to ensure our
female clients get a chance to indulge in a little bit of feminine
spoiling at the same time. Because, as most women know,
life – like investing – is all about balance.
Photos of a networking event:
Caren Rennie (Citadel) and Nicky Fitzgerald
Khanyi Chaba and Dr Thandi Ndlovu
Citadel’s Women of Worth team has used these insights to
better cater for women’s unique investing needs; these ensure
that women today can reach financial independence based on
their specific requirements. This is aided by the fact that the
team is made up solely of women, whose goal it is to finetune Citadel’s understanding of what women desire from an
investment plan and how best to meet these requirements.
Yvonne Johnston and PJ Powers
27
LIFESTYLE
SA WINE EXPORT
By freelance writer, Mike Froud
Chief Executive Officer of Wines of South Africa (WOSA), Siobhan Thompson regards the development
of various “global brands” as crucial to maximising the future growth potential of export markets and
volumes that boomed to record levels in 2013.
Following a decline in the number of
wine-grape farmers in South Africa over
the past 10 years, the remaining 3300 or
so “primary producers” and some 560
cellars ranging from huge to boutique in
size have reaped the benefits of a massive
export resurgence. In 2011, total SA
wine exports were going through a short
period of decline. Albeit that the market
had grown from 22 million litres in 1992
to 407 million litres in 2008, it had
contracted to around 350 million litres
in 2011 before rocketing to well over 500
million in 2013.
Whereas most of the traditional
wine-producing countries of Europe
experienced one of their smaller harvests
in 2012, the winelands of South Africa
followed up with one of their bigger
crops in 2013 – weighing in at 1.5 million
tons, compared to 1.2 million in 2003.
The quality was good, and the export
markets grew to include France and
Italy, much of it in the form of bulk wine
(non-packaged), some of it blended with
local product before reaching consumers
and a significant amount of it branded.
With a mandate to grow the image of
Brand South Africa internationally,
28
Stellenbosch-based, not-for-profit
industry organisation, WOSA represents
the nation’s wine industry with offices in
London, New York and Hong Kong, and
has contracted marketing agents across
139 countries and counting, compared to
the 20-odd in 1992. Among the positive
developments, reports WOSA CEO
Siobhan Thompson, is that the bulkcomponent of SA wine exports is down
in a number of markets and margins are
improving in other quarters.
The United Kingdom is South Africa’s
biggest export wine market ahead of
Germany, Russia, France, Sweden and
the United States, and it’s encouraging to
see an upward trend in terms of pricing.
“Sales are increasing in the £10-plus and
£20-plus categories and have dropped
in the sub-£5 category,” says Thompson.
The “SA £5-plus category has grown by
over 65% since 2009” and is explained in
part by the strengthening value of Brand
SA.
Thompson comments on UK
supermarkets acknowledging SA
producers more on the packaging of their
exclusive wines and on leading South
African wines receiving an increasing
amount of coverage in the British media
by leading English wine writers including
Jancis Robinson and Tim Atkins. “We’re
getting out there more, marketing
more actively in places including some
where we simply hadn’t sold to before.
Good quality at a good price became
our stamp, and the challenge now is to
succeed at a higher level.”
Mulderbosch, Graham Beck and Douglas
Green; Boschendal, Ken Forrester, Two
Oceans, Fleur du Cap and The Wolftrap
from Boekenhoutskloof; La Motte and
Leopard’s Leap. These are just some
of the wine brands that Thompson has
observed making inroads in international
markets.
The people making decent profits tend
to be doing so through efficiencies, big
producers with brands and economies of
scale. Also doing well are those who’re
selling more than a bottle of wine – the
experience, a brand home, places that
people talk about and remember.
“Among the challenges,” says Thompson,
“where we are not yet established, is that
we need to grow some global brands.
We need to get better prices for our
better wines. We’re talking aspirational,
at £15-plus. And there is definitely a
need for prestigious. We cannot think at
one level only. Nederburg, Two Oceans,
Wolftrap, Kumala…these are doing well
at one level and we now need to compete
at a bigger level as well as at specialist
and aspirational levels – the Cognac
and Champagne type of brands that
everybody knows but which take a lot of
time to develop.”
Thompson remarks that just as there
is a market for inexpensive, easily
affordable, there’s also a place for superpremium positioning at R1000 a bottle
or more. “Around the world, price equals
status,” she says, and the chances of
pulling it off under the South African
flag are improving as the industry gets
better at working together as well as
independently.
To this end, the brand strategy is multifaceted, including the promotion of top
SA wines at themed events, restaurants
and at industry fairs. With WOSA having
showcased Pinotage and Chenin Blanc in
London among the regional tastings, it’s
involved around the globe.
Thompson reports on SA Chenin doing
well internationally, Chardonnay and
Rosé doing particularly well in the USA,
good support for well-rounded, easierdrinking red blends…and Méthode Cap
Classique sparkling wine is another
sector for growth, she feels.
“We don’t have a lot of money to market
Brand SA,” says Thompson, reflecting on
the levy of a few cents per litre used to
fund WOSA internationally. “Another of
our challenges is to find the sweet spot in
terms of social media, the internet and
communication messaging. We’ve got a
good foundation on which to build – that
of diversity, of our flora and fauna, our
soils, the biodiversity movement…we
have product integrity and ethical labour
practices. And there are the beautiful
winelands, a beautiful country to visit
with fantastic hospitality, friendliness,
our different cultures…visitors become
ambassadors for our wines.”
South Africa currently ranks eighth among the countries
exporting the most wine around the world. Thompson
thinks it reasonable to expect the ranking to have
improved by a position or two 10 years from now. And
with this in mind, one of the markets she has her eyes
on is Brazil – if the industry can somehow overcome the
obstacles such as Brazil’s trading arrangements with
Chile and Argentina that include lower tariffs relative to
those applicable to South African products.
29
OFFSHORE
IS LA ND ST YL E
By freelance writer, Fiona Zerbst
Fancy your own piece of sundrenched paradise by the sea?
You don’t have to look (or fly)
too far, with prime real estate
on offer in Mauritius and
the Seychelles. These idyllic
honeymoon destinations are
increasingly attracting South
Africans keen to emigrate or
diversify their assets – and
there are some good incentives
to make the move.
The island nations are a smart choice
for South Africans. Mauritius is a fourhour flight from Johannesburg and
outranks South Africa in terms of global
competitiveness, according to the World
Economic Forum’s 2013-2014 Global
Competitiveness Report (Mauritius is
placed 45th to South Africa’s 53rd). A
democracy with strong, transparent
public institutions, Mauritius boasts
clear property rights and strong investor
protection.
The Seychelles, an archipelago of small,
pristine islands just under five-hours’
flight from Johannesburg, may not
be as competitive (it’s 80th on the
list), but the country does have an
30
efficient government, well-developed
infrastructure and a strong public trust
in politicians – the only blot on its copybook was a military coup in 1977. (It does
have attractive tax-haven status, even
though the shadow of money laundering
hovers over it.)
“It is smaller and less developed than
Mauritius and there are fewer business
opportunities, but it is quieter and more
idyllic,” says Chris Immelman, Managing
Director of Pam Golding’s international
division.
Aside from being stable and relatively
prosperous, these countries have made
it easy for South Africans to own real
estate. “If you want to buy a property
as a rand hedge and perhaps get some
rental income, you can move your money
across quite easily without using your
foreign investment allowance, which
is R4m for individuals and R8m for a
family,” says Immelman. “However,
income or profits from the investment do
have to be returned to South Africa once
you sell the property.” These properties
make an ideal hedge as South Africans
investing in their individual capacity
are benefitting from it being in a dollarbased property market.
“Because Mauritius is part of the
Southern African Development
Community (SADC), South Africans
can buy property without using their
allowance and they can apply for money
to be moved to Mauritius when they buy
property, but they are only allowed one
property in their own name,” says Theo
Pietersen, Chief Executive Officer of
Seeff Properties Mauritius. “Mauritian
banks also offer potential buyers bond
opportunities when buying into an IRS
(Integrated Resort Scheme) or RES (Real
Estate Scheme) – South Africans can get
up to 70% on a bond and banks will use
the property as security.”
A CH O ICE O F
DEV ELO PME NT S
Mauritius’s residential property market
is highly diversified, but non-citizens can
only buy through one of three schemes.
An IRS allows non-citizens to acquire
resort and residential property on the
island and gain automatic permanent
residency as the units have to be priced
higher than US$500 000. In 2007,
RES was introduced and allows small
landowners to develop their land by
building residences, commercial and
"
There’s good capital growth in both the Seychelles and
Mauritius and investors have also seen good rental returns.
leisure facilities for sale mainly to
non-citizens who will gain permanent
residency if the unit acquired is priced
at more than US$500 000.
“A RES project can be developed
on land of at least one acre (about
4,200m2), but it can’t be more than
10 hectares,” says Rhoy Ramlackhan,
Managing Director of Broll Indian
Ocean. “RESs are situated mainly in
prime areas whereas IRSs are generally
in secondary locations, given the size of
leisure amenities required.”
The Invest Hotel Scheme (IHS)
was introduced in 2009 and allows
property developers to sell hotel rooms,
villas, suites or any part of a hotel to
individual buyers during and postconstruction. “The scheme was set up
for the overall financing of new hotel
projects but also offers individual
buyers all the facilities of an exquisitely
furnished luxury resort hotel and
the promise of rental income,” says
Ramlackhan.
Buyers automatically qualify for a
residency permit when buying an IRS
unit (and a RES unit if it is priced
at US$500 000 or above) and this
residency lasts as long as the unit is in
the buyer’s name, says Pietersen. This
is a huge draw-card for South Africans
who may be looking for an offshore
haven in times of political instability,
or who want to move their business
across to their new home. He adds that
properties can be bought in dollars,
rupees or euros – the benefit of buying
in rupees is the fact that the rand is
much stronger than the rupee (at a rate
of about 3:1).
The Seychelles offers governmentapproved developments that are
essentially eco-friendly, given
the Seychelles’ dedication to
environmentalism. Buyers can purchase
"
freehold in certain developments like
Eden Island (a marina development)
and Four Seasons Private Residences
Seychelles (which is on Petite Anse Bay,
Mahé).
Both Mauritius and the Seychelles have
tax regimes that benefit South Africans
who relocate their businesses – you
pay no capital gains, property or
inheritance tax and, in the Seychelles,
you have the added advantage of free
state schooling for children between
five and 16 years of age.
“Mauritius taxation is flat rate of 15%
for both individuals and companies.
South Africans living in Mauritius or
renting out their units for investment
purposes will therefore benefit from
this taxation rate,” says Pietersen.
PA R A DISE PRICETA G S
As you can expect, properties don’t
come cheap. According to Immelman,
a two-bedroom apartment in Mauritius
starts at around US$250 000 –
typically in the northern and western
areas, where the weather is better. You
can get a small villa for around US$1m.
Often, these developments include golf
courses, wellness centres or will be
situated in a beach location.
In the Seychelles, a one-bedroom
apartment sells for around
US$425 000, roughly twice what
it would have cost a buyer in 2005.
“People who bought around that time
doubled their money in less than five
years – they were the early adopters
who took great risks but reaped the
rewards,” says Immelman.
“There’s good capital growth in both the
Seychelles and Mauritius and investors
have also seen good rental returns.”
ARE T H ERE A N Y
H IDDEN CO ST S ?
“Property price aside, a buyer will
have to pay a registration tax to the
government (US$25 000 or 5% for
RES properties and US$70 000 or 5%
for IRS properties, whichever is the
highest),” says Marie Francoise Dalais,
Seef’s property consultant for IRS/
RES. “Buyers will also need to pay
notary fees of about 1.15%, board of
investment (BOI) fees of MUR 10 000
(Mauritian rupees) for the purchase of
a retail property only, plus agency fees
of about 2% plus VAT.” In some cases
these costs are included in the price,
but this varies for project to project.
Ramlackhan says the 2014 Mauritian
budget gives foreign property
investment a boost by allowing retired
foreigners to acquire apartments in
local projects, subject to a minimum
transfer of US$120 000 at the time of
their application. “Foreigners should
probably acquire property now because
ownership by foreigners is expected to
fully open in the coming years meaning
an increase in price in prime spots,” he
warns.
Pietersen stresses that property rights
are protected. “Mauritius has rules in
place to protect the buyer – a buyer
will get a title deed before his property
is even built and the developer will
need to give a full guarantee that, even
if he becomes insolvent, the property
has to be completed. This ensures that
buyers don’t lose money to fraudulent
developers,” he says.
The price-tag may deter some, but
there’s no doubt that more riskaverse South Africans will find the
peaceful islands a balm – and a good
investment, to boot.
COMPANY NEWS
Re ach Out
2014
We make a living by what we get,
we make a life by what we give.
- Sir Winston Churchill
Marina Knox - Human Resources Director
marinak@citadel.co.za
As Citadelions, we have experienced the joy and
fulfilment of giving of our time as well as personal
contributions to communities close to our hearts
over the last year. We firmly believe that by giving, we
receive so much more. Various projects were hosted
by the different offices during 2014.
T H ESE SHOES W ER E M A D E F O R
W ORKING
This project was aimed at collecting slightly worn work shoes,
which were given to individuals who have been trained in shoe
repairs. By receiving worn shoes, they could apply their newly
learned trade in repairing these shoes and selling them to
derive an income. In total Citadel collected 489 pairs of shoes.
The project helped provide dignity to individuals. Rather
than being a mere hand-out, recipients could earn their own
income.
The Sandton office supported this project, with Citadelions
making personal contributions that resulted in 226 pairs of
new shoes being purchased and given to underprivileged
scholars in Tembisa, who were extremely proud to have a pair
of brand new school shoes.
FU N DAY
The Cape Town office hosted 39 children from the Langa and
Mitchells Plain communities for a day of fun at the Wesfleur
Sports Grounds in Atlantis.
DR E S S I NG DOW N F OR A G O OD
CAUSE
A number of running shoes were also collected, which were
given to underprivileged individuals in Khayelitsha, Cape
Town.
Citadel offices also supported Slipper Day – 298 tickets were
sold in support of raising funds towards children fighting lifethreatening illnesses.
M A N DE L A DAY
Casual Day, a project aimed at fundraising for people with
disabilities, was also supported in all offices.
The Pretoria office hosted a market day as part of its
fundraising for Mandela Day. Employees as well as external
individuals could hire a stall to sell food and hand-made goods.
The income derived was used as part of the reach out activities
around Mandela Day.
National Bandana Day was celebrated in aid of the Sunflower
Fund in support of the South African bone marrow registry.
Offices were vibrant in different coloured bandanas, worn in
many creative ways.
On Mandela Day, the Pretoria office was filled with activity
as Citadelions made sandwiches and packed parcels for
distribution. All products used were sponsored by employees.
In total, 400 sandwiches were made and distributed to
communities, and 90 hampers filled with groceries were
packed and distributed to the following projects: Willows
Methodist Church; the Salvation Army and Danville Hulp
Projek.
Proceeds from the market day were used to purchase food and
blankets for a displaced community that was being housed in
the Christ in Me International Church in Pretoria Central.
32
N O CH IL D S H O U L D G O T O
S C H O OL BA R E F OOT PR O J E C T
I N DIVIDU A L E F F O RT S
Many individual projects are supported by Citadelions when
a need arises, such as sponsoring nappies and baby goods for
those in need.
Reaching out to others not only provides
the recipients of our efforts with essentials,
but also aims to uplift and provide dignity
to them, and to Citadelions who get to
experience the joy of giving and making a
difference.
P H OTOS OF T HE D I F F ER E NT P R O J E C T S
33
PERSONAL FINANCE
T HE LO W
V O L AT I L I T Y
A N O M A LY
"
Hannes du Plessis - Citadel Quant Analyst and Portfolio Manager
hannesd@citadel.co.za
It doesn’t matter how beautiful your theor y is, it
doesn’t matter how smar t you are. If it doesn’t agree
with experiment, it’s wrong.
"
- Richard Feynman
Risk taking is a critical life skill, so understanding how risk taking pays off is important. Risk has
been present in every domain of life throughout history. Waging war over scarce resources, hunting
for food, mate selection – all these activities contain risk. And they require courage. But it would be
delusional to think that the simplistic application of courage should result in a positive payoff. You
don’t simply charge across enemy lines with no knowledge of the lay of the land and no strategy,
carelessly assuming that your chances of success increase with courage. Even the skilled hunter makes
a careful study of his prey, knowing full well that the tables can easily turn.
TAKING RISKS
HISTORY
It seems very obvious that taking risks is something that
you apply only when you have a competitive edge and in the
right context. So where did the idea that to get rich you need
to take risk evolve into the non-equivalent notion that risk
taking begets higher returns? Unfortunately, driven in part
by academic theory, too many investors naively think that
simply taking risk generates the payoff for such risk. This is a
problem, as it discourages the type of follow-up that makes risk
taking productive in the first place.
The history of portfolio theory took a wrong turn. To
understand this problem, we need to look at the history of what
we call the standard model of portfolio theory. The standard
model came into existence in the most fertile period of the last
century in financial markets research during the 1960s and
early 1970s. The confluence of two forces resulted in a model
known as the Capital Asset Pricing Model (CAPM), which
would occupy a lot of academic energy for another 40 years.
These two forces were:
1
The publication of seminal works of Markowitz (1952), Sharpe (1964), Lintner (1965) and Mossin
(1966).
2
The creation of the first ever comprehensive database of historical stock prices by researchers at the Centre
for Research in Security Prices (CRSP) at the University of Chicago. This database demonstrated that the
aggregated stock indexes had earned a sizable return premium of 5% over treasury bills over the 1926 to
1962 period. This seemed to confirm a prediction by the theory. It is important to note that this return
premium occurs in between asset classes. The basic claim of the standard model was that the expected
return on any security is a linear and increasing function of its risk, in turn defined as its co-variation
with the ‘market’ portfolio. A large amount of empirical work followed until finally, 20 years later, it was
properly refuted by Fama and French (1992). They proved that increasing risk was empirically associated
with decreasing returns, when we look within common stocks as an asset class.
35
In Karl Popper’s vision of how science works, theories produce falsifiable hypotheses and when these hypotheses
are falsified, the theory is rejected and researchers move on. However, despite the evidence uncovered by 1992, the
standard model would persist in the minds of its believers for a while. For example, Campbell (2000) offers this
defence of the model: “Precisely because the conditions for the existence of a stochastic discount factor are so general,
they place almost no restrictions on financial data.” This is a bit like 19th-century physicists who assumed that
luminiferous aether 1 existed and kept coming up with more fanciful explanations about why it couldn’t be measured.
It turned out of course, that there was no aether.
SHORTCOMINGS OF THE STANDARD
MODEL
Fortunately for scientific progress, we are now living in
perhaps the second most highly fertile financial markets
research period since the beginning of portfolio theory.
The financial crash of 2008 served up a very strong test of
the standard model and it failed the experiment miserably.
Grouped together under the term low volatility anomaly, there
has been a resurgence in interest in the exact nature of the
payoff to financial risk taking.
With 50 years of American data and robust method, studies
such as Clarke, de Silva and Thorley (2006, 2011) demonstrate
beyond reasonable doubt the superior performance of low risk
stocks. This points directly to an inverse general relationship
between risk and return within common stocks.
THE EFFECT SHOWS UP WITHIN
NEARLY EVERY ASSET CLASS
The effect does not show up in stocks only. Eric Falkenstein
(2012) presents empirical evidence for an inverted risk-return
relationship in 17 asset classes. In his introduction he says: “No
other article, paper, or book puts all this evidence together,
primarily because no one thinks this general absence of a
positive risk-return relation implies it might not actually be
there.”
What about South Africa? It has been known for a while that
low risk stocks on the JSE have nearly double the average
monthly return compared to high risk stocks over an extended
period of time (Van Rensburg and Robertson, 2003).
FINDING A BALANCE
The now useless standard model assumes that people are
paid to withstand a universal undesirable. For example, like
receiving an amount of money for every courageous extra
minute you leave your hand in hot water. Those who have the
highest pain tolerance achieve the highest returns on average.
In contrast, throughout life we understand that courage is
productive only if balanced with caution, which takes into
account your special capabilities for your opportunities. There
is no linear ‘courage premium’.
The myth lies in moving too hastily from the particular to the
general. Some risk taking in a specific context, in a specific
way, yields a positive payoff. This does not guarantee a positive
payoff for all risk taking in general. Instead, mindless exposure
to risk is the path to financial ruin. This is the central message
from those who have uncovered the low volatility anomaly.
With 50 years of evidence from stocks and additional evidence
from 17 other asset classes must surely re-classify an observed
empirical effect from anomaly to norm.
Those who possess a stronger survival instinct would sit up
and take notice.
1 In the late 19th century, luminiferous aether, meaning light-bearing ether, was the postulated medium for the propagation of light. Following the negative outcome of
ether-drift experiments, the concept of ether as a mechanical medium having a state of motion lost adherents. It has been replaced in modern physics by the theory of
relativity and quantum theory (Wikipedia, http://en.wikipedia.org/wiki/Luminiferous_aether).
36
CITADEL ART
PRICE INDEX
W HY AN ART INDEX ?
Many of our clients are avid collectors of art, both on an aesthetic
level and, in some cases, as part of a diversified investment strategy.
As advisors, we realised there was no consolidated view of the
industry as a whole that could define art as a legitimate alternative
asset class by allowing real objectivity, transparency, measurability
and comparability over time. We thus developed the Citadel Art
Price Index (CAPI) as a means of assessing the change in value of
South African art and demystifying the asset class.
Find the latest CAPI results on our website.
Visit www.citadel.co.za and click on the about us tab.
Citadel. Discovering the true worth of your wealth.
Pretoria: +27 12 470 2500
Cape Town: +27 21 670 9100
Durban: +27 31 560 7200
Act, 2002. Member of the
Group.
SPORT
F ROM A
C APTAIN’S
PERS PECT IVE
By Springbok rugby captain, Jean de Villiers
I can’t remember life without rugby. I started
playing the game with a group of older boys
two years before I started primary school thanks to my brother, André-Louis. He was
in Grade 0 at the time and was asked by the
Grade 1 teacher if he wanted to play for their
team. He agreed, on the condition that I also
played. That’s how it all started.
leadership is a collective effort. You want the backing of your
team as well as assistance from your fellow players to help you
be an inspiring leader. Once you have that, and the whole team
buys into a common end-goal, it becomes much easier.
Team culture is also another key aspect a leader needs to
consider. It’s important to realise that no individual is bigger
than the team. You either buy into the culture, or you’re not
part of it at all.
I grew up in Paarl, Western Cape in a typical rugby home. My
father played a few seasons of provincial rugby back in the day,
and we were all big supporters of the game. As rugby has been
central to my life since I can remember, I knew that it would be
my career, even before the game turned professional.
These are lessons I’ve learnt throughout my career and I have
been lucky to have great influences in my life and career since
I was very young. My rugby heroes, growing up, were John
Gainsford and Danie Gerber.
I think those aspirations were fuelled by the fact that I always
had it easy as a player while at school. I was fortunate to always
be chosen for the A-team and to play representative rugby
from as early as primary school. Later, I represented South
Africa on all levels and I made my test debut in 2002 against
France in Marseille at the age of 21.
John Gainsford is a family friend of ours and I’ve known him
since I was a child. He had a massive impact on the way I see
the game. One day, after he had returned from a trip to France,
he found my brother and I on the lawn, kicking the ball. When
he saw what we were doing, he said: “Stop, stop, stop! If you
want to play for South Africa one day, you don’t kick the ball,
you run with it.” That has stuck with me ever since!
ROUGH START
And then, seven minutes into that first test, I was injured.
I was forced to put a lot of very hard work into my game to get
back to the top. I realised what real sacrifice was about, as well
as the importance of support structures, especially family and
friends.
As I was getting back on course, I picked up another serious
injury during a Rugby World Cup warm-up game in 2003
in Springs, Gauteng. I honestly thought I would never get
the opportunity to play a second test for the Boks. This
setback made me realise that it took more than hard work,
commitment and sacrifice to get back to the top. It needed
me to have clear goals; because without goals it is difficult to
progress.
I also learnt that there will always be stumbling blocks along
the way, but that it’s entirely up to you to determine how
you allow these challenges to affect you. A positive outlook
is critical to achieve a positive result. Luckily, I did get the
opportunity to play that second test, two years after my debut
test.
LEADERSHIP
My career has been good with over 100 test matches under my
belt. But, it was those early challenges that helped me grow
as a leader, an aspect of my position I really enjoy. For me,
I was also fortunate enough to meet my other big rugby hero,
Danie Gerber, when I was at primary school. He’s always been
someone who has inspired me on the field and we still stay in
touch regularly.
Both these men have shown a lot of interest in my career,
from my youth through to today, and it’s something I really
appreciate.
FAMILY
The people who have influenced my life the most are my
family; my parents André and Louise, my brother AndréLouis and, since we met in 2003, my wife Marlie (or Pops,
as everyone knows her). These are the people who motivate
me daily, inspire me to be better, and who have made great
sacrifices to give me the fantastic opportunities I have been
afforded.
Becoming a father to my two daughters Layli and Lana, and
my son Luca, has provided me with the greatest motivation,
because I want nothing more than to make them proud.
Rugby has been good to me and for that I’ll be eternally
grateful. I would love to be remembered as a captain who cared
– about my team, my teammates, our supporters and what
Springbok rugby represents. But also as someone who gave
back and helped to make South Africa a better place.
39
PERSONAL FINANCE
YOUR PORTFOLIO
IT’S NOT JUST A COLLECTION
OF SHARES YOU LIKE
Contributed by the Citadel Equity Team
The great thing about my job is that (almost) everybody has an opinion about the stock market. People generally
love to talk about the companies they are invested in, have been invested in before, or are thinking of investing in.
Those who have bought shares individually (eg not just in
collective investment vehicles like unit trusts) are especially
interested, as am I, in the stories surrounding businesses. We
like to delve into their prospects, how they came to be where
they are today, their histories and their ability or inability to
survive and prosper in the future.
It would be fair to say that many of these investors have a good
idea of the fair value of the companies that they own. So it is
only a small logical step further to feel happy about buying a
collection of shares that you like, and calling it a portfolio.
Even if you are extremely good at picking businesses that
have a better than even chance of outperforming the market,
the sobering truth is that you are only halfway towards
constructing an efficient portfolio.
What is the definition of an efficient portfolio? Modern
Portfolio Theory (MPT) is built on the appealing and logical
FIGUR E 1 :
T HE EFFICIEN T
F R ONTIER IN
PORTFOLIO
C ONS TRUCTION
Return %
A portfolio above this
curve is impossible
40
risk.
Accepting for the moment that ‘standard deviation’ is a good
proxy for risk (a big ask for some!) and that the curved line
represents the best outcome for any share portfolio, Figure 1
shows where on the risk vs return graph portfolios might find
themselves.
Clearly, it is easy to end up in the sub-optimal area below the
curve – most blindly constructed portfolios do (red crosses) –
where risks are higher than they need to be for any given rate
of return.
Efficient portfolios, however, will sit on the curved line (blue
crosses; on the so-called ‘Efficient Frontier’ in MPT parlance),
where you get the maximum return for any risk budget.
Optimal portfolios should lie
on this curve (know as the
“Efficient Frontier”)
High risk/High return
Medium risk/Medium return
Low risk/Low return
Copyright 2003
- Investopedia.com
idea of attempting to extract the maximum return for the least
possible risk. As it turns out, well-constructed portfolios have
the fortunate property of maximising your returns at minimum
Portfolios below the curve are not
efficient, because for the same risk
one could achieve a greater return.
Risk % (standard deviation)
The difference between these two
types of portfolios lies in a keen
understanding of what is commonly
known as the only free lunch in
the investing business: proper
diversification.
The key to truly understanding
diversification starts with a simple
example: imagine a portfolio consisting
of just two companies, say SABMiller
and Microsoft (Figure 2). If you held
50% of each one, you would assume
that your two-share portfolio would
have the risk and corresponding return
denoted by point A – halfway along
a straight line between a portfolio
consisting of 100% of SABMiller
(Security 1) and a portfolio consisting
of 100% of Microsoft (Security 2).
The good news is that the risk-return
profile of your two-share portfolio
is considerably better than that; it’s
actually at point B in Figure 2, which
shows a similar return to point A, but at
considerably lower risk.
HOW CAN THAT BE?
The curvature in the risk vs return
line (in other words your free lunch)
is due to the fact that SABMiller and
Microsoft’s share prices do not behave
in the same way and are not moved by
the same events. So, in a year in which
IT companies underperform, defensive
businesses like SABMiller might do
well, and vice versa. That is to say, they
are not correlated well. Or, they have
a low co-variance, in technical jargon.
Since this is the case, the risk behaviour
of your two-security portfolio is lower
than the average of the two securities
separately.
This is a marvellous result, and is true
for any well diversified portfolio of
shares. It is also the only free lunch you
are likely to get as an investor!
41
FIGUR E 2 :
T HE FREE LUN CH D I VERS IFICATION
R E DUCES RISK AT
NO EXTRA COS T
Return %
50/50 mix of
securities 1 and 2
Security 2
Microsoft
B
A
Security 1
SABMiller
Adapted from: http://
ww.advisorperspectives.
com/newsletters08/
image/22fig2.gif
Risk % (standard deviation)
This is all good in theory, but how does one construct such portfolios
in real life?
The Citadel equity team uses a process formulated and refined over
the years, which is focussed on minimising risk through adequate
(but not overdone) diversification. This is the other half, the efficient
portfolio construction process referred to above, and is the
part so often neglected by part-time investors.
It starts with adjusting the portfolio for easily observable
concentration risks, such as excessive portfolio exposure to only one
or two industries, or having the portfolio overly exposed to only one
earnings factor, such as consumer spending or infrastructure.
These risks are easy to detect and correct. It becomes a little trickier
to sniff out other less obvious factors such as a portfolio’s exposure
to liquidity, or operational gearing, or a host of other inadvertent
factors. Without the right portfolio diagnostic tools, an investor
might be blissfully unaware of his or her portfolio’s vulnerability to
rand weakness until it is too late. Or he may not see that the portfolio
carries high interest rate risk, despite the investor not intentionally
building a portfolio with excessive balance sheet debt, or even having
a dovish view on future interest rates.
In short – and in the spirit of the adage that hope is not an
investment strategy – building portfolios with robust risk
characteristics is not simple. It is naive to believe that a
collection of shares that you like will give you the optimal
bang for your risk buck. Doing the risk-mitigation work
inherent in good portfolio construction is essential. After
all, who wouldn’t have the free lunch, if it was on offer?
42
LIFESTYLE
Whisky
SOUTH AFRICAN STYLE
By freelance writer, Gaye Crossley
South Africa may be a tiny whisky producer by global standards, but
what it lacks in volume it certainly makes up for in quality.
South Africa’s whisky lineage dates back over 125 years. The James
Sedgwick Distillery in Wellington, Western Cape, pays homage to this
history as it carries the name of Captain James Sedgwick; one of the
pioneers of South Africa’s liquor industry. Sedgwick founded J Sedgwick
& Company, Purveyor of Quality Liquor, Tobacco and Cigars in 1859.
After his death in 1886 Sedgwick’s sons set up what is now the James
Sedgwick Distillery on the banks of the Berg River in Wellington. The
facility only became an exclusive whisky distillery in 1991, when the
distillation of Three Ships was moved there. It is the only dedicated
commercial distillery in Africa.
Modern South African whisky production is limited to just two award
winning Distell brands and a third by micro-distiller Drayman’s.
Distell’s first whisky, Three Ships, was launched in 1977 with
Three Ships Select. The label then introduced Three Ships 5-year-old
Premium Select and the Three Ships Bourbon Cask Finish, winner of
gold at the International Spirits Challenge in 2013. The company’s
limited edition Three Ships 10-year-old Single Malt is the
range’s premium label. It was first released in 2003 and again in
2010. The distillery expects to launch another two editions over the
next two years. Among the single malt’s many accolades include gold
medal wins at the International Wine and Spirit Competition in 2007
and in 2011.
Bains Cape Mountain Whisky is the second Distell product and also
produced in the James Sedgwick Distillery. Launched in 2009, Bains is
South Africa’s first 100% grain whisky. Since its launch Bains has been
the recipient of multiple awards, culminating in the brand being voted
the World’s Best Grain Whisky by the World Whiskies Awards.
Located in Pretoria, micro-brewer and distiller Drayman’s is renowned
for its German-style beers and English-style ales, bitters and meads. But
it also produces two whiskies. The Scotch-style, Drayman’s Highveld
Single Malt, is distilled locally and is matured for between three
(the South African legal requirement for a single malt) and five years.
Its Solera Whisky is produced by using imported high-malt Scotch
whiskies that are matured in French oak casks using the solera method.
Although Drayman’s is a quality producer, the distiller’s volumes are
small and the product is currently limited for sale.
43
INSPIRATION
LESSONS IN LEADERSHIP
FROM THE LOCKER ROOM TO THE BOARDROOM
By freelance writer, Cara Bouwer
Gary Bailey was one of the youngest
goalkeepers ever to play in the English
Football League. Lucas Radebe was
voted among the top 100 greatest South
Africans in 2004. In 2014 Jean de Villiers
became the fifth Springbok to play 100
tests. Desiree Ellis captained Banyana
Banyana for a decade, retiring with a
win rate of 72%; while Hashim Amla is
renowned for leading the Proteas test
cricket team from the front. Over and
above their personal achievements, these
sporting heroes are also visible examples
of inspired leadership in action. And this
leadership can be transferred from the
playing field to the boardroom as has
been highlighted by top business schools
like the Gordon Institute of Business
Science (GIBS).
Back in 2013 GIBS ran an online
leadership course dubbed Succeed under
Pressure. The seven-week programme,
which focused heavily on the ‘soft skills’
of leadership, saw the business school
team up with former Manchester United
goalkeeper, businessman and author
Gary Bailey and GIBS Professor David
Beaty, a business leadership expert
who has experience working as a sports
psychologist to golfers on the Sunshine
Tour, South Africa’s local golf tour.
44
The course drew on the insights that
Bailey shared in his book Succeed
Under Pressure, which he co-authored
with British change management and
leadership specialist, Rakesh Sondhi. At
the time, GIBS’s Sue Swart explained:
“Gary has taken his learnings from a
highly pressurised and public sporting
environment and extracted takeaways
which have relevance and meaning to all
leaders, no matter what their business or
environment.”
In sports mad South Africa it’s easy to
draw parallels between sporting heroes
and sporting success and the sort of
level-headed strategy required to run a
successful business.
Examples highlighted in the book
included legendary Manchester United’s
former manager Sir Alex Ferguson’s
enviable ability to ‘reframe’ after a
setback. Bailey observed that Ferguson
never dwelt on mistakes; he reframed
and moved forward. “Many leaders and
managers tend to dwell on negatives, by
teaching them to apply these reframing
techniques you create a more positive
and effective leader,” explained Swart.
In fact, respected former JSE Chief
Executive Officer, Russell Loubser did
just that during another discussion at
GIBS, this time on the traits of great
leaders. He declared: “I don’t subscribe
to the theory that you are born a
manager or born a leader. I’ve never
worked with anybody who doesn’t have
some management capability or some
leadership capability…to me it’s no
different to having a sporting talent and
really working at it and developing it on
a constant basis over a period of time.
You need a few breaks and luck, but
that constant working at whatever your
talent is, whether you are sportsman,
a manager or a leader, I think that’s
crucial.”
“Sport is a fun way to create a context
to which we can all relate. Using these
examples we can unpack the issues and
really examine what we can learn from
these situations and then apply the
insights to our business and personal
lives.”
But perhaps the greatest lesson which
leaders in the boardroom can take from
sporting heroes is the pride and passion
which sets a good leader apart from an
extraordinary leader. Leading from the
front. Leading with a purpose and a
plan. That’s what it’s all about.
Classic sporting leadership quotes
“Before I came to United, I told myself I wasn’t going to allow anyone to be stronger than I was. Your
personality has to be bigger than theirs. That’s vital...it’s not about looking for adversity or for opportunities
to prove power; it’s about having control and being authoritative when issues do arise.” - Sir Alex Ferguson,
former Manchester United manager who lead the English Premiership club to 13 league championships and 25
other domestic and international trophies
“Coaching is a different space altogether; you do it to try to add value to a group of people and the individuals
in that group. I really look at my work in that way rather than the trophies that we gathered at the end of it all.
Every individual that I have come across – certainly in my experience as a player – needs someone to play for,
and I wanted them to play for me. I wanted them to know that I had put so much time and energy and invested
so much of myself into their games that they would play for me.” - Gary Kristen, former coach of the World
Cup-winning Indian cricket team
“I would not be standing here today if not for him (Nelson Mandela), and I feel the responsibility to continue
working in his image, to motivate and galvanize South Africa’s next generation...he was a man who believed in
the power of sport and a man who I owe my career to. He made it possible for black South Africans to dream
and to lead. He taught me humility, generosity, courage and integrity. Madiba also taught me how sport could
be used as an indomitable force for social change, and how it could impact individuals, communities and
nations.” - Lucas Radebe, former Bafana Bafana skipper
“For me, leadership is a collective effort. You need the backing of your team as well as your fellow players to
assist you in leading. Once you have that, and the whole team buys into the common end goal, it becomes very
easy. Team culture is also very important for a leader and it’s important to realise that no individual is bigger
than the team. You either buy into the culture, or you’re not part of it at all.” - Jean de Villiers, Springbok
captain
“Find the one thing you are good at (your gift) and pursue it. Be a leader, not a follower and be the best at what
you do then share your experience by teaching others. Make a difference in some-one else’s life.” - Desiree
Ellis, former Banyana Banyana captain
“When you’re in a leadership position you’re more a servant than a leader. You should serve the people you’re
responsible for.” - Hashim Amla, South African Test cricket captain
“Do not seek to be popular. Endeavour to treat all team-mates fairly and be honest with them all.
Underpinning every decision you make as a leader should be the knowledge that your decision benefits a whole
team.” - Will Carling, England’s youngest and most successful rugby captain who steered the side to back-toback Grand Slam wins in 1991 and 1992
“Based on what I’ve seen in sport, business and charity, if you make the
most of what you’ve got by preparing in the right way and sustaining the
right attitude, then you’ll get lucky more often than not. A positive mindset attracts good luck like iron filings to a magnet, while a despondent
demeanour marshals negativity like a doomsday prophet invites calamity.”
- Steven Waugh, former Australian cricket captain, in his book The
Meaning of Luck: Stories of Learning, Leadership and Love
Sources: Forbes, ‘Inspired - Remarkable South Africans Share Their Stories’ by
Jennifer Lindsey-Renton, The Guardian, Cape Town in Colour, Sapa
45
TRAVEL
MALAWI’S MAGNIFICENT
MAJETE WILDLIFE RESERVE
By freelance writer, Gillian McLaren
The Shire River flows from Lake Malawi, southwards through rugged, hilly terrain, into the Zambezi. With Miombo
woodland in the west and Leadwood and Silver Cluster Leaf woodland in the east, the area is exceptionally beautiful.
The river valley is lined with thickets and dramatic Star Chestnut – Sterculia appendiculate. Here you will find Malawi’s
major herds of elephants and a thriving population of the endangered black rhino.
Sitting at the Msepete Hide in Majete
Wildlife Reserve, you can watch
the moon as it rises over the Shire
(pronounced Shir-ee) escarpment and
Tyolo Mountain, while hundreds of
buffalo slake their thirst at the waterhole.
Dust swirls above the milling throng,
as they wait for their turn in the water,
46
creating a profoundly moving African
scene.
The picture has not always been so
rosy. In 1990 the last black rhino was
exterminated by poaching and other
game was denuded. According to
Bentley Palmer – a passionate wildlife
conservationist – the human population
explosion in Malawi caused deforestation
and increasing land encroachment on all
National Parks and Reserves, including
the Majete area. In the 1970s nearly a
million refugees fled to Malawi from
Mozambique to escape the civil war.
Much that could be eaten was taken,
even rats and some birds. Poaching was
rife, both for food and for finances from
sale of animal parts.
In an attempt to rescue, rehabilitate
and manage the area, the Malawian
Government entered into a 25-year
joint private/public initiative with
African Parks in 2003. Game was translocated from South Africa to Malawi, to
re-established populations of black rhino,
eland, roan antelope, Lichtenstein’s
hartebeest and Cape buffalo. Dr Antony
Hall-Martin speaks lovingly of the black
rhino project and says “every calf was
accounted for over a period of twenty
years” after the black rhinos were
reintroduced. These conservation efforts
have been hugely successful in Majete
and Liwonde National Park. Robin
Pope Safaris sponsored the relocation
of two lions from South Africa that were
reintroduced to Majete Wildlife Reserve
in August 2012. The release of a sixth
leopard to be reintroduced to the area
took place in December 2012.
Majete’s perimeter fences are patrolled
daily by committed game guards
from African Parks, to maintain and
repair damage caused by vigorous bull
elephants or burrowing warthogs and to
check for any signs of poaching. Water
from the Shire River is pumped to four
boreholes in the park.
The ongoing success of this initiative
has led to ready support from private
sector funded lodges and camps. At the
confluence of the Shire and Mkulumadzi
rivers, Robin Pope Safaris has established
the luxury Mkulumadzi Lodge with eight
private chalets, in the shade along the
riverbank. Getting to the lodge involves
an exciting walk on a rope bridge, strung
across a tributary of the river. Spectacular
views of the Mpatamanga rapids – as well
as elephant herds or families of warthogs
coming for a drink – may cause you to
linger on the raised wooden deck of your
chalet. Rotund hippos snort and splash
in the water and emerge in the evening to
graze, when you can see their pink-hued
skin folds and stocky legs. The spacious
bedroom area is completely open to the
deck in the front, which can be curtained
off at night or left open as you lie on
your king-sized bed, beneath a canopy of
mosquito netting.
An outdoor shower looks into the top of
Wing pod and Apple leaf trees, where
you could see an owl or Rusty Spotted
Genet during your evening ablutions. If
you prefer a bath, you can open panels
of windows, for an outdoor feel and to
maximise the expansive view.
In the precincts of the lodge you can
spot many of the more than 350 species
of birds found in the park, including
the highly prized Racquet-tailed roller,
Crowned Hornbill or Arnot’s Chat.
Delicious meals
accompanied by fine wines,
are served in a thatched,
open dining area, which
also has a splendid view of
the Shire River. Adjacent
to this, beneath wellestablished Leadwood
trees, is an infinity
swimming pool with sun
loungers, but you won’t
want to close your eyes.
Although the volume and variety of
game is not what you would find in
Kruger or some other well-known
reserves, Majete is well worth a visit
for sightings of new species like Yellow
Baboon, the three different species of
magnificent Star Chestnut trees, or
specials including Böhms Bee-eater. The
scenery is spectacular, you barely see
another vehicle and Mkulumadzi Lodge
is outstanding for its setting, service
and chalets. As this area has the highest
density of animals and birds in the
region, it is perfect as a base from which
to explore Majete.
Travel tips and
contact details
Robin Pope Safaris, a member
of Classic Camps of Africa, has
excellent lodges in Malawi. As well
as Mkulumadzi Lodge, there is
Pumulani, set on Lake Malawi.
• www.robinpopesafaris.net
• info@robinpopesafaris.net
• +265 179 5483/4491
Malawian Airlines has daily
flights from OR Tambo International
Airport to Lilongwe and Blantyre. In
two hours, you will experience the
warm heart of Africa. Visas are not
required for South African travelers.
For reservations:
• Resjnb3w@aviareps.com
• +27 11 722 0230
Wilderness Safaris has
contributed greatly to the protection
of black rhino in Malawi, especially
in Liwonde National Park.
To visit their eco-lodge or camp see:
• www.wilderness-safaris.com/
camps/mvuu-lodge
• m1@wilderness.mw
Latitude 13 is ideal for an
overnight stay in Lilongwe, before
you fly back to Johannesburg. It has
contemporary décor in striking black
and white, with touches of grey. The
restaurant serves gourmet fare, with
an African twist.
• www.thelatitudehotels.com/
latitude13-boutique-hotelmalawi/home.php
• +265 996 40 31 59
• reservations@thelatitudehotels.
com
47
OFFSHORE
EXPANDING
INTO
AFRICA
By freelance writer, Amanda Killick
When it comes to launching big business into
the unknown – like the continent of Africa –
Chris Moerdyk has more than 40 years’ practical
experience in the field. As a well-known marketing
analyst dealing with the region, his is a cautionary
tale. But, when done right, the journey may end up
paved with gold.
When you make the decision to become a South African
entrepreneur, you’re taking a calculated risk – statistically,
you have between three and five years to make it in business
– or go broke. Now let’s assume you’ve survived the startup phase and have grown into a medium- to large-scale
enterprise and your executive team has suggested taking
yet another leap of faith by expanding your operations into
Africa. A smart strategic move, that could be a dream come
true, or a nightmare from beginning to end. That, says
Moerdyk, depends on how well you do your research.
“When I first got into export marketing, a lot of South
African companies thought: ‘I have a product, you want
it, send me the money and I’ll pop it into a container.’ But
times have changed. There’s still a massive amount of work
to be done in setting up the infrastructures around exporting
your product outside of your country. Africa represents one
of the biggest export opportunities for SA businesses – it’s
a massive market – and you’ve got to know what you’re
doing!”
Moerdyk believes that “in the next five to 10 years, as the
domestic market becomes increasingly competitive with
new players all wanting a piece of the pie, exporting into
Africa will not be optional, but imperative! Africa has
48
proven to be one of SA’s most promising
export markets, but also probably one
of the most complex.” And it’s those
complexities that can scupper any
thoughts of expansion before you’ve even
started filling in the forms.
Moerdyk retired as Head of Strategic
Planning and Public Affairs at BMW
South Africa 10 years ago to become an
analyst and assist businesses in fulfilling
their African expansion dreams. In his
40-plus years of marketing experience
in South Africa and the continent, he’s
learnt a lot about the way Africa does –
and doesn’t – do business.
“One mustn’t take South Africa into
Africa,” he says. “We’ve seen how, for
example, the Americans, the French
and the English can all replicate ‘a little
slice of the United States/France/United
Kingdom’ anywhere in the world and
make it a raging success. But you can’t
do that as a South African brand in
Africa – the way business is done on this
continent is unlike anywhere else in the
world, so it’s vital to do your homework
beforehand. For every hour you spend
researching the common market, you’ll
spend 10 on Africa. You have to actually
BE there to understand it.”
Moerdyk explains how you must “go in
knowing that the business and cultural
ethics that we consider taboo here in SA
are simply normal business practices in
countries like Nigeria, Ghana and Kenya,
and be prepared for that. It’s also key
to understand the difference between
bribery and corruption, and ethical
business practices – in some nations in
West Africa, these are one and the same.
It’s just how they roll. There’s a definite
ethics divide between East, West and
South Africa.”
Not all companies, however, subscribe
to these business practices and Moerdyk
cites a great example of this: “When
Afrox tried to set up business in Kenya
many years ago, they found that people
were asking for bribes and kickbacks to
do so, and because it flew in the face of
what Afrox was about, they decided not
to go that route. A few years later, the
Kenyans approached them and virtually
begged them to come over without
mention of bribes and kickbacks. So they
did. Afrox got to do business in Kenya
and stay true to their business ethics.”
But it’s not only cultural business
differences you need to be aware of;
it’s also how you market your goods.
Moerdyk believes it’s time to dust off
the very basic principles of marketing
and rely on them. He says: “In many
instances, you’ll find that your message
needs to be more aligned to what you
know your customers wants to hear,
rather than what you want to say, which
goes in the face of what we know about
marketing to South Africans. Their
buying behaviours are more culture- and
habit-driven than ours.”
With years of experience taking
retailers across borders, Moerdyk
believes it’s vital for the company
to align themselves with the
new country as soon as possible.
“Technology is great, but in
Africa, marketing face-to-face
is key, especially in setting up
initial relationships to ensure
long-term export sustainability.
Demonstrating ties can be as
simple as incorporating their flag
into your advertising material, but
remember, Africa is all about pure
consumerism. If you’re supplying
the right products of the right
quality and price, no-one actually
cares where it comes from.
Partnerships within a country of export
can also prove beneficial. “If you can,
for efficiency’s sake, find a local partner
who not only has connections but also
knows the way things are done in that
country. In certain African regions,
you can go in solo – think the Southern
African Development Community
(SADC) region, Botswana, Zimbabwe –
but this is less so the further north you
go. The partner need not be your client
but must be someone who understands
the protocols and legislation, especially
as they relate to setting up contracts and
the ramifications thereof,” he says.
Moerdyk has also seen firsthand how
expansion into a new market can result
in receiving a glut of new orders, but
do spare some thought on whether
you’re geared up enough to fulfill them.
Here, the old adage of “don’t bite off
more than you can chew” comes into
play. He says, “One global order that
goes beyond your production capacity
can cripple your business, despite it
flourishing here at home. It’s vital to
ensure that your production output can
consistently meet the demand of orders
placed locally and abroad. It may mean
bringing in new staff, expanding your
production line or introducing new shifts
to run the operation 24 hours a day, but
consistency in delivery is key.”
Lastly, Moerdyk advises you to
be extraordinarily careful of
local laws. He cites the lesson
learned by a company that
manufactured a machine to
process the different parts of
the Lala Palm tree (Hyphaene
coriacea), which grows
prolifically throughout the
continent. They spent millions
creating the machine, had it all
ready and set up to sell to the
local market. Moerdyk then
goes on to explain how, at the
machine’s media launch, the
then South African Minister
of Agriculture approached
the company’s owner, saying
he sincerely hopes there’s an
export market for the machine,
as the Lala Palm is a protected
species in South Africa…do your
homework!
OFFSHORE
AFRICA OFFERS
PROMISING
OPPORTUNITIES TO
LOCAL COMPANIES
Ganesh Shenoy - Citadel Investment Analyst
ganeshs@citadel.co.za
"
The darkest thing about Africa has
always been our ignorance of it.
"
- George Kimble (geographer, 1912)
DOING BUSINESS IN AFRICA
Many South African companies have expanded into
Africa and are thriving in diverse sectors. Doing
business in Africa provides unique challenges and many
opportunities. However, it also requires a different set of
skills, deep understanding of the local culture, tenacity,
and creativity to adapt to local conditions. This comes
from experience and local knowledge.
ECONOMIC GROWTH RATES IN
AFRICA
TABLE 1: ECONOMIC GROWTH RATES OF AFRICAN
COUNTRIES COMPARED TO EMERGING COUNTRIES
2001- 2010
2 0 1 1 - 2015
Nigeri a
8.9%
6.9%
Ethiopi a
8.4%
8.1%
Mozamb iq ue
7.9%
7.7%
Zam bia
6.1%
7.0%
S outh Afr ic a
4.5%
2.5%
China
10.5%
9.5%
I ndia
6.8%
8.2%
Cam bod ia
7.9%
8.1%
AFR I CAN C O UNTRI ES
O TH ER E ME RGING
COUNTRI ES
Source: Organisation for Economic Co-operation and Development
50
With fewer conflicts and higher expected economic
growth rates, the lure of favourable prospects in Africa has
attracted capital from international and local investors.
Table 1 illustrates that the economic growth rates of
emerging countries like China, India and Cambodia
compare favourably with the likes of Nigeria, Zambia and
Ethiopia.
Other factors that strengthen the investment case for
Africa include the following:
• The middle class (people earning between US$10
and US$50 a day) is expected to grow to 1.1 billion in
2016, which accounts for 46% of Africa’s population.
As the middle class grows, so does each individual’s
disposable income. This results in higher demand for
durable and non-durable goods. Companies across
this spectrum, including retail, telecommunications,
media and healthcare are well positioned to benefit
from this.
• Literacy levels are improving, which provides access
to jobs in semi-skilled and skilled professions that
are mainly urban based. As workers move to cities
to find work, the demand for housing and urban
infrastructure like schools, hospitals and shopping
malls increases.
• A historic lack of investment in supply chain activities
like procurement, distribution and warehousing,
provides opportunities for logistics companies to
transport finished goods and raw materials from
factories and ports to warehouses and retail centres.
LOCAL COMPANIES EXPANDING INTO
AFRICA
The forecast for South Africa’s economic growth is lethargic
compared to its peers.
Reasons for this include:
• Underinvestment in power and logistics infrastructure,
• Poor worker productivity and unstable labour, and
• A constrained consumer environment.
Companies that earn their revenue from local sources are
forced to explore outside of South Africa if they want to grow.
Because of the wide range of opportunities available in the
rest of Africa, many local companies have expanded into
Africa. However, at the same time they have found the social,
economic, legal and political frameworks a challenge.
INVESTING IN AFRICA COMES WITH
SIGNIFICANT BARRIERS
Table 2 shows the results of a survey by Euromonitor (2011)
of 193 global CEO’s who invest in Africa. It reveals that lack
of information transparency, poor legal frameworks and
corruption create significant barriers to doing business in
Africa.
Local companies MTN, SABMiller, Standard Bank, Shoprite
and Wilson Bayly Holmes have expanded into Africa and
overcome these challenges, generating enormous shareholder
TA BL E 2 :
BARR I E R S TO
INVESTI NG I N
A FRICA
value. However, many other South African companies who
have invested in Africa have not fared as well.
Telkom entered the Nigerian market in 2007 when it
bought Multi-Links for US$410 million. The deal was widely
supported by management, who wanted a “foothold in
Africa’s fastest growing economy”. Multi-Links operated a
fixed and mobile telephone network and provided data and
wireless internet access. Following the acquisition, numerous
difficulties plagued the business due to a price war with
existing telecom operators, poor distribution channels and
weak management. Senior employees spent a lot of time trying
to turn the ailing business around. Continued losses and
increasing competition saw the investment impaired by
R10 billion. Telkom eventually sold the business for
US$10 million in 2011.
Altech, which earned revenues mainly from its Netstar vehicle
tracking business and Auto Page mobile business, identified
a need in Kenya for data services and ancillary network
infrastructure for consumers and business. They bought a
60% equity stake in Kenya Data Networks (KDN) in 2010 for
R800 million. The balance was held by a local Kenyan partner.
Over time the network instability, falling data prices and a loss
of clients incurred operational losses, which needed further
investment to improve the network and restore profitability.
Problems were compounded when the local partner could not
meet its capital obligations. Despite all efforts, KDN continued
to lose money, eventually making a loss of R850 million. The
business was sold in 2013 for R550 million.
Barriers to investing in Africa
Humanitarian issues
0.0%
1.0%
Excessive regulation/bureaucracy
2.0%
Weak means of resolving commercial disputes
2.0%
Unavailability of large investments
3.0%
Macro-economic/currency risks
3.0%
A poor perception due to political risk
Corruption
Insufficient regulatory/protection for investors
Lack of sufficient information
15.0%
21.0%
23.0%
29.0%
Source: Euromonitor
51
UNDERSTANDING COMPANIES
At Citadel, we spend time and effort to
understand company management and how they
invest. We explore qualitative and quantitative
issues and ask prudent questions.
Following this process is crucial to and just as relevant for
exploring opportunities in Africa:
•
•
•
•
Does the profit on the invested capital exceed the riskadjusted cost of capital? How conservative is management
when they make decisions on levels of sustainable
revenues, cost synergies and operating margins?
Is the excess return sustainable? What barriers to entry
do management use to protect these excess returns? Our
philosophy is based on the principle that excess returns
attract new competition, which erodes this excess over
time. As a result, high operating margins and returns on
invested capital will revert to the long-term mean.
How does the investment benefit other businesses in the
company’s portfolio? Acquisitions should preferably be in
a similar line of business. If not, then we prefer to follow
an alternative strategy of returning cash to shareholders
rather than to diversify.
What is the level of risk associated with each investment
opportunity? How sensitive is the business to political and
regulatory changes and how is this included in the cost of
capital? What are the exit strategies?
•
What price is management paying for these assets? How
did they arrive at this price? Are the multiples low and is
management conservative in their estimates of revenue
and cost synergies? Is it a cash or share offer?
INVESTMENT OPPORTUNITIES BEYOND
SOUTH AFRICA’S BORDERS
Years of under investment in Africa has created many
opportunities across all sectors. The high excess returns
achievable in the short term will attract local and international
competition.
There are, however, certain factors that managements of
companies must consider to ensure they have a happy ending
to their investment story:
• The increase in competition will drive down returns in the
long term to a normalised level, which is the key level of
returns that management must consider.
• They must exercise price discipline and be prudent when
investing in growth stories and chasing high returns.
• They must conduct a comprehensive due diligence to
identify risks and risk mitigation procedures before they
invest.
If these principles are taken into account and the most
prominent barriers to investing in Africa are overcome, we
believe South African companies can benefit from expanding
into the rest of the Africa.
TEAM MTN-QHUBEKA:
SHINING THE SPOTLIGHT ON
AFRICAN CYCLING
By freelance writer, Tamara Oberholster
Team MTN-Qhubeka powered
by Samsung is Africa’s first ever
world cycling body, UCI, registered
Professional Continental cycling team
and is making history as it aims for entry
in the Tour de France 2015.
The team was thrown into the limelight
internationally back in 2013 – its first
year in the division – when team leader
Gerald Ciolek shocked the world by
52
winning the Milan – San Remo (the
longest professional cycling race at
398km) beating favourites like Peter
Sagan (Cannondale) and Fabian
Cancellara (Radioshack Leopard Trek) to
the victory.
Team Principal Doug Ryder, who
captained the South African national
cycling team from 1993 to 2002
and competed in the Olympics
(Atlanta, 1996) and multiple World
Championships, has long believed that
African cyclists have the potential to
compete and win and the highest levels
of the sport.
“Africa has produced the best endurance
runners, so why not cyclists?” he says.
“One major reason is that there are no
bicycles in the communities for kids to
start out on.”
SPORT
This is the reason that the talented
athletes of Team MTN-Qhubeka race; to
build exposure for Qhubeka, an NonProfit Organisation (NPO) that helps
people move forward by giving bicycles
in return for work done to improve
communities, the environment or
academic results. Qhubeka is an Nguni
(Zulu, Xhosa) word that means “to carry
on”, “to progress”, “to move forward”,
which is exactly what Team MTNQhubeka is looking to do, along the
way inspiring potential athletes within
the community of Qhubeka bicycle
recipients.
Ryder notes that 2014 has been a
“building year” for the team. “We
did have 10 victories, but the goal
for the season was to be more visible
in races and animate the races by
being represented in breakaways and
getting the team name and Qhubeka
Foundation out in the open,” he says.
“This racing strategy certainly helped
the team secure the wildcard entry
into our first Grand Tour; La Vuelta a
España. In fact, we were Africa’s first
ever registered team in a Grand Tour.”
Ryder says the Vuelta (aka the Tour of
Spain), was definitely the highlight of
2014 for the team. “We prepared really
well during a high altitude training
camp in Lavigno in Italy prior to the
event,” he says. “We started the three
week event with six out of nine riders
being first-timers to Grand Tours, which
was nerve wracking in terms of the
importance of this event to the team’s
future in racing at the highest level in
world cycling. We ended the event with
all nine riders, one of only five teams
to do so. We finished in top 10 three
times, with a best fifth place on stage 14,
and we had a rider in the top 20 on the
general classification.
“This showed the strength and
determination of the riders and how
this African team raced every day like it
was their last. The spirit and teamwork
from riders to staff to make the event
memorable was so awesome to be a part
of,” he says. “Looking to 2015, we have
added significant depth and power to
our team to win races. We have signed
riders from the some of the best teams
in the world to focus on winning the
Spring Classics, getting a wildcard entry
into the Tour de France and to attempt
to ride La Vuelta again.
The riders we have signed include
Edvald Boassen Hagen (Team SKY),
Tyler Farrar (Garmin Sharp), Matthew
Goss (Orica Greenedge), Theo Bos
(Team Belkin), Serge Pauwels (Omega
Pharma Quickstep), Steve Cummings
(BMC), Reinardt Janse van Rensburg
(returning to our team from Giant
Shimano) and Eritrean rider Natnael
Berhane (Europcar). Our 2015 team
will consist of 22 riders of whom 60%
will be from the African continent. 2015
is our biggest season yet and we look
forward to winning more races and
raising more awareness for the Qhubeka
Foundation.”
Of course, it’s not all sunshine, roses
and podium finishes for the team.
“Setting up an African team to race
against the best riders in the world
has many challenges,” Ryder admits.
“Firstly, we had to overcome the visa
challenges. We set up a company in Italy
[the team is currently based in Lucca in
Italy] and worked on getting the riders
residency permits so that they can race a
full European season.”
Ryder then goes on to say: “We had
to work on riding skills as most of the
riders had ridden on wide roads with
few riders, whereas in Europe you
race on narrow roads with 200 riders
and you go through a town every 20 to
30km that has all sorts of traffic in the
way. When that happens at high speed,
reaction time is paramount to survival.
Needless to say, we have broken many
collarbones in the last two years. The
riders are adapting to the racing and the
European living conditions and lifestyle.
We all look forward to a very successful
2015 season.”
African cycling
talent pipeline
The World Cycling Centre
Africa (WCCA) is based
in Potchefstroom and
aims to develop talented
African cyclists with the
support of the International
Cycling Union (UCI) and
Team MTN-Qhubeka, to
race as professionals on
the international circuit.
WCCA provides a feeder
team or development squad
to the MTN-Qhubeka Pro
Continental team, ensuring
that young, talented riders
from the African continent
have an opportunity to
progress.
The MTN-Qhubeka WCCA
team won the 2014 team
time trial event at the
South African National
Championships. Cyclists like
Nicolas Dougall, who spent 18
months with the feeder team
before joining Team MTNQhubeka in 2014, and who has
been re-signed for the 2015
season, are proof that the
pipeline is producing results.
PERSONAL FINANCE
TAX-FREE SAVINGS AND
INVESTMENTS
Wilhelm Söhnge - Citadel Wealth Manager
wilhelms@citadel.co.za
National Treasury and institutions in the financial services industry are
working tirelessly to make a range of tax-free investment products (TFIPs)
available to South African investors in 2015. In these new products, South
Africans will be able to hold familiar investments like units in collective
investment schemes, bank deposits and retail savings bonds. The beauty of
the new product, however, lies in the tax dispensation, as investors will not
be liable for any tax on interest, dividends and even realised capital gains
generated on investments within this product.
It is Government’s goal to encourage
South Africans to save more in order
to provide for times of need, as well
as their retirement. The introduction
of TFIPs is one step in a much wider
drive to encourage individuals and
households to save. If all goes according
to plan, we will see the introduction of
TFIPs at the start of the new fiscal year.
WHAT THIS MEANS FOR
INVESTORS
The launch of TFIPs will allow Citadel
clients to invest discretionary money
in certain of our funds, for example the
Citadel SA Equity H4 Fund, without
paying any tax on dividends, interest
or realised capital gains. The envisaged
eligible products may include exposure
to various asset classes, including
money market, fixed income, equity
and property investments or any
combination thereof. The National
Treasury’s vision is that these accounts
will form the basis of every South
African investor’s portfolio.
Currently, individual South African tax
payers pay tax on dividends at a flat
rate of 15%, irrespective of their other
54
income. Interest earned above the
annual exemption of R23 800 (R34 500
for taxpayers over 65 years of age) and
33% of realised capital gains above
R30 000 is included in income and
taxed at the scales applicable to
individuals. As the R23 800/R34 500
exemption was limited only to interest
bearing instruments, the proposed new
product widens the tax-free investment
space to include more options, for
example equity investments, by not
only allowing for tax-free interest but
also for dividends and realised capital
gains.
Contributions to TFIPs will be
limited to R30 000 per investor
per annum and a R500 000
cumulative life time limit will
apply. These limits will be
reviewed in future and may
periodically be adjusted for the
effects of inflation. The R30 000
annual limit will work on a “use it
or lose it” principle and there will
not be any roll-over for unused
portions of prior years. This is
to encourage investors to start
saving earlier and save regularly
over the long term.
Although the R30 000 annual limit
may seem a little low to some investors,
who may consequently contemplate
if it will be worth the effort to invest,
the amounts will quickly add up. For
example, even at the current annual
limits a family of four can have
investments of R600 000 plus all
growth thereon outside the tax net in
just five years.
Former Minister of Finance Pravin
Gordhan did not propose an increase
in the interest exemption in the
2014 National Budget. It is National
Treasury’s intent to keep this
exemption at current levels of
R23 800/R34 500. The objective is
for the annual R30 000 contributions
to make up for the interest exemption
diminishing in real terms and give
investors time to gradually adjust their
investment portfolios to the new tax
regime.
Investors may open more than one
account at more than one financial
institution, but will have to monitor
their contributions carefully if they do
so. The R30 000 annual limit applies
to the aggregate of contributions to all
TFIPs per individual, not per product.
SARS proposed heavy penalties of 40%
on any amount contributed in excess of
the annual or life time limits.
Transfers between TFIPs at different
service providers will be provided for
and will not count towards the annual
contribution limit.
Although the intention is to encourage
long term saving, the product itself will
have no minimum term and, depending
on the underlying investments, funds
should be available within days
when needed. Obviously an investor
should still ensure that the underlying
assets within the TFIP match his/her
investment horizon. As an example, an
investor who is likely to require funds
from a TFIP in the short term should
probably avoid investing in, say, an
equity unit trust. Withdrawals from a
TFIP should only be made after careful
consideration as amounts withdrawn
cannot be replaced – the normal annual
contribution limit will apply.
Although a wide range of underlying
investments will be available through
the TFIPs, direct share portfolios are
excluded. We assume this will be to
avoid providing a vehicle where active
speculative trading can be done in a taxfree environment. The use of derivatives
within TFIPs will also be restricted.
On the death of the investor all TFIPs
will form part of the deceased’s estate
and will be dealt with as set out in the
will. The amounts within the TFIPs
cannot, however, be transferred directly
to an heir’s TFIP. Any transfer of TFIPs
from one individual (or his/her estate)
to another will be deemed to be a
contribution and subject to the annual
and lifetime contribution limits of the
recipient.
Financial institutions like banks, long
term insurers, collective investment
scheme management companies and
linked investment service providers
(LISPs) will be authorised to market
TFIPs to the public. We expect most, if
not all, major players in the financial
services industry to launch versions of
this product in 2015, which will have to
comply with certain criteria to qualify.
It is National Treasury’s aim to have
products that are simple to understand,
transparent in their disclosure and
suitable for the institution’s target
market.
The required changes to the
Income Tax Act have already
been submitted to Parliament
and the draft regulations have
been released by National
Treasury. At Citadel we are
putting the final touches to
our version of the new product
in order to welcome the first
investors on Monday, 2 March
2015.
Your Citadel advisory partner
will in due course discuss with
you the suitability of a TFIP for
you and other members of your
family. Please don’t hesitate to
contact him/her, should you
have any questions or comments
in the meantime.
55
INSPIRATION
H O M E - G R O WN
INSP I R AT I ON
Citadel, in conjunction with parent company Peregrine and leading online investment source Moneyweb, hosted the
inaugural Citadel Inspiration Indaba on 2 September 2014 at the newly developed Inanda Club function facility in
Johannesburg. The event was opened by Citadel Chief Executive Officer, Andrew Möller who expressed the hope that
the Inspiration Indaba would inspire South Africans and become a catalyst for change through local inspiration.
In total, six speakers took to the platform and a panel discussion with three young local entrepreneurs wrapped up the
day’s proceedings as they shared their personal stories of failure, perseverance and, ultimately, success.
SIYABULELA XUZA
The first speaker of the day was 25
year old Siya Xuza, South Africa’s
very own rocket scientist. By the
time he was 17, Xuza had developed
an alternative rocket fuel which
saw him invited to the 2006 Nobel
Prize Ceremonies in Sweden and awarded first place at the
2007 Intel Science and Engineering Fair. Xuza has also been
honoured by having a minor planet named after him. Today
he is committed to developing new fuel-cell technology that
will change the face of power generation in rural Africa. A
charming narrator, Xuza told the story of how he started at the
age of six to create rocket fuel which, he hoped, would power
him to Jupiter. His story took the audience through his many
failures until one day, at age 17, he succeeded and launched
his first rocket, which broke the world altitude records. Xuza
told delegates that by knowing where you want to go and
committing to the journey you will get there. Among his many
insights he shared his personal motto: “Begin believing in
better.”
LEE SWAN
Xuza was a hard act to follow but
Lee Swan, the first African woman
to reach the magnetic north pole,
was definitely up to the challenge.
Swan took the audience through her
preparation and completion of the
2011 Polar Race, a gruelling Arctic adventure race that saw her
56
and two team-mates walk 820km across the Arctic ice in 22.5
days to win the race. They arrived at the Magnetic North Pole
on South Africa’s Freedom Day (27 April 2011). At the start
of the race Swan asked: “Do I trust myself?” She says, in any
tough situation, this is the key question to ask. If, on that day,
her answer had been ‘no’ Swan says she would have turned
around and gone home. When her and her team-mates were
stuck in their tent through an Arctic blizzard, she realised: “I
can’t control what is happening outside, but I can control what
goes on in my head.” This attitude pulled her through the most
gruelling experience of her life.
PADDY UPTON
Paddy Upton moved the theme
away from perseverance and
dedication to the importance of
creating what he calls “player
driven teams”. Upton shared
his experiences supporting Gary
Kirsten when they guided the Indian cricket team to become
world Test champions in 2010 and winners of the 2011 ICC
World Cup. He narrated how they brought this philosophy
back home, when Kirsten took over as Protea’s coach and
Upton was the South African team’s Performance Director.
In 2012 South Africa became world Test champions and also
were ranked number one in all other cricket categories; a first
for any team in the history of cricket. His message was simple:
“We listened to what the players want, rather than what we
think they want.” Upton explained that it was important to
get the players to think for themselves. “We need to create
thinking players,” he said, explaining that when players in
the team started thinking and deciding for themselves what
they needed, and when they started implementing strategies
for themselves and the team, then the whole team dynamic
changed. Upton said: “It was a player-owned culture, there was
no need for a controlling parent.” This, he believes, is where
South African sporting philosophy needs to develop.
ROB STOKES
Rob Stokes, the founder and
CEO of Quirk, Africa’s largest
independent marketing agency then
offered his remarkable insights on
entrepreneurship. Ten key lessons
were interwoven into the story of
the creation and challenges he faced throughout his 15 year
Quirk journey, namely:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Surround yourself with people better than yourself
Timing does matter
Always play to people’s strengths
If you’re going to do something, commit fully
You need luck
Be generous with your knowledge
Make yourself saleable, even if you are not for sale
Businesses struggle to innovate internally
The most adaptable to change, survive
Just. Do. It.
He ended his talk by saying: “If you just do it [being an
entrepreneur] for one year and you fail; you will still look back
at that year as the best year of your life.”
DR ADRIAN SAVILLE
Dr Adrian Saville is the founder and
Chief Investment Officer of Cannon
Asset Managers and holds a visiting
professorship at the Gordon
Institute of Business Science. Asked
to talk about what inspires him
about South Africa’s economy, Saville gave the audience an
insightful overview of the current state of the nation as well
as the steps South Africa needs to take to achieve the growth
figures set out in the 30 year National Development Plan.
He said: “[Post 1994] South Africa is an economic miracle.”
And this is something we should remember even when things
are not looking good. Saville stressed that South Africa must
develop its ‘six pack’, six criteria any country wanting to meet
its growth targets should focus on.
They are:
1. Savings and investment
2.
3.
4.
5.
6.
Demography
Policy and institutions
Education
Health
Openness
Saville hailed Germany and Japan as two shining examples
of countries that had succeeded by getting these fundamental
areas right since World War II to become the second and third
largest economies in the world.
HERMAN MASHABA
The last speaker of the day was
Herman Mashaba, the founder
of Black Like Me and one of
South Africa’s most renowned
entrepreneurs. He spoke about
starting Black Like Me during
apartheid-era South Africa under PW Botha’s rule, at a time
when black people were not allowed to own businesses.
Despite the odds, he went ahead with a R30 000 investment
and, within five years, had built a R10 million business. Having
lost everything twice and rebuilt it again, Mashaba looks back
on 1984, the year he started his company, with fondness and
an acknowledgement that starting up a small business, even
in those challenging times, may have been easier. He bewailed
the fact that over the past 20 years, legislation, government
and trade unions had ‘conspired’ against small business by not
giving them the necessary opportunities.
His vision for his future role as an influential South African
business man includes using his position:
1. To continue being an active citizen.
2. To assist in creating a business friendly country.
3. To help make South Africa a great nation.
4. To help create the ‘Rainbow Nation’ as former President
Nelson Mandela envisioned.
PANEL DISCUSSION
Ending the day was an illuminating panel discussion on
South African entrepreneurship featuring Andile Khumalo,
founder of MyStartUp; Lynette Ntuli, CEO of Innate
Investment Solutions, and Sean Riley, founder of Ad Dynamo.
The discussion was presided over by event facilitator, Siki
Mgabadeli.
Andrew Finlayson, Citadel Marketing Director, closed the
day by saying: “We [Citadel] are creating a platform for South
Africans by South Africans. We hope you take something away
that will last for many years to come.”
57
PHOTOS OF THE 2014 INSPIRATION INDABA
Panel discussion
58
Speaker, Siyabulela Xuza
Kerry King (Citadel), Graham Kramer, Esther Letlape and John Bayly
Speaker, Rob Stokes
Kevin Joselowitz, John Kennedy (Citadel) and Michael Hertz (Citadel)
Jessica Midlane, Tshepo Mathabathe and Maxie Davies
Speaker, Lee Swan
Speaker, Dr Adrian Saville
Oliver Dresner (Citadel), Robin Grobler and Dave Reddy
Gail Hoffmann, John Kennedy (Citadel)
and Jenny Ratcliffe-Wright
Speaker, Paddy Upton
Speaker, Herman Mashaba
59
Be inspired
by the stories
of others
2015 EARLY BIRD PACKAGES NOW AVAILABLE
VISIT WWW.INSPIRATIONINDABA.CO.ZA
or send an email to rebeccah@citadel.co.za.
Citadel Investment Services Proprietary Limited is licensed as a financial services provider in terms of the Financial Advisory and
Intermediary Services Act, 2002.
www.citadel.co.za
SPORT
THE
BUSINESS
OF RUGBY
By freelance writer, Kim Novick
The Rugby Championship is an evolution of the TriNations and amongst many rugby commentators
considered to be the ultimate contest. The
competition features teams that are currently ranked
first, second, third and eighth in the world. In its
third year, the Rugby Championship replaced the TriNations when Argentina joined the group in 2012.
As each team has its own sponsor, the game falls under four
different descriptors, depending on the country it is being
viewed in. In South Africa it’s the Castle Rugby Championship,
in New Zealand the Investec Rugby Championship, in Australia
the Castrol Edge Rugby Championship and in Argentina the
Personal Rugby Championship.
ARGENTINA, NEW KIDS ON THE
SOUTH BLOCK
When Argentina joined the competition in 2012 it was hailed
as “a defining moment for Southern Hemisphere rugby and
significant for world rugby,” by South Africa, New Zealand
and Australia Rugby (SANZAR) Chief Executive Officer, Greg
Peters. “Playing in the Championship will have significant
benefits for Argentinian rugby as a whole and will bring new
energy to the jewel in the crown of SANZAR. The Pumas, as
they showed at the Rugby World Cup, play an exciting and
different brand of rugby to the other three teams, which will
definitely add a new dimension,” Peters said.
In Argentina, Rugby is growing faster than in any of the other
Rugby Championship countries and the Rugby Championship
has successfully boosted the long term value of the competition
with a local economic impact of up to US$14 million for each
match hosted in the country.
Kelvin Watt of sports market research company Repucom says
this would have increased the logistical cost of the tournament
too and has also added an extra six matches to the event. “This
would in turn have impacted broadcast rights values. However
from a South African perspective it has not increased the
sponsorship revenue and ticket sales for Argentina matches
are not nearly what they are for New Zealand and Australian
matches held in South Africa,” he explains.
MONEY, MONEY, MONEY
Rugby has been dubbed as something akin to a “religion” in
New Zealand and is highly popular in South Africa...rugby in
Australia, however, is supported by only 7% of the population
and that significantly affects its revenue capability.
While the Australian Rugby Union (ARU) showed revenue in
excess of US$140 million in 2013 thanks to the British and
Irish Lions tour, those returns dropped to about US$100
million in 2014 and in 2015 it will fall further to about US$80
million because of the financial impact of the World Cup.
Generally however, the success of The Rugby Championship
offers the possibility of lucrative returns to both sponsors and
the economies of host nations and cities. In 2011 for example,
primary sponsors SABMiller signed a five-year agreement with
the South African Rugby Union (SARU) valued at a reported
US$3 million (R32 million) per annum. A MasterCard Study
61
of the 2010 Tri-Nations reported the competition contributed
over US$174 million to the Southern Hemisphere economy.
With the inclusion of Argentina in 2012, it was estimated
the tournament would see increased attendances and higher
broadcast share. Overall the value of the tournament increased
to around US$213 million.
The MasterCard study also highlights healthy levels of
economic impact for cities hosting the Rugby World Cup.
Sydney has been recorded as earning up to US$32 million
for hosting a big game like the All Blacks vs the Wallabies.
Johannesburg has previously benefitted a total of US$20
million from hosting a single match.
Watt points out that each year the All Black Test Match in
South Africa is the only sell-out rugby test of the season here.
ECONOMICS OF TV AND TICKETS
Both attendance and broadcasting of the Rugby Championship
boost the economic impact of the competition. The South
African Rugby Union’s rights, for example, are bundled across
properties. SARU’s overall broadcasting rights in 2013 came
to R340 million (US$34 million) and sponsorships came to
R339 million (US$33.9 million), of which a hefty chunk was
allocated to the Rugby Championship.
In 2012, a total of over half a million people attended the
Rugby Champion matches. The All Blacks were once again the
most popular to viewers, yielding the three highest attended
matches as fans from the host nations turned out to watch the
visiting All Blacks, averaging 72 872, markedly higher than the
45 627 tournament average.
Six Nations Rugby Championship - economics in the north
The Six Nations Rugby Championship comprises Scotland, England, France, Ireland, Italy and Wales. A study by
tournament sponsor, Royal Bank of Scotland (RBS), found that across all nations the championship is worth
£375 million (US$617 000). Home and away supporters spend around £9 million (US$14.8 million) in bars and
restaurants, £6 million (US$9.9 million) on hotels and £3 million (US$4.9 million) in shops, with further amounts
spent on travel and tickets.
Value of the Tri-Nations
The actual costs and incomes the Rugby Championship generates for host cities is not easy
to come by as organisations are not willing to reveal too much and reports have not yet
been released, but these 2010 Tri-Nations figures give an idea of the economic impact these
tournaments can have on an economy.
The 2010 Tri-Nations generated local economic impacts of:
62
•
US$8 million on Auckland economy from hosting New Zealand vs South Africa
•
US$11 million on Wellington economy from hosting New Zealand vs South Africa
•
US$14 million on Brisbane economy from hosting Australia vs South Africa
•
US$16 million on Melbourne economy from hosting Australia vs New Zealand
•
US$12 million on Christchurch economy from hosting New Zealand vs Australia
•
US$19.6 million on Johannesburg economy from hosting South Africa vs New Zealand
•
US$9.2 million on Pretoria economy from hosting South Africa vs Australia
•
US$8.6 million on Bloemfontein economy from hosting South Africa vs Australia
•
US$28 million on Sydney economy from hosting Australia vs New Zealand (estimated)
LIFESTYLE
LEADING THE WAY IN MARINE
CONSERVATION
Climate change, over fishing, mining, pollution and tourism are all
factors contributing to the declining state of the world’s oceans. To
address the problem, governments around the world need to act to
conserve the fragile eco-systems existing in the deep blue water of our
oceans.
Fortunately action is being taken, albeit slowly. The Indian Ocean
countries, whose populations of Emperor Penguins, green backed
turtles and parrot fish are under threat, are increasingly leading the
way with the establishment of some of the world’s largest marine
reserves.
Marine reserves fall under the
classification of a Marine Protected
Area (MPA), which is defined by the
International Union for the Conservation
of Nature (IUCN) as: “A clearly defined
geographical space, recognised,
dedicated and managed, through legal
or other effective means, to achieve the
long-term conservation of nature with
associated eco-system services and
cultural values.”
including sharks, tuna and swordfish
over the past 30 years. The UK’s
demersal (bottom feeding) fish numbers
have, for example, dropped by 94% since
1884. The independent Global Ocean
Commission has reported that half the
world’s coral reefs are already dead and
rising ocean temperatures and acidity
caused by global warming and other
factors means that by 2050 up to 60% of
the all ocean species could be extinct.
These marine reserves are generally
protected from any extractive activities
which could potentially have a damaging
effect on the surrounding area. This
includes mining, dredging, fishing and
aquaculture. Research, education and
limited leisure activities may, however,
be permitted in these areas under
controlled conditions.
The good news is that marine reserves
can make a significant impact on the
health of our oceans. Studies of MPAs
have found that there is always greater
biodiversity within these areas. They
have a greater biomass and also become
‘nurseries’ for commercial fishing
zones, allowing natural fish stocks
to replenish as spillover occurs to
adjacent areas. According to the Marine
Reserves Coalition: “Marine reserves
that encompass spawning stocks of
commercially important species are able
to help protect and rebuild these stocks,
thereby contributing to the associated
fishery.”
As the national parks of the oceans, these
reserves serve to protect eco-systems
and vulnerable species by buffering these
portions of ocean from the numerous
human activities which are contributing
to their environmental collapse.
And, make no mistake, a collapse is
imminent.
According to the Marine Reserves
Coalition, a body of five United Kingdombased organisations working together to
increase the number of marine reserves
around the globe, entire eco-systems
are at risk of being destroyed within the
next 25 years. Over fishing has destroyed
around 90% of large fish species
Marine reserves are also vital to ensuring
that predatory species, which rely on the
oceans for food, have a greater chance
of survival. The Antarctic’s Emperor
Penguin, for example, is under threat due
to declining ice areas and food shortages.
Researchers writing for Nature Climate
Change journal are currently calling for
marine reserves to be created around the
Emperor Penguin’s habitat, to ensure an
adequate food supply for the future.
63
American President Barack Obama is also putting his political
weight behind the creation of these reserves and is outlining
an enormous marine reserve in the Pacific Ocean. But, despite
good intentions, currently less than 1% of the world’s oceans
are fully protected.
Where the real action is taking place, however, is in
the Indian Ocean.
The Seychelles has announced the creation of a new marine
reserve surrounding the D’Arros Island Group. The area
encompasses 115 islands and the project is being supported
by the owners of the D’Arros Island Group, the Save Our
Seas Foundation. The statement announcing the creation
of the reserve says: “A 10-year plan has been devised and
implemented to reintroduce and rehabilitate endemic species
in order to restore some of the original habitat. D’Arros Island,
which is also rat free, will remain the main settlement in the
atoll and host facilities for research and education.” Sharks,
manta rays and turtles like the endangered Hawksbill turtle
will be protected in the reserve.
The largest marine reserve in the world, created by the British
government on 1 April 2010, is the Chagos Archipelago Marine
Reserve. The area comprises over 60 islands and lies around
500km south of the Maldives. At 40 000km2 it is larger
than France. The protection of the area is guaranteed for the
short term due to the support of the Bertarelli Foundation,
which works with scientists, non-governmental organisations
(NGOs) and governments with a focus on improving marine
conservation. But there is controversy surrounding the area,
not least of which is a dispute between Mauritius and Britain
over who has sovereignty over the region.
We have to rethink what we
are taking from these natural
systems. The next 10 years are
the most important in the next
10 000 years for protecting the
life-support system upon which
we all depend.
64
The Maldives, meanwhile, has announced its intention to
become the world’s largest marine reserve by 2017. At the
announcement of the country’s plan, at the Rio+20 conference
in 2012, President Mohammed Waheed said: “Maldives
remains wedded to sustainable pole-and-line fishing, while
others continue unsustainable fishing practices. Such practices
are destroying our regional and global fish stocks, with dire
consequences on the livelihood of many Maldivians. This year
we have established the first UNESCO Biosphere reserve in
the Baa Atoll, one of the 20 atolls that make up the Maldives.
I would like to announce today that Maldives will become the
first country to be a marine reserve. We can do it in a short
time. I hope we can do it in five years. It will become the single
largest marine reserve in the world.”
This is an encouraging move for marine conservation but with
the discovery of oil and gas on ocean beds around the world,
with increased fishing activity and a lukewarm resolve to tackle
global warming, many fear that efforts to protect the world’s
oceans may be too little, too late.
As former US National Oceanic and Atmospheric
Administration Chief Scientist, Sylvia Earle, has said: “We
have to rethink what we are taking from these natural systems.
The next 10 years are the most important in the next 10 000
years for protecting the life-support system upon which we all
depend.”
PERSONAL FINANCE
ENSURING FAIR TREATMENT
FOR CLIENTS
Nikki Klerck - Citadel Legal Advisor
nikkik@citadel.co.za
British retail magnate Harry Gordon
Selfridge is most often credited with
coining the famous phrase which
has set the standard for retailers and
service providers for the last 100 years:
“The customer is always right”.
By putting goods on display at his
Selfridges department store in Oxford
Street, London, Selfridge allowed
customers to examine them and
interact with them before buying.
Selfridge famously enticed customers
with educational and scientific exhibits,
such as the first demonstration of
the television; terraced gardens;
inexpensive yet elegant restaurants;
fashion shows and even an all-girl gun
club. His strategy of cleverly displaying
desirable goods in prominent and
easily accessible parts of the store and,
most importantly, ensuring that the
customer was always right, helped
Selfridge build an empire. Selfridges
still stands today as testament to his
legacy and philosophy.
The idea behind the phrase was to
ingrain in employees the need to
prioritise customer satisfaction above
all else, to treat customer complaints
seriously and, thereby, to ensure that
customers felt valued. While this was a
novel approach to customer service in
the early 1900s, today the conversation
has shifted to a discussion around
the ‘fair’ treatment of customers.
For example, in early 2000, the idea
that ‘unfair’ treatment of customers
was endemic in the financial services
industry was a bitter pill to swallow.
Many firms were of the view that
because they had been in business for
a long time, they must be treating their
customers ‘fairly’. Otherwise, surely,
they would be out of business?
This argument presupposed that if
a consumer hasn’t felt the need to
complain to a retailer or a service
provider, then they haven’t been treated
65
unfairly. Right? Wrong, according
to South Africa’s Financial Services
Board (FSB) and the United Kingdom’s
Financial Conduct Authority.
The question this raises is how could a
consumer have been treated unfairly if
they were satisfied with the service they
received?
To answer this question, we need to
unpack the understanding behind
the UK’s, and more recently, South
Africa’s, approach to financial market
conduct regulation, known as ‘Treating
Customers Fairly’ or TCF.
As the FSB was at pains to point out
in its April 2010 discussion paper
entitled ‘Treating Customers Fairly’:
“Issues concerning the fair treatment
of customers arise from the fact that
market participants do not possess
perfect information. In particular, the
system may be confronted with the
problem of asymmetric information
where certain market participants (the
suppliers of financial services) possess
information that others (consumers)
do not possess. This may lead to
consumers being treated unfairly and
possibly suffering considerable financial
loss in the process. If consumers could
somehow be provided with better
information so that they could make
responsible decisions, society should
benefit.”
inappropriate for his needs comes to
mind. He may be completely impressed
with the speed and professionalism
of the service he received, but only
years down the line discover that he
had been treated unfairly and has
been sold a financial product which is
inappropriate for his risk profile.
Current legislation in the South African
financial services sector is not absent of
duties imposed on companies regulated
by the FSB to treat customers fairly.
However, the FSB now wants to go a
step further by ensuring that the fair
treatment of customers is entrenched
in the culture of every regulated firm,
right from the top down.
The example of a customer being sold
a financial product which is wholly
Treating customers fairly requires that regulated firms adhere to the
FOLLOWING six TCF outcomes:
•
Customers can be confident they are dealing with firms
where TCF is central to the corporate culture.
•
Where advice is given, it is suitable and takes account of
customer circumstances.
•
Products and services marketed and sold in the retail
market are designed to meet the needs of identified
customer groups and are targeted accordingly.
•
Products perform as firms have led customers to expect,
and service is of an acceptable standard and as they have
been led to expect.
•
Customers are provided with clear information and kept
appropriately informed before, during and after point of
sale.
•
Customers do not face unreasonable post-sale barriers
imposed by firms to change products, switch providers,
submit a claim or make a complaint.
According to the FSB: “Firms are
expected to demonstrate that they
deliver the six TCF outcomes to their
customers throughout the product
life cycle, from product design and
promotion, through advice and
servicing, to complaints and claims
handling – and throughout the product
value chain.”
66
The FSB’s TCF programme will see
the rewriting of substantial financial
services legislation and is a welcomed
development to the industry.
Citadel is committed to TCF
and is actively entrenching the
TCF outcomes at every level of
the business.
WOMEN’S INTEREST
POST-DIVORCE
FINANCIAL
PLANNING
Nicky Gous - Citadel Advisory Partner
nickyg@citadel.co.za
Divorce is always a traumatic experience,
but finding a solid financial footing at
this time can prove to be a valuable
lifeline. That said, this is not always
easy. In our experience many of our
clients find themselves in the position
of no longer owning a home, their
savings being halved and having to
start paying child support; all of which
can be crippling both financially and
emotionally. International trends suggest
a woman can lose up to 77% of her net
worth during a divorce.
One in three marriages
ends in divorce in
South Africa. Research
suggests that, in the
wake of a divorce,
women are financially
the hardest hit.
Rebuilding this net worth is possible, but
initially requires sound financial advice
and the divorcee may have to make some
lifestyle sacrifices. Once the divorcee has
sized up her situation and formulated her
strategy, she has to commit to it.
TAKING STOCK
Objective advice from a financial advisor
is a critical first step. Most advisors will
have a comprehensive financial planning
tool to help you design a personal
financial plan based on your present
capital. This will give you a good idea of
what capital amount you will need to aim
for in order to retire well and what you
need to save to make that happen.
A word of advice though: it is best
to create a plan with your financial
advisor BEFORE you start your divorce
settlement negotiations. Divorces are
highly emotional and they are not a
time when individuals necessarily apply
the appropriate rationale and logic
to financial planning. This can prove
detrimental in the long term. A financial
planner is there to help you understand
a range of options that you can take
and their long-term outcomes. And this
advice is critical.
Understanding your own personal
finances is another key area of focus. Ask
yourself: What income streams do you
have and what are your expenses? Can
you afford to buy a home or will you have
to rent for a while? Can you afford child
support? What other expenses do you
need to cover? Where can you cut back to
build up your savings?
Working out a detailed budget will give
you a good picture of where you stand
financially. It will highlight where your
money is going and what cutbacks you
can make to add to your savings. Not
only will this give you more control of
your finances, but also give you a lot
more peace of mind during a difficult
time.
Creating financial stability after a
divorce will be challenging. If you
are close to retirement age, then
protecting your capital is of utmost
importance. Growing this capital
even more will make a difference to
your lifestyle after retirement.
If, however, you are younger, then it is
vital that you manage your investments
and make sure you grow your capital.
This will give you the best chance of
achieving a comfortable retirement in
67
the future. But be warned, you will be
walking a tight rope to make sure you
save enough while still having sufficient
left over to cover your expenses and
enjoy life in the here and now.
GETTING YOUR
STRATEGY TOGETHER
Once you understand your financial
position, the next step is to formulate
a plan.
The first and most important step
is to update your will once you are
divorced. It is also vital to review all
IMPLEMENTING YOUR
PLAN
Here are five tips to remember when
setting your strategy into motion:
•
Once you have a plan, take it on
and make it happen.
•
Your budget is your starting point.
Create it and then stick to it, no
matter what.
•
If you stick to your budget, you
will be able to save. An easy way to
ensure you put that money away
is to set up a debit order into a
savings vehicle, like a unit trust.
•
The easiest way to stick to
a financial plan and budget
accordingly is to create order in
your life. When your work and
home life run smoothly, it is easier
for everything else to fall into
place.
•
You are not a superhero; if you are
not coping do seek professional
help in the areas you are finding
difficult to manage.
the beneficiary nominations on all your
policies and investments. Once that is
done, you and your ex-spouse need to
agree on who will take on the guardian
role of any children should you both
pass away while they are still minors.
It is also advisable to explore the option
of creating a testamentary trust for
your children should either spouse
pass away before the children are in a
position to inherit or manage their own
wealth.
Death and disability cover also need to
be in place and updated, especially if
minors are involved, since maintenance
obligations will have to be fulfilled
under all conditions. Also, your needs
will have changed so this cover needs to
reflect your chance of circumstances.
Once your financial plan is in
place, make time to undertake
regular reviews with your
financial advisor so that you keep
on track with your new plan.
Finally, bear in mind to budget for
some basics that will help with the
transition, like housekeeping and
childcare.
INSPIRATION
T H E ART O F
IN S P I R ATI ON
South Africa is home to many men and women who not only
have lived lives worth celebrating, but their stories have the ability
to inspire greatness in those that take the time to hear them.
Influential African-American author Howard Thurman once
said: “Don’t ask what the world needs. Ask what makes you
come alive and go do it. Because what the world needs is more
people who have come alive.” Finding the inspiration to ‘come
alive’ and fulfil a life’s purpose may be considered a precious
gift. But what exactly is inspiration?
3. Inspired people are usually less competitive.
4. They often have greater self-esteem, greater self-believe
and are more optimistic.
5. Mastery of work also often comes before inspiration and,
says Kaufman: “…inspiration is not purely passive, but
does favour a prepared mind.”
Jonathan Mead, founder of the Paid to Exist initiative, talks
about the difference between inspiration and motivation in
his blog. “Motivation is about psyching yourself up. Chestpounding. Fire-walking. Heavy-metal riffs. You get the point.
Inspiration comes for a completely different place. The word
inspiration means to be in spirit. When you’re tuned into your
spirit, you are naturally drawn to do whatever feels best,” says
Mead.
Inspiration can have a number of positive effects on those
people who are touched by it, says Kaufmann. It encourages
greater creativity, enables the achievement of goals and, in
general, more inspired people set more motivated and dynamic
goals. Finally, inspiration increases an individual’s feeling of
well-being.
Scott Barry Kaufman, author of Why Inspiration Matters
adds: “Inspiration awakens us to new possibilities by allowing
us to transcend our ordinary experiences and limitations.
Inspiration propels a person from apathy to possibility, and
transforms the way we perceive our own capabilities.”
Kaufman draws on the work of psychologists Todd M Thrash
and Andrew J Elliot who segment inspiration into three parts:
evocation, transcendence and approach motivation. Essentially
that means that inspiration is evoked spontaneously with no
thought; it transcends our more basic needs and limitations
and involves a moment of clarity about what possibilities
actually lie ahead. But inspiration also requires action, say
Thrash and Elliot.
Inspired people share similar characteristics, says Kaufman.
1.
People who are open to inspiration are more likely to
receive it.
2. Those with inspiration often have a greater drive to
achieve mastery in their area of focus.
Kaufman stresses that receiving inspiration is not entirely out
of our control and that those who wish to be inspired can take
steps to increase the likelihood and frequency thereof. One
way to do this is to prepare through developing mastery over
a chosen area of expertise. Another way in which people can
tap into this inner drive, says Kaufman, is through exposure to
inspirational people, heroes, managers and role models.
In this respect Kaufmann refers to the writing of Gregory Dess
and Joseph Picken, authors of Changing Roles: Leadership in
the 21st Century. Dess and Picken say modern business leaders
need to change their focus from managing efficiently to rather
making better use of the resources within their companies.
They believe the five most important roles of leaders are:
1
Using strategic vision to motivate and inspire.
2
Empowering employees at all levels.
3
Accumulating and sharing internal knowledge.
4
Gathering and integrating external information.
5
Challenging the status quo and enabling
creativity.
69
MONE Y IS JU S T A NUM B ER
At Citadel we know that creating your hard earned wealth is
only half your journey. We believe that only in discovering
how your wealth can enable the greatest fulfilment in your
life, will you find its true potential. The harmony between
specialist wealth management expertise and a desire to find
this meaning, is what we call wealthcare. It’s the reason why
we get up in the morning and why our clients sleep well at night.
It’s who we are and it’s so much more than numbers.
Pretoria: +27 12 470 2500
Cape Town: +27 21 670 9100
Durban: +27 31 560 7200
Group.
THE ISLAND
LE S S TR AVE LE D
By freelance writer, Gillian McLaren
The Air Mauritius plane banks low over Rodrigues
Island, revealing the mountainous archipelago –
with its black volcanic boulders – encircled by an
aquamarine lagoon. This landmass is only 18km by
8km and was named after the Portuguese explorer,
Diego Rodrigues, who landed in 1528.
Unspoiled, uncommercialised and authentic, Rodrigues is like
the Mauritius of twenty-five years ago. From the small airport,
where staff warmly welcome you, people are genuinely friendly
and kind everywhere you go. Expect a cheery “Boujour” and a
smile from locals who are delighted that you are visiting their
island. In the faces of these consistently affable people, you see
a delightful mix of Indian, French, African and some Chinese,
which reflects the different nations that subsequently colonised
the island.
Most of the local people walk, many ride motorbikes and a
few have cars on the narrow roads. People are easy going
in the traffic and drive slowly and courteously to avoid the
pedestrians and the wandering sheep, goats and multitude of
chickens. It is a welcome relief from the aggressive pace of city
life. Nobody tries to sell you anything. Products and crafts –
like baskets and hats woven from leaves of the Vacoas tree –
are available, but are made for the local people.
Because the people are so pleasant, it is interesting to stay
in one of the guesthouses like Les Frangipanes – that faces a
pretty garden with several species of palm trees, near to the
beach in Ans aux Anglais – to meet Baby Pasnin, the gracious
landlady. Reputed to be one of the best chefs on Rodrigues,
Marie Louise Roussety, has opened her home Villa Mon Tresor
to visitors for twenty-two years. Each breakfast and dinner is
creatively presented, with Hibiscus or other flowers from her
lush garden. Traditional food is offered, including curry made
with fish caught that morning, red beans with rice and spiced
chicken. These are all served with her homemade brinjal or
lime achard. This food, as well as her grated green mango and
carrot salad, cooked pumpkin stems, and freshly squeezed
mandarin and lemon juice, is healthy, simple and delicious.
If you prefer to stay in a hotel, the Marouk Ebony Hotel
next to the azure lagoon is well situated for scuba diving and
snorkeling. The coral
reef is part of a national
park, so there is a great
diversity of life with exquisite
soft corals and exotically coloured fish,
like juvenile emperor fish, juvenile lionfish, cowries and shoals
of trumpet fish. Apparently the lagoon is one of the best places
in the world to learn wind surfing and kite surfing, as the water
is calm and the breeze pleasant and consistent. This is a good
place to observe the famed octopus fishing. Men and women
walk out into the lagoon and hook these creatures, which are
cooked in a delicious curry, made into a salad, or hung up in
the sunlight and eaten when dried.
The new Tekoma Hotel has a sublime view of the lagoon – with
its ever-changing hues – rippling on a pristine private beach.
Below the suites – with their subtle zen-like décor – is the
white, sandy beach with black volcanic boulders, littered with
shells and coral fragments. There are lizards with a tail three
times the length of its body and White Tailed Tropicbirds soar
in the cerulean sky. Tekoma Hotel’s cuisine has sophisticated
twists of the traditional island favourites and the dining room
has an exceptional view, out over the blue-green lagoon, to the
white breakers on the reef and the cobalt ocean beyond.
Sadly the indigenous trees on Rodrigues were plundered
for building materials and firewood. Giant tortoises and the
Solitaire – a hapless bird similar to the Dodo – became extinct,
as they were easy prey and apparently tasty. At the Grande
Montagne Nature Reserve, you can see some of the remaining
endemic plants and spot the Rodrigues Warbler and the
Rodrigues Fody, the only two remaining endemic bird species.
With its numerous walking trails, zip lining across 120m
deep ravines, the drama of huge stalagmites and stalactites in
Grande Cavern Caves giving a cathedral-like feel, there is no
shortage of action or splendour on Rodrigues. In our world of
globalisation, it is a refreshing change to find this authentic
and unique place, with its congenial people. For natural
beauty, sports and leisure and an escape into slow-paced island
life, it is well worth it to visit this lesser-known isle.
71
Travel information
What To Do
Where to eat out
Visas are not required.
Fly through the air like a Rodrigues fruit
bat – the only indigenous mammal on the
island – along a 420 meter zipline, with a
panoramic view. Tyrodrig Zipline www.
tyrodrig.com.
Coralie la Diffe’rence
brigilou12@hotmail.fr
situated high up on a hill with a
panoramic view. Try the excellent fresh
fish, including exquisitely delicate
parrotfish.
Money – Mauritian Rupees.
Flights – Air Mauritius to Port Louis
in Mauritius, then flight to Rodrigues
www.airmauritius.com.
French is spoken, so take a small
English/French dictionary.
Rodrigues Tourism Office
www.tourism-rodrigues.mu.
Visit the tourism office to get pamphlets
in English; information about history,
geography and biology of Rodrigues;
or great advice about activities and day
trips on and from the island.
Francois Leguat Giant Tortoise and Caves
Reserve www.tortoisecavereserverodrigues.com. Giant Aldabra tortoises
and radiated tortoises have been
imported and are thriving in Canyon
Tiyel of the reserve.
Bouba Diving Centre
www.boubadiving.com
Marouk in the South East.
Ile des Cocos day trip with Joe Menuin
discoveryrodrigues@intnet.mu.
Visit a bird sanctuary, an easy boat-trip
away, with scores of nesting fairy terns,
Common Noddie, Lesser Noddie and a
Ruddy Sandpiper.
72
La Marmite des Iles
marmitedesiles@gmail.com
right on the beach. Enjoy delicious
shelled prawns with rice and meet
Alexandre Coquet, a consummate host.
Newly furbished rooms for rent above
the restaurant have a perfect view, of
the ocean with small fishing boats.
Mengoz Snack is a quaint restaurant
frequented by locals. Some tasty food,
which has traditional fare fused with
Chinese elements.
SPORT
A CAR CRASH
A WEEK
“Rugby is a beastly game
played by gentlemen. Soccer
is a gentleman’s game played
by beasts. Football is a beastly
game played by beasts.” So goes
the famous 1972 quote by Henry
Blaha, a Boston College American
football player. As a sportsman
used to bruising encounters,
clearly Blaha understood that
rugby was not a game for sissies.
Recent studies by the University of
Canterbury in New Zealand have
found that the physical levels of
trauma experienced by a rugby player
in the course of a single game may be
tantamount to being in a car crash.
The university has been working on
a urine and saliva test to determine
exactly what stresses rugby players face
during a game. Working with players
from the ITM Cup (New Zealand’s local
provincial tournament), Professor Steve
Gieseg and student Angus Lindsay have
developed a simple and cost-effective
test to test trauma levels during a
match.
For two years Gieseg and Lindsay
gathered 44 samples per ITM game.
Urine and saliva samples were taken
both before and after each game and
then again a few days post-match.
This allowed the researchers to gauge
the amount of trauma and stress
experienced during an encounter
and assess the recovery time. The
researchers looked at four elements to
measure the level of trauma, namely:
neopterin, myoglobin, cortisol and
immunoglobulin G. Gieseg explains:
“Our research measured two chemicals
in the urine and two in the saliva to
gain a global view of how players
responded to the physical stress of an
individual game.”
The tests showed that the stress players
experience is equal to that experienced
after a serious trauma, like a car crash.
But what they also showed was that
some players recover extremely quickly
from these stresses. The test looks
at four easily measurable traumas:
mental stress, immune resistance,
inflammation and muscle damage.
Gieseg believes this test could assist
rugby coaches and medical staff to keep
track of a player’s health, recovery and
training during the various phases of a
competition.
The All Blacks’ strength and
conditioning coach, Nic Gill, is
particularly excited about the potential
for the test in the future. He says: “I
think if Canterbury University continue
to develop the procedure and their
understanding of the results, it could
one day have a great application.”
Gill says that preventing injuries
and keeping the team healthy is a
major motivation for the All Blacks’
team. And, no doubt, also for those
international teams looking to unseat
the reigning World Cup holders.
73
SPORT
BEST
MTBING
AROUND
CITADEL
HUBS
South Africa is a Mountain Bike (MTB) paradise. From the Absa Cape Epic, known as the Tour de
France of the MTB world, to its great routes across all nine provinces, South Africa is MTB mad.
Here’s what’s on offer near you:
Johannesburg and Pretoria
Cape Town
Raymond Travers, editor of Modern Cyclist magazine,
recommends Van Gaalen’s in Skeerpoort (near Hartbeespoort
Dam), as well as Modderfontein Reserve in Modderfontein and
Avianto Trails in Muldersdrift.
Tokai Forest in Constantia and Jonkershoek in Stellenbosch
come highly recommended, while Table Mountain Bikers offer
downloadable PDFs showing the Table Mountain MTB trail and
the Tokai/Silvermine route.
In Pretoria, there’s Groenkloof Nature Reserve and Voortrekker
Monument. Northern Johannesburg boasts Northern Farm and
PwC Cycle Park, while the south of Johannesburg has Thaba
Trails in Mulbarton.
Clubs
Clubs
George
Trails
The Johannesburg Mountain Bicycle Club, (JMBC) has been
around since 1989 and, according to its website, continues
to “celebrate the fun art of riding a bike in the dirt”. The club
organises social rides on most weekends, catering for a range
of fitness and skill levels. Visitors are also welcome at R30 per
ride.
Rockhoppers MTB Club offers weekly night races through
Delta Park. Members need to have a Cycling South Africa
Membership or domestic racing license.
The big clubs, like Cycle Lab and MTN Club 100, also offer MTB
rides and events for members.
74
Trails
The Tygerberg MTB Club offers various trails, some of which
are for members only, as well as club rides. Paarl MTB Club
offers free membership.
Trails
The Garden Route Trail Park is 60km from George and offers
events ranging from skills clinics to night rides and “enduro”
racing. Bikes are available for hire too.
Between Knysna and Plettenberg Bay you’ll find the highly
recommended Harkerville Trails with four different routes,
ranging from 11km to 22km.
Clubs
The Hillbillies MTB Club strives to implement a MTB culture in
the Garden Route.
More MTB information
•
mtbApp: available for Windows,
IOS, Android and BlackBerry,
this app offers a comprehensive
hyperlinked list of trails in every
province, as well as race listings,
multi-stage event listings, news,
skills clinic listings, and ample
clubs and associations listings too.
•
Tom Cottrell’s Cyclists’ Guide to
Road and Mountain Bike Races
in South Africa, available as a
paperback and as an app through
iTunes and on Android, the guide
lists more than 600 road and MTB
cycle races around South Africa.
•
Top MTB Trails and More Top
MTB Trails, both by Jacques
Marais, covering the best trails,
routes and rides in all nine of
South Africa’s provinces, these
guides offer up-to-date route
information, photographs and
detailed maps.
•
Modern Cyclist, providing multisport news and reviews for cyclists
(both road and MTB), you can read
this mag online or subscribe for
home delivery.
By freelance writer, Tamara Oberholster
Durban
Trails
Giba Gorge in Westmead has a reputation for tough trails, but offers
a purple route for children and beginners, progressing through to The
DownHill and Enduro tracks for experienced riders.
An hour outside of Durban just off the N3, you’ll find Karkloof MTB Trails.
All routes start and end at Karkloof Country Club. In the Ballito area, check
out Holla MTB Trails, offering 340km of marked and signed trails for both
novice and experienced MTBers alike.
Clubs
The Durban Mountain Bike Club (DMBC) offers rides through the cane
fields on week days and weekends, as well as keeping members up to date
with other MTB events and happenings.
Bloemfontein
Trails
The 7 Dams Conservancy offers beautiful scenery for a ride. Also keep your
eye on the Free State Cycling website, which offers news on upcoming
events and races in the province.
Clubs
The Founties Mounties Club is for, “Any cyclist; the old, the young, the
newbie, the experienced, the pro, the roadie, the bmxer, the downhiller, the
mountain biker, the trackie, for just a good fun time on the bike or to give it
horns.”
75
COMPANY NEWS
SOUTH AFRICA: HEADING
FOR PROSPERITY Or FAILURE?
This was the theme of the 2014 annual economic client presentations across the country. Speakers, Maarten
Ackerman and Yolanda Naudé, both from Citadel’s investment team, focussed on the local, as well as the global
economy and highlighted investment opportunities around the world. Here are some photos of the events...
annual economic client presentations
JOHANNESBURG
Nattie and Ken Kyle
Noel Schumann with Lauren Pelati
Flip de Wet (Citadel), Alet de Wet, Francois Malherbe
with Louis de Toit
Adam Mostert with Thinus and Rentia Smuts
Ian and Kotie Barnes
Leigh Mantel, Marc Watchhorn and
Ian Bishop (Citadel)
Rosa and Rui Godinhio
76
Stuart Neethling, Louis du Toit with Chris Nezar
PRETORIA
Marie de Bruyn with Gene van Huysteen
André Gouws with Herlo Nel (Citadel)
Maarten and Mooneen Fouché
Ducan and Loraine Haigh
Mary and Kenneth Anderson
Stefanie and Kobus Venter
Palesa Dube with Martin Prinsloo and Mike Morapeli
Graf and Gatlin van Durckheim with Coert and Alet Grobbelaar
77
annual economic client presentations CONTINUED
KWAZULU-NATAL
Edith and Malcolm Powell with Nic Horn (Citadel)
Clare Ramsay (Citadel) with Elize and Petrus Zeeman
Mike and Marion Matthewson
Denise and Cedric Lewarne
Paul and Kieran Botha
Maureen and Ellison Hind
Nora Hill with Norma and Barry Payn
78
Sandy Arnold, Nic Horn (Citadel) and Basil Budke
CAPE TOWN
Jasu and Manu Dala
Andrew Finlayson (Citadel) with Keith Reid and
Mandy Buys
Neil Harding with Janet and Brian Hopkins
Barbara and Peter Flowers with Barry and
Linda Brandon
Richard Bryant, Richard Buerger, Astrid Buerger and Mike Tiffin
Ebeneze Swanevelder, Annamarie and Johan
Gillmer with Cheryl du Preez
Louisa and Herman de Wet with Riana van der Watt (Citadel)
Sharron Mills and Sonya Behrens
79
MONE Y IS JU S T A NUM B ER
At Citadel we know that creating your hard earned wealth is
only half your journey. We believe that only in discovering
how your wealth can enable the greatest fulfilment in your
life, will you find its true potential. The harmony between
specialist wealth management expertise and a desire to find
this meaning, is what we call wealthcare. It’s the reason why
we get up in the morning and why our clients sleep well at night.
It’s who we are and it’s so much more than numbers.
Pretoria: +27 12 470 2500
Cape Town: +27 21 670 9100
Durban: +27 31 560 7200
Group.

English - Citadel

Transcription

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