18 Wednesday, January 30 2013 BUSINESS REPORT

Opinion&Analysis

MY COLLEAGUE gets at leastfive short-term loan offersfrom all the big banks everymonth. She only has onestore account and is paying

for her car. She feels she is being houndedby credit providers and I think its true.

Paul Slot, a director at Octogen, saidthis was exactly how consumers fell intothe debt cycle. He added that creditproviders could be aggressive, but con-sumers needed to do the hard work andresist the temptation.

“It starts with a small loan and once you[have] gone through the first loan youthink it is easy to get the next one. How-ever, once you cannot pay for all thesesmall loans, you go for the bigger one to tryand consolidate all your debt.”

According to Martin Snyman, a debtcounsellor at Octogen, seven cases werereferred to a magistrate court and the indi-vidual consumer’s commitment to repaydebt was between 79 percent to 160 percentof monthly income. The seven consumershad 82 credit arrangements between themwith the lowest being seven and the highest

17. The total debt amounted to R1.6 million. Slot said the real culprit in this case

would be the service provider that allowedthe consumer to use up to 70 percent oftheir monthly income to repay a loan.

The magistrate court declared 25 ofthese agreements, approved by main-stream credit providers and valued atR575 243, reckless. This means that theseconsumers are no longer required to repaythis debt.

This could be one way to make irrespon-sible credit providers pay for recklesslending, however, the process was a diffi-cult and long one. And a debtor may lose allof their money or the court may ask you topay just the capital. But the key is resist-ance. page 19

Remittance costsAfrica’s overseas workers, who sent closeto $60 billion (R540bn) in remittances lastyear, pay more to send money home thanany other migrant group, according to theWorld Bank.

South Africa, Tanzania and Ghana arethe most expensive with prices averaging20.7 percent, 19.7 percent and 19 percent re-spectively, “due to limited competition inthe market for cross border payments”.

Doubell Chamberlain, a consultant toFinMark on retail payment systems,identified a number of potential reasonsfor higher costs. In South Africa theseinclude the cost of complying with

anti-money laundering legislation and ex-change control. Moreover, competition islimited to banks because only banks haveaccess to payment systems.

Sandisiwe Ncube, a senior researcher atthe Centre for Financial Regulation and In-clusion (Cenfri), identified generic rea-sons why costs to transmit to Africa arehigher. The size and volume of remittancetransactions is often small, attractinghigher remittance costs per transaction.And the size of the remittance market isalso small – a larger remittance marketcould contribute to increased volumes andlower costs.

Moreover, regulatory requirementscould impede market entry (and ultimatelyinnovation) and drive up costs.

Also limited infrastructure couldpotentially drive up transaction costs – forinstance, sending money to remote areas

would mean additional transportation costs. Other minor considerations could in-

clude: the size of the remittance operator(the bigger the better); the size of theremittance service provider, which willdetermine the exposure to interest andexchange rate shocks; and the marketdominance of a particular remittanceproviders.

According to the World Bank, bringingremittance prices down to 5 percent of themoney sent from the current 12.4 percentaverage cost would put $4bn more in thepockets of Africa’s migrants and their fam-ilies who rely on remittances for survival.

Zille on breakfastsDA leader Helen Zille yesterday wrote along article entitled “First National Bank,the New Age and the Guptas: How politicalpatronage works in the ‘new’ SouthAfrica”.

The past week’s headlines were domi-nated by the FNB “debacle”, wrote the DAleader. For those readers who might havebeen hibernating, she noted, FirstRandchief executive Sizwe Nxasana “made agrovelling apology to the ANC, after thebank’s senior executives were summonedto [ANC headquarters] Luthuli House for aroasting over an advertising campaign”.

The enraged ANC threatened that itsvideo clips could deter investment, she re-ported. “For the FNB’s part, one of theirexcuses for withdrawing the ads was to

protect the children involved. If FNB hadreason to fear for the safety of their chil-dren, what does that say about SouthAfrica and the ANC? It is truly chilling.”

The ANC’s bullying of a private com-pany would do far more to kill investment“than anything a child might have said”.

But that was going off at a tangent. TheDA leader’s withdrawal last week from atelevised New Age breakfast was made “af-ter it emerged that state-owned enterprises,Eskom, Transnet and Telkom had funded24 breakfasts to the tune of R25 million”.

The “sponsorship” was a “fig-leaf” fordisguising the transfer of millions of randof taxpayers’ money into a company ownedby the Guptas, “who are major benefactorsof the ANC and [President] Jacob Zuma”.

Zille acknowledged that she hadthanked Telkom when she spoke at a NewAge breakfast in February. She had be-lieved it was an ordinary sponsorship atthe time. Instead of focusing on ChancellorHouse – which acted as a conduit of statefunds – the media focused on her alleged“hypocrisy”. It may be a little unfair, butthen one has to assume that she too knewabout Chancellor House last February, aswell as anyone else.

Perhaps is it simply about doing what apolitician says, rather than what theyshould not have done.

Edited by Peter DeIonno. With contributions fromNompumelelo Magwaza, Ethel Hazelhurst andDonwald Pressly.

THE OMNIPRESENCE anduniversality of sport in society isundeniable. The life and times ofsports stars, whether they aresoccer geniuses like Lionel Messi

or cycling heroes like Lance Armstrongare so interwoven into the fabric of fami-lies, friendships, and business connectionsthat it can be argued that sport plays a rolein shaping and dictating companies’ busi-ness fortunes.

For example, golf focuses on the honoursystem and sportsmanship – two majorattributes in a business world increas-ingly making decisions based on trust.

Ninety-seven percent of executivessurveyed in “From the Boardroom to theBack Nine: The importance of golf in busi-ness”, said that golfing with a businessassociate was a good way to establish aclose relationship.

But they said in the survey that wheel-ing and dealing on the fairway wasn’talways virtuous – 20 percent of executivessaid they would let a client beat them ifthey thought it would get them more busi-ness and 82 percent of executives admit tocheating on the golf course.

Even as we all agree that sports teachesvalues, that those who participate in sportclaim they learn respect, responsibility,self-discipline, sportsmanship, and team-work, there is no doubt that some believethat looking out for one’s own self-interestoften seems to trump everything else. Sowe should not be surprised that Armstrongcheated his way to fame and fortune.

After 13 years of fierce denials, Arm-strong admitted to Oprah Winfrey duringa recent interview that he did indeed useperformance-enhancing drugs to win theTour de France seven times.

Armstrong said he started doping in themid-1990s, using blood booster erythropoi-etin, testosterone, cortisone and humangrowth hormone, as well as engaging inoutlawed blood doping and transfusions.The doping regimen, he said, helped him inall seven of his Tour de France wins.

Two weeks ago a Liverpool soccer staradmitted to faking a tackle from an oppo-sition player so that the team could beawarded a penalty.

When Liverpool star Luis Suarez admit-ted that he had “invented a fall, because wewere drawing at home to Stoke and weneeded anything to win it”, it was a devas-tating blow to the coach Brendan Rodgers.

The coach called the striker to his officeand told him he wanted his teams to “bewinners, but winners in the right way, withthe best sporting manner”.

“We have a philosophy here – the teamalways going into every game looking towin in the best possible way and sportingmanner and we don’t want that to change,”the coach told reporters.

“I sat down with Luis and talked to him.He knows how I feel and what we are try-ing to do. This is a big club, bigger thananyone, and whatever people say goesaround the world. He accepts that andunderstands now.

“I said at the time it was the wrongthing to do. I need to protect the club and ifanything puts that in jeopardy I will dealwith that. Luis is aware of my feelings,”Rodgers said.

“In fairness to Luis, most players waituntil the end of their careers when theyare writing their books to put it in. He hasbeen honest enough to come out and say itin the middle of his career.” he joked.

So, in today’s world characterised bycorporate executives fabricating financialrecords, employees cheating employers,and thousands falsifying their taxes, itshould come as no surprise that athleteslike Armstrong choose to cheat in sports.

Like in sports, the purpose of businessis to serve people (the customers) with agood product, employees with fair wages,shareholders with profits and the commu-nity through taxes and philanthropy.

Cheating has helped some executivesget ahead in life by prioritising them-selves, regardless of how much harm theymay cause to others.

I am not accusing all executives ofbeing greedy and power-hungry. Many ofthem are doing wonderful things for manypeople, and they are building up their assetbase to pass on to their children. However,there are those who are so greedy and who

have such a low regard for their fellow manthat they would steal, lie and cheat to gainmaterial possessions. And then they lavishthemselves with the trappings from theirill-gotten gains.

We live in a society in which obtaininga goal or an end can become more impor-tant than how you go about obtaining it.Our society is centred on results.

These become so powerful that peoplelose sight of the means to achieve it. Orthey decide that it’s worth the cost.

In fact, the opposite is true. Cheatsforget that cheating undercuts a companyor an organisation’s value. What profit-making requires is honesty and integrity.

The fundamental principle of businessshould always be the voluntary exchangeof value for value, to mutual advantage.

To succeed, businesses must ensurethat what they offer is of consistently highquality. A company whose product is defec-tive, or which seeks to cheat its customers,loses its business.

Unfortunately in today’s business thereare pragmatic corner-cutters who ignorethe fact that there is value by subscribing

to honesty and creating quality productsand services and maintaining the com-pany’s reputation over many years – moreso than by cheating.

It is a pity that immoral actions seem tobe justifiable in pursuit of victory. This isneither a new development nor one limitedto the sports or corporate world.

The antics of the executives whose cor-porate integrity is being challenged dam-age the reputations of all executives whoobey laws, care for their employees andplay fair.

When skulduggery is uncovered withincompanies, it jeopardises not just themoney of investors, but the jobs of employ-ees and the public’s confidence in theeconomic system.

Therefore, having a corporate leaderwith a strong moral compass is essential.When that’s missing, the foundation of acompany is shaky.

Let us learn to recognise and rewardthe real face of leadership. Let’s continueour education in the art of leadership byreminding ourselves of the difference be-tween celebrities and heroes. Celebrities,

as the old saying goes, are people who arefamous for being famous. Heroes are peo-ple who do the right thing – whether youknow their names or not. Cheating has noplace in honesty and leadership.

So what is the ethical advantage used bythe most successful companies? ■ A commitment to performance for allstakeholder groups.■ Leaders who “walk the talk” in theirpersonal behaviour. ■ Institutional integrity, so that employeesfeel free, even obligated, to do the rightthing, even if it has a short-term cost.

In his book, Good to Great, Jim Collinssays at some time in their tenure, execu-tives face a dilemma: They can do what isbest for themselves and their careers – fortheir celebrity – or they can do what is bestfor their company.

Without exception, Collins says, chiefexecutives who took their companies fromgood to great chose the path that was bestfor their companies. Let that be the lesson.

Liza van Wyk is the chief executive of AstroTechTraining, which offers leadership training.

ONE OF the most significantdevelopments on the labour,and indirectly tax, front inrecent years seems to havebeen overlooked as we all fo-

cus on the hilarity of a mid-rankingemployee outsmarting his employer byoutsourcing himself.

The employee, who is now an ex-employee, had a mid-level job at technol-ogy firm Verizon. At some stage, hedecided he had better things to do with histime and worked out how to outsourcehimself to a firm in China. If you overlookthe dishonesty involved, the arrangementappeared to create a win-win situation forall concerned: the employee got to keepmost of his comparatively large salary andspent his day surfing the web, there was awork opportunity created for someone inChina and Verizon reported that the em-ployee turned in above-average work.

The fact that he was fired when the rusewas discovered reflected a surprising intol-erance of his pro-active, indeed entrepre-neurial, approach to work. Perhaps Verizonbelieved the man was employed not somuch to get a job done as to do a job. Hesucceeded on the first count, but failedutterly on the second. Or perhaps Verizonfelt cheated out of an outsourcing profit.

Having dismissed him one thing is cer-tain, Verizon will be trawling through theranks of its employees to see what oppor-tunities there are for more of this type ofoutsourcing. And this will not only be doneby Verizon, it will be done by all sorts ofcompanies in the US and across the globe.

What the Verizon employee has done islay the groundwork for a new generation ofoutsourcing. This will be devastating for thetargeted employee, but it will be great forshareholders and very senior executives. Inno time at all, the staff complement of eventhe largest companies will comprise onlythe executive directors and a handful of crit-ical employees who are there to manage thecomplex outsourcing balancing act.

And of course, to the extent that thecorporate bottom line benefited from thissecond-generation outsourcing, shareprices would surge and dividends wouldflow, resulting in automatic benefits forshareholders. This means that the execu-tive directors who have managed to clingonto their jobs will see their remunerationpackages reach stratospheric levels.

The surge in share prices would alsomake trading in shares and all their deriv-atives more attractive, which would en-hance the returns to fund managers andincrease their rent-seeking opportunities.

All of this will of course mean that un-employment outside China, Vietnam andother “low-cost” sources of supply, is set tosoar. It will not just be the likes of textileworkers who will be affected, it will behigher-ranked individuals who are not ac-customed to being the victims of the whim-sical demands of management cost-cutting.

But fewer employees means fewer taxpayers and fewer employment opportunitiesmeans greater demand for government-provided social services. The governmentmight be able to ease the resulting pressureby outsourcing huge chunks of its responsi-bilities and costs, but given the recent reve-lations about its large “consultancy” bill,this may not result in the sort of win-win sit-uation created by the Verizon employee.

Given that the loss of employee taxwould not be made up by an increase in taxfrom corporate profits, a desperate govern-ment might be tempted to increase not justthe corporate tax rate but also the tax onexecutive remuneration. Until it was re-minded that any such move would result inthe company and its executives decamp-ing, or outsourcing themselves, to a moretax friendly regime such as Russia.

Verizonoutsourcingcase is a canof worms

❚❚ DILBERT ❚❚ DIARY

Consumers urged to resist temptation of small loans

What does Lance’s confession mean to business?

BUSINESS WATCH

Paul Slot,a director atOctogen,said creditproviders could beaggressive,but consumersneeded to do the hard workand resist the temptation.

A corporate leader with astrong moral compass isessential.When that’smissing, the foundation ofthe company is shaky.

FAIRBUSINESS

A NEWLY married SouthFlorida man who opted to takehis wife’s last name is fighting theDepartment of Motor Vehicles(DMV) after it suspended his driv-ing licence on grounds of fraud.

Property investor LazaroSopena offered to change hisname following his 2011 marriageto Hanh Dinh in order to help hiswife’s Vietnamese family perpetu-ate their family surname. His wifehas four sisters.

Shortly after their marriage,Lazaro Dinh got a new passport

and Social Security card andchanged his bank account andcredit cards before applying toupdate his driving licence.

“It was an act of love. I have noparticular emotional ties to mylast name,” said Dinh, who wasborn in Cuba and came to the USat the age of 11 in 1984.

Lazaro Dinh was issued a newlicence after presenting his mar-riage certificate at his local DMVoffice and paying a $20 (R180) fee,just as newly married women arerequired to do when they adopt

their husband’s name.More than a year later Dinh got

a letter from Florida’s DMV accus-ing him of “obtaining a drivinglicence by fraud”, and advisinghim that it would be suspended atthe end of the month. Ironically, itwas addressed to Lazaro Dinh.

When he called the DMV officehe was told he had to go to courtto change his name legally, a longprocess costing $400. When he ex-plained he was changing his namedue to marriage, he was told “thatonly works for women”. – Reuters

Adoption of wife’s surname lands man in court for fraud

INSIDEBUSINESS

Ann Crotty

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❚❚ CONTACT

Liza van Wyk

❚❚QUOTE OF THE DAYIt is easy to be generous with other people’s money. – Latin proverb