JULY 2014 UNCOVERING

CONSTRUCTION
What goes on beneath?

AN INDUSTRY
REWARDED
Celebrating 16 years
of excellence

MANAGING
THE MONEY
Industry intelligence to nancial professionals www.cover.co.za What works for
the wealthy?

HOW GREEN CAN WE GO?

Renew the energy, renew the country

OFC_landscape.indd 1 2014/07/07 1:05 PM

Road to Nowhere DPS paths.indd 1 2014/06/03 9:35 PM
Road to Nowhere DPS paths.indd 2 2014/06/03 9:35 PM
 25 YEARS OF INDUSTRY INTELLIGENCE

CONTENTS
COVER JULY 2014

08

JULY 2014 UNCOVERING

CONSTRUCTION
What goes on beneath?

AN INDUSTRY
REWARDED
Celebrating 16 years
of excellence

MANAGING
THE MONEY
Industry intelligence to nancial professionals www.cover.co.za What works for
the wealthy?

SHORT-TERM
Are your product safety warnings up to scratch? 18
Brokers: Focus more on liability cover 19
Santam and Momentum pass the OSTI test 20
Do your clients know what theyre reading? 24
HOW GREEN CAN WE GO? Negligence versus recklessness
SAs been downgraded now what?
26
30
Renew the energy, renew the country

OFC_landscape.indd 1 2014/07/07 1:05 PM

ON THE COVER
FINANCIAL PLANNING
THE CONSTRUCTION INDUSTRY UNCOVERED 8
Construction carries various risks, from non-delivery Umbrella funds as solutions 53
challenges and public liability to crime. COVER asked #MyBigBreak 54
industry experts about the risks and challenges faced Post-application date changes 55
by the construction industry. Mandatory retirement preservation 57
Smooth bonus portfolios 60
CFA insight 61

MANAGING THE MONEY 80

Managing the wealth of individuals is a delicate and
critical task. COVER asked the industry what the latest
developments in the wealth management environment WORKING WITH WHEELS
are, and what a wealth management service actually
provides. An app for vehicle pre-inspections 62
Fleet management: what are the costs? 64
Dont get stuck in Cape Town peak traffic 66
Lessons from the Silver Mercedes gang 67
Improve your fleet fuel spend 68
RENEW THE ENERGY, RENEW THE COUNTRY 90 Soccer stars and their world-class cars 70
Renewable and sustainable energy projects are essential
to the development of South Africa, and Africa alike.
We explore projects that are underway, and risks
associated with the construction phase.

RETIREMENT
CELEBRATING THE INDUSTRY 103 Sanlam survey provides insight on pensioners 44
The 2014 Financial Intermediaries Association of Stronger reform on the retirement horizon 46
Southern Africa (FIA) Awards gala dinner celebrated The ABCs of retirement reform in SA 47
the achievements of insurers, underwriters and Liberty sheds light on the GEPF 48
investment companies. And what a night it was! Key outcomes of proposed retirement reform 50

The views expressed in this magazine do not necessarily represent those of its
owners, publishers or editorial staff. Editorial contributions sent to COVER are
Subscription rate: R470 per annum in South Africa. subject to editorial change to suit the style of the magazine. All manuscripts,
Other rates on application. photographs and other similar matter are accepted on the understanding that no
loss or damage is borne by the publisher, the editor or their personnel.
2 COVER JULY 2014

July 14.indd 2 2014/07/07 11:54 PM

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Untitled-5 1 2014/06/19 5:33 PM

 80 103

EDITOR
RISK MANAGEMENT Tony van Niekerk
tony@cover.co.za
Combating white collar crime 75
SCOR tips of trade 76 EDITORIAL
Cyber vs. PI 77 Annetjie van Wynegaard
annetjie@cover.co.za

Taryn Kerr
taryn@cover.co.za

GOVERNANCE ADVERTISING & MARKETING

Hermione Ballinger
Investing in compliance 52 hermione@cover.co.za

EDITORIAL, ADVERTISING & MARKETING

Thenjiwe Roda
thenjiwe@cover.co.za
TECHNOLOGY
ADMIN & SUBS
Enhance and evolve: new opportunities 85 Brent Munnik
brent@cover.co.za
Combating fraud through technology 86
Green geysers for sustained growth 87
LAYOUT & GRAPHIC DESIGN
Wesley Chipps
wesley@cover.co.za

AFRICA RISING Publisher

COVER Publications

South Africa squares off against Brazil 34 Street address

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Whats tripping up SAs banking industry? 36
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SA lags behind the global manufacturing sector 40
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South Africas economy at a glance 42 P O Box 2030
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REGULAR E-mail: info@cover.co.za
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Coffee with COVER 78
Associations 95 Editorial Board
Conference cover 98 Peter Atkinson, Seamus Casserly,
Events 103 Mike Duncan, Ronald Gordon, Mark Haken,
Market cover 108 Jonty Kirkman, Baravand Madhav,
Rod Pearson, Colin Travers.
Product Development 110
People on the move 112 Advisory Committee
Carel Nolte, Viviene Pearson, Kalim Rajab

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() 2014
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or
by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. Any
unauthorised reproduction of this work will constitute a copyright infringement, rendering liability both under civil and criminal law.
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ISN 1013-1507 COVER JULY 2014

July 14.indd 4 2014/07/07 11:54 PM

 Our partnership with financial advisers across South Africa enables us to consistently
provide you and your clients with the best products, service and support.
For the seventh year running, Discovery is proud to have been We are thankful for the partnerships we have forged with
recognised by the Financial Intermediaries Association of you and are inspired to further our vision and commitment
South Africa. Being awarded the best Health and Life insurer to innovation. We share these awards with South Africas
once again is a vote of confidence we dont take for granted. financial advisers.

2014
2014
2013
2012 2013
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HEALTH 2009 LIFE 2008
2008

www.discovery.co.za @Discovery_SA Discovery is an authorised financial services provider.

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Untitled-1 1 2014/07/07 11:00 PM

 Editorial

Construction
plodding along
It is never difficult to fill 112
pages with exciting news and
fascinating editorial from the
financial services industry.
On the contrary, my struggle
every month is that I have to
leave out some of the great
material we receive.
July has been no exception to this
rule. We bring you an issue packed
with information that will assist any
stakeholder in our industry to add
value to their own business and that of
their clients.

In our construction focus Zurichs Juan-

Pierre Holmes provides an overview
of the construction sector and tells us
that there has been steady sustainable
growth in this sector since the spike
before the 2010 World Cup, while
Brian Africa, PCBS, paints a bit more
subdued picture, suggesting a few
steps to ensure sustainability from an
insurance perspective. Mike Tandy,
Firedart Engineering Underwriters,
clearly sets out the challenges facing
the industry as well as the impact
they have, and Jim Connolly, Hollard
Scintilla Engineering, looks at the role
that the construction company plays
in ensuring affordable but sustainable
insurance premiums and thereby a
sustainable construction industry. Our
broker perspective this month comes
from George Davis, Principal Broker:
Construction Practice Group, Aon
SA (Pty) Ltd Projects Division where
he breaks down the risks facing the
construction industry and the role
that the insurance industry plays in
mitigating these.
To end off this in-depth feature we
Our other features this month highlight
opportunities, explore and suggest
solutions to challenges and share
comments from various people on
how they do business in the retirement
industry, the green economy and the
rapidly growing wealth management
industry.
If you love the idea of giving back
to society you will love the various
contributions we received on our
call to the industry to tell us what
they are busy with from a corporate
social investment perspective. Check
out pages 72 to 74. These are but a
tiny number of the various ways our
industry adds value to society. If you
would like us to publish what your
RECOGNITION FOR EXCELLENCE
Congratulations to the actuarial
members of our industry. On page
96 we bring you news that two
South African actuarial studies were
acknowledged internationally recently
when the Scientific Committee of
the 2014 International Congress
of Actuaries (ICA) in Washington
recognised both papers as the best in
their categories. Only 16 papers out of
the 225 presented received awards and
two of those were from South Africa.
As promised in our newsletter recently,
we bring you comments from the
winners of this years FIA Awards. Have
a look on pages 103 to 106 for all the
glamour and personal comments.

also bring you an economists view
on the changing face of construction,
through the words of Themba Moyo,
COO of MMQS.
cover
company is doing to make South Africa
a better place, please send us your
story and your photos. We would love
to share them with our readers.
Industry intelligence to financial professionals

6 COVER JULY 2014

July 14.indd 6 2014/07/07 11:18 PM

Untitled-1 1 2014/07/07 11:00 PM
 THE CONSTRUCTION
INDUSTRY UNCOVERED
Construction carries various risks, from non-delivery
challenges and public liability to crime. COVER asked
industry experts to unpack these risks and challenges.
Laying the groundwork
JUAN-PIERRE HOLMES,
Portfolio Head of Engineering,
Zurich South Africa
After the spike in construction
projects in South Africa during
the Fifa World Cup in 2010,
there has been some steady,
sustainable activity in the sector.
With infrastructure development being
prioritised on the national agenda, this
is set to increase. Of course, mitigating
risk in this complex industry is
becoming more and more challenging
for short-term insurers, particularly as
projects move beyond SAs borders.
Here are a number of trends we can
expect to see:
RISK ASSESSMENT
The risks involved with construction
are constantly evolving. Unpredictable
8 COVER JULY 2014
July 14.indd 8
weather patterns, especially excessive
rain, make it difficult to assess flood
risk. Another issue is the lack of skills
in the sector. A number of qualified
professionals are leaving the country to
contribute to projects overseas, leaving
behind inexperienced workers with
insufficient construction experience a
situation often compounded by a lack of
registered training in the industry. As a
result, more and more claims are being
attributed to human and technical errors.
Cross-border risk is becoming more
prevalent as mining and associated
infrastructure projects pick up pace
across Africa. Insurance companies
will need to be well-versed in the
regulations of other markets and will
also need to prioritise compliance with
in-country governance; ensuring that
customers are adequately covered
beyond SAs borders. Legislation in a
number of countries aims to facilitate
the growth of local players in the
insurance industry. Service providers,
like Zurich, who focus on cultivating
strong relationships with partners on the
ground will be best placed to navigate
legal and taxation requirements.
Short-term insurers should be pushing
for regulation that can formally guide
cross-border procedures as part of
the Treating Customers Fairly (TCF)
requirements. This will not only protect
customers, but will also streamline
the claims process. Scenario planning
and the development of technical
underwriting capabilities have never
been more important in the sector and,
of course, brokers will need to share
this expertise, and align their values
with those of the insurers particularly
when it comes to customer centricity
and claim payments.
RENEWABLE ENERGY
There is also a trend towards
embracing renewable energy on the
continent, with new wind and solar
powered technologies being developed
every day. Insurers will need specific
expertise in order to underwrite the
risk associated with these newer
and often unexplored technologies.
Companies that are able to draw on
a global network of experts that are
familiar with these types of endeavours
will certainly have an advantage.
Ultimately, its about providing
comprehensive coverage for
construction customers, especially
when they embark on projects outside
of SA. Partnering with brokers in
delivering on successful multinational
mandates will be critical to success,
particularly when it comes to consumer
education at point of sale. In the
end, quality over quantity will always
prevail.
2014/07/07 8:30 PM
 Construction Feature
Local construction
sector still grappling
The build-up to the 2010 World
Cup created the perception of a
buoyant construction sector with
a record number of construction
companies vying to capitalise
on this seemingly new vibrant
industry.
Together with the growth in the
sector came an increasing demand
for performance guarantees and
construction-related short-term
insurance, with products such as
contractors All Risk Insurance emerging
high on the demand list. This demand
inevitably created an environment
conducive to new insurers, particularly
underwriting management agents
(UMAs), looking to capitalise on the
new opportunities.
The expectation of continued public
infrastructure spending by government
post-2010 further served to lull the
short-term insurance industry into a
false sense of security that the industry
would remain sustainable.
However, the current state of the
construction industry is a far cry from
the positive sentiment leading up to
the 2010 World Cup. The liquidation of
the JSE listed construction company,
Sanyati Holdings, the demise of Cosira
and its holding company, First Tech
Group and the increasing number of
COVER JULY 2014
July 14.indd 9
distressed construction companies
applying for business rescue is a sign of
the times.
Unsurprisingly the current state of the
construction industry has left many
financial service providers (FSPs) and
reinsurers questioning its sustainability.
Now more than ever, the underwriting
philosophies and risk management
principles of FSPs continue to be tested
to the limit as liquidations, under-
pricing of contracts by construction
companies grappling to secure order
books, and the abuse of demand
guarantees, continue to take their toll
on short-term insurers.
THE CURRENT STATE
OF THE CONSTRUCTION
INDUSTRY IS A FAR CRY
FROM THE POSITIVE
SENTIMENT LEADING UP
TO THE 2010 WORLD CUP.
The under-pricing of contracts and
an ongoing level of distrust between
contractors and employers, a problem
exacerbated by the collusion debacle
has resulted in project delays. In this
scenario time is money, these factors
playing a key role in determining credit
risk assessments and pricing.
In addition, the specialist nature
of construction guarantees and
the complexity of the underwriting
process limits the involvement of
the intermediary as far as pricing is
concerned; this serves only to increase
concern and uncertainty among
financial advisors. Here it is therefore
advisable to refer all questions to the
underwriter before advising clients on
any pertinent matters.
BRIAN AFRICA,
Executive of Marketing and
Business Development at PCBS
Further afield, while opportunities
across the continent are present, they
come with their own set of risks and
require in-depth risk analysis. Different
languages, legal systems, and working
in some of these countries often
require additional insurance cover such
as political risk insurance. South African
construction companies also continue
to face stiff competition against
Chinese construction firms who in most
cases are able to complete the project
at lower prices.
The shortage of skills in neighbouring
countries often means that the
underwriting of these risks are left to
the South African professionals, and
although many opportunities exist
outside our borders, very few of these
opportunities actually move beyond the
planning stages due to skills shortages
in engineering and project financing.
However on a more positive note,
governments commitment to
infrastructure development as per the
NDP and 2014/2015 budget makes
for a more optimistic outlook for the
industry. In this regard government has
committed to supporting SMEs not only
as a whole but specifically those in the
construction industry, making this niche
of the construction sector a viable
opportunity.
9
2014/07/07 8:30 PM
 Construction Feature
Key challenges in the
construction industry
MIKE TANDY,
Managing Director
Firedart Engineering
Underwriting Managers
Many discussions are currently
on the go with regards to
infrastructure development in
South Africa as well as north of
our country. While construction
activity has slowed down
from before the 2010 Soccer
World Cup, the South African
government adopted a National
Infrastructure Plan in 2012
that intends to transform the
economic landscape, create new
jobs, and address service delivery
challenges.
In the 2013 budget speech, Minister
of Finance Pravin Gordhan said the
government planned to spend R827
billion in the building of new and
upgrading of existing infrastructure in
the next few years. These investments
in infrastructure are expected in the
areas of healthcare, universities,
schools, water, sanitation, housing and
electrification on the public amenities
development side. On the economic
development side, construction of
ports, roads, railway systems and
electricity plants are on the go or in
the pipeline. North of South Africa,
natural resource discoveries and
international donor bonds have ignited
massive infrastructure developments
10
July 14.indd 10
in a number of countries in Africa.
The IMF repeatedly points out the
massive infrastructure gaps that exist
in most African countries and the IMF
is deliberately encouraging, influencing
and sometimes funding some of these
developments in certain countries.
These developments bode well for the
insurance industry. However, when one
SOME OF THE KEY CHALLENGES THE CONSTRUCTION
INDUSTRY FACES ARE DESCRIBED IN THE TABLE BELOW:
KEY CHALLENGES
Skills shortage and
lack of expertise.
Regulations - various
regulations with regards to
employees, sub-contractors
and environment have been
implemented or are imminent.
Tender and preferential
procurement processes
for projects.
Availability of resources/
materials, escalating costs
as well as labour unrests.
looks at the insurance cover required
for such projects during construction,
there are a number of challenges posed
and risks attached to these projects,
both locally and in other countries
in Africa, for both the construction
companies and insurers of such
projects.
Looking at South Africa first, there
are numerous challenges that the
construction industry faces. Insurers
and brokers continue to play a critical
role in assisting their clients in the
construction space with solid financial
advice and adequate insurance cover
to mitigate the risks and challenges.
>
IMPACT THEREOF
Impacts on effective and
efficient project execution
which may result in losses for
the construction companies
and/or the insurer.
These regulations influence
the cost of projects, the
duration and potential
liability for the contracted
companies in a big way.
Inferior skills and expertise
coupled with procurement
and pricing pressures
can give rise to inferior
workmanship and materials
in order to meet budget
and procurement guidelines.
Supply challenges for materials,
labour, water and electricity
tend to drive project costs up,
may result in delays and poor
workmanship. Construction
companies can also fall into
the trap of taking short cuts or
foregoing some critical quality
assurance activities and post
project maintenace in a bid to
contain costs.
COVER JULY 2014
2014/07/07 8:30 PM
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 Construction Feature
For projects in the rest of Africa
the key challenges for South
African companies venturing into
these territories are inadequate
understanding of the respective
foreign environments with regards to
regulations, availability of skills and
expertise, culture, work ethic and sub-
contractor behaviour.
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July 14.indd 12
are very exciting and positive for
the construction industry in many
respects. However, they pose
different challenges and new risks that
construction companies and insurers
must be aware of. Professionals
involved in construction projects
geological surveyors, architects,
engineers and contractors must keep
abreast of new risks and understand
how they impact the construction
processes.
Likewise, insurance practitioners must
understand the risks and be able to
design appropriate products at the right
prices to cover these risks adequately.
In the same vein, it is imperative that
risk managers and brokers understand
the risks inherent in each different
construction project, and how variables
like nature, size and location affect the
expertise, extent and type of insurance
cover required.
COVER JULY 2014
2014/07/07 8:30 PM
 Covering Construction
Construction companies large
and small face similar problems.
They need to stay agile,
profitable and reputable. Keeping
high standards is a primary
concern.
The insurance cover of construction risks
is something of a marriage between
financial institutions, developers,
contractors and professionals such as
engineers. The contract document
governs the relationship, binds these
entities together and outlines the
obligations for parties to purchase
certain insurances.
The first responsibility will rest on the
developer/owner or the contractor
to purchase a contactors all risks/
contactors liability policy. This
protects them against risks like storm,
flooding, or theft that could affect the
project. It also covers liabilities arising
out of any damage or injury to third
parties.
COVER JULY 2014
July 14.indd 13
The second requirement is a
construction guarantee that the
contractor would provide from an
insurer or financial institution, to
ensure he has the funding to comply
with his contractual obligations and
complete the project.
In addition to the construction
guarantee, developers may be required
to account for possible delays in
completing the project on time.
Lastly, engineers giving advice of a
professional nature are required to
purchase a Professional Indemnity (PI)
insurance policy to ensure the integrity
of any design elements they may pass
off regarding the project.
There are some changes and trends in
the industry as construction companies
seek to boost lagging local business
by moving north into Africa. These
opportunities require understanding of
other risks and legislative requirements.
With a reputation for high standards
of workmanship and professionalism
South African contractors seem to be
adapting well in taking construction
projects north of our borders and into
other African countries.
Hollard Scintilla Engineering has been
providing solutions for contactors or
developers working north of South
African borders for over a decade.
One of the main considerations is
local legislation. Generally it is a
requirement that projects are insured
by a locally registered insurer in the
territory where the project takes place.
Hollard is well placed in sub-Saharan
Africa with operations in Namibia,
Botswana, Zambia and Mozambique.
In other territories the company has
partnerships with which it shares its
expertise and capacity to write risks.
Premiums, payments and currency are
also a factor. Most territories use the
US dollar; therefore Hollard Scintilla
Engineering accepts this currency and
also pays claims using the currency.
After a decade of doing business in the
territories, Hollard Scintilla Engineering
found that the greatest risk with
claims is the remoteness of contract
sites and the experience of assessors
to assess and adjust the loss. Hollard
Scintilla Engineering has on the ground
knowledge, insight and expertise to
give advice to clients on all of these
matters.
13
2014/07/07 8:30 PM
 Construction Feature
Digging deep into the
construction industry
GEORGE DAVIS,
Principal Broker:
Construction Practice Group,
Aon South Africa (Pty) Ltd
Projects Division
In 2013 the construction industry
made headlines for all the
wrong reasons, most notable
the infamous Competition
Commission enquiries. The
South African construction and
infrastructure industry, unlike
other emerging markets, has
struggled post 2010 FIFA World
Cup with depressed growth
with a slight recovery in recent
months.
WHAT TYPE OF RISKS DOES THE
CONSTRUCTION INDUSTRY FACE?
Construction companies face risks of
transformation, health, safety and
environmental sustainability, followed
by growth and expansion, and
compliance with laws and regulations.
Construction sites are hazardous and
accident-prone. Construction work is
exposed to damage caused by natural
perils like storm, floods and landslip.
Workers face man-made perils in the
construction operations. The risks of
fire, impact, instability and collapse are
intrinsic to the process.
14
July 14.indd 14
HOW DOES THE SHORT-TERM
INSURANCE INDUSTRY COMBAT
THESE RISKS?
All stakeholders have their own fears
of facing risks in the conduct of
business. The magnitude of the risks is
indeterminate at times. What needs to
be determined is:
The proportion of real
versus perceived risks;
The monetary quantification
of risks; and
The real import and the
impact of a type of risk.
Effective risk management results in
protecting assets, improving stability,
improving long term profitability,
safeguarding business reputations,
reducing insurance claims (and
reducing premiums), and guarding
future opportunities.
Mitigation of risks is the all
encompassing requirement. Broadly
speaking, construction projects face the
following type of risks:
Business Risks
Financial Risks
Technology Risk
Project Risk
Political Risk
Contractual risk management provides
a clear structured approach in
addressing responsibilities to insure
construction projects. Risk transfer
using contractual liability is one of
the most important risk management
tools available to risk managers, but
can be complicated and complex to
understand. The concern in particular
rests within the insurance provisions.
Ideally, the parties, in their contract, will
assign the risks and liabilities to the party
best suited to manage and minimise
the risks. The risks and responsibilities
associated with specific projects must
be clearly allocated within the contract.
In the end, the contract serves as a
framework of the law between the
parties and will establish which party has
assumed or negated a particular risk in
connection with the project.
Insurance provide products to negate
the risks and is available to cover the
risks for all parties complying with the
terms and conditions of such insurance.
It is cost effective in saving resources
like time, assets, income, and people.
Insurance should be practical, proactive,
systematic, and be an integrated part
the entire risk management activities of
construction projects.
WHAT ISSUES AFFECT THE
CONSTRUCTION INDUSTRY, AND
WHAT NEW DEVELOPMENTS HAVE
WE SEEN LATELY?
Labour unrest have caused many
headaches for construction companies
in South Africa and SASRIA in
particular does not cover loss of income
without physical loss or damage to
the construction project. Such delays
are deemed to be a contractual force
majeure event with no alternative for
relief from any other party including
SASRIA and the insurance market for
the construction company. Recently
project developers onerously transfer
labour unrest risks to construction
companies without considering labour
laws or insurance solutions.
WHAT ARE THE CHALLENGES OF
CONSTRUCTION NORTH OF OUR
BORDERS?
Contracting into Africa has huge
opportunities for growth provided the
laws and regulations are followed.
Positive results can be realised through
careful planning, and aligning strategy
with local knowledge and participation.
Placing insurance in Africa must
be followed with strict discipline in
partnership with local markets and
compliance with laws and regulations.
Local penalties and withholding taxes
could cost the contractor dearly.
In such circumstances, have the
contractor been advised properly by
the insurance advisor?
COVER JULY 2014
2014/07/07 8:30 PM
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 Construction Feature

The changing face of South

Africas Construction
Despite prolonged economic
uncertainty and challenges,
companies in the global
engineering and construction
sector have fresh confidence in
the growth prospects for the
industry. Coupled with data
pointing to an upward trend, the
industry itself is also changing,
according to Cost Engineering
and Construction Economist
Consultancy Firm, MMQS.
Traditionally, there has been limited
Quantity Surveying (QS) involvement in
infrastructure projects. These projects
were left mainly to the engineers.
However, due to the changing industry
complexities and larger budgets, the
role of the QS is starting to be seen as
an integral part of any infrastructure
development right from the planning
phase of the project.
Companies are no longer just building a
single-use structure; they are focused
on more large scale infrastructure
projects.

We are moving away from being the

This change means that we need to
think differently about the industry
as a whole and the role that both
the public and private sector need to
play to ensure we continue to gain
momentum, roll out infrastructure
plans and contribute to the growth of
SAs GDP.
To unlock investment opportunities in
South Africa and on the continent a
sound investment climate is needed,
together with a focus on local and
regional synergies that address the
challenges of infrastructure.
Risk management is important
to create a stable yet enabling
environment labour stability and
productivity is a prerequisite all based
on sound governance.
The insurance industry provides various
types of insurances and bonds for
the construction industry. All players,
including consultants (Professional
Indemnity insurance), contractors
and employers require insurance as
dictated by the different agreements
between the parties. Therefore, besides
regulating risk and how it is shared
between the construction parties, the
pricing level of the insurance industry
affects the costs in the construction
industry. The pricing of risk away from
the construction industry enables the
parties therein to carry out business
with a lesser likelihood of going out
of business in the event of negative
events materialising.
one that typically only manages budgets
and spreadsheets, to being able to
provide invaluable consultation and
cost management services to clients
and contractors. The emerging cost
manager is intrinsically involved in
defining, managing and cementing all
four pillars scope, quality, time and
cost towards the overall success of
any project.
THE OVERARCHING ROLE
OF COST MANAGEMENT,
HOWEVER, IS TO KEEP
COST DOWN OR AT LEAST
WITHIN THE BUDGET
The overarching role of cost
management, however, is to keep cost
down or at least within the budget
and protect the return on investment
though this role is more complicated
than merely being able to provide
the project manager and the client
with a holistic view of budgets. A
cost manager should also be able to
undertake forecasting cost analysis,
taking micro- and macroeconomic
influences including things like cost
of labour, inflation and exchange rates
into consideration. These can have a
THEMBA MOYO,
COO of MMQS
significant impact on the project team
being able to deliver within budget.
A cost manager should also assess the
location-project risks and be proactive
in pre-empting such risks with the
project manager or client. In certain
cases such risks may make or break a
project.
The role of the QS has changed
substantially from about 30 years
ago when all we did was provide the
quantities and costs of materials that
would be needed for projects. Now,
we have to play a more strategic role
one of cost and contract advisor as
technology has made the traditional
role of the QS redundant.
On larger or more complex projects,
for instance, having a cost engineering
specialist within the consortium who
can assist in optimising processes
and putting efficient financial control
measures in place will be beneficial
overall and help ensure specific project
objectives are met. Going forward
construction/engineering consortiums
will need to complement each other
from a skills strength point of view in
order to be effective.

16 COVER JULY 2014

July 14.indd 16 2014/07/07 8:30 PM

 Emeritus Reinsurance Company
SA Limited embraces a Pan African
business model as we join the competitive
South African insurance industry.

Tel: +27 11 783 8517 / +27 11 783 6549

Fax: +27 11 783 5440
info@emeritusre.co.za
www.emeritusre.co.za Enterprising Reliable Solutions
Enterprising Reliable Solutions

Untitled-1 1 2014/07/07 11:20 PM

 Short-term
Product Liability:
Are your product safety warnings up to standard?
ERIC DOM,
Underwriting Manager Liabilities, Global
Casualty, AIG South Africa Limited
Do your products carry
appropriate safety warnings?
If not, you could be open to a
product liability claim. When
introducing new products to
market, manufacturers and
distributors must take reasonable
care to ensure that the products
are suitable for purpose and
generally safe for their intended
use.
A central component in avoiding these
claims is a complete assessment of the
product, analysis of any risks the use
of that product might incur and the
provision of appropriate information to
guide consumers. That information is
generally conveyed through a variety
of means, including as part of product
labelling.
It is a universally accepted principle
that safety warnings cannot
compensate for products that are
inherently unsafe. An unsafe product
will always be so, regardless of what
warnings are provided. Though a
product liability policy will cater for this
it should not replace the necessity for
manufacturers to conduct the rigorous
Product Safety Risk Assessment
discussed in an earlier article.
18
July 14.indd 18
Broadly speaking, there are two
recognised forms of risk communication
associated with products. These are
instructions and warnings.
Instructions are a set of directions,
often provided in supporting manuals,
which aim to promote the effective
use of the product. In this form, risk
communication comprises part of
a wider set of messages (and may
form only a small component of
the messaging), but it remains an
important element of providing safety
information.
WARNINGS HAVE A
DISTINCTIVE GRAPHICAL
LAYOUT THAT SETS THEM
APART FROM INSTRUCTIONS
AND REMINDERS AND HAVE
ESSENTIAL INFORMATION
COMPONENTS.
Warnings, on the other hand, tend
to comprise of dedicated safety
statements and they are generally
provided on labels or signs placed on
the actual product; for example, some
toys are specifically dangerous and
consumers should be warned of small
parts that may be swallowed (such as
marbles).
Warnings have a distinctive graphical
layout that sets them apart from
instructions and reminders and have
essential information components.
Specifically, a warning should identify
the hazard and specify what actions
must be taken to avoid it.
Warnings have a distinctive
appearance and their design is guided
by supporting product safety standards
such as ANSI Z535 and ISO 3864. Key
elements of warnings are the words,
colour (usually employing yellow or
red), layout, size and positioning.
In some instances, pictograms are
included.
METHODS OF DELIVERY
Safety information can and should be
conveyed in many ways, including:
Advertising and sales materials;
Presentations given by sales staff;
Information provided in
external packaging;
In supporting manuals; and
On signs or labels affixed
to the product itself.
Customer support lines and websites
are also important communications
tools that manufacturers can use
to inform and warn consumers, and
through which they can recall products
if unanticipated safety issues occur
after sale.
In the next article in this series, we
look at Product Liability legislation and
standards.
AIGs web-based Product Liability
Service is a training system which
helps manage product liability risks.
Courses cover a variety of topics
including management, safety
warnings, risk communication,
legislation and standards, to promote
good risk management. The service
is supported by tools including a
model corporate product safety policy
statement, a self assessment audit and
a risk assessment tool.
Eric Dom can be contacted at
eric.dom@aig.com
COVER JULY 2014
2014/07/07 8:30 PM
 Brokers urged to focus
more on liability cover
Financial services products are
complex. Its important that
brokers constantly educate
themselves around the increasing
exposure that liability claims
present. Insurers need to play
their part in providing brokers
access to quality, tailor-made
solutions to ensure that their
mutual clients are sufficiently
covered in the event of a liability
claim.
The basic principle of providing
insurance is underwriting risk by
looking at two factors frequency
and severity. Liability claims are not
frequent, but they can be severe.
Within the short-term insurance market
(barring specialist risks) we generally
deal with two main types of liability
cover that impact the personal lines
and commercial insurance client:
personal liability cover and public
liability cover. The exposure often
overlaps. Where a gap may exist
within a personal insurance policy, an
extension to include an element of
public liability cover is imperative.
EXAMPLE:
A golf player hits his ball onto the
highway which causes an accident. He
could be held liable for the damages
caused to vehicle(s) and bodily harm
to their occupants, not to mention the
legal fees.
ANOTHER EXAMPLE:
A child pushes a trolley through the
car park and accidentally bumps into a
Ferrari. The child (or parent/guardian)
is responsible for the damages to the
car.
Public liability is required for people
who work from home temporarily or
permanently. Should a client come to
see the homeowner and their dog bites
the client; the homeowner is liable
for medical bills. The liability arose
COVER JULY 2014
July 14.indd 19
while the homeowner was conducting
business it no longer falls under
personal liability but public liability.
Current personal liability insurance
policies normally exclude liability arising
out of conducting business or ones
occupation. People who work from
home could face massive legal claims
for damages should they not have a
commercial policy with public liability
cover in place, or at least a specialist
personal policy that does extend to
cover this.
THERE ARE TWO MAIN
CHALLENGES WHEN IT COMES TO
LIABILITY CASES:
They cannot be ignored even
if the claim is bogus, legal fees
will be required for defence.
IF THE CLIENT IS
UNDERINSURED IN LIABILITY
COVER, THE COURT WILL
BEGIN ATTACHING THE
ASSETS TO COVER LEGAL
FEES OR PAY-OUTS.
Its difficult to determine how
much cover is enough. Liability
insurance is a limit of indemnity,
not a sum insured, so its not
so easy to define the ultimate
exposure of the risk being insured.
If the client is underinsured in liability
cover, the court will begin attaching
the assets to cover legal fees or pay-
outs. Ensure the liability cover in place
is at least equal to the value of your
clients assets. If the clients net asset
value adds up to R20 million, they
should have at least R20 million in
liability cover.
Trustees Liability or Directors and
Officers Liability Insurance is for
homeowners who reside in a block
WARWICK SCOTT-RODGER,
Head of Brokers
MUA Insurance Acceptances
of flats or sectional title and hold
a position as a trustee, member
of a body corporate, homeowners
association, or even when they are
directors or officers of a non-profit
organisation, charity or educational
body. These organisations or
associations should have their own
Trustees Liability or Directors and
Officers Liability Insurance in place,
but its not always the case. This cover
will protect insureds if they get sued
directly in their personal capacity for
an insured event that has occurred,
or through their wrongful act (error or
omission) in their duties, and damages
to a third party have been caused.
Following the trend of the US and
Australia, South African consumers
are becoming more litigious a
result of traditional and social media
empowering society about its legal
rights. Liability cover is generally
affordable. While personal liability
insurance is hardly tested, should the
need arise it can be life-changing.
We strongly advise you to ensure that
your clients are adequately covered
by selling them a specialist personal
policy designed specifically to meet
the specific exposures that each profile
type client presents.
19
2014/07/07 8:30 PM
 Short-term
Santam settled claims of
R13 billion in 2013
The recently published
Ombudsman for Short-Term
Insurance (OSTI) statistics are
in realisation that of the 1%
claims that Santam does not
pay out, only two in every
thousand are contested and,
even on independent third
party reassessment by the
Ombudsman; only 29% of these
contested claims are overturned.
This means that by far the majority
of contested claims (over 70%), are
upheld by the Ombudsman in favour
of Santam. The industry standard
is 32,91%. The overturn rate is for
personal lines claims only.
The latest report shows that Santams
share of the total number of complaints
Latest short-term
claim stats on the rise
According to the Ombudsman
for Short-Term Insurances
(OSTI) latest annual report,
9368 complaints were received
last year. Ombudsman Dennis
Jooste said that this rise is
largely attributed to the growing
awareness among the consumers
of their contractual rights.
Momentum Short-term Insurance
(MSTI) achieved an overturned ratio
of 10,26% in 2013 versus the 27,91%
published in 2012. In 2013 the number
of personal lines claims received by the
company in 2013 increased.
The 2013 statistics will be used by the
Financial Services Board in monitoring
20
July 14.indd 20
received by the OSTI fell from 9,53% in
2012 to 8,36% in 2013. Santams claims
registered increased by nearly 4%.
Santam has invested R287 million in
the 2013 financial year in strategic
projects in its commercial and personal
businesses to update and reconfigure
legacy systems in order to improve
efficiencies and create automation. A
further R240 million has been allocated
in 2014.
Currently 97% of all claims that come
through Santams 24/7 emergency call-
centre are digitised, indexed and then
subjected to a predictive analytics test
that differentiates between complex
and standard claims, allowing for IAN KIRK,
almost half of all claims to be settled Chief Executive Officer of Santam
within 24 hours.
Santam settled claims to the value of
R13 billion during the previous financial
year.
the market conduct of insurers going
forward.
The number of complaints received
and overturned by the Ombudsman
is a good indicator of how an insurer
finalises and deals with disputes.
According to the Ombudsmans latest
report, a constant three out of 1 000
claims filed with insurers ended up as
complaints to the Ombudsman. The
average turnover rate for the year was
33%, which means that only one out
of three decisions made by the insurer
was overturned.
With that in mind, MSTI is very pleased
to see that they are not only living VICKEY SWANEVELDER,
up to their own standards of treating Head of Claims and Claims Support,
customers fairly, but also to the Momentum Short-term Insurance
standards of the Ombudsman.
COVER JULY 2014
2014/07/07 8:30 PM
 JHB 45778
Together we can
grab Worry by
the scruff of its neck,
poke it in the eye
and give it
a good old wedgie.
Oh, and we can also sell insurance together.

Were super proud of the lasting partnerships were building with

each and every one of you, our brokers. When we work with
people like you, forehead veins dont throb, swear words arent hurled,
and everyones lives become a lot less worrisome.

personal commercial corporate investments Hollard Short-term, Hollard Life and Hollard Investments are Authorised Financial Services Providers.

Untitled-1 1 2014/07/07 11:02 PM

 22 COVER JULY 2014

July 14.indd 22 2014/07/07 11:03 PM

 COVER JULY 2014 23

July 14.indd 23 2014/07/07 11:03 PM

 Short-term
Understanding an
insurance policy is the
key to successful claims
Each month, Santam unpacks an interesting
insurance topic with research derived from exclusive
Santam client surveys. This month the insurer
focuses on claims processing and repudiation.
POLICYHOLDERS UNDERSTAND
THE NEED TO BE IN THE KNOW
According to the latest consumer
insight survey conducted by Santam,
policyholders (93%) indicate that
having an understanding of their
insurance policy plays a key role in the
claims process.
Policyholders comprehend the link
between the claims process and the
terms and conditions applied in their
policy contrary to a survey run
last year which showed that 46% of
respondents did not attempt to use
their policy document to lodge a
claim. The latest results indicate that
policyholders have improved their
awareness and are taking a more
proactive role in handling their claims.
It is important for policyholders to
understand the insurance cover they
have purchased and the steps involved
Close to 90%
of the survey
respondents have
never had any
of their claims
rejected.
24
July 14.indd 24
are the most common reasons for
46% of
respondents did
not attempt to
use their policy
document to
lodge a claim.
when having to claim. Although
policyholders understanding of their
cover is improving, we have noted
that there is still a need for more
consumer-friendly documentation and
processes.
Between 2013 and 2014 Santam has
invested significantly into updating and
reconfiguring systems in its Commercial
and Personal businesses in order
to improve efficiencies and create
automation. Santam launched the client
information and education portal: www.
insurancegoodandproper.co.za
REJECTION OF CLAIMS
Close to 90% of the survey
respondents have never had any of
their claims rejected. Policyholders
have an important role to play in
enabling Santam to continue paying as
many claims as possible. Policyholders
need to understand their policy and
ensure that all crucial details are
updated in order to avoid repudiation.
EDWARD GIBBENS,
Santams Executive Head of
Commercial and Personal Insurance
According to Santam the following
claims to be repudiated:
The item is not on the
existing insurance policy.
The right policy option
is not selected.
Its not an insured risk due to
uncertainty, for example, wear
and tear on machinery.
The cover for a newly acquired
item is not activated.
The policy conditions are not met.
THE INTERMEDIARY REMAINS
INDISPENSABLE
Moreover, and despite many
respondents indicating that they have a
better understanding of their insurance
policies, an overwhelming majority
admits that they still rely heavily on
their intermediary to decipher the finer
details of their policies and to help
them through the claims process.
An intermediarys role is invaluable.
Although we encourage policyholders
to take more responsibility and educate
themselves about their insurance
policy, the intermediary still proves to
be the safest and most reliable option,
providing convenience and unrivalled
expertise prior, during and after the
claims process.
COVER JULY 2014
2014/07/07 8:30 PM
 Zurich Insurance.
For those who
truly love their
business.
Zurichs specialist expertise in Engineering Insurance enables us to deliver
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including machinery, computer and electronic risks, construction risk and
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Our complete insurance offering is underpinned by industry technical

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Qualified engineers who underwrite and understand the risks associated

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Access to specialist teams of claims professionals with the authority to
make decisions, no matter the complexity of the risk.
Access to a global network of engineers, risk managers and surveyors
who analyse risk and provide comprehensive assistance to our customers.

Speak to your broker or visit www.zurich.co.za to

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15 Marshall Street, Ferreirasdorp, Johannesburg, 2001
Authorised Financial Services Provider No.17703

Untitled-1 1 2014/07/07 11:04 PM

 Short-term
Playing with fire
WPS VAN WYK,
Director, and
PHILENE SPARGO,
Associate Designate, Dispute
Resolution, Cliffe Dekker Hofmeyr
A common clause in insurance
agreements stipulates that
the insured is obliged to take
all reasonable precautions to
prevent or minimise loss or
damage, bodily injury, death,
liability and accidents. In
view of an interesting factual
scenario which has presented
itself to us, let us examine the
implications of such a reasonable
precautions clause, and whether
a court will be inclined to rule in
favour of an insurer in the case
of a repudiation based on such a
policy condition.
THE SCENARIO
We represent an insurer in a claim
wherein a motor vehicle accident
occurred in which the insureds
representative (who was the driver at
the time) drove at more than 100km/h
above the speed limit of 120km/h and
lost control of the luxury vehicle.
The vehicle left the road and rolled,
resulting in the vehicle being written
off and one of the passengers in the
vehicle was killed.
The insurer repudiated the claim in
respect of the vehicle relying on the
policys reasonable precautions clause,
and the insured subsequently laid a
complaint with the Ombudsman for
Short-Term Insurance (OSTI). After
investigation into the factual matrix,
the OSTI ruled in favour of the insurer
and the insured has since instituted an
action for damages against its insurer.
THE SOUTH AFRICAN LEGAL
POSITION
Despite conflicting historic decisions,
the most recent jurisprudence
demonstrates that it would undermine
the very purpose of a policy of
26
July 14.indd 26
insurance to interpret the policy
condition of reasonable precautions
as an exclusion of liability for the
insureds negligence. As such, our
courts favour a restrictive interpretation
of reasonable precautions clauses
(including use of the contra
proferentem rule).
An insurer must show that an insured
acted recklessly and not merely
negligently to be justified in its
repudiation of a claim arising from
damages caused by the insureds own
actions.
Importantly, as regards the scope
and interpretation of reasonable
precautions clauses, the evidentiary
burden lies with the insurer, to make
clear what particular risks it wished
to exclude in a contract of insurance.
AN INSURER MUST SHOW THAT
AN INSURED ACTED RECKLESSLY
AND NOT MERELY NEGLIGENTLY
This is a difficult onus to discharge
and the wording of the particular
exclusion against the backdrop of the
contract of insurance as a whole will
be decisive. Insurers should therefore
err on the side of caution and take care
to be specific in detailing the possible
exclusions of liability for loss under a
policy of insurance, rather than simply
relying on a general condition for the
right to repudiate in circumstances
where it may be shown that an insured
acted recklessly.
DISTINCTIONS BETWEEN
NEGLIGENCE AND RECKLESSNESS
In the 1999 case of Santam Ltd v CC
Designing CC in the Cape High Court,
Judge Comrie addressed the impact
and scope of a reasonable precautions
clause in detail, together with the
question of the interplay between
negligence and recklessness.
The learned judges exposition of
this topic took into consideration
previous decisions of our courts as
well as reasoning and precedents from
English decisions on the subject. The
judgement was given by a full bench
and has widely been accepted as
correct.
So what is the difference between
negligent and reckless conduct, and
what must an insured do to render his
insurer able to repudiate a claim on
the basis that he indeed played with
fire (so to speak) and courted danger
deliberately?
It is interesting to note that our
courts frequently equate reckless
conduct with grossly negligent
conduct. However, these concepts
are noted as differing (albeit by
very little) in Neethling, Potgieter &
Vissers Law of Delict 6th ed. at 127
(see also 134). Here, recklessness is
referred to as a serious degree of
negligence, for which the question
is whether the wrongdoer actually
subjectively foresaw the possibility
of consequences and either did not
care what the result might be or was
indifferent to the possible result and
nevertheless persisted in his conduct
In contrast, gross negligence, whilst
falling short of dolus eventualis,
involves a departure from the
standard of the reasonable person to
such an extent that it may properly
be categorised as extreme; it must
demonstrate, where there is found to
be a conscious risk-taking, a complete
obtuseness of mind
There may, however, be an overlap
between grossly negligent and
reckless conduct in respect of the
actions of an insured. This of course
complicates matters further, creating
difficulty for classification of conduct as
being either negligent or reckless.
COVER JULY 2014
2014/07/07 8:30 PM
Untitled-1
Untitled-1 11 6/27/14 11:04
2014/07/07 9:39 PM
AM
 Short-term
Whether an insureds conduct has
crossed the line into recklessness
will obviously have to be determined
with reference to the particular
circumstances of the claim and to the
specific policy (and wording thereof) in
question. On the one hand, continuing
to drive a vehicle which has been in
an accident and which the driver knew
28
July 14.indd 28
SO WHAT IS THE DIFFERENCE
BETWEEN NEGLIGENT AND
RECKLESS CONDUCT?
had experienced radiator damage was
considered by the OSTI in 2011 to
have rendered the insured deliberately
courting danger, and the insured was
declared to be responsible for all
serious engine damage suffered as a
result of such conduct. What, on the
other hand, of an insured driving well
over the speed limit?
From the description of recklessness
above it is clear that subjective factors
play a large role in determining the
recklessness of an insured. Such
subjective factors may be inferred
from the facts and surrounding
circumstances of the claim. In fact,
Judge Comrie noted in his judgment
in CC Designing that the question [of
recklessness] is predominantly one
of fact. Considerations in regard to
recklessness of an insureds conduct
include previous deliberation and
preparation coupled with failure to
render assistance, absence of surprise
at the outcome of an action or
omission, regret or sympathy and, most
importantly, the grave consequences
which have flown or may still flow
from such conduct.
It remains to be seen whether our
courts will deem driving in excess of
100km/h above the speed limit of
120km/h to be reckless in view of the
prevailing case law and to reverse the
OSTIs decision in favour of the insurer.
Watch this space for more
developments as the case unfolds in
regard to this pertinent question of SA
insurance law.
COVER JULY 2014
2014/07/07 8:30 PM
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Untitled-1 1 2014/07/07 11:04 PM

 Short-term

What does the sovereign debt

downgrade mean to SA (Re)Insurers?
The downgrading of South Africa sovereign debt by the worlds
major rating agencies has been the subject of a plethora of learned
comment, but the impact it may have in our industry has hardly
been considered. The reasons for the downgrades have also been
comprehensively analysed, so that requires no further investigation
we need only concern ourselves with the fact that we are now
rated effectively just one notch above junk status and what
impact that may have on our businesses. Out of interest, our
rating is similar to those of our BRICS associates, other than China.
For comparison purposes, these are as follows:

COUNTRY S&P RATING MOODYS RATING FITCH RATING

Brazil BBB- Stable Baa2
China AA- Stable Aa3
India BBB- Negative Baa3
Russia BBB- Negative Baa1
South Africa BBB- Stable Baa1
Thus we find ourselves in a similar
position to those countries with
which we like to be associated
however, ideally we should strive to be
competing with them from a position
of strength, rather than weakness. It is
also interesting to note that Nigerias
ratings are now at a level below ours,
so they already have slumped into the
junk bond basement.
From an insurance perspective, this
downgrade impacts on the credit
ratings of all insurers and reinsurers
locally domiciled (and for the purposes
of this discussion, domiciled should
be understood to mean locally
capitalised, locally registered and
locally regulated). These insurers and
reinsurers have until now enjoyed
ratings equivalent to the sovereign
rating and will now be downgraded in
terms of the ceiling policy followed
by ratings agencies. This policy
implies that the sovereign rating is
the maximum attainable rating for a
corporate bond. As a consequence of
this policy, companies which are at
the ceiling will be downgraded after a
sovereign downgrade and through no
fault of their own even if their own
financial situation has improved. This of
course defies logic.
Stable BBB Stable MARK HAKEN
Stable A+ Stable Consulting Reinsurance Manager
Renasa Insurance Company Limited
Stable BBB- Stable
RUR- BBB Negative
Negative BBB Negative as a proxy for completing their own
due diligence exercises. Downgrades
can have the effect of forcing them to
THE KNOCK ON EFFECTS OF THIS move large swathes of business from
ARE: their now insecure underwriters, the
1. In many reinsurance treaty wordings implications of which are massive.
there is a downgrade clause. This
may allow (or in some wordings, 3. In terms of the proposed solvency
require) the insurer to cancel mid- assessments under SAM, the efficacy
term in the event of a downgrade. of reinsurance coverage as well as
If some reinsurers and insurers are investments will likewise be impaired,
downgraded and cancellation clauses forcing insurers and reinsurers to retain
are automatically invoked, the financial still higher reserves as a result of the
security of those organisations being downgrades.
THIS POLICY IMPLIES THAT
THE SOVEREIGN RATING IS THE
MAXIMUM ATTAINABLE RATING
FOR A CORPORATE BOND.
protected is likely to be negatively All of this negatively impacts our local
impacted, and they too may suffer insurers, reinsurers and insuring public,
downgrades. A domino effect or as a result of a sovereign rating over
market spiral could follow which would which the affected parties have neither
impact the security of the market as a influence nor control, and irrespective
whole. of their own financial stability. The
insistence of pursuing the ceiling
2. Most insurance and reinsurance policy by the agencies should surely
brokers vet the security of their be reviewed as it is illogical and could
markets, and they generally rely on the have an exceedingly negative impact
ratings provided by the major agencies within our industry.

30 COVER JULY 2014

July 14.indd 30 2014/07/07 8:30 PM

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Untitled-2 1 2014/07/07 11:06 PM

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 Africa Rising

This ones for Africa

The Brazilian Soccer World Cup sends us back to 2010, when South
Africans united to host the world in our backyard. South Africa has all
the potential imaginable, with world-class corporates and resources,
all we need is a little wisdom and introspection. In the following
pages we see South Africa in light of Africa, the BRICS, and the world.

What can SA and Brazil

learn from each other?*
As attention turns to the
Brazilian Soccer World Cup,
Geoff Blount, CEO of Cannon
Asset Managers and a South
African married to a Brazilian,
compares SA and Brazil and
looks for the best of each.

South Africa seems to be increasingly federation in which each state has

Parallels are often drawn between
South Africa and Brazil. Both have
high income inequality, high crime
rates, sophisticated first world sectors
that run in parallel with very under-
developed third world sectors, a history
of dictatorial regimes, similar social
issues and vast natural resources.
Both suffer from a general level of
social discontent and negativity about
management and their prospects.
and I believe erroneously looking
to the Brazilian social and economic
model for solutions. While we have
much to learn from Brazil, South
Africa is fundamentally different
to that country and I think it is
worth discussing some of these soft
differences.
I am making simplified generalisations:
Brazil is vast and diverse. It is a
a unique identity. Brazil is larger
than the continental USA, and any
generalisations will, no doubt, be
countered by many exceptions.
Although not as expansive, South
Africa is equally complex. The
generalisations below are based on my
experiences as a South African who
has married into a wonderful Brazilian
family and travelled frequently to Brazil
for business and pleasure.

34 COVER JULY 2014

July 14.indd 34 2014/07/07 8:31 PM

 BRAZIL HAS BUILT A COMMON
NATIONAL IDENTITY
Irrespective of race and class, there is
a common community in language,
custom, music, and social symbols.
South Africans remain severely divided
by all of these, although we came close
to feeling unified during the Soccer
World Cup and, to a lesser extent, the
Rugby World Cup.
SOUTH AFRICANS HOST A
PERMANENT INFERIORITY
COMPLEX
We believe everything foreign is
better and we are oh so third world.
Ironically, this means we sometimes
overcompensate and deliver better
than first worlds. Brazilians are almost
the opposite. While aware of their
shortcomings, the Brazilian attitude is
that things are sort of okay. While
Brazilians like being Brazilian, in spite
of their issues, South Africans suffer
a roller coaster of emotions towards
their country, regularly swinging from
extreme despondence to exuberance.
BRAZILIANS ARE SETTLED IN THEIR
COUNTRY
We are not. But Brazilians are far more
inward looking, possibly due to the size
of their country, while South Africans
are more outward focussed. Brazil has
a dynamic and assertive foreign policy,
unlike the shy and sometimes morally
weak policy of South Africa.
BRAZILIANS ARE MUCH MORE
ENTREPRENEURIAL THAN SOUTH
AFRICANS
However, our large corporates are
world class, excelling on the global
stage. Despite issues with maintenance
and development, South African
infrastructure is superb relative to Brazil.
Brazils poor infrastructure is often
referred to as risco Brasil, the Brazil
risk.
BRAZIL HAS ONLY EVER
PARTICIPATED IN TWO WARS
These wars werent on their own soil.
Their dictatorship was relatively benign
compared to South Africas experiences
or their neighbours Chile and Argentina.
Although Brazil has a high crime rate,
it is not accompanied by the same
levels of violence as here. Our history
is one of internal and external wars,
confrontation and violence, which is
reflected strongly in our society today.
SOUTH AFRICANS TEND TO BE
HYPER-CRITICAL OF GOVERNMENT
When there is failure or ineptitude in
government or a parastatal at any level,
COVER JULY 2014
July 14.indd 35
we take that as a sign to emigrate and
as evidence that the country is going
backwards. Brazilians arent surprised by
failure or ineptitude and have learned to
live with it. We expect our government
to meet our ideals, and take it hard
when it doesnt.
BRAZIL HAS WORKED HARD
THROUGH STRONG SOCIAL
POLICIES
Theyve tackled and seen effective
implementation of the countrys
inequalities and the poor level of
education. We have not, and in fact
continue to condemn our children,
especially rural, to another generation
of poverty through poor management
of the education system.
SOUTH AFRICANS TEND TO PUSH
OURSELVES
If we run, we dont just jog, we do
the Comrades marathon. Brazilians jog
along the beach at a relaxed pace and
enjoy the view.
I dont believe that either Brazil or
South Africa currently has the ability
to become a fast growth economy
like China or India. The structural
problems we face are not being
adequately addressed by our respective
governments and we will remain
low-growth emerging economies.
Brazils recent economic successes
were cyclical, rather than structural, as
was ours up to 2008. It is a mistake
to confuse their cyclical growth with
structural growth. South Africa leads
Brazil in economics by five years. Our
property and economic bubble burst
in 2008; theirs will follow suit. In
that sense, Brazil could learn from us
on how to avoid five years of tepid
growth.
Brazils recent growth had the tail
wind of President Fernando Henrique
Cardosos conservative and market-
friendly economic policies. His
successor, Luis Incio Lula da Silva,
continued somewhat on that path,
but current incumbent Dilma Rousseff
has stepped up intervention and
interference in the economy, with
the already big hand of the state
getting bigger, accelerating Brazils
present slump. South African policy
makers risk emulating Rouseff, having
attributed Brazils recent successes
to current Brazilian policy. In reality,
the drivers predated it and I fear
Rousseff is dismantling these drivers.
The slump we currently face under
Zumas administration has been driven
by similar increasing government
intervention and micro-management
with often misguided, inconsistent and
poor policy. Our level of intervention
still pales in comparison to that of
Brazils.
We should learn from their policies
to bring about social and economic
upliftment, and how to improve
education. If we get the right
combination of Brazilian social policies
and education, coupled with a dynamic
private sector, we will move a long
way to solving our problems.
South Africa and Brazil are great
countries which face both amazing
opportunities and frightful challenges.
We have much to learn from one
another but, rather than blindly
emulating the Brazilian model,
South Africa should cherry pick their
successes.
THINGS SOUTH AFRICA SHOULD
LEARN FROM BRAZIL:
How to build a national identity;
Integration;
Joie de vivre, music and Carnival;
Like who and what we are;
Improving education and
social upliftment;
Use the ballot to change unpopular
governments rather than withdraw
politically or resort to violence;
Avoid Brazilian bureaucracy
and tax system;
Small business development
and entrepreneurship; and
The Samba.
THINGS BRAZIL SHOULD LEARN
FROM SOUTH AFRICA:
Infrastructure, airports, roads etc;
Be less fatalistic;
Be more outward looking;
The size of the state in the economy;
World class corporates; and
Banking and capital markets.
*A variation of this article will appear in
Halfway There, by Chris Hart and Glenn
Silverman, to be published in October
2014.
35
2014/07/07 8:31 PM
 Africa Rising

Whats tripping up
SAs banking industry?
Political intervention, technology risk and banking system have begun to ease. Tom Winterboer,
PwC Financial Services Leader for Africa concludes: Over
regulation rank high on the risk agenda of South
the past few years, banks have improved the quality of
Africas banking executives, according to the recent their risk management and how they manage their capital.
Banking Banana Skins survey by PwC. Coupled with reduced concerns over the macro-economic
environment, anxiety levels in the banking industry appear
Every two years the Centre for the Study of Financial to be declining after rising for seven consecutive years.
Innovation (CSFI) produces the survey in association with
PwC, which ranks 28 risks based on participants responses. With regulation and political interference continuing to
The study is based on responses from 656 bankers, risk impact the industry, banks will need to manage these
managers and close observers of the banking industry in 59 risks carefully while ensuring they are forward looking and
countries, including 14 from South Africa. focused on positioning themselves for growth in the longer
term.
Johannes Grosskopf, Banking and Capital Markets Leader
for PwC Africa, says: While banks in the rest of the world
cite the scale of banking regulation following the global
Banking Banana Skins 2014 (Ranking from first to 28th)
financial crisis and the accompanying political backlash
as their prime concerns, the risk agenda of South Africas
banking industry shares these themes, but with some
specific nuances.

The survey shows that as banks move towards greater

digitisation and increasingly embrace technology to manage
heightening regulatory requirements, they are focusing on
how to manage technology risk and criminality as a result of
concerns about the vulnerability of legacy systems to cyber
crime and outages. The banking industry appears to be hit
harder than others by the prevalence and exposure to cyber
crime and fraud, says Grosskopf.

For the first time this year a question was included in the
survey about risks associated with the rapid growth of social
media, such as platforms like Facebook and Twitter, and
their potential to amplify and accelerate reputational risk
exposure to banks. South African banks who have embraced
social media arguably more than international banks, ranked
this risk higher than their global counterparts (Global: 19;
South Africa: eight).

Although confidence about the macro-economic environment

has strengthened (Global: three; South Africa: four), the
survey suggests strong ongoing concern about the macro-
economic outlook, and specifically the stability of the
Eurozone, the impact of tapering of quantitative easing in
advanced economies and rising worries about what these
mean for emerging market prospects (Global: 17; South
Africa: seven).

Concerns about the banks themselves ranked lower in

South Africa than elsewhere. A number of institutional
risks such as profitability (Global: five; South Africa: 20),
the quality of risk management (Global: 11; South Africa:
26) and corporate governance (Global: eight; South Africa:
23) were ranked lower than in other regions. The survey
also shows that concerns expressed in earlier studies about
capital availability, liquidity risk and exotic products in the

36 COVER JULY 2014

July 14.indd 36 2014/07/07 8:31 PM

Untitled-1 1 2014/07/07 11:07 PM
 Africa Rising
Proving the attractiveness
of listed markets in Africa
It is becoming increasingly
clear that African listed equity
may serve as a compelling
complement to any general
investors portfolio. With
sufficient analysis to determine
where the real risks lie,
the growth potential and
diversification benefits of African
markets are significant motives
for capital allocation, for those
with a long-term view.
With the quality and availability
of information having increased
significantly over the past five years,
it has become easier to prove the
attractiveness of listed markets in
Africa. This trend serves as a further
reason for investors to look beyond the
poor liquidity and political instability
that characterise some African markets
and benefit from what has been
labelled the final investment frontier.
Listed markets in Africa have been
promoted to the global investment
community primarily on the basis
of portfolio diversification benefits,
by virtue of their low correlation to
developed markets, and their attractive
valuations with seemingly endless
growth potential associated with a
burgeoning consumer base.
It is vital that investors on the lookout
for attractive returns are able to
measure the accurateness of these
endorsements.
The participation of exchanges in
organisational structures such as
ASEA (African Securities Exchanges
Association), the promotion of regional
integration and the general focus on
and drive for increased governance
and transparency are slowly increasing
the efficiency of African listed markets
resulting in deepening liquidity and
lower concentration.
However, there is still much to be
done to mitigate logistical inefficiencies
inherent in these markets such as the
38
July 14.indd 38
size and variety of transactional costs, further indicating the niche role they
spreads on cross-currency transactions, play in this regard.
and regulatory road blocks.
Therefore, one can conclude that
DIVERSIFICATION IS THE KEY diversification may be achieved by
RisCura Analytics looked at monthly looking to African markets. However,
USD returns of the various MSCI TRI is this the right kind of diversification,
(total return indices) over the period or are you paying a premium in the
2004 to present. By using the MSCI form of adding additional risk to the
index series as a proxy for market portfolio?
LISTED MARKETS IN AFRICA HAVE BEEN PROMOTED TO
THE GLOBAL INVESTMENT COMMUNITY PRIMARILY ON
THE BASIS OF PORTFOLIO DIVERSIFICATION BENEFITS
All the African orientated indices
performance, it becomes clear that
(with the exception of South Africa)
diversification can be achieved
outperformed the developed world
by investing in African markets,
at a risk threshold lower than that
particularly Nigeria, Tunisia and
of emerging markets, indicating that
Morocco, which show low correlations
one does not necessarily achieve
with developed markets, emerging
diversification at the cost of additional
markets and the BRIC nations, with
volatility.
Kenya and Egypt following suit. In a
risk on environment, Africa should
be seen as an appropriate safe haven.
However, contrarily, capital flight occurs
back to the developed markets and
shorter term correlations tend to one.
The net result is somewhat of a lagged
period of negative volatility, allowing
correlations to stay low. Investors
miss out on the expected benefits
associated with these low correlations.
The 24-month rolling correlations to
the MSCI World Index tell a story of the
diversification pros of country-specific
allocations. Two years on from the
crisis of 2008, RisCura Analytics has
seen diversification benefits originating
from low correlations as a result of the
return differentials of African countries
to their more developed counterparts
during the 2008/09 period of negative
volatility. In comparison to the frontier
markets correlation to the MSCI World
Index from mid-2008, African countries DEON SMITH,
Product Specialist
(excluding South Africa) consistently
RisCura Analytics
show lower correlations over time,
COVER JULY 2014
2014/07/07 8:31 PM
 4172 Wetpaint Advertising

4172 Chuck Norris_297x210_CoverMag.indd 1 2014/03/25 9:14 AM

Untitled-1 1 2014/07/07 11:08 PM
 Africa Rising
Local manufacturing
still disappointing
According to the latest StatsSA
data, local manufacturing
production increased by 0,7%
year-on-year in March. The
best performing sectors were
basic iron and steel, and wood
and paper products, rising by
4,6% and 9,8% year-on-year
respectively. In the first quarter,
manufacturing declined by 1,6%
compared to the final quarter
of 2013, manufacturing will
therefore detract from gross
domestic product growth in the
first quarter.
NO INCENTIVE TO EXPAND
CAPACITY
In a different report, StatsSA
revealed that capacity utilisation in
manufacturing slipped back in the first
quarter to 81% from 84%, and that
under-utilisation increased from 16% to
19%. Firms listed insufficient demand
as the main reason.
40
July 14.indd 40
The BER/Kagiso Purchasing Managers
Index (PMI), also released last week,
is a more current indicator of the
local manufacturing sectors health.
The PMI dipped below the 50 point
level that separates contraction from
expansion in April, moving to 47,4
from 50,3 in March. This suggests that
output in the local factory sector is
likely to underperform in the near term
following the subdued performance
over the past two months. All of the
PMI sub-indices declined in April,
except for suppliers performance. The
forward-looking component, the ratio
of new sales to inventories, fell further
below 1, also indicating that firms
have enough stock to match sales
and therefore no incentive to increase
output.
SA LAGS THE GLOBAL
MANUFACTURING SECTOR
The weak performance of the local
manufacturing sector once again is in
contrast to other economies. However,
there is some good news in this as
stronger global economies should
eventually pull South Africa along with
it. There is already evidence of local
manufacturing exports picking up,
partly due to the weak rand. However,
South Africas performance has also
lagged its emerging market peers. The
HSBC Emerging Markets PMI is slightly
above 50, but the trend over the past
three years has been weak. Chinas
official manufacturing PMI inched up
to 50,4 in April but the HSBC PMI,
which focuses on smaller private firms,
remained below 50 in April.
Among the developed nations, the UK
posted the best performance, with its
manufacturing PMI rising to an eight-
month high of 57,3 in April from 55,3
in March. The US ISM Index rose to a
four-month high of 54,9 in April from
53,7. The Eurozones manufacturing
PMI also rose to a three month high
of 53,5 in April from 53,0 in March.
Significantly, all of the Eurozone
economies had PMIs above 50 for
the first time since 2007.
This indicates that a broad-based
recovery is finally gaining traction in
the troubled Eurozone, but growth is
still very slow and held back by high
unemployment, contracting bank
lending and fiscal austerity. However,
any improvement is welcome as the
Eurozone remains an important export
destination for us, as well as a major
source of our tourists.
DAVE MOHR,
Chief Investment Strategist
Old Mutual Wealth
COVER JULY 2014
2014/07/07 8:31 PM
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3513-A4-B-insurance.indd
Untitled-1 1 1 2013/10/15 11:08
2014/07/07 10:00PM
AM
 The South African
economy at a glance
The South African market plays
an invaluable role in pan-
African investments by providing
liquidity to a number of direct
investments. SA provides
indirect exposure to otherwise
inaccessible African markets.
The South African economy has not
lived up to its potential in the past
12 months. The economy recorded a
substantial deceleration in growth to
1,9% in 2013 from 3,8% in 2012. This
was underpinned by a relatively weak
global demand for SAs export products,
unfavourable commodity prices, and a
difficult local economic climate.
Supply-side disruptions, due mainly
but not exclusively to prolonged labour
unrest in the mining and manufacturing
sectors, aggravated an operating
environment characterised by more
subdued household spending.
South Africas currency weakness
required foreign investment inflows
to offset a persistent current account
deficit. The adverse impact on
consumer income, already affected
by high levels of unemployment, has
made conditions worse for domestic
businesses.
But these adverse factors are short-
term in nature. We can see signs
of improvement in global economic
42
July 14.indd 42
activity and the strengthening of the industries that may otherwise be
foundations for a sustained, albeit difficult to access.
uneven normalisation.
This trend has become especially
World GDP growth slowed slightly apparent in businesses supplying
to an estimated 2,6% in 2013; it the mining industry. Those
is expected to accelerate this year providing services and products, like
towards the 3,1% mark. China equipment hire, are now seeking new
has already prompted a revival in opportunities throughout Africa.
commodity markets and will likely
benefit mining company earnings. Other opportunities exist in servicing
the growing demand for consumer
SAs labour unrest in the mining products in Africa as economic growth
industry has been drawn out. across the continent puts disposable
Settlements are likely to run at little income into the pockets of consumers.
more than the rate of inflation.
The rands depreciation has had
positive and negative effects,
creating pressure on domestic
businesses but benefiting exports.
Manufacturing activity has shown signs
of improvement from this new-found
competitiveness, with recent economic
statistics showing signs of an increased
activity.
South African businesses also
benefitting from the weaker rand
have attributes beyond their domestic
operations, including brewing, furniture
retail and mining, all with a global
reach.
Potential growth lies with South
African businesses and investors
who have used their management SAIJIL SINGH,
and technological expertise to build Lead Analyst, Coface
positions in African markets and
COVER JULY 2014
2014/07/07 8:31 PM
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Untitled-1 1 2014/07/07 11:09 PM

 Focus on Retirement
The retirement fund industry has been placed under the microscope in the
following annual surveys, focusing on the core strategies for sustainable life cover.
Sanlams Pensioner
Benchmark Survey 2014
This year marks the fourth
annual Retirement Benchmark
Survey conducted by Sanlam.
The results of this years
survey once again provide the
market with valuable insights
into the trends and behaviour
of individual members and
pensioners.
Focusing on the pension space, a core
group of 250 participants took part in
this years survey. An additional booster
sample of 50 pensioners, representing
the affluent sector of the market, was
also interviewed. An affluent retired
individual is defined as having income
in retirement in excess of R25 000 per
month. This enabled, for the first time,
a thorough analysis of the retirement
needs of affluent individuals.
When comparing this years results
to the 2013 results, the consensus
feedback remains that members
should start planning and investing for
retirement from an earlier age.
44
July 14.indd 44
In light of National Treasurys
retirement reform imperatives and
the possible introduction of a default
pension product, pensioners were
asked what retirement options they
would have preferred at retirement
age. 63,3% of respondents in the core
group indicated that they would have
preferred complete freedom of choice,
AN AFFLUENT RETIRED
INDIVIDUAL IS DEFINED
AS HAVING INCOME IN
RETIREMENT IN EXCESS
OF R25 000 PER MONTH.
with no restrictions from trustees, and
the rest indicated they would have
preferred some level of interaction
with, or recommendations from,
trustees. The opposite can be seen
in the booster sample, with 38% of
affluent pensioners preferring freedom
of choice and 62% showing confidence
in considering input from trustees.
The percentage of pensioners who
believe that they have not saved
enough capital to last them during
retirement remained fairly consistent
at 52,4% in 2014 slightly down from
53,4% in 2013 but still relatively high
when compared with 2011 which,
at that stage represented 31,0% of
respondents. Evidently, only 24% of
the affluent group reported not having
saved enough, with 66% believing
they have enough capital saved to
last them through retirement. What is
a growing concern is the percentage
of average pensioners with a shortfall
between their monthly income and
expenses that continues to rise (59,2%
in 2014, 51% in 2013 and 33,3% in
2011). When asked how this shortfall
was dealt with, the pensioners in
the core sample mentioned reducing
non-essential expenses and cancelling
their private medical aid to rely on
the state healthcare. On the other
hand, affluent individuals seemed less
inclined to cut back on expenditure
and opted to continue working to
supplement their income, with a few
dipping into additional savings or
investments.
COVER JULY 2014
2014/07/07 8:31 PM
 Retirement
The survey results also show that the
core groups retirement age increased
slightly from 59 in 2013 to 60 in
2014, whereas the average period
of contribution lasted 29,8 years in
the 2014 survey compared to 28,5
years in the 2013 survey. This positive
trend shows that individuals had
saved longer towards retirement but
clearly not enough when compared
with the booster sample which shows
approximately 33,2 years of long-term
contributions. However, based on the
survey results formal employment
begins at age 22 for the core group
of pensioners. This leaves a period of
eight years contributions unaccounted
for, which is consistent with last years
results. The same trend is seen in the
booster sample as formal employment
began at an earlier age of 20,8 years,
leaving approximately 6,96 years of
contributions unaccounted for.
There is evidence during formal
working employment that some
individuals stopped their retirement
contributions through withdrawal at
either resignation or retrenchment with
20,8% of respondents in 2014 replying
yes to this question as compared to
17,1% in 2013. Of the individuals who
made a withdrawal, 63,5%withdrew
their full benefit in cash as opposed
to 48,8% taking the benefit in cash in
2013. The cash was used to pay for
the rising living expenses for 52,4%
of respondents in 2014 compared to
29,4% in 2013.
This trend is different among affluent
retirees as only 12% of respondents
indicated that they withdrew from
COVER JULY 2014
July 14.indd 45
their retirement savings at resignation
or retrenchment. From those that
withdrew, 50% preserved part of their
benefit or purchased a retirement
annuity and the other 50% opted to
withdraw their full benefit in cash.
Only 20% of these individuals used
the cash to pay for living expenses
with 80% either saving or investing
in investment instruments or business
ventures or settling/reducing their
mortgage bonds.
THERE IS A BIT OF
CONCERN AS IT WAS NOTED
THAT THE PROPORTION OF
GENERAL PENSIONERS WHO
REPORTED THEY HAD NOT
YET DEPLETED THEIR LUMP
SUMS REDUCED TO 58% IN
2014 FROM 65,7% IN 2013.
Keeping in mind the importance of
financial advice, the prevalence of
general pensioners receiving financial
advice before retirement has dropped
slightly from 60% in 2013 to 57,6% in
2014. On average, these pensioners
received financial advice 11 years
before retirement, whereas, ideally,
active members should receive
financial advice from much earlier on
in their working career. The proportion
of general pensioners who did receive
financial advice from their companys
HR office continues to rise.
If we look at the source of financial
advice, we see that 72% of affluent
retirees seek financial advice from
professional financial advisors as
opposed to only 34% of the general
pensioners who look mainly towards
human resources departments, fund
trustees or fund administrators for
guidance.
Pensioners, who opt for a lump sum
at retirement, are encouraged to
stay within the tax-free limit and
the lump sum should ideally be used
to repay debt. Based on the survey
results, the proportion of general
pensioners spending the lump sum on
living expenses is still relatively high.
There is a bit of concern as it was
noted that the proportion of general
pensioners who reported they had not
yet depleted their lump sums reduced
to 58% in 2014 from 65,7% in 2013.
However, savings is top of pensioners
minds as indicated by the results which
show an increase in savings accounts
and annuities purchased. When
compared with the booster sample,
72% of respondents have not depleted
their lump sum at all.
As far as post-retirement vehicles
are concerned, the market appears
to have shifted away from level
guaranteed life annuities (23,9% in
2013 as opposed to 20,4% in 2014)
towards guaranteed life annuities
escalating at a specified rate, with the
percentage of pensioners purchasing
these annuities increasing from 19,1%
in 2013 to 29,2% in 2014.
The 2014 Pensioner Benchmark Survey
has once again demonstrated the
tough financial circumstances faced
by South African retirees today. The
introduction of an affluent pensioner
booster sample allowed for very
insightful conclusions to be drawn that
are applicable specifically to affluent
pensioners. The results highlighted
the importance of obtaining quality
financial advice and the benefits
of starting to save early for your
retirement years. With these two
building blocks in place, retirees are
able to look forward to making their
retirement years the best years of their
life.
45
2014/07/07 8:31 PM
 Retirement
Retirement fund industry faces
stronger regulation and governance
South Africas retirement
fund industry has undergone
significant change but there is
still a long road ahead, with
much stronger reform, regulation
and supervision expected in the
near future, according to PwCs
2014 Retirement Fund Strategic
Matters and Remuneration
Survey.
69% of trustees believe that the South
African retirement fund is appropriately
regulated from the perspective of
protecting members, while 28% disagree.
Gert Kapp, Retirement Fund Leader
for PwC Southern Africa, said: Much
change has taken place in the South
African retirement fund industry, but
there is still plenty more to come.
The National Treasury has undertaken
to release a set of draft regulations on
default strategies by May 2014.
The Registrar of Pension Funds is
preparing a number of draft regulatory
instruments intended to implement
new provisions in the Pension Funds
Act relating to the training of trustees,
fit-and-proper requirements for trustees
and improving fund governance.
The PwC 2014 Retirement Fund
Strategic Matters and Remuneration
Survey collates the responses of 183
participants representing a total asset
base of R592 billion across a wide range
of funds. It offers a benchmark against
which trustees can compare aspects of
their funds working and strategies with
those of their peers.
The aim of the survey is to identify
trends in roles and remuneration of
trustees and principal officers, and shed
light on the stance retirement funds take
on trustee education.
The survey covers four broad
focus areas: trustees activities and
remuneration; trustees education;
principal officers and their remuneration;
and regulatory matters and retirement
reform. New areas investigated include
questions about chairpersons and
subcommittees as well as regulatory
matters and retirement reform.
46
July 14.indd 46
Kapp said: It is not surprising that survey
participants feel that regulatory cost and
complexity is becoming excessive.
Furthermore, participants think that the
pace of change is too slow and that the
proposed reform should be implemented
without undue delay.
The three top areas of regulatory
changes expected to have the most
additional cost for members of funds
were compliance with Regulation 28;
retirement reform and legislative changes
regarding taxation and preservation;
and recent revised financial statements
format.
The majority of participants (72%) felt
that there was scope for simplification or
a reduction in costs in the operation of
their funds.
TRUSTEES ACTIVITIES AND
REMUNERATION
In the 2010 and 2012 PwC retirement
surveys, the proportion of funds that
remunerated some or all trustees
remained static at 45%, but in 2014 this
increased to 50% overall.
For specialist funds, the median
remuneration band for chairpersons,
trustees and professional trustees is the
same, namely R10 001 to R50 000.
In contrast, the median is between
R50 001 and R100 000 for standalone
funds for all types of trustees. Kapp
said: It is interesting to note that the
fees paid to trustees are relatively low
compared to medium-cap financial
services organisations and even those
paid to trustees of medical schemes. The
high level of regulation and supervision
as well as the risks associated with the
assets under management within the
retirement fund sector surely warrants a
higher level of pay.
The main board appears to determine
the level of trustee remuneration for
standalone funds, according to 58%
of the respondents, with the level of
remuneration reviewed on an annual
basis. Trustees remuneration is
largely determined by the fund (72%).
While most funds do cater for trustee
remuneration (55%), a fairly high
proportion still does not (43%).
It is not surprising to note that most
funds (63%) have a chairperson
of the main board who also sits
on a subcommittee or two. This
is advantageous for the fund in
that the chairperson is perfectly
placed to convey outcomes from
the subcommittee to the rest of the
board.
Kapp added: Survey participants
feel the sooner it becomes law that
funds have to employ professional and
independent trustees the better. In
addition, trustee remuneration should
be based on skill level, contribution
and be benchmarked to industry norms
taking into account the complexity of
the fund and volume of business.
EDUCATION OF TRUSTEES
Johannes Grov, PwC Partner in the
Retirement Division, said: The sheer
scale of pension fund investments,
coupled with the relevant economic,
political and administrative risks,
places an enormous responsibility on
boards of trustees to govern these
arrangements wisely.
Not only do trustees have almost
unlimited fiduciary responsibilities
placed upon them by law, but they also
have a moral obligation to act in the
best interest of fund members.
The number of funds with a formal
policy on trustee education has
improved from 43% in 2012 to 63%
in 2014. This improvement is largely
due to an increase from 60% to 73%
among standalone funds, explained
Grov.
Across all funds, trustees spend an
average of 17 hours annually on
training and attending industry events,
compared to 27 hours in the 2012
survey. This decline may be due to
factors such as less major industry
changes (such as Regulation 28) and
increases in the costs of industry
events that make them less affordable.
As expected, professional trustees
are the most experienced and highly
educated, with 94% having more than
five years and 53% having more than
10 years experience, said Grov.
COVER JULY 2014
2014/07/07 8:31 PM
 PRINCIPAL OFFICERS AND THEIR
REMUNERATION
A significant percentage of principal
officers (72%) have 10 or more years
experience and it appears they are
staying on until they retire. The majority
of principal officers (84%) have a degree
or postgraduate degree.
The median remuneration band across all
funds was R350 000 to R600 000, but
for large funds this was R600 000 to
Simplifying retirement reform in SA
For the average investor, it can
be difficult to understand the
proposed reforms and the impact
that these will have. The reforms
are currently being championed
by National Treasury, with a
number of key objectives. These
objectives can be summarised in
the following eight key points:
1. IMPROVING PRESERVATION:
Too many individuals take the cash
option when they resign, rather than
preserving their existing savings and
benefitting from the compound interest
in later years. The aim is not to force
members to preserve their assets, but
rather to make it more attractive to
do so. This will be a tough task. For
many employees, their retirement
savings are their only cash reserve in an
environment where the unemployment
rate hovers around 25%.
2. IMPROVING FUND DISCLOSURE:
For many years, investors never fully
understood their benefits, and the
retirement industry (administrators,
asset managers, consultants and
life assurers) disclosed the bare
minimum, in terms of fees and
charges. Retirement reform aims to
improve disclosure and the long-term
impact of fees. As a result, funds will
be encouraged to communicate this
information to their members in a
simple easy-to-understand manner.
3. MAKING RETIREMENT SAVINGS
COMPULSORY:
Theres no legislation that forces an
employer to provide retirement benefits
to staff. This voluntary nature has a
huge impact on our retirement system
a large percentage of the population will
never have access to a retirement fund.
COVER JULY 2014
July 14.indd 47
R1 000 0000. For large funds, 29% were
remunerated more than R1 000 000.
The role of the principal officer is
underestimated and underpaid, according
to survey participants. Participants
said the role is equivalent to running a
company with R2bn assets with no staff
but all the responsibilities.
Tom Winterboer, PwC Financial Services
Leader for Africa, concluded: The
Employers with a handful of employees
find it expensive to join a retirement
fund, or do not want to be burdened by
the responsibilities.
It will be difficult for the government to
force all employers, especially in the
SME and informal markets, to provide
retirement benefits. This is especially
the case if the minimum entry levels are
high and products are not geared for
companies with only a few employees
or low contributions.
4. GETTING DEFAULTS RIGHT:
Treasury would like to see that
employees who do not, or who are
unable to, make their own retirement
fund decisions follow the most
appropriate and cost effective path.
This would include a risk-appropriate,
low fee investment mandate according
to the members investment time
horizon. This would extend to automatic
preservation and appropriate post
retirement products.
5. SIMPLIFYING RETIREMENT
SAVINGS AND IMPROVING
PORTABILITY AMONG PROVIDERS:
Standardised products are easier to
transfer between administrators,
whereas complex products tie the
members to a specific administrator, as
members believe that they may lose a
benefit. Simple and portable products
will increase market competition
between providers that will reduce
costs, according to National Treasury.
6. PROVIDING TOUGHER MARKET
CONDUCT AND MORE EFFECTIVE
SUPERVISION:
Following the 2008 global financial
crisis the government has realised the
need for tougher and more effective
regulation. As international reforms in
the global banking and insurance start
retirement fund industry is undergoing
profound changes. Trustees will need
to assess and review their governance
strategies and manage them in
accordance with the new regulations and
legislation.
Although many of the changes are
positive, they tend to come at a cost
in terms of additional complexity and
record keeping and reporting for fund
members, said Winterboer.
GERHARD KLINGER,
Employee Benefits Specialist
10X Investments
taking effect, Treasury suggests that
the retirement and savings industry
in South Africa be more regulated,
to protect members and to improve
market practices. The industry is
concerned that increased regulation
will increase administrative costs. This
can, however, be offset if the industry
moves to simpler standardised products
and practices.
7. CONSOLIDATING FUNDS:
Consolidating and standardising funds,
in terms of investments and benefit
structures, should improve efficiencies
and economies of scale. We are already
seeing some of the larger insurers
amalgamating retirement funds, in an
effort to achieve this.
8. MORE EFFECTIVE
INTERMEDIATION:
Treasury would like intermediaries
who sell life assurance products,
such as retirement annuities, to be
remunerated fairly without conflicts of
interest. Some of the more effective
practices which have already been
implemented include the Client Contact
Disclosures requirements and the
Conflict of Interests legislation, which
financial advisors must adhere to.
National Treasury has consulted with
the industry for a number of years and
we have started to see the effect of
the implementation of certain reform
aspects. From March 2015, contributions
towards provident funds will be treated
as contributions to a pension fund,
with the aim of providing a regular
income in retirement, rather than a
lump sum. Existing benefits will be
preserved and only new contributions
will be affected.
47
2014/07/07 8:31 PM
 Life
Understanding the GEPF
Recent reports have noted that
the Government Employees
Pension Fund (GEPF) is
underfunded by more than
R400 billion. The fact that
it remains a defined benefit
pension scheme, not a defined
contribution scheme, as has
been the trend with pension
funds within the private sector,
means this liability lies squarely
at the foot of the government.
Nick Hibbit, Head of Liberty
Corporate Intelligent
Insurance, spoke to COVER
about defined benefit pension
schemes and the GEPF.
WHAT IS THE DIFFERENCE
BETWEEN DEFINED BENEFIT AND
DEFINED CONTRIBUTION FUNDS?
WHAT EFFECT HAS THIS HAD
ON FUND PERFORMANCE AND
RETIREMENT READINESS OVER THE
PAST DECADE?
Under a defined benefit (DB) pension
fund the quantum of your pension is
predetermined based on your earnings;
the fund sponsor (usually the employer)
assumes the investment, inflation and
longevity risk under these schemes.
On the other hand, with a defined
contribution (DC) scheme, the pension
one can purchase at retirement is
48
July 14.indd 48
based on the accumulated value of
your contributions plus investment
growth. Under DC schemes the
member assumes the investments/
inflation and longevity risks.
THE PRIMARY CONCERN FOR
ANY DB FUND IS TO ENSURE THAT
THEY ARE ABLE TO PAY PENSIONS
AND PROVIDE INCREASES IN LINE
WITH THEIR MANDATES, WHICH
ARE OFTEN LINKED TO CPI.
DB and DC schemes are fundamentally
different in terms of performance
due, to some extent, to the fact
that the investment and inflation
risk lies with different parties under
each scheme being the fund and the
member respectively. Under a DC fund
members often have the ability to
select the scope of their investment, so
members within a single scheme are
likely to have differing performance
due to the choices they made. With a
DB fund, investment risk lies with the
fund and not the member, meaning
that the trustees take responsibility for
determining the investment strategy.
Over the last five years we have seen
a large number of DB funds alter their
investment strategies to take into
account the impact of their liabilities.
These new strategies are known as
Liability Driven Investments (LDIs).
WHAT OPTIONS ARE AVAILABLE TO
FUNDS THAT HAVE SIGNIFICANT
FUNDING LIABILITIES?
The primary concern for any DB fund
is to ensure that they are able to
pay pensions and provide increases
in line with their mandates, which
are often linked to CPI. This means
that primarily the fund should look to
protect and then improve their funding
level, in essence ensuring that their
assets exceed their liabilities. The
major risks that drive movements in
the liability are inflation and interest
rate risk and longevity risk. If a fund
can manage one or both of these risks
it will go a long way to achieving its
objective.
There are a range of options available
to funds which we can broadly group
into three categories:
1. LIABILITY DRIVEN INVESTMENT
(LDI) STRATEGY
This is where the fund aims to hedge
out the interest and inflation risk by
investing in assets that move in line
COVER JULY 2014
2014/07/07 8:31 PM
 with a change in the liability due to
movements in the yield curve caused
by fluctuations in interest rates.
2. CASH FLOW MATCH
Here an insurer or bank guarantees
to pay the fund a pre-determined set
of cash flows over a period of time.
As the payments are guaranteed this
solution transfers more risk away from
the fund than an LDI strategy.
3. TRANSFERRING OF BOTH RISKS
TO A THIRD PARTY LIKE AN
INSURER BY MEANS OF A GROUPED
ANNUITY POLICY
This solution provides the greatest level
of certainty of payments for pensioners
but generally does require more assets
than the other two solutions.
HOW WOULD TRANSFERRING A
LIABILITY AFFECT THE FUND?
Transferring the liability or portion of
the liability allows the fund to manage
its risks better. This effectively means
that the fund is more likely to be able
to pay pensions and grant increases
without having to call on the fund
sponsor, being the government in the
case of the GEPF, to provide additional
capital.
WHAT ARE THE POTENTIAL RISKS
CURRENTLY FACING EMPLOYEES
RETIREMENT SAVINGS?
With regard to a DB fund the primary
risk is whether or not the fund
(effectively the employer) will be able
to meet their obligations in the future.
Should the fund have a significant
funding deficit (liabilities are greater
than the assets) and the employer
COVER JULY 2014
July 14.indd 49
cannot make good this deficit it could
well result in lower than expected
increases.
Members of a DC fund face significantly
more risks than those in DB funds. The
nature of DC funds implies that these
members take on all risk with regard
to investments, inflation and how long
they live. My view is that the greatest
risk faced by these members is that
they do not contribute sufficiently to
provide for any meaningful pension in
their retirement.
WHAT ARE YOUR VIEWS ON
DEFINED BENEFIT FUNDS IN THE
SOUTH AFRICAN CONTEXT?
From the employees perspective, I
think those whove remained in DB
funds are smiling, because they know
exactly what pension they will get and
that the pension is payable for life, as
the investment, inflation and longevity
risk sits with the fund and its sponsor.
Theyre generally on a good wicket.
From the fund sponsors (employer)
perspective, its a different story;
a large number of funds are
underfunded, including the GEPF.
There are some significant liabilities
that have been raised by employers
and as a result we have seen a trend in
the market to transfer these liabilities
that tells you that employers are
concerned about the ever increasing
costs of the these funds. Very few
employers outside of government still
have open DB funds. In the private
sector most employers now only offer
DC funds.
WILL INVESTORS POTENTIALLY
BE GOING INTO A FUND WITH
R400BN DEFICIT? HOW DOES THIS
CHALLENGE FACING THE GEPF
POTENTIALLY INFLUENCE THE
NATIONAL SAVINGS SCHEME?
As mentioned earlier the risk of
underfunding does not lie with the
member of the scheme, it ultimately
lies with the fund sponsor, in this case
government. You could argue that as
government is seen as a good credit
risk and that the underfunding is
therefore immaterial to new members
of the GEPF. My view is that this
underfunding challenge does not really
impact the National Savings Scheme in
any way.
HOW DOES THE GEPF GET OUT OF
THIS DIFFICULT SITUATION?
The recent reports with regard to the
underfunding of the GEPF are as a
result of the fund holding insufficient
additional reserves. These are
effectively reserves suggested by the
actuarial valuators of the fund to make
allowance for actual experience versus
the assumptions they have made.
While the GEPF does follow an LDI
strategy to some extent, being the
largest holder of government bonds,
there should be an even greater focus
on this. However where there is such
a significant shortfall the only real
solution in the long run is for the fund
sponsor being government (ultimately
the tax payer) to make good this deficit
over time. The private sector has
moved away from DB funds due to the
ever increasing costs of these schemes,
possibly government should consider
the same.
49
2014/07/07 8:31 PM
 Retirement
Retirement reform in SA:
An update
LISA GRIFFITHS,
Associate Director in Wealth Advisory
at BDO South Africa
National Treasury issued a
media release on the 14th of
March 2014 that summarised
and developed the principles
and ideas contained in
previous papers and discussion
documents, particularly the
paper of the 11th July 2013.
Importantly, this document tabulated a
time line of the various phases of the
reform process in short, the draft
regulations are to be in place by the
end of 2015.
The key developmental areas are as
follows:
MANDATION OR AUTO-
ENROLEMENT
The voluntary nature of our retirement
funding industry has been identified
as one of the single biggest factors
affecting inefficiencies in the
retirement system. In a voluntary
system such as our own, employers
and individuals have to be persuaded
to make retirement provision for
themselves or for their employees.
Treasury is hopeful that mandating
retirement provision, provided that the
process is efficient and well regulated,
will resolve many of the problems.
They do mention that special provision
will have to be made for low-income
and vulnerable workers.
IMPROVING PRESERVATION
We all know about this one even
where workers participate in the
retirement system, too often benefits
are withdrawn prior to retirement.
Lack of pre-retirement preservation
increases financial vulnerability and
costs at and during retirement.
IMPROVING FUND DISCLOSURE
There is currently no prescribed
disclosure methodology for charges
50
July 14.indd 50
relating to retirement funds. Standards
of disclosure vary greatly. Collective
Investment Schemes (unit trusts)
use the Total Expense Ratio (TER)
which is retrospective. Insurance
policies use the Reduction in Yield
(RiY) which is forward-looking.
Government is concerned that costs
within a retirement fund such as
trustee remuneration, conferencing
and workshops need to be scrutinised,
regulated and perhaps banned outright.
Treasury sincerely believes that
disclosure of charges in the retirement
industry has to be improved.
GETTING DEFAULTS RIGHT
Based on international experience,
it has been suggested that a major
improvement in retirement incomes
will result if the default options are
improved. The default option is that
result which occurs when an individual
fails to exercise choice. This could be
on retirement, on leaving employment
or even whilst an active member of a
retirement fund for example portfolio
choice. Many funds do not have
default options and where they do,
outcomes are questionable.
CONSOLIDATING FUNDS
There are currently over 3000
retirement funds registered in
South Africa. Many of these are
small, inefficient and lack corporate
governance. This diversity of
product also increases the need
for financial advice and attendant
cost. Consolidation of funds and
standardisation of products is expected
reduce costs which should enhance the
financial position of the member.
SIMPLIFYING RETIREMENT
SAVINGS PRODUCTS AND MAKING
THEM PORTABLE BETWEEN
PROVIDERS
Too many product providers
and competition on the basis of
complexities of product, rather than
value-for-money are perceived by
Treasury to be problematic. Although
certain products may well enhance
the position of certain customers by
meeting their needs more effectively,
Treasury believes that these products
are a driver of higher costs. They
envisage an industry based on simpler
products, which are portable between
employers. Portability between
different product providers is essential
in well-functioning market. Situations
where consumers are locked into
long term products and unable to
move to more efficient products
are problematic. Treasury believe
that simpler products will increase
competition to the benefit of the
consumer.
ENSURING EFFECTIVE
INTERMEDIATION
That old chestnut intermediary
remuneration. Treasury considers that
the manner in which intermediaries
are remunerated for the sale of
insurance policy type products, is an
important factor in product design.
High upfront costs, which are then
recovered over the life of the policy
leading to disappointing outcomes is
of concern to government. Treasury is
pursuing a model where intermediary
remuneration does not create a
conflict between their own interests
and their obligation to their customers.
Rebates paid by investment
management companies to investment
platforms are considered offensive as
they complicate and obfuscate true
costs.
PROVIDING TOUGHER MARKET
CONDUCT REGULATION AND MORE
EFFECTIVE SUPERVISION
Government is talking tough here.
Lessons have been learnt from
the Global Economic Crisis of
2008/2009. The last few years have
seen a number of high profile cases
concerning retirement funds where
value has been lost or destroyed to
the detriment of their members. New
regulation will be tougher and more
intrusive to be effective. Globally, we
have seen increased regulation of the
banking and insurance sectors and this
is to be extended to the savings and
retirement sectors in order to protect
members and improve market conduct
practices.
COVER JULY 2014
2014/07/07 8:31 PM
 KINGJAMES 30281
Were in the business of planning for tomorrow. The never-ending
pursuit of meticulously crafting our clients futures. And while
everyones expectations of the future may be different, we take
great pride in instilling a sense of security to the unknown. We do
this in the way weve always done it by staying true to a traditional
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dedication to making the most of every rand entrusted to us. Values
that choose functional over fancy and never waste time worrying
about window dressing. Its what works for us. And its what works
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Untitled-1 1 2014/07/07 11:09 PM

 Governance
Why compliance is
a good investment
ELANA HONIBALL,
Head of Compliance at Masthead
The realities of managing risk
and the stepped-up enforcement
efforts of government regulators
have made the compliance
and ethics function a far more
important part of a business
these days.
The consequences of non-compliance
are steep. In recent months the FSBs
Enforcement Committee has issued
administrative penalties ranging from
R10 000 to R2 million. Whats more
is that the incidence of penalties is
becoming more frequent, as regulation
becomes increasingly complex.
Penalties for lack of compliance are not
just a local occurrence. US financial
services giant JPMorgan Chase & Co
spent some $5 billion on litigation
in each of the past two years. Last
year, the company planned to spend
an additional $4 billion and employ 5
000 new staff members to fix risk and
compliance issues.
The cost of non-compliance goes
further than just a fine. One would
need to take into account the
opportunity cost associated with
enforcement action, where everything
52
July 14.indd 52
is put on hold while the business
devotes attention and resources to
fending off the enforcement action.
In addition, the cost of a tainted
reputation, damage to brand and loss
of clients can be devastating. In worst
cases, financial advisors can lose their
licenses, while businesses can be
forced to shut down.
In light of the consequences of non-
compliance, it is prudent for businesses
to build and continuously enhance
compliance and ethics programmes to
better protect themselves from risk.
A robust compliance programme can,
in fact, be considered as a low-cost
insurance policy.
Having said this, businesses are
currently feeling the wrath of the
economy and many are strapped
for cash. As spending and budgets
contract, ethics and compliance is
usually the last area to be allocated
any money. This happens because
businesses often view this area as an
unnecessary cost and prefer to focus
their budget on income-generating
activities such as marketing. According
to Deloittes 2013 Compliance
Trends Survey, the size of the typical
compliance function appears to remain
relatively small in both manpower and
budget. As much as money should not
influence whether or not to do the
right thing, it does.
But, given the relatively low cost
involved, and the significant benefits
offered by a good ethics and
compliance programme, there is no
excuse to ignore setting one in place.
To keep costs in check, it is important
to make compliance a repeatable and
sustainable process.
By automating compliance processes
as far as possible, businesses can
reduce the cost of human intervention,
which is often the largest portion
of compliance spending. Companies
can quite successfully outsource the
function if they cannot afford or
prefer not to employ a compliance
officer or team. Outsourcing can
provide access to experts who keep
abreast of emerging regulatory and
compliance requirements, regulatory
implementation leading practices and
other regulatory trends.
With a good compliance programme
in place, and by cultivating an ethical
corporate culture, a business makes
decisions in the best interest of
everyone. Losses are reduced, as
business is gained in a fair manner.
From an internal perspective, losses
incurred through misconduct decline
too, as transgressions are detected
at an early stage or prevented from
happening at all. This cuts the costs
that would potentially be spent on legal
fees, lawsuits, investigations and other
expenses associated with misconduct.
Having a compliance programme, or
access to a compliance team, also
demonstrates to stakeholders, including
the regulators, that your business is
making the effort to follow standards
of good business conduct.
What exactly would your return
on investment be on a compliance
programme? To assess the financial
impact, one should subtract the money
a compliance programme saves a
business from the cost of running
the programme. That would involve
estimating the savings of events
that could have, but never actually
happened, such as client complaints
or financial penalties. The value of
these savings, as well as the functional
savings that come from building a
better compliance and ethical culture
in your business, is naturally difficult
to calculate. Ultimately, businesses
should be patient with their compliance
programme, as its value is best
determined over time.
In the near future, just as audit,
legal and HR resources functions
are considered natural components
of a business, so too will ethics and
compliance be included. It will be
considered not only as a part of a
business, but something that a business
desires to do.
For now, businesses that have an
effective compliance programme in
place will have a distinct strategic
advantage over their competitors, who
are likely to be arm-wrestling with
the regulators or constantly repairing
compliance failures.
COVER JULY 2014
2014/07/07 8:31 PM
 Financial Planning
Umbrella funds
offer solution to
small businesses
Auto-enrolment must be managed
to prevent cost increase
CRAIG AITCHISON,
Corporate GM of Customer
Solutions at Old Mutual Corporate
Proposals released by National
Treasury last month strongly
emphasised the governments
commitment to auto-enrolment
to correct inefficiency and
improve the poor savings
rate in the current South
African retirement system.
However, auto-enrolment
needs to be part of a pre-
determined process, otherwise
the mandatory savings system
may actually increase costs to
employers and members.
Employers, especially those of
small businesses, need to consider
management of auto-enrolment in
retirement funds carefully, should this
become mandatory. The alternative
is increased costs, possibly at the
members expense. This is the
current experience of the United
Kingdom, which implemented auto-
enrolment on 1 October 2012.
Smaller businesses may have
fewer resources to devote to auto-
enrolment requirements and the
costs are likely to have a greater
impact on them.
COVER JULY 2014
July 14.indd 53
RYNO
Killing himself with
30 a day.
While larger corporate employers
may have resources to transition
to auto-enrolment practices better,
including access to specialist pension
advice, small businesses will need
to look at consolidating resources to
gear up for the change.
A well-managed umbrella fund,
which is a highly cost-efficient
retirement savings solution for
employees, can positively address the
challenges they may face.
Umbrella funds enable employers
to auto-enrol their employees in a
simple, pre-determined way, with
changes managed via the monthly
payroll submissions. This allows
employers to keep their eye on their
core business. Its a good solution
for small businesses as well as large
corporates.
In an umbrella fund the
administrative burden and other
governance costs are shared by the
participating employers in the fund.
This pooling of assets and sharing
of costs gives rise to economies of
scale and lower charges to members.
Retirement fund members therefore
benefit because a larger proportion
of their contributions will go towards
their retirement savings.
Latest industry statistics from the
Financial Services Board (FSB)
shows that funds with fewer than
20 members pay on average 10
times more administration fees as
a total percentage of contributions,
compared to large funds with over
10 000 members.
Practical experience has
demonstrated that stand-alone funds
(where a retirement fund administers
its own fund) can benefit by moving
to umbrella funds.
53
2014/07/07 8:31 PM
 Financial Planning
#MyBigBreak
BrightRock gives South African
life insurance a face lift
BrightRock has sent sports
correspondent David Kibuuka to Brazil
where he will report on the World
Cup matches using the Twitter hashtag
#mybigbreak.
Daves Big Break will be screened week
nights on eNCAs sports reports until
13 July. Viewers will see Dave fumble
and hustle as he encounters crazy
characters, obstacles, and challenges
that will encourage him to learn to love
change.
Its all part of BrightRocks Love Change
consumer marketing campaign and
ties into the Change Exchange, an
online resource centre that BrightRock
has created for people to have
conversations about lifes big change
moments: tying the knot, starting a
family, buying a house or landing that
dream job.
This is just one example of the myriad
of ways BrightRock has not only
changed the face of South African life
insurance, but given it a haircut, an
iPad, and a brand new attitude.
Two years ago BrightRock, underwritten
by Lombard Life Ltd, entered the
South African life insurance market.
BrightRocks Executive Director: Actuarial
and main product architect, Schalk
Malan, said that in the early days of a
life insurance company, each year is a
54
July 14.indd 54
milestone. COVER caught up with Schalk
Malan and co-founding Executive
Director Suzanne Stevens to talk about
the road so far and the days to come.
BRIGHTROCKS ACHIEVEMENTS
Since opening for new business in April
2012, BrightRock has written future
premiums of R811 million in total, with
cover in-force equating to around
R51 billion. Nationwide, more than 2
700 independent financial advisors
have signed distribution contracts with
BrightRock to date. Month-on-month,
the number of activated policies is
growing by an average of around 20%.
Malan believes that the true test of a
companys achievements is how it fares
at the claims stage. In the past two
years BrightRock has made a number of
substantial pay-outs the largest claim
paid to date was a death claim of
R16 million.
Malan said: The industry has sat up
and taken notice of us, and weve
seen some product developments
being launched in response, especially
in the income protection space. The
broker markets response has been
tremendously positive and the client
take-up to date has been exceptional.
NEEDS-MATCHED PRODUCT
DESIGN
BrightRocks needs-matched product
design has given consumers the power
to co-create a life insurance product
suited to their exact needs with their
financial advisor. BrightRock aims to
meet policyholders needs, not only
at the time of sale, but also post-
purchase as it tracks the behaviour,
growth and duration of each individual
financial need over time. This speaks
to BrightRocks commitment to Treating
Customers Fairly.
Malan said that the tremendous demand
for cover created by the huge insurance
gap (of R24 trillion, according to the
latest ASISA industry study) in South
Africa, presents a significant opportunity
for BrightRock.
Thats why we started this business.
We knew change was needed and
believed we could deliver the kind of
consumer-centric product thinking
required to help close the gap.
This also speaks to BrightRocks
flexibility. BrightRock policyholders can
change their choice of a lump-sum to a
recurring pay-out (or a combination of
the two) at claim-stage for their income
protection needs on permanent illness
or injury and on death.
PLAIN LANGUAGE AND PAPERWORK
BrightRocks website says it well:
We dont pretend life insurance is
simple, it isnt. So we do our best to
tell you about it in everyday English.
BrightRock uses objective medical
criteria based on international clinical
best practice guidelines to assess illness
and injury claims, removing many of
the traditional barriers to claim. Stevens
said BrightRocks documents are written
in ways that people can understand
for example, clinical definitions
include laymans explanations for easy
reference.
Instead of issuing generic
documentation, BrightRocks paperwork
is crafted around individuals.
Peoples lives dont stay the same.
BrightRock has designed a product that
rides the winds of change with their
clients, all the way.
COVER JULY 2014
2014/07/07 8:31 PM
 A change of health
after the date of
application
BY THE OMBUDSMAN FOR LONG-TERM INSURANCE
The applicants duty of
disclosure in an underwritten
policy does not end when the
application is completed. In
terms of the common law,
the duty continues until the
conclusion of the contract; and
the timing of this will depend
on the circumstances of the
particular case. Insurers extend
the duty by means of specifically
contracting on a different basis.
For instance, it could be stated
in the application form that the
duty to disclose will continue
until the later of the first
receipt of the premium or the
commencement of cover.
The following case studies shed
further light on the issue:
CASE 1
The date the application was signed
26 August 2012.
A PROVISION IN THE
APPLICATION FORM STATES:
You confirm you have given relevant,
complete and true information. By
signing this application form, you give
a formal promise (called a warranty)
that you have given us and will
continue to give us all information
relevant to your application until we
have accepted risk under this policy
or until this policy starts, whichever
date occurs last...
The risk was accepted on 10
September 2012 and the policy
commenced retrospectively on 1
September 2012.
A claim was lodged shortly
afterwards for breast cancer. During
investigations the insurer discovered
that the complainant consulted
a doctor for a breast lump on 6
September 2012.
COVER JULY 2014
July 14.indd 55
RYNO
Pays a packet for
risk insurance as a smoker.
Biopsies followed on 10 September
and 12 September 2012 and after
that cancer was diagnosed.
In terms of the clause stated above
the insurer repudiated the policy and
declined the claim.
We upheld the insurer based on the
wording in the application form for
the following reasons:
The backdated date of entry was 1
September 2012, but the insurer only
accepted risk on 10 September 2012,
which is thus the applicable date.
The consultation was on 6
September 2012, after the life
insured noticed a breast lump, and
the fact that the life insured had
a mammogram and ultrasound on
the same date, was clearly material
information, in that a reasonable
prudent person would have disclosed
it to allow the insurer to assess the
effect of the information on the risk
it was asked to undertake. She had
a duty to disclose this information
even if she had not yet been
diagnosed.
Had the insurer been informed of the
breast lump, it would have deferred
the decision to accept the policy until
the outcome of the investigations was
known. As it turned out, a diagnosis
of breast cancer was made a few
days later, on 10 September 2012.
If one reconstructs the policy to put
the complainant in the position she
would have been if she had correctly
disclosed the breast lump, and the
insurer then waited for the outcome
of the investigations, it is clear that
the application for insurance would
not have been accepted.
The insurer was entitled to void the
policy, and no claim was payable.
55
2014/07/07 8:31 PM
 Financial Planning
The period between the dates of
application and when cover commences,
can, in some cases, be quite long
even several months. The office has
handled some very unfortunate cases
where the life insured has had a change
of health during this period and an
eventual claim (even many years later)
is then declined.
CONDITIONAL ACCEPTANCE
Some insurers specifically mention
in the application form that the
acceptance of the risk is conditional
upon there being no change in health
between the dates of application and
the cover commencing.
CASE 2
The policy was applied for in June
2009 but a medical incident called
haemoptysis, coughing up blood,
occurred on 7 July 2009. The policy
was accepted prior to 7 July 2009
but only issued on 13 July 2009.
When a claim was lodged following a
pulmonary embolism the insurer found
out about the haemoptysis incident and
it relied on the following clause in the
application to void the policy:
56
July 14.indd 56
Should this application be accepted
by the Insurer, it will be conditional
upon there having been no material
alteration to the facts on which the
acceptance was based and no illness
or injury suffered by the Life Covered
between the date of this application
and the date the Insurer issues your
Benefit, or 30 days prior to the first
premium due date elected by you,
whichever is the later.
This was not a question of non-
disclosure in our view but the
application of a condition. A reinsurer
had given its opinion that it would
have been reasonable for an insurer
to have deferred the underwriting
decision until more information (in the
form of a further medical report) had
been obtained. There had thus been
a material alteration of the facts on
which the insurer relied to accept the
policy.
The insurer was entitled to rely on the
abovementioned clause. The condition
for acceptance of the application had
not been fulfilled as there had been
a material alteration of the facts.
Therefore the acceptance fell away.
CAUTION
It appears that some policyholders,
and possibly even some intermediaries,
are not aware of the implications of a
change of health on insurance cover
and the continued duty of disclosure.
It may be necessary for insurers to do
some education and to draw attention
to this aspect in their documentation.
Such references usually appear in
the fine print which is part of the
declaration on the application form.
This is not information to which the
applicant pays particular attention,
unless it is highlighted. It could also be
that he/she no longer remembers what
he/she read in the application form if
there is a lengthy period between the
application and the cover commencing.
There are some insurers, which refer
to this continuing duty of disclosure
in their Welcome Letter when the
policy is sent to the client. This is a
commendable practice, which is more
likely to elicit the required information
from the applicant.
COVER JULY 2014
2014/07/07 8:31 PM

Advisors to face
mandatory retirement
preservation
Mandatory retirement preservation
will soon add another layer of
complexity and operational
challenges to retirement fund
management in South Africa.
This is a reality that employers,
principal officers, retirement fund
trustees and service providers
need to start considering,
according to professional services
firm Deloitte and Ubiquity,
a stakeholder engagement,
communications and reputation
consultancy firm.
Reforms around mandatory
preservation of retirement benefits
are moving fast. The National
Treasury (in its 2014 Budget Update
on Retirement Reforms, released 14
March 2014) confirmed that its latest
proposal was being discussed at
NEDLAC, and that proposals would
be implemented following final
consultations.
With the impending deadline, it
is becoming even more imperative
for the industry as a whole to be
mindful of the changes and start to
COVER JULY 2014
July 14.indd 57
SAVE THE
RYNO
Ryno needs to quit
the killer. With a
commitment to do so,
Altrisk will give him
a reduced premium
from day one.
Plus well help him quit.
If your clients smoke talk
to them about Altrisks
Proactive Smoker it
could save their life and
prepare for these or risk facing their pocket.
unnecessary business challenges in
the future, says Anitha Giridhar,
Associate Director of FIST at
Deloitte.
For more
In 2013, the proposal was that each
information
worker would be permitted one speak to your
withdrawal per preservation fund per
year, the amount of which would be Altrisk broker
limited to 10% of the capital value
of the retirement savings preserved, consultant or go
with a minimum value.
to www.altrisk.co.za
Unused withdrawals would be
permitted to be carried over so that
members would not feel the need to
withdraw the maximum amount each Were your type
year, to minimise potential financial
strains in the future. of risk insurer.
After stakeholder engagement, the
proposal has been amended to
include the following:
A de minimis requirement has been
introduced to remove the need
for small sums to be preserved.
The number of withdrawals will
be limited to one withdrawal per
taxpayer per year, rather than
one withdrawal per preservation
fund per year, to reduce the
number of withdrawals.
57
Altrisk is a division of Hollard Life Assurance, an authorised
financial services provider (FSP 17697).
2014/07/07 8:31 PM
 Financial Planning
Under consideration is a review
of the tax treatment of pre-
retirement withdrawals to ensure
fairness and to discourage
withdrawals for frivolous reasons.
Any withdrawals before retirement
will serve to reduce the amount
that can be paid by a pension
fund in the form of a lump sum
(i.e. one-third of the capital value
if no prior withdrawals have been
made) to minimise the erosion of
retirement benefits by early access.
While further clarity is required from
the National Treasury and the Financial
Services Board, it is likely that new
preservation rules could possibly
come into effect as early as 2015.
This emphasises the extent to which
retirement preservation has become a
reform priority, says Kaveer Beharee,
Principal at Ubiquity Consulting.
While the industry awaits the National
Treasurys release of its set of draft
regulations on default strategies,
including requirements for funds to
have default investment portfolios,
default annuity products for members
on retirement and default preservation
rules for members on termination of
membership before retirement.
While retirement preservation is a big
step towards improving an individuals
quality of life during their pension
years, the current proposals will
bring about significant changes in the
running of funds.
58
July 14.indd 58
Moving forward (and ahead of
further consultation with the National
Treasury), employers, funds, providers
and trade unions will have to consider
the following:
Preparing for benefit
administrative challenges to
cater for preservation changes
IT IS LIKELY THAT NEW
PRESERVATION RULES
COULD POSSIBLY COME INTO
EFFECT AS EARLY AS 2015.
Considering funds and retirement
service providers especially benefit
administrators will require time to
adapt to new regulation. The industry
should possibly consider requesting
that new regulation be staggered over
a period, giving various stakeholders
sufficient time to put these changes
into effect.
Driving down costs
Cost-efficient structures and
transparency support reform
objectives. Retirement service
providers and boards of funds should
understand how cost-efficient
compulsory preservation models
implemented in other countries are.
Currently, a default opt-out model
appears to be the favoured model
for ensuring a smooth transition
once a member leaves the fund to a
preservation fund. This will possibly
reduce the need for a member
to acquire a solution on the retail
market.
Governance by the boards in
implementing the new changes
In its current format, preservation
proposals will require fund boards to
acquire advisory services with respect
to the discretionary rules that funds
can apply to annual withdrawals.
Current proposals limit annual
withdrawals to a maximum of 10%
of the capital value of the retirement
savings preserved. In determining
withdrawal rules, funds will have to
ascertain the profile of fund members,
member needs, efficient and effective
communications with members and
ongoing support to members with
regard to withdrawals. These new
rules will ideally also be revised in
accordance with King III and PF130
provisions.
Ensuring new regulations do not
impede current operations
Boards of funds will have to ensure
that the implementation of new
rules and regulations will not affect
the services provided by benefit
administrators capabilities like benefit
withdrawals. Funds can do this by
having control audits like ISAE 3402
performed to ensure system integrity.
Regulatory preparedness in
dealing with changes arising
from this legislation
Preparedness by the Financial Services
Board to process large volumes of
regulatory amendments resulting from
the reforms to ensure timely and
effective implementation by the various
stakeholders.
While we support mandatory
retirement preservation and the
consultative process by the National
Treasury, retirement funds and service
providers should start developing
strategies and processes to ensure
that new regulations do not lead to
operational failures, ends Giridhar.
COVER JULY 2014
2014/07/07 8:31 PM
HAVASWW-D63274/E

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which were upwards of R4.2 billion last year alone.
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Untitled-1 1 2014/07/07 11:09 PM

 Financial Planning
Smooth bonus portfolios:
the investment worlds blue jeans
TWAN WESSELS,
Marketing Actuary: Investments
at Momentum Employee Benefits
Smooth bonus portfolios are
not the flavour of the month.
This might be as a result of over
confidence; considering that
markets are flaunting record
highs. However, smooth bonus
portfolios have been around for
decades and they still provide a
good fit and value to investors,
playing an important role in
the retirement industry. They
are reliable and they have been
around the block - smooth bonus
portfolios are the investment
worlds blue jeans.
Debates in the media about the costs
versus benefits of smooth bonus
portfolios and the role they fulfill in
the retirement industry followed the
release of National Treasurys technical
discussion paper Charges in South
African retirement funds. The paper
was a thoughtful review - including
some criticism - of smooth bonus
portfolios. In response to the recent
60
July 14.indd 60
commentary around smooth bonus
portfolios, it is worthwhile to consider
whether smooth bonus portfolios
will be as durable as blue jeans and
continue to fulfill an important role in
the retirement industry.
Smooth bonus portfolios offer the best
of both worlds, providing exposure
to an aggressive portfolio, but with
downside protection through capital
preservation. The insurer provides
the capital guarantee and capital
preservation is therefore not achieved
through a conservative asset allocation
or via the use of various hedging
strategies. The smoothing mechanism
in smooth bonus portfolios assists in
managing policyholder expectations by
reducing exposure to the extreme ups
and downs of investing in the market.
SMOOTH BONUS
PORTFOLIOS OFFER
A BETTER VALUE
PROPOSITION THAN LOW
RISK, LOW RETURN FUNDS.
In the role smooth bonus portfolios
fulfill in the industry, it is often
overlooked that these portfolios also
offer guaranteed benefit payments at
the smoothed investment value on
unexpected exits which include death,
disability, resignation and retrenchment
- and not just offer guaranteed benefit
payments on retirement. Currently,
due to a lack of preservation, these
exits constitute the majority of
payments from retirement funds; even
if preservation is improved, death,
disability and retrenchment will remain
realities. During times of unexpected
and emotional events one needs
peace of mind and a reliable blue jean
partner in ones investment selection.
Smooth bonus portfolios are also a
good fit for investors who have a low
tolerance for investment volatility and
investors who are close to retirement
and wish to protect the value of their
investment from a market downturn.
If capital preservation is an objective
- for example in preservation funds
and even for unclaimed benefit funds -
smooth bonus portfolios offer a better
value proposition than low risk, low
return funds.
In the technical discussion paper,
criticism was raised regarding the cost
of the capital guarantee in smooth
bonus portfolios; the potential exit
penalty on termination; the lack of
transparency and the conflict of interest
between the insurers shareholders and
its policyholders. Although the criticism
was thoughtful, it is always important
to consider how all the threads are
woven together to make up the final
product.
In return for the capital guarantee
offered by the insurer, a capital charge
is charged. The capital charge pays
for the true economic cost of the
investment guarantee itself, as well as
the regulatory capital that the insurer
must hold. The regulatory capital must
be met by the insurer to ensure that
the promise to the policyholder will
always be honoured. The peace of
mind that the investment guarantee
brings comes with a price. Although
it is possible for retirement funds to
smooth their own investment returns,
this does not provide any investment
guarantee. Smoothing inside a
retirement fund is equivalent to running
an insurer without any capital which,
if it is not managed correctly and with
the necessary expertise, exposes the
fund to significant risks.
Smooth bonus portfolios are a
form of insurance against adverse
market movements. The guaranteed
smoothed investment value is only
payable on certain insured events.
Payments on non-insured events i.e.
a voluntary exit or termination, will
normally be paid out at the lower of
the smoothed investment value and
the actual underlying asset value.
This feature is wrongly seen as an
exit penalty. It is critical and exists to
COVER JULY 2014
2014/07/07 8:31 PM
 protect the remaining policyholders
and prevent anti-selection in the
form of sophisticated investors
acting on information and skills not
available to other fund members by
withdrawing from the fund in times of
economic turmoil purely to realise the
guarantee.
Finally the technical discussion
paper raised concerns about lack of
transparency and conflict of interest
between the insurers shareholders
and its policyholders. Smooth bonus
portfolios have evolved over the last
few decades, have opened the black
box in favour of sensible transparency
and are now subject to strong
governance principles to ensure that
there is a strong voice representing the
Statement of Investor Rights
Ten rights that any investor will
expect from financial service providers
The Statement of Investor
Rights was developed by CFA
Institute to advise consumers
of the conduct they are entitled
to expect from financial service
providers.
CFA Institute is encouraging financial
professionals around the globe to
support the statement and provide it
to their clients to demonstrate their
commitment to fundamental ethical
principles.
Since the financial crisis of 2008,
CFA Institute, through its regional
member societies, has undertaken the
responsibility to rebuild the credibility
of the financial services industry,
explains Nerina Visser, CFA and
Deputy President of CFA Society
South Africa. Through the Statement
of Investor Rights, we as financial
professionals are able to show our
clients that they can trust us to provide
the service they expect and deserve.
Visser provides a summary of the
10 investor rights according to
CFA Institute. When engaging the
COVER JULY 2014
July 14.indd 61
interests of policyholders. Numerous
lines of defense protect policyholders
interest and these include a statutory
actuary who has a statutory duty to
protect the interests of policyholders
and committees with independent,
non-executive director representation.
In addition, just as it is vital for Levi
to maintain a trusted brand, it is at
the heart of an insurers vision as well.
The strength of business is built upon
looking beyond the numbers: because
people count.
It is important to compare like with
like. Just as jeans are different to
chinos, smooth bonus portfolios are
different to market-linked portfolios
and they serve a different purpose.
The appropriate use of smooth bonus
services of financial professionals and
organisations, I have the right to:
1
Honest, competent, and
ethical conduct that
complies with applicable
law
2
Independent and objective
advice and assistance
based on informed
analysis, prudent judgment, and
diligent effort
3 8
My financial interests
taking precedence over
those of the professional
and the organisation
4 9
Fair treatment with
respect to other clients
5 10
Disclosure of any
existing or potential
conflicts of interest
in providing products or
services to me
portfolios should be promoted by
improving member understanding of
their features and their relative costs
and benefits.
In the current market environment that
includes local and global structural
challenges, a lot of uncertainty and
markets flaunting record highs, it might
be an opportune time to reconsider the
merits of the investment worlds blue
jeans. The proof is in the performance:
a respectable multi-managed partially
vesting smooth bonus fund makes
blue jeans talk, having achieved a real
return in excess of 6% per annum over
the last 10 years, net of the capital
charge.
Yes, it makes blue jeans talk.
6
An understanding of my
circumstances, so that any
advice provided is suitable
and based on my financial
objectives and constraints
7
Clear, accurate,
complete, and timely
communications that
use plain language and are
presented in a format that
conveys the information
effectively
An explanation of all fees
and costs charged to me,
and information showing
these expenses to be fair and
reasonable
Confidentiality of my
information, and
Appropriate
and complete
records to
support the work done on my
behalf.
61
2014/07/07 8:31 PM
 Working with
WHEELS
World of wheels:
powered by technology
In this months Working with Wheels, technology is the name of the
game. Weve come so far, and this is what we learned along the way.
An app for vehicle
pre-inspections
JASPER VAN HEESCH,
Head of Business Development
at Lightstone Auto
Lightstone Auto, a provider of
comprehensive data, analytics
and systems for the insurance,
lending and dealership industries,
and Custom App, the specialist
mobile app development firm,
have recently introduced LIVE
Inspect, a new addition to the
LIVE App suite, to assist insurers
in accurately understanding
vehicles they have added to their
books.
62
July 14.indd 62
Some insurers think pre-inspections
are unnecessary, calculating that the
business case does not stack up. Poor or
unreliable data, costs, delays and effort
needed to get a customers inspection
done, are often not worth the effort.
Other insurers have embraced pre-
inspections and multiple channels have
been tried and tested, with mixed
results. An analysis by Lightstone Auto
found that inspections done for one
major insurer were 40% incorrect
when it came to make, model and VIN
number.
Inaccuracy affects underwriting precision
and prevents efficiencies in claims
management where insurers want to
manage their vehicles through the
claims process via the vehicles VIN
number.
We have developed a new benchmark
in pre-inspections solutions which we
believe will dramatically improve the
derived benefits and will challenge
thinking on this topic, said Graham
Harvey, CEO of Custom App.
Using a combination of the mobile
app, a data management system and
a related interface that can be fully
integrated into various datasets and
insurer management systems, the
LIVE Inspect solution allows credible
inspections to be done by anyone, at
any time. These activities and outputs
can easily and immediately be tracked
via a dashboard allowing the insurer to
see the details of the inspection as soon
as it is complete.
The mobile app uses form pre-population
and license disc and drivers license card
scanning and decryption. These elements
alone significantly improve data capture
accuracy as inspectors no longer need to
type in any details, in particular the 17
digit VIN number which is notorious for
input error.
The data management system integrates
with the proprietary auto datasets of
Lightstone Auto for each inspection, and
can automatically flag to the insurer that
the vehicle make, model and/or year on
the policy are wrong.
The app can take photos and make sure
that every key action is time, date and
location stamped.
We are currently building a self-
inspect version of LIVE Inspect which
insurers can put into the hands of their
policy holders. With fraud detection
mechanisms like number plate
recognition and proximity evaluation,
Lightstone Auto is helping insurers make
things more convenient for their clients
while still retaining the integrity of the
solution, said Harvey.
The app is available for free download
on Android and IOS and a small fee is
charged for each inspection completed.
For more information visit:
http://www.lightstoneauto.co.za/
COVER JULY 2014
2014/07/07 8:31 PM
Untitled-1 1
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2014/05/19 11:10
11:58 PM
AM
 Working with
WHEELS
Demystifying the cost
of fleet ownership
WADE GRIFFIN,
Director of Commercial Vehicles at
Hyundai Automotive South Africa
With fleet vehicles the cost of
ownership has a direct impact
on the businesss bottom line,
yet the fleet is often a critical
component to getting the work
done.
SMEs that run fleets need to
understand the elements that make up
the cost of ownership. These elements
can be managed by selecting the right
vehicle fleet through the right vehicle
provider.
MINIMISE DOWNTIME
Understand whats included or
excluded in a vehicle warranty. While
full manufacturers warranties tend
to be more valuable as they cover
part failures and are comprehensive
in nature, local warranties can contain
a host of exclusions and limitations
in terms of what is covered. A local
warranty may look more appealing
with a lower upfront cost, but it could
result in higher maintenance costs.
64
July 14.indd 64
SERVICE AND MAINTENANCE PLAN
OPTIONS
What happens when a vehicle in your
fleet breaks down? Do you have a
maintenance and service agreement
thats supported by an expansive dealer
network and a comprehensive roadside
assistance offering?
UNDERSTAND NOT
ONLY THE COST OF THE
PURCHASE, BUT THE COST
OF VEHICLE MAINTENANCE.
SELECTING THE RIGHT FINANCING
STRUCTURE
Understand not only the cost of the
purchase, but the cost of vehicle
maintenance. A full maintenance
leasing (FML) contract can be more
beneficial to the business: vehicles are
not registered in the companys name
and there is no disposable risk. The
company receives a fixed maintenance
rate for the period of the lease plan
and can budget for a fixed amount
monthly.
REDUCING PREMATURE VEHICLE
REPLACEMENT
Drivers are responsible for the vehicles
that they operate and the cargo
transported. SMEs should select a fleet
supplier that can assist in training their
drivers with:
performing preventative
maintenance checks;
safe driving principles
and mechanisms;
driver techniques and
driver health; and
fatigue prevention.
MAXIMISE EFFICIENCIES
The elevated cost of fuel is an ongoing
challenge. Investment into efficient
vehicles will not only save on fuel
spend but also lower carbon emissions.
Management of downtime, supplier
support and vehicle quality play a
role in managing cost of ownership
and business sustainability. SMEs
need to select the right fleet and the
right provider to optimise costs and
efficiencies.
COVER JULY 2014
2014/07/07 8:31 PM
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Untitled-1 1 2014/07/07 11:10 PM

 Working with
WHEELS

Cape Town:
Most congested city in South Africa
DAAN HENDERICKX, The Traffic Index compares travel times during non-
Country Manager of congested hours with travel times in peak hours experienced
TomTom South Africa by passenger vehicles. The Index takes into account both
local roads and highways. The top 10 most congested cities
TomTom (TOM2) has published its fourth annual ranked by overall congestion level in 2013 were:
global traffic index for 2013. The results revealed
1 Moscow 74% 6 Palermo 39%
that Cape Town is the most congested city in
South Africa, surpassing Johannesburg the most 2 Istanbul 62% 7 Warsaw 39%
congested city in 2012. 3 Rio de Janeiro 55% 8 Rome 37%
4 Mexico 54% 9 Los Angeles 36%
TomToms traffic data showed that traffic congestion on
secondary roads is worse than main roads, and commuters 5 So Paulo 46% 10 Dublin 35%
are spending an average of 10 working days a year stuck
in traffic. This is creating a new set of challenges for local South Africa has seen an increase in congestion in all of
authorities looking for solutions to the increasing traffic the six cities that the report monitored. Congestion in Cape
problem. Town and East London has increased by 2%. South Africa
had a congestion level of 21% in 2013 while the individual
The data found that the traffic shortcuts drivers take to
cities were ranked as follows:
avoid congestion are actually long-cuts, adding 50% more
travel time to journeys. South Africa is the only country in
the world to experience their worst congestion on a Monday Global Ranking
morning while the rest of the world experiences worst 1 Cape Town 27% 33
congestion most often on a Tuesday morning.
2 Johannesburg 25% 48
Traffic congestion continues to be a global challenge.
Traditional responses to congestion building new roads 3 East London 22% 65
or widening existing ones are no longer proving to be
4 Pretoria 22% 73
effective. Real time traffic information can help drivers
find the quickest shortcut on their journey, and assist 5 Durban 18% 98
governments to make smarter decisions to improve traffic
flow for their cities. 6 Bloemfontein 12% 134/138

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July 14.indd 66 2014/07/07 8:32 PM

 The story
behind the silver
Mercedes gang
Statistically, a motorist
is more likely to become
a victim of hijacking at
their place of residence,
on a weekday, between
16:00 and 20:00 in the
evening.

Previously motorists were

warned to be vigilant when
approaching their place of
residence, to ensure that they
werent being followed, and
to be cautious when exiting
the vehicle to open a gate
or to carry in the groceries.
While a place of residence
continues to be the likeliest
scene of a hijacking, it is now
just as dangerous to exit your
driveway as it is to enter.
The viral video of the Silver
Mercedes-Benz Gang showed
a couples attempt to share
their experience with the
world, in order to empower
others. On 17 May the gang
accessed a residence in
Blairgowrie after trapping a
vehicle in between the silver
Mercedes and the closed gate
of the property. The disturbing
camera footage sees the
motorist being removed from
the vehicle and forced back
through the now open gate
to his home. The gang uses
a spotter to identify potential
targets, block your path and
leave you helpless.
PUBLIC SERVICE
ANNOUNCEMENT FROM
MATRIX:
Check your surroundings;
be sure you are able to
exit your home safely and
without any disruption.
Never sit in your parked
car; be cautious of
your surroundings.
GRANT FRASER,
Divisional Director:
Product and Marketing MiX
Telematics (Consumer)
Veer onto the road as
soon as traffic permits
and it is safe to do so.
Do not wait for the gate
to close; to check that the
property is secure circle
the block and confirm
this when you pass by.
If you must exit the vehicle,
switch the car off, close
and lock all doors keys
in the ignition will identify
you as an easy target.
Dont follow a structured
routine; criminals
will be less able to
premeditate a crime.
Dont make the
situation worse; comply
with demands.
Keep your panic button
nearby and alert authorities
as soon as it is safe.
Vigilance will go a long way in
protecting you and those who
share your journey.
Watch the video here:
http://bit.ly/SydLGn

COVER JULY 2014 67

July 14.indd 67 2014/07/07 8:32 PM

 Working with
WHEELS
The value of technology
and business efficiency
Fuel costs are estimated
to constitute roughly 45%
of total operating costs for
many businesses, especially
those involved in logistics and
transportation. For businesses
operating a fleet of vehicles,
the associated running costs are
increasing year on year by 12%.
Tracker Business in partnership with
TomTom provides live in-cab traffic
interrogation and navigation services
unique to Tracker Business which
enable drivers to avoid congested
routes and select the shortest possible
68
July 14.indd 68
routes. Operators can also select routes
that will avoid toll roads and direct
drivers on the shortest most efficient
routes around toll gantries.
The return on investment in most
cases ranges between four and eight
months and fleet owners can no longer
ignore the fact that drivers and driver
behaviour need to be controlled if they
are going to manage their fleet costs
effectively.
The proven savings are considerable
and for a courier company able to save
20 km per day (per vehicle) for a fleet
of 40 vehicles, indicates an annual
saving of more than R260 000, which
over three years works out to a saving
of around R800 000.
Mike Crankshaw, CEO of fleet
management company, FleetCUBE,
said: Fifty vehicles cost about R6,8
million a year in total operating costs.
When businesses are able to set the
right fleet management policies, they
should be able to reduce costs by
R680 000.
Shorter routes mean using less fuel
and less wear and tear, leading to less
maintenance and tyre costs.
Avoiding traffic congestion is
paramount to the efficient operating
of logistics companies. Wasting
time results in customer service
frustrations, loss of income for
the company, unnecessary fuel
consumption, and wear and tear
on the vehicles. Useful navigation
devices ensure that traffic congestion
is identified and alternative routes can
be selected to avoid these.
MODERN ROUTE NAVIGATION
DEVICES TAKE THE GUESSING
OUT OF THE EQUATION,
TRANSLATING INTO LESS
BUSINESS MILEAGE.
Driver efficiencies result in increased
productivity for example additional
deliveries, which means earning
additional revenue. Drivers often
think they know the shortest route to
the next customer, but human error
is surprisingly high. Modern route
navigation devices take the guessing
out of the equation, translating into
less business mileage.
Fleet management services enable the
fleet owner to know where each driver
is and their time of arrival at the next
delivery, which is optimal for good
customer service.
COVER JULY 2014
2014/07/07 8:32 PM
Untitled-1
Untitled-1 11 2014/02/1811:11
2014/07/07 9:40PM
PM
 Working with
WHEELS

World cup stars

and their super cars
GLOBAL CAR CLASSIFIEDS CARMUDI UNLEASHES THE
FANCIEST RIDES OF FIFA HEROES
With FIFA World Cup around the corner, Footballers from
across the globe have headed to Brazil to put everything
on the line for the pride of their nation. However, away
from the field, do you know how much pride they place in
their rides? Carmudi digs into the brands and budgets of the
super rides that catch the fancy of some of the best football
players across the world.
4) SAMUEL ETOO MAYBACH 57 S XANATEC COUPE
1) RONALDO LAMBORGHINI AVENTADOR LP 700-4 At a time Etoo was the highest paid player in the world.
Officially recognised as the best player in the world He is said to have a fleet of cars costing an astonishing
currently, Ronaldos car exudes the same type of panache 6,700,000 USD. Of his collection the car that stands out is
the footballer does with the ball at his feet. The Lamborghini his Maybach Xanantec Coupe. It costs over a million dollars
Aventador is not a shy car with a lofty 700 Brake and has a huge presence on the road, similar to that of the
Horsepower (BHP) to help the vehicle reach a top speed of Cameroonian captains on the pitch.
217mph. The Ballon Dor winners car comes in a stealthy
matte black to add that extra touch of understated style.
However all this flash will set you back a hefty 450,000
USD.

5) RIBERY LAMBORGHINI GALLARDO LP560-4 SPYDER

Ribery, referred to as the jewel of French football by the
legendary Zinedine Zidane will once again be the focal point
of Frances bid for World Cup glory. Riberys glory on the road
is in the form of his Gallardo LP560-4 Spyder. Able to reach
201mph and costing 225,000 USD, his ride comes in an eye
catching bright green so he is never out of the spotlight.
2) LIONEL MESSI GRANTURISMO MC STRADALE
A car befitting of a player held in the same regard as some
of the greatest of all time. When needing to get from A to
B, Messi uses his Maserati GranTurismo MC Stradale. His
vehicle comes in a clean looking white, reaches a top speed
of 188mph and costs upwards of 181,000 USD. Certainly
a worthy drive for the only man who can stand toe-to-toe
with Ronaldo in world football.

6) NEYMAR AUDI R8 GT
The man with the weight of a nation on his shoulders and
the face of the Brazil World Cup. The talented forward
chooses to cruise the roads in the Audi R8 GT. Costing
nearly 250,000 USD, it reaches top speeds of nearly
200mph. Neymar has decided to keep the design simple
and sleek in a bright white paint job and a classical red
leather upholstery interior.

3) WAYNE ROONEY ASTON MARTIN VANQUISH

For the talismanic Englishman it is fitting to choose a car that
is British. The Aston Martin Vanquish is a car which expresses
the same class on the road that Rooney does on the field.
This car set Rooney back a fair amount costing 280,000 USD.
However, with a top speed of 183mph and a booming engine
of 565 BHP it is most certainly a car for a superstar.

70 COVER JULY 2014

July 14.indd 70 2014/07/07 8:32 PM

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Untitled-1 1 2014/07/07 11:11 PM

 CORPORATE SOCIAL INVESTMENT
Renasa lays the
foundation for education
A teacher affects eternity;
he can never tell, where his
influence stops. Henry Brooks
Adams
The Thandulwazi-Rokunda teacher
development programme, established
in 2006 by the St Stithians Foundation,
aims to improve the skills of educators
teaching in schools in previously
disadvantaged areas. Thandulwazi
derives from the isiZulu meaning the
love of learning, and the up-skilling
workshop sessions coordinated
by Karen Walstra and hosted by St
Stithians College are held on 11
72
July 14.indd 72
Saturdays during the school year. These
sessions focus on foundation phase
numeracy and literacy; maths, science
and technology at the intermediate and
senior phases; and helping educators
gain computer skills.
On Saturday 17 May 2014 Bonny
Loureiro, the General Manager of
RITE (Renasa Insurance Training
and Education), Renasa Insurance
Companys social responsibility
programme, presented a workshop at
Thandulwazi.
RITE supports the foundation phase of
education by helping underprivileged
schools lay the building blocks for
By Annetjie van Wynegaard
literacy by creating and distributing
reading books to schools in need.
Bonny Loureiro, a former teacher,
writes the stories, and Julia du Plessis
is the illustrator.
Bonny presented the readers to
teachers and spoke about interactive
ways to make learning fun and
effective. During the workshop the
teachers spoke about how to use
games in the classroom, not only
to teach language, but also to build
confidence in students and to help
them grow into strong individuals
physically and intellectually.
Bonny stressed the importance of the
foundation phase on a childs cognitive
capacity, literacy, numeracy and ability
to communicate.
At the end of the workshop Bonny
gave the teachers readers to take back
to school and use in their teaching.
RITE has bought the rights to the
Alphaland Literacy Programme and has
already donated it to over 250 schools
in past years. RITE has extended its
reach through the RITE Reader Project.
Renasa donate packs of 110 readers per
class to each teacher that attends the
RITE workshops.
COVER JULY 2014
2014/07/07 8:32 PM
 CORPORATE SOCIAL INVESTMENT
Dream, Believe, Achieve
Momentum plays host to 120 girl
children in the workplace
Momentums vision is empower young
women across the country to believe
in themselves and to open their
eyes to the integral roles they can
play in shaping this nations future.
Wednesday, 4 June was Take a Girl
Child to Work Day at Momentum.
Take a Girl Child to Work Day enjoys
a wealth of support from both public
and private sector organisations and
corporations. This years campaign was
aimed at girls from Grade 10 to 12 with
the tagline Dream, Believe, Achieve.
Frank Magwegwe, Momentums Head
of Middle Market Segment shared
his story of success, showcasing that
dreams do come true. After completing
high school, Magwegwe moved to
was initiated to highlight the crucial
role that young women can inspire,
influence and lead others to greatness.
Magwegwe said, We wanted to get
Johannesburg where he found himself the message out there, by educating
homeless. He later started a fruit and and empowering a girl child, you are
veg stall which funded his university helping the young women and girls of
fees. Magwegwe holds a number of this country to believe in themselves.
diplomas and degrees and has recently
To date, over 600,000 girl learners
completed Harvard Business Schools
have been blessed with an opportunity
Advanced Management Programme.
to be exposed to the world of work.
Despite advances in legislation, the
majority of women in South Africa still
suffer from gender inequality
as they lack the skills to
make them economically
independent, said Magwegwe.
We are extremely happy to
have the opportunity to be part
of this initiative and influence
girl learners that they can be
the future of South Africa by
beginning with a dream.
More than 120 girls visited
Momentum offices, which

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COVER JULY 2014 73

July 14.indd 73 2014/07/07 8:32 PM

 CORPORATE SOCIAL INVESTMENT
Santam helps youth combat crime
Santam has committed an
additional R2,7 million in
support of the National Institute
for Crime Prevention and the
Reintegration of Offenders
(NICRO) work to help
adolescents reduce their risk
of falling into a life of crime.
This brings the insurers total
investment to this cause close
to R5 million and extends its
partnership by another four
years.
The cash injection from Santam has
enabled NICRO to expand the Safety
Ambassador Programme to a group
of 60 grade 9 to 11 learners from the
Hodisa Secondary School and Moemedi
Secondary School in Rocklands in the
Free State where the programme will
run for three years.
NICRO, a non-governmental
organisation, ultimately aims to
find lasting solutions towards crime
prevention. Forming part of their
74
July 14.indd 74
basket of interventions is the Safety
Ambassador Programme which aims to
curb the spike in juvenile offenders by
inspiring young people to lead a crime-
free lifestyle.
Santam sponsors the programme at 24
schools across South Africa and as a
result of their investment since 2009,
close to 800 learners have successfully
completed the Safety Ambassador
Programme.
Santam appreciates the potential
of young people, and strategically
invests in partnerships that help youth
realise their potential. The scourge
of crime in our country, particularly
in disadvantaged communities,
impedes peoples potential to
thrive psychologically, socially and
economically. Programmes like the
NICRO Safety Ambassador Programme
are a vital contribution to society
because they ultimately help to nurture
community wellbeing.
NICRO has been developing
constructive solutions to breaking the
cycle of crime and violence in South
Africa since 1910. It was the first
Tersia Mdunge, CSI Manager at Santam
organisation to develop intervention
programmes specifically for children
and young people involved in crime.
Vuyo Nelane, a Grade 10 leaner from
Hodisa Secondary School, says he looks
forward to participating in the initiative.
I cannot wait to get involved in this
programme that will help me become
the best person I can be. I also think it
will help us to make positive changes
in our school while having fun in the
process.
The programme will be implemented
as a structured curriculum that
involves peer education, building
learner capacity, clarifying values and
value systems, and developing and
implementing practical projects and
activities.
I am confident that the programme
will enhance our efforts to give
the learners direction and purpose.
Learners will not only gain skills on
how to deal with crime, but the
programme will also prevent them from
getting involved in such activities, says
Mrs Rebecca Mpailane, a teacher at
Moemedi Secondary School.
SANTAM MANAGES A
STREAMLINED CSI PORTFOLIO
THAT CURRENTLY INCLUDES THE
FOLLOWING INVESTMENTS:
UNICEF Safe and Caring
Child-Friendly Schools;
City of Cape Towns School
Resource Officers;
Santam Child Art Programme;
Santam Staff Volunteerism; and
Santams Emthunzini BBBEE
Community Trust that provides
funding in the areas of education,
arts, culture, training, development
programmes, enterprise
development and job creation.
COVER JULY 2014
2014/07/07 8:32 PM
 Risk Management
Combating white
collar crime
BY TARYN KERR
The second annual Insurance
Fraud Conference was held on
20 and 21 May was hosted by
Spectacular and sponsored by
Censeo. The event addressed
how cyber crime affects the
insurance industry.
Servaas du Plessis, CEO of Censeo,
spoke about optimising the industry
approach to fraud, and how brokers
and insurers need to work in sync to
prevent it. He spoke about steps the
SAICB have taken in preventing fraud.
The South African Insurance Crime
Bureau (SAICB) was founded in 2008,
and its member companies represent
more than 50% of the South African
Insurance industry (based on GWP).
In its first five years of operation the
company delivered an average return
on investment of 2,2:1 for its member
companies while the return on
investment for the current, sixth year
of business, amounts to a ratio of more
than 5:1. The current membership
year has seen the SAICB help return
more than R75 million to its member
companies.
COVER JULY 2014
July 14.indd 75
Although were funded by the
short-term insurance industry, our
operations benefit all South Africans,
and to date we helped return assets
valued at more than R60 million to
the uninsured public, a member of
the SAICB said.
It is as difficult to measure the impact
and prevalence of insurance crime, as it
is to measure efforts to combat it. The
SAICB has adopted the measurement
of successful convictions as one of
its KPIs. To date, there have been 15
investigations that have resulted in
finalised criminal proceedings. In all 15
instances, the perpetrators were found
guilty a 100% strike rate for the
SAICB.
Chris Andrews address was entitled,
Cross-Industry Challenge: Distributing
Responsibilities. Andrew asked, to
what extent does fraud prevention
fall into the intermediaries hands? He
said all departments need to tackle
fraud, and technology can assist
fraud detection and prevention. Leon
Townsen, MD of Censeo, reviewed
the latest fraud trends in South Africa
and globally. A comprehensive study
showed that the fraud demographic
has drastically changed of late, with
cyber crime statistics rising annually.
He identified that while the insurance
industry has taken great steps in
reducing fraud in certain areas, more
investment in new developments is
needed.
William Lawrence, from the
MEA-SAS Institute, spoke about
confronting fraud from the front end,
and how underwriting is affected and
can be effective in preventing fraud
trends. He explained how analytics
can be used not only to uncover, but
also outsmart the most resourceful
fraudster.
Hugo van Zyl from the SAICB gave
a progress update and presented an
industry-wide database of known
fraudsters.
The second day kicked off with Ronel
Rust, Senior Manager of the Fraud
Investigation and Dispute Services,
at Ernst & Young. Rust provided
practical ways in which the industry
can identify key opportunities to
curb fraud, what it takes to make
a positive change and what is
preventing this. George Barnes and
infamous Tony Sales joined Rust for
a panel discussion on catching and
prosecuting known fraudsters. The
panel addressed issues of dismantling
organised crime, investigating fraud
and how to build a worthy court case.
Ian Logan, a Senior Director at
Transunion Credit Bureau, spoke
about how to prevent fraud at the
point of sale. He addressed the issue
of online fraud, credit data and the
propensity to commit fraud, and
using the data in the insurers favour.
George Barnes, MD of Forensic
Investigations and Risk Management
Consultants, spoke about how to close
the loopholes to prevent furthering
fraud trends. He discussed the future
of data sharing, and how this can be
used more effectively in the insurance
industry.
The conference concluded with the
UKs alleged greatest fraudster, Tony
Sales. A riveting presentation gave
the audience a unique insight into
the intricate psyche of an organised
criminal, how a fraudster selects his
targets and commits his crime. Sales
also gave advice on how the insurance
industry can offer greater customer
service, without running the risk of
fraud.
75
2014/07/07 8:32 PM
 Risk Management
SCOR shows insurers
the tricks of the trade
BY ANNETJIE VAN WYNEGAARD
What is business interruption and
contingent business interruption?
SCOR Global P&C sought to explain
these terms and their impact on the
insurance industry at the two-day
campus seminar from 14 to 15 May
2014.
Didier Schtz, Risk Control Practice
Leader at SCOR P&C, was the speaker.
He used the analogy of Russian
Babushka dolls to explain how CBI
claims are interrelated. CBI is an
extension of BI, which is an extension
of property damage coverage.
Schtz said that BI insurance is not
a nice to have or one size fits all CBI mitigation.
coverage. BI insurance coverage must
be tailored to specific needs and risks.
He explained how to use chain rules
to determine whether BI applies, and
emphasised that the brokers role is
very important in this process.
The chain rules define an insured loss
as:
Physical damage or loss
To suppliers, customers or
dependent property
Of the type covered as specified
in the Property Damages Policy
Which causes an interruption
For a defined indemnity period.
Schtz explained that for CBI coverage
to apply, the type of physical damage
must be the same as insured under
the controlling policy. CBI coverage
will only be adequate if one is able to
identify and understand the impact of
other business on operations, he said.
The first day focused on the
explanation of terminology and
the theory behind BI and CBI, and
the second day saw the practical
application of the theory by the
brokers, insurers and underwriters in
attendance.
76
July 14.indd 76
Schtz made available a tool box
for facing BI and CBI exposures, and
made use of real world case studies to
understand interactions, to understand
wordings, and to grapple with BI and
treatment plant, a tunnel operator, and
BI and CBI exposure can be
determined by using the Triangle-
Tripod method. Vulnerability is
determined when the:
1. Risk object (human resources,
technology, information, finance, etc) is
exposed to a
2. Hazard (socio-economic, man-made,
natural disaster, operational) and holds
3. Financial consequences (continuity,
profit, stability, growth, reputation,
etc.).
Schtzs reading material explained
that a BI and CBI mitigation plan finds
economically justified solutions to
mitigate the financial consequences of
an identified BI exposure.
The two types of BI and CBI
mitigation plans are:
1. A contingency plan for loss affecting
critical facilities and equipment, and
2. A business continuity plan in the
case of a major disaster that affects a
processing unit or more than one plant.
During the second day attendees
assessed several case studies, identified
potential hazards and consequences
of a major loss, and brain stormed
contingency plans and business
continuity plans for different scenarios.
The real-world scenario included the
day-to-day operations of a pulp mill, a
a steel maker.
The second day ended with thank you
drinks and the opportunity for the
industry to network and to share their
experience of the two days.
SCOR is a global reinsurer with 39
offices across five continents reporting
to six hubs: New York, London,
Paris, Zurich, Cologne and Singapore.
The Campus seminar was also an
opportunity for the SCOR Global P&Cs
Engineering team, Andreas Arnold from
Switzerland and Pui Fong Han from
Singapore to meet with clients.
Terry Ray, CEO of SCOR Africa
Limited, said that as a subsidiary of the
main group, SCOR Africa Limited has
brought the experts from Paris to talk
to underwriters and reinsurance brokers
about CBI. Ray said CBI has been a hot
topic in recent years, certainly over the
last 18 months. He said the session was
a good opportunity to share knowledge
on the subject.
To download an electronic copy of
SCORs latest publication written
further to the annual conference,
follow the link:
www.scor.com/images/focus_cbi.pdf
COVER also did a video interview with
Didier Schtz. Watch it at:
http://bit.ly/1hQ9gwZ
COVER JULY 2014
2014/07/07 8:32 PM
 Cyber versus PI Round 1
NATALIE VAN DE COOLWIJK,
MD of CyGeist, a cyber-focused UMA
underwriting on behalf of Guardrisk
We are noticing a rapidly
growing interest in our cyber
insurance offering, both
by brokers and potential
policyholders. This is in
response to significant changes
in the corporate threat
landscape over the last few
years, primarily as a result of the
increasing value of organisations
digital and information assets,
the corresponding surge in
cyber crime and introduction of
legislation forcing companies to
protect sensitive information.
Insurance has evolved accordingly,
as can be seen by the increasing
number of carriers venturing into the
cyber insurance market. Brokers and
consumers are trying to understand
what new coverage elements cyber
insurance policies introduce, and where
their cover potentially overlaps with the
more traditional insurance products, in
particular professional indemnity (PI)
policies.
COVER JULY 2014
July 14.indd 77
CyGeist and Stalker Hutchison Admiral
(SHA), an underwriter of Professional
Indemnity insurance, agree that the
biggest and most understandable
difference between cyber and
professional indemnity policies lies in
the cover for consequential costs of a
data breach provided by the former.
Professional indemnity policies do not
provide any of the first party cover
offered by a cyber insurance policy,
said Candice Sutherland, Business
Development Consultant at SHA.
This first party cover includes loss of
business income and data recovery
resulting from a network security
or privacy breach, as well as crisis
management, which encompasses all
costs incurred in minimising the impact
of the breach. These costs include:
fees of attorneys, forensic investigators,
IT specialists, loss adjusters, costs
of minimising reputational damage
and notifying parties affected by the
breach.
FIRST PARTY COVER IS
A FUNDAMENTAL RISK
MANAGEMENT TOOL
TO DRIVE CORRECT
POLICYHOLDER
BEHAVIOUR.
Companies often underestimate
the value of the first party cover,
particularly crisis management. First
party cover is the driving force behind
the purchase of such policies in the US.
Figures from the latest NetDiligence
Cyber Liability and Data Breach
Insurance Claims study substantiate
this. Of the $84 million in total
payouts submitted by insurers for the
purposes of the study, approximately
half (50,4%) was spent on fees of
specialists, crisis management and
notification.
First party cover the main difference
between cyber and PI is a
fundamental risk management tool to
drive correct policyholder behaviour.
Traditional liability policies respond
when a demand for damages is made
by third parties. In the specific case
of cyber incidents immediate action is
critical. Waiting is not an option.
Cyber insurance policies are triggered
when a breach is suspected. At this
point relevant crisis management
service providers are deployed. A
proactive approach is imperative in
minimising the loss and potential
reputational damage.
As far as the actual liability element
is concerned, there might be some
specific circumstances resulting in
overlaps between the two types of
policies, but this will ultimately depend
on how broadly the professional
indemnity policy wording is framed.
The broker and client would need to
review the following more closely:
Generally professional indemnity
cover relates to the provision
of a professional service, but
information and cyber risks are
often not a fundamental part of the
professional service being offered.
Broadly speaking professional
indemnity cover is negligence-
based, and since the Protection of
Personal Information Act (POPI) is
going to impose strict liability, these
risks could fall wide of the cover.
Fines and penalties are a
common exclusion under
professional indemnity policies,
whereas cyber insurance policies
generally afford coverage to
the extent insurable by law.
SHA and CyGeist recommend
keeping track of rejection decisions
by insurers going forward in order
to understand to what extent these
risks are excluded from traditional
liability coverages. There is also the
possibility that some insurers wont
feel comfortable covering such risks
and end up implementing further
exclusions so as not to insure them.
Candice warned that in the US many
insurers have rejected cyber and
privacy related claims under the
more traditional policies, and when
contested, the courts have sided with
insurers.
77
2014/07/07 8:32 PM

Hollard's bright future
T
aryn Kerr from COVER sits
down with Nic Kohler, CEO
of Hollard, to chat about the
Etana-Hollard merger, and how the
Hollard Broker Markets transaction
is a serious vote of condence for
the broker channel. With a number
of successes both nationally and
internationally under their belts,
Kohler sees a bright future for
Hollard and for its broker partners.
78
Coffee_july.indd 1
Coffee with
COVER
Taryn Kerr: Where did your journey
in insurance begin?
Nic Kohler: I studied actuarial science at
university, so I was destined to work within
the insurance industry. I had a bursary from
Commercial Union, so I began working for
them in the actuarial department. That was
"We try to avoid
the only company that I worked for before I
joined Hollard in 1997.
unnecessary
TK: How did you end up at Hollard
formality and
and what was your journey inside bureaucracy"
the company?
NK: Hollard was a very small company in
1997, but I had friends that had worked with
me at Commercial Union, and had recently
joined Hollard. Hollard was just starting to
get serious about life insurance at the time,
and had started to employ people from
the life industry, and my friends convinced
me to consider joining Hollard. I met with
Miles Japhet, Managing Director of Hollard
at the time, and he suggested that I attend
the company conference as a bit of an
introduction to the company culture. I loved
the atmosphere at the conference, especially
the fact that Hollardites were serious about
what they did, but did not take themselves
too seriously. The company had no legacy
and there was an opportunity to do things
that were right for the customer from the
outset. Based on all of that, I joined Hollard
to do some actuarial work, but soon became
involved in many different areas of the
business. In 2007, I was given the incredible
opportunity to take over as CEO from Paolo
Cavalieri, when he left to start Etana.
2014/07/07 11:12 PM
 TK: How did Hollard manage to
keep the "small company" feel for
so long and do you think you will
be able to manage that after the
Etana merger?
NK: We have a very deliberate strategy to
maintain a small company feel, as we do
believe that it offers a lot of advantages
over more traditional corporate structures.
It gives us agility in decision-making and
helps us to be an employer of choice, a
place where people enjoy working. We
try to avoid unnecessary formality and
bureaucracy, and we try to maintain a at
structure and to say no to politics. But
there is denitely a pendulum effect with
growth comes a need for some structure,
but then you realise that you may have
gone too far, and you break it all down
again. The Etana team has come from a
smaller company, and will therefore be very
valuable in swinging the pendulum back to
the agile side.
"I studied actuarial
science at
university, so I was
destined to work
within the insurance
industry."
"I think that our
partnership
model will
evolve in a
positive way"
Coffee_july.indd 2
TK: The merger with Etana seems and Mozambique have set new records
year on year and are maintaining that
to have gone smoothly, from a
momentum this year. They provide
business and personnel point of great diversication from the tougher
view. How did you experience it? underwriting environment that we are
experiencing in South Africa at the moment.
NK: It was relatively smooth, but only
Many of these countries have high-growth
because of a very deliberate focus
economies, which also helps. We are
on change-management, as well as a
developing life insurance businesses in
tremendous amount of goodwill from Etana
these countries, in order to develop a
staff and Hollardites alike. I really need to
composite business model as we have here.
commend the entire Hollard and ex-Etana
We are also looking to expand our African
team for approaching the integration in a
footprint - we are in negotiation to acquire
very constructive and apolitical fashion.
a majority stake in a Ghanaian insurance
Paolo and his executive played a critical role
company, and are in the nal stages of
in bringing the Etanans into the fold. It was
negotiating an entry into East Africa. This
a critical leadership moment for them, and
expansion gives our South African based
they had to show the broader Etana team
partners a great opportunity to do business
what they were gaining despite a very real
elsewhere in Africa a rapidly growing and
sense of loss. Of course, the integration also
increasingly competitive set of markets.
had an impact on Hollardites, and it required
a mature approach from all involved. We TK: What are your thoughts on
are now less than a month away from
RDR and the survival of UMA's and
completing the physical integration, and
independent brokers?
I think this process of presenting a unied
proposition to the market will be a lot easier NK: We are holding our breath to see
once everyone has settled down in their new exactly what RDR will entail, but from
workspaces.
what we have been led to believe, I think
that it will be good for the industry. It will
TK: You need to be commended on
provide regulatory clarity on things such
the new branding, as it has been so
well received by consumers.
as denition of intermediary services and
related remuneration, and will ensure that
intermediaries are properly remunerated for
NK: Thank you. It was important for us - we
their professional advice. Ultimately, it will
have been quiet for a while, and Etana had
continue the process of professionalising
a very strong brand identity so we needed
the service provided to the client by
to make sure that we got out there with
intermediaries, and will assist these
a refreshed proposition that reects our
intermediaries to get proper recognition
personality, warmth and quirkiness.
for the value that they add. Ultimately,
TK: Will the size of Hollard impact the intermediaries who ensure that their
businesses meet RDR requirements will not
the strong partnership model that only survive but will thrive.
has made it famous?
The UMA that has a proper value
NK: I think that our partnership model will proposition will also thrive, but I think it
evolve in a positive way, since we now have will be tough for UMAs that are simply
the Etana branch that has a signicant local administrators and which are using the
is lekker position across the country, and we model to derive extra remuneration. As
have a more complete product range than Hollard, we rmly believe that the UMA
we have had in the past. We have deeper model will have a denite place in the future
resources and more to offer, but we still environment, especially when it comes to
believe strongly in the power of partnership. specialist and niche risks.
We want to tweak our partnership model
to leverage the strengths that we have, as
opposed to relying entirely on the partner for
every aspect of business.
TK: Hollard has been active north
of our borders for a very long time.
How is that going and what exciting
things are happening?
NK: It is going very well. Our SADC
operations Namibia, Botswana, Zambia
79
2014/07/07 11:12 PM
 Wealth Management

Managing the wealth of individuals is a delicate and critical task. COVER asked the industry
what the latest developments in the wealth management environment are, and what a wealth
management service actually provides. We also considered where the industry is moving
toward, and how nancial advisors are making use of unique opportunities.

A complex conversation
THIERRY VALLET
GM of AfrAsia Bank and Executive
Director AfrAsia Private Banking

Greater complexity and

dynamism are reshaping the
wealth management industry.

Well-versed private customers

with complex needs and the
shaky investment context present
challenges to wealth managers. The
internationalisation of the economy and
technological developments ensure that
banks have to constantly reinvent their
value proposition and diversify for new
markets. Technological developments
makes banking services available online
decreasing the need for an extensive
network of offices.
At the same time, the regulation of
reward and rising levels of investors
confidence following the banking
crisis of 2008 require a new level of
transparency and new methods of
charging for services. As a private
bank, we aim to help our customers to
mitigate the risks they face and benefit
from market conditions.
Wealth management is based on
trust. With the trust we build with our
investment partners, we provide sound
and creative investment solutions for
our clients needs. Wealth Management
is delivered at AfrAsia Bank by our
experienced team of Private Bankers
and Portfolio Managers. They aim to
first understand the customers needs,
objectives, and future plans. Given
this, a tailor-made solution is provided
to each customer. Our offering spans
from traditional banking products
offering attractive returns, financial
planning, investment solutions through
specialist investment houses including
our in-house asset management arm
AfrAsia Capital Managements (ACM).
AfrAsia Bank adopts a customer-
centric approach. We are able to offer
tailor-made products that traditional
institutions do not provide: more
attention is given to customers.
Currently, private banking and wealth
management stand for a major part of
the banks activity. The management
has been able to position AfrAsia Bank
such that it is perceived as a real
private bank in Mauritius and in the
region.
As a result, our comprehensive
set of service is attracting an
increasing demand from high-net
worth individuals (HNWI). Most
of our customers prefer to invest
with us while The AfrAsia offering
is complemented by our asset
management arm which in proposing
competitive and creative investment
products with attractive returns to
individuals and institutions.
The AfrAsia approach to Private
Banking enabled us to develop solid
recognition in the regional scene.
AfrAsia Bank was awarded the Best
Private Bank in Mauritius 2013 by The
Banker/Private Wealth Management.
The current positive growth in Africa
is driving the development of financial
services and slowly encouraging
the shift from traditional banking
to a modern business platform: the
needs of the continents residents are
changing as their wealth increases.
This is why Africa and especially the
SA HNWIs market segments are at the
core of AfrAsia Banks strategy.

80 COVER JULY 2014

July 14.indd 80 2014/07/07 8:32 PM

 Growing tomorrows
leaders today
The MET Collective Investments
2014 Boutique Investment
Manager Conference was
held on 9 and 10 June in
Cape Town and Johannesburg
respectively and showcased
MET Premium Partners, a select
group of boutique and specialist
investment managers offering
investors access to diversified
and unconstrained sources of
alpha.
Kevin Hinton, Head of Distribution
and Client Services at MET Collective
Investments, opened the days
proceedings, explaining that, in
the current uncertain market, an
increasing number of institutional
investors are seeking non-traditional
sources of return. The long-standing
bull market and hunt for cheap
capital has led to a proliferation of
smaller, more nimble investment
managers which are able to leverage
market opportunities more timeously
and offer active and smart beta
investment options.
The percentage of market share
occupied by South African boutique
investment manager businesses has
risen from just under 10% in 1999 to
almost 40% in 2014, with the number
of portfolios managed now at about
180. According to an international
survey by Sungard, key factors
behind the rise of boutiques globally
COVER JULY 2014
July 14.indd 81
include, among others, investment
manager talent leaving large banks and
corporates to form their own firms,
agility, pure investment and singular
strategy focus (non-core functions
largely outsourced), uniqueness of
investment research and investor
distrust of larger firms.
The salient points under each of the
presentations included:
INDUSTRY COMMENT: THE
RELATIONSHIP BETWEEN
WINNING PORTFOLIOS AND
IMPROVED INVESTOR EXPERIENCE
David O Leary from Morningstar
discussed the disparity of stock
analysis information available in the
market and the difficulty that often
creates for investors. Morningstar
therefore aims to assist in better
investment decision-making by
evaluating investment managers
according to five key criteria:
1. People: investment manager talent.
2. Process: how strategy translates to
portfolio construction.
3. Parent: sales or stewardship (putting
the investor first, fee structure, market
leading or lagging products, etc.) as a
priority focus.
4. Performance: why the portfolio
performed as it did in different
markets.
5. Price: is the portfolio good value
when compared with similar portfolios
sold through similar channels?
Manager tenure and investment in their
portfolio(s) are also key considerations.
Portfolios which have been managed
by the same portfolio manager for
five years or more, and in which
the manager co-invests, generally
outperform.
ALTERNATIVE INVESTMENTS
Liliane Barnard from Metope
Investment Managers considered
the outlook for South African listed
property. Metopes view is that the
sector is currently an excellent asset
class choice as it offers stable income
yields (inflation-outperforming income
growth, with more than 95% of income
derived from rentals, resulting in
quality distributions being supported by
cash earnings), improved liquidity and
interest from foreign investors looking
for high-yielding investments, rental
market growth, increasing supply of
new space and lower vacancy rates.
The South African property market
offers significant diversification
opportunities for inward-listed
companies and foreign holders of local
entities. Local listed property has been
the best performer in the past 10
years, offering yields of 23% (compared
with equity (20%), bonds (9%) and
cash (8%)). As the sector has a low
correlation with other asset classes,
it also contributes to the reduction of
overall risk in a portfolio.
Total returns from the South African
listed property sector for the next two
years are expected to be 11% to 12%
per year (with a real return of more
than 5%). Global property is expected
to return 10% for the next 12 months,
with a suggested portfolio weighting of
15%.
81
2014/07/07 8:32 PM
 Wealth Management
Ian de Lange from Seed Independent
Investment Consultants presented on
the benefits of smart beta strategies.
Passive trackers and active investment
managers typically outperform market
cap-weighted indices after costs,
whereas smart beta approaches tend
to outperform traditional market
cap-weighted indices through the
systematic use of predetermined
styles and factors when constructing
portfolios.
Seeds investment process involves
the use of two building blocks, namely
value (stocks that trade below their
intrinsic value) and momentum (price
and earnings momentum), when
constructing portfolios. BCA, the
worlds leading provider of global
macro and independent investment
strategy research, has proved that
value and momentum considerations
outdo growth in the US and globally.
Value and momentum outperform
in different market conditions and
the blend therefore produces more
consistent outperformance.
Seeds one-year equity return (at 31
May 2013) is 28,65%, with a ranking
of 5/114 (ALSI 21,81% and 50/114 and
general equity median 21,03% and
57/114).
Kobus Louw from Contego Asset
Management explained the importance
of investment protection through
portfolios having a negative to low
82
July 14.indd 82
correlation to the market and capital
preservation through growth asset
classes (like equities). Contego offers
three portfolios in the MET Premium
Partner stable, namely the Contego BI
MET Income Plus Fund (low risk, stable
returns), Contego B2 MET Protected
Income Fund (cautious, low-equity
income portfolio) and Contego B3 MET
Protected Balanced Fund (moderate
risk, high-equity balanced portfolio).
All the portfolios have outperformed
their benchmarks and sector averages
since inception (January 2012).
Important notes:
The Contego BI MET Income
Fund offers better returns than
money market and cash.
The Contego B2 MET Protected
Income Plus Fund offers an attractive,
tax-efficient level of income.
The Contego B3 MET Protected
Balanced Fund offers strong,
inflation-protection growth.
Clients looking for reliable, consistent
returns from an informed, more
conservative investment manager would
be well suited to Contegos approach.
FLEXIBLE INCOME
Louis van der Merwe from Truffle
highlighted the importance of a
fundamental valuation philosophy
within a co-investor investment
management environment. Such an
approach assists in maintaining steady
income streams, improved liquidity and
reduced volatility.
Truffles investment strategy also
involves capital preservation (through
reduced volatility), asset class
diversification and minimum exposure
to the general equity market. A
blend of dividend, interest and rental
income results in real, tax-efficient
returns. The investment manager
uses a combination of listed perpetual
preference shares, listed corporate
bonds and property in the companys
portfolios, with its flexible income
portfolio generating returns of 7,8%
(5,22% after tax) at 6 April 2014.
Investors suited to the portfolio require
regular income, protection from equity
and bond volatility and optimised,
after-tax returns.
Brandon Quinn from Saffron Wealth
focussed on investment strategies
involving income enhancement (Saffron
MET Opportunity Income Fund) and
inflation protection (Saffron MET
Inflation Linked Bond Fund).
Saffrons investment philosophy
encompasses alpha generation within
a risk framework, taking advantage
of pricing inefficiencies, a quantitative
and technical research bias, an
unconstrained investments universe
improving risk-adjusted returns and
diversified sources of added value
improving the risk/return profile. Key
to Saffrons investment process is risk
budgeting, short-term investment
maturity, specific entry and exit yield
expectations and the quantification of
potential downside risks.
The boutiques flexible income-
focussed portfolios offer a wide
investment universe, including cash,
sovereign bonds, credit, listed property,
global investments and commodities,
credit and equity derivatives.
ACTIVE EQUITY
Cy Jacobs from 36ONE Asset
Management explained that the
market does not always price securities
efficiently and that share selection
through bottom-up fundamental
analysis (with a macro analysis overlay)
can, as a result, outperform over time.
36ONE furthermore manages risk
through the monitoring of portfolio
exposures within a range of asset
classes, including mid- and small-cap
shares.
COVER JULY 2014
2014/07/07 8:32 PM

Adding value through the exploration
of growth opportunities is also key,
as is analysing opportunity versus
risk scenarios. Business opportunities
are balanced against associated risks,
including revenue streams, possible
cost escalations and the inefficient
use of capital. Analysis is an on-going,
interactive process, with portfolio
positions being monitored in real time.
36ONE manages four portfolios:
two unit trusts (36ONE MET Flexible
Opportunity Fund and 36ONE MET
Equity Fund) and two hedge funds
(36ONE Hedge Fund and 36ONE
Fund). The 36ONE MET Flexible
Opportunity Funds total three-year
return to 30 April 2014 is 87,5%
(compared to the JSE All Share Index
return of 63,3%) and the 36ONE
MET Equity Fund has returned 61.0%
(compared to the SWIX index total
return of 51,6%) since its inception on
1 July 2012.
Chris Botha from Imara Asset
Management discussed the generation
of attractive, real returns through
investment in advantaged businesses
over longer timeframes. The company
views capital impairment as its primary
risk and portfolios are therefore
benchmark agnostic with no cash
limits. Imaras investment universe
comprises a watch list of 120 shares
and factors which are considered
include high return on invested capital
COVER JULY 2014
July 14.indd 83
(high conversion of earnings into Gary Quinn from Blue Alpha
discretionary cash), sustainability of Investment Management discussed
franchise (dominant market position the use of equity guidelines as a means
affording pricing power), management to enhance returns and lower risk.
(innovation and marketing investment) Although index valuations are a strong
and valuation (high yield/low price). form of measurement, this does not
always apply to shares. Simply picking
The investment process then involves shares with low price-earnings ratios is
an adherence to the houseview of the insufficient as this should be balanced
share, bottom-up (predominantly) and with return on equity and market cycle,
top-down share analysis, a maximum as well as cash flow considerations.
share number of 35 and maintaining a
relatively low churn rate. Management
visits are undertaken regularly
and companies that are not fully
understood are not invested in.
The Imara EF rel All Share Fund (112%)
has outperformed the FTSE/JSE All
Share Index (53,4%) since its inception
in 2008 and the Imara EF rel Domestic
General Equity Fund (112%) has
outperformed the general equity sector
average (65%) since its inception (also
in 2008).
Blue Alphas equity positioning involves
Hlelo Giyose from First Avenue
resources (growth and quality),
Investment Management looked
industrials (growth could continue
at intrinsic value investing (which
at pace) and financials (yield and
is not deep value or growth/
growth). Price earnings are a poor
momentum investing), with companies
predictor of returns in resources, while
demonstrating a high price-to-
domestic industrials benefit from cash
earnings ratio featuring significantly
flow measures and financials from
in its portfolio (61,9%). First Avenues
contracting balance sheet analysis.
product offering is highly concentrated
with the investment teams best ideas, The Blue Alpha MET CI Emerging
with its 10 best occupying up to 60% Market Fund (18,9%) has been a
of its portfolios. consistent top-quartile performer
over one, three and five years,
outperforming the FTSE/JSE W All
Share total return (12,3%) and South
African general equity sector average
(11,3%).
Delphine Govender from Perpetua
Investment Managers, a 100%
privately-owned company, discussed
the companys analytical philosophy,
behavioural process and organisational
focus. Key to its analytical philosophy
is an understanding of who Perpetua
is as an investor and adhering to
Quality and margin of safety form part
of share selection, with stewardship
(capital allocated effectively), economic
moat (wide or narrow), valuation
(trading at discount to intrinsic value)
and uncertainty rating (predictability of
cash flows) considerations key to the
process.
First Avenues portfolio has handled
bouts of uncertainty extremely well,
with its general equity portfolio
outperforming the SWIX on the five
biggest drawdown days of the past year.
83
2014/07/07 8:32 PM
 Wealth Management
that, while the companys behavioural
process focusses on the belief that
producing different returns necessitates
portfolios which are different to
the market and average manager.
Perpetuas organisational focus involves
the firm being set up as a profession
or business, with freedom, aptitude,
internalisation of process, temperament
and incentivisation as building blocks.
Mismatches between value and price
matter most, with Perpetua focusing
on intrinsic valuation, discounted share
purchase and conviction maintenance
to leverage associated opportunities.
Value investing is core to this approach,
with Perpetua falling into the bottom
left of the value investing continuum.
Members of the investment team
are all analysts, with individuals (as
opposed to committees) accountable
for decision making. The investment
manager is not benchmark cognisant
and takes a longer-term view on
investments (the value of a company
takes precedence over the trajectory of
its share price).
The Perpetua Composite Return
(11,5%) has outperformed the SWIX
(6,4%) on a year-to-date and three-
month (11,5% versus 10,0%) basis.
RESPONSIBLE RETIREMENT
INVESTING
Adrian Clayton from Northstar Asset
Management considered long-term
exposure to quality investments where
value exceeds price. Shareholding times
are indefinite; valuations reflect the
correct price and quality is measured
by a sustainable return on invested
capital using this approach.
Northstars equity research process
involves quantitative screening (value
and quality measures) and reading
(books and research reports), which
culminate in a watch and buy list of
companies. Some of Northstars current
views are cash as a sound capital
preservation tool, long-dated bond
maturities being favoured over shorter-
dated, property being overvalued and
resources offering depressed turnover
levels, although with fair valuation.
The Northstar Managed Fund has
consistently outperformed its peers and
inflation plus 5% benchmark since May
1999.
Steve Mills from Counterpoint Asset
Management discussed the companys
focus on simple, yet effective, business
84
July 14.indd 84
practices aimed at providing long-
term, superior risk-adjusted returns.
The key drivers of strong returns,
according to its investment philosophy,
are traditional valuation methods,
which are constantly reassessed, being
used within a dynamic investment
environment.
The company believes that the
assessment of themes (growth rates,
inflation, interest rates) operating
within markets is critical to the
understanding of valuations placed
on securities. Counterpoints hallmark
is contextual value, which involves
the combination of environment and
method in its investment approach.
Diversification and an understanding
of different sources of returns are also
important.
Key differentiators for Counterpoint
are its experience in running multi-
asset class portfolios and availability
on various multi-asset class managers
and LISP platforms. Portfolios offer
exposure to local money market and
short-dated fixed income, long-dated
fixed income, property and equities,
with global exposure to fixed income,
property and equities.
Charles Booth, also from Truffle, then
went on to highlight the companys
returns framework, which involves
consistent alpha generation, maximising
independent positions and managing to
any benchmark and risk tolerance.
This returns framework has resulted
in the companys portfolios outranking
peers and outperforming sector
medians since their inception:
Truffles CIS Equity Fund has a
minimum 75% equities mandate,
with the objective of long-
term capital preservation. The
portfolio has outperformed the
sector median by 4,6% since its
inception in January 2011.
Truffles CIS Balanced Fund has
a capital split between equity,
property and interest-bearing
investments mandate, with a CPI
plus 4% return objective. The
portfolio has outperformed the
sector median by 5,6% since its
inception in November 2011.
Truffles Flexible Fund has a
capital split between equity,
property and interest-bearing
investments mandate, with a CPI
plus 5% return objective. The
portfolio has outperformed the
sector median by 7,2% since its
inception in January 2011.
ENGAGING WITH PREMIUM
CLIENTS IN THE NEXT DECADE
Sebastian Dovey from The Scorpio
Partnership delivered an interesting
closing presentation, which considered
the question of what the wealth
management industry needs to do
to double its current US$18,5 trillion
assets under management in the next
five years.
Investor habits are changing and
research conducted by Scorpio has
illustrated that maintaining existing
client relationships and investing in
systems and technology that promote
and support these associations is key.
Demonstrating value for money is
going to prove vital in the coming years
and information management, which
makes it easy for clients to navigate
their savings and keep up with trends,
will form an integral part of that.
Another important observation is how
wealthy clients find their investment
managers. Leading the survey was
24% of respondents identifying wealth
managers through friend or family
referrals and 17% through their own
research, both of which support
the importance of relationships and
technology.
A discussion around how investors
feel about saving was also highly
enlightening in terms of wealth
managers deciding on how best to
manage their needs. Having clients
identify words, which best describe
their investment attitude (bearing,
bullish or owl), helps in shaping the
level and type of consultation best
suited to them.
MET Collective Investments CEO,
Leon Greyling, closed the days
proceedings, explaining that the
MET Premium Partners investment
managers have been put through
a rigorous due-diligence process to
ensure they have the requisite skills
and processes in place to meet the
varying needs of investors. Momentum
Manager of Managers is therefore able
to use their expertise in retirement
fund portfolios and Momentum-
branded retail investment solutions
where a multi-manager portfolio is
required.
COVER JULY 2014
2014/07/07 8:32 PM
 Technology
Legacy transformation:
the enhance and evolve approach
Cloud, data, mobile and social
media are all transforming the
way consumers interact with
their insurers. This represents an
exciting opportunity for South
African insurers that are willing to
invest in new core technology.
Historically, South African insurers
have invested in aging, tightly-coupled
monolithic systems that adapt poorly
to changing technologies and are
failing to meet the requirements of
this growing customer base. Even
the recent technology upgrades
insurers have undertaken havent
really changed this. These legacy
systems are unable to address the
needs of the new landscape and they
are, in effect, hampering business
growth opportunities, in contrast to
the latest micro insurance businesses
that are growing from a new cost and
technology base.
While micro insurance is but a small
portion of the insurers portfolio in
South Africa, there is a profitable
opportunity there if the model is right.
Established insurance businesses have
the advantage of a wealth of historic
information, but they need to be able
to leverage this data more effectively.
Newer insurance businesses have
already accomplished this by adopting
technology platforms that are flexible
and adaptable to change. These
insurers can operate across multiple
channels, access data that gives them
a birds eye view of the landscape,
and launch newer products faster.
Furthermore, recent regulatory change
COVER JULY 2014
July 14.indd 85
in South Africa has had a massive
impact on insurers. There is regulatory
scrutiny on products, and pressure to
change existing distribution channels.
The challenge is to manage growth and
exploit the revised channels through
the intelligent use of customer data,
while, at the same time, adapting to
changing legislative requirements. One
area of consideration is the Protection
of Personal Information Bill, which will
impact on the way companies manage
personal information. At the same
time, focus needs to be placed on the
Solvency Assessment and Management
framework and Treating Customers
Fairly standards.
RHYS COLLINS,
Head of African Operations at SSP
Legislative change can have both
a positive and negative impact
on the insurance industry, but its
critical to have a flexible technology
as usual. The Enhance and Evolve
infrastructure in place to be able to
approach also helps businesses mitigate
deal with the competing forces for
risk, and to extract all the value and
technology change. From research,
data from their existing systems on a
it is clear that updating the core
step-by-step basis.
It enables insurance businesses to
INSURERS SHOULD BALANCE upgrade their most critical legacy
technologies on a modular basis and to
THEIR LACK OF COMPETITIVENESS
evolve without complete replacement,
WITH IMPLEMENTING A NEW ensuring they remain competitive and
CORE SYSTEM. that customers do not suffer in the
process.
In this manner, the most urgent
technology platforms that underlie business priorities can be addressed
the main processes within insurance first, while other systems can be
is imperative for survival. Adapting updated in line with strategic business
legacy platforms is complex, time- need. This approach allows the
consuming and fraught with issues, so business to be proactive in addressing
building a business case for technology its legacy systems, rather than being
investment can be difficult. As a driven purely by market change.
result, these expenditures need to be
prioritised and cost-justified, more so The opportunity to take advantage of
than ever before. Software-as-a-Service (SaaS) delivery
will also play a big role in legacy
However, insurers should balance evolution for those companies able
their lack of competitiveness with the to manage the constraints and risk
pain and cost of implementing a new around data management. The result is
core system. Insurers should consider a flexible, adaptable modern platform
Enhance and Evolve strategies that that enables the business to respond
gradually replace core systems. This quickly to change, and is optimised
approach is helping some businesses for Big Data and new product
move to new flexible technology development, as well as digital, mobile
platforms while maintaining business and social.
85
2014/07/07 8:33 PM
 Technology
Technology motorises
insurers anti-fraud vehicles
JONATHAN HOLDEN,
Managing Executive: Insurance at
Innovation Group South Africa
Fraud will always be alive as a
necessary cost of being in the
insurance business. But the law
of diminishing returns is under
strain. The global economic
crunch has fuelled an appetite
for fraud perpetration, biting into
policy pricing.
SOUTH AFRICAN FRAUD SCENE
An estimated R15 billion or 30% of all
2013 insurance claims in South Africa
were fraudulent. Businesses lose an
estimated 5% of annual revenues to
fraud, with a continual upward trend
in the number of commercial crimes in
the country.
This is driven to a large extent by
fraud in the motor industry down a
long value chain from towing, panel
beaters, salvage and glass fitting,
through to accidents and theft.
While road conditions, escalating costs
of vehicle repairs and theft do drive
car insurance premiums up, about 25%
to 33% of all claims contain some
element of fraud, according to the AA.
86
July 14.indd 86
Over-inflating household claims is
also worsening in South Africa not
only among individuals and SMEs,
but among syndicates claiming either
through multiple policies or fake IDs.
On a commercial level, fire damage is
still a South African classic, with stock
loss claims natural to escalate in a
distressed economy becoming much
more prevalent.
GLOBALLY, FRAUD IS CURRENTLY
COSTING THE WORLD ECONOMY
$3,5 TRILLION
A GLOBAL PANDEMIC
World travel and trade, the rise of the
multi-national corporation, the internet
and broadband access all these
trends converge to create challenge
and opportunity for innovators on both
sides of the law. Fraudsters will hunt
for gaps in the system to exploit.
Globally, fraud on the back of corporate
competitiveness and technology
advances is currently costing the world
economy $3,5 trillion in occupational
fraud costs alone.
Companies and governments can best
root out fraud and corruption if they
employ innovative electronic tools.
Businesses can protect themselves
against fraud by purchasing commercial
crime or fraud risk insurance and risk
management tools.
In the US, as in India, medical claim
fraud is sweeping insurance coffers
clean. The UK one of the most
sophisticated trackers of insurance
fraud, reported a 2,5bn loss to the
economy in 2013 60% from personal
claims, with a sharp rise in bodily
injury claims earning Britain the label
whiplash capital of the world.
LOCAL RESEARCH FINDINGS
Innovation Group researched the top
fraud trends in 2013, and found that
52% of fraudsters blamed theft and
break-ins for lost belongings. Claims on
TV and audio devices (29%), computer
equipment (25%) and jewellery (21%)
were found to be the most popular.
Almost three quarters of fraudulent
claims for jewellery came from men,
with 38% of all claims made by under-
18s. Meanwhile, 47% of mobile phones
were reported as stolen in September
2013, which coincidentally was the
month the iPhone5 was launched.
BETTER DETECTION AND
PREVENTION
Anti-fraud regulations and more robust
data analytics tools are needed to
detect red flags.
For the insurance industry, the right
balance needs to be struck between
cost of prevention and detection, and
losses suffered through fraud. One of
the challenges in striking this balance is
to identify and measure the real cost of
fraud to an insurer.
PINPOINTING THE GAPS
Analysis of the constantly evolving
nature of fraud and the fraudster
helps the insurance industry bolster
its defences against these universally
costly criminal activities.
Problems of identifying and dealing
with insurance fraud are complex, for
four main reasons:
Fragmented or inconsistent data:
Fraudsters rely on multiple insurers
and multiple databases to create
confusion or avoid the possibility
of the insurer making the right
connections to identify fraud.
Complexity: fraud is diverse and
dynamic, only limited by the
imagination of the fraudster.
No core mechanism or process:
Applying a consistent approach in
all cases is difficult; what rules do
you apply and how rigid are they?
Agility of the customer: Dealing
with an issue often provides a spur
for the fraudster to try something
COVER JULY 2014
2014/07/07 8:33 PM
 new; so you need a comprehensive
approach to spot emerging issues.
BIG DATA PLAYS A PIVOTAL ROLE
Electronic tools can expose the major
fraud risks, and act as a deterrent for
potential fraudsters.
Data mining can lend considerable value
to the organisation seeking to leverage
key business intelligence or predictive
analytics to detect insurance fraud and
protect the organisation from loss. Many
How green geysers can
help the insurance industry
Imagine a geyser that tells
you in advance when it needs
to be replaced. carbonTRACK
has developed a locally-
manufactured smart energy
platform that allows users
to monitor their energy
consumption in real-time, with
the potential to cut costs for the
insurance industry.
About 250 000 electrical geysers are
being replaced annually. This platform
and the devices connected to it will
predict geyser failure before it occurs
by detecting leaks in the drip tray
and alerting the homeowner to the
problem.
Finance and insurance organisations
will benefit from the proposed Green
Geyser programme and we will help
policyholders replace their electric
geysers with solar geysers. The
system will mitigate risk as it allows
for proactive maintenance, and its
reporting protocols will alert insurers
and installers when the geyser is
performing below par.
The platform was jointly created by
with its Australian sister company to
allow users to measure and manage
their electricity consumption using their
phone, tablet or desktop.
The platform interfaces with
conventional electrical hot water
geysers, renewable energy devices such
COVER JULY 2014
July 14.indd 87
claims are not caught, simply because
companies lack the necessary tools to
identify which claims are legitimate and
which may be fraudulent.
When implemented within an insurance
adjuster process, data mining leverages
a combination of powerful analytical
techniques with first-hand business
knowledge. This information is then
turned into the insight necessary to
identify probable instances of abuse or
fraud.
as solar water heating geysers, heat
pumps and tracking solar panel energy
generation.
The carbonTRACK device is easy to
install, and the software interface is
simple and easy to understand. Savings
are transparent and understandable.
Under certain conditions, energy
savings in the residential sector have
peaked at up to 35% of the energy bill.
Electricity grids in Africa are under
enormous pressure and the lack of
supply has severe repercussions for
users. Consumers increasingly expect
both content and control from their
mobile smart devices and laptops.
More and more, they are demanding
to receive content on their phones
and tablets, and to be able to manage
more than just their finances from their
phones, given todays connected world.
REMODEL LEGACY SYSTEMS TO
COMBAT CRIME
Legacy systems are a problem, and
new systems are expensive. Although
funding is always an issue, taking on
new, sufficiently sophisticated systems
can reduce the current 30% of all
premiums going towards fraud, and at
the very least push these 10 to 15%
down within the next five years.
IRVAN DAMON,
CEO of carbonTRACK South Africa
The Internet of Things refers to a
network of connected machines or
appliances embedded with sensors,
digitally communicating bytes of
information across the internet to devices
like your smart phone, tablet or desktop.
In South Africa, with its spiralling
electricity tariffs representing an
increasingly important cost centre for
consumers, monitoring and switching
energy loads are an urgent requirement.
carbonTRACK units are manufactured
locally in South Africa, creating jobs
and contributing to the green economy.
Once installed in the household by an
accredited installer, they communicate
with the software platform via the
internet to allow users to:
Monitor and track household
power usage remotely;
Monitor temperature and switch
the geyser on and off;
Control the pool pump;
Detect leaks in the geyser drip tray;
Set geyser temperatures remotely;
Detect runaway temperatures on
the geyser and avoid damage;
Reduce carbon footprint; and
Cut energy bills.
87
2014/07/07 8:33 PM
Untitled-2 1 2014/07/07 11:13 PM
Untitled-2 2 2014/07/07 11:13 PM
 Renewable Energy
Renew the energy,
renew the country
Renewable and sustainable energy projects are essential to the development of
South Africa, and Africa alike. These projects have very specic risks, some of
which are risks during the construction phase. COVER kept an eye on the industry,
to see what projects of this nature are underway. We also asked for some insight
on risks specic to these projects, focusing on the construction phase.
M&F protecting whats
important to SA
In recent years, there has been a
growing emphasis on renewable
energy as a source of alternative
energy.
South Africas Integrated Resource Plan
(IRP), which is a 20 year projection on
electricity supply and demand, indicates
that by 2030, approximately 38% of
the total electricity generated in South
Africa - about 23 375 MW will be
required to come from renewable
energy sources. This is according to the
South African Department of Energy
Independent Power Producer (IPP)
Renewables.
Mutual & Federal has been providing
insurance cover for local renewable
energy projects that involve the
construction of both wind and solar
farms.
The construction of renewable energy
plants is complex and involves
a diversity of risks. Many of the
components used for the solar or
wind farms are sourced overseas.
Risks therefore include the importing
and shipping of the components
90
July 14.indd 90
a wind farm were damaged during a
Photo Voltaic (PV) cells during inland
and transportation by road before
construction work commences. Once
the plant has been constructed, the
permanent assets will also need
appropriate cover, from testing and
start up, through to full operation.
Within its Corporate & Niche division
Mutual & Federal offers quality
Corporate, Marine and Construction
insurance solutions to turn renewable
energy setbacks into comebacks.
In order to meet our clients needs,
we have developed a product, using a
cradle to grave design approach, which
provides Marine, Construction, and
Operational cover for assets, breakdown
and profits, all in one comprehensive
policy, said Samantha Boyd, Head of
Corporate & Niche Insurance at Mutual
& Federal. She added that the policy is
able to adapt to various situations and
incidents. To date weve had incidents
where a client experienced damage to
materials while in transit to a site. In
another incident a clients blades for
storm at a harbor where it had been
stored prior to shipping to South Africa.
Other incidents included damage to
transit from the ports, due to road
accidents or overturning of trucks, and
loss during the construction phase of a
wind farm project where a tele-handler
which was being used to pick up blades
overturned and fell on top of the
blades. All of these incidents would be
recoverable in terms of our Renewable
Energy project insurance policy, thus
providing the protection expected by
our clients, she concluded.
Mutual & Federal has the technical
expertise and resources to provide
clients with peace of mind knowing that
they are dealing with an insurer that
understands the complexity of renewable
energy risks, and can offer the necessary
cover under one seamless policy.
COVER JULY 2014
2014/07/07 8:33 PM
 The JSE lists its
a low carbon infrastructure, minimal
resource reliance and increased natural
resources, says Parks Tau, Executive
Major of the City of Johannesburg.

first green bond

Johannesburg Stock Exchange
(JSE) has listed its first green
bond. The R1,46 billion ($140
million) bond issued by the City
of Johannesburg will be used
to fund green initiatives within
South Africas largest city.
The bonds are priced at 185 basis
points (1,85%) above the R2023 South
African government bond. The bond
auction, which took place in the week
before the listing, was 150 percent
oversubscribed. The bond, referred to
as COJGO1, will mature in 2024.
The bond will used to fund climate
change mitigation strategies especially
those 2402
thatILASA
include
Half greater use of
Page Horizontal
Ad.pdf
and natural energy. One of the city
councils green programmes include
the installation of 43 000 solar
water heaters by City Power that will
collectively save the equivalent of
22,5GW-hours of electricity a year,
enough to run a small town.
The green bond will provide the city
with a funding source to improve and
expedite the implementation of its
gas 1
climate change
2014/02/05 12:34 PM mitigation strategy,
The JSE has always been linked to
the development of our city and we
are pleased to work with the City of
Johannesburg to bring this bond to
market. Funding green projects are
important in all cities to ensure their
greater sustainability, says Graham
Smale, Director of Bonds and Financial
Derivatives at the JSE. Johannesburg is
the first city in the C40 Cities Climate
Leadership Group to issue a green
bond.
The city council issued its first
municipal bond in 2004 and had
redeemed R1,9 billion, including R900
million in the past 12 months. The JSE
regulates the largest listed debt market
in Africa, both by market capitalisation
and by liquidity with approximately
R25 billion traded daily. At the end of
2013, the JSE had roughly 1 600 listed
debt instruments worth more than
R1,8 trillion. More than half of the debt
listed on the JSE is placed by the South
African government.

If you are a Loss Adjuster who is a

cut above the rest, you have to be one
C
of our members.
M

CM

MY

CY THE INSTITUTE OF
CMY
LOSS ADJUSTERS OF
K
SOUTHern AFRICA

Providing insight and guidance, overseeing education and ensuring continuous professional
development to Loss Adjusters of distinction for over 50 years you know you can rely on us.

For more information please visit www.ilasa.org.za

Tel +27 11 325 1977 Fax 086 519 9446 E-mail admin@ilasa.org.za
First Floor Victoria Gate South, Hyde Park Lane Manor, Hyde Lane, Hyde Park, Johannesburg

COVER JULY 2014 91

July 14.indd 91 2014/07/07 8:33 PM

 Renewable Energy
Sustainable Development
JATIN SHARMA,
Business Development Leader and Head
of Offshore at GCube Underwriting and
MIKE ROBSON,
Managing Director of C&G, outline the
risks and rewards in African renewables.
In less than two years, renewable
energy project development has
made a substantial shift from
Europe and North America to the
emerging markets.
This has been encouraged by generous
government frameworks, the falling
cost of technology, opportunities to
build cost competitive projects at scale
and a blend of wider financing options,
ranging from multilaterals and export
credit agencies to more traditional
project finance. The African continent
is at the forefront of this shift.
South Africa and Morocco are leading
this growth, with Kenya close behind.
Total financing secured by the 28
renewable energy projects during
South Africas first renewable energy
independent power producer (IPP)
procurement round, amounted to
$5,7bn in funding. The Kingdom
of Morocco has awarded contracts
for some of the largest wind and
concentrated solar power (CSP)
projects in the world. Although
countries like Morocco and South Africa
have a relatively mature construction
and infrastructure industry, the
schedule and scale of projects, not to
92
July 14.indd 92
mention the coordination of contractual
interfaces, will present substantial
challenges and risks for developers.
Regulatory, credit, resource,
construction and operational risks
are nothing new for renewable
energy developers and investors
alike. In Africa, the potential impact
of each remains to be seen. Stability
of financial incentives supporting
renewables will be critical; particularly,
as many African governments opted
not to introduce European style feed-in
tariffs. But several developers have
failed to consider what the effect
of non-compliance with regulatory
thresholds for local content could mean
for the bankability of their projects,
and, as such, incentives may be
withdrawn for falling short of defined
percentages of local content and failing
to provide an adequate, bankable
hedge.
Transferring this risk to their suppliers
and/or contractors is a poor substitute.
Suppliers and contractors will always
elect the most cost competitive
approach to building a project, and
with the exception of local construction
labour, their international supply
chains are far more appealing than
developing local supply. Constrained
balance sheets may also take their toll
as the solvability of local developers,
contractors and often the power
offtaker raises concerns about the
ability of counter parties to deliver on
contracts, as well as having sufficient
contingency funds in place to tackle
problems manifesting during the
construction and operational phase.
OFF GUARD
In recent years, many European
investors have been caught off guard
by worse than expected wind flow in
winter months leading to a decrease
in energy production, leaving many
in a highly constrained liquidity
position and forced to draw on debt
service reserve accounts. It is unclear
whether African renewables, with their
abundant natural resources for wind
and solar, will face similar challenges
in the short to medium term. Resource
data has been collated in a relatively
short space of time in order to meet
government-imposed deadlines. The
lesson learned from developers in other
markets building under similar time
constraints has been poor siting of
projects where wind turbulence, rather
than abundance, has led to several
mechanical failures within the turbine
and overall, a shortened asset lifetime.
Although well understood by
experienced developers, construction
and operational risks pose greater
challenges in Africa. Poor packing and
handling of equipment while in transit,
theft from site and subcontractor
deviations from accepted construction
practices are commonplace. Many
original equipment manufacturers
have been quick to send business
development executives to the
continent, but slow to realise the
need to build up a local operations
and maintenance team, develop crane
availability strategies or stockpile
strategic spare parts of equipment
susceptible to machinery breakdown.
Providing a secure framework to
underwrite the development of
African renewables, and ensure
appropriate investor security requires
the experience of insurers who have
supported the development of clean
energy assets in multiple emerging
markets. At GCube and C&G, we see
Africa as having clear promise for
renewable energy development, and a
market that has the ability to leapfrog
the traditional phases of national
energy development in the same way
that African mobile telephony by-
passed hard-wired communications.
The continent is not without
challenges, but by working with
experienced partners, investors in
African renewables should not only
be able to generate portfolios of well
performing assets, but also know they
are securing first-mover advantage
in a market that has huge potential.
Mike Robson concludes, The market
still has a long way to go, but with the
right safeguards in place, South Africa
certainly has the potential to meet its
energy goals. The remarkable success
of C&G in Round 1 & 2 underlines the
importance of pro-actively identifying
an opportunity and then putting in
place a sound, proudly South African
and world-class solution.
COVER JULY 2014
2014/07/07 8:33 PM
 Renewable energy tariffs
cheaper than Eskom
It is more attractive for the
government to procure new
energy from renewable energy
sources given the current trend
of Eskom electricity generation
costs and the competitiveness
within the Renewable Energy
Independent Power Producer
(REIPP) procurement programme.
Speaking at a media presentation in
Johannesburg, Mark van Wyk, Head
of Impact Investing at Mergence
Investment Managers, said that the
tariffs at which renewable energy
independent power producers are
supplying energy into the grid has
decreased significantly over the three
successive bidding rounds of the
REIPP. This is partly as a result of
efficient project installation costs and
technology enhancements.
The latest round three of the bidding
programme has culminated in an
average wind energy tariff of R0,65/
COVER JULY 2014
July 14.indd 93
Kwh and an average solar energy
tariff of R0,80/Kwh. While this
compares favourably with Eskoms
current average electricity generation
cost of R0,64/Kwh, Eskom tariffs
are expected to increase higher than
inflation with the new generation
capacity from the Medupi and Kusile
power plants, each with an average
expected generation cost in the region
of R0,97Kwh.
According to Mergence research,
total investment into wind and solar
renewable energy plants currently
amounts to R82 billion, with the
banking sector, insurance companies,
pension funds and international
investors as major funders.
Currently more than 85% of South
Africas generation capacity comes from
coal-fired power plants. In terms of
governments 2010 integrated resource
plan (IRP) the objective is to reduce
carbon intensive coal energy to 50%
of the mix by 2030, with renewable
energy sources contributing at least
26% of the energy mix.
The benefits of renewable energy
include green savings. For
each kilowatt hour of coal-based
energy generation, Eskom emits
approximately 0,96 kg of carbon
dioxide and uses approximately 1 litre
of water. The current procurement of
3468 MW renewable energy sources
into the energy mix instead of coal-
fired power plants will reduce South
Africas annual carbon emission by 6
million tonnes.
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2014/07/07 8:33 PM
 Renewable Energy
Meet the battery doctors
BY ANNETJIE VAN WYNEGAARD
I first met Chris and Serena
Anderson in South Korea
where we taught English
together for a few years. Chris
and Serena, a married couple
from Johannesburg, immersed
themselves into Korean culture
from the get-go.
South Koreans recycle everything.
Going green isnt just a buzz word
its a way of life. Nothing is wasted
anything that can be repurposed is
boxed up and reworked, usually by
roving ajumas (older women who
walk by your house and pick out the
good stuff for an extra buck).
Our gang stayed in Daegu city. In
2013 Chris and Serena attended the
Daegu Green Energy Expo. They were
planning to return to South Africa and
start their own business. We were
concerned about the escalating costs of
electricity back home and spent hours
at the expo talking to people about the
different solar, hydro and wind energy
options available, said Serena.
The expo made them realise that
renewable energy was definitely the
direction they wanted to go into, but
they were concerned about the costs
for the average South African.
At the expo we came across a team
of people promoting their battery
regeneration equipment. After speaking
to the operators we realised this could
be a great way to help South Africans
save money while recycling batteries.
Batteries are everywhere, and we
felt that this technology was more
accessible to the majority of South
Africans. After weeks of research we
eventually found a far more advanced
product with Battery Doctors and
began planning to bring the technology
to South Africa.
Chris and Serena started Battery
Doctors RSA in January 2014, as a
local arm of the international company,
94
July 14.indd 94
Battery Doctors, a division of ProTec
International. The company is currently
operating in over 50 countries around
the world.
Together they re-energise used or
dead batteries with a non-hazardous,
environmentally friendly chemical
called ProBat which works with a
specially designed charging system
called ProCharge. These re-energised
batteries are second hand batteries
that have been brought back to full
capacity and are sold with the same
one year warranty you would get with
most brand new batteries.
BEING A YOUNG ENTREPRENEUR IN
SOUTH AFRICA TODAY
The landscape for young entrepreneurs
has been riddled with bumps. Theres
definitely support for entrepreneurs
in South Africa, but its not always
easy to find, said Serena. As we
understand it, the South African
government has plans to introduce an
arm of government aimed specifically
at assisting small and emerging
entrepreneurs. We only hope that the
services available from such a branch
of government will be readily available
to all entrepreneurs all across South
Africa.
Age is a major factor when starting
a business, said Serena, along with
access to finance. Without access to
capital, it is much more difficult for a
business to grow, she said. It forces
players to start small, and grow slowly.
This can be a good thing as it forces
you to watch each part of the business
very carefully, but it can and often
does hinder growth.
A third factor is access to entry in
the market. It costs too much and
takes too long to register companies.
If a business could be registered and
started on the same day, income could
increase and opportunities might not
be lost.
Despite the challenges, Chris and
Serena are optimistic about their
future. When things become more
difficult than we anticipated, we always
remind ourselves why we started out.
We want to make a difference for our
people. We want to create employment
and make our country better. Thats
what keeps us moving forward and
always thinking of ways that we can
improve our offerings and become
better at what we do.
Our choices are limited, but only to
the positive. We will only knock on
more doors, speak to more people and
do what we can for the people of our
country.
COVER JULY 2014
2014/07/07 8:33 PM
 The risks and rewards of
renewable energy projects
Dubbed the most attractive
emerging investment destination
for solar photovoltaic (PV)
capacity, South Africa is, this
year, seeing a number of new
renewable energy projects
becoming operational.
According to David Dyer, Divisional
Executive for Services and Renewable
Energy at Marsh Africa, about three
years ago, the Department of Energy
announced a Renewable Energy IPP
bidding programme with an allocation
of about 3725MW of power in five
different rounds, with a split between
PV (1450MW), wind (1850MW),
concentrated solar power (CSP), hydra,
landfill gas, biomass and biogas making
up the balance.
Government issued 28 project licenses
(1 416MW) and Eskom confirmed
that 18 of these have already been
connected to the grid, involving mainly
wind and PV projects in the Eastern,
Western and Northern Cape provinces,
accounting for 1028MW.
A further 19 projects were awarded
in Round 2 (1 044MW) which are
presently under construction. This was
followed by 17 Round 3 projects (1
456MW) that had to reach Financial
West Africa joins in
Sierra Leone Ministry of
Finance and Economic
Development announced
that Sierra Leone has won
the first call for proposals for
the prestigious International
Renewable Energy Agency
/ Abu Dhabi Fund for
Development (IRENA / ADFD)
financing facility; and have
signed the 6MW Freetown
Solar Park project which will
target urban and western
rural districts around the
capital, Freetown. This is a
landmark Renewable Energy Project in West Africa, adding
valuable and needed clean electricity to the grid.
COVER JULY 2014
July 14.indd 95
Close by July 2013 before construction
of these projects can start.
It is quite a lengthy process, but once a
project has been selected as a preferred
bidder and reaches financial close,
construction can start and within nine
months to two years, a project can
come to fruition, which is much quicker
compared to the time it takes to build a
new coal or nuclear power station.
However, the risks involved in putting
up such a renewable energy plant can
be wide-ranging, from engineering and
construction risks, to the logistics of
getting massive equipment moved from
the harbour to its final destination. The
use of experienced local contractors
and insurers with knowledge and
understanding of local conditions,
translates into a significant differentiator.
Initially a lot of equipment had to be
imported from overseas because we
didnt have any manufacturers in South
Africa. First of all, there is a marine risk
for the equipment being transported
by sea on board vessels. Once the
equipment arrives at the port, road
transit from the harbour to the sites
poses additional risks. As projects are far
out in the country somewhere, travelling
on smaller roads and accessibility can
sometimes be a big challenge.
strengthen the existing cordial relationship between the
Governments of Sierra Leone and the United Arab Emirates.
During the construction phase, he
highlights the possibility of fires and
floods that can cause damage to the
equipment. Also from a security point
of view, there must be adequate
safekeeping on site to protect the
valuable equipment and cabling from
being stolen.
Once the project is completed, and has
been properly commissioned, there
are operational threats that need to be
considered.
Because all of these projects are
financed, the Lenders require adequate
protection in the event that something
goes wrong throughout all the stages
of the project.
Equilibrium is being reached between
the cost of putting up a renewable
energy plant and the cost of power,
and its becoming more economical
and viable to do that successfully.
There are a number of manufacturers,
particularly on the solar side, which
have started up local manufacturing
operations, contributing to the cost
effectiveness. This has to a large
extent been driven by the Department
of Energys increasing local content
requirements, which encourages the
growing industry.
The USD 18 million clean energy
project includes institutional
and critical human resource
arrangements for sustainable
management of the facility.
Gratitude was extended to IRENA
for coordinating the selection
process, the ADFD for extending
USD 9 million as part funding to
the Government of Sierra Leone
and ASIC/OGI that will coordinate
additional USD 9 million as private
equity. The project will place
Sierra Leone on the global map
of Renewable Energy; and further
95
2014/07/07 8:33 PM
 Actuarial Society of South Africa
International accolades for
South African actuarial research
Two South African actuarial
studies were acknowledged
internationally recently when
the Scientific Committee of the
2014 International Congress
of Actuaries (ICA) recognised
both papers as the best in
their categories. The Congress
was held in Washington at the
beginning of April.
Niel Fourie, Public Policy Actuary at
the Actuarial Society of South Africa,
said more than 225 actuarial papers
and presentations were delivered at
the Congress to some of the worlds
leading actuaries from around the
globe.
Only 16 papers out of the 225
presented received awards and two of
those were from South Africa. This is
significant since it shows that South
African actuarial skills are rated highly
by the rest of the world.
According to Fourie South Africa was
the third most represented country
at the Congress next to the US and
Denmark. Our presenters and papers
were of exceptional quality, which
made me proud to be a South African
actuary.
96
July 14.indd 96
The award winning papers were
presented in the Pensions, Employee
Benefits and Social Security category
and the Health category.
Fourie said both papers tackled topics
that are relevant beyond the borders
of South Africa, namely ensuring
sustainability of social security benefits
and the cost of healthcare during the
final year of a persons life.
ALLEVIATING POVERTY WITH
SOCIAL SECURITY
The first paper titled The Evolution
and Future of Social Security in Africa:
An Actuarial Perspective was written
by members of the Actuarial Societys
Social Security Member Forum. The
authors are Fatima Badat (Ernst &
Young), Kudzai Chigiji (WesBank),
Johann Sohnge (Metropolitan Life),
Krishen Sukdev (Independent Actuaries
and Consultants) and Natalie van Zyl
(University of Stellenbosch).
ONLY 16 PAPERS OUT OF THE
225 PRESENTED RECEIVED
AWARDS AND TWO OF THOSE
WERE FROM SOUTH AFRICA.
The paper aims to display the state
of social security in Africa by looking
at the successes and challenges
facing African countries like Rwanda,
Zimbabwe, South Africa, Namibia and
Tanzania. Comparisons with other
emerging nations were used to identify
lessons that can be applied to African
nations, given some of their similar
socio-economic characteristics.
The paper highlights the fact that
assessing and ensuring sustainability
of social security benefits requires
actuarial modeling of long-term
demographic and economic changes
to ensure that adequate resources are
held. The role of the actuary is also
extended to areas involving strategy
and policymaking and implementation
in taking Africa closer to poverty
alleviation through social security.
Co-author of the paper, Johann
Sohnge, said: Receiving international
recognition is certainly motivation to
continue and build on the work that is
currently still a drop in the bucket.
Co-author Kudzai Chigiji commented:
Winning this prize means that this
lesser known side of the actuarial
profession will attract attention, which
will afford us more opportunities to get
involved in global matters that have
lasting social impacts.
HEALTHCARE COSTS IN THE FINAL
YEAR OF LIFE
The second award winning paper was
titled An Actuarial Perspective on
Healthcare Expenditure in the Last
Year of Life. The authors are Shivani
Ramjee, Senior Lecturer in Actuarial
Science at the University of Cape
Town and Matan Abraham, Research
Assistant in Actuarial Science at the
University of Cape Town.
The aim of this paper is to highlight
the key methodological considerations
in an investigation into the costs
incurred by health insurers arising
from the provision of benefits
during the 12 months preceding a
beneficiarys death.
Ramjee said: It was wonderful
to have the work acknowledged
internationally. Its an area of research
that we are continuing to work in so
it important that we get the feedback
that the work is valued by the
actuarial community.
Both research projects are work in
progress. The papers and presentations
can be downloaded from
http://ica2014.org.
COVER JULY 2014
2014/07/07 8:33 PM
 Association for Savings and Investment South Africa
Strong growth in
local CIS industry
LOCAL CIS INDUSTRY GROWS TO
R1,54 TRILLION IN FIRST QUARTER
Quarterly statistics for the local
Collective Investment Schemes (CIS)
industry, released on Monday 19 May
by the Association for Savings and
Investment South Africa (ASISA),
show that in the first three months of
this year the SA Multi Asset category
once again attracted the bulk of all
net inflows. SA Multi Asset portfolios
recorded net inflows of R23 billion
in the first quarter of this year. In
second place was the SA Interest
Bearing category with net inflows of
R10,1 billion. All other categories of
South African portfolios, namely SA
Equity and SA Money Market funds,
experienced net outflows.
The same pattern presented itself for
the 12 months to the end of March
2014. The local CIS industry attracted
net inflows of R158 billion of which
R114 billion was channeled to portfolios
in the SA Multi Asset category. The SA
Equity category suffered net outflows
and the SA Money Market category
recorded a marginal net inflow of
only R125 million. Portfolios in the
SA Interest Bearing category recorded
net inflows of R27 billion for the year
ended 31 March 2014.
Multi Asset portfolios make it possible
to achieve diversification across
asset classes within one fund. Expert
portfolio managers determine the
appropriate exposure to the different
asset classes in line with their
investment mandates. The SA Multi
Asset category is made up of the
following sub-categories: Income, Low
Equity, Medium Equity, High Equity and
Flexible.
Investors are doing the right thing by
entrusting asset allocation decisions
to the professionals. While these
portfolios were not designed to shoot
the lights out, they aim to deliver a
more stable performance than pure
equity portfolios by smoothing out
market volatility through diversification.
The prudent approach taken by the
majority of investors has paid off. The
COVER JULY 2014
July 14.indd 97
SA Multi Asset High Equity category
continues to be the most popular
with investors, and portfolios in this
category have delivered an average
return of 15,9% over the one year
ended March 2014, and an annualised
return of 15,1% for the five years as
well as the 10 years ended March
2014. By comparison portfolios in
the pure equity category delivered
less than 5% more over the three
reporting periods.
While portfolios in the Multi Asset High
Equity category are allowed equity
exposure of up to 75%, they are not
obliged to maintain such an aggressive
holding.
The SA Multi Asset category consists of
507 portfolios and holds almost half of
total industry assets.
THE INDUSTRY IN SUMMARY
Although inflows tapered from the
record breaking highs achieved
between the third quarters of 2012 and
2013, the local CIS industry continued
to benefit from strong investor
confidence in the first quarter of this
year.
The net inflows of R27 billion in the
first quarter of this year brought to
R158 billion the total net inflows for
the 12 months ended March 2014
the second highest net inflows for any
rolling 12 month period. A total of
R166 billion in net inflows was recorded
for the year ended March 2013 the
highest ever.
At the end of the first quarter this year,
the local CIS industry managed assets
of R1,54 trillion and offered investors 1
053 portfolios.
WHO INVESTED?
More than half of the inflows in the 12
months to the end of March 2014 came
either directly from investors (28%)
or were channeled via intermediaries
(28%).
Linked investment services providers
(Lisps) generated 24% of sales and
20% of sales was received from
PETER DEMPSEY,
Deputy CEO of ASISA
institutional investors like pension and
provident funds.
OFFSHORE FOCUS
Locally registered foreign funds held
assets under management of R212,8
billion at the end of March 2014,
compared to R216 billion at the end of
December 2013.
These foreign funds recorded net
outflows of R7,3 billion for the first
quarter of this year, mainly due
to repurchases from institutional
portfolios. While retail investors were
taking money offshore, institutional
investors were bringing money back.
There could be two reasons for the
outflows from institutional funds,
either rebalancing of portfolios or profit
taking.
Foreign currency unit trust funds are
denominated in currencies like the
dollar, pound, euro and yen and are
offered by foreign unit trust companies.
These funds can only be actively
marketed to South African investors if
they are registered with the Financial
Services Board (FSB). Local investors
wanting to invest in these funds must
comply with Reserve Bank regulations
and will be using their foreign capital
allowance.
There are currently 308 foreign
currency denominated funds on sale in
South Africa.
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2014/07/07 8:33 PM
 IISA Hail Forum
The impact of hail on
short-term insurance
Recent weather events have
caused damage that led to
insurance claims of more than R1
billion in the past year.
On Friday 30 May, South African
insurance companies, along with the
South African Insurance Association
(SAIA) and The Insurance Institute of
South Africa (IISA), reinsurance experts,
weather scientists and an international
agricultural insurance specialist, held
a forum to discuss insurance risk and
exposure. COVER mapped out the key
points made by all stakeholders.
John Melville, Executive Head of Risk
Services at the Santam Group, opened
the risk forum. Melville said that 2012
and 2013 saw a dramatic increase in
hail insurance claims in motor and
property insurance in South Africa.
He asked, Has something fundamental
changed in our weather patterns? What
should we expect going forward? What
can we do about the risk from an
underwriting and claims perspective?
Melville gave a brief description of the
history of documented hail incidents in
South Africa.
In 1949 hailstones with a circumference
of 23 cm fell in Pretoria, damaging
12 000 large windows at Iscor and
hundreds of motor cars. In 1980 12 of
South African Airlines 36 aeroplanes
were damaged at OR Tambo
International Airport. The industrys
insured loss was R25 million (R1,2
billion in 2014) and aircrafts claims
were around R20 million (around
R900 million today). In 1984 in
Witwatersrand the insured damage
was R50 million (or R1,2 billion today).
Pretoria suffered again in 1985 when
the city centre was damaged and
insured losses reached R75 million, or
R1,6 billion today.
THE ORGANISERS
SAIA Chief Executive, Barry Scott,
said the 2012 and 2013 claims
were driven by severe hail storms
98
July 14.indd 98
predominantly in Gauteng. He added
that crop damage due to foul weather
led to massive losses over the past two
years.
IISA Chief Executive, David Harpur,
said the forum was a necessary event.
He said the industry needs to take a
forward look on its risk and exposure
to weather related claims. We cant
predict what is to happen if we dont
put our heads together and find
solutions to mitigate the impact on the
industry as a whole.
THE SCIENTISTS
International and local weather
scientists, Dr Deon Terblanche,
from the World Meteorological
Organisation (United Nations) and
Professor Stuart Piketh and Mr
Roelof Burger, from the North West
University addressed the changes in
the weather patterns at the forum.
A growing and urbanising global
population, and a warming climate,
imply greater exposure to extreme
weather events, including hail storms.
There is an urgent need for improved
techniques to observe and predict
these events and for the financial
tools to build resilience. said Dr Deon
Terblanche.
The WMO has 192 member countries.
Terblanche said, according to the Swiss
Re sigma, global insured losses from
catastrophes were USD 45 billion in
2013, with large contributions from
floods and hail. Total economic losses
from natural catastrophes and manmade
disasters were USD 140 billion in 2013.
He said that hailstones are lumps
of ice/water/air mixture with sizes
greater than five millimetres that
are generally opaque with layered
structure. He said the hail embryo is
formed within 15 minutes. Hail forms
in strong thunderstorms, particularly
those with intense up-draughts, high
liquid water content, great vertical
extent, large water droplets, and where
a good portion of the cloud layer is
below freezing. Hail is most common
in mid-latitudes during spring and early
summer when surface temperatures
are warm enough to create instability
for strong thunderstorms, but the
upper atmosphere is still cold enough
to support ice.
Terblanche concluded with a discussion
on the controversial subject of weather
modification and hail suppression. He
said that hail suppression has taken
place in Mpumalanga and elsewhere in
Gauteng, with inconclusive results.
COVER JULY 2014
2014/07/07 8:33 PM

Professor Stuart Piketh said, South
Africa has cutting edge infrastructure
and capacity to study hail events and
a rich history and body of knowledge
of local hail research. The North
West University is busy expanding
this infrastructure and capacity
to specifically meet the needs of
communities interested in the impact
of hailstorms as well as evaluating
the trends in storm frequency and
severity.
Burger spoke about how they study
hail storms. He said that studying hail
storms are made up of six elements:
Observing hail on the ground,
observing the environment, observing
thunderstorm microphysics, observing
thunderstorms using satellites,
observing thunderstorms using radar,
and modelling hailstorms.
He said hail occurs during summer,
reaching its peak in November. Storms
start between 12h00 and 20h00, and
peak between 17h00 and 18h00.
THE INSURERS
From an insurance and claims
perspective, Waldi Els, Santam Group,
Regional Claims Manager said, Our
challenge is to encourage a culture
of risk mitigation and risk awareness.
We have to ensure that we from an
industry point of view are prepared to
deal with the challenges faced by such
an event. I would like to share the very
wise words of Charles Darwin, It is not
COVER JULY 2014
July 14.indd 99
the strongest of the species nor the
most intelligent that survives, it is the
one that is most adaptable to change.
THE REINSURERS
From a reinsurance perspective Pieter
Visser, Aon Benfield, Catastrophe
Analyst said, The hail event on
28 November 2013 caused the
largest market catastrophe loss in
the history of the local insurance
industry estimated at R1,4 billion. The
impact of the rapidly expanding urban
sprawl in Gauteng and the increased
participation of the emerging middle
class in insurance are main drivers in
changing the hail loss environment.
He said that the loss to reinsurers from
28 November 2013 about equalled
the total catastrophe premium paid in
2013. Some insurers catastrophe losses
went into the third catastrophe layer
for the first time in their history.
Visser said that reinsurance is designed
to protect against large catastrophe
losses. He said there should be
increased awareness around hail
between 15 October and 15 December.
Insurers should aim to understand their
exposure better and spend more time
and money on risk profiles. He said
there is, for example, a substantial risk
attached to suburbs with solar geysers
a potential market for reinsurers.
Holger Schwarz, the executive
responsible for crop insurance in
Europe and Africa at the international
reinsurer, Munich Re, gave a global
perspective on hail exposure and
risk management in crop insurance.
Schwarz said: The International Panel
on Climate Change (IPCC) assessment
report number five expresses low
confidence in observed trends in
small-scale thunderstorms (hail, gusts,
tornadoes).
However, Schwarz added that overall,
for all parts of the world, there seems
to be a trend of more frequent and
severe thunderstorms. Because of more
humidity in the air, the preconditions
for torrential rain and thunderstorms
(having the potential for extreme hail)
are fulfilled. A significant trend of
more humidity can be seen in North
America, in parts of Europe, and the
Eastern part of South Africa.
Consequently, the occurred events and
severe losses in these regions in 2013
are not surprising. The South African
farmers are ever-more exposed to hail
and other natural perils. Therefore they
need comprehensive insurance cover
as a risk management tool, beyond
standalone hail cover. This can only be
based on a Public-Private Partnership
between the public sector, the farmers
and the insurance industry.
Schwarz said to ensure successful crop
underwriting, a few key aspects are
necessary:
Build up a loss database
per crop and region;
Calculate technically
adequate rates;
Manage ones portfolio
composition by crops
and regions;
Use specialist know-
how and expertise;
Organise professional and
efficient loss adjustment; and
Continuously develop
products.
He emphasised the importance of a
public-private partnership in ensuring
a sustainable risk management system
for crop production.
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2014/07/07 8:33 PM
 Loss Adjuster Conference
Seventh annual Loss
Adjusters Conference 2014
The Institute of Loss Adjusters
of Southern Africa hosted their
seventh annual conference on
22 May this year.
President of the ILA, Jan Schubart,
said: The Institute has for many years
supported the ongoing education of
its members and provided a platform
for all industry members in their quest
to strive for continuing professional
development.
The conference covered topics
including corrosion and cures of
pipes, Fidelity Guarantee insurance,
Professional Indemnity for loss
adjusters and brokers, electronic
equipment losses, POPI for loss
adjusters, principal controlled policies,
and mitigating fire and water damage,
followed by a cocktail evening.
The following pages will focus on two
presentations: Professional Indemnity
and Protection of Personal Information.
PROFESSIONAL INDEMNITY
Kristy Carrs presentation on
Professional Indemnity (PI) for loss
adjusters and brokers defined PI cover
as cover that would be triggered when
the following factors are present:
1. Your legal liability;
2. To pay compensation;
100
July 14.indd 100
3. As the result of any actual or
alleged;
4. Negligent act, error or omission;
5. In the performance of the
professional duties of the insured.
WHEN DETERMINING THE ISSUE
OF NEGLIGENCE, SAID CARR, TWO
SIMPLE QUESTIONS NEED TO BE
ASKED:
1. Would the reasonable expert in
the insureds position have seen the
possibility of loss or harm? And if such
harm was foreseeable,
2. Would the reasonable expert in
the insureds position have taken
reasonable steps to avoid such harm
from occurring?
She said that membership of ILASA
requires loss adjusters to buy PI
cover, and that loss adjusters clients
usually stipulate in their SLAs with loss
adjusters, that the loss adjuster must
purchase PI cover.
Carr quoted from the ILASA Code of
Conduct, mentioning that it was a
good place to start, when looking for
pointers on how to avoid a PI claim. An
insurer should give specific instructions
to the loss adjuster:
All services should be rendered in
accordance with the contractual
relationship existing between the
loss adjuster and his principal and
in accordance with any service level
agreement that subsists between
them.
A loss adjuster must ensure that he
only accepts a mandate where the
performance of the mandated function
matches his expertise.
The acquisition of any information
by the Loss Adjuster must be in
accordance with any privacy and
protection of information legislation
that may be in force, and the loss
adjuster must keep records for up to
five years after the completion of his
mandate, although some circumstances
may require the records to be kept for
a longer period.
Carr stressed the importance of
thorough record keeping, including
record of advice provided (by brokers
to their clients). Remember, she said,
it is an often quoted maxim that the
law is not concerned with the truth, its
concerned with the proof.
WHEN IT COMES TO THE LOSS
ADJUSTERS POLICY SCHEDULE,
CARR IDENTIFIED NINE POINTS TO
KEEP IN MIND:
Who is the insured? Is it one
company, or have they bought other
companies?
When is the retroactive cover date?
COVER JULY 2014
2014/07/07 8:33 PM

What is the business description?
When is the period of insurance?
Is the limit of indemnity
provided on an each and every
claim or aggregate basis?
What is the excess, and is the
excess inclusive or exclusive of
legal costs and expenses?
Have endorsements on the policy
which widen the cover granted
to the insured been carried
through from year to year?
Did you make sure that extensions of
cover that you believe are in place
are reflected in the policy schedule?
Reinstatements of cover.
Carr asked, what is an adequate limit
of PI cover for loss adjusters? The usual
answer provided by most brokers, she
said, was the highest limit you can
afford, as no broker can ever tell you
with absolute certainty that any limit
(within reason) will be adequate to meet
any claims you might face. To determine
the limit of cover, loss adjusters should
take into consideration their SLAs.
Brokers must consider the nature of the
work they are undertaking, whether it is
high or low risk.
You can increase your limit at any
time during the policy period and pay
a pro-rata premium on the increased
premium that will be due, said Carr.
This increased limit will not apply
to claims and/or potential claims or
incidents that you are already aware of.
COVER JULY 2014
July 14.indd 101
POPI FOR LOSS ADJUSTERS
Sandra Sithole and Aneesa Bodiat
from Norton Rose Fulbright unpacked
the implications of the Protection of
Personal Information Act (POPI) for
loss adjusters.The Act gives effect to
the constitutional right to privacy by
regulating how anyone who processes
personal information handles, keeps
and secures that information.
SOME DEFINITIONS PERTINENT TO
THE ACT
Bodiat explained processing as
anything you do with the information
from the beginning to the end and
added that this includes the storage
and destruction of the information.
Personal information relates to a living,
natural person or an existing juristic
person. Information that will identify
that person, including email addresses
and phone numbers, is personal
information.
A data subject is someone to whom
the information relates, and a
responsible party is someone who
determines the purpose of and means
of processing the information, in this
case the insurer.
The operator is someone who uses
and processes information on behalf
of the responsible party, in terms of
a mandate or a contract but without
actually coming under direct authority
of the responsible party. This is where
the loss adjusters responsibility kicks
in.
THE EIGHT CONDITIONS FOR
LAWFUL PROCESSING OF
INFORMATION ARE:
Accountability;
Processing limitation;
Purpose specification;
Further processing limitation;
Information quality;
Openness;
Security safeguards; and
Data subject participation
POPI is about data protection and
using information reasonably and fairly,
said Bodiat, and responsible parties and
operators must have systems in place to
safeguard information.
Consent and acquiescence are central
to POPI, which makes the wording in
contracts and policies very important.
10 THINGS LOSS ADJUSTERS
SHOULD KNOW ABOUT POPI
Sithole identified 10 important facts
that loss adjusters need to know to
comply with POPI.
1. CLAIMS ARE ONLY TO BE
INVESTIGATED WITH THE
INSURERS KNOWLEDGE AND
AUTHORITY.
The loss adjuster, as the operator,
processes information for the
responsible party, the insurer, according
to the contract with the insurer and
acts as the insurers agent.
2. THE INSUREDS CONSENT TO
INVESTIGATE A CLAIM COMES VIA
THE INSURER.
This is the insurers responsibility. The
processing of personal information by
the loss adjuster is allowed by reason
of the provisions in the policy.
3. CONSENT TO PROCESSING
Consent refers to the data subjects
specific, voluntary and informed
expression of will in terms of which
permission is granted for processing of
personal information.
4. KEEP PERSONAL INFORMATION
CONFIDENTIAL
Do not disclose personal information.
The Act allows for disclosure of
information if required by law, for
example, in terms of the Promotion of
Access to Information Act or in terms
of the mandate.
101
2014/07/07 8:33 PM
 Loss Adjuster Conference
5. SECURITY OF PERSONAL
INFORMATION IS PARAMOUNT
When you outsource, for example, your
IT services, make sure you have the
appropriate security systems in place
and the obligation is in their contract.
POPI will require you to prove that all
reasonable measures were taken to
secure your IT systems.
6. THE INFORMATION REGULATOR
This is an external enforcement body
that will assess claims of breaches of
data protection, civil damages, and act
as a legal aid resource for people who
do not have the money or resources to
take legal steps themselves.
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July 14.indd 102
7. AUTOMATED DIRECT
MARKETING
There is a whole chapter in the Act
dedicated to direct marketing. Most of
the provisions mirror the similar themes
in the Consumer Protection Act. This
doesnt d affect loss adjusters directly.
8. CROSS-BORDER TRANSACTIONS
There are restrictions placed on the
cross-border transfer of personal
information including the requirement
for consent. The cross-border transfer of
information is also allowed in the case
where a transfer is necessary for the
performance of a contract between the
data subject and the responsible party.
9. RECORD RETENTION PERIODS
After a period of time the responsible
party is required to get rid of the
information or to de-identify the
information (strip it of identifying
factors that could name the data
subject). But records may be retained
if this is a contractual requirement or
where the information is required for
purposes of the responsible partys
lawful activities.
10. PENALTIES AND OFFENSES
The data subject can complain to the
Regulator, and failure to comply could
mean a fine of up to R10 million, or jail
time.
READ THE ACT NOW,
ESPECIALLY CHAPTER
THREE WHICH SETS
OUT THE EIGHT CORE
PRINCIPLES OF THE ACT.
WHAT SHOULD YOU BE DOING
DIFFERENTLY UNDER POPI?
Sithole said: Read the Act now,
especially chapter three which sets out
the eight core principles of the Act.
Conduct a gap analysis;
Put privacy governance in place;
Mitigate the risks of
security breaches;
And revisit contracts which relate
to PI and liability wordings.
Lastly Bodiat and Sithole advised
delegates to train their staff in
e-security, to become more creative
with passwords and encryption, to
fortify physical security needs and to
consider cyber insurance policies.
Schubart thanked the delegates
for attending the conference: It is
obvious, even to me as a loss adjuster
at times that without you the delegates
this event would not take place. I
thank you for your participation and
encourage you to tell us what you
would like to see in future events.
COVER caught Jan and Kristy on video.
Visit our YouTube page for snippets of
the conversation: http://bit.ly/1kGTqJC
COVER JULY 2014
2014/07/07 8:33 PM
 FIA Awards

FIA Awards
Celebrating 16 years of financial excellence
South African intermediaries
vote for the best financial
service providers.

The 2014 Financial Intermediaries

Association of Southern Africa (FIA)
Awards gala dinner celebrated the
achievements of insurers, underwriters
and investment companies that
provide the best support to the
intermediaries that make up the FIAs
membership.

Arnold van der Linde, President of the

FIA, said that the FIA Awards represent
the benchmark for excellence in the
offerings of product suppliers as rated
by South Africas financial and risk
advisors.

As we celebrate the industrys top

product suppliers we should also
embrace with all of the associated
responsibilities our task to protect
the free market that makes our clients
product choices possible. Lets never
invite nor, though irresponsible actions,
force the regulator to kill our industry
with excessive regulation.
Nine FIA Awards were issued to
cover the four core disciplines in
the financial advice space, namely
employee benefits, financial planning
(including risk and investment advice),
healthcare and short-term insurance.
We would like to extend our heartfelt
congratulation to each of the category
winners at the 2014 FIA Awards, said
FIA CEO, Justus Van Pletzen. And we
offer a special word of thanks to those
product suppliers who continue to back
the model of intermediated distribution
and consistently put their clients our
members first.
While the FIA Awards present an ideal
platform for product suppliers to be
recognised for going that extra mile,
we should not lose sight of the role
that valuable and reputable advice
plays in assisting consumers to secure
their financial futures.

COVER JULY 2014 103

July 14.indd 103 2014/07/07 8:33 PM

 FIA Awards

A WORD OF THANKS
FROM THE WINNERS
The winners have expressed their heartfelt
gratitude for receiving the awards. This is what
they had to say.

SANTAM
On celebrating the achievement of Short-Term Insurer of the
Year Commercial, Santams Executive Head of Commercial
and Personal Insurance, Edward Gibbens, said: Today, more
than ever, we recognise the essential role that insurers play
in society and we know it is our task to demonstrate the
HOLLARD real value our business has for individuals, businesses and
Hollard received the award for Short-term Product Provider indeed, the South African economy.
of the Year: Personal Lines for the second year running.
Pierre Geyer, Head of Commercial and Personal Lines at
Hollard said: The personal lines insurance space is incredibly
competitive, with direct players becoming more aggressive
and new players continuously entering the market. Its great
to get the feedback that were still assisting our brokers to
compete in this very tough environment.

With our promise of Insurance Good and Proper, to both

policyholders and intermediaries, we recognise our role
through our partnerships and continuous investments in
our business with the intention of exceeding expectations,
added Gibbens.

Quinten Matthew, Santams Executive Head of Specialist

Business said, Santam has established strong partnerships with

It is a real honour to receive this recognition, but we also

regard it as a call to action. We are hard at work looking
at how our offerings in the personal lines space can be
improved and will be calling on the broker community
to assist us to ensure they remain competitive and offer
genuine value to consumers in this space, added Geyer.

Hollard Group CEO Nic Kohler said: We continue to strive

to assist our partners to navigate an extremely demanding
environment, both from a competitive and regulatory point
of view.

104 COVER JULY 2014

July 14.indd 104 2014/07/07 8:33 PM

 our intermediaries and their feedback has been fundamental in
the formulation of our value proposition. Weve always wanted
to provide the type of service that supports the work that our
intermediaries do in this business and I believe we have made
great strides in achieving just that.
CIA
CIA was named the Underwriting Manager of the Year. Andr
de Waal, Managing Director of CIA, expressed the companys
excitement and gratitude.
We are thrilled with this our third FIA Award, which stands
testament to our hard work and commitment to our line of
business, and to the individuals in the industry who make it
happen our brokers!
Receiving this award acknowledges the dedication and effort
the CIA team has put in during the past fourteen years.
As much as the FIA actively promotes and expects
professionalism, competence and ethical behaviour from
its members so are we at CIA passionate about brokers
who share our vision of providing service excellence to our
policyholders.
As has been the case in all the previous years, the awards
ceremony was once again a well-organised prestigious event
enjoyed by all those attending. A huge thank you to the FIA
for a wonderful evening!
COVER JULY 2014
July 14.indd 105
DISCOVERY
Discovery came out tops in two categories at this years
Financial Intermediary Association of Southern Africa (FIA)
Awards. Discovery Life took the honours in the category
Long-term Insurance Product Supplier of the Year Risk
Products; and Discovery Health was named Product Supplier
of the year Healthcare. Discovery Health has won this
award category each year since its introduction.
It is heartening to know that these product offerings by
Discovery are seen as the benchmark in their respective
categories, said Hylton Kallner, Chief Marketing Officer for
Discovery.
Kallner thanked all intermediaries for the recognition at this
years awards: We are humbled and extremely grateful for the
support from our intermediaries. They are an integral part of
our business structure. Our philosophy is to create innovative,
category leading products that meet consumers needs and the
FIA awards are a gratifying endorsement of that ethos.
ALLAN GRAY
The industry recognised Allan Gray as the Product Supplier
of the Year Investment Products Single Premium. Jeanette
Marais, Director of distribution and client service at Allan
Gray, responded on behalf of Allan Gray:
105
2014/07/07 8:34 PM
 FIA Awards
We are very flattered to win this award, which for us is
testimony to our focus on creating long-term wealth for
our clients. We are also grateful for the recognition by the
advisor community that the award reflects.
We continue to follow the same investment philosophy,
which we believe will deliver superior returns to clients over
the long term. We offer a simple range of funds that we
believe serves the needs of most of our clients, in line with
our view that too much choice does not necessarily help
clients make good long-term decisions.
As most advisors know, past performance is not necessarily
a guide for the future, and investment decisions should be
based on thorough research, not simply picking last years
winners. The issue, however, is for investors to understand
this, and that is a key role that advisors can play.
I would like to take this opportunity to thank all the advisors
for the important role they play in their clients lives, for
their ongoing support, and for their continued trust and
confidence in Allan Gray as their investment partner.
LIBERTY
Liberty was named top Product Supplier of the Year
Investment Products Recurring Premium. Frank Schutte,
Managing Director: Retail Product and Marketing, Liberty
responded:
It is an honour to receive this award on behalf of Liberty. It
is a greater honour to be acknowledged among our peers
at the FIA Awards this evening. Weve been hard at work to
reinvigorate Liberty in the investment space so to receive
this recognition from the industry is a great achievement for
us.
106
July 14.indd 106
Consumers and advisors are very conscious of the value they
are receiving, and we are happy that they have recognised
Liberty in this regard.
While our innovative product ranges such as Liberty Evolve
and GateWay (our LISP product) are important for growth,
our existing recurring product range is equally important in
providing investors with holistic investment options.
SANLAM
Last but not least, Sanlam walked away with the award for
Product Supplier of the Year Employee Benefits. Dawie de
Villiers, CEO of Sanlam Employee Benefits, said: The award
is a great honour and a true indictment of the success of
SEBs business strategy. The intermediary lies at the heart
of our business in many ways. Every product we develop
or service we introduce is checked against the needs of the
intermediary.
Dawie continued: Winning this award has shown that we
are doing something right, that our products, support and
services meet the needs of this extremely important group.
And that we are making it easy for intermediaries to engage
with their clients about SEB.
We are beyond thrilled with this result. The awards will
inspire SEB to improve its offering and the quality of its
client service further. It is truly gratifying to have our efforts
rewarded and this definitely drives us to continue to grow
and improve.
The evening could not have been made possible without the
hard work and dedication of each and every intermediary,
insurer, underwriter, product provider, and industry body and
association. Well done!
COVER JULY 2014
2014/07/07 8:34 PM
 Global strength

Regional teams

Local guru

Put life into motion anywhere in the world

Life insurance markets are changing rapidly and opportunities abound. Together with our
team of experts, you can quickly design and roll out new ideas at the global, regional, or local levels.
Its an integrated, customized approach to product development. And its the perfect combination
for moving forward in new, promising directions.

Learn more at www.munichre.com/life

NOT IF, BUT HOW

Untitled-1 1 2014/07/07 11:14 PM

 Market Cover
INSETA increases training to
unemployed learners in 2013/14
SANDRA DUNN,
Chief Executive Officer (CEO) INSETA
In the 2013/14 financial year the
Insurance Education and Training
Authority (INSETA) has funded
training to a 9 604 learners, of
which 4 006 were unemployed
learners and 5 598 were
employed learners, compared to
2 761 learners in the previous
financial year.
According to the 2011 Census, South
Africa has an estimated 3,2 million
persons aged 15 to 24 who were not
employed and not in education and
training (NEETs). This figure represents
about a third of the 15 to 24 year
old population. 1 468 unemployed
youth and 3 727 workers successfully
completed learning programmes, which
started the year before.
Skills development is directly linked to
an increase in Gross Domestic Product
(GDP). Countries that have increased
their literacy rates of between 20% and
30% have simultaneously increased
their GDP from 8% to 16%.
INSETA continues to increase skills
development in the insurance and
related sectors, thereby contributing to
reducing unemployment, poverty and
inequality.
108
July 14.indd 108
Mzimkullu Msiwa, INSETAs
Chairperson, said, We are committed
to delivering quality training, which
has a genuine impact on economic
growth, thereby ensuring a good
return on South Africas investment in
education and training.
A further analysis of some of key
INSETA-funded training and support
for the 2013/2014 financial year is
listed below.
DEVELOPING SCARCE AND
CRITICAL SKILLS
INSETA increased its support for
developing actuaries, underwriters and
assessors. An amount of R30,7 million
has been invested in the development
of actuaries and over the past five
years INSETA has partnered with the
South African Actuaries Development
Programme (SAADP) to support 301
unemployed learners.
INSETA gave six scholarships to
learners to study with the Association
for Savings and Investment South
Africa (ASISA) Academy in the Life
Insurance Underwriting and Claims
Assessor programme. The scholarship
recipients obtained valuable work-
based experience with insurance
companies.
One barrier in the insurance sector
includes the fact that there is no
formal registered qualification for
some occupations. However, INSETA
has succeeded in registering the
Insurance Underwriter qualification
with South African Qualifications
Authority (SAQA) under the following
qualification title: Occupational
Certificate: Insurance Agent: Insurance
Underwriter.
ARTICULATION OF THE WEALTH
MANAGEMENT CAREER PATHWAY
INSETA continues to support the
Articulation Initiative launched
in 2010 by providing funding for
learnership candidates to register
with Technical Vocational Education
and Training (TVET) colleges to
complete their National Qualification
Framework (NQF) level 5 Wealth
Management Qualification. Once they
have completed this qualification,
learnership candidates can go to
university, with a bursary from
INSETA.
PARTNERSHIPS WITH
UNIVERSITIES AND TVET
COLLEGES
INSETA partnered with public
universities and TVET colleges
to support unemployed learners
studying towards full qualifications
in areas of scarce and critical skills
in the insurance sector. A total of
712 unemployed learners received
bursary funding and 83% successfully
completed their studies.
INSETA was appointed by the
Department of Higher Education and
Training (DHET) to be the lead Sector
Education and Training Authority
(SETA) in three TVET colleges. INSETA
launched their offices in the Eastern
Cape at Ingwe and Ikhala Colleges.
INSETA will co-ordinate the activities
of the other SETAs in the province,
around common services, like career
guidance. INSETA expects to launch
their offices at Ekurhuleni West College
this year.
SUPPORT FOR SMALL BROKERS
AND BURIAL SOCIETIES
INSETA provided funding for 507
burial societies who benefitted
from short programmes in Financial
Management, Bookkeeping,
Secretarial skills, Treasurer training
and Information Technology skills.
INSETA provided 746 small brokers
with support through short training
programmes. INSETA supported
brokers with Financial Advisory
and Intermediary Service (FAIS)
programmes, learning material and
examination preparation workshops.
INSETA has also set up a dedicated
broker network (including a skills
portal) to support small brokers. So
as to encourage participation of small
employers, INSETA runs a dedicated
Small Medium and Micro Enterprises
(SMMEs) Learnership programme in
which they manage the recruitment
of learners, project management,
administration, payment of stipends
and training.
COVER JULY 2014
2014/07/07 8:34 PM
 On the road with
Hollard Insurance
Hollard Insurance went on the
road in May to launch their
new Brokers Market across the
country.

Companies stop growing when they

stop adapting to change, said Hollard
Insurance CEO Nic Kohler on Thursday
evening, 22 May, at the Johannesburg
leg of the Hollard Insurance Broker
Road show. Hollard started because
the industry needed to change.

Hollard has recently launched its new

Hollards Broker Markets business in
Cape Town, Johannesburg, Durban and
Port Elizabeth.

Kohler said the Reintegration of Etana

brought about Hollard Insurance
Partners (dedicated to UMAs) and
Hollards Broker Markets business. He said the new Broker Market is The Johannesburg event was well
dedicated to brokers, with a risk attended by local and Pretoria-based
Hollards Broker Markets business is
improvement mindset and focused brokers, and the presentations were
headed up by former Etana Chairperson
product experts. followed by an informal networking
Paolo Cavalieri. Cavalieris CV reveals
session.
a long list of national and international He said the new Broker Market believes
accomplishments in accounting, that local is lekker, and will not make
banking and finance, as well as rowing. use of call centres. He said the broker
is at the top of the new business
Cavalieri said, If ever was a time for
model: With you we can do a better
independent advice and the role of the
job.
broker, its absolutely now.

COVER JULY 2014 109

July 14.indd 109 2014/07/07 8:34 PM

 Product Development
Beames gone wireless
Beame has launched a wireless
tracking unit. The brand has
offered an affordable, wireless
solution with benefits to
consumers everywhere the
most important being one of
the best recovery rates in the
industry.
The brand catered for audiences
looking for affordability and
functionality. The wireless solution
answered the market need for a
simple, non-intrusive product that
wouldnt tighten the purse strings
and in doing so, ensured that tracking
became a reality for a much broader
South African market.
No matter how broad the market,
some fundamentals just dont change;
consumers everywhere no longer have
the time to fuss over detail, so from
installation through to management,
Beame customers enjoy simplicity in
its truest form. Online purchasing and
installations at a nearby Tiger Wheel
Banking App gets a facelift
The FNB Banking App has
published its latest version to
App stores and it is packed
with new features, a new look
and feel, account opening,
personalised customer offers and
inward SWIFT payments from
abroad.
The refreshed look and feel makes
the App visually more appealing, and
more importantly, even easier to use.
The FNB App is available across major
smartphone platforms including iOS
(Apple), Android, and Windows Mobile.
Blackberry v10 will be available soon.
A new innovation on this latest version
of the FNB App is the ability to open
an account, from start to finish using
the banking app, in under 10 minutes.
Other than FNBs tablet app, this has
not been possible to do on an App
in South Africa until now. Customers
110
July 14.indd 110
and Tyre illustrate consumers facing
innovations that continue to and have
already accelerated the growth of the
brand.
They have also released the Beame
Smartphone App. The app launched
on 17 June to Android and Apple users
everywhere and at the touch of a Play
Store/iStore button, subscribers take
tracking into their own hands. The
brand shows that just compiling a list
of FAQs and making it available on a
corporate website is an obsolete CRM
practise.
with the consumer and the brand as
Beame has considered how the well as insurers and contract holders.
landscape has changed and moulded In one very funky looking application
a solution that again shakes up the all Beame contract holders can manage
industry. In line with its offering of and distribute information to insurers,
simplicity, the brand now offers secure contact the organisation directly with
contract management at the touch any queries, report a hi-jacking or
of a button. Important and useful vehicle theft and check the proper
information is now at customers functioning of a unit for extra peace of
fingertips. mind.
Grant Fraser Divisional Director: The application will be available on
Product and Marketing MiX Telematics other platforms in the near future with
(Consumer) explains, This App goes a the second release scheduled for July
long way in facilitating communication 2014.
can now open cheque accounts, credit
cards and investment accounts from
the convenience of the FNB Banking
App for both smartphones and tablets.
Personalised product offers takes the
hassle out of banking by matching
specific products to customers based
Over the last year, the FNB Banking
on their individual characteristics. FNB
App has delivered a number of
Banking App users will be able to get
new features, such as the ability to
pre-approved loans, accounts and
investments offered to them as soon purchase iTunes codes for customers
or as gifts. A new eBucks menu also
as they login, without having to search
lets customers check balances, reward
for them.
levels and more. Share Investing and
With this new feature we can ensure Stock broking, which was introduced
that customers using our App only in October last year, means that
receive personalised and relevant customers can also trade shares,
product offers, says Giuseppe Virgillito, equities and view other instruments in
Head of Banking App, FNB Mobile and real time.
Connect.
Technology improves at a rapid pace
FNB has also launched SWIFT and we work hard to harness new
Payments on the FNB Banking technologies and innovation to bring
App, allowing customers to receive something relevant and useful to our
payments from abroad from their customers. The latest version of our
smartphones. App does just that, concludes Virgillito.
COVER JULY 2014
2014/07/07 8:34 PM
 Discovery Invest
launches equity product
For investors looking for equity
exposure to the European and US
markets, the Discovery Capital
200+ offering is a fixed-term
five-year product based on a
global portfolio investing in the
Eurostoxx50 and S&P 500 indices.
Launched by Discovery Invest, the
Discovery Capital 200+ product offers
some unique features for investors
who remain fully invested for the five
year period. These enhancements
are aimed at boosting investment
returns while offering some capital
protection in negative markets, says
Craig Sher who is the Head of Product
Development at Discovery Invest.
If the global portfolio return is
positive at the end of five years,
the Discovery Capital 200+ will
provide a minimum return of
100% (double) the original capital
investment made. This includes
flat performance (if markets move
sideways), or even if there is very
limited positive performance.
If the global portfolio return is higher
than 100% after the five year period,
investors will not only double the
capital they invested, but receive all
the additional upside return as well.
There is also conditional downside
protection. Should the global
COVER JULY 2014
July 14.indd 111
portfolio provide a negative return
of up to 50% at the end of five
years, 100% capital protection
is provided for and the investor
receives back full capital. So if an
investor invested R1 million and
the portfolio return is negative
40%, the investor receives back
the R1 million original investment,
and capital remains intact.
However, should the portfolio fall
more than 50%, the investor would
be exposed to the full downturn in the
portfolio. For example, on a R1 million
investment, with five year performance
being negative 60%, the investor
would receive back R400 000.
Sher indicates that the planned
allocation of the portfolio is 70% to
the Eurostoxx50 and 30% to the S&P
500 price indices. Although the global
portfolio is based in these offshore
markets and invested in foreign indices,
the product has been designed so there
is no currency risk to the investor. If
the Rand weakens or strengthens over
the five year period, this does not
impact on the final return of the global
portfolio.
The global portfolio returns do not
include dividends as these distributions
are rather utilised in providing the
enhanced payouts and guarantees that
the product offers at the end of its five
year maturity.
Sher points out that there are
no management fees within the
global portfolio. However, standard
Discovery Invest administration fees
apply, as would financial adviser fees
if investors make use of financial
planners. Discovery does, however,
provide another unique benefit called
the Discovery Upfront Investment
Integrator, where investors have the
opportunity to get back the value of
these administration and financial
adviser fees. The product is also
designed to be tax efficient so returns
are taxed as capital gains within the
Discovery Endowment Plan.
Investments are made as a once off
lump sum, with a minimum investment
of R100 000, and the product offer
closes on 10 July.
Sher explains that for all benefits,
protection and enhancements to apply,
investors must remain fully invested
for the five year period. However
we acknowledge that personal
circumstances can change, and should
an investor need to withdraw funds
prematurely, they would receive back
the market value of the financial
instruments Discovery has used at that
particular time.
This product is highly suited to equity
investors wanting some diversified
offshore exposure into developed
markets. There is the opportunity of a
high minimum return if markets are flat
or positive, with full upside potential
should markets more than double,
as well as the benefits of conditional
downside protection should markets
become negative, says Sher.
111
2014/07/07 8:34 PM
 LCM Credit Risk and Top Cover Norton Rose Fulbright
GARTH DE KLERK GALE SHABANGU
Partner: Top Cover Diversity and Inclusion Manager

Gijima Gijima IISA

MAPHUMUZANA NXUMALO BHEKI KHUMALO WAYNE ABRAHAM
CEO & Executive Director Human Resources Executive Board Member

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