Ezra Ndwandwe's Blog

IS AFRICA RESPONSIBLE FOR ITS ECONOMIC WOES?

Firstly, a significant part of the answer to that question is YES. Owing to our former rulers, Africa was ruled by dictators who - for the most part - were concerned about their well-being more than that of the economy.

Secondly, the reason why there is so much corruption in African governments is the inability to understand that politics are not about riches. When you make a decision to be a politician, you make a decision to serve and to have influence more than to have money. Africa’s politicians want both money and influence. I don’t mean that politicians must be poor but politicians should not concern themselves about self enrichment. This is the reason why corruption is so rife.

Thirdly, I think Africa’s politicians are sadly visionless. I do not think many stop and ask themselves what their personal vision is and, of course, the vision of a legacy they want to leave behind. Even if that vision is not publicly announced because I don’t think that any president does that anyway, but for ones’ leadership to be effective one needs a compass of where one wants to go. It is through this personal vision that one will be able to identify areas of responsibility whether through a collective or as an individual. I don’t think that the likes of Obama are a law to themselves, they too have a party and a constituency to report to but they look set on a particular vision - be it to transform perceptions about the US or the lives of ordinary Americans.

WHAT CONSTITUTES A GOOD LEADER?

There are four characteristics that define a credible leader:
 
1. Consistency (leadership that knows no colour or is confined to any relationship)
2. Engaging (appreciating that leadership is not about you)
3. Decisive (take a stand. Good or bad)
4. Caring/Empathetic (appreciating that there are certain things that are beyond our control)

The subject of business leadership has been studied and written about a lot, yet it still eludes us in practice.

In contrast to the characteristics of a credible leader are styles of leadership that do not deliver results and are not sustainable. These include an Autocratic leadership style (i.e.) such leaders tend not to achieve much. Impressionist leadership style (i.e.) those that want to impress everyone, tend to not be respected.
 
Equally, inconsistent leaders are seen as poisonous and only perpetuate corporate politics. You can lead or deliver your mandate by deliberately dealing with issues in a decisive and non-personal way. Take a stand on issues- Don’t be a spineless leader who has no stand. Good or bad, take a stand. Business leadership is not about consensus or democracy. Yes it should be inclusive/considerate of others views but not negotiated.
 
Remember, the buck stops with you. If you have not delivered your mandate, your stakeholders will not hold a conference to ask why and then apportion blame- they will deal with you as they should.

SHOULD BUSINESSES BE WORRIED BY THE ANCYL'S CALL TO NATIONALISE MINES?

Yes and No
 
Yes. This is because we have come to know the ANCYL as prophets of things to come. They spoke about the recalling of President Mbeki and President Mbeki was recalled, they spoke about the dismissal of the SAA CEO and that happened and, more recently, they have been shouting about the transformation of the judiciary and that as I write this column has taken priority.
 
So we know that the ANCYL is militant and may indeed give an indication of things to come.

No, because I personally do not know the reasons or objectives of nationalization when, in fact, there is talk to privatize some of the state owned enterprises.
 
The government is yet to show its Best Operating Practice when it comes to business success. If anything right now, state owned enterprises seem to be unprofitable and heavily dependent on government for sustainability - we do not want that for our mines. Instead, what we should do is analyse in great detail the value chain of how our minerals are transformed to the final product and from that indentify areas where governments’ influence can be increased. In that way the government will remain in touch with the process including the beneficiation of our minerals which undoubtedly will lead to investments in technology, create skills for our people and of course create and retain jobs. This call might/will send out jitters to the market immaturely and may negatively affect Foreign Direct Investment in the mining sector.

HOW MUCH STRIKE ACTION HAS COST US

There is no doubt that the strike season costs our economy a lot of money in actual productivity costs.
 
The strikes continued to highlight the ideological divide between business-friendly policies of the ANC government and its alliances. Economists find it difficult to put a figure or costs in lost productivity but some estimate it may be as high as R3 billion. It is equally difficult to quantify the negative impact on investor confidence but one thing we know is that low productivity simply means strain on the business.

What suprises me though is that we know all of this for a fact, yet year after year, we have strikes that cost the economy billions of Rands. Strikes are bad for service delivery; you will remember that some people lost loved ones during the strike of emergency workers.
 
My question therefore: Is this the language better understood by employers? Or is this our way of life? So we should expect a strike season year after year?

MAINTENANCE OF PRODUCTIVITY

One of the biggest challenges that organizations are faced with is improving or maintaining productivity levels especially in these difficult times where employees are faced with pressures of their own and possibilities of a retrenchment exercise.

It is true that organizations are going to survive this economic slump by maintaining or improving productivity levels. But what is productivity? Simply put, productivity is achieving your targets with less effort and less may be people, money, energy/electricity etc. 

If you were to visualize it; it would look like a mathematical fraction with your numerator being those things that you need to do more of and your denominator as those things you need to do less of. The challenge with many organizations who want to qualify or to improve their productivity is that many know that something has to change in the organization but many do not know what needs to change or more importantly, what it needs to change to. So what do they do? They embark on an organizational change management project which of course will not yield results and that is purely because of the foundation questions of what needs to change and to what it needs to change to were not answered.
 
Whether it’s change of leadership, shop-floor staff training or even changing how we do things in order to improve productivity, we need to be clear on what we want to achieve and how it will make us a more productive organisation.

FINANCE MINISTER'S BUDGET SPEECH

I think the minister used his budget statement to sensitise all of us (both government and the general public) on the economic challenges that lie ahead.

It is clear that there is a possible R60 billion revenue shortfall in the current financial year that will influence South Africa’s medium to long term economic plans.

The anticipated challenge which has come about as a result of a R9 billion shortfall in corporate taxes by collection deadline as well as both the low VAT and customs collections, necessitates a review of state departmental budgets by all ministers to find possible fat. Remember that the shortfall in revenue was estimated to be around R94 billion in February but it is clear that it will be between R144 billion and R154 billion in march 2010.

However, one must not despair too much as these are 1st quarter figures. The October budget statement may be completely different and I mean either worse or better. It is also important to note that albeit undesirable to do so, but the deficit can be covered by either domestic or foreign borrowing although this option will not be without negative consequences to the future finance and economic plans.

My view is that since we have such a huge deficit, a higher sub 6% inflation and a possible 2% economic contraction, we need to revisit our economic figures at least for the medium term and perhaps re-budget using 2% economic contraction as our base. I also think that even if the recession cycle was to turn this year, the GDP will be lower than anticipated at least for the next 3 to 4 years. So let’s plan as such. We will have to be creative in generating income as our tax base is shrinking.

SABMILLER AND NEW BEE DEAL

SABMiller has come up with a rather interesting BEE deal said to cost up to R6 billion in share value. Interesting that a deal of this magnitude can be cooked up in such depressed economic times but also that the deal will cost new BEE partners way less than a fraction, if that. Talk about financial genius.

My observation or opinion on this deal though is…

First it is important to mention that SABMiller has a 3 tier liquor license in South Africa (i.e.) license to farm ingredients or beer raw materials, license to manufacture/produce the beer and thirdly a license to warehouse and distribute the beer. It is through owning the third license (i.e.) warehousing and distributing the beer that SAB has managed not only to dominate but to literally own the market/retail space in SA.
 
Now this 'wow deal' is happening at retail level with ordinary South Africans. As mentioned in print media, there are no politicians or business heavyweights in this deal so for all-intents-and-purposes; this deal may be viewed as truly broad base. However, the trick about this deal is that by and large the new shareholders are themselves shebeen or tavern owners who stock and sell SAB products. Up to 40% in shares is available to shebeen and tavern owners. Not only will liquor retailers be able to participate but also entities that have applied and can provide evidence that a liquor license has been lodged will be eligible to participate.

Talk about killing current and future competition. Of course politicians don’t own Shebeens/Taverns (I’m open to a different view) and therefore selling shares to stockist to me seems like such a subtle manner to own them. These are golden handcuffs and add to that the fact that shareholders will only be able to sell their shares after 10yrs. How would you buy other liquor products if you know they will affect your share value? (e.g.) How can a Vodacom shareholder have an MTN cell phone contract? Even if the argument could be that other brewers may do the same if they wish, you will find that if you go to many taverns you will see that SAB products are dominating space whether it is a storeroom or a fridge. This is a tricky deal for the competitions’ commission. I’d like to see what they make of it. But what a way to fend off competition- Remember, Heineken is said to be preparing its plant to be up and running in 2010.       

TRANSFORMATION IS A BUSINESS IMPERATIVE

Stating the obvious, the broad objectives of Affirmative Action are really to advance previously disadvantaged South Africans in corporate.
 
It is a fact that Affirmative Action makes no mention of the fields or functions in which this advancement is to happen, so naturally one would assume that it should be throughout an organization’s value chain.

Now, if we take a step back and ask ourselves if previously disadvantaged South Africans are transforming corporate SA, the honest answer based on my observation is NO! I know many people believe we are making strides. However, I’d argue that there are equally many decision makers in corporate that, to this day, devise ways and means to undermine transformation initiatives such as AA.
 
To this day, the 'lack of skill' reason is still cited as a major reason why transformation is so slow. Even our charters - which are aimed at forcing corporate to comply at least through targets - have, in their own way, reduced Affirmative Action to a numbers game. What affirmative Action has highlighted though, is for me, gaps in our approach to corporate transformation. It seems not enough to rely on Affirmative Action as an intervention to transform corporate SA. The very fact that companies are found to be compliant with charter requirements yet no black people occupy positions of power or influence (e.g.) Finance Director, Marketing Director, Managing Director, Operations Director over and above Corporate Affairs Director, HR Director etc. Whilst the latter are important roles, they can largely be classified as support roles and are sometimes not in the core of business influence.
 
We need to take a step back and evaluate or intervene and judge them on their impact to transform corporate SA for the better.

SPORTS AND MARKETING

Sports’ marketing is the field of business that will continue to influence both the country’s economy and businesses’ bottom line if done correctly. There is no doubt that sport plays a fundamental role in the economy and should not be taken lightly.

Sports’ marketing has 3 distinct parts to it:

1.      Sport event marketing:
marketing at a particular sporting event to would be spectators (sales orientated)

2.      Sponsorship (Vodafone and Manchester) -  Sporting event sponsorship:
We all know how sponsorship has become an important part of marketing

3.      Sports and tourism:
This is the part I am hoping we’ve been able to leverage. It is about tying tourism packages to sporting events (e.g.) using sporting events to aggressively promote tourism which of course will impact on the GDP.

There is a lot of money in sports marketing but very very few players - and I am hoping that through talks like these a lot more people will see value in pursuing sports marketing as a business venture.

KNOW YOUR DEBT AND COVER IT!

Why debt cover is important:

1.       Interest rates are lower and favourable - get rid of bad debt

2.       Distorted view we have on debt and death - Don’t we just wish our debt can die with us!

You really do not need to be an accountant to analyse your financial circumstances.
 
Sad to say, that when some people die they leave behind debt that the family has to deal with. NB: It is important to know what you owe and what you spend your money on monthly. You see, debt has an accumulative effect. You may buy something on what may appear as favourable terms (e.g.) No deposit and first installment of R500 after 3months. In that 3 months you may buy something else on terms, then add your car, insurance, home loan, petrol, electricity etc. you’ll be shocked at how much you earn vs. what you have to pay on a monthly basis. For some people at the end of the money there’s too much month left.
 
It is for this reason why it is so important to know your income status, your affordability status and your debt status so that you can then make arrangements on how you can cover your debt in the event of your death. Knowing your financial status is not only to cover you/your family should you die but also helps you plan better. You’d be surprised at the number of people who do not know what they spend their money on. They know it evaporates but don’t know why or even on what?