Ezra Ndwandwe's Blog

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?

CHARITY ORGANIZATIONS FACE CREDIT CRUNCH

Charity organizations are faced with the challenge of budget cuts from donor organizations.

I do believe that those organizations that have made a commitment to support charity organizations shouldn’t pull out just like that. In my mind, CSI is even more important now. And much like we expected the West to keep its commitment to financially support Africa even in these difficult times, so too should organizations continue their financial support to charity organizations. Unfortunately there is very little room for a creative solution here - the needs of Charity organizations cannot be met by donor organization's employees spending time at these charity organizations (e.g.) only money will buy groceries, pay rent, buy clothes etc.

My view is organizations need to involve employees before deciding on pulling the plug. Maybe, just maybe employees can come up with an alternative solution. Organizations should engage employees on how to sustain their commitment including asking them to buy extra:

-          Non perishable food (food parcels)

-          Clothes (old, but good clothes)

-          Old, but good blankets

Of course depending on affordability.

MORE INVESTMENTS FOR AFRICA

We had spoken about Mahindra, the Indian car manufacturing company's intention to invest in setting up an assembly plant in South Africa.  Now, the Indian pharmaceutical company, Aurobindo, plans to set up a $10m manufacturing plant in South Africa.

The pharmaceutical giant Aurobindo is the biggest producer of anti-retroviral AIDS drugs in the world and already has operations in Brazil, the US and Europe but not Africa.  It is envisaged that the $10m plant will create as many as 100 jobs.

The foreign direct investment could not come at a better time and needs to be celebrated.  As is the case with China though, it does appear that India wants to conquer Africa and will do so using South Africa as its gateway.  Once again, I ask; what is South Africa's strategy to deal with India?  What is our game plan?  Because, quite clearly, both India and China are pursuing Africa to grow or strengthen their own economies.  Are we happy to be just employees?  Like China, India is growing through acquisition and presence in foreign markets, what have we done?

It is clear that Africa is becoming a lucrative alternative for economic growth - I only caution that this should not be at the expense of Africans.  Although this will certainly strengthen our Rand and offer an opportunity to those who wish to invest in a pharmaceutical company, let's have a plan to deal with the Chinese and the Indians.

BUSINESS LEADERSHIP TRANSFORMATION

When it comes to innovation, South African business leaders are ranked very low compared to Americans, English, Indians and even the Brazilians.
 
Innovation - as far as I am concerned - is the ability to take your organization and invariably take the economy to the next level. Lack of innovation therefore means that many, if not most of South African business leaders are caught up in maintenance roles. Some organizations go to an extent of identifying innovation as a value - nothing wrong with that, if an innovation-conducive environment prevails.
 
The Oxford Dictionary defines 'innovation' as the ability to bring about different methods to do the same thing (i.e.) a smarter way. If we were to look at how state departments and businesses were run during the apartheid era vs how they have been run in the past 15 years, I would venture to assert that we have not been innovative enough. My view is that if we were to move away from accepting and applauding mediocrity in service and in business, we will begin to be more innovative.
 
Innovation does not always depend on science and technology, although it has a lot do to with it, it is about our mindsets - the way we think and apply our minds to tasks. That, for me, starts with transforming leaders to inspirational leadership and to lead with excellence in all we do, be it sports, arts, business and politics.
 
We owe it to ourselves to give it all we have. That, I would argue, should be our identity as South Africans.

BEE - PASSIVE INVESTMENT VEHICLE?

We all know that BEE is a well intended intervention with an objective to transform our economic landscape. Its intention is to ensure the participation of the previously disadvantaged in the mainstream economy.

However, this well intended intervention runs a risk of being undermined through many means including fronting if we do not take ownership of it. When people negotiate a BEE stake and succeed, they in turn need to make sure that indeed the company they are now associated with truly transforms.
 
If BEE is going to serve as a passive investment vehicle, then we are also guilty of undermining a well intended transformation initiative. Merely owning 26% or even 51% of an organisation is not enough unless it is reflected in the true running of the business- that means 26% or 51% of business influence including the business strategic direction. If we continue on the passive investment route as is the case with many BEE transactions, soon we will be unbundling many deals and this will undoubtedly question the wisdom of empowerment initiatives. Again, if we go on as passive investors all we are doing is stifle economic growth, encourage a culture of entitlement and discourage a culture of risk taking. And out of this stance, there will be little or no understanding of business and economics that underpin business development. This, of course, is a perfect reason for white business to continue to dominate the economy with black business trailing behind hoping for a 26% stake.

BEWARE OF INVESTMENT SCAMS

There are times when we all have to be extra cautious about what we do with our money.
 
Because many people would like to make an extra buck passively - what they call passive income, they will try anything that promises a high return.  These are especially opportune times for scams with a promise of high returns. It is not only the wealthy that get hit by scams such as the Ponzi scheme that was recently exposed, even the poor are exposed.

Be aware and question any scheme that promises you a return that is far greater than what a financial institution will offer you for your investment. Schemes such as the Ponzi scheme only benefit the first lot and then depend on the number of people joining it to sustain it further. Founders usually lure potential members by promising abnormally high returns on their money. The more members you can get to join, the longer the scheme would run but when there are no more members joining, the scheme will likely fall apart. Be extra careful with your hard earned cash. Times are tough for everyone! Investigate any investment or business opportunity that requires an upfront investment with a promise to double your money in a short space of time. If it appears to be too good to be true, it most probably is!
 
Legit Investment Options:

1. Money Market
2. Long term investments
3. Retirement Annuity etc.

YOUTH AND BUSINESS

You are young once - make the most of it! The challenges faced by the youth of our country are many and complex ranging from education and career choices, teenage pregnancy, HIV/AIDS, crime, drugs and the general lack of role models.
 
Young people that wish to go into business need to know that it may look easy to run a company of your own, it may look good to be a boss of your own but it is definitely NOT easy. It cannot be done with little or no commitment, patience, hard work and perseverance. If as a young person you have a desire to get into business be sure you understand the requirements of running a business. Business is the one field where there are no shortcuts or even substitute for hard work. Be mentally prepared that you will have to make sacrifices both at a personal level as well as a social level. I do think that many people especially young people go into business ill prepared mentally and as a result do not have the mental toughness required to carry them through difficult business times. I also believe that many young people do not necessarily have the patience to invest time and effort before the drive the latest BMW X5 or Porshe. This could be because a lot of our successful business people do not tell their stories of origin enough. When we see Patrice Motsepe- we associate him with business success, because that is what brought him to our attention but very little of his struggles is ever told to inspire young people. I do believe that we need to also invest time to find out what challenges he’s had to overcome to get to where he is today- use that as inspiration for our young people with a desire to go into business.

TOURISM IS AN IMPORTANT PART OF OUR ECONOMY

Interesting to read from print media how some of the suggestions on Bizz Buzz are seen as valid interventions - (e.g.) the IDC bailout plan to assist businesses is one such intervention and then the opportunity as presented by recession to 'up-skill' via creative work plans (i.e.) working 3 days a week and attending training for 2 days were spoken about at length on Bizz Buzz. We seem to know what we are talking about.

It cannot be argued that tourism is a significant contributor to our economy and we are so blessed as a country in such tough economic times to host international sports activities that will help set the stage for a significant increase in tourism. We are presented with an opportunity to showcase our country, and there will never ever be such opportunities in our lifetime. The IPL, Confed Cup, British/Lions tour, and of course the 2010 World Cup are events that we should use strategically to position SA as a tourist destination of choice. Those who are here must experience our hospitality and humility; they must experience our culture and its diversity in order for them to recommend coming to SA for a holiday.
 
We have so much to show from arts and culture to warmth and welcome and we need to take advantage of these activities as to keep our economy stimulated throughout the recession period. Those that are watching through TV must be overwhelmed by our country’s beauty in order for them to tour SA. I guess this is a pledge as we host business colleagues or even friends from abroad, let us make an effort to wow them. This is the only way all these sporting activities will leave a legacy. These events are not only to entertain us, but also to raise the profile of our country. Tourism is business and an important one!

1.     Eskom’s 34% Hike

Eskom’s’ bid to get a hike of 34% for its electricity tariffs has been described as unlawful and by others as a form of super tax. I guess all of us agree that something has to be done with regards to maintenance and in some cases the erection of new power stations in order for us to avert a possible situation of running out of power or a situation where the current infrastructure can no longer cope with the country’s power demands. I was not at the presentation to NERSA but from what I heard and read, Eskom may have not impressed the need sufficiently to justify its request for 34% hike. The timing to fully justify is now, given the economic climate, I mean we are in recession but also the facts of what would happen if these hikes were not approved. I am not sure how long we can delay this but I am sure sometime sooner or later these hikes would be affected. I know that some quarters have requested an analysis of Eskom’s costs of doing business in order to see how this request can be justified, that for me is an indication of how much the public has lost faith in Eskom’s operations and actually suspect these hikes will end up filling executives’ pockets by way of bonuses. Let’s keep an eye on this one.  

2. Mahindra investment in South Africa    

The Indian owned vehicle maker is in advanced stages of a feasibility study to set up an assembly plant in SA. For various reasons, this is strategic and very good news for both South Africa and India. For SA in terms of filling the gap left by GM which has decided to relocate the Hummer assembly from SA to US. For India of course as a launch pad to the Sub-Sahara which is a viable option from a cost effectiveness perspective.

There is talk of some sort of collaboration with Mercedes Benz SA, BMW SA and even Volkswagen SA rather creating a plant from the ground. There is enough capacity to collaborate.

DOES AFFIRMATIVE ACTION BREED BUSINESS LEADERS WITH NO DEPTH?

If we are not careful - both as business leaders and as individuals - we may be breeding a generation of workers that lack business experience. One hopes this is a passing stage and that as many people begin to take positions of influence in organizations, that they will stay longer in positions and accumulate the actual experience of running a business. This hopping around from one company to another on the basis of by and large money is not sustainable, for both the individual and the business. I have come across CV’s of people who have worked on a full time basis for 5 different companies in one year; surely there must be something wrong with that equation. If we are not careful on how business applies affirmative action or how we as individuals receive this affirmation, the unintended consequences may be a lot of people that have worked for many businesses that lack depth of actual business experience.

We as a people need to develop:

-          Resilience to withstand uncomfortable work environments

-          Drive: Be driven by purpose/conviction more than money

-          Capacity as we get affirmed; this should be our business and we have control over this aspect.