Don’t under-estimate the worth of the non-breadwinner

Many people believe that only the family breadwinner needs to have life, disability and severe illness cover. This view is fundamentally flawed, a financial planning professional says.

Craig Torr, director at Cape Town-based financial planning practice Crue Invest, says that just because the stay-at-home partner does not earn an income does not mean the family would not suffer financial loss if that person were to die or become disabled.

“According to our financial planning principles, we believe in preparing a joint financial plan for both spouses – irrespective of who works, who doesn’t, or how much each earns,” Torr says. “Regardless of income, qualification or career, the couple is running a joint household and is jointly responsible for the financial future of the family.”

Torr takes as an example a family of four, where the wife is the sole breadwinner and, by mutual agreement, the husband is a stay-at-home father to the couple’s two small children. The natural, and correct, assumption is that the wife would require assurance in the event of her own death or disability, Torr says. If she were to die, she would need her life cover so that  her husband could  maintain the family’s standard of living , invest for the children’s education and fund his retirement. If she were to become disabled, she would need her disability cover to pay her a monthly income until she reaches retirement age. And if she were to suffer a debilitating illness, she’d probably also require lump-sum severe illness cover to provide capital to cover the additional expenses.

“However, many couples fail to ask the question: what would happen to the working partner and children if something happened to the stay-at-home partner – in this case, the father?” Torr says.

A  host of functions  would have  to be replaced, he says. The stay-at-home parent’s job description is likely to include performing household chores, grocery shopping, paying and managing  domestic workers, lifting children to and from school and extra-murals, liaising with schools and teachers, supervising homework, and preparing meals and school lunches.

“The reality is that a full-time father might not earn an income, but he does work. His role is the most important job on Earth,” Torr says. If the husband were to die, questions the breadwinner wife would need to consider are:

• Would I have to hire an au pair or a child-minder to take care of the children in the afternoons?

• Would I need to hire a tutor to help my children with homework?

• What would happen during school holidays? Would the children go into  holiday care, or could I rely on other members of the family to look after them?

• Would I need to hire a domestic worker (or increase domestic help) to prepare meals ?

• Would I consider cutting back on my hours of work in order to spend more time with my children?.

• Would I consider having my parents (or in-laws) move in with me to assist with the children?

Torr says: “Our society, in general, undervalues the role of the stay-at-home-parent, and this is never more evident than  in the field of financial planning. In the words of GK Chesterton, ‘How can it be a small career to tell one’s own children about the universe? How can it be broad to be the same thing to everyone and narrow to be everything to someone? No, a [stay-at-home parent’s] function is laborious, but because it is gigantic, not because it is minute.’”

The reality is that the loss of a stay-at-home parent is greater than anyone can  quantify, and you need to consider risk cover for that person too, Torr says.

Needs-matched cover for stay-at-home parents

Schalk Malan, the chief executive of life assurer BrightRock, says although his company is not the only provider to insure stay-at-home parents, its needs-matched approach to life and disability assurance makes it well suited to do so.

“With BrightRock’s needs-matched product structure, disability and income protection cover for a stay-at-home parent can be uniquely tailored in terms of cover amounts, premium increases and pay-out structure to meet the family’s household, childcare, healthcare and debt needs. Unique features include the ability to choose between a lump sum and a recurring income at the point of claim, when the family better understands the stay-at-home parent’s prognosis and their financial needs. Families can also buy additional cover or change cover when their needs change, without medical underwriting.

“BrightRock will calculate the stay-at-home parent’s ‘income’ at a maximum of half of the working spouse’s income, and maximum rand limits apply. Income-earning clients who choose to become stay-at-home parents, take time off work or take extended maternity leave will keep all their BrightRock cover in force at their existing cover amounts for up to 12 months. In both of these scenarios, clients will continue to have access to the additional features of our product offering, which enables them to change their cover as their needs change.

“We believe it is worth protecting income for stay-at-home parents, given the role they play in families’ financial well-being,” Malan says.

This article first appeared on Saturday, 1 July 2017 in the Personal Finance section of Independent Newspapers (The Weekend Argus, Pretoria News Weekend, Saturday Star and the Independent on Saturday), as well as IOL.co.za. Click here to read the original version.

BrightRock’s Schalk Malan on CNBC and eNCA

BrightRock CEO Schalk Malan appeared on two television shows to share consumer tips about recession-proofing your finances.

Schalk first appeared on CNBC’s Open Exchange on Tuesday morning, 22 June 2017:

 

This was followed by an interview on eNCA’s Moneyline on Wednesday evening, 23 June:

Cinderella and the Quest for a Blesser

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Money is the single biggest reason why so many fairytale marriages end unhappily ever after. But the underlying causes are complex, and bring the story of Cinderella right into the modern era. So what, then, is the best way to make money and a relationship work?

By Maya Fisher-French

After a talk I had given at a Women’s Day breakfast, a woman in her early 30s came to chat to me about an issue that faces many financially independent women.

My talk had been about the “Cinderella Complex” and a woman’s unconscious or conscious desire to be cared for by a man.

I’ll call her Thobeka. (It’s not her real name, as is the case with all the other women in this story.) As a single mother, Thobeka said that unlike many other women in her situation, she was not convinced that a man would be a Blesser, a term used to describe a sugar daddy.

Thobeka’s issue was that she had worked very hard to become financially organised and to support her child on her own. “I don’t have debts and I have investments. What if I meet a man who is a spendthrift or arrives with debt?”

Money is a minefield that couples have to face and navigate between the roses and racing heartbeats. Considering that money is the biggest reason for divorce, how you handle money as a dating couple could be a predicator of how you will manage money as a committed couple.

A couple of years ago I had a conversation with a family friend, who in her early 20’s, had started to date a guy quite seriously. Angela’s concern was his money attitude. He always split the bill when they went out and never offered to pay in full.

She faced the challenge that as she was several years younger than him, her earnings were not on par with his. So going out for dinner several times a week or the choice of venue could put substantial strain on her budget if they went 50/50.

I suggested to her that she be honest and tell him that while she loves going out for dinner with him, she can only do what is affordable for her. If there is a fancy restaurant he would like to go to, he would have to foot the bill.

The relationship continued long enough for them to move in together. They set up a budget where she contributed a percentage that represented her earnings relative to his.

But she couldn’t handle his budgeting and financial prudence, she wanted to be more exuberant and spontaneous. Ultimately the relationship ended, and here is the rub – she is now dating a man who loves spending money on her. As a classic Cinderella, she found her Blesser and is very happy about it.

Ultimately, relationships are about personalities. A couple made up of a spendthrift and a saver may find a perfect balance where the spendthrift is protected from their worst financial mistakes, but the saver learns to enjoy life a bit, as long as both appreciate what each other is bringing into the relationship.

Someone who loves spending money and someone who loves having money spent on them will also find compatibility, unless the money, or credit line, runs out.

For others, the difference in their money attitudes may just drive them insane, or can be used as a power-play in a relationship – especially if there is a difference in the earning power. As they say, “he who holds the gold, makes the rules”.

In another conversation, Carol had recently married and the newly-weds moved in together. Both were on their second marriages with grown children and had gotten used to living their own lifestyles. Her husband earns a modest income and has simple tastes and needs while Carol is financially very well off and enjoys the good things in life.

After moving into their new home Carol starting buying new furniture, making minor renovations and generally spending money. Within a couple of weeks, she noticed that her relationship was not going that smoothly, especially in the bedroom. The problem was the shift in power that her money created.

The reality is that while most women do not have a problem with a financially successful partner who enjoys spending money on them, for some men, a financially stronger partner can make them feel emasculated. This is going to be a challenge in many relationships, as more women become the main breadwinners.

Some women like Carol will want to spend on their partner, women like Thobeka will be afraid that a financially less astute man will bring her down and women like Angela will still want a man who can spoil her. So when you fill in those online dating questionnaires, the most important attribute may just be a synergy in the way you view money.

*Maya Fisher-French is an award-winning financial journalist with a flair for cutting complex money matters to their core. Find out more on  mayaonmoney.co.za. Maya on Money, Your Money Questions Answered, is published by NB Publishers.

This article first appeared in The Comet, an online platform by BrightRock, provider of the first-ever life insurance that changes as your life changes.

Get Ready for the Holiday of a Lifetime!

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After a year of sweat and toil, you’ve earned your holiday break. So don’t let the planning for your holiday make you sweat and toil even more. Plan well ahead, and you’ll be able to enjoy every moment of your well-deserved getaway.

By Maya Fisher-French

I recently returned from an overseas trip that I started planning nine months ahead of time. I used the time to plan, budget and make sure that when I returned from my well-deserved break, there would be no scary credit card bills to deal with.

One of the benefits of planning ahead is that you are able to spread your payments over time. This is how I made sure my holiday was booked and paid for before I got on the plane.

 

Nine months before travelling: book your airline ticket

The earlier you book your air-ticket the cheaper it is. I used travelstart.co.za which gave me the best price comparisons. I booked through my credit card for convenience and also for the free travel insurance.

Another benefit of booking with a credit card is that you are also covered if the airline goes bust under a charge-back where the transaction can be reversed if the goods or services are not delivered.

As I already had funds to cover the ticket, I transferred the money into my credit card. Ideally you want to have saved the money to pay for the tickets, but if you have to spread the cost, make sure it’s only over one or two months.

 

Eight months before travelling: start putting money aside for spending

I calculated how much day-to-day spending money I would need and started building that up in my credit card. I don’t get foreign cash before leaving on an overseas trip as I just draw cash when I arrive at the airport , although this once did backfire when the ATM was offline.

I also don’t find the pre-paid currency travel wallets that cost-effective. But my main issue is that for both foreign cash and travel wallets you have to fill in forms with the bank and provide your air-ticket and passport – it’s an unnecessary additional hassle.

The risk is that our currency takes a nose-dive during your trip, but it could also strengthen. I take the view that I have already spread my risk by paying for my trip over nine months.

 

Six months before travelling: book your accommodation

Now that your ticket is booked and paid for, you can pay for your accommodation. Airbnb has made travel so much cheaper but I also used websites like booking.com and tripadvisor.com to get realistic reviews on places to stay.

In some cases you can just pay a deposit but I opted to pay the accommodation in full (refundable if I cancel before a certain time) as this took away currency risk.

With the rand so volatile I used an opportunity of rand strength to effectively peg the cost of accommodation. It also means that six months before I leave, both my accommodation and flights are paid for.

 

Three months before travelling: book car hire/transport

Again this is about spreading out the cost of the overseas trip and also taking advantage of rand strength. If you are using reputable global car rental agencies, you can comfortably book online and make payment. There is a refund option if you cancel in time.

I always opt for the full insurance package with no excess. It is a lot more to pay, but once when a driver went into the back of me while I was travelling abroad, I was very glad I didn’t have to worry about handling the excess in a foreign currency!

I also included wi-fi in the car – this allowed me to use my phone for navigation and generally provide free wi-fi.

I also booked a train trip online with a great online booking service, loco2.com, which covers and compares all modes of transport around Europe and the UK.

 

One month before travelling: book your tourist activities

Most major tourist sites allow you to book tickets online and this way you also get to jump the booking queue. Many top attractions have timed entry tickets which can actually sell out weeks in advance, so it makes sense to get in early.

A month before you travel you should already have a good idea about your itinerary, since you’ve already been researching for eight months!

 

A week before you travel: sort out insurance

You will receive free travel insurance on your credit card, so make sure you have the relevant contact numbers on your phone. Also make sure you know what the insurance covers and whether it is worth topping up.

Most free travel insurance is fairly basic and has limits to the cover provided. Make sure you read the fine print, such as the fact that you are not covered if you are 75 or older or for pre-existing health issues.

Top-up insurance provides higher levels of cover, including cover for pre-existing conditions, no/less excess payable on claims and also additional benefits such as cover for loss of baggage, travel documents and cash.

Also inform your medical scheme that you’ll be travelling abroad. They will cover medical expenses up to a certain point and may also offer free travel insurance, which I signed up for.

This is also a good time to inform your bank you will be overseas, as any transactions on your card outside of the country may trigger a fraud investigation and you could find your card has been stopped.

With careful planning and budgeting, an overseas trip does not need to turn into a financial liability.

 

*Maya Fisher-French is an award-winning financial journalist with a flair for cutting complex money matters to their core. Find out more on  mayaonmoney.co.za. Maya on Money, Your Money Questions Answered, is published by NB Publishers.

This article first appeared in The Comet, an online platform by BrightRock, provider of the first-ever life insurance that changes as your life changes.

How to Save Your Money & Your Marriage

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For richer or for poorer, runs the familiar refrain, and it’s worth repeating in an age when money is a leading cause of marital strife. What can you do to make sure that your partnership works, and pays better dividends for you both?

By Maya Fisher-French

Money is a big issue for many couples, so much so that it is the main cause of divorce. Yet finding an equitable way to manage the household finances is a bit like finding the Holy Grail.

The main issues for couples around money are: a discrepancy in the amount each spouse earns; different views the couple may have on how the money should be allocated; one spouse is a spender while the other a saver.

There are few married couples where both earn the same income. Invariably one spouse earns more and if they have children, the husband tends to be the main breadwinner as, in many cases, the wife has taken time off to raise the children or has chosen a career that allows her more flexibility. Moreover, women on average earn less than men.

The Women in the workplace research programme run by the University of Johannesburg found that women earn 15% to 17% less than men – to put that into perspective, a woman would have to work nearly two extra months to have the same income as a man.

This inequality is due to many factors, including that women tend to select careers that are in the caregiving sectors such as nursing or teaching, which are lower paying.

Employers also view women of childbearing age as more likely to leave their employ so they are less likely to try retain them with higher salaries.

So, if one of you earns more than the other, especially if the reason is due to raising children, how do you create a household budget and investment strategy that is fair ‒ if you recognise that economic value is not the only value in a relationship.

One of the best models I heard about was a couple where the wife was a stay-at-home mom and the husband’s salary was divided equally between them.

The wife received half his salary in her bank account and together they drew up and contributed towards their household and personal budgets as well as made their investment decisions.

This is a very empowering way to manage household finances for both spouses. It requires both partners to be aware of how money is spent and what provisions are being made for the future. This will lead to better decisions.

It also allows for reasonable discussions about how money should be spent without negative power-roleplaying coming into the relationship.

This does of course only work if there is a household budget. As a couple you can see clearly how much is needed to meet your basic needs of housing, electricity/water, groceries, insurance and so on. In this model you both contribute equally as you effectively both have the same income.

You can decide whether you want to invest together or have your own separate investment plans and goals, although I would recommend you do have a consensus on retirement planning as that is income that will be shared in the future.

You can also allocate a portion of your income to personal spending. You can spend your money on the things that you enjoy and that your spouse may consider frivolous, as long as the bills are paid and the retirement savings are on track.

Other couples divide the household expenses based on percentage of income. For example, if one spouse earns 30% of the total household income and the other 70%, they contribute accordingly for the joint expenses.

This of course requires trust and openness in the relationship, but maybe if you are unable to be open about what you each earn, then the problem is the relationship itself.

 

*Maya Fisher-French is an award-winning financial journalist with a flair for cutting complex money matters to their core. Find out more on  mayaonmoney.co.za. Maya on Money, Your Money Questions Answered, is published by NB Publishers.

This article first appeared in The Comet, an online platform by BrightRock, provider of the first-ever life insurance that changes as your life changes. The opinions expressed in this piece are the writer’s own and don’t necessarily reflect the views of BrightRock.

How Saying No to Takeaways Totally Changed My Life

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Jolted into action by a Spring-clean of wasted food in a fridge, a lover of takeaways decides to eat at home for a change. The benefits are plain to see, not just in a  leaner credit card bill, but a pair of too-tight jeans that finally fit. Are you brave enough to give it a try? 

By Dave Luis

Three packets of bacon: eighty-seven ZAR. One delightfully pungent brie: thirty bucks. Roughly two hundred ronts’ worth of free range lamb loin chops and the same amount again of prosciutto. Throw in a hundred rands’ veg and an unopened two litre milk.

This is not some bizarre recipe for a heart-attack inducing meal for the most indelicate of palates. It is the expired food I tossed out when I was forced to spring clean my fridge because it was too full and starting to smell less than welcoming.

y pattern is this: after a long day at the office, I stop at the grocery store on the way home.

I pick up the ingredients for a sumptuous dinner, but as I am so exhausted by this stage of the day, the thought of slaving over a hot stove is torture, and so I also stop at the drive-through and pick up takeaways, telling myself “Self, tomorrow you don’t need to shop because you have enough food!”

Except that the next day I do shop, and I go through the same routine. And I always pick up a takeaway dinner.

Added to that the takeaway lunches I buy at work, and I am spending around R150 – R200 every day of the week on takeaways and I pack all that unused grocery shopping in my fridge and leaving it to rot. Shameful. I know. And a ridiculous waste of money.

So I have put myself and my credit card on a diet. I’ve even hashtagged it, because that seems the popular and responsible thing to do these days, to show you’re serious about something. For the month ahead, I am #NotEatingOut.

No takeaways. No light and fluffy melt-in-your-mouth cronuts at the office from the patisserie over the road (this is the difficult part of the challenge.)

There is so much good food at home, that all I’ve needed to do was to occasionally pick up a couple of tomatoes and onions or a fresh loaf of free-range, organic, banting-paleo bread. (Just kidding! Standard government-issue white loaf for me, thanks.)

I have planned my menus and cooked at night, even when I was tired and really, really didn’t want to. In fact, especially then. And each time I cooked I made a little extra to fill my lunch box for work the next day.

Soon I had to pack in a little extra on top of that because my work mates really took to my cooking and I am by nature a gregarious, sharing kind of guy.

Ultimately, once the sixty days of #NotEatingOut are done, I want that regime to become my monthly habit. It just makes financial and wellbeing sense.

I’ve learned a few valuable lessons along the way. Curry cannot be hurried along in an electric frying pan. Fresh garlic is better than that tasteless rubbish in a jar.

Frying bacon in a bit of olive oil is perfectly acceptable, and of course, you can never have too much bacon. But I knew that last point already.

So what’s changed? Well, there has been an unexpected health benefit. I have lost the horrible bloated feeling that a diet of mostly processed foods gives me, and the size 42 Levi’s I bought in November 2015 that I could never fit into now actually close.

Also, I’m not throwing out hundreds of rands of spoiled luxury foods, so that’s a win.

But mostly, the change that I am most impressed with is that I saved between R3000 and R4000 just in October. And that means my credit card will hate me less with each passing month.

And that means that when friends suggest a sushi dinner at that quaint place in Sea Point, I can legitimately enjoy a night out without any guilt or credit limit anxiety, and I get to actually enjoy the food as a treat and a change from my daily routine.

This article first appeared in The Comet, an online platform by BrightRock, provider of the first-ever life insurance that changes as your life changes. The opinions expressed in this piece are the writer’s own and don’t necessarily reflect the views of BrightRock.

 

 

South Africa didn’t shine at #WEF16, but sanity might prevail – Alec Hogg

Shortly after his return from the 16th annual World Economic Forum in Davos (#WEF16), Switzerland, award winning journalist Alec Hogg shared some thought-provoking take-outs during a breakfast for BrightRock’s Laureate advisers. Watch the video of Alec’s presentation or read the transcription below, and don’t miss the interesting conversation that followed afterwards between him and former 702 radio presenter and MC David O’Sullivan, which can be viewed at this link.

Transcript:

Well …it’s really a privilege to be talking to you today. To be going through the feedback from this year’s World Economic Forum. In fact they called me … they … I was accused of being … of spreading lies and mischief. And I see mischief is …it’s the old … my … my old homeboy from Newcastle, Mac Maharaj, used to love talking about mischievous journalists. Well, something had happened at the World Economic Forum this year lead to the Presidency … calling me mischievous; so it is a badge of honour. It’s the second in the last three months in fact that they had a go at me. The previous one was when Cyril Ramaphosa was talking about creating five million jobs. And I mentioned it in editorial that if he were to create five million jobs by 2020 that meant … every month from here until 2020 as many jobs would have to be created as are currently employed First National, ABSA, Nedbank and Standard Bank – every month. To which he said that it wasn’t jobs he was talking about; it was job opportunities. Which I then discovered was if you give a guy a pick and shovel for a day that’s a job opportunity. Politics… Anyway, let’s move on to the World Economic Forum. It’s the 46th time that I’ve been to Davos. Sorry, the 46th time the WEF has had their presentations in Davos; the 13th time that I’ve been there and most of my visits have been very pleasant. South Africa has punched way above its weight. In 1993 … was the first time I went there. We were the belle of the ball just before the election in ’94 and then again in 2010 just before the FIFA World Cup; South Africa was really doing extremely well. At that point in time Trevor Manuel in 2010 was leading the delegation. In 1993 it was a very strong delegation just ahead of the elections in ’94.

This time around it was very different. The South African Delegation was invisible and I’ll give you some of the reasons for that in just a moment. Just a little bit of background: The World Economic Forum brings together 2500 leaders from around the world from business, government and academia. And in essence what happens during these five days is they set the economic agenda for the world for the next 12 months. It started in 19971 at a little place called Davos. It’s a picture postcard town in Switzerland. The decision to have the very first event in ‘71 in Davos was transformative for the town. When you go there today you will see many five star hotels in what was really a little village. In fact it is quite reflective of Europe itself. And the religious issues that they had in Europe that we in South Africa being a new world country in many ways don’t really relate to. But in Davos you’ve got 12 000 people roughly live there. There are two towns in one town. One’s called Davos Platz that’s where the Protestants live, you know the wild livers, they have the casinos in Platz, they have their own schools, and they have their own churches. And then Dorf is where the Catholics live and they have their own churches and schools. And indeed both have their own railway stations even in a little town of 12 000. So it’s quite an interesting place. And every year that I’ve been there and every time that I’ve had the opportunity of visiting and spending five days I’ve realised that it is a place to open minds.

And this is a lovely story. In 1992 on the stage you see Nelson Mandela and FW De Klerk and on the screen behind them is Mangosuthu Buthelezi. Now in 1992 Mandela had recently been released from prison. He went to Davos with an agenda to nationalise everything. At the time I was working on SABC television. I can remember speaking with a lot of the ANC leaders. You know it was just Thabo then it wasn’t Mr Mbeki. It was just Tito then it wasn’t Mr Governor. It certainly was Trevor and Jay. These guys had never been to the SABC before so they quite enjoyed the green room where we had pretty good whiskey and they’d never drunk SABC whiskey and they made sure that they had their fill because they had been banned for all these years. But they were very much on a nationalise everything agenda. A bit like Julius Malema today. He was going to nationalise all the banks. He’s going to nationalise all the mines. That’s the starting point for him. It was very similar there. So Mandela went to Davos in 1992. The first time that he, De Klerk and Buthelezi shared the same stage. And when he returned from Davos he came with a completely different economic agenda. Nationalisation was off the table. It was all about a mixed economy. It was about the country pretty much that we see today. What happened, well, lots of people in Switzerland say that the western world got hold of him and that they convinced him that everything he had believed in was wrong. In fact it wasn’t so. There was a man named Võ Văn Kiệt. A very fascinating human being if you’d like to go and look him up. He was a general in the Viet Cong army and he had become, recently, the Prime Minister of Vietnam. He was one of Nelson Mandela’s heroes because if you’re sitting in Robben Island and the West has put you there and the West is supporting those that you are fighting with [then] clearly you would like to support those who are giving the West a hiding – which the Vietnamese were doing, or had done, against the United States.

 

So when Mr Võ Văn Kiệt got hold of Mr Nelson Mandela in Davos he said to him that this idea you have of following the Soviet route is flawed. We’ve tried it in Vietnam and we have been in desperate trouble. But I am now introducing a reform agenda in Vietnam. And this reform agenda is making … the Communist Party which I lead still runs the country … but the economy is completely free enterprise. And it’s a very similar model to the one that the Chinese used and one that Mandela came back to South Africa with. So, if you think it’s expensive to send our politicians to Davos just imagine how expensive it would have been had Mr Võ Văn Kiệt not had that conversation with Nelson Mandela in 1992.

Opening minds is a very big part of the whole forum because these 2500 people who are there are literally the power mongers of the world. You have Nobel Prize winners there; you have at least half of the leaders of the G20 [there]. And when you are in a room as an A-type personality, as judging by the awards that were given out a bit earlier a few of you are, A-type personalities like to achieve and they also like to tell other people their opinions and you can imagine if you’ve got these from all over the world in one place at the same time it is quite a lot of talking. But increasingly when you have esteemed people from other countries you also tend to listen and remember God did give us two ears and one mouth for a reason.

The networking I would say is another big part of the World Economic Forum. That’s a picture I took this year of Pravin Gordhan together with Martin Wolf who is one of the leading columnists in the world. He writes a column on economics for The Financial Times of London. He is also a big star in Davos. He facilitates many of the very big sessions there and a thought leader in his own right.

This was an event that Pravin gave … one of the few … In fact I think it was the only near public event that South Africa’s delegation in Davos gave this year. It was to a group of senior journalists from around the world and in this Pravin Gordhan gave us an outline of how he sees the economy in 2016. To give you an understanding of how well this was received or how much interest was in this, given the state of South Africa as we know what happened with our weekend special finance minister on the 9th of December, there were 65 000 views of the video on our website that we embedded. Quite incredible. The World Economic Forum said they’d never seen anything like this for an economic briefing. Clearly Pravin Gordhan did speak from the heart and he made some very pointed statements. But he was fighting a rear-guard action because the country’s reputation took three very big hits before the forum started this year. All of them from organisations who tend to use this showpiece as an opportunity to amplify the announcements that they are saying.

The first of these was this newspaper article which appeared in the second biggest newspaper in Switzerland. It was distributed for free to delegates of the World Economic Forum and it reads … as you can see it’s a full page on Jacob Zuma and a very unflattering photograph which … under the headline ‘A toxic president’.

Next came the International Monetary Fund’s release of its latest economic forecasts. In October it had put a forecast for South Africa of 1.3% economic growth. Of course it didn’t just talk about South Africa; it talked about the whole world. In the whole world it expects to grow 3.4%. South Africa 1.3% in October. In January it adjusted that growth rate to 0.7%. So it halved our economic growth rate because of what happened in December. If you think the blunder, the Nene-gate as we call it, was expensive, well, the International Monetary Fund confirms that.

The third big hit that the country took was from the Edelman’s Trust barometer. This is a survey that is done around the world. Edelman is a big investor relations and public relations company based in New York. A global business. They interview 33 000 people from various countries and they like to work out in those interviews the trust of the public in government, business and the media. [laughing]. I’m not going to tell you about the media because that’s been on a slide for long, long time. Business is actually surprisingly stable but government or trust in government is declining all over the world. Richard Edelman, who made the presentation, said to us that in certain developing countries it has now fallen to a catastrophic level. His words, not mine. He disclosed that in Brazil … he highlighted two of these countries … in Brazil the trust was 21% i.e. the public of Brazil 21% of them have trust in the government and they’re trying to impeach their president at the moment. In South Africa the figure was 16%. So considering those results … and the interviews of those were based before Nene-gate in December … it wasn’t really a place where you’d expect Team South Africa to be proudly flying the flag.

The impact of these three issues on the South African cause was graphically illustrated on the second day of the World Economic Forum when there’s traditionally a high profile Africa investment session. Now in Davos, at any one time, you have a selection of five to ten different places you can go to. And this session on Africa, over the years, has become increasingly popular. In fact if you don’t arrive there 15 to 20 minutes before you can’t get in or you haven’t been able to get in in past years. There’s been … I remember one year arriving a little bit too late and there was such a long queue that I just never … I never got in to see it. South Africa has always been the centrepiece of this particular session which is televised live and between South Africa and Nigeria you would find that most of the attention is being focused. This year, however, President Zuma pulled out. He says ‘a few days before’; my information was ‘at the last minute’. He offered Pravin Gordhan to come in his place. Pravin Gordhan was unacceptable to the President of Ethiopia who didn’t want to be downgraded or have the session downgraded. And as a consequence there was no South African representation there and the Paul Kagame from Rwanda was a last minute replacement for Zuma and it looked it. The audience unlike in previous years which was absolutely chock-and-block … you could see that I turned around in my seat and took a photograph … as you can see rather disengaged and quite a few empty seats. So, the opportunity that South Africa had given the first three blows was perhaps missed. On the other hand there was a wonderful cartoon by Zapiro which showed one with the president being present and the one with the President not being present and said well which of these two scenarios is better for the country – suggesting the second one was. We did have a statement from the presidency to say that he had met with the Swedish Prime Minister that morning, Stefan Löfven, one of the last socialists who’s still in office.

The consequence of that was after I had reported it I was accused of mischief and spreading lies; there was no real explanation of what was going on. Unlike every previous time that I’ve been in Davos this year Zuma restricted his engagements to tightly controlled invitation-only audiences where the agenda was one-way delivery. The Presidency issued a statement after Davos claiming it had been a great success. Having been there I would suggest that wasn’t completely true. And also the #ZumaMustFall even made it to Davos; there were a few people demonstrating outside the area Brand South Africa had taken over. Quite extraordinary. But, it wasn’t all bad for South Africa. There were some South Africans who really shone and continued to shine on the global stage and indeed at the World Economic Forum.

As I mentioned earlier Davos is used to amplify announcements like the International Monetary Fund updating its economic forecast and various others. Amongst these is a lady you might recognize she was the deputy president of South Africa, Pumzile Mlambo-Ngcuka, who left the country after her husband who you might remember was with the NPA and said that we have a prima facie case against Jacob Zuma who at the time the Deputy President. And he was then accused of being an apartheid spy. He, Bulelani Ngcuka is his name, and Pumzile after the transition from the Mbeki administration left the country. She went and did a doctorate in Mobile Technology; mobile meaning cell phones. And she’s now one of the top five at the United Nations. In fact she’s here later this week and I hope to see her either on Friday or Monday on her visit to South Africa. She runs the women’s stream at the UN – hugely successfully – and with her knowledge and understanding of mobile technology, she’s put together a program called ‘He for She’, which is bringing males who support gender equality. And really Pumzile is one of our superstars out there in the rest of the world and doing extremely well at it. What she announced in Davos this year was gender equality … her strategy … she’s brought in ten companies. Ten global companies that she’s now got on board and they are going to assist in forwarding … she’s leveraging basically their bases and those companies include Unilever, McKinsey, Barclays, Vodafone, PWC, so these are heavyweight business and their CEOs were all there to support her in this and they promised that by 2020 they will have gender equality in executive ranks and in the boardroom. Extraordinary, from a South African who’s driving that.

Other statements that were amplified and are continuing to reverberate long after Davos include income inequality. You might have seen what Thomas Piketty, the French economist, has been proposing. Well, he and many others have been picking up on an organisation called Oxfam whose Kenyan head for International Affairs, Winnie Byanyima, is again one of the star attractions in Davos. This year she disclosed, quite a spectacular statistic, that half the people on earth, in other words 3.5 billion people, their wealth is equivalent to the wealth that is owned now by 62 people. So the richest 62 people have got as much wealth as the bottom 3.5 billion. That’s in itself is quite extraordinary but it’s come from 388, five years ago. So the rich are getting richer. What they are doing about it now is interesting. Some of the targets are tax havens and all the politicians … you might have seen recently a settlement between Google and the British Government for a £130 million in taxes that was not on the table. These multi nationals are being forced to pay more taxes but as far as you guys are concerned particularly for your clients if they have funds in tax havens I would strongly recommend that you tell them not to try and hide it. These are … increasingly the tax havens are being attacked not just by one or two governments but by all governments and it’s on the politically popular platform of income inequality.

Other issues that are under threat at the moment on income inequality is intellectual property. The laws on intellectual property at the moment trump human rights laws and there’s a groundswell of opinion to say that that can’t be right.

The other big trend or the other big thing that the World Economic Forum does is identify trends early. This is a picture that I took two years ago and the guy on the right is one who is important. He’s name is Erik Brynjolfsson. He is a professor at MIT and he wrote a book, called ‘The Second Machine Age’, together with another professor at MIT – which is by the way the most difficult university in the world to get into – his name is Andrew McAfee. And the two of these guys essentially went and had a look at things that robots weren’t supposed to be able to do but were doing. Because as we know for well over a decade now artificial intelligence and robotics has been taking over many of the jobs that human beings did in the past but there are certain jobs that human beings just would always be doing; like driving a car. Wrong. They investigated Google’s driverless cars initiative and discovered that there were now literally hundreds and thousands of kilometres that Google driverless cars had been driving around on Californian roads. Completely safe, well, not completely safe; they had had seven accidents in this time in all these years. Six of them they were rear-ended and one of them was a Google employee who decided to take over the driving of the car himself. [Laughing]. The developments that they identified in 2014 have accelerated and continue to accelerate. It’s all about artificial intelligence, 3D-printing, technology getting smarter and smarter. And if you understand the way that mankind has evolved you would then easily be able to identify with what Klaus Schwab, who is the man who created the World Economic Forum, called this year’s event, which was ‘The Fourth Industrial Revolution’.

The first industrial revolution was something we well know. The centre of the world then was Manchester. Some people who follow football still think it’s the centre of the world. Not so much after last weekend. But Manchester was where the first industrial revolution started; where people left the fields and started going into the cities. You might recall, around this time, there was a fellow by the name of Ned Ludd. And Ned and his followers didn’t like the fact that machines were taking over their jobs so they got the old-fashioned version of a ‘bobbejaanspanner’ and they went and smashed up some machines. There were a few shootings. Those days the police were not quite as restrained as they are today and Ned Ludd and his followers are forever remembered as luddites. So, when you are called a Luddite by somebody who thinks they are intelligent they are actually insulting you if you believe modernity is a good thing; if you believe that technology should go forward. However, if they call you a Luddite and you think all this world development is not a good thing then you should actually be pushing out your chest.

The second industrial revolution came in the early 1900s with the discovery of electricity. So you had steam for the first one and then you had electricity for the second one. The interesting thing about this is that half of the world, half of the world, is still in a second industrial revolution so they haven’t even had electricity in many countries. Those 3.5 billion people who have the same amount of money as the top 62 don’t have electricity which kind of tells you something. Interesting development.

The third industrial revolution began more recently. That was the computing power. We all know what life was like, or most of us in this room know, before computers. Before excel spreadsheets, before or rather in the days of telexes when I started. Does anyone remember what a telex is? Fax machines? And as the development of the third industrial revolution went through it was of course accelerated by Tim Berners-Lee who discovered this wonderful thing called the internet. On this one as well half of the world’s population is still not there. In South Africa, wherever you want to look at us, we’re in the top half because we do have the internet and we do have access to computing power.

But now we’re into the fourth industrial revolution and this is where it’s starting; with the ubiquitous internet. What does that mean? It’s a big word but it just means that in my hand, in all of our hands with a smartphone … and I don’t even have an iPhone 6 yet … but my smartphone is as powerful as all of NASA’s computers with which they put a man on the moon in 1963. And as a consequence of that you probably have all of their computer power, all of the computing power IBM had at the time and plus all of the Russians as well and it’s just in your cell phone through a thing called Moore’s Law. If you haven’t heard of Moore’s Law, it’s a professor who in 1965 wrote an article for Fortune Magazine where he said that his analyses of what’s happened in the past few years suggests that computing power will double every year at the same price. Now the exponentiality of that has a massive impact on development, on human development, and we’re seeing Moore’s law now being enacted right across many parts of the world we’re living in. An expert in the fourth industrial revolution is Ian Golding. He is a South African. He is a professor at Oxford University. You see there were some of our guys really flying the flag very high there. And he’s got a book called ‘The Second Renaissance’ which comes out in May. The renaissance you might remember was the period in history from 1450 that transformed the world. Leonardo da Vinci, Galileo, Copernicus, even Martin Luther – the cleric who rebelled against the church at the time – they all came from the renaissance. He believes that the second renaissance, or the fourth industrial revolution, is all about a battle of ideas as exactly it did happen during the first renaissance. How did that happen? There was a guy called Johan Guttenberg, who lived in Germany, who in 1450 invented the Guttenberg press. Up to that point you could have taken all the books in the world, all the knowledge in the world, and put into one big wagon. After the Guttenberg press was invented, which is the invention on moveable type, you started producing books and lots of knowledge. So for the next 250 years you had this explosion of knowledge but it was still only in a tiny little corner of Europe where it began. His thesis is that the knowledge is now exploding through that very same smartphone that we have. Everybody on earth has access to the same information simultaneously. If you want to become the world’s best lawyer the only thing that’s stopping you is your own initiative. You can tap into Yale University, you can tap into Harvard, and you can go into even MIT. Many universities around the world will give you free access to as much learning as you can take. That is the reality and he says that the next Michelangelo could be sitting in a shack in Orange Farm. The next Copernicus could be beavering away on his smartphone in Nairobi. And this to his view, to Ian Golding’s view, is a massive advantage to people previously excluded.

Just by way of a stat that really jumps home to me, and should to you, economies generally should be the size of the globe that their populations are. And we’re seeing this happening in Asia. Asia’s got 60% of the world’s population. Asia’s share of global GDP is slowly edging up towards it. Europe has got about 12% of the world’s population; its share of GDP is slowly edging down towards 12%. Africa has 13% of the world’s population; it has 3% of the world’s GDP or wealth. Now the only similar example that we have in history was in the United States of America between 1870 and 1915 – the golden era of the Unites States economy where it grew at a growth rate of 4.4%. Projections for Africa, despite the oil price falling and the exposure that this continent has to Africa, are that it will grow 5% or more for the next 30 to 40 years much like we’ve seen from China. During that period of time the United States created six of the ten richest people in history. So you have two very interesting things happening here: You have a rebalancing of the world’s wealth through the initiative of individuals because they have access to information. And the second thing you have is a continent that is really so far behind, i.e. Africa, but has just as many smart people as anywhere else in the world that is now getting the opportunity to leapfrog. Africa itself has a lot of issues. I see there are worries that a quarter of the Zimbabwean population will starve this year because of the drought. The president of Rwanda wants a third term despite in the constitution only having two terms and so on.

But there’s also lots of very good news if you’re start looking at places like Ghana. Even today one of the worst of the examples on this continent is Chad but the president of Chad has announced although he took power in a coupe 25 years ago and he’s announced that after this election that he’s probably going to win – because he’ll probably rig the votes again – the next guy is going to have his time limited to two terms maximum. So there is progress wherever you might look.

The problem about the second renaissance or the fourth industrial revolution is two-fold: Status Quo kicks back against it; people don’t like this kind of thing. If you’re a beneficiary of the Status Quo like the church was during the renaissance, like kings and queens were during that time you didn’t want things to change. That’s part of the human condition. And we are expecting to see lots of kickback. We’re already seeing that in the United States with the kind of people that they want to vote into power there. People are very unhappy, there’s more extremism. We’re seeing the extremism growing in certain parts of the world. There’s a lot of that attention in Davos about the Middle-East; about immigration into Europe.

But the second big thing about it, as much I’ve given you the bright side that everyone has access to information, it also is a very dark side in that anything that is done by rote or rules-based; done by rote, we think that is easy to understand people who are manufacturing bring a robot in to change it. Rules-based, something we don’t really think about, white collar. People who are doing accounting, tax advising, that machines – artificial intelligence – can do better. Those jobs are at threat. What isn’t at threat are those who deal in human relationships which I guess, for once in your life, you can actually say: ‘Okay I got a tough job but it’s actually one that isn’t going to go away.’ Whereas there are many, many other jobs … in the United States there are no tax advisors left. Literally no tax advisors because you just buy a program because it is rules-based and the program would tell you how much tax you should pay. The US has calculated that 47% of its existing jobs will disappear in the next 20 years. And the UK has worked out that one third of its jobs will disappear. And just to give you a little touch of this; in future if you are going to buy a pair of shoes you won’t be going into a shop that sells shoes imported from China in some large factory you will in fact go around the corner to a 3D-printer which will print out your pair of shoes exactly to fit your feet. So the changes are dramatic and they’re happening and the emphases, the new emphasis, now is on re-skilling and entrepreneurship. Entrepreneurship as you know has been very difficult for many years. As an entrepreneur myself I sometimes get terribly frustrated by the obstacles and I know you would share that concern with me but more and more this is becoming the way into the future.

Just to go into the kind of the last little bits of the World Economic Forum; what does 2016 hold? This is the closing economic panel. The one I love going to because after five days of engagement and interaction, people would like to know where the economy is going to. Christine Lagarde, she’s the lady with grey hair in the middle there, the very impressive managing director of the International Monetary Fund; is one of the brightest stars in Davos. Her thesis is that the big threat that many worry about – the hard landing of China – remember China is the place that’s actually pulled the rest of the economy for the last 10 years and that its economy is going to hit troubled times. She doesn’t believe that that’s likely. And George Soros, was in Davos this year as well, he’s now 85 and one of the great thinkers of the world, he was agreed with her that China has the resources to pull itself out and not to have a hard landing. Not so easy in Europe. The bright spot for the world though is Britain and India and Argentina. And perhaps in our question time we can talk about that a little more.

Where the issue does come in for China though is that they are trying to do three things at once. Three transformations at once. And amongst those, the three ones are… overlaid by President Xi… you know when he went to India, his name is X I, they called Mr Eleven. President Xi has a war on corruption. In fact if you are a billionaire in China and you’ve been doing it through dodgy business you kind of disappear. Simply disappear. That happens, when you read the Financial Times of London as I do, you’ll see quite often that Chinese business people who have a global presence just don’t … you just don’t hear from them anymore. So the war on corruption is very real in China and very aggressive. They do however have to move their economy from manufacturing to services. They’re moving it from export driven to internal and they’re trying to move it from investment to consumption. Those are huge challenges and issues that they are going to be dealing with into the future.

The other thing is something Lagarde calls asynchronistic monetary policy; I had to look up the word. What it means is when you synchronise things that it all works together. Asynchronistic means in different speeds. In America they are pulling the money out of the system; and in Europe and Japan they’re still putting money into the system. So that could help generally for the world and that’s probably why the International Monetary Fund says that they still looking at 3.5%/3.4% growth this year.

Britain, those of you who have connections and I think many people in this country do with Britain. The big story there is Grexit. Last year we had Grexit. Greece’s exit from the European Union which was averted at the 11th hour. Now the Brits are going to be voting later this year on a potential exit there. The British who are the fastest growing economy in Europe and who are on track to overtake Germany in the next 25 years as the biggest economy in Europe; they don’t want to be aligned with economic policies in Europe. They say that those economic policies are doomed to fail and as a consequence they want to be part of Europe but be told not what to do. That’s a very tricky place to be. If you follow the media in the UK you’ll see the likelihood at the moment anyway is that the British will vote to go out of the European Union which has all kinds of implications of not having the free trade. But it is an issue and a development that needs to be looked at from a global perspective.

Just to sum it all up from a South African side; we didn’t shine in Davos but then again if you had to look at the performance of our share price, the Rand, in the month or so running up to Davos it was very hard to see how we were going to shine.

The good news about that is, and I would like to end off here by giving you a couple of the things that Pravin Gordhan said in his economic briefing. The good news is that it does appear as though finally sense is starting to prevail within the economic management of this country. We’ll know for sure tomorrow? Tonight? At the State of the Nation. I would urge you to try and stay awake through it and to absorb the reality of what’s being said in there. If not you can always go into BizNews tomorrow and pick up the highlights. And then the budget speech next Wednesday where Pravin Gordhan has promised us that he’s going to give us some pleasant surprises. That’s not pleasant surprises in that the taxes are going to go down; Pleasant surprises in that things will be done to avert, hopefully, a junk status for South Africa’s debt. To go into Junk status would be a very serious problem for this country.

But I will end with this: Pravin said: “We’ve got to take a harder look at the challenges and how we’re going to deal with them. Tough questions have been asked within government about what we need to do differently. We need tough reforms on education and the skills area. We need to create co-investment with the private sector. There are a significant number of us within the ANC who want to restore our integrity.”

Thank you.

 

Footslogging Your Way to Fortune

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Going for an early morning run is hard work. Who among us wouldn’t rather hit the snooze button and drift back into dreamland? But in the long run, the self-discipline and commitment will pay off, and the same applies to your financial goals. By Maya Fisher-French

I recently required surgery to my ankle after sustaining a serious injury. Thanks to this ongoing ankle saga, if I ever want to be able to hike and run again, I am going to have to commit to some serious rehabilitation work. This involves spending 20 minutes each day strengthening and increasing the flexibility of my ankle.

This is chronically time consuming, not to mention phenomenally boring. Who honestly has 20 minutes to spare every day, or quite frankly wants to spend those spare minutes with a resistance band wrapped around your foot attached to the leg of a table? Let me tell you, it is hard work and it hurts!

In order to fit this exercise into my daily schedule as a working mom, I have to get up half an hour earlier than my kids, so my exercises are done before the morning chaos starts of getting kids dressed, fed and packed off to school.

And I love my sleep. I am the sort of person who could hit the snooze button endlessly. Yet I have this goal and it’s a really, really important one. My regular 5km runs and going on hikes are my passions in life; they are what keep me sane, with the added benefit of keeping the fat rolls under control.

This means I have no choice but to apply myself, because the bottom line is that no amount of physiotherapy visits or anti-inflammatory medication is going to help me reach my goal. Only my own hard work and dedication will get me there.

Getting out of debt or reaching some other financial goal is pretty much the same.

You can buy as many self-help books as you want, read dozens of articles on money management and attend endless seminars, but until you put the time aside to draw up a regular budget, and unless you find the discipline to stick to your goals and make a real commitment, you are never going to reach that goal.

It will not be an easy journey, and there will be lapses. There are days I skip my morning routine and even worse, days where despite all the work I am putting in, my recovery seems to be going backwards rather than forwards.

It is often a matter of two steps forward, one step back. But I persevere and find the motivation more often than not from the beauty that surrounds me. It reminds me that my need to walk in the mountains of Cape Town is far greater than that extra bit of sleep or self-inflicted pain.

If you are on a financial journey, find that motivation. Set a goal and imagine what it will feel like to reach it. Know too that it will not be an easy journey, but in the end it will be far more rewarding than continuing to spend money on stuff you really don’t need.

* Maya Fisher-French is an award-winning financial journalist with a flair for cutting complex money matters to their core. Find out more on mayaonmoney.co.za. Maya on Money, Your Money Questions Answered, is published by NB Publishers.
This article first appeared in The Comet, an online platform by BrightRock, provider of the first-ever life insurance that changes as your life changes.