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Logistics property is strongly placed for growth

Credit: Equites

The trend which saw logistics property growing as a sector because of the Amazons of the world needing more space to store their products will speed up in the post-Covid world as more people work and order from home.

The Economist focused in its 30 May 2020 issue on Prologis, Amazon’s biggest landlord. The American company has assets of $125-billion and 90 km² of floor space, and spent $25-billion in 2019 in America and Europe. E-commerce now accounts for about 40% of its construction activity, whereas it was a fifth before the pandemic.

A similar trend playing out in South Africa was noted by Nick Wilson in the Business Times (Sunday Times, 5 July 2020). The logistics property sector had “boomed in recent years due to the growth of e-commerce” but was likely to do even better because of Covid-19. About a third of Fortress’s R30-billion portfolio is in the logistics sector and it signed contracts in 2020 with Takealot and a Netflix production company.

The clients of Equites, a company which focusses on logistics property, include Amazon, Super Group, HDL and DSV, a Danish transport and logistics company. Equites is the only specialist logistics property company listed on the JSE. In six years, its portfolio has grown from R1-billion to R15-billion. There are more than 30 real estate investment trusts (REITs) on the JSE and they generally deliver good value.

FNB, which publishes a regular property barometer, has done an in-depth analysis of previous crises to help understand what may occur in the post-Covid property market. According to John Loos, a property strategist at FNB Commercial Property Finance, the most vulnerable sector is likely to be Retail Property. Smaller neighbourhood centres, with more essential items and greater convenience, will be less vulnerable.

This is borne out by the results announced by Resilient in 2020. Of the company’s 28 retail centres across South Africa, the ones that did best were the smaller, rural malls.

Credit: Fortress Reit Ltd

The South African Council of Shopping Centres calculates that the country has the sixth-highest number of shopping malls in the world. R2-billion was recently spent on Menlyn Park in Pretoria to expand it to 177 000 m² of gross lettable space while the Gateway Theatre of Shopping in Durban, South Africa’s second-biggest mall, recently spent R750-million.

The lockdown accelerated the trend for people to work from home, and so the Office Property sector will come under pressure. Many companies will be reducing office space but, as Loos writes, “Improved technology has gradually been driving a greater remote working trend for some years. Covid-19 has merely sped this trend up.”

Industrial Property will take a hit but is expected to recover strongly while Residential Property is expected to be the least at risk. Prices will likely go down, but people need a place to live and the work-from-home trend will increase the importance of residential property.

The lockdown accelerated the trend for people to work from home, and so the Office Property sector will come under pressure.

Loos concludes that, “In a few decades time, the composition of the property stock may look noticeably different to what it is today, the key features being a smaller portion of the total being retail and office property, and an even larger portion of the stock being residential property than is currently the case.”

Statistics SA has found that the percentage of South Africans living in flats has risen markedly. Whereas 26 out of 100 approved plans in 2013 were for flats, this figure reached 59 in 2016. Although the total number of people living in flats is still relatively small (5.4%), this figure will rise as urbanisation increases.

Construction rebuilding

Job losses and business rescues have been recurring themes in the South African construction sector for some time. The fact that some kind of recovery must happen after the lockdown will give hope to all construction and construction material companies, and they will hope that increased order books will allow them to restart some of their facilities.

Corobrick is a manufacturer of masonry, pavers and concrete earth retaining systems. The company, which has its headquarters in Durban and employs 1 400 people, announced in 2020 that four of its 13 factories would be closing.

PPC Cement suffered losses for the year ending 30 March 2020 with cement demand significantly down from the previous year. The Covid-19 lockdown will have made the situation worse and a rights issue is likely to follow.

Cement and brick manufacturers are hoping for a quick recovery.

Road-building, renewable energy and affordable housing have proved good sectors for Raubex, which returned good results in 2020, despite the lockdown occasioned by Covid-19. The company’s Earthworks and Materials division delivers two-thirds of its operating profit but it is upbeat about its Roads division winning contracts in South Africa in the short term. Tenders were entered for R22-billion worth of road construction in the six months to March 2020.

The Inner City Local Area Plan (LAP) for Durban has been developed for the Strategic Planning unit of the eThekwini Municipality by a Joint Venture called IPPU. A major milestone was reached in 2019 when the beachfront promenade extension reached the harbour. The project began in early 2018 and cost R400-million.

According to the organisers of the 2019 KZN Construction Expo, infrastructure will attract more than R200-billion in investment over seven years and R35-billion will be spent over 15 years at the Point Waterfront development.

Online sources: 

Coega is fast-tracking infrastructure projects

Cecilia Makiwane Hospital is a large, provincial, government-funded hospital situated in the Mdantsane township of East London, Eastern Cape.

The Coega Development Corporation (CDC), developer and operator of the number-one Special Economic Zone (SEZ) on the African continent, namely the Coega SEZ, provides expertise in the fast and efficient delivery of minor and mega complex infrastructure development projects in South Africa and the rest of the African continent.

The CDC has a 20-year proven record in infrastructure development and facilities maintenance.

“We can assist all government departments to fast-track the implementation of their infrastructure projects, amid the coronavirus pandemic challenges, to stimulate the local economy, lift local SMMEs, and create job opportunities.

“We are the infrastructure implementing agency of choice in the country because of our cutting edge customised solutions, international best practices and methodology. Coega has ISO-certified systems and processes that guarantee the effective delivery of the projects within scope, time and budget. We can even save our clients money through our project accounting solutions. Our record of unqualified audit opinion by the Auditor General of South Africa on our projects speak for itself,” said Dr Ayanda Vilakazi, CDC’s Head of Marketing, Brand and Communications.

The CDC’s Infrastructure Project Management Services include:
  • Project methodology and system.
  • Development of reporting and monitoring services.
  • Stakeholder analysis and engagement programmes.
  • Integrated planning and budgeting.
  • Development of business plans.
  • Procurement of service providers and required equipment.
  • On-the-job training and contractor development.
  • Human capital solutions.
  • Post-implementation monitoring and facilities maintenance.
La Mercy Maths, Science and Technology (MST) Academy in KwaZulu-Natal. Coega is an Infrastructure Implementing Agency.

The CDC’s infrastructure project expertise and strategic solutions are utilised by various government departments and the private sector, locally and in the rest of the African continent.

Our clients include, among others, the Eastern Cape and KwaZulu-Natal Departments of Basic Education, Eastern Cape and National Departments of Public Works and Infrastructure, and National and Eastern Cape Departments of Health.

Furthermore, the CDC has worked with other clients outside of these departments to fast-track the implementation of their projects. These include, among others, the Mpumalanga Economic Growth Agency (MEGA), Northern Cape Development Agency (NCEDA) and Richards Bay SEZ.

Kingsburgh Primary School, Lovu Town, KwaZulu-Natal.

On the African continent, the CDC is taking full advantage of inter-Africa trade, which has been made possible by the signing of the African Continental Free Trade Area (AfCFTA) agreement by African countries to promote greater economic integration across the continent.

To this end, the CDC’s International Business under Coega Africa Programme is managing the implementation of infrastructure projects in Zimbabwe, Central African Republic and Cameroon, among other countries.

For more information on the CDC’s Project Management Services, please contact our expert in Infrastructure Project Management:
Mr Chuma Mbande: 
Email: chuma.mbande@coega.co.za
Tel: +27 43 711 1600
Pretoria Office: 
Tel: +27 12 451 8300

Oceana Group, integrally invested in the Oceans Economy

The Ocean, or Oceans Economy, is positioned within the South African Government’s National Development Plan (NDP) as a key driver of economic activity and growth which will help eliminate widespread poverty and inequality by 2030.

As Africa’s largest fishing company, and home to the South Africa’s iconic brand, Lucky Star, Oceana is focused on protecting the integrity of the country’s marine ecosystems, promoting sustainable employment opportunities, and contributing to the country’s food security.

Oceana believes that South Africa’s more than 3,000 km of coastline along a major international strategic shipping route presents the perfect platform for sustainable and long-term usage of our oceans and coastline for responsible growth and development and shared prosperity.

A sustainable oceans economy incorporating both the traditional and newer industries such as fishing and maritime transport, allied to newer sectors such as marine tourism, renewable energy, aquaculture and marine biotechnology, have the potential to meet the needs of all peoples, particularly those who make up rural coastal communities who have borne the brunt of poverty.

From humble beginnings in the tiny West Coast fishing village of Lamberts Bay when the Lamberts Bay Canning Company Ltd was established in 1918, Oceana has over the course of the last century grown to be a leading global fish protein company and Africa’s largest fishing company. Oceana is ranked among the top 5 most empowered companies on the Johannesburg Stock Exchange and listed on the Namibian Stock Exchange as well.

The Group operates in South Africa, Namibia and the USA and markets fish-based products in 46 countries across the world.

The fishing industry estimates that it accounts for 20,000 direct jobs and a further 60,000 indirect jobs across the economy in South Africa, where the Group continues to drive economic empowerment, real transformation and environmental stewardship for current as well as future generations.

Government launched Operation Phakisa (“hurry up” in Sesotho) in mid-2014 to spur sustainable economic growth across key areas in a bid to address poverty, inequality and unemployment. The Oceans Economy was one of seven targeted sectors, and listed six priority areas including offshore Oil & Gas, Aquaculture, the further development of Small Harbours, Coastal and Marine Tourism, Marine Transport and Manufacturing & Marine Protection Services and Ocean Governance.

The fishing sector was not included as one of the key priority areas under the Oceans Economy despite its significant socio-economic contribution which is estimated at over R14-billion a year.

The fishing sector is far more established than some of the newer maritime industries punted under Operation Phakisa but this does not mean that fishing is not a key contributor and enabler to national imperatives of economic growth, job retention and creation, and sustainable economic development, particularly in coastal areas and communities where unemployment and underdevelopment are chronic issues.

The commercial fishing sector, of which Oceana is an important stakeholder, makes a socio-economic contribution of R14.3-billion per annum, employing in excess of 20,000 people directly and a further 60,000 indirectly, and has an annual spend of over R1-billion in developing and supporting around 2,000 SMMEs all across South Africa.

The sector is also noted for its capital intensive nature and, as such, lists fleet and processing facilities valued at over R13,5-billion, with further capital investments of R7,5-billion over the last 15 years.

The sector furthermore can speak to demonstrable transformation, having moved from one of the most untransformed sectors into one of the most transformed. Under Apartheid only 1% of commercial fishing rights were held by black South Africans, but black ownership has grown and has continued to rise, from 35% in 2004 to over 75% currently.

Oceana operates 11 factories across the world and also manages a fleet of 54 vessels and eight cold storage facilities.

The Oceana Group works hard to empower communities and contribute to environmental sustainability throughout all the communities in which the company operates. Oceana is also committed to job security, investing in skills development, and bringing new technologies to bear to support and uplift coastal communities.

Oceana holds the popular pilchards brand Lucky Star, which enjoys 80% of market share in South Africa.

The Group is working hard to drive positive transformation in fishing to ensure that the small-scale fishing sector participates in and contributes towards the broader economic development of South Africa by creating better job opportunities, shared prosperity, and enabling sustainable development in coastal communities.

While the commercial fishing industry is well transformed in terms of broad ownership, here is still a need for greater transformation at participation levels. Continuity through certainty and long-term stability provides the platform for significant further growth and economic development and it is imperative that all stakeholders work together with a unified sense of purpose.

A fully transformed commercial fishing industry is key to unlocking economic development in South Africa because the fishing value chain offers enormous opportunities for inclusive growth and employment and enterprise development in coastal communities.

At Oceana, we believe that any company that is afforded the right to fish must prove their tangible commitment to converting these rights into broad-based social and economic benefits.

This should at all times be done in a sustainable and inclusive manner. As such, the company launched the Oceana Empowerment Trust (OET) in 2006 to unlock and convert the value of harvesting fishing rights into shared, broad-based value for eligible black South African employees.

The OET has a 10% shareholding in Oceana with a market value of almost R1-billion, making the Trust the largest 100% black-owned fishing entity in South Africa in terms of ownership value. As of September 2019, 2,447 beneficiaries had received over R400-million through the Trust, allowing them to become financially empowered and active participants in South Africa’s formal economy.

The Oceana Group will also continue to play its part in skills development as it is vital for South Africa and the greater continent’s growth. Oceana’s interventions are premised on the fact that holistic skills development is central to enabling young people and women in particular to be active economic participants and not mere bystanders.

Oceana recognises that the development of the small-scale fishing sector and the enhancing of skills in this area is paramount to longer term success, to empower individuals and communities to participate to a greater degree in the formal economy, but crucially, also creating the opportunities and platforms to support and meet these ambitions.

Communities need to move beyond just survival mode to a state where they are empowered enough to become agents of economic change, where dignity is restored and long-held dreams fulfilled.

Imraan Soomra – CEO, Oceana Group

I am confident that we have a sustainability strategy that enables us to convert fishing rights into shared value and continue to deliver social and environmental dividends to society.

Areas of potential growth include marine science, engineering, vessel crewing, supply chain, artisans, food safety and supply of vessels and related equipment.

Oceana invested R28.3-million in skills development in South Africa and Namibia in 2019 and offered leamerships, internships and graduate programmes to empower the youth.

A key part of the Oceana Group’s strategy in terms of empowerment and greater participation in the Oceans Economy is the Oceana Maritime Academy which will be launched and fully operational in the first quarter of 2021.

Oceana has launched this exciting initiative with an initial R40-million capital investment and will spend R35-million a year on fishing sector skills and training with a particular focus on small-scale fishers.

The state-of-the-art facility in the Hout Bay harbour precinct is an investment in the future of the South African and international fishing industry, being the only academy in South Africa that focuses exclusively on the needs of the fishing industry, both small-scale and commercial.

Seeking to address the scarce and critical skills shortage in the industry, the Oceana Maritime Academy will offer world-class, accredited and industry relevant maritime skills and training that will provide the industry with new talent while enabling small-scale fishers to fish more productively, profitably and sustainably.

The Academy will draw attendees from the local Hout Bay community, the small-scale fishing sector from all over South Africa, Oceana Group employees, as well as anyone interested in a career in the fishing industry, and offer training in a broad range of skills.

This shared value initiative will not only strengthen the Oceana business and the talent pipeline pool for the entire industry, but will help build a stronger, more prosperous and equitable country.

While Oceana’s strength lies in fishing, with its core business being the catching, procuring, processing, marketing and distribution of canned fish, fishmeal, fish oil, horse mackerel, hake, lobster and squid, the Group has a diversified portfolio of operations which extend to the provision of refrigerated warehouse facilities and logistical support.

Oceana markets and sells close to 300,000 tons of fish and fish products in 46 countries in Africa, North America, Asia, Europe and Australia and as part of further diversification in the Blue Economy, is seeking to move into longer term sustainable fish supply in aquaculture.

Oceana views the Oceans Economy as a key driver of sustainable economic growth, job creation and food security, yet the Group remains fully committed to protecting the integrity of the country’s marine ecosystems.

Yet fishing is but one way in which the Oceana Group is seeking to empower the communities in which it operates.

Through the Group’s flagship brand Lucky Star, the company has partnered with the West Coast Business Development Centre (WCBDC) to assist aspirant and existing business owners in the small West Coast towns of Laingville, Steenberg’s Cove, Stompneusbaai, Velddrif and Lamberts Bay.

Lucky Star provided the WCBDC with the building to be able to provide its services to the St Helena Bay community, resulting in the WCBDC in 2019 assisting almost 200 entrepreneurs with a variety of services.

Oceana recognises that the Small and Medium-sized Enterprise (SME) sector will be one of the key drivers of economic growth and development and employment in years to come and therefore is an active enabler and supporter through initiatives such as interest-free loans, training and infrastructure support, which seek to unlock the inherent potential in this sector, particularly for rural coastal communities.

At Oceana, we believe that by working together, the glaring inequalities which so blight South Africa’s beautiful landscape, can be overcome and we can create a country where opportunity, inclusivity and prosperity for all can find a home.

Sharing Africa’s beauty with the world

Mohair is one of the world’s most beautiful sustainable natural fibres.

South African Mohair Industries Limited (SAMIL) is the link between mohair producers, processors and consumers. Our vision is to be an innovative South African company specialising in the production and processing of natural fibres, as well as speciality spun yarns.

Mohair, the fleece of the Angora goat, is:
  • the noble fibre, known as the diamond fibre
  • lustrous, resilient and offers exceptional colour reflection
  • one of the world’s most beautiful sustainable natural fibres
  • a symbol of luxury and exclusivity.

African Expressions

Our local brand African Expressions was born of the desire to share Africa’s natural beauty with the rest of the world. Through our unique range of yarns, we express the essence of that which makes Africa magical. Our network of local farmers, who farm in optimal Angora goat conditions, breed stock which bear excellent fibres. This ensures that our yarns are naturally soft to the touch, easy to knit and luxuriously versatile.

Crafters and knitters are returning to their passion

Michael Brosnahan, SAMIL CEO

Michael Brosnahan, CEO of SAMIL, unpacks the effects of the Covid-19 lockdown on the mohair industry.

With people at home during the Covid-19 lockdown, was there greater demand from creative people?

Happily for SAMIL the crafters and knitters of the world took refuge in their art, many of them returning to their passion, with time on their hands. The demand for our hand knitting and crochet yarns increased dramatically during the hard lockdown periods and this increase in demand shows no signs of abating.

What were other effects of the pandemic?

Sadly, the effect on farmers and processors was quite devastating financially, particularly in the months of April to June, when we were unable to export our mohair tops. This obviously impacted all who are employed in the industry by way of significantly reduced income. We are very grateful for the assistance provided by the government via the UIF TERS system which helped to reduce the impact.

How will the “new normal” affect the mohair industry?

Providing that South Africa and other countries do not return to a hard lockdown situation, it should not have a further impact. Demand for high-fashion goods will always be there and due to the reduction in availability caused by the ongoing drought conditions in the Karoo region, where most of the mohair is farmed, demand outstrips supply.

Is there a growing awareness of the importance of sustainability among customers?

There is no doubt that the consumer of today makes purchase decisions no longer merely on price alone, but also on their understanding of the ethicality of the manufacturing process. They want to know that the goods have not harmed the environment in any way. This concern extends further to the welfare of the people producing the items and the treatment of the animals.

The Responsible Mohair Standard is an established set of rules drawn up by the global non-profit organisation, Textile Exchange. These rules govern all aspects of the mohair industry, from the care of the environment to the welfare of the animals and all the individuals employed in the industry.

SAMIL divisions

Farming

SAMIL Farming was established with the primary objective of stabilising and possibly increasing mohair supply to the processors.

Combing

SAMIL Natural Fibres Combing is in Berlin, outside East London in the Eastern Cape. As mohair processing has decreased in other parts of the world, SAMIL Combing has become one of the world’s leading processors. Unlike many processing plants SAMIL Combing focusses on and is committed to processing only mohair.

Trading

Through a strong support base of affiliated companies, partners and agents, SAMIL has established strong connections throughout the world for the purchase and sale of raw materials and finished goods. South Africa processes in excess of 80% of the world’s mohair production. The advantage of having both top-making and spinning operations in South Africa, as well as access to raw material produced within the company, is that SAMIL is able to offer lots guaranteed from origin, a rare luxury in today’s business environment.

Spinning and dyeing

SAMIL Spinning is a global manufacturer of outstanding quality mohair yarns, producing a wide and exclusive range of mohair and mohair blended fancy and fine-spun yarns in both fine-count and coarser varieties. We are internationally renowned for our superior product range and cater for the hand knitting, machine knitting, weaving, hosiery and decor markets. Although we specialise in pure mohair, we also blend mohair with a range of other natural and man-made fibres. Yarns can be custom dyed to any shade at SAMIL’s state of the art dye house.

Genetic research

The latest venture under the SAMIL umbrella is the research project called ANGELA which aims to enhance Angora goats and the mohair industry, from increasing kidding rates to the improvement of the different hair qualities. The project will make available its results to all in the mohair farming community.

World-class zinc operation in the heart of the Northern Cape

Vedanta Zinc International (VZI) is a grouping of zinc assets located in South Africa and Namibia, owned by the sixth-largest diversified resources company in the world, Vedanta Limited. Vedanta Limited recently invested R5-billion into VZI’s flagship, Gamsberg open-pit and concentrator project in the Northern Cape province, which is now fully operational and was inaugurated in February 2019 by President Cyril Ramaphosa.

VZI’s operations include Black Mountain Mining (Pty) Ltd (consisting of underground operations Deeps and Swartberg as well as the flagship surface operation, Gamsberg Project) located in South Africa’s Northern Cape province, and the Skorpion Zinc Mine and refinery in Namibia’s //Kharas region. VZI’s vision is to create an integrated, world-class regional zinc complex with the values of Safety, Trust, Entrepreneurship, Innovation, Excellence, Integrity, Respect and Care at the core of their business.

As of March 2020, VZI employed more than 4 200 people (including business partners), of which 99% are South Africans: 80% are from the Northern Cape and 60% from the Namakwa District.

President Cyril Ramaphosa and Vedanta chairman Anil Agarwal at the Gamsberg mine opening.

VZI’s Gamsberg Phase I open-pit mine represents $400-million worth of investment into South Africa by the Vedanta Group. Life of mine extension at other mines in the complex ($46-million), Gambserg Phase II ($350-million) and a further $850-million worth of investment on a possible Gamsberg Smelter-Refinery Complex are potential future investments in the South African mining sector.

The smelter-refinery is subject to the availability of power and support from government to make the project economically viable.

Leveraging technology

Gamsberg has implemented a unique flotation system, the Staged Flotation Reactors (pictured above). They break the conventional flotation paradigm into individual, optimised reactors which drastically reduce energy and air consumption. The footprint in the plant gets reduced by around 50%, operations become easier and maintenance costs are lower. VZI is the first company in Africa to adopt Staged Floatation Reactors.

Backfilling operations is an integral part of Black Mountain. Underground mining creates voids which need to be filled. This provides opportunities for mining operations like Black Mountain to dispose of waste material underground and provide support and stability to the surrounding rock mass.

Biodiversity

The Succulent Karoo Biome is unique in its floral diversity. Among the 36 global biodiversity hotspots, the biome is home to at least 6 000 species of plants that have evolved over millennia. VZI’s environmental specialists have worked closely with a wide range of experts, including those from the International Union for Conservation of Nature (IUCN), to ensure the site’s necessary protection, preservation and ultimate restoration.

The Gamsberg Nursery is derived from the Environmental Management Plan (EMP) and the requirements for the Integrated Flora Permit. Since October 2019, there have been 12 000 plants grown with 379 different species. After the upgrade, 129 000 plants will be housed in the nursery.

The Gamsberg Nursery houses 379 different species and will have a capacity of 129 000 plants after the upgrade.

Community commitment

VZI has joined hands with PinkDrive NPC, a significant player in the gender-related cancer sector, to bring critical screening to the Northern Cape. The outreach programme is for the communities of Okiep, Nababeep, Bergsig, Pella and Pofadder. The campaign aims to create awareness, provide education and render health-related services to community members. Community members are also provided with free screening and testing for Covid-19.

In 2015, 12 new local businesses were created and commercial opportunities to the value of R7.1-million were provided. Childcare and education support programmes benefit more than 1 800 children at a cost of R6-million per annum. Youth and sports clubs are supported. The total spend on corporate social responsibility and community work is over $14-million to FY2020.

The outreach programme delivers groceries to local communities and organisations.

During the Covid-19 lockdown period, many outreaches were made throughout the region. Items distributed included masks, hand sanitiser, gloves, care packages, face shields, food and clothing to areas within the Khai Ma and Nama Khoi municipal areas. Visits were made to old-age homes and disability care centres and schools.

Ready to get behind government’s ambitious infrastructure programme

Futuregrowth is an investor in the Khobab Wind Farm.

In a world in which the government and central bank have several means available to stimulate the economy, infrastructure spend is a powerful anti-recessionary fiscal policy tool.

However, in South Africa economic growth has been constrained by lower levels of investment in infrastructure than in other developing economies, which has been exacerbated by specific issues such as ageing infrastructure and infrastructure bottlenecks. The Covid-19 crisis and the fiscal support needed to alleviate the damage done to businesses and the most vulnerable citizens as a result of the lockdown could also put the government’s future infrastructure ambitions at risk.

The extent of infrastructure spending in an economy is reflected in the level of gross fixed capital formation (GFCF) as a percentage of Gross Domestic Product (GDP). The measure captures how much money as a proportion of total economic activity is being invested in capital goods, such as equipment, tools, transportation assets and electricity and various measurable outputs of these.

South Africa’s reported GFCF has been historically low, with the exception of the build-up to the FIFA World Cup in 2010. Latest statistics show GFCF as a percentage of GDP was 18.19% in 2019, which is considered far too low for a developing economy. Several studies consider an acceptable norm to be in the region of 30% to 35% of GDP.

South Africa’s GFCF ratio also has some way to go before it will achieve the target in the government’s National Development Plan of 30% by 2030. While assessing this, it is important to note that a country’s current debt level does have a bearing on its ability to fund infrastructure initiatives – and South Africa’s government debt burden doesn’t bode well for the country’s infrastructure funding capacity.

When you include guarantees to State-Owned Enterprises (SOEs), the government’s debt-to-GDP ratio is expected to rise to well above 100% compared to the average emerging market level of around 45%. A debt-to-GDP level of more than twice as large as the average emerging market means that the South African government will have very little scope to fund large-scale infrastructure and developmental initiatives and thus the burden will fall elsewhere.

Although there are historical reasons for this high debt-to-GDP burden, the government’s finances have also been stretched by the social and economic measures it has needed to put in place to alleviate the economic fallout from Covid-19. A fiscal rescue package of R500-billion will add to the already high debt burden and economic lockdowns have already resulted in lower levels of revenue generation, putting the government in a difficult position fiscally.

If the environment is right, private investors are ready

Banks, as well institutional investors, are no strangers to fulfilling a funding role but have become more apprehensive about doing so, given the government’s governance, financial and operational SOE failures.

While the various developmental finance institutions need to fulfil a specific role when it comes to industrial policy, economic development and providing credit-enhancing capital, capital market players need to have confidence that the policy environment will remain stable and that potential investments will offer sufficiently attractive risk-related returns.

Jason Lightfoot, Portfolio Manager at Futuregrowth

To a great extent, the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) met these criteria, enabling the private sector to play an important role, committing about R200-billion to the programme to date. REIPPPP is seen as an important success story, particularly in respect of the impressive implementation role that the Independent Power Producers Office played in that programme.

Unfortunately, the success of this programme has not been emulated in other sectors and there hasn’t been a coordinated approach to address the other necessary infrastructure investments until now.

That may change with the Investment and Infrastructure Office set up by President Cyril Ramaphosa. The government gauged private sector investment appetite recently when it presented various project pitches for various sectors deemed a priority to the broader market, as a precursor to the inaugural Sustainable Infrastructure Development Symposium of South Africa (SIDSSA). Sectors the government has identified as in need of infrastructure investment include energy, digital infrastructure, water and sanitation, human settlement, agriculture and transport.

The government’s latest engagement with the private sector is a step in the right direction. It crowds in potential private sector investors in a much more coordinated manner and includes them in assessing how these various initiatives can be funded.

It is encouraging that the government is engaging with capital market participants during the conceptual stage of some of these projects because it will allow concerns to be addressed earlier and thereby potentially ensure a much higher success rate.

Breaking out of SA’s low-growth trap

Although the range of projects is wide, there are several significant ones that could change the South African landscape to the benefit of all. From a digital perspective, infrastructure investment in broadband fibre connectivity could provide peri-urban (townships) and rural communities, which have been traditionally underserviced, with affordable access to broadband connectivity.

The infrastructure initiatives under consideration could be important contributors to getting South Africa out of its current low-growth trap. Although the estimated R1.5-trillion needed to fund the projects over the next decade is a tall ask, the private sector is ready to fund them as long as they are well structured and managed, that investors are compensated for the risks that they are taking and that they ultimately have policy certainty.

Futuregrowth

Futuregrowth has been a long-standing institutional investment partner in infrastructure and developmental finance, funding projects for close on 24 years. It manages the largest debt fund of this nature in Sub-Saharan Africa, the Futuregrowth Infrastructure and Development Bond Fund, which has a market value of more than R15-billion. It has funded various transactions over the last two decades to the benefit of all South Africans – and will continue investing in projects that provide the impetus the domestic economy needs to lift its economic growth rate to sustainable levels in the future, while earning risk-adjusted returns.

Futuregrowth Asset Management is a licensed financial services provider.

 

The Maritime Economy offers blue water opportunities

Richards Bay is the site of South Africa’s largest coal export terminal. (Photo credit: TNPA)

Rarely does a country have an opportunity to start a new sector from scratch, let alone two. When the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) began in 2011 to find new sources of electricity, a strong new economic sector came into being. In eight years, investment totalling R209.4-billion was committed to the energy programme by local and foreign entities.

If anything, the potential of the Maritime Economy, sometimes called the Oceans or the Blue Economy, is even greater.

The anticipated numbers are impressive. The share of the Maritime Economy to South Africa’s gross domestic product (GDP) will by 2033 grow by upwards of 250% (and perhaps as much as 350%) compared to its current value, to a figure between R129-billion and R177-billion. A million new jobs are expected to be created.

In every field South Africa either has existing infrastructure or is in the process of creating or reviving it: ship-building and repairs, oil rig maintenance, oil and gas operations, port operations, logistics, marine engineering and bunkering.

South Africa’s eight ports are run by the state-owned group Transnet, which has a strategic plan for each port to focus on its strengths. Transnet spent R2.5-billion on new port equipment in 2019/20.

On the west coast, Saldanha is the main port for the export of iron ore. Large industrial operations already exist and the Saldanha Bay Industrial Development Zone (SBIDZ) is set to become a hub for maritime repair activities and oil rig maintenance and repair.

About 1 800 km to the east and five degrees further north, Richards Bay Coal Terminal (RBCT) is South Africa’s primary export portal. Although volumes dipped somewhat to 72.1-million tons in 2019, the fact remains that the infrastructure is in place to support expansion of aspects of the Maritime Economy through the Richards Bay Special Economic Zone (RBSEZ).

Sectors under investigation include alternative energy generation and opportunities in the gas sector. A feasibility study is being done on a gas-to-power plant and a large liquid petroleum gas import and storage terminal was recently built for Petredec by Bidvest Tank Terminals.

Saldanha Bay can offload Very Large Crude Carriers as can the Port of Durban, which is Africa’s busiest port. Durban handled more than 81-million tons of cargo in 2019, which included 2.84-million TEUs (twenty-foot container equivalent). The Durban Car Terminal handled 521 280 vehicles (Africa Ports & Ships). Durban is responsible for about 60% of the total volume of containers handled by the country’s ports.

The Port of Durban is home to many maritime companies. EBH SA has been in marine engineering and ship repair since it began as Elgin Brown and Hamer in 1878. Three South African shipbuilders (SAS, Damen Shipyards Cape Town and Nautic Africa) have agreed to pool resources on contracts to become more competitive.

The KwaZulu Cruise Terminal (KCT) consortium won the contract from TNPA to finance, build and run the new Durban Cruise Terminal.

Work underway at Durban’s drydock facilities. (Photo credit: TNPA)

The Port of Cape Town has also launched a dedicated cruise-ship terminal. A renewed focus on ship repair through facilities such as the Sturrock and Robinson drydocks is on the cards for the Port of Cape Town, which has a diverse offering through its Container Terminal, Multipurpose Terminal, Liquid Bulk Terminal and Fresh Produce Terminal.

Drilling off the southern coast has revealed vast resources in the Brulpadda field in the Southern Outeniqua Basin. If some of this gas can be recovered, the two SEZs on the Eastern Cape coast would become critical to its utilisation. The Port of East London is aligned to the East London Industrial Development Zone while Port Elizabeth has two ports, the city port being joined by the Port of Ngqura which anchors the Coega Special Economic Zone.

Fishing

South Africa has 3 000 km of coastline and the extent of the country’s territorial waters is greater than its land size. About half of the fish that South Africans eat is caught locally, and almost all of that comes from the waters off the Western Cape. The two most popular types of fish are hake and sardines, which are harvested by deep-sea trawlers.

The fishing industry earns R3.4-billion in foreign earnings annually and employs 26 500 people across 22 sectors, the main ones being deep-sea trawling and aquaculture (JSE).

The aquaculture industry is currently small, but since 2014 investment commitments of about R700-million have been made. The Coega Special Economic Zone is planning a 440 ha Aquaculture Development Zone to accommodate new projects.

One possibility is to promote import substitution, for example, with salmon, of which South Africa currently imports more than 5 000 tons every year.

The allocation of commercial fishing rights in 12 sectors that was due to happen in 2020 has been postponed to December 2021. It is likely that the quotas of larger fishing companies will be reduced in favour of small-scale fishing companies.

There have been several changes in ownership in the fishing industry, most likely linked to the upcoming determination of new fishing rights in which black shareholding will be a factor. The acquisition by black-controlled Sea Harvest Group of Viking Fishing is part of a larger trend.

Tiger Brands has unbundled its 42% stake in Oceana Group. Oceana holds the popular pilchards brand Lucky Star, which enjoys 80% of market share in South Africa, and has the highest market value of fishing companies in South Africa. The Oceana Group recently purchased Foodcorp’s fishing rights and a US fishmeal and oil company, Daybrook.

Building infrastructure is a presidential priority

Richards Bay IDZ (Credit: TNPA)

The two central planks of the South African government’s post-Covid rebuilding programme are infrastructure and industrialization.

To promote and monitor the first priority, an Investment and Infrastructure Office has been created in the Presidency. It is headed by the former Gauteng MEC for Economic Development, Dr Kgosientso Ramokgopa. In 2020 national government gazetted 51 priority infrastructure projects, with a total investment value of more than R340-billion.

Sectors targeted for intervention include energy, housing, transport, water and sanitation, agriculture, agro-processing and digital infrastructure. Some of the “special projects” that fall outside sector categories include:

  • Rural pedestrian bridges and rural roads.
  • Energy and water savings on government buildings.
  • Digitizing of government information: 10 000 young people will be employed to digitize government information, including hospital files and police dockets.
  • Student accommodation.
  • SA Connect Phase 1B, broadband expansion.

A reconstituted Council of the Presidential Infrastructure Coordinating Commission met for the first time in July 2020. With President Cyril Ramaphosa in the chair, the commission includes national ministers, provincial premiers, mayors of big cities and representatives of the South African Local Government Association. Where the council intends doing things differently is by paying close attention to:

  • Preventing corruption through transparent tender processes and strong due diligence.
  • Community involvement in planning and implementation.
  • Emphasis on local employment and procurement and targeted involvement of SMMEs.
  • Blended financing through the Infrastructure Fund to mobilise more resources from the private sector, multilateral development banks and development finance institutions.

A World Bank report has shown that a 10% increase in infrastructure spending results in a 1% growth in GDP. A study carried out by KMPG for the Gauteng Province found that spending on infrastructure resulted in additional economic activity worth R26-billion in the province and created 92 000 direct jobs.

In the country’s biggest province in terms of economic activity, the Provincial Government of Gauteng spent R30-billion on infrastructure between 2013 and 2016. The Gauteng Infrastructure Master Plan is expected to account for expenditure of about R1.8-trillion over a 15-year period.

Special Economic Zones

A key component of the strategy to boost the value of the country’s products is to develop infrastructure where manufacturing can take place, namely Special Economic Zones (SEZs) and industrial parks.

Each province has been allocated SEZs that play to regional strengths. Described as “major catalytic projects” for the northern province of Limpopo, the Musina-Makhado SEZ (MMSEZ), the proposed Tubatse SEZ and several industrial parks are central to the strategy of expanding Limpopo’s manufacturing capacity.

As of February 2020, Shaanxi CEI Investment Holdings had committed to a $5-billion investment in a vanadium and titanium smelter project at the MMSEZ and a further $1.1-billion had been pledged from other sources. The first-phase focus is on energy and metallurgical processes but agro-processing, logistics and general manufacturing are expected to follow.

Gauteng Premier David Makhura on a visit to the the Nissan plant at Rosslyn in 2020.

In the Pretoria area, already home to several Original Equipment Manufacturers (OEMs), the Tshwane Automotive Special Economic Zone (TASEZ) has been launched. It is a joint project of the Gauteng Province, the Department of Trade, Industry and Competition, and the City of Tshwane. The implementing agent is the Coega Development Corporation (CDC), the developer and operator of the Coega Special Economic Zone (SEZ).

The Coega SEZ is at the Port of Ngqura near Port Elizabeth and it too has an automotive component, recently strengthened by the large investment of the Beijing International Automobile Corporation (BIAC). East London’s Industrial Development Zone (ELIDZ) has many companies that sell to and service the nearby Mercedes-Benz plant while both coastal SEZs have a strong suite in logistics and are planning expanded aquaculture parks.

Energy is a key infrastructural requirement for the growth of any economy, and SEZs are playing a role. The Coega SEZ has been named as the site for one of two liquefied natural gas (LNG) plants to be built (if partners can be found) in terms of the national gas-to-power plan.

The Richards Bay Industrial Development Zone (RBIDZ) in KwaZulu-Natal is the other site designated for an LNG plant, with the capacity planned for 2 000 MW. RBIDZ is also the location of a new biomass plant.

The OR Tambo SEZ in Gauteng underscores Ekurhuleni’s strengths in manufacturing and logistics. The OR Tambo SEZ has launched the biggest food processing operation in the southern hemisphere (and the world’s second-largest refrigeration plant). With a special focus on export-oriented value-added industry, the OR Tambo SEZ leverages its connection to the country’s busiest airport. The focus of this SEZ is on agro-processing, jewellery manufacturing and mineral beneficiation as well as the development of hydrogen fuel cell technology. The SEZ is a subsidiary of the Gauteng Growth and Development Agency (GGDA).

Two of the largest infrastructure projects in South Africa’s history have unfortunately been delayed and are running over budget. National utility Eskom set out to build two huge power stations in Mpumalanga (Kusile) and Limpopo (Medupi). Both are near existing power stations and should have a stable supply of coal.

Eskom committed to completing Medupi in 2020 and intends finishing Kusile by 2023. Medupi will be able to feed 4 764 MW into the South African power grid when in full commission. Kusile will have a capacity of 4 800 MW and will be the fourth-largest coal-fired power station in the world. It will also the first in South Africa to use flue-gas desulphurisation (FGD), a technology that removes oxides of sulphur, such as sulphur dioxide, from exhaust flue gases.

 

Building South Africa back better in 2021

Containers at Port of Durban. Credit: Transnet National Ports Authority (TNPA)

By John Young, South African Business 2021

Build back better has become the new catchphrase. There is a lot of building to do for the South African economy after two recessions, a decade of looting of state resources and a health crisis that all but shut down the economy for several months.

The Chief Executive Officer of the Johannesburg Stock Exchange, Leila Fourie, wrote in June 2020 that she wants to “contribute towards a better, fairer, more sustainable world” (Business Day). As co-chair of the Global Investors for Sustainable Development (GISD) Alliance, a grouping of banks, bourses and asset managers, Fourie has been working to promote investment in Covid-19 bonds, the Sustainable Development 500 fund and renewable energy.

This kind of thinking informs many of the plans that were put forward by business, labour and political parties as the Covid-19 lockdown served to focus the minds of all South Africans about the need to plot a better way forward. The National Economic Development and Labour Council (Nedlac) came up with an agreement which focussed on infrastructure investment, creating a supportive policy environment and the promotion of “strategic localisation” and exports. An umbrella business body, Business for SA (B4SA), identified 12 initiatives which, if accompanied by policy reforms, would boost the economy significantly. The African National Congress (ANC) produced its own economic recovery document.

Having consulted with all these bodies, President Cyril Ramaphosa on 15 October revealed government’s recovery plan. The Economic Reconstruction and Recovery Plan (EcoRRP) names infrastructure investment and building up the country’s manufacturing base as priorities. The plan intends to unlock R1-trillion in private investment. Furthermore, a commitment is made to improving the capability of the state and to remove barriers to doing business or investing in the country.

New roads such as this link to the North West from Gauteng are important parts of infrastructural development. Credit: SANRAL

Soon afterwards, Finance Minister Tito Mboweni announced the medium-term budget policy statement where the most significant promise related to reducing the state’s wage bill. Mboweni is a former Reserve Bank Governor and Labour Minister. The President is a former miner and trade unionist. Both men have been engaged for years in drafting the economic policy of the ANC but it remains to be seen if they can persuade the unions representing workers in the public sector to accept a three-year freeze on wage increases. This will be a major test because South Africa’s debt to GDP ratio is high. The cost of servicing debt is equal to nearly 14% of revenue.

A step that President Ramaphosa took in July did not receive many headlines, but his amendment of the regulations governing the enquiry into state capture made a big difference to the work of the National Prosecuting Authority (NPA). Enabled by the amendment to work with the evidence presented to the commission, prosecutors quickly finalised cases and arrests started happening. After a decade in which it seemed that immunity was guaranteed for corrupt officials and employees of state-owned enterprises, the tide started to turn.

Prosecutions obviously do not provide certainty against future corruption, but at least the prospect of arrest might be a deterrent. One of the biggest obstacles to economic recovery is South Africa’s level of debt, and that is caused largely by the state electricity utility, Eskom, where corruption was rife for years.

The government’s directory lists 131 state-owned entities but there are said to be about 700 altogether, at various levels of government. The three biggest, all of which fall under the Department of Public Enterprises, are Eskom, South African Airways (SAA) and Transnet, with five large divisions covering ports, railways and logistics. Eskom and SAA are significant drains on the country’s finances and getting control of all of the country’s SOEs is another major priority.

Agriculture was one industry that saw some positives during the Covid-19 lockdown. Although sectors like wine suffered badly, a reported increase in maize exports, as well as greater international demand for citrus fruits and pecan nuts, helped the industry expand by 15% (StatsSA). Grain crops such as maize, wheat, barley and soya beans are among the county’s most important crops. Only rice is imported. Wine, corn and sugar are other major exports.

Basing economic growth on a devaluing currency is not always the best long-term method of boosting economic growth, but high-value agricultural exports and increased numbers of high-spending international tourists hold some promise for helping to get the South African economy back on a growth path. Horticulture in particular is seen as holding great potential not only for increased earnings, but for creating jobs.

New economic sectors

Another new area that holds great potential for the South African economy is the Oceans Economy. South Africa has 3 000 km of coastline and the extent of the country’s territorial waters is greater than its land size. And yet the country does not have a merchant marine fleet and only scrapes the surface in terms of the percentage of repair and maintenance of boats and oilrigs which could potentially bring work to its ports.

The introduction of renewable energy into the South African energy market via the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was successful, but the programme stalled.

Hopes were raised with the publication of a new Integrated Resource Plan (IRP) because investors crave certainty. The IRP is a road map for South Africa’s electricity generation and the previous administration seemed determined to push for an expensive nuclear programme. The latest plan confirms that the already hugely successful drive for renewable energy will be continued and expanded.

South Africa’s traditional strength in minerals still holds good. Although gold mining is declining in volumes (even while prices rise), the major investment of Vedanta Zinc International in a project in the Northern Cape and Sibanye-Stillwater’s acquisition drive in the platinum group metals (PGM) sector are significant economic drivers. Coal and iron ore continue to be exported in large volumes through the Richards Bay Coal Terminal on the east coast and the Port of Saldanha on the west coast.

Richards Bay, apart from being the country’s main site for the export of coal, is also a registered Industrial Development Zone (IDZ) and consequently is in a position to attract investors in a range of sectors.

Automotive manufacturing and automotive components continue to thrive, with large investments by most of the major marques and increased exports a feature of the sector. There has been inward investment in recent years, most notably by the Beijing Automotive International Corporation (BAIC) in the Coega Special Economic Zone outside Port Elizabeth. The Tshwane Automotive Special Economic Zone (TASEZ) has been launched at Silverton in Pretoria.

A new SEZ has been formally declared in the northern part of Limpopo, the Musina-Makhado SEZ. The Namakwa SEZ in the Northern Cape is awaiting its licence, as is the Tubatse SEZ in eastern Limpopo.

Geography

South Africa’s location between the Atlantic and Indian oceans ensures a generally temperate climate. The 2 954 km coastline stretches from the border with Namibia on the Atlantic to the border with Mozambique in the east. The cold Benguela current sweeps along the western coast while the warm Indian Ocean ensures that the Mozambique/Agulhas current is temperate.

South Africa’s coastal plain is separated from the interior by several mountain ranges, most notably the Drakensberg which runs down the country’s eastern flank. Smaller ranges in the south and west mark the distinction between the fertile coastal strip and the dry interior known as the Karoo.

The city of Johannesburg is located on the continental divide, whereby water runs south of the city towards the Atlantic Ocean while waters to the north drain towards the north and east. Johannesburg is 1 753 m above sea-level.

Most of the country has summer rainfall but the Western Cape, which has a Mediterranean climate, receives its rain in winter. Droughts are not uncommon and although the national average is 464 mm, most of the country receives less than 500 mm of rain every year. The Western Cape experienced a severe drought which was broken in 2018. The Orange and Vaal rivers play important roles in water schemes and irrigation and the Limpopo River defines the country’s northern boundary.

 

A post Covid-19 world – the implication for management and leadership development (Part 3)

In the previous two articles, we established that uncertainty and instability is the “new normal” and that we require different leadership and decision-making approaches to effectively navigate the complexity. In this final article, we will focus on providing practical suggestions to enable leaders to maintain momentum in these times. Here are some thoughts on maintaining momentum.

Cultivate fast feedback loops

Risk and opportunity emerge on the edges of our organisations. We cannot afford not to have diverse and fast feedback loops in place. We cannot adapt effectively if we don’t know what we are being adaptive to.

Delegate what you can (don’t waste your time and decision-making energy on complicated and unclear decisions)

We all have limited energy for making decisions. Decision-fatigue is real. Now is not the time to micro-manage and spend time making decisions that are within the expertise or mandate of others to make. Focus your efforts where it matters most, managing constraints in the complex and chaotic domains.

Find ways to step off the dancefloor and onto the balcony (slow down)

Ron Heifetz (5) writes about getting a balcony perspective. When we are in the middle of the dancefloor, things are frenetic. We are focusing on details, and immediate decisions. We lose sight of bigger patterns. It is easy to get sucked into the franticness of everyday operations. You have to take time out, take a step back and get a perspective of broader patterns that are playing out or emerging.

If you don’t, you could be heading straight for a cliff and not see it coming before it is too late. Or the opportunity of a lifetime may pass you by because you weren’t looking.

Practice self-care and don’t go it alone

Leaders are forced to make impossible trade-offs in their worlds. This is a very tough intellectual process with a deep emotional impact and undertone. These trade-offs are made on “external things” such as “do I keep staff (and not retrench)” or “do I keep costs high and wipe out dividends that support pensions?”

The psychological experience of these kind of trade-offs is called a double bind: “I am damned if I do and I am damned if I don’t…” The experience is that as a leader, I must execute a plan that feels like a lose-lose option. Very few things are as “rough” as being in a double bind. It is jarring. It leads to loneliness, exhaustion, confusion, inertia, feelings of disorientation, reactions (instead of wise responses) and deep discomfort with self and a criticism of self. Within a double bind, we experience all the most complicated human emotions, and there is no way out. We are critical of ourselves, critical of the situation we find ourselves in, critical of the government, critical of world leaders, critical of humankind for creating the conditions that got us here in the first place.

Practice wayfinding and foster “the passion of the explorer”, let go of notions of returning to a “normal”

The skills, competencies and mindsets that served us and helped us make decisions in the past, no longer work. In the past, failure became fashionable and we paid lip service to it, e.g. fail early and fail fast, which is popular in Agile circles. However, in general we still see failure and making mistakes as something to be avoided, not something to learn from.

Now, mistakes are unavoidable. We need to become explorers and way finders. We will make mistakes, so make sure the steps you take are “safe-to-fail”, i.e. mistakes are recoverable. Understand that failure is an opportunity to learn, and that there is no shame in not knowing. We come from a context where our worth was largely defined by our ability perform; by having answers and being right. Now no-one has answers, and no-one can consistently be right.

Create containment, but don’t become a certainty merchant

Leaders are seduced into becoming merchants of certainty for others. This is challenging us, not only in our work effectiveness, but on the level of identity. Who are we, as leaders, and humans, when we face the unknowable and when we are forced to make decisions where neither option seems right? Who are we when the people that follow us look to us for answers and certainties we don’t have?

A key role of leadership is providing “containment”. In psychology, containment refers to a dynamic where an individual helps others to process and endure existential fears. Leaders bring containment when they show up as human beings, communicate authentically, sets clear boundaries and provides a sense of purpose or direction. A situation that feels uncontained, i.e. not having sense of direction, clarity around boundaries and a sense of connection, that we are in this alone, creates extreme anxiety and that anxiety can lead to burn-out.

Let go of the old (and new) “normal”

We talk about business continuity in the sense of surviving the crisis and getting back to normal; instead we need to think in terms of transformation, not only about our businesses but about all the other systems we depend on. Now is the time to think radically differently about everything, not about ensuring continuity and a return to a pre-Covid-19 status quo.

Getting locked in a state of perpetual past and future thinking can be exhausting. We tend to project the past into the future in order to create a sense of predictability. While we can learn from the past, but cannot be seduced into thinking it illuminates the future; we are in uncharted territory − hindsight doesn’t lead to foresight.

Truly embrace and cultivate diversity

In our discomfort with messiness and ambiguity we have a tendency to create linear and simplistic stories not only about events but also about others. Our stereotypical views of other people, our “othering of the other” have led us to frame diversity as a problem to solve, usually with highly inadequate compliance-driven solutions. But in complex systems diversity is key to our resilience, it is not a problem, it is a strategic asset to nurture.

As we have seen now with our over-optimized supply chains, if we don’t have sufficient diversity, we have no resilience and limited adaptive capacity. We need variety, not only in gender, race and age, but also cognitive diversity, i.e. differences in perspective. Yes, diversity creates tension. But tension is creative, where there is no tension there is no change. If we stamp out all difference and tension, we undermine the adaptive process.

The Core Idea – Future Fit Management & Leadership

  • Our Value Proposition will enable decision-makers and leaders to become complexity- and future-fit.
  • Focusing on meta-skills that will ensure adaptive capacity, and the ability to respond to increasing turbulence.
  • With exponential change, technical skills and best practices have short-lived and limited value. Our programmes will aim to fundamentally shift how participants see and make sense of their contexts and equip them with meta-skills such as curiosity, learning agility, sense-making and adaptive intelligence.

Our view on Future Fit Management & Leadership

Being a Future Fit Manager or Leader will require the development of the following fitness areas:

Future Fit Management & Leadership

Digital Fitness – For managers and leaders, the key to digital readiness lies in creating awareness and stimulating interest in and preference for the digital way.

People Fitness – Self-development and appreciation lies at the heart of appreciating the value and potential that lies in diversity.

Customer Fitness – Mindsets for growth and agility is required to keep the customer at the centre of all innovation and design processes as we adapt to an ever-changing environment.

Strategic Fitness – Doing the right things and doing them right.

Functional Fitness – Developing the required technical, managerial skills.

Complexity Fitness – The ability to take on a Complexity view on all the Fitness Areas discussed above. Complexity and sense-making as “new language”, enables decision-makers and senior leaders to ensure adaptive capacity, and the ability to respond to increasing turbulence.

Strategic Partnering

As one of South Africa’s thought leaders in the applied complexity, Sonja Blignaut has teamed up with the UFS Business School for purposes of developing a range of short learning programmes in applied complexity and to facilitate the development of a Complexity View on a Future Fit Management and Leadership Development value proposition.

Sonja is a thinking partner for leaders, change-makers (individuals and teams) who need to lead in uncertainty; enable strategic agility and create future-fit organisations. She co-creates and delivers fit-for-context interventions to enable responsive and adaptive organisations.

Sonja also looks after the global Cognitive Edge network and is the South African partner for Prof Dave Snowden’s company Cognitive Edge for over a decade (Wales, USA, Singapore, UK, Netherlands, Brazil). She teaches locally and internationally on Complexity, Cynefin™ and enabling adaptive organisations. Sonja is certified in various individual and systemic coaching methods and a sought-after speaker, with experience at various conferences locally and internationally, including TEDx.

If you missed the first two parts of this series, you can find it here: Part 1 | Part 2
Please visit the UFS Business School website for online programmes available, or contact Ansie Barnard: Barnardam@ufs.ac.za

Sources:
  1. Black Swan. Taleb, N. 2007
  2. https://apps.who.int/gpmb/assets/annual_report/GPMB%20Press%20Release%2017%20Sep.pdf
  3. https://www.weforum.org/reports/the-global-risks-report-2020
  4. A leader’s framework for decision making. Snowden & Boone, 2007, Harvard business review
  5. The Practice of Adaptive Leadership: Tools and Tactics for Changing Your Organisation and the World. Heifetz, R., Grashow, A., & Linsky, M., 2009.
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