Your legacy remains our top priority
It may be too soon to fully gauge the economic impact of COVID-19 and the associated lockdown on the South African economy, but emerging facts and figures point to a long and hard recovery for the country.
South Africa's existing fiscal constraints, coupled with little headroom to respond with the financial firepower of nations like India and China, mean this is likely to be a bleak winter for many.
In response to this crisis, RMB Private Bank has responded through two main avenues: Personal relief for clients and banked businesses, in tandem with a
broader societal investment under the South African Pandemic Intervention and Relief Effort (SPIRE) fund.
The SPIRE fund, a R100 million commitment by the FirstRand Foundation, FirstRand Empowerment Foundation, and FNB, aims to support South Africa's
overall pandemic response. SPIRE is working with government and civil society partners, as well as business, industry and sector initiatives, including the Solidarity Fund, to provide an effective response to the virus.
While our national response is gaining momentum, so too has the uptake by our clients of the Cashflow Relief Plan, offering a 3-month Payment Break with a
separate credit agreement at prime interest rate, which we rolled out to help those battling the fallout from the pandemic. In recent weeks we have also observed
increased client interest in bringing offshore funds back into South Africa, as a way of addressing short- to medium-term cash-flow constraints. Handled in
accordance with the correct procedures, this is a relatively quick process and funds can be re-invested offshore again in the future. However, where possible,
exhausting other local options first remains preferable. Our financial advisors are on hand to guide you through the options available.
For many of our clients, the importance of this key client-advisor relationship has been highlighted during the lockdown period and underlines the impact of our
hybrid approach of personal relationships coupled with innovative digital solutions. Raj Makanjee, CEO of Retail Banking believes this is the way forward for
the industry. Certainly, it has become increasingly clear to us as a bank that our drive towards greater digitisation has enabled us to operate smoothly and effectively during the lockdown period.
An exciting new partnership between eBucks Rewards and pharmacy, health and beauty retailer, Clicks, also underlines the relevance of the digital approach to
industries other than our own, plus there are attractive eBucks advantages to this partnership for RMB Private Bank clients. While Clicks's strong online presence
was certainly an attractive drawcard when talks began, this has been heightened as consumers flood towards e-commerce options.
One of the hallmarks of our eBucks offering over the years has been our tremendous eBucks Travel and eBucks Lifestyle benefits, particularly those on offer to high-net-worth clients such as yourself. While the entire tourism and
travel industry is on pause, and the face of business travel in particular is likely to change post-pandemic, there is medium-term potential for local
tourism. In an insightful contribution, our Head of eBucks Travel and Lifestyle, Elsa Silva, shares her views on the future of this critical sector.
All sectors of the economy have, of course, been impacted by the pandemic. We delve into the sobering economic facts and figures emerging around South Africa's COVID-19 response, and assess the country's fiscal headroom to respond to these marked challenges.
Finally, while many of our staff members continue to work from home for the immediate future, rest assured that our commitment to you remains undiminished. Stay well, stay safe and stay strong.
CEO RMB Private Bank
Adapting to a post COVID banking reality
How will the current pandemic change the face of financial services? Will the industry respond rapidly to the changing needs of clients? What role will digital play?
How will operations change for the better? While technology is vitally important, and the uptake of digital will be key to how the industry responds on a global level, the
most important consideration must be the careful balance between technology and human interaction in this future world.
It is also pushing financial institutions around the world to rethink how they do business and how to adapt to the changing needs of their clients.
In recent years, the private banking proposition - as part of the broader FirstRand Group - has been positively impacted by a focus on digitisation and the adoption
of relevant technologies and tools. Raj Makanjee, CEO of Retail and Private Banking believes that this has positioned the bank well through the current
coronavirus crisis. However, more can and must be done to ensure RMB Private Bank lives up to its role as your trusted money manager. This means paying
careful attention to the delicate balance between technology and human expertise.
"With the Fourth Industrial Revolution and the aggressive push for banks around the world to digitise, the implication has been that fewer people would be
employed, but we've seen that money is an emotional thing and there is deep complexity to banking. Even though people can help themselves, using digital
tools, they want a person they have a relationship with to help them," says Makanjee.
In the high-net-worth space this human touch is of particular importance since the banking proposition becomes more convoluted as issues around gearing or
diversifying offshore come into play. Or, in the current context, considerations might also incorporate bringing money back into the country from overseas or
dealing with a material drop-off in income as a result of the economic impacts of the pandemic. "At times like these our clients want the support of a trusted
human being, who has a relationship with them, to help them navigate these complex issues," says Makanjee.
Since the South African lockdown came into effect on 27 March, the bank has noted with interest the rise in more meaningful client interactions with private
bankers. "Our clients are increasingly welcoming their banker into their homes," says Makanjee, with reference to the Microsoft Teams virtual meeting platform
available to the bank.
"People are feeling more vulnerable right now, so our human connections are more important than ever before." He adds: "Our private bankers have been very
effective in having Microsoft Teams-based meetings with clients. Because many of our clients have more time available, they are opening up and wanting to have
more meaningful discussions through virtual technology about medium- to longterm considerations such as wills and financial plans." The decision to migrate
the bank to Office 365 on the Cloud, and to the Microsoft Teams platform, has proven essential in enabling this sort of connection, says Makanjee. And it
extends beyond client discussions to internal team conversations and collaborations as well.
Evolving workplace model "Prior to the lockdown we were not convinced we could achieve the productivity required when working from home," he explains. "Now we
know that can be achieved, so we are paying particular focus to helping our people achieve balance."
In the long term, Makanjee sees a hybrid workplace approach coming into effect, with strict safety protocols in place. "That social community at work is important,
so we are moving towards a model of having 50% of our staff working productively at home and 50% coming in because they need the infrastructure, or
may be affected by load shedding, or they need to collaborate," he explains. The pandemic is also driving new ways of thinking within the bank around how to
better use existing infrastructure to accommodate the range of skills housed in the bank, from front-line bankers to call centre suites and branch staff.
"Historically we've designed our model on the basis that people in a branch belong to the branch team and those who need to engage with clients, are Private
Bankers. Now all those people are having to work from home and talk to clients, so this challenges how we think about our model," says Makanjee. In the future,
he suggests, for example Soweto-based staff may rather find themselves with office space in Soweto, rather than having to drive to town or Sandton where the
team has been based. This approach, he explains, would shift the thinking even more towards the right platforms and having innovative technology in place, from
voice recording for contracts to robo tools. What cannot change, he stresses, is the overall client experience.
Proactive service, better solutions
Globally, banks around the world are pushing for greater degrees of innovation in terms of products, services and technology - and this is something that certainly
needs to be accelerated in the South African context, believes Makanjee. "At RMB Private Bank we are fortunate that we have a lot of things working for us: the
culture, the passion for innovation and the tech enablement of our business model, for example.
Now we need to take what we have already achieved and just accelerate it further." A more proactive understanding of the needs of clients and how they
should be planning for this unpredictable future features strongly in this innovative thinking, and is an area of particular interest for us. Certainly, there is
increased scope for working with clients to balance short- to medium-term consumption needs and around ways to protect the future for themselves, their
families and children. "This is easier said than done," admits Makanjee, and it requires each client's situation to be taken carefully into account. "Some people
have become wealthy not because they understand money, but because they are good at something. But when it comes to what to do with that money and how
much to save and invest back in the business, this is where expert advice is invaluable." The concept of agile thinking and adaptive leadership - two terms
which focus on a readiness to lead change within organisations - have a place in the way in which RMB Private Bank is approaching these changes. "Organisations
globally are grappled with this issue of relevance and value," says Makanjee. "It's not about tech and business, it's about how tech and business teams work in
integrated and agile ways to deliver outcomes that are platform based. A typical client experience will have a combination of tech enablement, rich data, client
experience, product knowledge and client relationship knowledge. It's our job to bring all of that together in one team to deliver outcomes almost instantaneously."
As much as the current crisis is projected to have a severe impact on the local and global economy, it also has the potential to radically change how we bank - for the better.
Already the implications of lockdowns, social distancing and safety concerns are fast-tracking moves towards webinars and unique types of client
experiences, which enable closer and more meaningful client interactions. Ironically what is forcing us apart physically is moving us closer together in the digital sphere.
The times are indeed changing, and business strategies must adapt accordingly. Ultimately, this should mean a better client experience
which taps into digital opportunities, virtual interactions and deeper personal relationships.
Unpredictability is part of life, so put a plan in place.
Some events and global crises come at us from left field, but they do not need to derail a carefully thought-out wealth management plan. Unpredictability will
always be part of the wealth management journey, which is why the wise and prudent investor ensures that a contingency plan is in place to weather any
storm - from ill health, to a downturn in the markets, the implications of an unsuccessful business venture, or a global pandemic.
Not least that unpredictability is always with us, so it is a wise and prudent person
who plans for the proverbial 'rainy day'.
No one is suggesting that the current crisis could easily have been foreseen, but there are many other rainy days that you should be planning for. This could take
the form of unexpected medical expenses, the financial fallout from an unsuccessful business venture, cash-flow constraints or even interest rate volatility.
"The question you need to ask yourself is: 'If life happens, am I prepared'?" says Doret Jooste, CEO of Retail Money Management. "Everyone is worried and
anxious about the future. But view this crisis as an opportunity to take a step back and see what you can learn from it." While this process generally starts with the
central building block of having a valid and up-to-date Will in place, there are a plethora of other ways to protect yourself and your assets during times of stress.
Part of Jooste's remit is to help RMB Private Bank clients better manage their debt, to efficiently structure their finances in order to navigate cash-flow
challenges during emergencies, and how to ensure effective budgeting and investment habits. She offers several key lessons that apply to South Africans of
all backgrounds and wealth profiles during the uncertain age of COVID-19, when incomes are under threat and business prospects unclear.
Take out credit insurance
Most people have some form of debt, often for critical things like a home or a car or for a second home, either locally or abroad. For certain clients, debt might also
extend to commercial financing and business overdrafts. Irrespective of the type of debt, invariably any sudden loss of income or cash-flow interruption will
immediately make servicing this debt more challenging.
Fortunately, as an RMB Private Bank client you have access to credit insurance that enables you to ensure against a full loss of income. Should you suddenly find
yourself without a salary, the policy will cover your premiums for up to 12 months. "It is a great solution, especially for salaried clients," says Jooste. "It gives you real
peace of mind. If you don't have credit insurance, consider getting it sooner rather than later." One can also consider taking up income protection insurance, which
pays out a monthly income - either in full or partial - should you become severely impaired or disabled.
Have a cash reserve available
This really is 'saving for a rainy day'. Financial experts usually advise that you should have the equivalent of three months' income tucked away and easily accessible.
"So often people scoff at the idea of an emergency savings plan, but COVID-19 is teaching us exactly why you should have one," says Jooste. "It also reminds us
how important it is that these funds are readily available. If there's an emergency it doesn't help to have your money tucked away in a 90-day account." If you don't
have an emergency fund, she suggests that now might be a good time to start building one up. People who are working from home, for example, could be saving
on fuel and transport, cosmetics, perfume, beauty salon visits and expensive hobbies such as golf or mountain biking; so why not siphon those funds into a savings account?
"Obviously you may also spend more on things like water and lights if you're
permanently at home. But, on balance, you should be saving a bit of money. Try to
channel that into your emergency fund," Jooste advises.
If you are struggling financially, consider applying for Cashflow Relief
With so many South Africans in financial difficulty due to losing their jobs or businesses, there's an obvious temptation to seek a payment holiday from home
loan, vehicle loan or similar obligations. It is important to remember that most financial institutions will typically offer a payment holiday and then add it to your
loan agreement while continuing to charge you interest and fees. Many consumers believe that if their payment holiday is for, say, three months then the
life of the loan will be extended by three months.
"But, because you are now carrying over this amount, you end up paying much more in fees and interest - and for a much longer period than the additional three
months you anticipated," Jooste warns. "Especially if you still have a long payment term left on your loan and it is a product that carries a higher interest
rate, such as a personal loan."
In contrast, RMB Private Bank's Cashflow Relief with Payment Break plan was developed specifically to have minimal impact on a client's longer-term financial
situation and to avoid adding to the life, and cost, of the loan. "How it works is that RMB Private Bank pays the client's instalments for three months, which means
the original loan agreement and the client's payment profile remain unchanged," Jooste explains. "Obviously the client must repay the money that the bank has
paid over on their behalf. But we ring-fence that by creating a separate loan. We only charge interest at prime, which is a big saving if the client originally had, for
example, a personal loan at a much higher interest rate than prime."
She adds: "There are also no fees charged and the term of the loan is flexible. So if you find that you are back on your feet quickly, you can settle
the loan early and there is no penalty payable."
Manage your debt by consolidating and paying off where possible
A final piece of advice is to manage your debt by consolidating loans and paying off whatever debt you can. Unsecured credit such as retail store cards, furniture
loans and micro-loans have high interest rates and there will be a standard R59-R65 monthly service fee on each.
"Either try to pay these off or consolidate them into a single low-interest rate loan so that you can save on interest and account fees," Jooste says. "All of these
tactics are drips that you can gather in your financial bucket to help fill it up much quicker."
Travel and tourism in a post-pandemic world
The tourism industry is currently on hold. But when the global coronavirus outbreak has been contained, travel will make a comeback. Leisure travel is
likely to lead the way, once confidence about health and safety can be assured, but business travel is unlikely to ever be the same again. With companies
tapping into technology for their meeting and conferencing needs, hopping on a plane to a far-flung destination may no longer be deemed necessary.
The chief reason is that lockdown is teaching companies that face-to-face meetings with colleagues in other South African cities, or with clients in far-flung
parts of the world, are not as necessary as we once thought. With all the technology at our disposal - from Skype for Business through to Zoom, MS
Teams, Google Hangouts and even email and the humble telephone - management teams are coming to accept that they can achieve most of what they need to without hopping on a plane.
"The entire tourism and travel industry is on pause right now," says Elsa Silva, Head of eBucks Travel and Lifestyle, which over the years has offered extensive
travel-related discounts to the bank's clients. "But when it does make a comeback, as it inevitably will, the face of business travel will change more markedly than leisure travel."
Some would argue that this change of mindset is long overdue, given that the technology to effectively communicate and hold remote meetings has long been
with us. Perhaps in future this change will be recognised as an unanticipated benefit of the pandemic, in that it has forced organisations to change the ways they think, act and prioritise.
Leisure travel is destined to flourish again
Leisure travel, though, is a different scenario. "I firmly believe that leisure travel will boom again as soon as people feel safe and have confidence that they will not
be compromising their health," says Silva. She believes this rebirth will begin slowly and surely, with South Africa-based leisure travel to self-catering
accommodation, B&Bs and boutique hotels leading the way. Getting back to nature and enjoying experiences that are in harmony with the environment will be
the predominant theme. "We foresee the starting point being self-drive trips. Families will get into their cars for smaller, boutique-type getaways to
destinations where there aren't big crowds. It will be a kind of celebration of their return to freedom," Silva explains.
Cross-border travel will grow only later and could be hampered to some extent by consumer nervousness at venturing too far afield. People will also be cashstrapped
as a result of the financial devastation wrought by the pandemic, making expensive international travel a step too far for many. "International tourism will
take a while to ramp up because people may not want to travel outside their comfort zone, or the destination they plan to go to may not be open for business.
Or the airline they planned to travel on may have gone out of business," Silva observes. While some would-be travellers may be nervous about getting onto a
plane or staying in a resort, there will always be some travellers who are more adventurous than others, and it is these individuals who will be at the forefront of
getting the global industry up and running again.
eBucks has become a major travel industry player
Silva is well placed to predict travel and tourism trends. Since eBucks was founded nearly 20 years ago as a vehicle to add value for clients, it has provided
discounted travel and helped millions of South Africans to stretch their wallets and make their money go further.
Since the launch of eBucks Travel's new platform in April 2018, eBucks Travel and Lifestyle has booked close to 500 000 travellers on domestic and international
flights and clients have spent over R241 million worth of eBucks on those flights. More than 34 000 car rentals have been booked, with clients spending over R27
million worth of eBucks on those car rental bookings.
While most bookings are done electronically, the dedicated eBucks Travel consultants can tailor-make any holiday package according to client needs. "Our
main role is to add value to our clients and help them best utilise their eBucks. Part of that is unlocking all the benefits that come with it. For example, using the
SLOW Lounge is a very strong benefit. It is also possible to unlock benefits like the Avis Point 2 Point airport transfers. The more involved you are as a client, the more you can unlock benefits and savings."
And while clients are unable to enjoy these benefits currently because of the global pandemic and travel being paused - clients still have access to many other
benefits through the eBucks Rewards programme, says Silva. "And when it is time for travel to resume, we will make sure a measured and carefully considered return."
A perspective on SA travel industry
The travel and tourism industry is, for obvious reasons, one of the hardest-hit sectors of the South African economy. This means the road back after the pandemic will be a difficult one.
Speaking during a recent webinar hosted by South African Tourism CEO Sisa Ntshona, Tourism Minister Mmamoloko Kubayi-Ngubane said she did not foresee
local tourism making a return before early December. "Because of the nature of tourism, it is likely to be one of the last sectors to be welcomed back into the
economy, given travel restrictions and the need for social distancing," she said. "The full impact of the pandemic on the South African tourism industry is still
unknown and we are aware that international travel will only likely resume in 2021. We have to focus on targeting the domestic market once tourism is able to operate."
The minister noted that her department was analysing the tourism industry to see which sectors were high-risk and low-risk for spreading the virus. "We are
working with various stakeholders to see which sectors of the industry can operate in the different levels of the framework and we are guided by the Department of Health in this analysis," said Kubayi- Ngubane.
She added that there were concerns that the industry may have been stigmatised by the coronavirus. "We're aware that society may believe that travel and tourism
brought the virus to South Africa, and [that] could lead to a hostile environment for international travel to resume. As the tourism industry, we need to show we are
doing everything we can to mitigate the spread of the virus so that this possible stigma won't impact [the industry] once it resumes."
At the time of writing, industry bodies such as the Tourism Business Council of South Africa (TBCSA) were hopeful that the South African tourism industry as a
whole might only be opened up again by September 2020, in time for the summer high season, which brings in 60% of the sector's annual revenue. This opening
would be based on a staggered approach. International tourism brings 8.7% into South Africa's coffers annually, and employs more than 375 000 people
(according to TBCSA), so a failure to open by September could be potentially detrimental to the industry, which is already feeling the pain of the local and international travel ban.
COVID-19 and the state of SA INC.
The fallout from the COVID-19 pandemic on SA Inc is becoming clearer in early economic numbers and projections for the remainder of the year. The South African
Reserve Bank expects the economy to contract 7% this year, while the South African Chamber of Commerce and Industry's business confidence index fell to 77.8 in April
from 89.9 - its lowest level since inception in 1985. With very little fiscal headroom, how is South Africa responding? And how does this compare with the rest of the world?
Anecdotal evidence also tells us that small, medium and micro enterprises (SMMEs), from nail and beauty salons to restaurants and private gyms, are feeling
the effects of the extended lockdown. Car dealerships, manufacturers of nonessential items, mines and retailers are under pressure, alongside individual
households. The property market is also under pressure, with vacancies projected to rise sharply and with downward pressure on rentals.
Casting a wider net, the South African Reserve Bank (SARB) expects the economy to contract 7% this year. In addition, the South African Chamber of Commerce and
Industry's business confidence index fell to 77.8 in April from 89.9 - its lowest level since inception in 1985.
South Africa, which went into the ring against the coronavirus in what can best be described as a precarious financial state, must now also battle a global fallout
that has seen the world's largest economy, the United States, decline by -4.8% in the first quarter. In early May, CNN reported that one-in-five American workers
had filed for unemployment benefits since mid-March when the lockdown came into effect. While some of these losses would have been temporary, resulting from
short-term business closures, they could become permanent as cash flow starts to bite and capacity deteriorates.
According to Chantal Marx, from the Wealth and Investments team: "How this situation will play out, and how long it will last, is still up for debate but we will
continue to see the release of poor economic numbers and continued volatility in markets." Only a steep reduction in infection rates, an effective treatment protocol or a vaccine could stem the tide.
Back to business?
With the United States chomping at the bit to reopen its economy, and with Europe tentatively dipping a toe in the water, SA Inc has the advantage of
observing how other nations handle not only the healthcare demands of the virus but also the complex process of reopening their economies. China, having
brought its infection rate under control, is now functioning at around 80% of capacity, with citizens crossing borders to boost domestic tourism, factories up
and running and even exports surprising with a 3.5% hike in April. But with slow demand from the rest of the world, Chinese manufacturing will remain under pressure.
"How this situation will play out, and how long it will last, is still up for debate but we will continue to see the release of poor economic numbers and continued
volatility in markets." Much hinges in the months to come on how the United States - which has been heavily hit by the COVID-19 virus - manages to get its
economy back on track. This is made more challenging by political fumbling and discord, the stark limitations of the country's public healthcare system and issues
rolling out testing. "Unfortunately, as the largest economy in the world, the longer the United States struggles the bigger the impact on everyone else, including
China," points out Marx. And this also ripples down to South Africa. While the United States is a key trading partner, alongside the United Kingdom
and Europe, South Africa's most important focus remains China. Chinese demand for commodities drives South African exports, but China in turn lives off global
demand. As a result, explains Marx: "We are probably going to see a decline in the value of exports from South Africa. But demand in South Africa locally is so weak,
and the oil price has gone down so much, that our import basket is likely to be smaller, so this might not have a big impact on the rand."
Relief packages around the world
Issues with rand volatility, however, pale into comparison with how SA Inc will handle the economic fallout from COVID-19. Globally, governments from the
Group of 20 countries have promised to inject over US$9 trillion into the world economy, and most major central banks have loosened monetary policy by
cutting interest rates or buying assets.
"The United States Federal Reserve (Fed), in particular, is worth talking about," says Marx. "They've not only continued to purchase treasuries, and actually
ramped up that programme again, they have also decided to start buying corporate bonds. And they are also - temporarily - buying back treasuries from
other central banks, to try and take some volatility out of the markets." The European Central Bank is continuing to purchase bonds and is also loosening
the financial requirements demanded of banks, as have the Fed. The SARB has also announced that, for the first time, it will be buying sovereign bonds to
improve liquidity in the local bond market, and has embarked on a series of interest rate cuts. In addition, the SARB has engaged in a range of measures with
commercial banks to free up liquidity and improve liquidity in the intra-bank market.
The latter, says Marx, is particularly interesting. "Following the 2008 crisis, Basel III [the international regulatory accord] came out, requiring banks to keep a
liquidity buffer. The SARB was very quick to implement this. Now the SARB is saying that banks can temporarily tap into these liquidity buffers to facilitate
lending into the market - this is exactly why these buffers were put in place, to give banks headroom in times of stress to help out the economy."
South Africa's fiscal headroom, however, largely ends there. Which is why government has not been able to deviate too much from its plans prior to the
COVID-19 outbreak. "They are taking it department by department and shifting money around to support the economy, rather than spending more, since they
simply don't have the capacity," says Marx.
What government is doing, however, is working closely with commercial banks to improve the availability of funding in the economy. Says Marx: "The R200 billion
government guarantee programme will facilitate commercial banks' balance sheets to improve access to financing by SMMEs."What does set South Africa
apart from the rest of the world is a strong 'benefactor system', whereby individuals are gifting money to the economy, some of them directly, some
through the state and some through the Solidarity Fund. "We haven't seen something of that scale relative to what government is spending anywhere else in
the world; so that's a unique dynamic," says Marx.
A slow economic recovery
Unfortunately, because of the constraints on South Africa's fiscal situation, the country could take longer to recover than the rest of the world. According to Marx:
"For the rest of the world, we expect things to look really bad in the first and second quarters and then to start looking much better in the third and fourth
quarters. In South Africa, recovery is expected to take longer, with the country lingering at the bottom before recovering."
For investors, meanwhile, the fundamentals still hold true.
"This is not the first pandemic the world has ever seen and it won't be the last. Markets never stay at historic lows (forever,") says Marx. "Once the prospect of
normalisation exists, from a real economic perspective as well as from a financial market perspective, you should see a sustained recovery playing out. Until then,
markets will remain volatile. It is a case of being patient and not panicking. It is essential to keep to your investment strategy and remember you are a long-term
investor, so you will experience ups and downs in the market."
What to consider when accessing your offshore funds
In an effort to continue operating effectively in their business and personal capacities in the face of cash-flow constraints, an increasing number of clients are
considering bringing offshore funds back to South Africa. This disinvestment process can be handled quickly and easily if the right procedures are followed, but
there are some important considerations you need to take into account.
The question for South African investors is: How will this affect me?
In most instances this can be done relatively quickly and easily if the correct
procedures are followed. Similarly, applying the right protocols will also ensure
that the funds can be invested offshore again if and when they are no longer
needed in South Africa. But before you embark on this process there is one critical
question you should ask: Have I first exhausted all my local funding options?
First try to fund from a local source
"If you are thinking about repatriating your offshore funds to South Africa in order
to, for example, temporarily sustain your business or professional practice during
the current crisis, my advice is to first try all possible means of sourcing additional
funding from within South Africa," advises Francois Sohnge, Head of Advice and
Financial Advisory, RMB Private Bank.
As a general principle, Sohnge says there should not be a currency mismatch
between your assets and your liabilities. In other words, if you have a business or
an investment that is denominated in rands, try to fund it from a rand source.
Offshore funds are usually long-term investments
"If you have used your Single Discretionary Allowance and/or Foreign Investment Allowance to take funds offshore, that money is almost certainly earmarked for a
long-term purpose, such as a property asset, to fund a child's university education, or to invest in a business," says Sohnge.
Sohnge adds that the COVID-19 pandemic has caused a lot fear and negativity, which can lead to short-term thinking and irrational decisions resulting from
panic. "Don't let emotions cloud your judgement and stay invested if at all possible," he advises. "Before you make any decision, speak to an advisor or a
wealth manager. Because they are not as close to the situation as you are, they are better able to give objective, professional advice."
Follow the correct procedures
If you are a South African resident who has made the informed decision to repatriate offshore funds back to South Africa, the good news is that the process
is relatively simple and straightforward. Although it is vital to follow the right processes in order to avoid any unnecessary fees. Similarly, following due
process will ensure that these funds, or a portion thereof, can be taken offshore again in the future. The first step would be to notify your offshore banker and
transfer the funds from your offshore bank account into your SA bank account. When the funds arrive in SA, you will simply need to confirm that the proceeds
come from your authorised offshore capital. Chantal Robertson, from the Global Solutions team, points out that all South African residents are entitled to an
annual Single Discretionary Allowance of R1 million which can be used for many purposes including travel, gifting and foreign investment. In addition, individuals
are also entitled to a Foreign Investment Allowance of R10 million, subject to tax clearance.
This means that those funds, plus any related income derived offshore from them, are regarded as offshore assets and you are under no obligation to bring these
funds back into the country. Similarly, any foreign earnings generated while living and working abroad are also exempt, as well as foreign inheritances received from non-residents.
No tax clearance when sending funds offshore again
Robertson explains that since there is no requirement for you to bring any of these legitimate offshore funds back to South Africa, if you choose to do so then
"the rand equivalent of the money you brought into the country is re-transferable out of the country again at any point in the future". Importantly, if these funds do
leave the country again, they are not deemed to be part of either your annual Single Discretionary Allowance or Foreign Investment Allowance. She emphasises
that there is no additional tax clearance requirement for such transfers. However, it is imperative that the incoming funds are reported as a disinvestment of capital
on the Cross-Border Reporting System, which is the 511 Balance of Payment series.
The BoP reporting is key as this will ensure that the Rand equivalent introduced is re-transferable offshore at any point, without the need for tax clearance. "It is vital
that you retain the relevant transaction reference details, such as the deal number and deal confirmation," Robertson advises. "This is the only information that we,
as a bank, would require should you wish to re-transfer these funds abroad again when your local cash flow is stronger."
The power of partnerships: Clicks and eBucks
eBucks Rewards members can now earn and spend eBucks at Clicks stores nationwide when paying with qualifying RMB Private Bank cards. The South African
pharmacy, health and beauty retailer has more than 650 stores around the country as well as a strong digital presence both online and via the retailer's App - putting
convenience, security and safety at the forefront of this exciting new partnership.
The South African pharmacy, health and beauty retailer has more than 650 stores around the country as well as a strong digital presence both online and via the
retailer's App. This digital footprint makes the partnership even more attractive currently as consumers are being pushed to make greater use of e-commerce
sites in the face of the COVID-19 pandemic and the resultant national lockdown.
This unforeseen benefit of the partnership is becoming increasingly significant, with Clicks responding to the lockdown restrictions by swiftly adding a Click and
Collect offering to its existing delivery infrastructure. "The Click and Collect service could not have come at a better time," says eBucks Rewards CEO Johan
Moolman. "It provides our clients with the convenience and security to place orders on the Clicks website or via the Clicks App, and they can collect these
items at the nearest Clicks store."
For a brand which in itself is renowned for its use of technology, this focus on innovation and solving for the needs of clients certainly sits well as a corporate
tie-up. Adds Moolman: "The bank prides itself on being at the forefront of innovation, and we will continue looking at ways to add even more value to our
clients through strategic partnerships that make it easier and more convenient for them to stretch their wallets."
The fact that negotiations with the Clicks Group, leading up to the eBucks announcement, were ongoing for several months is indicative of the importance
the eBucks team ascribes to signing up the right partners. This process, says Moolman, was essential to ensuring that the resultant partnership brought as
much value to eBucks members as possible.
The end result is an attractive proposition for RMB Private Bank clients, which could yield up to 15% earn for eBucks customers.
In addition, Clicks and existing eBucks partner, Engen, have also entered into a ClubCard fuel partnership. The closer ties between these three strong brands now
has the potential to open up additional value for RMB Private Bank clients.
2020 in lockdown
On 13 February 2020 the biggest concerns facing South Africans were Eskom and SAA, the inevitable Moody's sovereign rating downgrade and a severely stretched fiscus. A month later, on 15 March, President Cyril Ramaphosa declared a national disaster. The arrival of Covid-19 in South Africa has changed everything.
The day President Cyril Ramaphosa delivered his State of the Nation address before Parliament, on 13 February, there were 64 437 cases of the Covid-19 around the world (mainly in China). And none in South Africa.
On 23 March, a week and a day after President Ramaphosa evoked extraordinary emergency powers to deal with the pandemic, there were 350 536 cases globally, 15 327 deaths and 402 reported cases across all provinces in South Africa.
These rising numbers, and country lockdowns around the world, have fundamentally changed the direction of 2020.
Facing down a health threat of staggering magnitude and virulence, business, labour and South Africans from all walks of life are being called to come together to put past differences aside, to support one another, come up with innovative ways to support small and medium-sized business and to help corporates to keep their doors open. The focus has swung to ensuring that workers have the necessary social and financial support to survive, as individuals and the economy battle to deal with the speed at which the virus has shuttered offices, restaurants and malls, in the process seemingly changing the face of the world forever.
On March 16, Minister of Finance Tito Mboweni announced that National Treasury would use money from the National Disaster Fund to help finance the government's response to Covid-19, although how much is available is yet to be determined.
And yet, just a month previously, South Africa was battling downgrades, political in-fighting and ongoing state-owned enterprise woes.
It was certainly clear a month ago that 2020 was poised to be a difficult year locally and, with the United States setting the tone for the year with a drone strike that killed Iranian General Qasem Soleimani, it looked set to be challenging on a geo-political front too. But few could have foreseen the desperate attempts to stem the spread of a virus which continues to claim lives, stretch governments and see borders around the world slammed shut.
While Covid-19 dominates news headlines currently, there remain issues of global importance which still require our attention. Trade issues like the phase one trade deal agreement between the US and China and, subsequently, a war of words around China telecom equipment maker Huawei and its 5G network.
Brexit is still not yet fully resolved. While the 31 January exit was much publicised, the United Kingdom remains in the European single market and customs union until 31 December; so uncertainty is likely to persist. What that means for South African investors is the subject of just one of the articles we've put together for this edition. We also included a mega-trend focus on the impact of urbanisation and explore the intrinsic value of establishing an offshore trust as a means of ensuring the inter-generational transfer of wealth.
During uncertain times such as these, during which world markets have been shaken to their core, we have taken the opportunity to get back to basics by outlining our asset management and wealth and investment approach. Sticking to an investment plan remains the single most important way in which to deal with the current situation, no matter how difficult that is or how concerned you are for the future.
More importantly, during these heightened times we would like you to be more aware of possible fraud and theft which, unfortunately, are a sad reality.
In many of these cases, fraudsters find it more effective to exploit human behaviour. Therefore, no one should let down their guard when it comes to safeguarding their credentials and personal information; particularly when it comes to banking. We want to assure you that we are prioritising an uninterrupted service to you, and our 24/7 digital solutions allow for minimal disruption when transacting on your RMB Private Bank account and at this time we urge you to make use of these solutions to minimise delays and also be cautious of fraudulent activities.
I sincerely hope that you, your family and friends remain safe and healthy.
Eric Enslin, CEO RMB Private Bank
On Friday, 27 March 2020 Moody's (one of the three major credit rating agencies) downgraded South Africa's sovereign credit rating to sub-investment grade while maintaining a negative outlook. Fitch and S&P (the other two major agencies) both downgraded South Africa to sub-investment grade in 2017.
Moody's highlighted the following primary drivers in coming to their decision:
- Structural economic bottlenecks that limit GDP growth potential and employment creation.
- Deteriorating public finances and unfavourable debt dynamics.
- The acute financial stress state-owned enterprises (SOEs) are under, particularly Eskom.
- Uncertainty around structural reforms and implementation risk.
While the downgrade had largely been priced in by financial markets, the timing thereof could not have been worse; it came amid a wave of global risk aversion, further currency weakness and higher bond yields.
The yields on SA bonds reflect the rate at which the government can borrow money. Generally speaking, a downgrade would be associated with a higher risk profile and result in a higher yield and consequently more expensive borrowing for the sovereign.
Additionally, the rules for certain passive indices and institutional mandates stipulate that only investment-grade debt may be held and there may be some forced selling as a result of this change in rating for South Africa.
Given the current market turmoil related to Covid-19, markets have been inherently more volatile and liquidity has been constrained. This event could exacerbate this issue in the local bond market.
In financial markets the news itself is often overshadowed by the extent to which the event was expected and consequently priced in already (the local bond market is down ~12% year-to-date).
The current yields on SA Bonds already compare with those of other sub-investment grade countries around the world, and as such this event does seem to be largely reflected by current prices.
Given recent market turmoil the usual quarterly rebalancing of passive indices has been delayed by a month, which should alleviate any immediate selling pressure on SA Bonds. The current level of SA Bond yields is very attractive given the low rate environment globally and yields a significant margin over inflation (approximately SA CPI + 7% for 10-year bonds). While the downgrade is negative, there may be investors who still find appeal in the relatively high-yielding SA debt.
The portfolio construct and strategies we run are inherently long term in nature, and consequently short-term market events do not usually have a notable impact on our portfolio positioning and strategy.
This particular event is uncommon, and also comes at a time of heightened volatility. As such the team will pay close attention to the market impact and look for opportunities amid these movements.
Presently, SA Bonds are an attractively valued asset class notwithstanding the downgrade and its implications. Any further sell-off in the bond market could be used, where appropriate, to opportunistically increase exposure. Additionally, we will pay attention to the impact on the rand and take advantage of repatriating assets at oversold levels and increasing exposure during strength.
In summary, the downgrade has certainly added to the flurry of recent negative news. However, the event itself is unlikely to surprise the market - and there are many mitigating factors that may result in the downgrade being met with mixed reactions from market participants.
The focus now shifts to government's ability to effectively manage its debt profile and implement structural reforms. Clients do not need to be concerned as their portfolios remain well diversified and appropriately positioned for the current environment. The investment team continues to work throughout the current turmoil, making use of technology to meet more frequently than in normal circumstances; thereby ensuring that our fiduciary duty as stewards of client capital is discharged with diligence and due consideration.
Solving your needs with effective asset management
Few would argue that the foundation of successful investing hinges on a deep understanding of the global macro-economic environment.
But that's not all. It also necessitates a quality approach, one which considers investing in robust assets - companies of substance that can hold firm during economic cycles and which are best equipped to generate long-term sustainable revenues. And it requires a focused approach built around the concept of diversification.
That's the investment philosophy which has long underpinned the approach shared by FirstRand experts across the FNB, Ashburton and RMB brands. But now, under new Wealth & Investments and Ashburton Investments CEO Sizwe Nxedlana, this asset management position is being streamlined, better coordinated and geared towards client-centricity and ease of use. It's the same core philosophy in action, but with a maturation of processes, platforms and tools.
Our approach to asset management
In a nutshell, explains Nxedlana: "Our approach is about quality, at a reasonable value. It is macro-cognisant and we are long-term investors."
In the past, FirstRand's asset management communication approach focused heavily on the macro-economic aspects of sound investing, but this has never been the full and complete story of what goes on behind the scenes. "Now we have become a little more explicit about what we do and we are elaborating on our entire investment process and what this has to deliver to our clients," explains Nxedlana.
In practice, this means a greater emphasis on the environmental, social and governance (ESG) factors which are used to measure sustainability and the social impact of an investment. "We are about quality and when we invest your money we want to make sure we are investing in quality companies that are socially conscious, are governed appropriately and which take cognizance of environmental factors; because we think those are businesses that will be sustainable," says Nxedlana.
A great deal of attention is paid to quality screening across this investment process, to determine a viable universe of both onshore and offshore investment options. The next step is to undertake a detailed valuation effort to get into the nitty-gritty of the company in question to determine its quality and if it is valued appropriately.
Says Nxedlana: "We are doing a lot of work to make sure our valuation models are in place and are modernised." Drawing on the group's macro-economic expertise is certainly a critical consideration within these valuation models, allowing for long-term investments which, when made, can form part of a portfolio for as long as possible in order to reap the utmost benefit. With all these elements in place, there should ideally be no need for chopping and changing of portfolios.
So what's new?
While this philosophy has long underpinned the FirstRand investment process, advanced plans are afoot within the broader group to bring all the strands of investment expertise together to streamline processes and create a highly client-centric experience.
Nxedlana took on the role of Ashburton Investments CEO in October 2019, alongside his existing role of CEO of Wealth and Investments. This move exemplifies the group-wide approach to leveraging it's platform capabilities in order to deliver the right investment solutions and to better meet client needs.
Explaining the dual role in more depth, alongside his focus on integrating FirstRand's investment capabilities through a single investment process and unified digital platform, Nxedlana explains that the current approach is being directed at getting the most out of the strong capabilities within the group and finding more efficient and effective ways to execute investment management more tightly.
"We have capability, which sits in a variety of places, and we are now really focused on understanding what the client's investment problem or investment need is across all the segments we have; that's across retail, commercial, corporate and institutional. Within that I also include intermediaries like independent financial advisors and direct fund managers," he says. The aim is to build on an existing culture of solving for client needs but doing so in a more deliberate and more co-ordinated manner.
What sparked this shift?
From the days when Laurie Dippenaar, GT Ferreira and Pat Gross founded a small financial structuring house in Johannesburg back in 1977, the FirstRand legacy has evolved into one of innovation and entrepreneurship. This has been evident in the growth and development of the various business units operating under the FirstRand banner. But organisations mature and, when they do, their systems and processes must do the same.
Nxedlana explains: "Now the organisation is being tilted on the side to emphasise client first, after all we potentially have clients who bank with us, lend, invest and take out insurance. The starting point for this new way the group is operating gives us the chance to pull together more. In the past we certainly collaborated, but we are now enhancing the coordination between the various business units that have grown up and been built within the group."
While some capabilities were born in different areas of the group for specific reasons, the idea now is to create an easier, more efficient and more effective offering for clients.
"As we have matured in terms of our focus on investment in the retail world, we've actually found that there is a lot of capability that sits within FirstRand in the likes of Ashburton and RMB and which, if we coordinated this better, would ensure a more efficient way to package solutions and also to distribute more efficiently, seamlessly and cost-effectively to clients," says Nxedlana. "Ultimately, we are building the business through understanding client needs, across segments and not just within certain business units.
Putting it simply: "We are trying to solve investment needs."
Urbanisation - a global phenomenon
A staggering 80% of global GDP is now generated in cities around the world. These hubs of innovation and wealth creation are not only a notable global shift, but they also boast investment opportunities, open doors to business and industry and make social and service delivery faster and more effective.
Based on World Bank figures, this surge in urbanisation is a global phenomenon. While the United States already saw 40% of its population living in cities in 1900, by 2016 this was estimated at 82%. Western Europe, similarly, was at 41% urbanisation in 1900 and stood at around 80% in 2016, versus Japan's 12% rising to a staggering 92% just five years ago.
Estimates from both the World Bank and the United Nations point to the fact that 55% of the world's population currently lives in cities, a number that is expected to rise to 68% by 2050. This means that in 30 years an additional 2.5 billion people will be living in cities than do so today.
High-growth populations like China, India and Nigeria are expected to be the major countries for urban population growth up to 2050, with 90% of urban growth expected to come from Asia and Africa. This huge shift is stretching many emerging market economies, requiring a dramatic change in how countries design, engineer and service these sprawling mega urban areas.
At a local level, explains Chantal Marx, from FNB Wealth and Investments, South Africa is sitting on an urbanisation rate of about 65%, compared with the likes of Brazil and Argentina, which already have more than 80% urbanisation. "The Northern Cape adult population is about 600 000 people, about the same size as the Ekurhuleni metropole in Gauteng. So Boksburg and Benoni and surrounds have as many people living there as the entire Northern Cape province; which gives you an idea of just how urbanised we are in Gauteng," she says.
"To give a sense of the movement, two new people move to Johannesburg every day, versus 79 to Delhi, 18 people to Sao Paulo and 22 a day to Mexico City, 10 to New York, nine to London," says Marx. Lagos in Nigeria is said to add 77 people per hour, according to the World Economic Forum; a staggering number of people for any government to accommodate and service.
In fact, McKinsey Global predicts that by 2025 there will be 100 African cities with more than a million inhabitants, many of them the young and unemployed in search of scarce opportunities.
While the rate is slightly slower in South Africa than other parts of the world, it is expected that the country will have an urbanisation rate of close to 80% by 2050, in line with global trends. While this has potential to make service delivery easier, given the centrality of people and the concentration of services in certain areas, the problem currently is the pace of this movement into cities ill-equipped to deal with the numbers.
Pros and cons
"There are a lot of issues around urbanisation, but ultimately no country has actually achieved middle-income status without a significant move of the population to cities, as this is where economic activity is centred. So, generally, it's quite positive in the longer term," says Marx.
"Things that become important include infrastructure, homes, buildings, energy, safety and mobility. Disruptive tech also plays a big role, such as broadband capabilities, 5G, the Internet of Things, big data, the cloud and artificial intelligence," says Marx, she adds that while there is undoubtedly an economic value to rapid urbanisation, the challenge facing cities and administrators is keeping up with the rising numbers.
Key strategic planning
Planning, therefore, must be fast and effective but also realistic, she says. "You don't, for example, want a situation like you have in China where they've planned for certain urban spatial issues and you end up with ghost cities."
Similarly, 19 countries around the world are facing a converse planning situation, where their urban populations are declining into 2050; these include the likes of Japan, Belarus, Bulgaria, Estonia, Germany, Serbia, Ukraine, Bermuda, Cuba, Greenland and Puerta Rico. "Often this is due to aging populations where older people don't necessary want to live in cities. So your urbanisation rates will be very high in Africa and Asia, which have higher youth populations, and a little lower in other [more mature] areas," explains Marx.
Shifting economic power
From an investment perspective, rapid urbanisation also creates opportunities for industries such as online shopping channels and logistics, which benefit from the closer markets and greater demand.
"A high urban concentration just makes it a lot easier for those industries to thrive," explains Marx. "Similarly, e-commerce will thrive in a society where urbanisation is quite high and where it continues to grow. For example the likes of your Takealot and Faithful to Nature online stores."
Because urban populations tend to be more educated, sectors such as private education and tertiary institutions also tend to flourish, which in turn leads to better productivity, since competition is higher and skills are more readily available.
Other industries which benefit include infrastructure, homes, building, energy and safety. The housing issue alone has sparked, from a South African perspective, some interesting entrants onto the JSE in recent years, notes Marx, singling out Calgro M3, which is focused on low-cost housing, and Balwin Properties, which caters to the R1 million to R1.5 million market.
"Similarly, Indluplace Properties deals with rentals of residential property, concentrated in Gauteng and the Western Cape, and they should also benefit from this mega-trend," says Marx. This sector, in turn, provides an uplift for infrastructure companies dealing with road construction, bridge building and rolling out the backbone elements of any city, from sewerage to broadband fibre.
Make no mistake, urbanisation is a key mega-trend to watch, and one which creates opportunities for individuals, businesses and investors.
The intrinsic value of an offshore trust
The world of offshore investing opens the door to a variety of interesting and sometimes intriguing considerations.
For example, should investments be held directly by an investor or should an offshore estate planning structure be used? In many aspects, offshore investment decisions clear the path to diversification and provide opportunities and triggers on how the investments should be housed for the inter-generational transfer of wealth.
In 2018 alone, South African investors were estimated to have sent in the region of R68.5 billion offshore, according to United States research firm Real Capital Analytics. With economic concerns on the home front these outflows are likely to have maintained a similar momentum in 2019, going into 2020.
Planning opportunities arise when investing offshore, for example it is important to address questions of how and where investments are to be housed and how the associated offshore investment portfolio is being managed. Ensuring a robust approach, which is both tax efficient and protects the wealth for future generations, must also be investigated.
Without expert estate planning and administration services, and the existence of a valid offshore Will, investors could find themselves with offshore exposure without the optimum structures in place to house these assets. Working with our Global Solutions and FNB International Trustees, situated in Guernsey, can ensure that all the necessary paperwork is in place, advice is fit for purpose and that portfolios are well structured.
In many cases, this involves the establishment of an offshore trust.
When to consider an offshore trust?
Trusts remain effective tools for wealth preservation and, although the local and international trust industry has experienced a variety of changes in recent years, there is still value in using the correct structure. Offshore trusts have a role to play when considering the impact on one's wealth and also for ensuring that the wealth preservation plan is not limited to the wealth creator alone.
Chanel Kempff, Head of Fiduciary, explains that the advantages of generational wealth preservation are intrinsic to trusts. A trust ensures that you do not have to transfer assets from generation to generation and incur unnecessary costs and taxes while attempting to keep the assets in the family. A trust is normally fluid and any shift in family dynamics can be dealt with to maximise the impact where there is change in circumstances. "It's a more seamless succession plan," she explains.
"Furthermore, if assets are owned by a trust, then your Will is not required to deal with such assets, since the trust will continue after your passing," explains Kempff. "The assets are protected, and can be administered by a trusted partner within the FirstRand Group".
"Before you establish an offshore trust, it is important to seek expert advice on key considerations such as how you fund the structure, the exchange control limitations and the tax implications", says Kempff. RMB Private Bank's Global Solutions can work with you on the funding mechanisms and lead you through the process.
She adds: "Our offshore trusts are administered in Guernsey and the trusts obtain full exposure to the laws of Guernsey".
Global outlook, local office
RMB Private Bank assists clients with the seamless process of establishing an offshore trust. "Ultimately the integrity of the structure is key," explains Kempff.
Local and international expertise are always on hand through the Global Solutions specialists, consisting of a team of experts, including a Fiduciary Specialist, Wealth Manager, exchange control expert and Private Banker.
Drafting an offshore Will
While a trust does, theoretically, reduce the need for an offshore Will, it is always advisable to consider an offshore Will the moment you take funds out of the country or acquire an asset abroad. "Clients go to great lengths to structure their South African assets, however, you are generally speaking unable to hold your offshore share portfolio or offshore accounts in your local structures and this has an impact on your personal worldwide balance sheet," explains Kempff.
While it is not impossible to deal with international assets in your South African Will, it is important to note that your offshore assets can mostly not be dealt with by your local executor; for that you need assistance in the offshore jurisdiction/s in question, which can delay the process of wrapping up your estate should the Will have to do a trip around the world. "It is partly for this reason," says Kempff, "that it is our house view that you consider the impact of having a local Will, a Will for a specific jurisdiction or a worldwide Will." The Fiduciary Specialists will guide you through the process ensuring that the preparation of multiple Wills does not unintentionally revoke your local or any other Will.
FNB International Trustees can assist South African individuals holding assets in the United Kingdom, Northern Ireland or Jersey, Guernsey and the Isle of Man to draft offshore Wills specifically dealing with these jurisdictions. We work with an international network of professionals to find suitable support when dealing with assets situated in different jurisdictions.
While offshore investing is a crucial part of any diversified portfolio, ensuring the correct structure and long-term approach to the management and preservation of your offshore assets is equally important.
Brexit. What now for SA and 'Little England'?
Three years and seven months after 52% of Britons voted to leave the European Union (EU), the United Kingdom (UK) ceremonially cut ties with the EU on the evening of 31 January 2020. Like all protracted divorces there are still negotiations to be had, and while those take place the UK will remain in both the EU customs union and single market for a transition period ending on 31 December 2020. But the die has been cast.
The question for South African investors is: How will this affect me?
Sizwe Nxedlana, CEO of RMB Private Bank's Wealth and Investments, believes that "if Great Britain wants to become Little England, the economic impact on SA will be negligible."
Fundamentally, explains Nxedlana, the South African economy is driven by three main things: domestic macro-economic reform (such as action on state-owned enterprises, labour flexibility and the ease of doing business), the state of the Chinese economy (since we need them to hoover up our commodity exports) and foreign investment inflows (which make the actions of the United States Federal Reserve all important).
"So, the Goldilocks scenario for South Africa is that if China does well, a reform agenda that is gaining traction domestically and if United States (US) interest rates are low, then the South African economy will fly. What happens in the UK, quite frankly from a South Africa macro-perspective, is not that important. However, for an investor who wants specific UK exposure then it does become more important," he admits.
The uncertainty factor
Two big issues dominate the concerns around Brexit currently, explains Chantal Marx, from Wealth and Investments: An UK-EU trade deal and the issue of financial equivalence.
Both will likely be on the table until 31 December, says Marx. "And it's probably going to be a last-minute signature or an extension at the end of it. And that will mean further uncertainty in the markets, which does add an element of risk around the UK and Europe, which are still among the largest economies in the world. Even if they aren't growing as fast as a China or in line with the US, they still have a meaningful impact on sentiment which could influence the direction of global markets and by extension, the JSE."
A contentious trade deal
All indications are that the EU plans to play hard ball in the trade deal negotiations, says Marx. "The UK said it did not want a bespoke deal, rather something similar to that of Canada, South Korea and Japan. But the EU is being very sticky and they want to negotiate from scratch, because the UK isn't quite like Canada, South Korea and Japan due to its proximity to Europe and the fact that it manufactures many of the same goods [as Europe]. So Britain is a much bigger competitor to EU products than the other three."
For the UK, which imports about 30% of its food from the EU, according to a 2018 paper published by the House of Lords, issues such as tariffs and customs barriers could potentially impact food security. But the leverage is not all one sided. "That's quite a substantial number and it would also indicate that it would be important for the EU to maintain that relationship from a trade balance perspective, so they wouldn't want to sever those kinds of ties, either" she says.
Both sides have much to gain - or lose - from this process, but currently both are playing political games, adds Marx. So its brinkmanship that's catching the headlines.
In mid-February the EU's chief negotiator in Brussels, Michel Barnier, said the UK should not kid itself that it would achieve a general, open-ended and ongoing equivalence in financial services. "We will keep control of these tools, and we will retain the free hand to take our own decisions," he said.
What makes this such a critical point?
Marx explains that in order to do business with the EU, countries require special permission and certain requirements in place for money to flow freely across borders. "This mostly relates to norms and standards on issues like, anti-money laundering and anti-corruption. The UK wants financial equivalence to the point where the EU accepts that their financial system works more or less in the same way and that their norms, standards and controls are at the same level as that of the EU," she says. "The problem is, if they don't get this financial equivalence, they will be subject to other conditions for money to flow freely between Britain and the EU and this would impact quite a lot of business, not only from a transactional perspective but an investment perspective."
Japan, the US and Singapore have been granted close to financial equivalence by the EU.
In addition, the UK also appears to want the power to grant financial equivalence to other countries; hence Barnier's sticking point. "I don't see the EU going for that," says Marx, "so they'll probably arrive at a point where the EU grants the UK close to financial equivalence, but they are unlikely to give them the right to grant financial equivalence themselves."
Are the clouds lifting?
While the game playing continues between London and Brussels, there are signs that both business and consumer confidence have improved slightly since the decisive election of Boris Johnson in December 2019 and the exit from the EU at the end of January.
The recent Bank of England-backed Decision Maker Panel survey by Nottingham and Stanford universities "showed an uptick in investment expectations", according to the Financial Times. "In the three months to January, the surveyed businesses [3 000 in total] said they expected investment in the year ahead to grow 4.6% in financial terms, up from 2.4% in the previous three months," reported the newspaper.
Marx adds: "This is quite a big survey and they've said that investment expectations of businesses in the UK have increased - 4.6% is quite significant for an economy as mature as the UK."
Consumer confidence also improved in January, although it's still negative at -9%. "But that could change as things start normalising in the UK economy and once business investment starts coming in," she notes.
Investment implications for South Africa?
First and foremost, says Nxedlana, it's important for any South African client looking for global, offshore exposure to appreciate that RMB Private Bank's approach is to "position ourselves in such a way that we diversify from any regional or national idiosyncrasies. So we'll give exposure to the US, to the UK, to continental Europe and Asia Pacific. Which means that the way we do things means that our clients don't have to worry too much about Brexit-specific issues."
While it's interesting to read the Financial Times and understand the reach of these British issues, "from our perspective and for South African investors seeking offshore exposure there is one word: diversify".
Marx agrees that sticking to your diversification strategy is essential.
"And if that strategy includes offshore investment, and if you have an allocation to the UK, then there is no need to change that now as you will already have taken the pain. But you might not necessarily want to up your exposure yet, due to lingering uncertainties."
Over and above keeping a close eye on how the relationship between Britain and the EU plays out, Marx believes South African investors should be mindful of the exposure South Africa has, from a markets' perspective, to the UK economy.
"Some companies won't see an impact, because they are just dual listed, but a company like Quilter, which specialises in personal finance and investments in the UK market, will be heavily impacted if things deteriorate further. Conversely, it will also be positive for them when things start going better," says Marx. "South Africa also have a lot of retail exposure to the UK. Brait, for example, owns New Look and Iceland Foods, Foschini Group has Phase Eight and Truworths has Office where exposure is almost purely to the UK."
Finally, South Africa has notable exposure on the JSE to the UK property market, making an improvement in confidence critical.
While these are telling issues for South African investors with UK exposure, fundamentally Nxedlana believes that - relatively speaking - "there are much bigger elephants in the room, for us, than Brexit".
WALKING THE LINE
Walter Conner, an American author and wisdom guru, once observed: "Life is a constant balancing act, and keeping your balance is not always possible. The better you prepare yourself, the better your chances of regaining your balance when you lose it."
Right now it feels as if we are walking a tightrope, trying valiantly to find that balance, while dodging any number of unwanted obstructions.
Over the course of the past few months this balancing act has become, at times, precarious amidst conflicting opinions around key developments like the National Credit Amendment Bill - or 'debt relief bill' - being signed into law, the introduction of the National Health Insurance Bill to Parliament, and news that South Africa's unemployment rate has climbed to 29% and the release by National Treasury of a 77- page strategy document to get the country's economy back on track. Globally, ongoing protests in Hong Kong, ongoing Brexit turmoil, the devastation wrought by Hurricane Dorian on the Bahamas, heightened tensions in Kashmir, and ongoing global trade war uncertainty create yet more layers of complexity.
And yet, in the midst of these challenges, there are green shoots; such as RMB Private Bank's Youth Development Initiative. This 12 - month learnership initiative is helping young matriculants to gain exposure to the world of work, develop valuable skills in the process and stand a better chance of securing full-time employment. It's an uplifting programme, which highlights how collectively South Africans can make a difference in turning around our country and our economy.
Initiatives such as this, no matter how small in the grander scheme of things, help to ensure that we maintain our own balance, both as a private bank and as a custodian of your wealth and financial legacy. This too is akin to a balancing act. It takes planning and precision, tremendous care and expertise; and a healthy dose of confidence in the tools at your disposal.
Right now, diversification is still very much one of these vital tools, and a word which is frequently on the lips of wealthy individuals and trusted advisors. This is why we are excited to unveil our new equity offering which will enable investors to invest in international shares using rands. It's as simple as buying local shares using your Share Investor or Local Trader account. This new offering is the easiest way to get exposure to the top 20 shares in the United States, without depleting your single discretionary foreign allowance.
We also take a two-pronged look at a driving force in global investing: sustainability. We examine the sustainable investing trend in South Africa and also extend this to our award-winning Islamic Banking offering, which again walked away with the Global Islamic Finance Award in 2019 and is evolving into a dynamic and complete solution.
Plus we offer a taste of the thrills eBucks has in store for you over the summer months.
nav» TAKES ON HEALTH,
nav» takes on health, wellness
RMB Private Bank's new nav» Wellness platform aims to help South Africans better understand their wellness. Why? Because wellness requires the integration of physical health, mental, spiritual and financial wellbeing. Get this right and you are stronger, more resilient and healthier in all dimensions of your lives. The problem is that many South Africans neglect their health or make uninformed choices which impact their lives and their financial wellbeing.
Since FNB and RMB Private Bank clients collectively already spend R30 billion a year on health-related activities and products, FNB Life Insurance and the nav» team put their heads together to create a free product which could be launched across the entire client base.
By clicking through to the nav» Wellness feature under the nav-igate tab on the RMB Private Bank App, clients are led through a simple setup process which allows them to track their health and fitness journey. The offering includes questionnaires about nutrition and lifestyle and sets scores and goals. nav» Wellness also offers a range of offers from running watches to gym memberships to equipment. In addition, nav» Wellness has partnered with Dis-Chem, making it easier for users to order and collect prescription medicines within two hours.
And this is just the beginning. Watch this space for more functionality and options as RMB Private Bank works with you to keep you in tip-top shape in all areas of your life.
Tap-n-Go with Tap-and-PIN
Soon some 600 FNB ATMs around South Africa will have tap-and-PIN technology installed so you can tap your contactless cards against a near field communication reader on an enabled ATM before entering a PIN. This means your card doesn't have to leave your hand, further guarding against ATM fraud. Machines will be rolled out in Gauteng, Western Cape and KwaZulu-Natal first.
FNB Life lauded for digital excellence
FNB Life walked away as the winner of the Excellence in Insurance Digitisation category at the 2019 Southern Africa Edition of the Finnovex Awards. The awards also seek to honour the pioneers and visionaries who have transformed the financial services industry.
Lee Bromfield, CEO of FNB Life, stressed that while much had been done, there were so many additional applications of smart technology in the industry. "It has become vital for life insurance providers to embrace such technologies to remain relevant," he said.
"To ensure that our life offering is in line with the industry changes and our clients' needs, we have begun a journey to digitise our funeral and life insurance offering to suit the digital age while gradually scaling our value-added incentives across the product range. We believe that the integration of our offering into industry's leading digital capabilities continues to give us a competitive advantage in the market," Bromfield said.
UNEMPLOYMENT ONE LEARNER
AT A TIME
South Africa's persistently high unemployment rate grew to 29% in the second quarter of 2019, according to Statistics South Africa's latest Quarterly Labour Survey. The statistics, released at end-July, also highlighted a 1% increase over the year-ago period in the number of young people without work, without training and not in school. The unemployment rate among young South Africans, aged 15-24, was 56.4%.
These sobering figures lead President Cyril Ramaphosa to declare that South Africa is "in a deep and serious crisis". He said: "We've got to be innovative and we must combine that with our willingness to be as creative as possible to address this crisis."
Commenting on these figures, Cheryl Murphy, Programme Manager for RMB Private Bank's Youth Development Initiative, admits that the rising unemployment rate, particularly among the youth, remains challenging. She adds: "An education is important. As much as 34.5% of our youth who do not have a matric are unemployed - 29.4% of matriculants and 9% of graduates remain unemployed."
In a world where required skills are changing rapidly, and where established learning institutions are being challenged by digital technology and the rise of Fourth Industrial Revolution 'soft skills' such as critical thinking, complex problem solving and creativity, it is apparent that there is still much to do in the education arena to impart the skills the market needs. This current mismatch is frustrating both businesses and those youth looking to enter the workspace, says Murphy, and it is this disconnect that RMB Private Bank's Youth Development Initiative seeks to address.
Together with the Harambee youth employment accelerator, RMB Private Bank's Youth Development Initiative aims to provide young matriculants with a 12 -month learnership through which they'll gain practical work experience and be mentored through the development of vital futurefocused skills.
At end - June 2019, the first intake of 314 learners completed their 12 - month work experience with the bank. A further 1 081 learners are currently undertaking their work experience in a variety of roles. To date, 1 395 young people have been offered this opportunity and, at present, 110 learners (35% of the first intake) have been either permanently employed or have entered into a further fixed-term contract with the bank.
RMB Private Bank is extremely passionate about the impact of this initiative. "A young person participating in the initiative, who previously had no income, now has an opportunity to contribute towards the household, for example, paying for younger siblings to attend school, or buying groceries." says Murphy. "In helping one young person, we are also helping the family and the community at large."
But it's not always easy, admits Murphy, who says some youngsters need more help than others adapting to the rigours and regulations of a full-time corporate job; but support is provided by the business teams who work with the learners on a day-to-day basis.
In this respect, she is quick to praise Harambee as being a "particularly valuable partner to have walked this yearlong journey with us. They have been a positive and proactive partner in everything we have done," she says, adding that Harambee sources the right learners, with appropriate skills to fully benefit from this opportunity.
"We also partner with our learnership providers, who understand where our young people come from, which builds this initiative out into a tripartite learning experience. Looking further down the line, we have partners like Giraffe [automated recruitment agency] and Quest [employment consultants] who assist our learners in finding further alternate employment at the end of their 12-month work experience with us. Across the value chain we have partnered with companies driven by the same values, goals and objectives," says Murphy.
The escalation of the unemployment crisis is highlighting the need for individuals, companies and communities to look for innovative solutions to the problem, stresses Murphy. "We are just one small part of a solution. Our hope is that, if we all play a part, the problem can be managed positively and proactively."
SUSTAINABLE INVESTING COMES
A new report by independent research firm Morningstar recently showed that European funds deemed to be 'sustainable' were more likely to be top performers. According to the Financial Times newspaper in a 12 August 2019 article: "Morningstar examined the net return of funds domiciled in Europe. More than 34% of sustainable funds appeared in the top quartile of their category in the year to June and about 63% made it into the top half."
Sustainable investments show a similar trend in South Africa, showing that companies with better environmental, social and governance (ESG) performance do better than corporate peers who pay less attention to these social, compliance and environmental levers.
As Morningstar noted with regards to European performance: "These numbers are consistent with evidence from academic research that suggests no systematic performance penalty associated with sustainable investing and possible avenues for outperformance based on reduced risk or added alpha."
In fact, noted a 2015 academic paper in the Journal of Sustainable Finance and Investment (ESG and Financial Performance: Aggregated evidence from more than 2000 empirical studies), about 90% of academic research "find a non-negative ESG-corporate financial performance relation. More importantly, the large majority of studies report positive findings."
This, believes Chantal Marx, RMB Private Bank's Head of Research, reinforces why the 'rational investor' is increasingly putting money into companies that are interested in sustainability and ESG. "Generally companies that rank highly from an ESG perspective tend to outperform those that don't," says Marx, and this links directly back to managing investment risk.
"Even if you consider governance and board structures, having a diverse board from a gender and race perspective reduces the probability of group think, which means boards are less likely to miss something or make massive mistakes," explains Marx. While, on the social side, community impact is critical, as are environmental concerns.
While there are degrees of concern which we associate more with some industries than others, what is becoming increasingly apparent around the world is that "when your social responsibility outlook isn't strong and your programmes aren't strong, it will have an impact on your bottom line", says Marx. This is driving companies to consider society at large when they make day-to-day business decisions, from poor working conditions to damaging environmental impacts.
Companies in morally ambiguous industries are particularly at risk of investor perceptions around the risk associated with their activities, making moves by the likes of miners, big tobacco and alcohol to align themselves with good ESG particularly noteworthy. After all, says Marx, "it is one thing for a financial services company to take its entire head office off the grid, but it's much more important that an oil company doesn't destroy an ecosystem due to an oil spillage".
Similarly, even if your investment is socially motivated and your intention is to benefit all stakeholders, it's still important to keep the bottom line in focus. And this rotates back to risk.
"Ultimately you will get to a point where your risk may be lower due to your focus on ESG," explains Marx. "If you are a mining company, for example, and you chose not to focus on the environmental aspects of your business, then you might face fines and social backlash. That would ultimately result in a loss of profit and lower returns. But if you are focused on the environment and diligently spend money every year to ensure what you are doing is best practice, then it would presumably cost you incrementally less and have a much less negative impact for shareholders."
Why does it matter?
Author and corporate governance specialist Nell Minow once observed: Boards of directors are like subatomic particles - they behave differently when they are observed.
"I love this quote," says Marx, explaining that it sums up the importance of ensuring that trusted bodies like boards continue to act in the best interests of shareholders. But even with these checks and balances, scandals do break. Consider the ongoing probe into the Resilient stable, the Facebook-Cambridge Analytica scandal, Steinhoff, Petrobras or concerns around Glencore's dealings in the Democratic Republic of Congo.
None of these inspire investor confidence, says Marx. And all hit the company in question's bottom line and share price, with the likes of the Steinhoff scandal all but wiping out shareholder equity.
For investors, already being pummelled by uncertain markets and geopolitical machinations, the damage done by not paying attention to the likes of ESG is a concern which can be avoided by applying a sustainable investing lens.
What is sustainable investing?
While sustainable investing as a concept is growing in popularity around the world, few fully grasp the concept beyond looking at companies with an ESG focus.
BlackRock, the global investment firm, puts it this way: "Sustainable investing is about investing in progress, and recognising that companies solving the world's biggest challenges can be best positioned to grow. It is about pioneering better ways of doing business, and creating the momentum to encourage more and more people to opt in to the future we're working to create."
Marx explains that there are a variety of components to sustainable investing, from responsible investing to impact investing, investing for change and even shared value. "ESG and, to a certain extent, religious investing also fall into sustainable investing, such as Shariahcompliant investing," she explains. "But the general point is not only thinking about the profits, the bottom line and maximising shareholder returns, but looking at it from a stakeholder perspective. And this extends from employees all the way through to people living in the communities where companies run their businesses. Its's about being very cognisant about what you are doing and how it is impacting society at large."
While shared value talks to finding business opportunities in addressing social issues, and impact investing to having a measuring social or environmental impact as well as a financial return, both of these and their associated investment philosophies have a social element merged with a financial imperative. Increasingly this is an appealing mix for investors with a social conscience as well as an eye to risk management. And that, the data is telling us, is a positive combination.
MAKING A MARK ONE STEP AT A
Marketing gurus around the world have been quick to latch onto the 'buy one, get one free' tactic to drum up sales. Why buy one when you can get two, is their mantra. But another, far more altruistic and value-driven approach is: Buy One, Give One.
This is the business philosophy behind South African sneaker brand VOSK, which was born out of founder Wesley Vos's desire to do more with his life than just boost his own bank account.
Armed with a qualification in Marketing Management from Boland College in Stellenbosch, Vos had set out on the expected corporate path, working in the financial industry and in asset management and absorbing all he could from big business's approach to strategy, marketing and branding. But it wasn't enough. He yearned for an approach to profitable business that achieved its goals in a sustainable and socially-minded way.
In 2013, Vos learnt of the 'Buy One, Give One' concept of leveraging for-profit business to make a difference in people's lives. "That really spoke to me. Just working for money and trying to enrich myself financially wasn't enough for me," recalls Vos, who threw himself into researching the concept and the companies that subscribe to it, like eyewear brand Warby Parker, soap maker SoapBox and Bombas socks. Applying this philosophy to a fundamental item like shoes soon took root and the VOSK brand took flight.
Vos traded in his slick wheels and bought his mother's old car, borrowed some money from friends and family and imported his first batch of shoes at the beginning of 2014. "I spent almost a year-and-a-half selling those shoes at the Root 44 Market in Stellenbosch, every weekend Saturdays and Sundays," he recalls, using the opportunity to focus on market research and how people responded to both the brand and "the concept of us giving a pair of shoes to a child in need when they buy".
The response was overwhelming. "People loved the philosophy and they quite liked the brand and the branding; but I realised that we needed to design a new style," recounts Vos. "The first style was more of a slip-on shoe, so I went back to the drawing board and starting designing more of a sneaker-style shoe with a classic look."
It was at this point that Vos realised that his vision was too big for one man alone, and he partnered first with Avontuur owner Michael Taberer, whom he met at church, and then Emmanuel 'Manny' Ohonme, the Nigerianborn, United States-based founder of Samaritan's Feet, an organisation that has distributed more than seven million pairs of shoes to children across 108 countries.
Having perfected the look and the imprint on the sole of each shoe - a cut-out of the African continent, which means you physically #imprintafrica everywhere you go - the new-look VOSK sneakers went on sale locally on 13 August 2019, retailing at R699 a pair and ensuring that each pair sold means a donation of shoes to a needy child.
Each purchase also comes with an invitation to join VOSK on one of the company's Giving Days in the Western Cape, where participants wash the feet of a child and present them with their first pair of shoes. "Buying a pair of shoes is your personal invite to be part of this hand-over if you want to," says Vos, who adds that "one of the first emails we sent our clients who purchase online is an invite to join a private Facebook group - I call it the VOSK Inner Circle - where these events are publicised".
VOSK shoes are available via online fashion store Zando, through the VOSK website - www.vosk.co.za - and soon through retail stores nationwide.
An added call to purchase for locals and supporters of all things made in Africa is the fact that, after struggling for four years to bring the full production process to Africa - from sole moulds and design all the way through to material sourcing and manufacturing - VOSK secured a quality production partner in Durban in 2019. This means every pair of VOSK shoes can lay claim to having been conceived, designed and produced in South Africa.
The next step for the brand is focused on a more global concern, one which necessitates exploring the use of environmentally friendly materials, such as materials made from plastic bottles. "This is a conversation we do need to have," says Taberer. "If we can start making shoes from sustainable materials as well then we will be giving to people in need, creating locally and giving people jobs, plus using environmentally friendly materials."
Already this combination of local production, environmental concerns and a social message has found assent among African expats around the world and in key markets such as the United States and the United Kingdom, where VOSK hopes to use the brand to positively promote the continent.
"One of the reasons Wesley and I connected and took the conversation further, which ended up in a partnership, was our shared passion not just for South Africa but Africa as a whole," says Taberer. "We love this country. We want to see quality jobs created and we want to see something that goes out across the globe which talks about how we can make quality products and how we have people who are excited and passionate about what they do. And we are giving back to a community that needs it most."
Vos and Taberer are not blind to the problems facing Africa, but they chose to make a difference and shape the future one step at a time. "We embrace the fact that there are problems and challenges, as they create solution opportunities. My father always taught me that problems were made to be solved," says Taberer. "We employ Solutionist Thinking approach. We want to bring a solution. Sure, Africa might not be there yet, but there is so much opportunity and we are excited to be walking a journey that helps to bring human dignity to every South African."
In short: #imprintafrica, make a difference with each step you take, and be proud of it.
LOOKING TO 2019
Apple founder and all-round business
innovator and guru, Steve Jobs, once
observed: "You can't connect the dots looking
forward; you can only connect them looking
backwards. So you have to trust that the dots
will somehow connect in your future."
This is easier said than done, but certainly it's
impossible to intelligently predict the future
without taking into account the actions,
events and themes which propelled us to this
point. Similarly, stepping into the future
without a roadmap and without a sense of
the road ahead would put you at a distinct
disadvantage in this complex and highlyconnected
world. So, in this newsletter, we
take stock of the year past and turn our
attention to some of the likely trends that we
can expect to unfold in 2019.
As an emerging market economy, South
Africa is deeply affected by global
movements and developments and also by
the performance of our emerging market
peers. So we take a look at the expectations
for emerging markets in the year to come,
particularly given the developing world's
underperformance in 2018.
We also examine trends impacting the
financial services sector in South Africa, with
particular attention to the banking and
insurance sectors. There are some
interesting developments afoot in South
Africa, with the emergence of TymeBank,
Bank Zero and Discovery Bank. Ultimately,
this means more competition and better
choice for consumers, and that's to be
welcomed. It also means a greater focus on
wealth management and budgeting tools to
make your financial experience simpler, more
effective and more understandable. This is
something our nav» innovation does with
aplomb, so we caught up with the team.
Of course 2019 is a notable election year
for South Africa - an event which also
brings with it heightened uncertainty and
the promise of rising political rhetoric.
This environment highlights the
importance of cross-border
diversification, so we examine recent
changes which are making it simpler and
easier for local business owners to invest
offshore or to open subsidiaries; and we
highlight how our experts can guide you
through the foreign direct investment
We also take this opportunity to remind
you to be ever vigilant with your banking
security during the holiday season and, as
such, we share with you some of the
cybersecurity measures we have in place
to protect you and your hard-earned
BANKING, INSURANCE TRENDS FOR 2019
Technology, cybersecurity, digitisation and
innovation were buzzwords for the banking
and insurance sectors in 2018, but what lies
around the corner for 2019?
Head of Research, Chantal Marx, outlines six
trends which she believes will continue to
shape the South African sector.
Integration of financial services
Across the world we are seeing insurers with
a focus on investments and banking, and
banks with a focus on investments and
insurance. This trend is likely to continue well
into 2019 because there is a natural crosssell
opportunity, explains Marx. She notes
that in South Africa's low growth environment
companies are trying to grow their revenue
streams and service clients across platforms.
"You want to ensure that your banking client
transacts through you, invests and ultimately
insurers. And likewise for the insurance
client," she says.
An evolving landscape
New entrants like TymeBank, Bank Zero and
Discovery Bank are also bringing more
competition and greater choice for
The important thing to consider is what these
new arrivals are hoping to achieve, says
Marx. TymeBank is positioned as a 'digitally
smart' bank with no monthly fees, but it's
Bank Zero which is particularly interesting.
"Bank Zero is opening the doors to financing
for small- and medium-sized businesses,"
she says. "I'm sure the traditional banks do
their part but there are still a number of
entrepreneurs who battle to get any sort of
Marx believes the arrival of Bank Zero could
be good for economic growth - and the
sector as a whole - if they get it right.
"Increased activity in the sector is good for
everyone, especially if a bank is focused on a
new avenue or a previously underserved
Discovery Bank, which is due to open early
next year, is likely to play heavily on the
cross-sell angle, says Marx, envisaging a key
role for Vitality. This was borne out in mid-
November 2018 when Discovery Group CEO
Adrian Gore said the new 'behavioural bank'
would include Vitality Money to tailor interest
rates and offer rewards. While their exact
target market is still unclear they are likely to
position themselves for a higher income
consumer. "This does raise questions for the
private banking market currently. You'd have
to see what the impact is on private banking
and private wealth, and that might be quite
challenging next year."
Ultimately, however, increased choice is a
good thing and it will make value propositions
vital and increase the role of loyalty
programmes. "Something like an eBucks or a
Discovery Vitality becomes vital to
incentivising people to participate in this
cross-sell offering," she says.
The expansion of robo advisory in wealth
management continues to be a big theme
globally, and 2019 will be no different.
Marx explains that robo advice works when
you have a very simple savings requirement,
which makes it perfectly aligned to South
Africa's growing middle class. It brings down
costs and also reduces the time it takes to
get a financial plan in place. "If you can do
your own eFiling then robo advice is probably
something you'd be comfortable with," she
explains, possibly with an initial one-off
meeting with a financial planner just to
address any questions. "From there the robo
structure would recommend any changes to
your portolfio on an annual basis."
Things get more complex in the high-networth
(HNW) space, where clients have
trusts and different sources of income
and different jurisdictions. These
individuals will continue to need expert
The rise of budgeting apps
Global budgeting apps like Mint and
Acorns, as well as Old Mutual's local
offering 22seven, highlight another userfriendly
trend to watch. RMB Private Bank
is also improving its budgeting
capabilities, with nav» Money offering a
helicopter view of finances to enable
clients to make solid financial decisions.
"People want to know where their money
is going and its more practical and fun to
do this via an app, which automatically
imports all your information [across
service providers] and categorises it so
you can see where you are spending your
money," explains Marx. "The challenge
there is how to monetise it, unless you
can get people to save through that app
it's almost impossible."
Impact of technology on skills
The likes of robo advice will, adds Marx,
have an impact on jobs and could also
create opportunities as more skilled
wealth managers and financial planners
are focused on the HNW segment. "This
opens up the industry to new, younger
planners who can service people who are
guided by robo advice," she says.
In addition the more widespread rollout of
these new technologies will also foster
greater demand for the capabilities
required to develop and support the likes
of robo advice and app creation;
opportunities traditionally out of the
scope of financial services.
Socially responsible investing
The final trend to watch is exemplified by
Fedgroup's new Impact Farming app,
which gives investors the option to put
their money into 'impact investing'
opportunities, in this case by buying bee
hives, blueberry bushes or solar panels
and earn returns of between 10% and
16%. This sort of crowdfunding investing
is exciting, says Marx, who notes that the
fact that this is being offered by a
recognised financial entity makes it a less
risky form of venture capital while offering
individuals the opportunity to feel that
their money is making a difference. The
app is easy to use and explains returns,
risk, sector exposure and the duration of
"This type of investing is small in South
Africa currently," says Marx, "but it is
picking up gradually." This follows a
global trend set by the likes of Newday,
which allows investors to choose from six
funds for a little as US$5 aims to deliver
social returns without sacrificing financial
returns. "This is probably a Millennialdriven
trend, and it's positive," she
OFFSHORE OPPORTUNITIES OPEN UP FOR BUSINESS INVESTMENT
Offshore investing has, in recent years,
become an increasingly popular way for
successful South African individuals to
achieve diversification in their investment
portfolio. The allowances that individuals
have access to in moving money offshore for
foreign investment purposes has provided
the flexibility for this. Spreading hard-earned
resources and ensuring that everything you
have isn't subject to a single set of economic,
political and social pressures simply makes
South African residents, 18 years and older,
are entitled to an annual Single Discretionary
Allowance for R1 million, which may be used
for travel, gifting, foreign investment etc. In
addition they are also entitled to an annual
foreign investment allowance of R10 million,
subject to tax clearance.
"Today's investor is a global citizen and, as
such, they are mobile, unrestricted by borders
and boundaries, and wired in to a world of
potential opportunities," says RMB Private
Bank's Chantal Robertson, Head: Global
Wealth Solutions. "So while conversations on
diversification are common, they focus on
solving for you as an individual. Now there's
no reason why savvy business owners can't
adopt a similar strategy to ensure the longterm
financial health of the business they've
worked so hard to establish."
While it wasn't too long ago that South
African businesses wanting to invest offshore
or open subsidiaries had to deal with a fairly
complex regulatory process, over recent
years this has been significantly simplified.
The current foreign direct investment (FDI)
policy has broad parameters and one key
aspect is that authorised dealers (local banks
authorised to deal in foreign exchange) can
now approve applications in this regard
based on certain criteria. The success of
these applications hinges on the business
case and assuming that the proposed
acquisition falls with the authorised dealer
parameters, then the bank can approve
business investments up to R1 billion. Larger
investments would require South African
Reserve Bank (SARB) approval. Other
changes include the relaxation of the
percentage shareholding relating to offshore
businesses, and the requirement to repatriate
dividends back to South Africa.
"The rules around FDI have changed
significantly in the last few years," Robertson
observes. "The SARB and Treasury want
South Africans to replicate their successful
business models outside our borders. They
want to encourage South Africans to go into
new markets and create success stories."
Operating businesses only
Robertson emphasises, however, that the
current FDI rules apply solely to bona fide
offshore business investments and not to
South African companies wanting to make a
passive investments offshore in, for example,
property. "The focus is on operational entities
that are going to set up shop or acquire an
existing business in another country. Passive
investments may be acquired using an
institutional investor and, while RMB Private
Bank could certainly help with that, it is not
part of the FDI process."
Currently, the SARB's rules allow registered
banks to vet and process FDI applications for
acquisitions up to a value of R1 billion -
covering equity contributions, shareholder
loans and any necessary guarantees which
may need to be issued from South Africa.
Applications in excess of R1 billion require
"The value of this revised process is that
you, as a business owner, control it and
drive it," says Robertson. "There are still
some administrative elements like the
annual reporting that still needs to be
submitted to the SARB, but it is much
more user-friendly than earlier policies.
From a timing perspective, the bank in
most instances has the ability to
authorise these applications fairly quickly.
Obviously, when businesspeople spot an
opportunity, time can be of the essence."
Working through the process
The Global Wealth Solutions Team
consists of experienced cross-border
specialists who are able to guide clients
on the FDI process. The first step is to
understand what the client wants to
achieve via an offshore business
investment and determine whether it falls
within the FDI requirements. Thereafter,
FNB will assist clients to understand the
guidelines and walk them through the
Among the requirements are a wellmotivated
business case and a cash-flow
forecast that substantiates the outflow
amount being applied for.
"Applicants must clearly articulate their
business case," notes Robertson. "And
the current process allows you to pursue
different business opportunities offshore,
meaning that it does not have to be in the
same line of business that you're involved
in within South Africa. The policy is far
She continues: "Another benefit is that,
once the transfer of funds has been
approved, there's no need to move the full
amount offshore from the get-go. You
can transfer as and when you need the
funds on the other side."
FDI rules require that the SARB receives
regular progress reports and financial
statements from the offshore business.
However, there's now a greater
acceptance that forecasts and reality may
differ due to unanticipated circumstances.
She concludes: "The important point is
that a new world of offshore investment
opportunities is open for South African
businesses via the FDI process. It is key,
however, that you have access to our
specialists who can provide guidance on
the entire process from start to finish."
HEAD: FDI inclusions and exclusions
South African entities that qualify to make
foreign direct investments (FDIs) are as
Private companies (e.g. Pty Ltd entities)
South African entities that do not qualify
to make FDIs are as follows:
FDI regulations apply to all countries, with
the following exceptions:
EMERGING MARKETS IN 2019: UNCERTAINTY AND CAUTIOUS OPTIMISM
Emerging markets tended to be significant
underperformers in 2018. This was driven by
a US dollar that performed strongly as a
result of United States President Donald
Trump's home-based economic stimulus
package, which sucked up excess liquidity in
global markets and injected it into the vibrant
So, can emerging markets - including South
Africa - recover to deliver a better
performance in 2019? Mark Appleton, Head
of Multi-Asset and Strategy at Ashburton
Investments, believes there's reason for
cautious optimism, although with a high level
"Emerging markets thrive on external dollar
liquidity and in 2018 there wasn't much of
that around because the United States
economy was so stimulated," he explains.
"Economies with high levels of US dollardenominated
debt were particularly hard hit
because their currencies were weakened by
the strong dollar."
There were signs, however, that 2019 could
paint a brighter picture. For example, Trump's
loss of control of the House of
Representatives following the United States'
midterm elections will limit his ability to
implement economic programmes as he
"On that basis we don't think there will be
additional United States fiscal stimulus going
forward and the US dollar will likely not
continue its strong upward trend," says
Appleton. "We predict the US dollar will move
sideways in the short term and, in 2019-2020,
the movement will potentially be sideways to
down, which could provide relief for emerging
There may also be relief as a result of the
recent softening of trade war tensions
between the United States and trading
partners Mexico and Canada. In general,
trade wars impact global economic growth
and emerging markets are particularly
vulnerable to the fallout. However, Appleton
warns that trade war tensions between the
United States and China still remain high and
must be resolved if emerging markets are to
"Mr Trump is a hard man to read and so we
don't know if the situation will escalate or not.
Hopefully there's a meeting of minds, but it
could still be a bumpy road. The Chinese
economy has taken some strain due to the
trade war and we must remember that
emerging markets, including South Africa, are
very dependent on Chinese trade, particularly
when it comes to commodities.
"Even without the impact of its United States
trade war, we think a Chinese slowdown is on
the cards, although they seem to be
implementing stimulus measures so as to
mitigate the rate of slowdown. But it would be
unfortunate for everyone if the Chinese
economy slowed dramatically."
Emerging markets to watch
Despite the possibility of a slowdown, China
will still be one of the emerging markets to
watch in 2019. Others that are expected to
perform positively include India, Mexico and
"China will still be interesting from an
investment point of view next year,"
observes Appleton. "We are overweight on
India and it looks good from an economic
growth perspective. But the Indian
elections are coming up, so it's important
to watch developments."
He adds: "Mexico is also doing okay and
the peso looks cheap to us. There is a
new socialist-leaning government in
place, but it is expected to be
economically responsible. In Brazil,
interest rates have gone down and the
economy is picking up. The recent
election saw a move to the right and there
has been a remarkable bounce in terms of
Emerging markets to avoid include
Turkey, which has been ravaged by
political turmoil and economic
mismanagement, and Venezuela. The
latter has long been in economic freefall,
despite its oil-rich status.
And what of the emerging market outlook
for South Africa and the African continent
Appleton says South Africa's performance
in 2019 is difficult to predict because it is
so dependent on reforms being
implemented. "The world is desperate to
see signs of a new way of administering
state-owned enterprises like Eskom. It is
critical that we see reform and that the
cost of business comes down. If we
achieve that, South Africa could be an
attractive investment destination -
certainly from an offshore investmentflow
point of view."
As for the rest of Africa, Egypt and Kenya
are high-potential markets to watch.
While the continent has been under strain
recently, the Ashburton team believes the
African demographic will underpin its
economies in the longer term. "In sub-
Saharan Africa we are looking at GDP
growth rates in excess of 5%. Sometimes
Africa can be a difficult place to invest, but
in the longer term it looks an interesting
and constructive story," Appleton says.
In conclusion, he emphasises that there's
cautious optimism around emerging
markets in 2019, but still uncertainty.
"Global GDP growth is peaking in 2018
and we are seeing signs of deceleration
coming through. But the path of the US
dollar remains critical to emerging
markets and if the dollar strengthens -
even though this isn't our base view -
then the painful emerging market
experience could be extended for a little
CONSTANT VIGILANCE ESSENTIAL IN THE FACE OF RANSOMWARE ATTACKS
Fortunately, experienced IT professionals,
cutting-edge cybersecurity technology and
continually refined response procedures are
in place to repel the would-be intruders and
keep data secure.
Chief Cyber Security Officer, Kovelin Naidoo,
explains that there are different types of
Ransomware attacks, At its most prevalent
form ransomware attack involves malicious
software which installs mainly through a
phishing email this software then gain
access to a victim's sensitive data, or to
prevent someone from accessing their data
by illegally encrypting it. The victim must then
pay a ransom to either prevent dissemination
of the sensitive information, or to have their
data unencrypted. These extortion demands
are also commonly targeted at large
Victims range from large organisations, such
as financial institutions, to small businesses
or even individuals. Indeed, the latter are
usually easier to compromise because they
lack the sophisticated cybersecurity detection
mechanisms of large organisations and it is
here that sensitive data, including bank
account login details and other sensitive
information stored on your computer, are
Like most global financial services the
FirstRand Group has seen quite a few
attempts over the past few years, says
Naidoo. "But it's something that we anticipate
and we build into our defences. It's important
that, as a bank, we stay ahead of the curve.
The way we do that is by investing in the right
skills, systems and cyber awareness
programs this includes having security
analysts who are in touch with the latest
trends in the organised crime world, because
this is where targeted high profile
cyberattacks mostly stem from. We have to
know how the bad guys are innovating and
then bolster our systems through
collaboration with the other banks and with
law enforcement globally and locally."
According to Naidoo, banks around the world
share intelligence on new methods and
technologies used by cybercriminals. In this
country, the South African Banking Risk
Information Centre provides a forum for
banks to distribute information. "This ensures
that if Bank A is attacked in some way, other
banks are aware of it and can strengthen
their defences in that area," he explains.
Targeted Cyber attacks may be carried out
from anywhere in the world and criminals
often use Virtual Private Network or similar
anonymising technology to disguise their
country of origin. This makes it difficult for
law enforcement agencies to track offenders
but not impossible.
Perpetrators fall into three broad categories:
Those who do it for the money; those who do
it for a social or political agenda (called
'hacktivists'); and those who are somehow
able to lay their hands on the cyberweapons
of extraordinary proportions that were
originally created by nations to protect their
sovereignty. In the wrong hands, the latter
become highly effective tools of cyberattack.
Figures contained in the Verizon 2018 Data
Breach Investigations Report, published in
April, indicate that there were 53 000-plus
data 'incidents' and almost 2 200 confirmed
data breaches worldwide in the previous 12
months. Not all related to financial
institutions, but a 2017 study by enterprise
security firm Positive Technologies reported
that banks sustained an average of 983
attacks per day targeted at web applications.
A large South African financial services group
suffered a data breach in June this year and,
in 2016, the Bangladesh Bank lost US$81
million when custom malware was
introduced into its IT systems in a highly
"If there is a cyberattack on the bank,
an incident response plan kicks in,"
explains Naidoo. "There are then a whole
raft of procedural steps that take place,
including involving law enforcement,
forensics experts and others. We also run
exercises and simulations to constantly
improve response times."
Naidoo says RMB Private Bank is
particularly concerned at ransomware
and other forms of cyberattacks aimed at
its customers. The more secure the bank
makes its systems, the more
cybercriminals target clients through
phishing and other forms of social
engineering. The RMB Private Bank App
also provides an additional layer of
security. Especially if you're the victim of a
SIM-swap scam, the RMB Private Bank
App has additional layers of security to
protect you. "So we urge customers to
use the app at all times," says Naidoo.
Cybercriminals will normally target a
customers' email, usually through
phishing, malware or simply a weak
If you regularly interact with your private
banker via email, or if you do your
business/investment banking via email,
you become a person of interest to those
with nefarious intentions.
He continues: "If you're on social media
and you have a public email address like a
Gmail or a Hotmail account, make sure
you use complicated passwords and
enable two-factor authentication
(something that you know - your
password, and something you have -
your mobile phone). So even if the bad
guys compromise your user name and
password for your email, they still can't
get in because they need access to your
mobile phone as well. Two-factor
authentication is available on most social
media platforms and most public email
We implore clients to use best practice
when protecting their digital ecosystem,
advises Naidoo. "Ensure your software is
always up to date with the various
security updates on all your devices you
use for transacting and accessing your
emails. Ensure you have a reputable antivirus
- we provide free anti-virus for
customers to enhance their device
security." Finally, evaluate your email
communications carefully and be on the
lookout for phishing and social
engineering attempts. If you are uncertain,
contact your trusted advisor or our fraud
teams for assistance.
Ensure you keep the RMB Private Bank
Fraud number saved in your phone:
087 575 9444.
MORE EXCITING INNOVATIONS ON THE CARDS FOR NAV»
Around 1.5 million users have already taken
advantage of the unique offerings that enable
RMB Private Bank customers to better
navigate their financial and life journeys. But
the development team behind the popular
nav» app is not resting on its laurels and is
continuing to seek new solutions to client
Launched in mid-2016, the app currently
offers the nav» Home, nav» Car and nav»
Money functions, each with various subfunctions
aimed at solving particular
problems that clients encounter on a daily
basis. But there's still more to come.
"We have several exciting launches lined up
for next year that will further enhance the
nav» app and the convenient solutions we
can provide to our customers," says Orsheran
Singh, Imagineer at nav» responsible for
marketing, product development and
innovation. "The app is one of the ways that
we can do more to help our customers, not
only when it comes to meeting their core
banking needs, but in other ways that will
enhance their financial and life journeys."
Since winning the Global Banking Innovation
Award in 2012, the bank has become
synonymous with innovation. "This is
something that our customers expect of us,"
says Singh. "The broad aim of nav» is to
satisfy demand from a growing segment of
customers for innovative digital self-service
channels that can be accessed 24/7."
The first solution, called nav» Home, was
unveiled in June 2016 as a new way for RMB
Private Bank clients to buy and sell property.
Users can use the app to list a home for sale,
search for a property to buy, get pre-selected
for finance, check associated costs, arrange
to view a listed property, negotiate the price,
check on the value of a property, and get real
estate reports for specific areas.
"Known RMB Private Bank sellers can
connect with known RMB Private Bank
buyers in a reliable, cost-saving and secure
environment," explains Singh. "Through this
solution, they can engage, arrange to view a
listed property and negotiate the price via
Secure Chat on the RMB Banking App. Sellers
and buyers need only disclose personal
contact information when they are
comfortable to do so."
At present, nav» Home has one million unique
users and R4.7 billion in home loans have
been approved for transactions done via the
Launched in April 2017, nav» Car provides
simple solutions to the daily challenges of
vehicle ownership. After a one-off scan of
their licence disc, users can arrange for their
licence to be renewed annually and for the
disc delivered to their door. Annual licence
renewal reminders can also be programmed
into the system, while owners who are
considering selling their vehicle are able to
access an estimate of its current market
In addition, instant fine notification allows
for minor traffic infringements to be
viewed and for these to be settled via an
easy in-app payment.
According to Singh, 250 000 vehicles are
loaded into the nav» Car 'garage'. "That's
a quarter of a million customers we are
helping with their daily automotive
journey," he says.
The third solution, nav» Money, was
launched in May this year and is at the
heart of the app concept. It allows
customers to better manage their
monthly spending, from tracking
upcoming payments toz monitoring their
overall income and expenses.
It includes a Track My Spend feature,
which shows users how much money is
flowing into their account, checking it
against known upcoming payments, and
monitoring expenses. The feature enables
users to see where they are overspending
or using credit sub-optimally, and will
deliver money management tips to
nav» Money also includes a My Credit
Status tool, which intelligently monitors
the customer's credit status, showing
them how they are currently ranked and
how they can improve their credit score.
Singh says the data RMB Private Bank
collects on its customers allows it to help
users improve their money management
skills and leverage a team of experts to
provide them with sound financial advice.
"Nav» Money gives you a helicopter view
of your finances to enable you to make
solid financial decisions," he observes.
The solution has 200 000 registered users
Apart from the vehicle licence renewal
service, which costs R199 and can be
paid in-app, all the other solutions are
available at no cost to clients.
"We are happy with the uptake thus far, it
has been great," notes Singh. "The
customer interest in the three services
highlights the real need in the South
African market for user-friendly, digital
tools designed to put banking clients in
the driver's seat."
RMB Private Bank customers wishing to
download the nav» app can do so via the
App Store (Apple users) or the Google
Play Store (Android users).
STAYING ONE STEP AHEAD OF THE PACK
A decade after the global financial crisis and the world once again finds itself in a unpredictable and uncertain period. The first eight months of 2018 saw the United States administration alienate a number of traditional allies and seemingly form stronger ties with long-held 'enemies'. There is
greater volatility in emerging markets and, in South Africa, political posturing is on the rise ahead of the 2019 elections.
Staying one step ahead in a world of uncertainty takes a great deal of planning and a deep understanding of the drivers fuelling economic tensions. At RMB Private Bank we are committed to assisting our clients to navigate these demanding times by keeping you abreast of the latest trends impacting your future financial peace of mind. We call it Solutionist Thinking; it inspires what we do with a proactive mindset that sets us apart. Therefore, in this edition, we find ourselves delving into some of the issues arising as a direct consequence of global and local political events.
One of the most impactful matters fuelling economic uncertainty, especially in emerging markets, is US's trade war with the China, the European Union, Mexico, Turkey and Canada. Although South Africa is not in the firing line of US's economic wars, the country is directly affected by the impact of United States and Chinese tariffs on the global trading environment.
South Africa's economy is also being heavily impacted by exponentially increasing fuel prices. Rising oil prices and rand volatility, compounded by increasing fuel levies, have resulted in the fuel price increasing by nearly R4 per litre to date in 2018, with further increases expected. The impact of these hikes will have a devastating effect on the South African consumer and ultimately on the economy as a whole.
However all is not negative, there are a number of global trends that could ultimately positively impact the global economy and South Africa. Improvements in cyber security, robotics, collaboration and power storage in the form of better batteries, as well as the increase in demand for electric vehicles and the impact of the sharing economy have the potential to change the face of society as we know it.
Navigating this new world will, however, demand world-class skills, global networks and quality education. In recent years we've keenly observed a demand from RMB Private Bank clients to finance their children's international education. Not only does this require careful financial planning, it also demands a different kind of preparation in terms of developing the holistic life skills of these young applicants.
While we strive to share our thoughts and insights into the topics dominating the news and affecting our day-to-day lives, amidst all of this turbulence there is still fun to be had, so What's On offers some interesting ideas for some much-needed down time
Eric Enslin, CEO of RMB
MEGATRENDS: THE FUTURE OF MOBILITY
In 2017 France announced that it would ban all petrol and diesel vehicles by 2040. The declaration came just days after car maker Volvo said it would only build electric and hybrid vehicles from 2019. The Netherlands and Norway, as well as Germany and India have announced similar plans to ban combustionpowered cars by 2025 and 2030 respectively. Could this provide the thrust needed to turn the future of mobility on its head?
Right now, says Chantal Marx, Head of Research at FNB Wealth and Investments, penetration levels for electric cars in particular are low. "But it is likely to work in much the same way as we saw mobile phones and PCs: very slow and steady until it isn't. That is, until there is a big shift or a tech break."
John Joyce, Portfolio Manager at Ashburton Investments, acknowledges that "a lot of R&D is being thrown at this topic by the big manufacturers, all of whom are taking a view that down the line there is going to be a push for cleaner burning cars. If countries like France deliver on their announcement then we could well see a jump in the growth rate of electric and hybrid vehicles."
While one can never discount the impact of leapfrog technologies, agrees Joyce, right now the rate of change is incremental, not dynamic. However, a shift in human behaviour could well provide the important push.
The growing influence of the more socially-conscious Millennial generation (those in their 20s and 30s) is likely to spark a change, says Joyce, as is the fact that consumers of all generations are tapping into the shared economy. "Most cars are only used for 4% of their life, which is a huge amount to outlay for a big ticket item which is being used inefficiently. Add in maintenance, insurance, downtime and fuel costs, and compare that to taking an Uber, and those numbers add up," says Joyce.
Where this shift of behaviour could ultimately change mobility, believes Marx, is towards self-driving vehicles operating as an Uber pool. "It would be safe and more cost effective. That would be the end state."
Huge strides are already being made in the autonomous driving sector, with the likes of Alphabet's selfdriving arm Waymo working with Land Rover and Chrysler; with Amazon's Alexa signing up Volvo, Toyota and Ford; with Microsoft's Azure services finding favour with BMW, Renault-Nissan and Volvo; and with Kia and Hyundai opting for Google Assistant. "It will ultimately be these platforms that drive the autonomous driving revolution," says Marx. "Big tech companies investing in these types of platforms will be the winners in this sphere."
Other companies to watch include battery manufacturers, cybersecurity experts, robotics innovators and electric car manufacturers.
Certainly this confluence of factors is important for the electric car sector; which has been battling to fly the flag for 'greener' transportation. One reason for this was the drop in oil prices in 2014, from more than US$100 a barrel to US$29. With North American oil coming on stream the urgency to push ahead with renewable options was dampened, and the nascent industry was knocked back.
Electric vehicles will continue to be impacted by the oil price as they gain in popularity, warns Marx, noting that this too would probably spark a dip in the oil price and further "slow down the move to an ideal world".
Right now, explains Joyce, electric cars comprise less than 1% of all vehicles sales globally, "and although they are growing quickly it's still a small portion of the bigger car market." As a result there are fewer choices and costs are high. "In countries like South Africa there is the added complication of charging electric vehicles using Eskom power and therefore, indirectly, through oldfashioned dirty coal. This is likely to remain the case unless, like in Denmark and Norway, government drives the uptake of renewables."s Having just embarked on a 10-year build to bring the coal-burning power stations of Kusile and Medupi on line, Joyce is doubtful about a fundamental shift towards renewables in South Africa.
Marx agrees that regulation will play a role, but notes this will differ by region. "In Europe, for example, regulations are already stringent when it comes to emissions, but you might have a different situation in the United States where there is less focus on the environment." But, as countries like France prove, this can change on a dime.
What are the broader implications of these trends? Well, admits Joyce, there are big implications for jobs and the sorts of skills required to construct electric vehicles.
There are a lot of knock-on effects, says Marx, such as the need for less road infrastructure investment due to fewer cars on the road, and fewer parking lots. "Insurance companies might be impacted since self-driving cars would eliminate human error, and you'd obviously see an improvement in environmental impact. Plus the rise of ride-hailing platforms like Tencent's DiDi or an Uber or Lyft would increase too."
On a more human note, a shift in mobility trends could mean more time to be productive and less time in traffic, says Marx. Or simply more time to stream TV shows and engage on social media. And that brings with it a whole range of additional opportunities and implications.
GLOBAL CITIZENS VALUE AN INTERNATIONAL EDUCATION
In an increasingly competitive world, keeping one step ahead of the pack is essential. But giving your children, a world-class private school education is no longer enough. Today's parents are looking further afield in the hopes of also giving their children a worldclass tertiary experience.
RMB Private Bank's Head of Global Wealth Solutions, Chantal Robertson, explains: "More and more South Africans are looking beyond the South African education system and thinking that, if they have the means, they want to offer their children more." An international education can do just that.
In the opinion of Rebecca Pretorius, Country Manager of Crimson Education, a global admissions counselling and mentoring organisation: "Students who study abroad get a range of real benefits. These benefits include getting coveted intern opportunities at organisations like Microsoft, Google and General Electric. These students also graduate having strong alumni networks and associations. In addition, students from Ivy League or top-tier schools can demand significantly more impressive starting salaries, which can range from being 20% to 50% higher than traditional starting salaries."
Although it can be argued that the rewards from attaining an Ivy League or international degree from a top-tier institution far outweigh the cost of the investment, this level of education remains out of the grasp of many. However, Robertson acknowledges that this is a typical discussion to be had with RMB Private Bank clients. Part of such conversations entail outlining the additional costs associated with sending your children to study abroad. Pretorius notes that these costs can be partly or fully funded through financial aid and scholarships - in fact, applying for financial aid is one of the services offered by Crimson. Children who study overseas also need accommodation and living expenses. Then there are the additional travel overheads that are incurred by both parents and children.
In this respect, the Global Wealth Solutions team works with families to help them strategize the best way to move and manage their money in a foreign jurisdiction. Planning is essential. "There are so many considerations when sending children overseas to study. As a starting point, the use of a Global Account or an offshore account with FNB Channel Islands can help you cover all sorts of expenses," explains Robertson.
Most importantly, it depends on each family's particular circumstances. If your children are close to finishing their schooling, then your priority may be to simply manage rand volatility and convert Rands into a foreign currency. This can easily be achieved by having access to a foreign currency account to deposit any residual from a client's annual R1 million discretionary allowance. If the children are younger, then it would be beneficial to look at longer term saving options that are available using a Channel Island account.
In addition, we have Wealth Management and Portfolio Management capabilities in London and Jersey. As each client's needs differ, RMB Private Bank can offer a range of solutions to assist clients to manage their money abroad.
Robertson adds that parents need to remember that current Exchange Controls allow them to pay tuition fees directly to the relevant institution offshore, outside of the individual allowances. This is a major benefit given that the foreign tuition may be substantial in Rand terms. This means that depending on the value of their foreign savings and investments - together with the strength of the rand - fees can be paid without touching funds already invested offshore. RMB Private Bank can also assist clients who are who are looking to take it one step further and buy property overseas, should they prefer this option to accommodate their children abroad.
Of course, affordability is only one consideration when it comes to securing your child a quality international tertiary education. Pretorius says that in an increasingly competitive environment world-class learning institutions are requiring a lot more from children than mere academic prowess. She explains: "The admission rates for foreign students at competitive schools are very low, typically less than 5%. It is important therefore, to consider their overall application. It is no longer only about considering the one pillar of academics, but also about their extracurricular activities and leadership abilities."
It is for this reason that Crimson advises parents to ensure that their children develop this aspect of their lives in preparation for their application. Pretorius suggests parents start the process from Grade 10 through to Grade 12. This, she says, will give them enough time to build their extracurricular and leadership abilities. "What one of our programmes will look like is having them start their own business, community or other project that will help them demonstrate skills, knowledge, experience and the impact they can have on society at large. Essentially these are the qualities they need to demonstrate in their application," she advises.
The downside, however, of sending a child overseas to study is that many of these students may find employment and settle overseas." But there is a significant upside, as Pretorius notes in conclusion: "When these students' vision has been expanded exponentially based on experiences and networks gained from their time abroad, and from getting a top-tier international degree, they can do amazing things when they come home."
THE RIPPLE EFFECT OF FUEL PRICE HIKES
Despite the high levels of attention and service which South African motorists receive at our service stations, filling up at the pump is becoming less pleasurable by the month. Fuel prices are continuing to rise and, in the short term at least, it seems there's little prospect of relief.
Unfortunately, even giving up your gas-guzzling luxury sedan or 4x4 in favour of something more fuel efficient won't insulate you from the pain. The ramifications of a high fuel price extend to every corner of the economy and impact everyone from the very poor to the extremely wealthy.
"Fuel is a necessity in our economy. The most obvious and direct impact of the higher fuel price is on transport costs: it is more expensive for people to travel and to get to and from work in cars, buses and taxis," explains RMB Private Bank Senior Economic Analyst, Jason Muscat.
"But the impact is much broader than that. Fuel is required to produce many of the products we consume on a daily basis. The agricultural sector is a good example: farmers use diesel in their tractors, their harvesters and to power the trucks that take their produce to market. So their costs go up and the price of food increases."
He adds that, because the South African rail system is inefficient, goods are usually delivered by road to distributors, retailers and other end users. This, in turn, raises the cost of most items, including the packed goods that consumers buy in supermarkets, malls and spaza shops.
"Ongoing price rises translate into wage increases and all of these factors feed into inflation. If inflation isn't contained within the target range of 3%-6% then the Reserve Bank will raise interest rates. A hike in interest rates means you pay more on your credit card, your bond, your vehicle loan and any other personal or business loans that you may have."
According to Muscat, sometimes the impact of a fuel price rise is more immediately noticeable than at other times. At present, consumers are under pressure and unable to absorb additional costs, so manufacturers and retailers tend not to pass these on in an effort to maintain sales and preserve market share. In easier economic times, however, there is no hesitation in passing on costs to end users.
If the fuel price eventually comes down, will other prices come down with it? Muscat says that in theory they should, but this seldom seems to happen. "That's because businesses, public transport providers and others may have had to give away margin in order to keep their customers. So they won't adjust prices downward and will try to make up for the lost margin."
There's a general reluctance by corporates around the world to drop their prices, Muscat observes. However, if businesses were to be under significant margin pressure indefinitely, the result could be retrenchments or even closure. "Companies also need to give a return to shareholders and investors. So it is a bit of give and take," he explains.
As a country, South Africa is overly dependent on fuel and therefore highly susceptible to fuel price fluctuations. "We could be doing more in terms of battery powered vehicles, electric vehicles and so on," Muscat states. "But then we have another problem in that we have very high electricity costs. So do you use expensive electricity to charge your vehicle, or expensive oil to power it? Right now I don't know the answer to that, but it seems we are not quite as advanced as many other economies in terms of finding alternatives to oil and, consequently, we are particularly vulnerable."
Ideally, the best way to mitigate the impact of oil price hikes is to grow the domestic economy. If the economy grows, the exchange rate begins to strengthen and then the rand-per-barrel cost of oil comes down.
Muscat believes there would be other benefits too. "If we were a stronger economy, chances are that tax revenue would be growing and there would be less pressure on National Treasury to use fuel as a mechanism to increase tax revenue. In a stronger economy, corporates would be doing well and would be paying more tax. They'd also be hiring more people, so there would be more personal tax flowing into the fiscus. Plus, more people in jobs means more consumer spending and additional tax revenue in the form of VAT."
Currently there are two taxes on fuel: the General Fuel Levy and the Road Accident Fund Levy. Combined, these constitute R5.30 of every litre of fuel sold in the country, according to the Automobile Association of South Africa. "When the next Budget is announced in February, more taxes will inevitably be added," predicts Muscat. "Unless the rand appreciates substantially, or the oil price decreases substantially, we believe the fuel price will go sideways to slightly higher. Either way, it's not good news for South African consumers."
WHAT DOES A GLOBAL TRADE WAR MEAN FOR SA?
In August, the rand dropped to twoyear lows triggered, in part, by fallout from a spike in United States-Turkey diplomatic and trade tensions. With the US also instigating trade wars with the likes of China, the European Union and even fellow North American Free Trade Agreement members Canada and Mexico, what are the implications for the South African economy and for local investors?
According to Mark Appleton, FirstRand's Head of Multi-Asset and Strategy at Ashburton Investments, even though South Africa isn't directly in US's firing line, it is suffering significant collateral damage simply because it's an emerging market.
"Our currency tends to be a hedge against emerging market nervousness - we have a very highly-traded market in terms of the rand," he explains. "When there are issues in other emerging markets, like we're seeing at the moment in Turkey and China, then international investors tend to sell the rand because it is a mechanism for developed market investors to reduce their exposure to emerging markets."
RMB Private Bank expert Jason Muscat, Senior Economic Analyst, says the rand has also weakened on the back of concerns that the higher tariffs the United States is imposing on Chinese products will reduce China's demand for imports. China is among South Africa's biggest trading partners. "For example, we export a lot of iron ore to China for them to manufacture steel. Higher tariffs on Chinese products make them less attractive and China may need less iron ore from us. This introduces volatility which impacts our currency."
Given that South Africa is a small, vulnerable and open economy, there may be further implications if the United States-inspired regional trade wars continue to escalate and impact the global economy. "Trade wars are negative for global growth," notes Appleton. "There is a strong correlation between global trade and global economic growth. In general, global trade is good for productivity - and productivity enhances global growth. When you mess with that basic economic formula then the cost of goods, services and imports goes up." Various studies indicate that a full -blown trade war could negatively impact global growth by anything between 0.5% and 1.5%.
What do these potentially gloomy scenarios mean for South African investors? Appleton says his advice is not to panic and to have a diversified portfolio. "South African investors tend to want to take their money out of the country when the rand is weak and emotions are running high. They panic and typically get out at the wrong time."
Rather employ a measured investment approach, he urges. "Having some offshore exposure is very important from a balanced point of view. You get diversification and you get currency protection. Use your offshore allowances and regulatory permissions to get that exposure."
Careful structuring of your local portfolio is equally important. The South African equity market has significant rand hedge qualities and there are a number of globally exposed South Africa-listed companies in which you can invest. BHP Billiton, Anglo American and British American Tobacco are all examples of businesses that will derive value from a weaker rand.
South African investors should also note that there's value in emerging market currencies and yields, Appleton advises. "For example, you can buy a 10-year South African bond at the rate of 9%. With our inflation rate forecast of 5% to 5.5% over the next two years and around 6% in the longer term, you achieve a real yield of around 3%, which is attractive compared with the yields available in developed markets. In the United States for example, the 10- year bond yield is 2.83% and their inflation rate is currently running at about 2.9%. Also remember that the long-term growth prospects for emerging markets - in terms of demographic profile - are positive."
Given the exceptionally strong performance of the United States economy, is there a case for South African investors to put their money there? Appleton believes there is, but points out that United States markets are not cheap. "The market could get a bit stronger in the short term. But from a valuation point of view, we think the rest of the world will probably catch up over time."
Fortunately, there are some positives to be had from a weaker currency. An immediate benefit is that the weaker rand makes South African exports more attractive. Another piece of good news is that the rand looks cheap and could well make a comeback before year-end. "Our view is that the rand has been oversold and is excessively weak because there's quite a bit of emotion around it," Appleton advises. "It's difficult to predict how long this will continue, but we anticipate it will strengthen from its current levels before resuming a gradual weakening over the longer term."
Also expect US's current hard-line trade war stance to soften, predicts Muscat. "Trade wars benefit nobody in the long term. Trump is unpredictable, but he may step back once he realises the impact of his tariff hikes on his own economy. For example, Apple's iPhones are imported into the United States from China, so he is actually putting tariffs on a United States product that is made in China. It is not going to be good for the United States economy. It creates inflation."
A MARDI GRAS TO REMEMBER
A MARDI GRAS TO REMEMBER
Music, all-night celebrations and late-night revelry, that's how the world sees the most high profile mardi gras event on the annual calendar. Historically, the Rio Carnival centred around Christian feasts but today it has become a symbol of good humoured fun, where the carnival attracts some 70% of Brazil's tourists in any given year with its flamboyant parades and colourful festivities.
This year eBucks Travel has secured a mouth-watering mardi gras package to Rio Carnival; pack your feather boas and prepare to dance the night away.
Carnival in Rio de Janeiro - 5 nights
Package price: R24 326 per person sharing
eBucks Travel Web Reference: eB-AME018
Each year people from all around the world make the pilgrimage to Rio to partake in the all-out festivities which, for Brazilians, mark a national celebration bigger than New Years and all other holidays combined. Marvel at the flamboyant costumes and feel the electric energy. From its elegant balls and vibrant outfits, through to its street parades and party scene, the Rio Carnival 2019 promises to be a night to remember.
Validity: 01 March 2019 to 07 March 2019 (This package is ONLY valid for the duration specified and any additional nights need to be quoted separately)
Return flights from Johannesburg to Rio de Janeiro including approximate taxes
Return private transfers from airport to hotel
5 nights' accommodation at the 3-star Copa Sul Hotel or similar
Seat in Coach Round trip transfer Hotel / Carnival Parade / Hotel
Sambodrome ticket - Grand Stand - Bleacher Sector 9
Your choice of either Half Day Corcovado (Statue of Christ the Redeemer) and TIjuca Forest Tour OR Sugar Loaf & City Tour
Exclusions: All items not mentioned above.
Emirates: Get up to 40% off Emirates flights
Uber: Sign up and use the promotion code EBUCKS to get R200 off your first ride or earn up to 15% back in eBucks
SLOW: Enjoy and relax with complementary SLOW Lounge visits
Forex: Earn up to 50% back in eBucks through FNB Foreign Exchange*
*Terms & conditions apply.
All services are subject to availability and this estimate is to be used as a guideline only.
DISNEY ON ICE PRESENTS DREAM BIG
22 June - 1 July 2018, Ticketpro Dome, Johannesburg
4 July - 8 July 2018, Durban ICC
11 July - 15 July 2018, GrandWest, Cape Town
Everyone has their favourite Disney princess, from Frozen's Anna and Elsa to Ariel and Belle, Cinderella and Rapunzel, Tiana, Jasmine, Aurora and the ageless Snow White. Add a dash of pixie dust to the mixture, courtesy of Tinker Bell, encase the entire experience in a winter wonderland setting, and youngsters (and the young at heart) will enjoy an enchanting glimpse into a world where dreams do come true.
CARTOON NETWORK LIVE!
3-8 July 2018, Teatro at Montecasino, Johannesburg
This is an interactive live show for the whole family featuring popular Cartoon Network characters from Ben 10, The Amazing World of Gumball, Adventure Time and The Powerpuff Girls. In Cartoon Network Live! Kelvin Gizmo, scientist extraordinaire, takes us into the world of Cartoon Network which is under threat of Zarr, the evil robot. We travel through the Land of Ooo, the city of Townsville and Elmore and meet their famous inhabitants. With them, and the help of the audience, Kevin Gizmo will hopefully be able to stop Zarr and his evil plans. The production brings together an international, award-winning creative team to ensure a quality family entertainment stage show for audiences of all ages (ideally kids should be five and older).
WODAC PET EXPO
20-22 July 2018, Gallagher Convention Centre, Johannesburg, Gauteng
The World of Dogs and Cats (WODAC) is the ideal event for animal lovers. Events taking place over the three days include arena events to dog jumping, agility, dancing with dogs, fly ball and show dogs and cats. WODAC caters for all animal enthusiasts, from fans of reptiles, parrots and budgies, to rabbits, koi fish and horses. Welfare organisations are also on hand to share information about the great work they do. Plus pet accessories and new products are on sale, offering everything you need to keep your pet happy, healthy and entertained.
COMIC CON AFRICA
14-16 September 2018, Kyalami Grand Prix Circuit, Johannesburg
Superheroes and sidekicks, Trekkies and Star Wars aficionados young and old are counting the days to Comic Con Africa - the first time this global science fiction and fantasy convention has come to the African continent. Over three days, the event will showcase comic books, sci-fi and fantasy-related film, television and similar popular genres from animation to toys, gadgets, clothing, collectible card games, table top games, anime, manga, video games, web comics and fantasy novels. Visitors can also enjoy celebrity panel discussions, seminars, workshops and autograph sessions, with Aquaman actor Jason Momoa among the big names already confirmed for the event.
5-7 October 2018, Ticketpro Dome, Johannesburg, Gauteng
rAge is South Africa's biggest annual video gaming computer, technology and geek culture exhibition. The event provides a platform to touch and feel, try and experiment. Now in its 16th year, enthusiasts can buy new games and consoles at rAge, chat to local comic book artists, or take selfies with their favourite cosplayers. Besides all the stands, retail outlets and e-sports stages, rAge also features an artist's alley, and a home-coded area where local game developers showcase their games.
FNB JOBURG ARTFAIR
6-9 September 2018, Sandton Convention Centre
The FNB JoburgArtFair, the first international art fair on the continent, plays a pivotal role in supporting the contemporary arts landscape in Africa. The event is renowned for providing a space for leading artists, galleries, collectors, writers, thinkers and art lovers to congregate.
19TH STARLIGHT POP OPERA
19 August 2018, Umhlanga Ridge
The world-class Starlight Pop Opera offers lovers of classical music a wonderful opportunity to listen and enjoy a dynamic range of beautiful music, from opera to full on rock. This enchanting event is a celebration of local talent, local ingenuity and local creativity, and is not to be missed.
15 September 2018, Country Club Johannesburg
This year marks 20 years since the first Starlight Classics evening charmed South Africans with its unique blend of Afro-symphonic entertainment; 2018 is no different. Again under the directorship of maestro Richard Cock, this year's edition will again enchant audiences and offer an opportunity to enjoy leading musicians. During the Cape Town leg of the event, held at Vergelegen Wine Estate in March, the audience was treated to the likes of Lira and Riana Nel, the operatic talents of Sunnyboy Dladla and Cecilia Rangwanasha, and international jazz violinist Tim Kliphuis.
RMB GRACE TO GRACE
13 October 2018, Magaliesburg
Take a break from the big city and bring the family to the charming Mount Grace Country Hotel & Spa for a mountain biking challenge that suits the cycling enthusiast, keen runners, trail run devotees and even tiny tots. With 48km, 16km and 5km MTB routes, 20km and 10km running options and a 1km adventure trail for the kids, this is the ideal getaway for the active family. Race participants will also enjoy complimentary 15-minute massages, while client discounts for full treatments will be on offer at the acclaimed Mount Grace spa.
24-26 October 2018, Sandton Convention Centre
South Africa's premier wine show is currently in its 18th year, and attracts some 10 000 wine lovers annually and about 150 exhibitors comprises big brand names, boutique wineries, wine routes, imported glassware, wine accessories and wine storage systems. Aficionados can enjoy intimate winemaker tastings while the Shop@Show facility allows wine lovers the opportunity to order their show favourites for home delivery.
20-22 July 2018, Gallagher Convention Centre, Johannesburg, Gauteng
The World of Dogs and Cats (WODAC) is the ideal event for animal lovers. Events taking place over the three days include arena events to dog jumping, agility, dancing with dogs, fly ball and show dogs and cats. WODAC caters for all animal enthusiasts, from fans of reptiles, parrots and budgies, to rabbits, koi fish and horses. Welfare organisations are also on hand to share information about the great work they do. Plus pet accessories and new products are on sale, offering everything you need to keep your pet happy, healthy and entertained.
Across all these innovations, however, the importance of secure channels and ongoing protection of your personal identity information and digital devices has never been more critical. So, in this newsletter, we highlight not only the possibilities but look to arm you with essential tips to ensure your cyber security.
In the wake of a 25 basis point drop in the repo rate, we also take this opportunity to take a closer look at what this new cycle might mean for bonds.
Finally, there are some vinous delights on offer from eBucks Lifestyle and we gear up for RMB WineX 2017, taking place from 25-27 October 2017.
We welcome your feedback about these articles, which we hope you find absorbing and relevant.
'GLOBESITY' IS A MEGATREND WORTH WATCHING
Trends that change the way we live, work and invest
You wouldn't put your money into a new product, company or sector without asking some key questions, would you? Well, neither would your financial advisor. This is why so much of our time at RMB Private Bank goes into dissecting long-term political, environmental, social and demographic 'megatrends'; developments which can impact your long-term investment returns.
There are a range of megatrends which RMB Private Bank keeps on its radar, says RMB Private Bank's expert Chantal Marx, Head of Research at FNB Securities. "Some are quite in-depth, such as the emergence of the sharing economy, demographic changes, the rise of 'globesity', energy and other scarce resources, the impact of disruptive technology and how Millennials are changing consumption patterns," she says. While others are more general. All, however, have the potential to change the way we live, work and invest.
In forthcoming newsletters we'll take the time to outline a number of these megatrends, giving our views and insights into the possible implications. From a South African perspective many of these global developments are likely to impact our society too, some for the better and others less so. For example, globesity - the increase in obesity around the world - is just one example of a ticking time bomb with a possible upside for astute investors.
Research from Wits University's Priceless research unit in 2016 tells us that obesity related diseases, like heart disease and diabetes, are now responsible for 13.1% of deaths in South Africa. Compared with 13.8% attributable to HIV/Aids complications. This, says Marx, makes globesity of particular importance to the health of South Africa's citizens and also impacts healthcare resources, pharmaceutical companies and medical aids.
But it's not all bad news. With statistics from the Heart and Stroke Foundation telling us that South Africans are the heftiest in sub-Saharan Africa - with 70% of women and about 33% of men being classified as overweight or obese - this has spurred on a counter trend towards health consciousness.
"In emerging markets we have a disparity of income," explains Marx, and an associated disparity in trends. "Higher income individuals are generally in the healthier phase and they are teaching their kids these lifestyle behaviours. And while fast food is still a megatrend for this group, their choices are more health conscious, for example shopping at Woolies or Kauai or using systems like dinner kit delivery service UCook."
These healthier habits are increasing the uptake of wearables too, she explains, highlighting the likes of Garmin and Fitbit fitness trackers, which are, in turn, providing benefits for the insurance industry. "Discovery, for example, is using this data to improve its actuarial efficiencies," explains Marx. Adding these devices into the medical aid mix also makes consumers 'stickier' when it comes to retaining and using memberships to fitness and health clubs. This, says Marx, also keeps up demand for athletic-leisure wear, a bandwagon onto which the likes of Adidas, Reebok and Under Armour have been quick to jump onto in recent years. This specialisation also extends to the type of clothing that fitness fanatics need for yoga versus Crossfit versus spinning.
On the other end of the spectrum are South Africans for whom fast foods - not a Fitbit - represent an 'aspirational' lifestyle choice and, of course, there are also those who find it cheaper to eat convenience foods that to buy fresh produce. "Companies like Famous Brands benefit at this lower end of the market," says Marx. "Pharmaceutical companies and health groups benefit in the middle, although it's a challenge for medical aid companies because a lot of these individuals are employed and covered by medical aid."
After unpacking these divergent themes, the skill comes down to carefully distinguishing between a trend and a fad. Fads don't change the way people live, says Marx, but trends like globesity do. "At RMB Private Bank our job is to adapt to these things, to take them seriously and to spot the opportunities." It's research and analysis like this that highlights the current - and long term - potential of a group like Brait, (which owns Virgin Active), Holdsport, Mr Price Sport, Discovery and offshore companies like Apple and Fitbit. It's this approach that keeps RMB Private Bank' investments thinking one step ahead of the pack.
WHAT YOU NEED TO KNOW ABOUT BITCOIN AND BLOCKCHAIN
The surge of cryptocurrency
Even digital currency sceptics are being won over by the rampant surge of cryptocurrency Bitcoin over the past 12 months, a rise which saw its value touch US$5,000 a few weeks ago before coming down quite significantly to below $3,000 and now stands at just below $4,000, having overtaken the price of gold in March.
Despite the volatility of cryptocurrencies like Bitcoin, Litecoin, Dash and Ethereum - and volatile they are, with any hint of uncertainty pushing their prices up or down significantly - these digital currencies, which operate independently of any central bank, have surged into our collective financial lexicon in recent months on the back of uncertainty over issues like the United States and North Korea, Brexit and rising global tensions, says John Joyce, Portfolio Manager at Ashburton Investments. "This is not unlike the reaction we see from gold as a haven during uncertain times," he says.
The value of Bitcoin lies in the fact that just 21 million Bitcoins will only ever 'be mined', so, like gold, supply is limited. This gives them value. Some, like the Chinese central bank, argue that while Bitcoin's value makes it an asset, it is still not a currency and that regulation is needed. In mid-2017 German central bank member Carl-Ludwig Thiele told Handelsblatt newspaper that: "Bitcoin is a means of exchange which is not issued by a central bank, but by unidentified actors. I do not see it as a currency. If you think Bitcoin would be as safe as the euro or the dollar, you have to take responsibility for it." Some would argue that digitisation of banking has already desensitised consumers to the need to hinge a currency to a concrete, physical value or, indeed, to a central bank, opening the door for what JP Morgan calls "the audacity of Bitcoin", which is "a stateless, virtual and peer-to-peer currency".
Equally important is the imperative technology behind the likes of Bitcoin. Blockchain technology, which was originally devised as the system behind Bitcoin, is essentially a public ledger of information duplicated thousands of times over a network of computers. The data isn't stored in one place, rather it is hosted on thousands of computers at the same time.
Farzam Ehsani, Blockchain Lead for RMB, is a recognised authority on blockchain technology and believes it will be as transformative to the global financial system as the internet has been to the world. "Blockchain is the underlying technology that allows a distributed and decentralised community to come to consensus about the true state of a system," he explains. "Bitcoin is an asset on top of this technology. Other assets can also use these consensus protocols and technology."
It's because blockchain data is not centralised and can't be hacked or disrupted at a single point, that it's become such a sought-after technology. So much so that even Bitcoin sceptics like American tech billionaire Mark Cuban recently told Bloomberg News that he'd be investing in 1confirmation, a fund which aims to raise US$20 million to invest in blockchain companies. Cuban might not rate Bitcoin, but he believes blockchain is a "foundation platform from which great applications can be built".
Ehsani points to the home buying process as one sector that is inevitably going to be disrupted by blockchain. "Imagine the ability of buying or selling a house and it being transferred into your name not in weeks or months, but in a matter of seconds or minutes. To me this is not some crazy theory, this will be reality in the not too distant future. It is just a matter of time."
Similarly, Joyce notes that the emergence of cryptocurrencies could be a significant disruptor to the banking system as we know it. "These currencies bypass the bank," he explains. While banks are unlikely to disappear as a result, being cut out of the loop will have adverse consequences for the traditional system. This is why banking groups like FirstRand are quick to investigate the potential of blockchain.
The implications of blockchain on banking, believes Ehsani, include disrupting payments - which currently makes up about 30% of total global banking revenue. "Right now, using Bitcoin, one could transfer monetary value and it would arrive in the United States or any other part of the world in 10 or 20 minutes, an hour at the most. And it would probably cost a grand total of less than R10 regardless of the amount being sent. In addition, it doesn't touch a single financial institution to get there. This can be viewed as a threat to financial institutions but can also be seen as a tremendous opportunity as costs come down and volumes increase. Banks need to start thinking creatively about this new paradigm," he says.
Right now, however, making a cryptocurrency mainstream looks unlikely, believes Joyce, citing the limited supply as just one hindrance. But the change is coming and FirstRand is working to understand the disruptions as well as the opportunities. "The idea of cross-border payments will, in the future, become as silly as the idea of cross-border email," says Ehsani. "Value is able to be transferred instantaneously, just like information. That's what the blockchain does."
WHAT THE RATE CUT MEANS FOR GOVERNMENTS BONDS
The impact on your investment portfolio
When the South African Reserve Bank took the market by surprise with a 25 basis point repo rate cut in July 2017 it handed indebted consumers a fillip; a reduction in their monthly home loan and credit card payments. The general advice from the experts was, however, not to squander this relief, but rather to save through these uncertain times and build a nest egg.
But, while the average investor might be concerned with their property bond, there is another bond which is also impacted by a rate decrease, and that's government bonds. These have more of an impact on you and your investment portfolio than you might think; forming as they do a healthy proportion of any pension fund. So what does a rate cut mean for these bonds?
According to RMB Private Bank expert Justin Louw, a Relationship Manager at FNB Securities, the 'bonds 101' fact we all need to know is that when interest rates go up, bond prices go down. And when interest rates go down, bond prices go up. "So, in a decreasing rates environment, like we have at present, government bond prices are going up. This means that our clients who have bonds in their portfolios or are invested in multi-asset funds could benefit," says Louw.
This may seem contradictory, because South Africa's sovereign debt has been downgraded to sub-investment this year, but, explains Louw, the market had priced in this downgrade possibility well ahead of time and had already reacted to ongoing South African political uncertainty and instability. So, even during this period of doubt and uncertainty, government bonds have delivered solid returns.
"What has been beneficial for us is that the carry trade [where investors borrow at low interest rates and invest in assets that offer higher returns] has been perpetuated, so there have been positive foreign bond flows following the March cabinet reshuffle and the downgrade," explains Louw. "Inflation has come lower, which is very beneficial, this has been aided by the relatively low oil price and the relatively strong rand. The rand strength came from an improvement in the current account balance and the carry trade. Because inflation has come down, the South African Reserve Bank has a bit of room to cut interest rates."
The carry trade can be explained by the real yield differentials at play, explains Louw. Assuming South African inflation averages 5.5% and the bond yield at the time of downgrade was 9%, then you had a 3.5% differential of a real yield. "If you look globally there is no real yield available," he says. "In the United States inflation is around 1.7% and the bond rate is 2.2%, so you have 0.5% yield. That explains why investors are coming here. They are looking for real yield."
While it has been beneficial for bond prices and the rand, foreign ownership of South African bonds is also a concern because it could have a massive volatility effect if foreigners sell. "At the end of the day, if someone sells something you hold, en masse, then the price can go down a lot and you can lose money. The opposite is also true so it pushes the value around," says Louw. "Volatility in something as conservative as a bond isn't great, as bonds tend to be used for more defensive stable retirement vehicles and older clients, so you don't want to be exposed to that volatility."
This volatility is evident in the fact that in 2016 bonds produced roughly a 15% positive total return, however the previous year they declined by around 16%. In summary, RMB Private Bank expects further volatility in bonds and the only way to avoid this is if you hold them to maturity. "You'd have to hold the R186, for example, till 2026, to guarantee that 8.6% return currently," explains Louw. "Bonds are instruments utilised for income generation in portfolios and especially if you have an offset from a tax point of view or a tax beneficial structure they are attractive with the current real yield."
He also notes that, as a fund manager, "you cannot afford not to have a bond strategy for both sides of the coin on the table", but you do need to constantly consider the risk and timing given this volatility. "This is where a good advisor comes in," he says, noting that the timing of buying and selling bonds in volatile times should constantly be appraised.
There has been some negative sentiment around bonds lately, with the likes of Coronation shedding South African government bonds in its flagship Balanced Plus fund earlier this year. In most part this was because they regarded bonds as being too strong and, in their view, the price did not reflect the risk inherent in the market due to the political uncertainty South Africa is currently experiencing, explains Louw. "The R186 as a reference was about 8.40%, which really was too strong pre the rate cut. We also didn't think it would price in further downgrades, so we lightened our long exposure."
But that was before the surprise interest rate cut. So now, if bonds do weaken again, Louw notes that "we might push our weighting in bonds up as they are still attractive, not necessarily for individuals from a tax perspective, because the distribution is considered as interest, but if you have a pension fund then bonds are attractive due to current yields. At this point you get a percent or so higher return than in the money market, but note this does involve putting capital at risk compared with, for example, a money market."
With RMB Private Bank projecting at least one more rate decrease this year - potentially in October or November - and possibly another in early 2018, we are in the throes of what is expected to be a shallow interest rate decline cycle of around 75 basis points. This bodes well for existing holders of bonds.
TAKE YOUR CYBERSECURITY SERIOUSLY
Keep you and your family's data safe
If you use a computer, a tablet or a mobile device, but you don't back up, have antivirus, a secure password and are not actively trying to protect your online identity, then read on because you are not alone. The South African Fraud Prevention Services (SAFPS) recently released statistics which show an increase of more than 200% in identity theft in South Africa over the past six years. And, says SAFPS, a staggering 8.8 million South Africans were caught out by cyber criminals in the past year.
Cybercrime is not just a plot line on popular TV shows, it is a very real threat in the real world. As such, it's imperative to take active steps to protect yourself, your data and your identity.
Kovelin Naidoo, the man they call 'Mr Robot' at RMB Private Bank, may be an expert in this field, but he still stands by some basic steps we can all take to ensure we are a lot safer in the cyber world. Some of these are good habits to get into, he says, like keeping all your devices up to date in terms of software.
"Run all your updates and, if it's Microsoft, keep all the security patches up to date," recommends Naidoo, who suggests making use of automatic updates. "Also make sure your security software is up to date. As an RMB Private Bank client we provide you with an antivirus software licence. When you log in you can download a licence key for Trend Micro." Trend Micro is just one option, he notes, "any antivirus would do. As long as it is up to date."
Once you have these protections in place, then it is essential that you are brutal with your password selection. The days of birthdays, names and star signs are over, today's hackers are wise to these tricks and will break through them quickly, so it is vital to ensure you have a relatively strong password in place, particularly for your online banking. Naidoo suggests that the minimum password length should be eight characters and it should be relatively complex.
He elaborates: "If we look at hackers and how they operate, it is relatively easy to hack simple words from a dictionary, and family and pets names are freely available on social media. So we recommend you use password phrases - such as 'My dog's name is Bingo!' - which would be incredibly difficult for a hacker to break into." So pick a favourite phrase from a book or a poem and type it as it appears in the book; capitals and spacing's included. Ensure you have applied this change to all your sensitive information, emails and applications. Social media accounts do have additional security and privacy settings, so enabling these also ensures the security and privacy of your information.
But, even once you've got all the basics in place, never become complacent. Cybercrime often features well-coordinated attacks and RMB Private Bank works closely with law enforcement to try and identify syndicates. But there are also individuals operating in this space, warns Naidoo. "We've all heard of ransomware over the past six months. And the barriers to entry there are low." To protect yourself in the event of ransomware, it is vital to back up your data on a remote storage device regularly, says Naidoo. Do so at least one a month. "So, if you can't gain access to vital information, then you can fall back on your storage and data."
But, ideally, you've put in place behaviours and security which keep you and your data safe. This includes being suspicious of any emails and attachments which seem unusual. "Most computers are infected through an email with a virus," explains Naidoo. "Cybercriminals are quite masterful when it comes to Photoshopping emails from municipalities or telecoms or banks, links might look right but that link will send you to a malicious site. So scrutinise links and attachments." Do remember that RMB Private Bank will never communicate by using links in emails, nor will we ask clients to send sensitive information or details via email.
Naidoo recommends, from a banking perspective, that you transact using the RMB Private Bank App. "There is strength in all our security but we believe the RMB Private Bank App is the way to go, because we know it is difficult for cybercriminals to target mobile applications," he says. "In the RMB Private Bank App you are fully in our ecosystem and you aren't reliant on other software. But outside of that App there is a whole ecosystem which we can't control."
For example, SIM swaps are an increasingly popular technique which cybercriminals use to gain access to your personal data. But, using App, allows the bank to pick up anomalous and suspicious behaviour which we can proactively block or request you to confirm via a trusted mechanism. "SIM swaps are the first step to identity theft and financial fraud by criminal elements, all they need is your cell number, a utility bill and a copy of your ID. That's it to legitimately do a SIM swap," explains Naidoo.
Identity theft is a big issue in the cyber world, but it transcends the digital sphere. In the real world you should always keep documents such as IDs and passports in a secure location, says Naidoo, and shred sensitive information, like FICA or RICA documentation, once used. "Cybercriminals also look to target your garbage in the real world, and if I have your utility bill and your ID I can do a lot of damage. If you run a small business then also ensure that this security awareness extends through the organisation. If hackers can't get to you, then they will try those close to you, such as your PA or your children. So these practices should cover all devices and people in your circle."
Remember, concludes Naidoo, that all your banking needs can be fulfilled using the secure RMB Private Bank App, "from everyday banking, to renewing your car licence, to evaluating your property price. Many of our clients are still exploring the many things you can do with the App."
PUT YOUR SMARTPHONE IN THE DRIVER'S SEAT
Get instant access to information
Finding simple and smart ways to assist you to navigate life's difficulties is central to RMB Private Bank nav» innovations. First we started with nav» Home, which looked at 'angst points' in the home buying and selling process. We worked out a slick system to assist you with everything from instant home loan pre-approval for qualifying clients, to getting a free instant property estimate, to searching for your ideal home, and even finding schools and services in your new suburb.
Now we've rolled out nav» Car... so you are never required to stand in line to renew your vehicle licence again!
With nav» Car we aim to make vehicle ownership and compliance just that bit easier, by giving you instant access to a range of tools using the RMB Private Bank App.
For starters, explains Orsheran Singh, Imagineer (Head of Product Development) at nav», you add your vehicle to the App by scanning your licence disc or using a manual entry method. This will give you instant access to information about your car such as value estimates, specs, licence reminders and will even alert you to traffic fines, which you can pay using the RMB Private Bank App.
For many the seamless ability to renew your licence at the touch of a button is the biggest winner. Simply make an in-App payment and your disc will be delivered to your door, says Singh. The handling and delivery fee of R199 excludes the renewal amount, and saves you queues, questions and the frustration of computer malfunctions at the Traffic Department or Post Office.
Plus, once you join up to nav» Car you can opt to take up the On-road PROTECT bundle too. For only R95 a month, this add-on puts you in the driving seat by offering:
Vehicle licence renewal assist: Free handling and delivery to your door for up to five vehicles (excludes renewal amount).
Fines assist: Instant fine notifications and discounts negotiated on your behalf.
Bail assist: 24/7 bail assistance at roadblocks.
Claims assist: Tyre repair due to pothole damage and road Accident Fund claims.
According to Jolande Duvenage, Chief Imagineer (CEO) of nav», every nav» solution is designed to free up your time and put you in control. "We underestimate how much the bank can assist you," she says. "We are seeing the growth of the self-help client and we need to allow for that customer." One way to do that is to ensure that the tools required for ease of use and instant action are at your fingers tips courtesy of your smartphone.
Want to put nav» Car to the test? Simply open the RMB Private Bank App and select nav» Car. Right now this is the closest you will come to a self-driving experience!
SECURE CHAT. IT'S A PRIVATE BANKER IN YOUR POCKET
Taking digital convenience to the next level
The RMB Private Bank has been a huge breakthrough in banking convenience, says Giuseppe Virgillito, Head of Digital Channel. This requires that RMB Private Bank keeps innovating and ensuring that clients find personal value in using this platform, even if their support team generally deals with their banking requirements or they are comfortably reliant on their private banker.
It's this thinking which saw the creation of Secure Chat, RMB Private Bank's interactive messaging platform on the RMB Private Bank App.
According to Virgillito, Secure Chat was born out of this realisation: "Our clients require personalised service and we need to fit into how our clients' lives work." From there the team put themselves in the shoes of a busy client whose most convenient means of communication on a day-to-day basis is his or her smartphone.
"Our clients are busy and they often don't have time to call the bank, or go to the bank. So, with Secure Chat, they can, at their convenience, log in and have an open conversation with a skilled professional," says Virgillito. This puts your bank in your pocket, be it during a board meeting or while you are waiting for your next flight at the SLOW Lounge.
For those clients still learning their way around the RMB Private Bank App, clients can access Secure Chat by logging into the App, clicking 'More' and then opening up the 'Messages' tab. You'll access Secure Chat in the top right-hand corner.
The Secure Chat service automatically drives clients to the RMB Private Bank App, and this is an intentional move on the part of the bank. "The App establishes a secure connection irrespective of how you access the App, even through a public WiFi connection. Locally or internationally you can connect to a hotspot and talk to your banker with confidence because, by using the App, you are secure and authenticated," explains Virgillito. "This means that you don't have to go through the authentication process and this allows us to service you faster and let you get on with your day."
The App exists to assist clients to meet their daily banking requirements, and Secure Chat adds to that service by giving RMB Private Bank clients 24/7 access to a skilled professional who understands their requirements and can deal with any query. Or, if a client requires an additional level of service, the query can rapidly be scalated to an appropriate expert.
"In time, Secure Chat will evolve into a one-stop-shop where you can talk to us day or night and where we'll be able to invite highly skilled and highly trained specialists into the conversation," says Virgillito. But, for now, you have access to a trained professional and a personalised service which offers the following services:
Obtain stamped bank statements
Request Visa letters
Query debit orders
Get online banking and RMB Private
Bank App support
Query your eBucks Rewards.
While these are all great services, Virgillito stresses that "a client should not be limited to these five things. The App and Secure Chat service are about giving you access to your information in the palm of your hand, all day and all night."
Secure Chat adds another layer to the RMB Private Bank banking proposition, concludes Virgillito. "Secure Chat is just a more convenient, more secure and more accessible way of delivering you the best service."
TASTE THE GOOD LIFE WITH EBUCKS LIFESTYLE
Give your taste buds a treat
eBucks Lifestyle has teamed up with Wade Bales Fine Wine and Spirits, the 'personal bankers' of the wine industry, to create three unique and exclusive Cape winetasting experiences for discerning RMB Private Bank clients.
They have assembled three experiences from which you can choose:
Heritage meets contemporary flair at Steenberg
Your Steenberg experience includes a superb neo-bistro three-course meal prepared by Executive Chef Kerry Kilpin at Bistro Sixteen82, an establishment rated among 20 of the world's best winery restaurants.
Marvel at the mountain views at Beau Constantia
Beginning at R500 per person, you will enjoy a glass of Cap Classique on the steep agricultural slopes of Constantia Neck as you take in the beauty of the Beau Constantia boutique wine farm and gaze out over False Bay. Then enjoy a private tasting of all Beau Constantia's Premium Wines - each of which has been awarded more than 90 Robert Parker Points - in the owners' exclusive VIP Bronze Box Glass Conservatory.
You will be treated to the culinary excellence of acclaimed Executive Chef Ivor Jones (formerly of The Test Kitchen) who will prepare a gourmet set menu of eight tapas served over three courses at the Chef's Warehouse - a gastronomic delight that you won't want to end.
Reconnect with the land at Klein Constantia
Starting at R1 000 per person, you will embark on an off-road 4x4 tour up into the spectacular vineyards where you will enjoy a glass of bubbly while taking in the exquisite views.
Thereafter, you'll be whisked off to the quaintly named Duggie's Dungeon for a traditional country-style lunch of succulent chicken, pickles, homemade jams and pâtés, freshly baked breads, delicious quiches, cured meats, cheeses and fresh salads. Subject to his availability, you could also experience meeting Matthew Day, one of the new wave of young winemakers energising the Constantia Valley and get his personal take on the rich history of the Klein Constantia Estate.
And that's not all...
With December just around the corner, now is the perfect time to consider enhancing your Wade Bales Fine Wine and Spirits experience with additional eBucks Lifestyle special offers in order to get maximum value and enjoyment out of your Cape Town visit.
For example, you could enjoy a discount of up to 40%* when you fly kulula.com from Johannesburg to Cape Town and when you make use of Avis car rental. Or you could enjoy a discount of up to 53%* on Rovos Rail, the most luxurious train in the world, as you relax in reconditioned wood-panelled coaches and recapture the romance and luxury of a bygone era.
When you get to Cape Town, choose to stay at Rovos Rail's stately seaside St James Guesthouses fronting onto Kalk Bay at a discount of up to 53%*.
Or enjoy a saving of up to 35%* when you stay at the award-winning five-star 12 Apostles Hotel & Spa or you could select to stay at The Table Bay, Sun International's luxurious five-star hotel overlooking the Victoria & Alfred Waterfront, at a discount of up to 10%* and kids stay free.
Furthermore, to ensure that you enjoy your tasting experience without worrying about drinking and driving, take advantage of eBucks Lifestyle's point-to-point vehicle transfers from Avis.
To find out more about any of these exclusive offers or to book, log in to eBucks.com and click on the Lifestyle tab.
* Discounts exclude all taxes.
Popular events on the tourism circuit around South Africa
25-27 October 2017, Sandton Convention Centre.
Wine making has come a long way since the times of the ancients - when rotting grapes were transformed by the natural yeasts present on their skins into something akin to the beverage we drink today. Back then little was known about cellar hygiene and the outcome of the process was often a matter of chance. It was only in the 19th century that Louis Pasteur began to understand the crucial role played by yeast, and little more than 50 years ago that Emile Peynaud determined the cause of malolactic fermentation.
Today, even the most rustic of cellars is hightech compared with a generation ago. Yet, despite this, much of what goes into traditional quality red winemaking is essentially unchanged from 200 years ago. It's no surprise to discover that the best wines from the 19th century are often still very much alive - an indication that the people who made these vinous treasures understood the art, if not the science of it.
Despite the tech revolution of the past few decades, many of the new generation ofwinemakers are reverting to techniques and equipment that have been used for literally thousands of years. Egg-shaped amphorae are back in fashion as fermentation vessels; foot stomping of grapes - a gentle and effective way of extracting flavour and tannins - has also made a comeback; oxidative practices often yielding so-called orange wine are very much a la mode. The battle cry is authenticity, a banner which unifies the rustic and the precise, the archaic and cutting edge.
Wines from every corner of the national vineyard, as well as a selection from around the world will be available for tasting over the three nights of RMB WineX 2017. Of course there will be hundreds of examples made in great volumes and with great technical precision, and hundreds produced in tiny quantities by so called "boutique" and "garagiste" winemakers. This is because there is no absolutely right or wrong way to transform grapes into wine - the market is the final arbiter. Over the past 18 editions of WineX - the largest consumer wine event in the Southern Hemisphere - pretty much every possible style of wine has been available for sampling. And since very few wine producers in South Africa ever seem to go out of business, clearly they mostly manage to find a palate for every wine.
As an RMB Private Bank Client, enjoy our exclusive offer for RMB WineX.
*Use the code PBclient17 and get discounted tickets from Computicket.
Coffee and Chocolate Expo Cape Town 2017
7-8 October 2017, Durbanville Racecourse, Cape Town.
If you're a coffee aficionado or lover of chocolate then brace yourself with a celebration of cocoa and beans during the third instalment of Cape Town's Coffee and Chocolate Expo. Find out about the origin of your favourite hot beverage and learn how to pour the perfect cup at the Chocolate Theatre. Additional highlights include a chocolate pairing with various liquors, whiskies and, of course, fine wines. Plus expert chocolatiers who be on hand to discuss the craft of fine chocolate making.
Prince Albert Leesfees 2017
3-5 November 2017, Prince Albert, Western Cape.
For the sixth consecutive year this charming book festival returns to the picturesque town of Prince Albert. Words in all their manifestations are the focus of the Leesfees, and this year comedy and satire join the programme in the form of comic talent Nik Rabinowitz. For all the readers out there, this festival is a must!
Ficksburg Cherry Festival 2017
16-18 November 2017, Ficksburg, Free State.
This annual festival, held in the sleepy town on the foothills of the Maluti Mountains, is the longest-running crop festival in South Africa, dating back to 1968. It is also Ficksburg's main opportunity to grab some of the action on the South African tourism circuit. A number of programmes run concurrently throughout the festival, including children's events, and live music to workshops. Popular events include wine and chocolate pairings, an introduction to cooking with cherries, and a range of sports events, including a fun run and road cycling race. A great event for the whole family.
Champagne Louis Roederer & Riedel
6 x Champagne Louis Roederer Brut @ R795.00/bottle (List price: R 4 770.00)
6 x Riedel Vinum Prestige Cuvee Champagne flutes @ R 345 each (List price: R 2 070.00)
RMB Private Bank client price: R 3 995.00(Actual price: R 6 840.00)
Champagne Louis Roederer & Domaines Ott
6 x Champagne Louis Roederer Brut @ R795.00/bottle (List price: R 4 770.00)
6 x Domaines Ott Blanc de Blancs @ R395.00/bottle (List price: R 2370.00)
RMB Private Bank client price: R 4 500.00 (Actual price: R 7 140.00)
To order - please contact Casandra McDonald on firstname.lastname@example.org or 011 482 9178.
Youths make their imprint on the world
Many Generation Xers (those in their early 50s and 40s) or Baby Boomers (in their late 50s and 60s) share their homes and lives with members of the two latest generational groupings, the Centennials (under the age of 23) and the Millennials (in their 20s and 30s). As a result many know only too well how different they are from their children and grandchildren, how they are motivated by different things and how their approach to life, work and wealth diverges.
Understanding how these new generations 'tick' is something researchers, companies and marketers are keen to unpack; after all they are the clients, leaders and social influencers of the future. Those in the know tell us that the youth of today are a demanding, impatient, socially-minded and digitally-driven group. They prize education, have lofty ambitions for themselves and care deeply for humanity and the planet.
These individuals, particularly the Millennials who are increasingly moving into the workplace, are beginning to reshape key industries and sectors with their unique approach to life. Philanthropy, as you'll read in this newsletter, is adapting to their influence; savings and investment firms are taking notice of this group's pressures and pleasures; trends like gamification are influencing the way we all learn and earn; and our economy is also adapting to the youth's openness to sharing and collaborating (just think about how Airbnb and Uber have changed the way we travel).
As a bank, our solutions must also address this group's desire for control and clear communication, while ensuring that we offer value to our existing clients. A prime example of building an innovation that holds merit across generations is nav» Money, which complements the 'My Net Worth' balance sheet functionality already available on the RMB Private Bank App. nav» Money is a digital money management solution to help you better navigate your financial journey. Like the other nav» products by RMB Private Bank, nav» Money is changing the way our clients manage their money, as well as their expectations of financial services.
The youth of this country is indeed reshaping the future and forcing business to adapt, think out of the box and innovate. There is much to celebrate about these developments and, as we mark Youth Day on 16 June, it is vital to turn the spotlight on the wealth of talent and potential that exists in South Africa's young people. We hope you enjoy these insights into South Africa's dynamic young people.
Trends: Get in the game with gamification
What is it about that Fitbit on your wrist or the pedometer app on your smartphone that inspires you to clock 10 000 steps a day? Why does real-time feedback on your driving spark better habits? The human psyche responds to these forms of 'gamification'; a fancy way to describe the confluence between the real and the virtual worlds. The question is why? As part of RMB Private Bank's megatrends series, we get under the skin of this emerging trend.
The gamification sector is expected to grow into a US$11 billion industry by 2020, according to Research and Markets in the United States. This is being driven not only by user uptake but also by a growing realisation that incentivising people through gamification can improve not only customer relations but employee engagement. Investing is no different; something which global asset management firm BlackRock's co-founder, Rob Kapito, told a conference in London last year when he stressed that financial services institutions would have to become more like game developers to appeal to younger investors. "It's a game," he was quoted as saying by the UK's Business Insider. "All of the technology is gamification... What we need to do is find the financial game that makes people feel comfort and safety. The winners, in my opinion, are going to be the people who have that game, have the technology, and have the brand."
The reasons for this are manifold, and include the feel good factor associated with the rewards offered by gamification platforms, the fact that these offerings are designed to be fun and engaging, and that they celebrate achievements (even if it's just moving up a level in recognition). Furthermore, researchers suggest that because the human brain can get bogged down by information and the myriad options we are exposed to daily, having an app on hand to direct your behaviour helps to relieve cognitive overload.
Most of us, of course, don't associate these benefits with the word gamification, which instead conjures up images of virtual reality headsets and military-style 3D operations. "It's a word that sounds like you'll get stuck in a video game and be a digital version of yourself," admits Chantal Marx, Head of Research at FNB Securities. "But what gamification does is optimise human behaviour by making it fun to do things that you don't always enjoy."
A good example of this is Discovery's Vitality innovation, says Marx, who explains: "Discovery is basically de-risking their own book while encouraging people to look after themselves." Loyalty and rewards programmes, such as FNB's eBucks Rewards and Dis-Chem Pharmacies' Loyalty Benefit Card, have a similar ethos of rewarding good behaviours. In the case of eBucks, the focus is on rewarding customers for how they bank and enabling them to save money and do more when they spend their eBucks. "Dis-Chem Pharmacies is an example of how giving people points for purchases makes them want to frequent your establishment," explains Marx, and this rationale works across retail, the health sector, insurance and education.
In fact, says Marx, "studying or learning a new skill is often not a massively fun experience, but gamification is changing the face of education and how we learn".
Language app Duolingo is a great example, which uses cartoons, quizzes and short learning sessions to impart vocabulary and grammar in a fun and interactive way which rewards you as you climb from level to level, much like a video game. "They make it fun for you to learn and it's less of an effort than going to a language school where it's all about sentence construction," says Marx. "This approach can work for both easier and more complex subjects. Just look at Stanford Online or Coursera to see how much more gamified education has become and how opening up learning from home has made education far more accessible."
A less flashy example of gamification is using this approach in the workplace, harnessing this fun and interactive approach to improve employee morale and productivity. "If you can get a really good interface going, where employees can make career goals and plot their way forward and track their progress, then you have a smart tool for guiding employees through their careers while retaining talent," says Marx. This level of gamification is slowly coming to South Africa, but in Hungary professional services firm PwC makes use of a free game called Multipoly which simulates what it is like working in an accounting firm by presenting similar business problems to work through. Aimed at college students, PwC Hungary claims a 78% increase in candidates looking to work for them as a result of the game. This is precisely the sort of approach which BlackRock's Kapito finds so exciting. "Millennials want to game. It's a game society," he said at the 2017 conference.
Given the digital focus of gamification, it makes sense that this type of approach appeals to Millennials (those in their 20s and 30s) and Centennials (under the age of 23), says Marx, but it also works across generational lines. How many 60 year olds do you know with an Apple Watch? "While they are fixating about making their points, they are become a healthier version of themselves. At the same time the company's risk has been reduced."
It's hardly surprising, therefore, that companies are jumping on the bandwagon and looking to adapt their way of doing business to the 'game society'. This, explains Marx, is creating investment opportunities. BlackRock, for example, invested €30 million into Scalable Capital, an Anglo-German digital investment platform, in 2017; putting its money where Kapito's mouth is. Marx believes the savvy investor should also be paying attention to companies that are innovating in this space by launching their own programmes. She also singles out companies that are creating this gamification content, "those tech start-ups in the US as well as IT companies, the guys who are building the apps that are being deployed into businesses to help improve efficiencies through gamification".
In South Africa's tech space most of these companies are conglomerated, so you'll have some exposure even though it may be diluted, notes Marx. And that's a good thing, after all gamification is here to stay and with the youth hungry for more engagements of this nature, gamification is likely to be a meaningful for years to come.
Tackling youth unemployment a national imperative
Unless all South African stakeholders come together, any chance of meeting the National Development Plan's stated objective of reducing youth unemployment to 6% by 2030 will continue to be an unrealistic vision and the negative impact on both the economy and the psyche of the country will continue to spiral out of control.
This brutal reality was highlighted recently after Statistics South Africa (Stats SA) unveiled another Quarterly Labour Force Survey replete with negative numbers, forcing the country to once again take stock of a stubbornly high official unemployment rate of 26.7% (a 15-year high) and a high and rising youth unemployment rate.
For youngsters aged 15-24, the data shows that 52.4% of South Africans in this age bracket are unemployed (up from 51.1% in the final quarter of 2017). Broaden that to the 15-34-year-old age group and the number sits at 32.4%, the highest in the world ahead of Greece (25.2%) and Spain (22.2%).
Until policy interventions, the promised jobs summit (mentioned by President Cyril Ramaphosa during his State of the Nation Address in February 2018) and a notable improvement in South Africa's growth figures are achieved, any chance of wrestling these figures to more acceptable levels will remain a pipe dream, says Jason Muscat, Senior Economic Analyst at FNB Economics.
"We continue to remain downbeat on the prospects for meaningful declines in the unemployment rate," says Muscat. "Despite the forecast for economic growth of approximately 2%, GDP (gross domestic product) will have to grow at more than double that rate to impact the unemployment rate."
This is not to say that some attempts to address the problem are not unfolding. In March 2018, Ramaphosa launched the Youth Employment Service (YES) which aims to bring government and business together in an effort to create a million paid world experiences for young South Africans over the next three years.
Initiatives like YES are important since the longer someone is unemployed, the deeper their discouragement, the more chance they will continue to miss out on opportunities and, eventually, the higher the likelihood that they will stop looking for work altogether. South Africa is not short on such initiatives, be they government- or private sector-driven, but to date such efforts have failed to make a significant and perceptible dent in unemployment numbers, particularly among the youth. Furthermore, in an economy dogged by slow growth and weighed down by structural inequalities and inefficiencies, the precarious position of the youth becomes even more heightened, says Muscat, as they are often the first to lose their positions and the last to be rehired.
One role which corporate South Africa can fulfil to counter this worrying trend centres on supporting the entrepreneurial focus of the country's youth. This means ensuring ongoing education around business ownership and, in the case of the financial services sector, working hard to share tips and insights around developing sound financial behaviours, both personally and for young business owners. Mentorship plays a substantial role too, and has the potential to guide young people towards business ownership in a supported fashion with a long-term and sustainable focus. Working closely with tertiary institutions to ensure that graduates enter the workplace armed with the right skills is another avenue ripe for collaboration; one which has the potential to ensure that opportunities and skills complement one another in the economy.
However, more needs to be done to get all stakeholders onto the same page. Just recently Business Day newspaper noted that unless the private sector substantially increases its fixed-investment spending in the country, the rise in business confidence fuelled by the optimism around Ramaphosa's presidency will not translate into meaningful numbers of jobs being created. This disconnect between the private sector, the government and unions is very real and its impact on prospects for job creation are tangible, says Muscat. So initiatives like YES do have an important role to play in bringing all economic players to the table.
In this respect it is important to take notice of inputs from the likes of the World Economic Forum (WEF), which touts an approach to turning around youth unemployment that hinges on five strategies:
Boosting job creation and labour demand
Better preparing youth for the job market
Creating pathways towards productive work
Improving financial well-being
In order to get each of these steps into play, the need for intelligent collaboration across all players in society is a must. There is no way around this, as Sean Rush, President of JA Worldwide, a youth-focused global non-profit organisation, wrote in a recent WEF blog: "Only through the concerted efforts of several parties - and a willingness to stick with it over the long-term - can we address the world's youth unemployment challenge and achieve lasting change."
Muscat agrees: "The reality is that the faster an economy grows, the more jobs are created. Over time, as the fourth industrial revolution gains traction and jobs are increasingly replaced by machines and software, this relationship will break down, so is all the more reason to tackle our systemically high unemployment rate before it is too late."
Generations unite to drive philanthropy
"Philanthropy is the thing that I am really excited about, and having success means I can do more." These are the words of will.i.am, entertainer, actor and Grammy Award winning musician. This modern-day poet's view encapsulates what philanthropy is all about and, having sown the seed, 43-year-old will.i.am and his more socially-minded Generation X cohort have certainly set the stage for the new Millennial grouping (those individuals currently in their 20s and 30s) to build on this culture of giving back.
While South African philanthropy body Inyathelo's 2017 Annual Survey of Philanthropy in Higher Education shows a substantial rise in the number of high-net-worth individuals in South Africa giving to worthy causes, like education, the truth is that many in this space have been giving consistently for years. Increasingly, these high-net-worth individuals are involving their children - and grandchildren - in their efforts.
According to Prince Siluma, Head of RMB Private Bank's Philanthropy Centre, the next generation of philanthropists is clearly coming through. These individuals are savvy, digitally driven and socially minded. "For the Millennial, philanthropy is more about alignment to their values and about creating long-term relationships," says Siluma, who believes this aspect of the Millennials, and other even young generations, will reshape the sector. "Non-profit organisations need to start thinking how they communicate their stories to these individuals," he says, noting that "if you get hooked up with a Millennial then you have a partner for life".
This insight applies equally to the work being done by the Philanthropy Centre, which caters to the social investment needs of affluent individuals and corporates, by assisting them to create their own philanthropic social investment foundations. The centre facilitates and guides clients through the establishment of the necessary legal structures; applies for tax exemptions and rebates; assists with identifying qualifying causes; undertakes ongoing fund and investment management in accordance with best practice governance; and monitors and reports on the impact of these social interventions.
The Philanthropy Centre also keeps a keen eye on trends in this space, and the generational shift is an interesting one. "For many of our clients who start family or private foundations, a major focus is getting their children into philanthropic causes and encouraging them to participate. With the Millennials being more socially conscious than other generations, this sets up these foundations well for a sustainable future," says Siluma.
Citing a recent example, Siluma explains: "We started a foundation for a client at the end of last year and she has roped in both her kids, one is a trustee and the other is managing the foundation as the MD. Both youngsters are working with the foundation on a full-time basis and both are in their early 30s. They love it. I follow them on Twitter and they are always punting the foundation's work."
While a foundation such as this has no shortage of passion and dedication, often the input of experts is needed to help create the largest impact. "There are a lot of causes out there, and you can't help everyone," stresses Siluma, "so when I engage with my clients I encourage them to focus on a particular cause and then decide what they want to achieve. If you want to help previously disadvantaged children around education, that's too broad. Rather narrow it down in order to make an impact which you can monitor."
This practical approach to philanthropy is in line with a more action-driven generation that wants to see rapid improvements on the ground. "People always ask me what the difference is between philanthropy and charity," says Siluma, "and I always use the old-fashioned saying about teaching someone to fish. That's what philanthropy is all about. If you solve a systematic problem you solve a social problem. If you invest in the systematic problem and you solve it permanently, then you have a more sustainable solution."
Over the years wealthy individuals have thrown themselves into supporting good causes, either through giving or putting their skills to good use. Often these actions go unnoticed and unreported, frequently at the behest of the philanthropist. "I don't think we give enough credit for these actions," says Siluma. "Philanthropists do this because it is the right thing to do, so they tend to shy away from the media and talking about what they are doing. Look at education, a number of foundations I know are doing magnificent things when it comes to education. Do you hear about it?"
But, as the social, digital and collaborative nature of the Millennials grows in this space, there is every possibility that this more siloed, behind-the-scenes approach will give way to sharing, circulating stories and real collaboration, something the sector certainly needs, believes Siluma. "The reporting in this space is not that great and collaboration is still in its infancy," he says, explaining that many foundations and companies just don't like to collaborate and prefer instead to hold onto their projects. "We need to get to a point where collaboration is the norm because when we are focusing on complimentary areas then the impact can be huge."
As former Public Protector Thuli Madonsela remarked during the recent Business in Society conference in Johannesburg: "Most Millennials are about creating the world they want to live in." And that opens the door for a philanthropic future driven by action more than by words.
Youngsters crave money management insights
Young South Africans, who make up 27% of the country's population, are a determined group. If they can focus their strategic intent on developing sound financial behaviours, then South Africa may well be able to turn around its poor savings culture in less than a generation. Do they have what it takes to step up?
In 2017 market research firm GfK performed a cross-generational study of South African Centennials (younger than 23), Millennials (20s and 30s), Generation X (40s and mid-50s), Baby Boomers (50s and 60s) and the Silent generation (70 and above). Far from highlighting a flighty and financially irresponsible youth market, GfK revealed that South African youngsters aged between 20 and 34 are vibrant, well-educated, individualistic people for whom authenticity is essential.
"With greater access to education they are more self-assured and believe that they control their own destiny," noted the GfK researchers. "Following this sense of control, they are more optimistic about their economic future."
Not only are the Millennials well placed to take control of their financial futures, they also have clear savings priorities. When the Sunday Times Generation Next 2017 survey, conducted by HDI Youth Marketeers, asked youth participants how they would prioritise saving goals they went for: Paying for a car (16.5%); international travel (14.2%); buying a property (11.7%); paying for my studies (11.2%); and opening my own business (8.4%).
While the GenNext study shows that these youth certainly respect money, they don't regard wealth with the same importance as previous generations; putting family first. But they do crave information and guidance around planning for their futures.
HDI's Client Service Director, Cuma Pantshwa, says this explains their appreciation for mentorship and guidance. "Young adults want money. And, in this space, they seek brands that will help them to achieve that; brands that will get them to the next level and help them achieve their dreams."
When it comes to sound financial behaviours they are open to learning about money management, saving, investing and financial planning. They just need exposure to the right thinking, says Pantshwa, who urges companies to bridge the gap between an under-par education system and the skills the youth of South Africa need to navigate today's complex modern world. This means running educational workshops and roadshows, hosting talks and online discussions and visiting universities to share real-life case studies. FNBy's youth accounts, which offer savings options specifically created for those younger than 25, are a great example of this approach. Not only do they include a yCard, free online and FNB Banking App usage, unlimited internal transactions and unlimited card swipes, but also access to a library of educational videos related to saving and investing.
A recent article by Wealth Management magazine went even further in its focus on education by recommending that financial institutions adapt their communication and education efforts to the Millennial customer by adopting a more open, convenient and educational approach. They suggested blogging about financial concepts and money management and even "incorporating some type of gamification, or videogame-like tasks and achievements, into the financial planning process. For example, if a client connects all their financial accounts to the client website you provided, reward them with a set of points they can later cash in for a gift certificate."
In case you think this approach is age specific, Chantal Marx, Head of Research at FNB Securities, adds: "You would typically think that gamification appeals only to Millennials and Centennials, but it works across generational lines." The popularity of eBucks is a case in point, with the appeal of this popular rewards programme spanning generations.
However, rewards and innovative communication channels aside, consulting a trusted advisor is essential for young professionals looking to outline appropriate goals and select products that are suited to their specific life-stage needs.
The financial decisions facing today's young professional are more complex than savings products alone, says Marius Pentz, Regional Head of RMB Private Bank. Take, for example, the cost of pre-tax debt and how you can "create liquidity by leveraging off your assets in a tax friendly manner"; exploring the impact of cryptocurrencies on the market and understanding how the workings of the market (both local and global) impact your investment portfolio. The latter "involves knowing what impacts the rating agencies' view of our economy and political environment and what has changed", he says.
It also requires understanding the advantages of tax-free saving (using your R33 000 Tax Free Savings Account limit annually), opening up a modest retirement annuity earlier rather than later, and having the foresight to start saving early for your own children's education and future needs. All of these behaviours should begin to take shape in your 20s and 30s; helping you to capitalise on the power of compound interest.
Another consideration is when, for example, Millennials start having financial discussions with their own children and involving them in the family's wealth discussions. Such discussions are the backbone of future savings success and financial security and are the only way to turn around South Africa's poor savings rate. National Savings Month is the ideal time to open up family discussions around saving and investing.
Tune into your finances easily and effortlessly
Like the name - nav» - suggests, RMB Private Bank's unique series of navigation tools give you control over your buying decisions, your financial outlay and the property selection process by bringing together all the expertise within the FirstRand banking family and putting them at your fingertips via the RMB Private Bank App.
To complement the 'My Net Worth' balance sheet functionality already available on the RMB Private Bank App, RMB Private Bank has introduced nav» Money, a digital money management solution, which follows hot on the heels of nav» Home and nav» Car. nav»Money gives you a helicopter view of your finances to enable you to make solid financial decisions.
Both nav» Home and nav» Car started life by looking at the 'angst points' in the process of buying a home or licencing a car, then worked backwards to create a slick and easy-to-use solution.
Since launching two years ago nav» Home has attracted one million visitors to the App and facilitated R2.7 billion in home loan payouts. Similarly, in the year since nav» Car was brought to market 182 000 vehicles have been loaded on to the system, which has processed 10 000 licence renewals. The uptake for both services highlights the real need in the South African market for user-friendly, digital tools designed to put banking clients in the driver's seat.
Now nav» Money steps in to give you a consolidated view of your wealth, explains Etian Louw, Imagineer (Head of Product Development) at nav», your financial GPS through life.
What is nav» Money?
The beauty of nav» Money lies in its simplicity, as it allows you to:
Track your spending by helping you manage your monthly spend, while also providing tips to help you improve your monthly cash flow.
Check your available funds by giving you instant calculations that take your schedule payments and debit orders into consideration. This helps you to plan for upcoming payments.
Determine your credit status by giving you an overview of your payment history and financial health, including credit limit usage, your credit track record and more.
The tool can quite easily be used by a young executive or professional, a seasoned businessman or youngsters just learning to take charge of their finances.
"On 16 May 2018 significant enhancements were launched to the RMB Private Bank App to create solutions that prioritises our helpful, innovative and customer-centric digital solutions, and the nav» Money App became available for download," says Louw. The RMB Private Bank App requires no data to run and has been designed making use of conversational language. This is vitally important in bringing greater financial inclusion into the South African banking environment.
"Some of us have been very fortunate to grow up hearing conversations about money management, others haven't," says Louw. "So the tips provided through nav» Money come back to simple habits like paying yourself first, or making use of your eBucks to pay for fuel or bigger purchases. The key thing is that this helps to instil correct financial behaviours; a saving and investment theme that will be built more into future upgrades."
Why nav» Money?
Critically, in a world debating issues of personal safety and data privacy, Louw stresses that no personal information is requested by nav» Money and all recommendations are made based on your accounts and interactions with RMB Private Bank App. nav» Money does, however, provide an overview of your credit rating, and offers meaningful steps for improving your credit history. "This can be very helpful in determining your credit financial fitness," says Louw.
While any long-term decision around taking on debt, saving or investing necessitates a conversation with your trusted advisor, Louw believes that with nav» Money at your fingertips you can empower both yourself and your children to care for your financial legacy and their financial futures. "No longer do you have to deal with spreadsheets and calculators, we do it all for you," says Louw. "It's all available to you at the click of a button on one convenient view."
A SOLID APPROACH FOR A TOPSY-TURVY WORLD
The year 2019 started, as many expected, with a huge amount of noise: load shedding at home, to Brexit abroad, the crisis in Venezuela to the shutdown in the United States. South Africa, alongside the likes of fellow African nations Nigeria, Ghana and Botswana, goes to the polls this year, and all eyes are on the outcome of the 8 May poll.
In the run-up to this critical election, February saw the delivery of the State of the Nation Address by President Cyril Ramaphosa and the 2019 Budget Speech by Finance Minister Tito Mboweni. Central to both was the Eskom conundrum, with Ramaphosa confirming the state-owned entity would be split into three parts, namely generation, transmission and distribution. Mboweni added meat to the Eskom turnaround plan, allocating R23 billion a year in financial support to the power utility without taking on Eskom's debt. He also confirmed Ramaphosa's statement that Eskom would be split into three independent components.
While wealthy individuals appeared to come of relatively lightly in Mboweni's 2019 Budget, with no increase in tax on investments, wealth taxes, capital gains or estate duty, tax brackets have not been adjusted for inflation, bringing bracket creep into play. The economy as a whole also remains under pressure and the projection that debt-to-GDP will breach the 60% level for the first time in 2023-24 will raise concerns both locally and among global ratings agencies.
However, while South Africa continues to walk a fiscal tightrope, the rest of the world is moving on and confronting game-changers like blockchain, cryptocurrencies and artificial intelligence. While change seems to be the order of the day, at RMB Private Bank we are tempering this outlook with a 'back to basics' approach. In the midst of conjecture and opining, we take comfort in the institutions, insights and traditions which have stood investors in good stead through the 2008 global financial crisis, political uncertainty here in South Africa and economic meltdowns around the world.
Keeping a clear head above all the headlines screaming for our attention is essential. Therefore, for us, 2019 will be a year of insights and information, 'how tos' and effective, decisive action. Of course, getting this right requires that we put you at the centre of everything we do. Only by working together to understand your needs and ambitions can we work together to find the right answers to your specific questions. This view is embodied in RMB Private Bank's Solutionist Thinking approach, a philosophy that looks beyond bottom lines and account balances and delves deeper to unlock value and grow wealth in meaningful and tangible ways.
Over the year we'll return to this theme and provide you with more articles that talk to issues facing our clients, themes of a global and local nature, and ideas and concepts shaping the world of wealth management as we know it.
To get the ball rolling we're taking a step back from the ongoing focus on all things digital and technological and have elected to unpack some key fundamentals. Since service is the bedrock of our business, we outline the place, scope and influence a family office has in the world of the ultrawealthy and the role RMB Private Bank can play in this bespoke world. Then, having observed a notable trend towards offshore property purchases in recent years, we take a closer look at this development and highlight ways in which we can help you navigate this crossborder process.
We also examine the impactfulness of philanthropy, a driving force for so many of our clients, and offer insights and invaluable tips to help you achieve the change you desire. And, finally, we take a glimpse at some of the exciting new Connect offers on the horizon.
CREATE LASTING CHANGE THROUGH IMPACTFUL GIVING
Giving is a deeply personal choice, one which motivates individuals to donate to causes that are close to their hearts. Given the intimate nature of giving, the act of philanthropy touches both the giver and the receiver. As Maya Angelou, the acclaimed author and poet, once observed: "I have found that among its other benefits, giving liberates the soul of the giver."
Just as the choice of cause is deeply personal, so too are the ways in which those fortunate enough to give choose to do so. One-off and even periodic donations have prompted RMB Private Bank's philanthropy arm to think differently about the concept of impactful giving and the flexibility required by our clients. This extends to how we work with clients to plot their philanthropy journey and determine upfront the positive impact they hope to have on South Africa's social landscape.
"Conversations around philanthropy have intensified in recent years as individuals are increasingly looking for ways to influence and donate towards causes that creating lasting change," says Prince Siluma, Head of Philanthropy at RMB Private Bank.
While Siluma is quick to note that there are no rules around donating, he points out that a central unifying intention remains the desire to create meaning through giving. "While donations to charitable causes create immediate relief from social issues; philanthropic giving ensures long lasting and positive change," he explains. "Being mindful of your choice of giving will ensure that the organisation that receives the funding will benefit and be sustainable in the longer term."
Social impact is based on addressing pressing social challenges and impacting personal behaviour; the outcome of which has the ability to address challenges being felt across society. There are several ways to achieve social impact, but the starting point lies in understanding the process of giving.
Siluma suggests applying a five-step framework to your philanthropic thinking to help guide you on this journey and ensure that you achieve the desired impact.
Setting objectives: Your objectives will help you establish and understand what your philanthropic vision and goals are. It will also help you unpack what impact you want to achieve through your giving.
Develop a giving strategy: Your giving strategy should be your blueprint to achieving your objectives. It will help guide you in terms of how to approach, implement and review your social giving objectives. It helps, for example, to focus on specific areas of giving, such as education, women and bursaries, to name but a few potential avenues. You also need to give careful thought to the best legal structure that enables your giving strategy, and seek expert advice if need be to ensure that the right structure is in place.
Giving tax effectively: You can maximise your donations by taking advantage of the allowable tax deductions and the different methods of tax-efficient giving. Again, enlisting the assistance of philanthropy experts can help you navigate the best way forward.
Selecting the right causes: With so many deserving causes out there, deciding who you give to and how much is the most difficult part. Begin by ensuring that you identify nonprofit organisations (NPO) based on your interests and objectives. Make sure they have a good track record of implementing social projects that are aligned to your objectives and that good governance structures are in place.
Assessing impact: Understanding the impact of your giving includes knowing how your funds are channeled through your chosen NPO by requesting feedback on what has been implemented and how this has impacted your cause.
Finally, positively changing the lives of others remains the key determinant of successful giving. "Ensuring that there has been a positive change to the social challenge is key to giving effect to your impact giving," concludes Siluma.
INVESTING IN PROPERTY ABROAD
Reasons for going this route include wealth diversification, creating a base for children to study abroad, generating foreign currency via rental income, establishing a holiday home, or seeking foreign residency status.
However, acquiring an offshore home for holiday purposes is a priority for only a small number of South African buyers, notes Chris Immelman, Head of Pam Golding International. While these holiday homes are typically being bought in Mauritius or Seychelles, Immelman notes that "most people buy for more practical reasons, such as externalising funds or generating foreign currency"
Apart from the Indian Ocean islands, popular destinations for buyers include Portugal, Cyprus and Malta (all Europe) and Grenada in the Caribbean. The United States also attracts interest. Portugal, says Immelman, is by far the most attractive destination right now. South Africans like the fact that Portugal forms part of mainland Europe, he says, noting that proximity to major European cities is also appealing.
Immelman points out that Lisbon and Porto, Portugal's two leading cities, are both transforming themselves and "attracting young talent from all over the world as new developments and upgrades take place. The country still offers amazing value and quality of life."
Portugal's popularity is due, in part, to its Golden Visa programme, which provides an opportunity to qualify for residency for a minimum real estate investment of between €350 000 and €500 000 (about R5.5 million to R7.9 million). The country has relatively low tax rates of about 20% and no wealth or inheritance tax, or tax on overseas pensions.
Similar to Portugal, part of the appeal of the Mediterranean island of Cyprus is that a property investment can lead to residency rights and ultimately European Union citizenship, albeit at a heftier price tag of €2 million upwards (roughly R31.5 million and above).
There's the opportunity to disinvest after three years by selling your property, but with the requirement that you reinvest €500 000 (R7.9 million). According to Immelman, few of Pam Golding's South African clients who invest in a home in these countries are pursuing emigration in the short term, but they do see it as a good investment opportunity to diversify their asset portfolio.
Guiding you through the process
For RMB Private Bank clients interested in taking the offshore property plunge, there are a range of services which they can leverage to make their investment journey a smooth one, notes Chantal Robertson, Head: Global Wealth Solutions.
"When considering the purchase of property offshore, it is key that you have a bank account in the related currency. For this purpose, you can choose to have a Global Account with RMB Private Bank, or alternatively open an account with our Channel Islands branch. You can fund these using your Single Discretionary Allowance of R1 million* or your annual Foreign Investment Allowance of R10 million*, which is subject to tax clearance, as per the Reserve Bank requirement. It may be feasible to have both, as the Global Account is a simple mechanism for short-term saving, whilst the Channel Islands offering is a transactional account in a foreign jurisdiction that also offers an offshore savings solution.
Depending on your timelines, it may be worthwhile to have a discussion with a Wealth Manager regarding the various investment options available offshore," Robertson explains.
For those wishing to put their offshore property into a trust, FirstRand's Guernsey-based international trust company can facilitate this.
"We bring the best of the FirstRand Group's offerings into play to provide end-to-end cross-border solutions," explains Robertson.
Of course, there are potential pitfalls to buying a home abroad. First and foremost, Immelman advises against going it alone, saying buyers should rather seek advice from a South Africa-based expert. "Your biggest challenge is to find someone on the ground who is trustworthy and has local knowledge of the property sector, otherwise you are going to end up either overpaying or buying in the wrong area," cautions Immelman.
"An area like the Algarve in Portugal looks like a great investment in mid-summer when it is full of visitors. But for much of the year it is dead. And if you want to attract a long-term local tenant for your property, it's pointless buying in an area far away from schools or with poor transport links. As an outsider, you probably wouldn't know these things." Potential buyers should first look at the full picture and be clear about their immediate property goals: Do they want to rent out the property?
If so, what is the expected return and how easy is it likely to be to find a tenant? Who is going to manage the property in the owner's absence? Who will collect the rent and pay the property taxes? Another consideration is whether there is a double taxation agreement between the country and South Africa.
In closing, Robertson reiterates the importance of getting the right advice on how to move funds offshore, and how to manage them once they get there.
*SA resident individuals who are registered taxpayers, and over the age of 18 can make use of their Single Discretionary Allowance or Foreign Investment Allowance.
EVERYTHING YOU NEED TO KNOW ABOUT FAMILY OFFICES
For ultra-high-net-worth families with complex business and financial structures, the family office has long been a way to manage their affairs. Among the oldest is the family office founded by famous American oil baron John D Rockefeller in 1882 to administer his family's businesses and philanthropic initiatives. Other high-profile wealthy families who have embraced the concept include the Rothschild dynasty (the family business is now being run by a seventh- generation member) and the Fleming family, whose best-known member was James Bond author Ian Fleming.
In South Africa, family offices have also long been used by the affluent. Eric Enslin, CEO of RMB Private Bank, says there's no precise definition of who should have a family office, what size it should be, or what package of services it should provide. Similarly, there is no yardstick of wealth that dictates the use of a family office.
"An office tends to come into play when there is a high level of complexity; when substantial wealth has been created that begins to span generations, and the family is involved in multiple cross-border business, investment and philanthropic activities," explains Enslin.
"Then you need a governance structure, a framework that will hold everything together. There is a saying that the first generation builds the wealth, the second generation establishes and looks after it, and the third generation spends it. A well-run office will ensure continuity, proper governance and ensure that the wealth endures across the generations," he says.
A high level of sophisticated administrative expertise is required when running family offices, explains Enslin. "Some families will have trusts, companies, investments and art collections. I know of one family that has an extensive art collection spanning the world. So just to manage the process of moving an expensive painting from Switzerland to Johannesburg, for example, requires a substantial amount of high-level administration and organisation."
Another important role fulfilled by such an office is to help resolve family disputes. The larger and more cross-generational the family becomes, the more likely it is that there will be disagreements that have the potential to cause major disruption and lasting financial damage. Similarly, if a prominent family member gets divorced, the granting of a substantial divorce settlement to the departing spouse could have a wider financial implication for the entire family unless it is properly managed.
In South Africa, where ultra-wealthy families have greater concerns about political and economic stability than their counterparts in Europe or North America, for example, family offices may have greater responsibilities when it comes to offshore investing, spreading financial risk or pursuing foreign residency options. The office may also be called upon to assist younger family members to study at suitable international universities.
Family offices come in two forms: a multifamily office that is typically an independent service provider with several families as clients of the business; or a single family office that operates for the benefit of only one family and where all operating costs are paid for by the family
Enslin says the advantage of going the former route is lower cost. There are economies of scale to consider since the cost of the staff and infrastructure is spread across multiple families. "Another benefit is that these advisors will bring to the table learnings from their work with other families," he adds. "Such offices will typically also have excellent infrastructure, administration and support, plus a wider pool of expertise to draw on."
The single family office is typically the option of choice for larger and wealthier families. They will appoint their own office head, who will then employ key staff based on the skills set required by that particular family - be it accountants, investment advisors, lawyers or philanthropy experts.
"The benefit is that the family has direct control, which means they set their own policies and procedures and avoid the extra layer of regulation that multi-family offices may have. The family gets 100% of the staff's time and focus. Many prominent families also feel it guarantees them more privacy. Ultra-high-net-worth South Africans often prefer this option because they get long-term continuity from people who share their deepest secrets," he explains.
While RMB Private Bank doesn't provide a family office service, it does work with many such offices to supplement their skills and expertise. "Especially if the family office is small, we will support them with services such as investment or philanthropy advice and help with strategic planning," notes Enslin. "We obviously provide private banking and may also be an independent corporate trustee."
Where an ultra-wealthy individual doesn't have a family office facility available RMB Private Bank can assist by bringing to bear an assortment of FirstRand Group services ranging from succession planning to tax optimisation. "We don't offer bookkeeping or accounting services, which is not something that South African banks typically do. But we can provide 90% of the services that an ultra-wealthy client will need," he concludes.