The second highly successful and interactive Nedgroup Investments ENGAGE in association with Business Day was held in Johannesburg recently. Panel discussions focused on how government and business leadership need to work more effectively together; responsible investing; digital transformation and fintech; and retirement fund reform.
What is required to trigger a shift in the economy, asked master of ceremonies, Alicia Seckam as she set the scene for the morning’s panel discussions.
For SA to thrive it needs a healthy private sector and better collaboration between business, government and civil society. Earlier this year, however, Nedbank slashed its growth prospects for SA.
Commenting on the Minister of Finance, Tito Mboweni’s recent publication of a document on economic growth, TV anchor and journalist, Karima Brown said cabinet does not have the cohesiveness to agree on economic strategy. The problem with government, she added, is not so much on what they say, but what they do. At the same time she criticised business for doing the same thing while expecting a different outcome. The biggest leadership failure in SA currently, she argued, is the fact that business and government don’t know how to speak to each other.
What SA needs right now is transparent leadership who act in the best interests of the country and a common purpose, said Mark Barnes, former CEO of the SA Post Office. “We’ll never unite all the different interests in this country if we can’t find points of intersection.”
SARS commissioner Edward Kieswetter, agreed with Barnes that the country lacks a unified sense of what it means to be a South African which he said reduces our focus and resources. He called on politicians to stop protecting their narrow self-interests. Quoting Martin Luther King Jr, he said injustice anywhere is a threat to justice everywhere.
The problem in SA currently is the economy, said Malungelo Zilimbola, Chief Investment Officer of Mazi Capital, adding that all other problems are symptoms of an economy in crisis. “Sort out the economy and it will sort out a multitude of problems including unemployment,” he said. Although SA has the capital and the skills, the ideology driving the economy is problematic which means the country is essentially stuck.
SA has a crisis of leadership, said politician Enoch Godongwana. He said SA needs leaders who don’t only play to their own constituents and are prepared to compromise. He argued that the governing parties problems were not due to a policy gap but rather in the execution of these policies.
The second panel discussion focused on responsible investing, a concept that recognises that our investment decisions today have far-reaching implications for future generations. Increasingly, environmental, social and governance (ESG) factors are the cornerstone that drive investment decisions, with owners of capital playing a fundamental role in engaging and holding business accountable for ethical business practices within the environments in which it operates.
In SA responsible investing is only now starting to gain traction as a concept, pointed out Robin Johnson, Head of Investments at Nedgroup Investments.
While shareholder value has traditionally been the main priority of publicly listed companies, that is now evolving to also include social and environmental capital, pointed out David Levinson, Responsible Investing Specialist at Nedgroup Investments.
Just Share, an NGO focused on driving investors to be more responsible from an environmental point of view, said ESG factors need to be incorporated into all areas of the business. She Tracey Davies, Executive Director of Just Share called for more public leadership around ESG.
ESG factors need to be a primary consideration and be both meaningful and sustainable, said Ndabe Mkhize, Chief Investment Officer of Eskom Pension and Provident Fund.
The next panel discussed the role of fintech and robo-technology in enhancing client experiences and improving savings and retirement outcomes. Technology will fundamentally alter how people access financial services, said Johan Bosini, a Partner at Quona Capital, a venture capital firm which focuses on the potential of technology to catalyse financial inclusion in emerging markets.
Despite the incorporation of fintech into financial services, financial service providers have realised they can’t operate without the human touch, said Quaniet Richards, Head of Institutional Business at Nedgroup Investments. “We generate better retirement outcomes and client experiences when we combine fintech with a human touch and empathy. There is no doubt that a combination of high touch and high tech provides better outcomes than fintech on its own.”
Digital transformation, machine learning and artificial intelligence will undoubtedly result in mass unemployment which will require a change to our monetary and financial system, said Wits University’s Dr Pravesh Ranchod, part of the RaiLab team. The lab focuses on state of the art research into artificially intelligent systems and acts as a centre of excellence and nexus of activities around artificial intelligence in Africa.
The final panel unpacked retirement fund reform. This has created increased demand for umbrella funds which has in turn resulted in new entrants to the umbrella fund industry. While costs are a significant factor when considering a move to an umbrella fund, they’re not the only factor, agreed the panel. They also agreed that new regulations place a huge burden on trustees.
A dedicated investment consultant is a significant expense for a small pension fund and may not always be viable, in which case it makes sense to instead consider an umbrella fund, said Hein Klee, Managing Director of NMG Consultants & Actuaries.
“If you put the member at the centre I don’t see a reason why an umbrella fund is not the answer,” said Michelle Acton, Principal Consultant at Old Mutual. The biggest challenge facing retirement funds, she said, was that the majority of members were not preserving and were instead cashing out their benefits when leaving employment. She argued that retirees should not have to choose between a living or life annuity and said ideally both were needed. Many retirees, however, were constrained because they hadn’t saved enough which was a challenge given that most people were living longer while retirement age in many companies is becoming younger.
Umbrella funds are aiming for better retirement outcomes and have a built in incentive structure which ensures it keeps growing, pointed out Guy Chennells, Head of Research and Development umbrella funds at Discovery Invest. “We expect interesting strides in the umbrella space in the next five years.”