Finweek UK 06 March 2014
SA INDUSTRY VISUAL INTERNATIONAL INDI25 MAKE money WITH PSG EQUITY FUND How SA’s are managing their RICH MONEY COINING IT WITH Mauritius PROPERTY R80m and growing 9 771024 740005 10939 SA: R23.50 (incl. VAT) Other countries: R20.61 (excl. VAT) www.finweek.com 6 March 2014 Start-up feature Meet the entrepreneur behind SleepOut If you need less space, more space or just better space, contact Redefine Properties. We have the place you need to work smarter. To view our portfolio, go to www.redefine.co.za or call 0860DEFINE. COMMERCIAL | INDUSTRIAL | RETAIL We’re not landlords. We’re people. CHARLIE BRAVO #315-14 Need more space? P10 HOW A TRILLIONAIRE MIGHT MANAGE THEIR MONEY 4 Feedback From our readers 6 Rewind & Trending News review and preview 8 Context How WhatsApp measures up 10 Cover How a trillionaire might manage their money 18 Insight Mauritius: the offshore property favourite 22 Embracing the e-commerce opportunity 24 The renaissance of the tattoo 32 The Gab Why traditional market research is a waste of time 36 Investment Why WhatsApp is good for Facebook’s 38 business; A risky business 40 Killer Trade: Trencor’s fate tied to the rand 43 Invest DIY A spotlight on the banking sector 44 Pro Pick Is it still time to dance? 45 House View Punts 47 Simon Says Curro, Adcock Ingram, Calgro M3, MTN 48 Small Cap Visual International:: Middle-income accommodation 49 Fund Focus PSG Equity Fund 50 Entrepreneur What’s an entrepreneur, really? 52 Start-ups: Connecting with Johann Jenson 56 Technology Road Test: Telegram; Simple billions 58 Life The week that was in SA sport 60 Directors & Dividends Dealings and payouts 62 In Brief Crossword; Sudoku P38 A risky business P22 SafeTrade: Embracing the e-commerce opportuniy Cover story: Marc Ashton and Kristis van Heerden Cover concept: Zandri van Zyl Cover story layout: Zandri van Zyl Photographer: ER Lombard Model: Liz Bruchhausen P57 Simple billions P50 What’s an entrepreneur, really? FEEDBACK 4 FINWEEK 6 MARCH 2014 Feedback PUBLISHED BY MEDIA24 WEEKLY MAGAZINES PRINTED BY PAARL MEDIA AND DISTRIBUTED BY ON THE DOT HEAD OFFICE 40 HEERENGRACHT, CAPE TOWN, 8001 OR PO BOX 1802, CAPE TOWN, 8000. PHONE 021-406-4552 GAUTENG OFFICE 5 PROTEA PLACE, PROTEA PARK, SANDOWN, 2196 OR PO BOX 785266, SANDTON, 2146. TEL 011-217-3053. WEBSITE www.finweek.com OVERSEAS SUBSCRIBERS +27-21-405-1905/7 FINWEEK SUBSCRIBES TO THE SOUTH AFRICAN PRESS CODE WHICH COMMITS US TO JOURNALISM THAT IS TRUE, ACCURATE, FAIR AND BALANCED. IF YOU THINK WE ARE NOT COMPLYING WITH THE CODE, CONTACT THE PRESS OMBUDSMAN AT 011-484-3612 OR ombudsman@presscouncil.org.za © FINWEEK 2011 ALL RIGHTS RESERVED. TO INQUIRE ABOUT PERMISSION TO REPRODUCE MATERIAL CALL OUR ARCHIVE AT 021-406-3232. SUBSCRIBERS 0861 000 571 subs@finweek.co.za SHOPS 0861-888-989 assistance@onthedot.co.za INQUIRIES Share your thoughts with us on Twitter (@Finweek) or find us on Facebook (facebook.com/Finweek) EDITORIAL EDITOR MARC ASHTON DEPUTY EDITOR TANDISIZWE MAHLUTSHANA MANAGING EDITOR NICOLE BOUCKAERT JOURNALISTS AND CONTRIBUTORS SIMON BROWN, SIMON DINGLE, GLENDA WILLIAMS, JESSICA HUBBARD, DAVID MCKAY, BRUCE WHITFIELD, KRISTIA VAN HEERDEN, GLENDA WILLIAMS, DANIELLE GARRETT, BLAIR BURMEISTER, WARREN DICK SUB-EDITORS WILLEM KEMPEN, STEFANIE MULLER, JUSTINE OLIVIER OFFICE MANAGER THATO MAROLEN LAYOUT ARTISTS BEKU MBOTOLI, TSHEBETSO DITABO, ZANDRI VAN ZYL GENERAL MANAGER CHARLENE BEUKES PUBLISHER LEE-ANNE COOSNER PROJECT MANAGER DEIRDRE MCDONALD CEO: MEDIA24 MAGAZINES JOHN RELIHAN CFO: MEDIA24 MAGAZINES RAJ LALBAHADUR ADVERTISING SALES AND SOLUTIONS SALES DIRECTOR CRAIG NICHOLSON 011- 322-0731 BUSINESS MANAGER (KZN) EUGENE MARAIS 031-566-4178 BUSINESS MANAGER (DIGITAL) TERANCE WINSON 021-443-9418 NATIONAL SALES MANAGER WEATHERTON NYAMBEU 011-217-3185 CIRCULATION SALES & SOLUTIONS CIRCULATION MANAGER ARMAND KASSELMAN 0 21-443-9975 SUBSCRIBER ENQUIRIES ELMARIE EYGELAAR 021-443-9828 QUESTIONING ETFS In The changing face of asset management (27 February issue), covering the PwC Asset Management survey, you included a pie chart on the top of page 29. The percent- age growth in passive investment as indi- cated in that chart is extremely interesting. Active assets under management (AuM) is expected to grow only 31.5% over the period; whereas passive AuM will grow an amazing 211% (from $7.3tr (2012) to $22.7tr (2020)). Passive investments will also double its market share (from 11% to 22%) over the period. The PwC survey accredits reduced fees, a core-satellite approach to invest- ment, reduced fees and the minimal dif- ferential between alpha and beta as being primary drivers for this. The survey also made it clear that the vehicle of choice will be exchange-traded funds (ETFs). PwC indicates that by 2020 most global fund managers will also have an ‘active’ ETF offering. First, money invested in ETFs is more fickle than many alternative actively man- aged instruments and this arguably con- tributes to volatility, which will be espe- cially magnified if the volume in ETFs doubles in size. There is an argument that both the market maker and arbitrage traders will ensure the gap between the trading price of an ETF and instruments it represents will always be minimal. ETFs trade through- out the day on the premise that there will always be a bidder to pick up any offers. I distrust the notion that ‘willing buyers’ will not run shy when a flood of desperate retail sellers rush to unwind their market exposure. Craig Martin CLARIFICATION In our 20 February issue, we featured South African-born entrepreneur Sarah Robinson and the activism work she is doing in Palestine. We touched on Rob- inson’s work with coffee business Bean There, where she cut her teeth as an entre- preneur. Robinson has requested that we clarify that her activism work in Palestine is not linked to Bean There. Contact Finweek, P O Box 785266, Sandton 2146, tel (011) 217-3000 or feedback@finweek.co.za THIS WEEK’S CONTRIBUTORS Marc Ashton marca@finweek.co.za Kelly Berold kellyberold@gmail.com Simon Brown simon@justonelap.com Simon Brown heads justonelap.com, a free resource of financial information and investment education. Blair Burmeister blairb@finweek.co.za Warren Dick warrendick7@gmail.com Simon Dingle simond@finweek.co.za Moxima Gama moxima@themoneyhub.co.za Professor Evan Gilbert Head of MitonOptimal Asset Consulting. Jessica Hubbard jessicah@finweek.co.za Graeme Joe graeme@butterbean.co.za Tandisizwe Mahlutshana tandisizwem@finweek.co.za David McKay david@miningmx.com Gareth Ochse garethochse@gmail.com Gareth Ochse is the founder of ValuationUp.com. Gavin Symanowitz gavin@blockbusterinnovation.com Dr Gavin Symanowitz is an actuary and founder of BlockbusterInnovation.com . Kristia van Heerden kristiav@finweek.co.za Bruce Whitfield brucew@finweek.co.za Glenda Williams glendaw@finweek.co.za For more information, visit finweek.com INSIGHT INSIGHT 18 FINWEEK 20 FEBRUARY 2014 FINWEEK 20 FEBRUARY 2014 19 LIFE IN THE PALESTINIAN WEST BANK Entrepreneur turned activist WANTING MORE OUT of life, South African entrepreneur Sarah Robinson took time out of her role as an entrepreneur to experience firsthand the political conflict in the H1 and H2 zones of Hebron in the Israeli-occupied West Bank, Palestine. Hebron is known as one of the more volatile areas in the Palestinian West Bank, where Israe lis are trying to force Palestinian reside nts out of the area by force. As part of a group of interna tional visitors, Robinson h oped to use her pres- ence at the Israeli check points and in the streets to record the many und ocu- mented human rights vio lations against local Palestin ian residents by Israeli settlers and soldie rs. By threatening to expose the a trocities via social platfor ms and releasing the materia l to the international media, sh e, along with the group that she was travelling with, hop ed to quell the violence at least so mewhat. Insight Franklin Resources, Inc. is a global investment management organization operating as Franklin Templeton Investments. This material does not constitute investment advice or an invitation to apply for securities. Investors should seek professional financial advice and obtain a full explanation of any proposed investment before making a decision to invest. Investments involve risks. The values of investments can go down as well as up, and investors may not get back the full amount invested. © 2014 Franklin Templeton Investments. All rights reserved. GLOBAL PERSPECTIVE. LOCAL EXPERTISE. In today’s complex and interconnected world, successful investing requires true global expertise. With over six decades of experience and more than 600 investment professionals on the ground across the globe, we are uniquely positioned to spot smart investments that others might miss. To put our wealth of global investment expertise to work for you, visit franklintempleton.co.za or contact your financial advisor. navigating global markets for 65 years INSIGHT 6 FINWEEK 6 MARCH 2014 Rewind BY BRUCE WHITFIELD Scrambling for skilled CEOs V ery few of us harbour any gen- uine ambition to be CEO of a listed company – never mind three of them. Even fewer will take on the challenge of running a R35bn logistics and motor dealership owner at 63 years of age. Mark Lamberti, however, is not a regular guy – which is precisely why Imperial wants him. He replaced Hubert Brody on 1 March and is yet to speak publicly about his appointment. His corporate history, how- ever, is nothing short of astounding. He founded Massmart in 1990 and listed it on the JSE 10 years later, was instrumen- tal as chairman in driving the Walmart takeover of the business while at the same time bringing together a disparate group of non-banking financial services compa- nies and listing them under the Transac- tion Capital banner. In among all of that he was also a director of Primedia and served on the boards of Wooltru, Datatec and Altron. It’s unlikely that he is doing the Impe- rial job for the money, and for the com- pany the appointment of Lamberti is indicative of a number of things: primar- ily that it succeeded in convincing him of the merits of the job but the other is decidedly more ominous. The fact that the board followed what it described as a thorough internal and extensive search and still chose a new CEO at an age where most of his contemporaries are happy to take cushier non-executive roles, highlights some very serious issues around South Africa’s skills shortage. KOOS BEKKER The new boss at Naspers*, Bob van Dijk, only joined the group six months ago. Netherlands-based Van Dijk was previ- ously head of eBay in Germany and joined the media and ecommerce group in August 2013 as CEO of online classifieds business Allegro. Koos Bekker, easily one of the longest-serving CEOs on the JSE, having started in 1997, is taking another year off to explore the world of technology before he returns to chair the business when ex- journalist and previous CEO Ton Vosloo steps down a year from now. He previously took a year off in 2007 and when he returned in 2008, Naspers was trading at around 16 000c. It is now eight times that level. Can shareholders expect the same? Bekker as chairman will be at HQ in Cape Town and Van Dijk after a year to settle in will be based out- side the traditional centre of power. It’s not a problem, says Bekker: “We’re a nomadic lot really. It doesn’t matter where you send your emails from, as long as you turn up for the meetings wherever they are being held in the world.” ■ *Finweek is a Media24 publication, which is a subsidiary of Naspers. That’s no criticism of Lamberti – he is obsessed with value creation, is fero- ciously ethical in his dealings, and has an unwavering commitment to SA as demonstrated through his tireless cam- paigning against rampant crime rates. Imperial is lucky to have him. He will be just the third CEO in the his- tory of the company, which started out of a single motor dealership by founder Bill Lynch, who first bought 10% of the company in 1973 and set about creat- ing a diversified conglomerate. Hubert Brody took over when Lynch became ill and died of cancer five years ago and has set about consolidating the diverse business and giving the multiple brands owned by the group a single Imperial identity. Lamberti will be looking to put his stamp on a business at a difficult point in the cycle. Koos Bekker Trend ing BY BLAIR BURMEISTER Gallo Images/Thinkstock INSIGHT FINWEEK 6 MARCH 2014 7 THE FRUSTRATION OF BEING bom- barded with unsolicited calls from call centres offering products that you have absolutely no need or want for is an all- too-familiar feeling for most. Banks, in- surers, cellphone service providers and gyms are common culprits and when this plays out, it often leads us to believe that our information is being handed out to anybody who wants it. This is about to change. The advent of the Protection of Person- al Information Act (POPI) is going to make it very difficult for direct marketers to get their hands on your personal information. But before you let out a sigh of relief, bear in mind that the bill is also going to have a major impact on the way that com- panies do business – especially if that busi- ness holds a lot of personal information about customers. “Since the POPI Act was signed into law last year by President Jacob Zuma, com- panies of all shapes and sizes are trying to come to terms with what this means for them and the personal data they hold,” says Daniella Kaf- ouris, senior manager for data privacy and POPI compliance at Deloitte & Touche. Some exceptions exist, but, according to KPMG’s Corporate Law Advisory Prac- tice, every person who collects, stores and otherwise modifies or uses information is responsible under POPI and must comply with the conditions required for the lawful process- ing of personal information. Organisations have started waking up to the fact that they have been sleeping on veritable gold mines of value in the form of consumer data. Personal data is a valuable commodity in today’s era. And now, the protection of that data has become equally important. The analysis of big data has become a key basis of competition, innovation and consumer surplus for companies, which is why the legalities of POPI have to be care- fully considered. Saint-Francis Tohlang of trends ana- lysis company Fluxtrends comments: “It forces organisations to use personal data responsibly and safeguard it. At the heart of this is our privacy in the face of more surveillance, privacy threats and growing distrust.” THE BURDEN OF COMPLIANCE As POPI is possibly among the most comprehensive pieces of privacy legislation in the world, the provisions make it difficult to fully understand the implications. Tohlang says that ethical data man- agement will be the result. “Investing in the infrastruc- ture, technology and governance to manage data in a professional and ethical manner will be a future trend that gains more traction. “Perhaps the true effects of POPI will most affect those in the business of direct marketing. Currently, direct marketers may collect, contact, retain and continue to share that personal information until such a point as a consumer ‘opts out’. This is the present situation under the Consumer Pro- tection Act. Under POPI legislation, direct marketers will have to obtain permission.” FROM DIRECT MARKETING TO SOCIAL MEDIA MARKETING Tohlang says that we will see a significant investment and drive from organisations to engage consumers in social media marketing as a means to overcome the significant constraints POPI imposes on other channels of direct marketing such as emails, SMS and phone calls. “Marketers and companies alike will now look to further the trend of speaking to their consumers through narratives that appeal to their lifestyles and needs.” He says that creating conversations within communities is what will ultimate- ly become the way in which marketing takes shape. Marketers would also need to invest in total rewards schemes and value propositions to continually engage consumers and convince them to want to stay in touch. To effectively manage personal infor- mation and comply with POPI, Kafouris says that organisations must invest in establishing the required data manage- ment capabilities. “While the require- ments of POPI seem onerous, they also represent good business practice. If implemented correctly, complying with POPI has the potential to generate tre- mendous business value.” ■ Pay attention to the Protection of Personal Information Bill INSIGHT Context www.finweek.com MARKET CAP RELATIVE TO LOCAL PLAYERS 8 FINWEEK 6 MARCH 2014 BRITISH AMERICAN TOBACCO SABMILLER BHP BILLITON COMPAGNIE FINANCIÈRE RICHEMONT NASPERS ‘N’ ANGLO AMERICAN MTN GROUP SASOL STANDARD BANK FIRSTRAND VODACOM OLD MUTUAL KUMBA IRON ORE ANGLO AMERICAN PLATINUM ASPEN PHARMACARE BARCLAYS AFRICA SANLAM NEDBANK 1 3 4 5 6 7 10 11 12 13 14 15 16 17 18 19 8 9 R1.147tr R754bn R557bn R536bn R398bn R365bn R352bn R192bn R181bn R178bn R163bn R148bn R121bn R118bn R113bn R109bn R102bn 2 R845bn 7 b n R209bn WHATSAPP market cap SOURCE: Techland ON THE INTERNATIONAL SCENE INSIGHT HOW WHATSAPP MEASURES UP With Facebo ok ’s annou nce ment l ast week that it was acquiring th e rapid- ly growing, cross-platform, mobile messaging company WhatsApp, the Finweek team thought it would be interesting to compare WhatsApp’s market cap relative to the biggest JSE listed companies and global peers. $19 billion $1 billion 2014 Facebook – WhatsApp Google – Motorola Mobility HP – Autonomy Microsoft – Skype Microsoft – Nokia phone business Microsoft – aQuantative Yahoo! – Broadcast.com AOL – Netscape Cisco – WebEx Google – Nest Google - DoubleClick Yahoo! – GeoCities eBay – Skype eBay – GSI Commerce Google – YouTube Yahoo! – Overture eBay – PayPal Microsoft – Visio Microsoft – Navision eBay – BillMeLater Amazon – Zappos HP – Palm Symantec – VeriSign security Microsoft – Yammer Microsoft – Fast Search & Transfer AOL – Mapquest Yahoo! – Tumblr Facebook – Instagram 2008 2011 2011 2011 2013 2007 1999 1998 2000 2007 2002 2013 2008 2007 2009 1999 2010 2005 2012 2011 2012 2006 2008 2003 1999 2002 2013 2012 HP – EDS FACT BOX THE NUMBERS BEHIND THE DEAL WhatsApp’s $19bn price tag left much of the tech world in shock and awe. Here are other noteworthy figures that have emerged in light of the acquisition: The number of times that Amazon CEO Je Bezos could have bought The Washington Post with $19bn. The number of Nkandla homesteads Jacob Zuma could build (if you believe Thuli Madonsela’s December report). The amount that Facebook paid per WhatsApp employee (the company employs only 55 people). 76 1 000 $345m The amount that WhatsApp has paid for marketing and PR since its launch. $0 BY MARC ASHTON AND KRISTIA VAN HEERDEN COVER 10 FINWEEK 6 MARCH 2014 [...]... BlackRock Investment Institute 1 2 Current 3 4% 6 Months ago -1 2002 2004 2 006 2008 2010 2012 2014 FINWEEK 6 MARCH 2014 13 COVER Financial advisory firm acsis is cautioning clients against expectations that recent returns are unsustainable over the long run Finweek spoke to Henry van Deventer about what his clients are expecting for 2014 What are your clients’ main concerns at the moment? At the moment... comment by professional baseball player Mickey Mantle: “You don’t know how easy this game is until you get into that broadcasting booth.”) ■ *Finweek is a Media24 publication, which is a subsidiary of Naspers FINWEEK 6 MARCH 2014 17 INSIGHT Insight 18 FINWEEK 6 MARCH 2014 INSIGHT Mauritius: the offshore property favourite BY BLAIR BURMEISTER T he island of Mauritius remains a firm favourite for affluent... Global Institute report stated, “Despite this wave of innovation, no African e-tailer has managed to achieve scale across the entire continent; the space remains wide open.” ■ FINWEEK 6 MARCH 2014 23 INSIGHT 24 FINWEEK 6 MARCH 2014 INSIGHT BY GLENDA WILLIAMS T attoos are trending Once the preserve of gang members, bikers, boxers or non-conformists, today they are trendy pieces of body art adorning even... crosscontamination After approval of the artwork stencil and positioning area, tattooing commences Depending on the artist, a small FINWEEK 6 MARCH 2014 27 INSIGHT talented people, which formalised academies would almost certainly not do,” says another tattooist 28 FINWEEK 6 MARCH 2014 5FM Images Since the industry is not regulated, establishing the number of tattoo artists and studios is impossible While... politics and related movements in the rand Warren Buffett Debt in the past five years Debt as percentage of GDP 250% UK US Japan South Korea China 200 150 100 50 0 2003 ’07 2003 ’07 1986 ’90 SOURCES:People’s Bank of China; IMF International Financial Statistics; Fitch Ratings 16 FINWEEK 6 MARCH 2014 1994 ’98 2009 ’13* *Estimate from The Wall Street Journal Gallo images/Getty images: Bloomberg RISING BURDEN... long-term decisions are almost always different things To invest successfully over time, it is critical to keep your eye on appropri- Henry van Deventer 14 FINWEEK 6 MARCH 2014 ate long-term decisions, which will be one of our greatest challenges in 2014 Are you positioning them for a pullback or market collapse? We do not believe that the stellar returns markets enjoyed over the last 10 years are sustainable... year thousands of investors wait for March to roll around so that they can glean insights from the legendary investor Warren Buffett The folks at Fortune magazine were able to get their hands on a copy of his annual letter to shareholders in advance and Finweek found these five insights particularly useful if you’re going to consider your investment strategy for 2014: ■ You don’t need to be an expert... valuation-driven approach and this guided us to position our clients to benefit from the reflation trade, however in the second quarter of the 2013 financial year, the margin of safety in fixed-income 12 FINWEEK 6 MARCH 2014 asset classes (property and bonds) had been reduced and we trimmed our overweight exposure to this side of the market In quarter four of financial year 2013 our analysis indicated that the... owners who enjoy the boating and watersport lifestyle It’s the only residential marina on the island that has been built solely for foreigners Single-storey and double-storey configurations at FINWEEK 6 MARCH 2014 19 INSIGHT Villas Valriche, offering two-bedroom villas of 220m2, up to four-bedroom villas in excess of 400m2 are priced from $650 000 to $3m and above depending on the buyer’s wants and... property division, says that a high percentage of IRS buyers use Mauritius for some form of business, one way or another “They either use the country as a domicile for their offshore companies, or 20 FINWEEK 6 MARCH 2014 as a launch-pad into Africa And those who have bought because they wanted to acquire a second or third home have seen the opportunities and have then developed businesses thereafter.” As business . booth.”) ■ *Finweek is a Media24 publication, which is a subsidiary of Naspers. INSIGHT 18 FINWEEK 6 MARCH 2014 Insight INSIGHT FINWEEK 6 MARCH 2014 19 Mauritius:. dispersion of returns. EM COVER FINWEEK 6 MARCH 2014 11 Gallo images/Getty images: Doug Armand COVER 12 FINWEEK 6 MARCH 2014 contagion into the developed