DESTINY Personal Wealth Report 2015

WEALTHPERSONAL

2015REPORT

YOUR GUIDE TO GROWING AND PROTECTING YOUR WEALTH

IN ASSOCIATION WITH

BOLD DISTINGUISHED YOU

MAN

Old Mutual is a Licensed Financial Services Provider

Putting aside all ethical and philosophical questions relating to the meaning of personal wealth, we were guided by two principles when compiling this report: the aspirational element and how those who have “arrived” manage their wealth.

So we are sure you will find this year’s edition of the Personal Wealth Report, brought to you in association with Old Mutual Wealth, packed with fascinating insights and inspiration.

From a masterclass in investments from our sponsors to five easy savings you can make right now, this report reveals that there are no profound secrets to wealth creation.

As tech entrepreneur Vinny Lingham says: “Money is what you need to live on every day; wealth is what you need to retire on. Don’t confuse the two and make sure you are constantly building your wealth for the long term.”

Richard GollerProject Editor

ED’S NOTE

A WEALTH OF WISDOM

Brought to you by Old Mutual Wealth in partnership with DESTINY MAN, this report aims to help you take a fresh look at your finances so that you can create the wealth you need to live your dreams.

There was a time when investing was about putting your money into a fund that matched your risk profile and achieved better returns than its peers.

However, in recent years this notion has been challenged by financial planners who understand that your relationship with money depends very much on your personal experiences, hopes and lifestyle aspirations.

Lasting financial well-being can best be achieved if you place your range of lifestyle needs at the very centre of the financial planning process and give a lot of thought to questions such as: “What matters most?”, “What do I want from life – and when?” and “How much is enough to fulfil this vision?”

At Old Mutual we believe in the value of partnerships. One of our key objectives is to earn respect through the quality of our research and advice, and trust through our deep commitment to being a responsible financial partner. • Visit: www.howmuchisenough.co.za to find out more.

HOW MUCH IS ENOUGH?

Mokaedi DilotsotlheGeneral Manager: Marketing


FCB10016310JB

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Old Mutual Wealth is brought to you through several Licensed Financial Services Providers in the Old Mutual Group who make up the elite service offering.

HOW MUCH IS ENOUGH TO HAVE THE BIG FAMILY HOME & STILL JET-SET WELL INTO RETIREMENT?How much is enough? An age-old question that needs a new answer. Old Mutual Wealth has it and it’s called Integrated Wealth Planning. It’s a wealth map that puts you and your goals at its core, helping you plan how much is enough for you – for now, for your life and for your legacy. Contact your Financial Adviser about your Old Mutual Wealth Integrated Wealth Plan.

Call 0860 WEALTH (932584) or go to www.howmuchisenough.co.za

ADVICE I INVESTMENTS I WEALTH

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GEORDI McINTOSH, HEAD OF FIDUCIARY SERVICES

What is the difference between wills and estates? A will is a legal document which names your beneficiaries and states what will happen to your assets when you die. It also directs the person or company winding up your estate in how things should be done. Estates are the administration process of winding up your assets at death. The person or company handling these affairs would need to go to the Master’s Office and report what they intend to do in relation to what the will stipulated. The Master’s Office needs to approve this report (called

a Liquidation & Distribution Account) before it may be implemented. It’s also during this process that the deceased person’s liabilities would be settled and assets transferred to the appropriate beneficiaries.

What makes wills and estates an important part of wealth planning? If you spend your life building wealth, surely you’d want to make sure your assets go to the right people. Essentially, you’d want to make sure you have a trusted person to handle your assets and liabilities (including bonds and other debts). Of course, you’d also want to ensure there’d be enough money for your beneficiaries after all the liabilities have been settled. These must be settled in cash – you

can’t give your creditors a piece of the house, for example. That’s why estate planning is important.

In some cases, you might be worried that your children may be too inexperienced to receive an inheritance before they are 25 years old, for example, and this you would stipulate in your will. But you must also review your estate planning every once in a while, as it is likely to be affected by changes to your financial planning and wealth accumulation.

Lastly, it’s important to talk about your will with your beneficiaries because money can cause terrible problems if your affairs are not handled properly. Sit down with your family while you are still alive so that there are no major surprises on

your death. It’s an opportunity for beneficiaries to ask questions and discuss sensitive issues.

What is the role of the personal wealth adviser on the subject of estate planning? To work in conjunction with the fiduciary specialist, as executors of the estate, in ensuring that your assets and estate planning are connected to your financial plan. You need people who understand your whole financial picture so that they’re able to assist you to build your wealth in a manner that is best for you and those you leave behind. The fiduciary services are experts in this regard.

What are South Africans’ attitudes towards wills and estates? There are those who say to

W R I T T E N B Y M ZO W I T B O O IROUND TABLE

From investment strategies to wills and estate planning, our panel of experts from Old Mutual Wealth have got you covered. Here’s your map to prosperity

Sound advice

wealthy clients: “I can get you a will for R250” – this devalues the importance of this service. I tell clients that a will is one of the most important documents you’ll ever make for yourself – it should be something you are prepared to pay for. It’s also not a once-off thing, but rather a “live” document that needs to be reviewed as your circumstances change. It shouldn’t be a price, but a value conversation. What price are you prepared to pay to have peace of mind that, should you be hit by the proverbial bus, your affairs are in order and you have an appropriate drafted will and knowledgeable executor to execute your wishes for the benefit of those you leave behind? Sadly, you may not see all the value of it while you are alive – but your family will.

Who needs will and estate planning services? Everyone needs a will. You should have control over what happens to your assets when you die. There are online sites that let you put a simple will together, so it’s actually accessible to everyone. If you have a financial adviser or sizeable assets, it’s advisable to pay for a professional service.

When you’re planning the distribution of your wealth, you definitely need a professional to assist you with it.

Can you use a will to future-proof your wealth? Absolutely, especially if you build wealth so you can pass it on to the next generation. As your wealth increases and becomes more complex, estate planning becomes a critical component of this transfer.

Any final thoughts? If you don’t have a will, you haven’t done comprehensive wealth planning – it is a key component of building wealth. It’s also not fair to the people you are leaving behind when you die as they are the ones who have to deal with the administrative difficulties which arise because you haven’t appointed an executor and directed how you wish your wealth to be distributed.

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66 • DESTINYMAN • MARCH 2015Old Mutual is a Licensed Financial Services Provider


AVIEN PILLAY, HEAD OF RESEARCH AND INVESTOR SERVICES AT PRIVATE CLIENTS SECURITIES

How do we introduce the younger generation to investing? One of the simple ways to get young people to understand the market is to invest. We encourage them to open a brokerage account so they can start investing right away. By buying shares directly, they can learn about the companies they invest in. Novices can read newspapers, financial publications and websites, such as www.bloomberg.com. There’s a lot of free financial information out there to help young people learn about investments. Trading online is another option, as it is quite cheap to open an account and begin trading on your own.

Do you need a minimum amount? An investor could start quite comfortably with R10 000. The right time to start is as soon as you have some extra money. Of course, you don’t want to be investing money earmarked for living expenses.

How should you tailor your portfolio when you’re starting out? It’s always advisable to diversify and those with larger sums to invest should look for a minimum of about 18 shares. However, if you start with R10 000, this will be difficult. Aim for a minimum of three shares.

What are the current trends in the investment landscape? There are many different issues, but what’s notable this past year is the volatility of the market. There’ve been some big currency moves that the market is trying to digest. The oil price has been a great talking point, the dollar has been strengthening and commodities have been weakening. But investors should focus on the fundamentals and look for good companies that would be great investments over the long term.

What are the best investments or companies to

ROUND TABLE

AVIEN PILLAY



Keep investing at regular intervals over the long term. It makes better sense to continue investing through market lows when share prices are undervalued and a lot cheaper, so that you gain

more wealth during the highs.

Understand your time horizon and risk profile. They affect how you invest. The younger you are and the longer you have to invest, the more risk you can

afford to take. Diversify. Don’t focus

on returns from individual investments. See your portfolio as a whole.

It is time in the market that counts – not timing the market. The longer

investors are in the market, the better the likelihood of making up for losses.

Each person is unique. A good investment for another person is not necessarily a good choice for you.

ROUND TABLE

consider in 2015? Discovery – its offshore interests are gaining traction. It’s also monopolised the local medical insurance sector and is expanding its reach outside the country.

Aspen – SA’s largest pharmaceutical company is expanding, both in emerging and developed markets, through partnerships with other big players like GlaxoSmithKline.

Naspers – its biggest holding is Tencent in China, but it also has other assets in developing markets that continue to grow. Over the next 10 years, Naspers will be able to generate a lot of value from these assets.

MRP – it has continued to go from strength to strength. It’s also successfully extended its offering into the sports and homeware segments. MRP is one of the few companies that performs well in a strong and weak markets. When consumers have more money to spend, they buy more clothes and when the economy is weak, the company does well because its products are more appealing than the more expensive brands.

British American Tobacco – 70% of its portfolio is in emerging markets where smoking penetration is still low and volumes are growing. The company is also able to expand margins by promoting its premium brands.

BASIC INVESTMENT PRINCIPLES (supplied by Old Mutual Wealth)

SHARON MOLLER, FINANCIAL PLANNING COACH

What are the basic elements of integrated wealth planning (IWP)? It incorporates everything a client would ever want in his life. If you wanted to educate your children, travel the world or even sponsor someone else, these could be done through IWP. We take into account every single aspect of the life you’d like to live and help you achieve those goals when they need to happen. Now we have moved away from just helping people with their retirement plans and focus on how they want to spend their lives, on a daily basis – even before retirement. We’d also like to know what you want to do after you retire to help you plan accordingly. This isn’t limited to finances, but lifestyle preferences, such studying further or climbing Kilimanjaro. Everything you’d like to do can be incorporated into your plan. However, you may be expected to make compromises on what you’re willing to give up.

Who would normally qualify? It’s not about qualifications or bank balances – everyone could do with IWP. You’re not going to drive a Ferrari if you earn R5 000. However, we target a certain measure of wealth because of our investment platform.

What are the pros and cons? The biggest problem is that most clients don’t know what they want. The discovery process that involves them deciding what they want

without being told is quite challenging. The good news is that we let the clients decide what they want to do with their lives. They understand what they’re putting money aside for because they’ve devised the plan themselves. IWP is disrupting the industry. The benefits far outweigh the negatives.

What else should clients consider when devising an IWP strategy? Understanding what goals you want for yourself is the first step in the process. Then you need an investment strategy to achieve them. From that point on, you should think of the inflation you need to target in your fund to achieve your goals. We have seven strategies in place that virtually replace the risk profiling that the industry would usually recognise. Once you’ve understood what strategy to target, we then align what funds are linked or mapped directly to that strategy. The mandate of those funds is to target a return that’s above inflation.

How often should the strategy be reviewed? It would depend on the client and the adviser, but some would meet every six months – if not, definitely every year. It’s important to see that your plans are still intact. For example, if you have children, your plans would change as you would need to consider their education. If everything is still the same, you’d still need to take a look at how your funds have performed in relation to the goals you set. If all is still according to plan, there’s no need to make changes. DM


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W R I T T E N B Y C A R A B O U W E RDRAGONS & DOSH

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AW R I T T E N B Y C A R A B O U W E R

We’ve seen them in action on TV as they put aspiring entrepreneurs through the ringer, and there’s no doubt they know their stuff. But, when you strip off the Dragons’ Den masks, who are these men? How did they amass their fortunes? And what mistakes have they made along the way?

ENTER THE DRAGONS

DRAGONS & DOSH

long with Identity Partners CEO Polo Leteka “The Rose Among the Thorns” Radebe and media entrepreneur Lebo Gunguluza, Gil Oved, Vusi Thembekwayo and Vinny Lingham form the impenetrable wall that makes up the judging panel for the South African edition of Dragons’ Den. These inspiring entrepreneurs not only command respect for the power they wield in the world of reality TV, but for their successes in the business world.

As Gunguluza said ahead of the show’s première in September 2014: “I had grown up so deprived that I was determined to make a lot of money and never experience poverty again. I set three goals: to become a millionaire by age 25, a multi-millionaire by 35 and a billionaire by 45.”

Pretty clear savings goals, you’ll agree. But what of the other Dragons? What gets their motors revving when it comes to investing and stashing away the millions?

VUSI THEMBEKWAYOA man who has certainly steered his own ship through life is Thembekwayo, who, at just 22, founded successful consulting business Uciko. By 23, he was an executive at Metcash Africa, one of the largest consumer goods companies on the continent. It was there that he started, grew and managed a multi-million-dollar portfolio. At 25, he was ready for another challenge and co-founded MOTIV8, a specialist consulting and services business.

A globally renowned public speaker who was once referred to by former Australian Prime Minister John Howard as a “rock star of public speaking”, he also holds his own in the company of musicians like Bob Geldof, who declared him

to be a “f**king great speaker”. When it comes to personal

wealth, Thembekwayo has the steadying advantage of family responsibilities. However, as the middle child of five siblings, raised by a single mother after his father’s tragic death, Thembekwayo is still something of a daredevil. His early approach to business was tinged with risk-taking. “At 22, I was a cowboy,” he recalls. “Guns blazing, shoot as many times as you can and hope you hit the target.”

Over the years, he admits he’s learnt to be more careful. “People say entrepreneurs like risk; I think we just define risk differently. For me, risk is spending my time working for someone else and never achieving my dreams. That’s far riskier than actually starting your own business and failing at it.”

THEMBEKWAYO’S WORDS OF WISDOMPEOPLE WHO HAVE MONEY DON’T MAKE A NOISE ABOUT IT. THEY DON’T NEED TO; YOU CAN SMELL IT A MILE OFF.

He’s older and wiser these days, “but I’m still taking risks”, he admits. After all, this is a man who’d rather put his cash into a venture capital fund than a risk-averse investment. “My dad used to say to me: ‘As you climb, lift. Don’t wait until you are at the top.’”

While a good investment for Thembekwayo is investing in others, he’s also an advocate of understanding what money can buy. He stresses: • Success is not about the age at

which one drives a Lamborghini.• Success is not about the clubs we

frequent or whether we can afford over-priced martinis.

• Success is not about the restaurants we frequent, the private bank cards we carry or the brand of watches we wear. So, all in all, in the world

of the Dragons, it seems money isn’t something you get gushy or overly sentimental about. Rather, it’s a means to an end and just an arrow in a large personal wealth quiver.


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SECTION • FEATURE


W R I T T E N B Y N A M E & S U R N A M E

VINNY LINGHAMTech success story Lingham is the man behind mobile gift card company Gyft, which he sold to USA-based tech giant First Data in 2014 for more than $50 million (about R550 million). He also created Yola.com in 2007 and Clicks2Customers, the overall winner of the 2006 Technology Top 100 Awards.

“As an entrepreneur, I’ve had to balance cash flow many times in my life,” he recalls. “I once had to buy a townhouse from my landlord to build the outstanding rental into

the purchase price, because I was so behind with rent payments back in 2001!”

There are no profound “big secrets” to wealth creation, Lingham believes. “Money is what you need to live on every day; wealth is what you need to retire on. Don’t confuse the two and make sure you are constantly building your wealth for the long term.”

As an entrepreneur, you’re also in no man’s land when it comes to personal wealth; after all, does what you make inevitably go back into the business? No, says Lingham.

“Personal wealth is very separate from business wealth. Companies may come and go and you need to be prepared for that by creating a balanced portfolio of assets that suit your needs and lifestyle. My biggest mistake as an entrepreneur has come in not understanding the difference between risking money and risking time. Losing time is the same as losing money and although it hurts less day to day, the impact is greater down the line.”

In terms of his own journey, he admits to being largely self-taught. “I spend a lot of time doing research and reading financial publications,” he says. And he’s not above taking risks. He recalls a particularly significant step towards the creation of his own wealth legacy back in 2003. “I sold my home for a R115 000 profit and started my first company, Clicks2Customers. I took a big risk, but it paid off and I’ve never looked back.”

Today his biggest financial indulgence is – wait for it – Bitcoins! “I think this [digital currency] has a lot of potential in the future, but it’s a very risky investment.”

GIL OVED At just 15, Oved began his career as an actor, starring in the TV series What If? He then went on to present youth magazine show Zap Mag. Today he is joint Group CEO of The Creative Counsel, a South African activations agency.

Oved is happy to share a few revelations: he’ll tell you that he loves classic movies, is a sucker for globe-trotting, a self-confessed foodie and is addicted to American politics. When it comes to financial indulgences, he admits: “I have a weakness for clothes, especially shoes. My mother often reminds me that I have only two feet and can wear only one pair at a time!”

Despite his proclivity for fancy footwear, Oved is a Chartered Financial Analyst, so he knows how to invest. The qualification is a three-year Master’s equivalent so, he notes: “A lot of that was spent understanding valuations of different classes of assets and analysing risk and return profiles for maximising

MAX OUT YOUR TAXDEFERRED INVESTMENT VEHICLES RETIREMENT

ANNUITIES, ETC AND MAKE SURE YOU CUT YOUR PERSONAL LIVING COSTS TO TRY TO SAVE 510% OF

YOUR MONTHLY SALARY. IF

YOU’RE NOT AN ENTREPRENEUR

AND YOU’RE NOT DOING THAT, RETIREMENT

WILL NOT BE POSSIBLE. BE

SURE TO START AS EARLY AS POSSIBLE.

ALSO, TRY TO GET A SECOND INCOME ON THE SIDE, EVEN IF IT’S JUST A BASIC ONLINE STORE, EVERY BIT HELPS!

DRAGONS & DOSH

LINGHAM’S TIPS FOR SAVING


SECTION • FEATURE


W R I T T E N B Y N A M E & S U R N A M E

portfolios. I understand things. But I still need to learn to make use of my learnings. I have been so focused on my business that I have failed myself in terms of applying my knowledge to my personal affairs. That is my official challenge for the next decade of my life.”

So, challenge accepted, where do you start? According to Oved, by: • Living your life for yourself

and not for anyone else. “Often, I see people wasting their hard-earned savings on flash at the expense of wealth creation.”

• Familiarise yourself with the concept of compound growth. “It’s such a beautiful idea and when it clicks that ‘more begets more, begets all the more so’, you are often tempted to spend less and save more.”While this insight reinforces

Oved’s gravitas, he jokes when asked if he has a personal story to tell that might make Dragons’ Den contestants regard him with a little less trepidation. “Me, scary? Say it isn’t so!”

He admits he’s experienced many situations when his investments went astray. “One of my first experiences was in my early 20s when I discovered ‘investing’ in the stock market. Day trading is not investing. Putting money into stocks based on rumour and third-party information without true analysis and investigation is actually a glorified

DRAGONS & DOSH

GREAT ENTREPRENEURS DON’T DO IT FOR THE

MONEY; THE MONEY IS SIMPLY THE OUTCOME OF GREAT ACHIEVEMENT. PERSONAL WEALTH IS ABOUT REALITY. IT’S ABOUT HAVING A CYNICAL APPROACH, A RESPONSIBLE PERSPECTIVE AND A CONSERVATIVE DEMEANOUR.

form of gambling. But, all of sudden, I made big money for doing nothing. I thought I’d hit the big time and that I had the Midas touch. It was kind of embarrassing learning that with stock market speculation, the adage ’what goes up, must come down’ rings true. Lesson learnt.”

He’s had a few of these “wake-up” moments. “In truth, I have my dad looking after my personal finances. I love numbers and business, but I hate focusing on my personal finances. My father often gives me updates and recommendations on wealth preservation and creation. Every time he does, I have a ‘wake-up’ moment.”

OVED ON PERSONAL WEALTH

DM



Chihuahua, bonds could be for you. You can opt for fixed-rate two-, three- and five-year terms (currently 7,25%, 7,75% and 8,25% respectively) or inflation-linked three-, five- and 10-year terms (currently 1,25%, 1,75% and 2% above inflation respectively).

GoldIf you’re the type who likes to touch and feel your assets instead of watching your bank balance rise, gold might be your key to saving discipline. Long regarded as a safeguard against market fluctuations, gold has shown steady growth over the medium to long term. As legal tender, Kruger Rands are easily bought and sold and don’t attract tax liabilities. You’ll be hissing “My precious” in no time.

Settling debtSettling high-interest loans should be your first port of call when planning your savings strategy, because there are no vehicles that will give you a 20-30% return on investment. If you don’t have a lot of money to spare every month, it can make sense to put a little extra into your bond. You will see an instant saving and, depending on how your home loan is structured, you may be able to access your funds at a rate far lower than you’d get if you applied for a personal loan.

EntrepreneurshipLet’s face it: no matter how many times you re-use your teabags or shift into neutral on the freeway, there’s only so much you can save. The amount you are capable of earning, however, is virtually limitless. An inordinate number of new businesses fail, so you need to have a healthy appetite for risk, but entrepreneurship has the potential to grow your net and personal worth exponentially in a relatively short period. This route should be of particular interest to those who have been late in jumping on the pension bandwagon.


South Africans excel at a number of things – accounting, rugby, service delivery protests – but saving is not one of them. In fact, household savings account for only 15% of total savings and 1,7% of GDP, putting SA way behind the global average. We are some way off achieving the National Development Plan goal of 25% of GDP in 2030.

Here’s how you can build your personal wealth and give the local economy a helping hand at the same time.

Tax-free savingsFrom March onwards, South Africans will be able to save up to R30 000 a year in an account or investment instrument of their

choice, up to a maximum of R500 000. With a wide variety of investment choices, barring those that charge a performance fee or expose the investor to unreasonable market risk, there is little excuse not to take advantage of the new legislation. The effect of the savings on capital gains, dividend and income taxes on investment growth is substantial in the long-term – just under R1 million over 20 years.

BondsSouth African retail savings bonds are a no-cost, almost zero-risk investment that offers attractive returns on lump-sum investments. If the thought of losing money on a volatile stock market makes you shrink away like a terrified

EASY SAVINGW R I T T E N B Y E B R A H I M M O O L L A

SINK OR SAVEStuck in a financial rut? Here are five simple ways to get a savings plan off the ground

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WEALTH PROTECTIONW R I T T E N B Y P E R C Y M A B A N D U

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EASY SAVINGW R I T T E N B Y E B R A H I M M O O L L A

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WEALTH PROTECTIONW R I T T E N B Y P E R C Y M A B A N D U

FUTURE-PROOF YOUR WEALTH

Home truths Your home is not an investment, but a lifestyle asset. This is true, whether you live in a bachelor flat or a mansion. The reality is that the fluctuating price of your home doesn’t make a big difference to your net worth. This is because you live in your house or flat and will probably continue to do so for a long time. If you sell it, you are going to have to find another place to live and even if you downgrade, it is unlikely that you will realise any financial benefit. Many people tend to think that, as they grow older and their children grow up and leave home, they should sell and move to a smaller space. However, they quickly discover that the smaller home costs more or less the same as their old one. Property should only be seen as investment if you get an income from it – like a commercial space or a house that you’ve rented out.

Diversified portfolioBuilding a diversified portfolio is the best way to future-proof your wealth. Putting all your money into shares, particularly a single share, is considered risky. The stock market can be unpredictable, so you need to hedge your bets. This is why investing in unit trusts, which consist of a variety of shares, is usually a better way to go. Find a good balance between the different asset classes – shares, property, government bonds and cash.

Investment insurance Share insurance premiums can be quite expensive, but offer a measure of protection in the event of a market crash. If your R100 share falls in value to R70, you will not be affected by the slump. However, many investors can’t afford insurance and those who opt for it find it eats into their gains in the good times. Diversify your portfolio to minimise risk before going the insurance route.

Stick to your gunsChanging your mind almost always costs money. Let’s say you have chosen to invest in shares for 10 years. Then, in a year’s time, you find a beautiful beach house that you think would make a good investment. You sell your shares and begin to invest in the property, which opens you up to potential losses in penalties, price fluctuations and opportunity costs. It’s important to work out exactly what you want to do with your financial life and stick with your decisions.

It’s one thing to make money; it’s another to protect it from economic uncertainty and unwise financial decisions. Andrew Bradley, CEO of Old Mutual Wealth, shares his future-proofing strategies

DM


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Money is for

making things

happen.

Wealth


CO M P I L E D B Y R I C H A R D G O L L E RINSPIRATION

WISDOM OF

Riches have long been a concern of businessmen, economists and philosophers. We present a thought-provoking selection of classic quotes on the subject

Every person who gets

rich by creation opens a way for thousands to follow – and inspires them to do so.

“MAN WAS BORN TO BE RICH, OR INEVITABLY TO GROW RICH, THROUGH THE USE OF HIS FACULTIES.” – Ralph Waldo Emerson, poet

“WHILE WE DO OUR GOOD WORKS, LET US NOT FORGET THAT THE REAL SOLUTION LIES IN A WORLD IN WHICH CHARITY WILL HAVE BECOME UNNECESSARY.”

– Chinua Achebe, Nigerian author

– Sir Richard Branson, English entrepreneur

“Never forget: the secret of creating

riches for oneself is to create them for others.” – Sir John Templeton, British businessman

“Wealth consists not in having great possessions, but in having few wants.”

– Epictetus, Stoic philosopher

THE GREAT ROAD TO

WEALTH IS TO LEARN USEFUL

FACTS.– MR Kopmeyer, success

counsellor to 102 companies

– Wallace D Wattles, American author


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Make some money, but don’t let money make you.

“WE DON’T KEEP ANY MONEY IN THE BANK; WHATEVER WE HAVE WE INVEST AND WE KEEP ON INVESTING – AND THAT’S WHAT WE DO.” – Nigerian billionaire Aliko Dangote


CO M P I L E D B Y R I C H A R D G O L L E RINSPIRATION

“MY LEGACY ISN’T IN THE LEVEL OF WEALTH I’VE ACCUMULATED:

IT’S IN THE NUMBER OF MEANINGFUL RELATIONSHIPS I’VE BUILT OVER THE YEARS.”

“WEALTH COMES FROM KNOWING WHAT OTHERS DO NOT KNOW.”

– Whitey Basson, MD and CEO: Shoprite Holdings

– Aristotle Onassis, Greek shipping magnate

“THERE’S NOONE WHO BECAME RICH BECAUSE HE BROKE A HOLIDAY AND NOONE WHO BECAME FAT BECAUSE HE BROKE A FAST.”

– Ethiopian proverb

– Tanzanian proverb

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The thought of quitting your job and working from home in the online space may appear to be utopian. However, every day, more and more start-up businesses seem to be cropping up online. Digital businesses bring immense flexibility from an operations perspective and by leveraging the Herculean power of the Internet, you can effectively penetrate your target market.

South Africans are becoming a lot more web savvy as a result of a significant drop in data and hardware costs. According to business writer and award-winning digital strategist Andy Gilder: “The rise of ecommerce in this country is going to have a great effect on businesses that are correctly geared for it. Yes, the last mile of the delivery will remain an issue, but as the demand increases, the infrastructure will catch up.” He is of the belief that

a core understanding of the way Google works is likely to be the most important skill a South African online entrepreneur can have. “For most people, Google remains the gateway to the Internet and understanding how to leverage it for your own business needs is crucial to achieving success.”

The Internet has added an entirely new dimension to the business world. Business dealings in the online space come with immense advantages. It wields a mighty reach that is further bolstered by content marketing, search engine optimisation, etc.

Nic Haralambous, founder of NicSocks.com, a popular online store

that sells trendy socks, believes the future of ecommerce is bright and those looking to capitalise on opportunities in the space need to find a niche. He says: “If you’re going to try to compete with www.takealot.com and others of its size, you’re already dead. If you’re going to be taking on a niche market and trying to own that, then you’ve got a shot. The Internet is a large space, so if you hustle hard enough, have a great product and do the right marketing, you’ll find an audience.”

He adds that the main difference between SA and the broader African region is that we’re going to dive straight into mobile commerce on a large scale.

Immensely successful online companies such as eBay have proved that the Internet is a fertile breeding ground for business. The web has forever changed the landscape of how

business is done. It has catalysed globalisation and international business relationships are easier to forge. Trepidation and scepticism over doing business online are withering at a steady rate as more efficient online security measures have been implemented by virtual vendors, as well as the emergence of various sales strategies.

Yuppiechef.com is a local online store that sells premium kitchen


ONLINE BUSINESS

WAY OF THE WEBThere is no cap on the immense potential that the Internet offers when it comes to driving profitable business

W R I T T E N B Y L E N I N R A J G O PAU L

IN FUTURE, ALL BUSINESS WILL BE ONLINE, AS PEOPLE WILL SEARCH FOR PRODUCTS, SERVICES AND CONTACTS ONLINE AS

THEIR FIRST STEP, EVEN IF THEY END UP BUYING OR COLLECTING OR PAYING ONSITE.

appliances, accessories and the like. At the beginning of 2011, Yuppiechef had a team of seven. It now boasts a staff complement of 80 and has been named the Best Ecommerce Store in the South African Ecommerce Awards for five years running. Marketing Manager Jamie Munro believes the entry of traditional retailers like Woolworths, MRP and Pick n Pay into the online space is helping to build consumer trust, as is the increasing media interest in this industry. He says: “One great advantage (of doing business online) is that you are not limited to physical

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ONLINE BUSINESS

Tell us about your experience in online business. I previously spent 10 years working in institutional research and trading in London. I left in 2010 to trade my own account and thereafter set up a global macro-research and advisory service. Previously, the infrastructure costs of this job made it prohibitively expensive for the average

individual to trade. The Internet has broken down these barriers to entry.

What are some of the most challenging aspects of online businesses? The most obvious problems relate to the lack of access to an effective broadband service. This is a non-issue in most developed places, but can be a nightmare in developing countries.

Typhoons, civil wars and load-shedding were not things I had to deal with in my previous career, but are part and parcel of working and travelling in certain regions.

What are the advantages of doing business online? Freedom of location, more efficient time management and lower infrastructure costs.

Any advice for readers looking to take advantage of opportunities in the online space? Produce goods or services that are attuned to the global marketplace. The Internet and globalisation have provided a level of scalability that was previously unheard of. If you have a successful model that works in SA, there is no reason why it

can’t work elsewhere. It also costs very little to greatly expand your target audience.

W R I T T E N B Y L E N I N R A J G O PAU L

Jehan Jabar is an established online trader from Durban who spends a lot of time making monetary moves on the web. He shares his thoughts on online business

CASE STUDY

locations and opening times, like traditional retailers. Your store is essentially available anywhere, anytime, and in the comfort of a customer’s own home. This is an especially significant benefit when you start looking at international expansion, as we are.”

When it comes to Internet-related matters in SA, Arthur Goldstuck is a name that repeatedly comes up. He established the first benchmarks for web strategy and website evaluation locally. Renowned for being a pioneer in the South African market and using the Internet as a productivity tool, he believes the online business furnace will continue to burn brightly. “There will be an increasing need to provide services to the mass market as it comes online and struggles with both utilising the online environment and finding appropriate information and services.

“In future, all business will be online, as people will search for products, services and contacts online as their first step, even if they end up buying or collecting or paying on-site,” he says.

By engaging in ebusiness, you can establish a nationwide or international presence while maintaining lower overheads. Jumping on this wave unlocks a world of opportunities. As such, online business is an avenue well worth exploring. DM


38WMOnlineBus.indd 3 2015/02/02 11:09 AM

I


TAX TALKW R I T T E N B Y S A M A N T H A G R E AT H E A D

n years gone by, SA was at the top of investors’ minds as the leading African country in which to invest. Yet, as the rest of Africa becomes the fastest-growing region worldwide, there is more competition than ever before. SA is now under pressure to convince investors that the country is still a favourable investment destination.

Our tax legislation could be a bargaining chip. While laws are not the only consideration when making investment decisions, they could help tip the scales. Is South African legislation turning the country into a tax haven, or is it driving potential away?

Tax haven?SA does not have the secrecy laws or low tax rates to mark it as a tax haven in the Switzerland or Cayman Islands league. In fact, the country recently signed information-sharing agreements with six traditional havens to prevent tax evasion, with more in the pipeline.

Even though SA is not a conventional tax haven, we need to question whether our tax regulations appeal to investors. According to PwC Director Kyle Mandy, SA is in the middle of the pack when it comes to tax attractiveness. “The country’s tax system is neither particularly appealing, nor – to any significant

extent – is it a deterrent to investors,” he says.

There have been attempts to make investment appealing to locals. If a portion of your income is paid into a retirement fund, you do not pay tax on it or any capital gains that you derive from it, and from this month, South Africans will be able to invest up to R500 000, limited to R30 000 per year, in a savings account without attracting tax.

Webber Wentzel’s Head of International Tax, Prof Michael Honiball, says that in addition to this, our capital gains tax rates are among the lowest in the world for both corporates and individuals. “From that point of view, the country is a good place to make long-term investments.”

Mandy adds that SA has a fairly advanced tax system for a developing country. The PwC Paying Taxes 2015 report ranks SA as one of the best African countries in this regard, with a relatively light administrative burden for potential investors to bear.

Average JoeYet SA is not quite hitting the nail on the head in all respects. While regulation is not driving wealth away, not enough is being done to attract it either. “From a capital gains sense, we are a low-tax country, but we are

A TAXING DEBATEAs SA increasingly competes with the rest of the continent for investment, are the country’s tax laws driving investors away? Or is SA actually a tax haven?

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TAX TALKW R I T T E N B Y S A M A N T H A G R E AT H E A D

heavily taxed in other areas. Tax is not an incentive for investors,” says Honiball.

Our company tax rates are among the highest in the world. “The average company tax rate in Africa is 27,4% compared with our rate of 28%. This is well above the 23% global average. It is also expected to be increased soon, which would make investors even more hesitant,” he says.

Mandy agrees that our tax rates are a cause for concern when attracting investment. “Corporate

tax is around 20% of total tax revenue, in comparison with the Organisation for Economic Co-operation and Development countries, where it is around 10%. Our reliance on corporate tax is much higher, which has certain risks associated with it.

“The most distorting taxes are corporate ones. To be more conducive to economic growth, the tax burden needs to be shifted away from taxes on income to indirect taxes and taxes on consumption, like VAT. There are also a few other benefits to this.”

Another potential deterrent for investors is the country’s tax legislation, which is one of the most complicated in the world.

The danger of such an expensive and complicated tax system is that it may not only discourage investors, but could also hinder citizens from realising their full financial potential. “You also

need to attract your own domestic investors and our tax laws are encouraging the opposite. It may, in fact, be encouraging emigration and corporates to invest overseas,” says Honiball. Despite these challenges, South African tax laws don’t differ greatly from those of the rest of the world. However, we need to position ourselves above other countries in terms of legislation to attract investors.

This is especially true if SA wants to remain the gateway into Africa. “We are competing against

the likes of Mauritius, Kenya and Ghana, which are all promoting themselves as the first stop for investment in Africa. SA has a relatively high corporate tax rate and is far less attractive.

“The country needs measures to increase its attractiveness as a location for company headquarters. It really needs something that is going to attract substance into the country,” says Mandy.

Honiball says the solution may be an amendment to regulations. “We need to change tax laws so that there is, at the very least, no difference between investing domestically or outside SA. Even more so, we need to make it more attractive to invest locally. If we are content to play in the same ballpark as everyone else, there is no need to change tax regulations, but if we really want to win, we need to find a better way.”

THE COUNTRY’S TAX SYSTEM IS NEITHER PARTICULARLY APPEALING,

NOR TO ANY SIGNIFICANT EXTENT IS IT A DETERRENT TO INVESTORS.

DM


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SENZO TSABEDZECEO: Afrirent Fleet Management, watch collectorTsabedze is also the founder of Indalo Fuel & Isando Capital, which operates in the local hotel industry.

What inspired you to get into this field? The fleet business

has always been white-dominated. I wanted to change that. At Afrirent, we strive to resolve fleet and transport management issues before they present themselves. We understand the importance of precise reporting and exceptional customer service. My greatest achievement has been creating one

W R I T T E N B Y T H A B I S O T H A N T S H AEXOTIC ASSETS

The CollectorsFor some men, collecting goes beyond a hobby. Meet two businessmen for whom it’s an emotional and financial investment

of the biggest fleet management companies in SA. I was also named Businessman of the Year by the Ehlanzeni District Municipality [Mpumalanga] in 2009.

What is your definition of success? To be able to generate enough money for the present and the next generation. God has blessed me so that I can be a blessing to others. My family and employees motivate me to wake up every morning and get going. They are counting on me to lead them and deliver.

Tell us about your collection. I call it an addiction. I’ve been collecting watches for the past seven years. I don’t see it as an investment, but as an appreciation for the craftsmanship of watchmaking.

Do you discuss your collection with a financial adviser and is it insured? No, because an adviser wouldn’t understand the thought process behind my fixation. And yes, all my watches are insured.

Is there a must-have piece you want to add to your collection? Yes – I’m planning to get a Hublot Skeleton for my birthday. It’s a hand-wound watch with sapphire crystal and a crocodile-skin strap.

What advice would you give a novice collector? Anyone can be a collector. You don’t have to break the bank to start.

38WMCollectors.indd 2 2015/01/28 1:41 PM

I’m motivated to get up each morning by my love for what I do. Cement is now in my blood. We have fun at IDM and it shows in the bottom line.

I never define success; it’s like a moving target. One needs to have fun and love what one does. My motto is: “Whatever you did well yesterday, get up tomorrow and do it better.”

I’ve had my wine collection for four years now. My dad loved wine. When I was young, he’d pour small glasses for my sister and I at Sunday lunches. As a student, I always enjoyed trips to wine farms and the history that came with each glass I drank. My wife and I built our first house in 2005 with a small cellar, which we could never keep full. I was initially interested only in local wines, but the bug really bit a few years ago when a mate of mine introduced me to French and Italian wines and the importers of these masterpieces.

My collection started as a hobby and grew into an investment. I’d love to own a bottle from Domaine de la Romanée-Conti, the greatest of all the Burgundy estates.

My advice to people who are interested in starting a collection is to just have fun. Wine is there to be shared over good times with family and friends.


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ROB REIN Director: Industrial Dry Milling (IDM), wine collectorRein has been at the helm of IDM since the firm was founded in 1997, with the aim of producing SABS-approved cement products.

My first job while I was an accounting student at the University of Pretoria involved installing salt water chlorinators for a pool company in 1995. Two years later, my friend’s family started a cement-blending business. They

asked if I wanted to help out and try my hand at selling cement. I started off in the sales department and grew the business rapidly. I was made a Director and shareholder in 2001 and 2004 respectively. I’ve lost and gained valuable partners along the way. I ended up in this industry by chance, as I wanted to become an accountant.

I don’t believe in accolades, awards and recognition. In business, you only have yourself and your partners to answer to.

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EXOTIC ASSETS

MANDLA SIBEKOChairman & Shareholder: NetFlorist SA, CEO: Aero Farms SA, art collectorEarlier this year, Sibeko was named co-Director for the FNB Joburg Art Fair, which will take place in September.

On his career trajectory… Serial entrepreneur Sibeko was the second black businessman to open and operate a Pick n Pay outlet in Soweto when he opened the doors in 2008 and was also part of the team who spearheaded the 2010 Fifa World Cup branding and won the Best Look

and Feel for an Event at the Global Event Awards. “After the World Cup, I sold Icon SA [the company responsible for the branding], as I felt we could do bigger projects, like the World Cup. I had to move on and find other interesting avenues,” he says.

On his motivation and life motto… “I’ve always lived by the philosophy of investing in my passion. Everything I’ve done has been fuelled by this desire.” This is evident in his cutting-edge Aero Farms business, which focuses on finding solutions to climate change issues. His advice to budding entrepreneurs is to focus on their passion and never fear or be intimidated by failure.

On his passion for collecting art… Sibeko was surrounded by art at home at an early age. He says: “My guardians loved and collected art. I vividly remember admiring a painting by William Kentridge at a very young age. I didn’t know who he was, but I was drawn to his work and found the art space fascinating.”

On his prized collection… In 2009, Andile Magengelele, a friend and an art adviser, introduced him to Nelson Makamo, a talented artist who inspired Sibeko to start collecting art. “I admire Makamo. Unlike Kentridge, he is part of my generation and a window to what this country is capable of producing in terms of talent.”

His collection currently consists of 25 artworks and he is planning on adding four more this year. He’d like to acquire works by Zimbabwean artist Patrick Makumbe and photographs from South African lensman Andrew Tshabangu.

“I see my collection as an investment and a hobby which holds sentimental value. It’s like a collage: it tells a story of where I’m from, where I’m at and where I’m going. I hope I’ll be able to look back and tell a story of a life well lived.” DM

comRead Grande Provence sommelier Khuselo Mputa’s tips on starting a wine collection

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