COMMUNICATION AND LIAISON News Desk Thursday 24 March 2011 has since processed approximately 861 Insurers insurance claims, mostly in the motor and asset space, with a total claims pay out value Local insurers benefit from of around R 19.75 million”, says Roux. growth of major sporting Dr Danny Jordaan, CEO of the 2010 FIFA events World Cup Organising Committee South Africa, last week thanked Aon South Africa The growth in the number and scale of major for its contribution to the World Cup. sporting events being held in South Africa Roux says that besides the financial aspect, has benefited local players in the insurance the tournament afforded companies such as industry, which are being utilised to provide Aon South Africa the chance to showcase risk management and insurance solutions for specialist skills in Event Liability and Event these occasions. Besides the immediate Cancellation covers. "A year after the event, financial spinoffs, local companies in the we are ready to share the knowledge gained insurance sector are also benefiting from the with our colleagues in Brazil as they bid for experience gained from providing these an appointment to the Local Organising services, with some being requested to share Committee for in Brazil for the 2014 World their knowledge with insurers in other Cup." countries. The recent Top Gear Festival, one of the According to Anton Roux, CEO of Aon South largest motoring festival the country has ever Africa, which arranged and placed all the seen, is another example of a large event insurances required by the Local Organising requiring expert and precise risk Committee for the 2010 FIFA World Cup, the management solutions. Dani Ettridge of event is a good example of such Aon’s Sport, Recreation and Entertainment opportunities. “The premium for the event Business Unit, says while the more than 75 cancellation cover was the single largest 000 attendees soaked up the trackside thrills premium ever placed by a South African in the rain this past weekend, few would have organisation at Lloyds,” he says. The group realised how much planning goes into the event. “There is detailed risk analysis being Stephenson recommends selecting carried out alongside the diverse operational investments tools that enable pensioners to logistics behind the scenes. The presenters, share in the investment returns made on the the cars, the track, the spectators and even underlying annuity portfolio by way of annual the weather must be considered. increases to their pensions. “The aim of these “Managing big event risks require a clear products is to provide annual increases to understanding of how to best transfer risk at help combat the negative effects of inflation,” a viable cost to the organiser – something says Stephenson, best delivered by a broker with experience in As an example of the effectiveness of these large-scale events,” says Ettridge. tools, Stephenson highlights the Old Mutual Fanews Corporate Platinum Pension 2003 With-Profit Annuity which recently declared positive Retirement Funds bonuses across all of its pricing interest rate categories (see table below). The Pensioners urged to use announcement, marks eight unbroken years investment tools to protect of positive bonus declarations and is effective for increase dates from 1 April 2011 - 31 retirement savings from March 2012. inflation Profit Pricing 2011 CPI Factors such as the recent inflation hikes Category Interest Rate Bonus and market volatility could have a significant 1.5% 1.5% 4.0% 3.5% impact on South African pension funds. In 2.5% 2.5% 3.5% 3.5% order to protect their retirement lump sums 3.0% 3.0% 3.0% 3.5% from these potentially erosive factors, local A 3.5% 3.0% 3.5% pensioners are urged to use specialised B 4.0% 2.5% 3.5% investment tools to safeguard their future C 4.5% 2.5% 3.5% nest egg. D 5.0% 2.0% 3.5% This is according to Roy Stephenson, Annuity Stephenson says that the 2011 increases on Actuary at Old Mutual Corporate, who points the Platinum Pension 2003 With-Profit to the South African Volatility Index (SAVI) Annuity compare well with inflation over the which increased by more than 50% during year, with increases on the lowest pricing the second quarter of 2010, indicating interest rate categories matching inflation. dangerous levels of volatility for pensioners. “It is here where the benefits of inflationary “Inflation has come down from the 6.3% year- protection and smoothing returns from year- on-year CPI inflation reported by Statistics to-year become even more valuable to South Africa at the end of December 2009. In pensioners, because they are shielded from light of this, the 2011 increases as set out excessive market volatility,” he says. above are a substantial improvement on last better, according to Jonathan Dixon, its year relative to inflation,” he says. executive officer for insurance. According to Stephenson, the Platinum Articles Pension 2003 increases for 2011 are 0.5% Dixon addressed an Association for Savings higher than last year in line with long-term and Investment SA conference on increase expectations relative to inflation. Wednesday. Year-on-year Consumer Price Inflation (CPI) The FSB is an independent institution that was 3.5% for the year ending 31 December 2010. oversees the local non-banking financial services industry in the interest of the public. The average increase for the Platinum Dixon said the FSB wanted to move from a Pension 2003 profit category of 1.5% has also "reactive approach" regarding regulations to exceeded inflation over the past five years. one where they would monitor situations and "detect early warning signs" as well as Pensioner Assets underlying the Platinum address conduct concerns before they Pension 2003 pensions are invested in a became "widespread". balanced portfolio of assets, with local and The institution would have more international equities together representing responsibilities once proposed regulatory 30-40 percent of the total asset portfolio changes for the financial services sector came depending on the pricing interest rate into effect. category. The National Treasury in February Stephenson says local equities, in the second announced the proposal for a twin-peak quarter of 2010, performed consistently with system, which would see the FSB become the the global theme of improved market market conduct regulator for financial conditions, with most international markets services in the country. generating positive returns over the period. "It's about changing our approach to However, he warns that the improvement in supervision and doing a lot more on-site the equity market was accompanied by very supervision, possibly active supervisory steps high levels of market volatility. on the conduct side," Dixon said. Moneyweb He added that "additional capacity" and skills would help the regulator improve. FSB Business Live FSB: We want to be more Media proactive on regulations SABC ordered to apologise The Financial Services Board wants to improve and perform its regulatory duties over M&G story The Broadcasting Complaints Commission of It said the SABC had failed to contact Sole SA (BCCSA) found that, in neglecting to give and had approached the Mail & Guardian journalist Sam Sole the right to reply to only an hour-and-a-half before the story was allegations that he accepted a R900 bribe to be aired. Gumede was contacted three- and was guilty of racial bias, the SABC failed and-a-half hours earlier. in its obligation to publish truthful and "The SABC has failed to comply with the unbiased news in an ethical manner. BCCSA code of conduct by broadcasting the The allegations against Sole were made by Gumede-Mail & Guardian story in a manner businessman Robert Gumede in a report on which is inconsistent with the requirements the SABC on November 4. of the code of conduct. In the insert broadcast on SABC 3 and "The BCCSA is requested to order the SABC SAFM, Sole was accused of accepting bribes to broadcast an apology to the Mail & from British businessman John Sterenborg Guardian and Sole on the SABC 3 7pm news in return for publishing damaging allegations bulletin and on the SAFM 6am and 7am of corruption against Gumede. news. "Here's a payment, one of the first payments "The apology must be given the same that Sterenborg made out to a journalist who prominence as the original broadcast." is an award-winning journalist, so-called The SABC said it believed it had not investigative journalist who goes out to attack contravened the code. black people, to say that they are corrupt, Times they bribe people and here it is," Gumede said in the report. General The BCCSA said the report was "serious" and "damaging". New bank info brings news of "The allegations made by Gumede against Sole are very serious and damaging," the economic strength ahead BCCSA said. Revisions to the Reserve Bank’s lead "Sole's credibility as an investigative indicator show a more upbeat picture of the journalist was questioned and he was not economic outlook than previous releases. afforded the opportunity to defend himself. Data out yesterday show the composite leading business indicator bounced in "The SABC is clearly biased against the Mail January to 134.2 points from 132.6. But & Guardian." even better news is that revisions to historic figures create a far more consistent view of The BCCSA said the broadcaster had growth ahead. "intentionally or negligently" distorted and The indicator signals the strength of the misrepresented the facts of the story, "in economy six to 12 months ahead. Before the particular, the allegation that Sterenborg revisions, the figures showed a peak of 131.4 paid Sole a bribe". points in April last year and erratic moves since then, reflecting uncertainty about future growth. Now there is a steady The surge in new residential mortgage loans progression from a recent low of 128.8 last in December “may have been short-lived”. June. Eight of the 12 components that make up the Reserve Bank economist Iaan Venter said: composite lead indicator were up in January. “After the two monthly declines in May and Among them were average hours worked per June, the revised indicator is much smoother factory worker, volume of orders in now and displays a clearer gradual upward manufacturing, the number of building plans trend, before increasing quite notably in passed and share prices on the JSE. December and January. This rising trend Three were down: job advertisements, the signals that the economic recovery should year-on-year change in the number of new continue over the short term.” passenger vehicles sold and the year-on-year This interpretation is in line with most change in the leading indicator of major economists’ forecasts that economic growth trading partner countries. will accelerate. Elna Moolman, the South The figure for gross operating surplus as a Africa economist at Renaissance BJM, percentage of GDP was not available. predicted that gross domestic product (GDP) would grow 3.7 percent this year and 4.2 Lead indicator figures are routinely revised percent next year. In last month’s Budget from early estimates, which are made when Finance Minister Pravin Gordhan forecast some of the components are not available. – GDP growth would rise from 3.2 percent this year to 4.1 percent next year. Business Report Venter said revisions to the lead indicator FNB launches ATM cash had been made as from January last year and affected the gross operating surplus as withdrawal by cellphone percentage of GDP, the export commodity price index, and the leading indicator of First National Bank has announced its latest South Africa’s major trading partner innovation - a Cash Withdrawal solution countries. using Cellphone Banking. “A few other components were revised marginally due to new seasonal factors.” A first in South Africa, Cash Withdrawal will Despite the revised outlook, some economists allow FNB Cellphone Banking customers to still expressed caution. Year-on-year growth withdraw cash directly from their FNB in the indicator is lower than it was transactional account at an FNB ATM previously – 5.5 percent in January from a without the use of any bank cards. peak of 24 percent in April last year – a sign that growth in GDP could lose momentum. CEO of FNB Cellphone Banking Solutions, John Loos, a home loans strategist at FNB, Ravesh Ramlakan said: "Innovation is at the said the fact that growth in the lead indicator heart of FNB's core values. It is through was tapering off had implications for the constant innovation that we are able to property market, which showed signs of recovery in December when year-on-year design and deliver solutions that will bring growth in the “value of new residential loans convenience to the lives of our customers and granted” rose to 16 percent from 5.4 percent Cash Withdrawal using FNB Cellphone in November. Banking is such a solution. "The increasing number of South Africans when you forget your purse or wallet at choosing to bank via their cellphones is home, or just quickly need cash for life's little evidence of the channels ease of use, safety emergencies, you can simply use your and convenience. When FNB developed cellphone. Cellphone Banking in 2005 it was with our customers in mind and wanting to provide "Constant innovation of our solutions is them with 24 hour access to their banking. another way of living to our brand promise of In developing Cash Withdrawal it was with how can we help you. It is through product the intention of providing our customers with enhancement that we empower our 24 hour access to their cash - even without customers through a variety of choices. FNB the use of a bank card," Ramlakan added. Cellphone Banking has changed the banking playing field," Ramlakan concluded. Ramlakan explained that cash withdrawal using FNB Cellphone Banking would work Personal Finance similar to a bank card, except that customers would no longer need to use their bank cards Market Conduct to withdraw cash. To withdraw cash using Cellphone Banking, Market conduct supervision customers needed to log onto Cellphone Banking and select the banking option. crucial - Treasury Customers would then have to select Market conduct supervision in the financial Withdraw Cash, and then the account from sector is as important as prudential which they wanted to withdraw cash i.e. regulations, according to Ismail Momoniat, cheque account, savings account, etc. the deputy director-general of tax and financial sector policy in the National Once the transaction was completed, the Treasury. customer would receive an sms with a temporary ATM PIN to use at the ATM. "For At an Association for Savings and Investment security reasons the temporary ATM Pin has SA (ASISA) conference on Wednesday, to be used within 30 minutes of receipt and Momoniat compared the financial sector to can only be used once," noted Ramlakan. nuclear plants. He added: "Technology has enabled us to "Certainly, regulating the financial sector is respond quickly and proactively to our like having oversight over a nuclear facility," customers' needs by coming up with Momoniat said. solutions that will help them go about their business. We've monitored customer In February, the National Treasury released a behaviour and have found that they often document entitled "A safer financial sector to have to enter a branch to get cash because serve SA better". Some of the key aims of the they've left their bank cards at home. Now, proposals in the document are making the financial sector safer by tightening prudential He said the document released by the regulations, improving market conduct and Treasury outlined proposals along four protecting the consumer better, and priority areas of financial stability, consumer broadening access to the financial sector. protection, access to financial services and combating financial crime. The document also has proposals for the so- called SIFIs (systemically important financial A financial stability oversight committee institutions). would be created soon, Momoniat said. A proposal for a twin-peak system was "We hope that market conduct regulators can announced during Finance Minister Pravin be set up more explicitly so we can move," Gordhan's Budget speech in February. Momoniat concluded. Discussions on this proposal are still taking place. Business Live Under the twin-peak system, the Financial Asset Management Services Board (FSB) would be the market conduct regulator for the financial services, Protect your portfolio from while the SA Reserve Bank (SARB) would be responsible for the prudential regulation of volatility banking and insurance sectors. The volatility in local and global equity has "We need to have the appropriate checks and once again highlighted the need for proper balances," Momoniat said. diversification across asset classes within investment portfolios, according to Eben According to Momoniat, in moving towards a Karsten, portfolio manager at Blue Ink twin-peak system, the SARB would be "well Investments. placed" to efficiently manage regulation as well as take responsibility of "macro The ALSI rallied almost 2% early in February prudential supervision". before plummeting 5% towards month-end on the back of concerns over the unrest in SA's financial sector was not severely affected north Africa and the Middle East. by the global financial crisis that saw many banks collapse two years ago, as local banks This volatility continued on the back of the remained sound during and after the crisis. devastating tsunami that hit Japan, sending stock markets plummeting by as much as Momoniat said SA was also under "great 12% in some cases. pressure" to provide loans to the low-income market and would have suffered the same In contrast, the monthly Blue Ink All South fate as the banks in countries such as the US African Hedge Fund Composite (BIC), which had regulations not been in place. tracks the performance of hedge funds in SA, registered a marginal decrease of 0,03% The rotation out of emerging markets was during the month. further evidenced in the bond market as the long bond yield rose by 50 basis points. According to Karsten, volatile short-term investment returns reinforce the argument "Foreign investors were net sellers of local for diversification - or the balancing of bonds based on their expectation of the SA portfolios across a variety of asset classes. Reserve Bank hiking interest rates in the next six months. Their fears drove the All "There was a major rotation out of emerging Bond Index (ALBI) 2.1% lower in January. markets into developed markets as risk Fixed-income hedge strategies shed, on aversion took centre stage through February. average, 1.67%." The trouble with the ALSI is the constant volatility and the negative external factors Karsten notes that the BIC has achieved a that can influence the markets. total return of 32.90% over three years, compared with 25.10% from the ALSI over "The geopolitical turmoil in the MENA (Middle the same period. Over the past year the BIC East and north African) countries detracted has returned 9.79% versus 18.98% on the from what initially looked like a strong month ALSI. The three-year volatility on the BIC is for the local equity market, "says Karsten. just 3.06% versus 22.05%. He adds that the hedge fund industry, "This volatility means equity investors who however, offers a number of investment enter and exit the market at the wrong time strategies across the risk/return spectrum. can suffer extensive capital losses." "Fund managers cannot predict when market Karsten says that, against the present global sentiment will swing from positive to backdrop of uncertainty, there is a strong negative; but they can protect investors' case for persisting with conservative asset assets from periods of market turbulence by classes through the first half of 2011. ensuring adequate exposure to hedge funds and other defensive assets." "Conservative investments offer positive real returns with very little risk." The BIC ended marginally lower, but, says Karsten, "a number of hedge fund strategies Personal Finance outperformed the index over the month, with long-short directional funds (+0.25%), long- FSP’s short non-directional funds (+0.57%) and market neutral strategies (+0.5%) leading the Alexander Forbes’ dabble in way." securitisation raises a few eyebrows The risk and financial services group, • You settled the loan. Alexander Forbes, back in 2006, when the On the surface the product appeared to be world was flush with cheap money and the made in heaven, but not for the big-four public had yet to develop a hatred for banks. bankers and high finance, launched Seniors’ Finance - South Africa’s first home equity Pat Lamont, general manager for Nedbank release loan. Home Loans: Sales and Customer Relations, said “Nedbank Home Loans can confirm that The product on the cutting edge of innovation the product in question formed part of its had a simple promise − if you were 65 and offering however [it] was discontinued in July older had built up residual equity in the 2008 due to low uptake. Whilst the product value of your home it would enable you to is well established in most western countries, access that value at least in part through we are of the view it was not well received in borrowing money against the value of your the South African market, as such the bank house. The borrower would receive “a lump took a decision to discontinue the offering”. sum or five equal annual instalments”, using their home as security and here’s the kicker Standard Bank said after extensive research, there would be “no monthly repayments” data showed that there was “… a very limited until the borrower triggered a “repayment demand …” for the offering in South Africa. event”. For its part Absa and First National Bank said they do not grant asset-based home A repayment event would occur when: loans. • You died; So what made Alexander Forbes believe it • Sold your house; could succeed? • You moved out of your house Anton Ossip, managing director of Alexander permanently; Forbes Financial Services, said, “There is a • You were sequestrated; demand and need for the product offering in • You commit a default under the loan the South African market” but despite this agreement and fail to remedy such view it had to close the product. default within the time period specified by Seniors’ Finance; Why? • You terminated the loan agreement; or Ossip says because “where it becomes difficult is that for this type of product you need a funder with a very long-term view, value of their home also known as the no because typically these kinds of loans do not negative equity guarantee simply proved have any repayment either of interest or too costly in the short term? capital for very long periods of time and therefore you need a funding institution or When asked about this Alexander Forbes funders that actually have the need for that said, it was“… very confident that the very long-term kind of paper and that has actuarial work done on the business model is proven to be more difficult to put together in of [sic] the best available…”. Determined to the South African market particularly after prove this Deon Viljoen, group finance the debt crises of 08/09. executive at Alexander Forbes, said, “the way this model works internationally is that a “The business model underpinning Seniors' bank or consortiums of banks provides a Finance anticipated using a combination of facility to fund loans for a period, until the shareholder funds and institutional credit total loan book is of such a size that it can be lines to finance the issue of SF HELP loans. economically securitised and issued in the As a direct result of the international credit long-term debt market. This frees up the crunch, we have been unable to access the facility to build up a new book until it is of a institutional credit lines that we require, and size to securitise. The debt crisis of 2008/09 have thus funded new loan issue entirely out clearly has had a significant impact on the of shareholder funds to date, which is availability of such funds. It should be noted unfortunately not sustainable. As a result we that Seniors’ Finance owns the intellectual have made the difficult decision to stop property around the design and features of issuing new SF HELP loans until further the product, but that the funding was notice”. always intended to be provided by banks and the securitisation market”. On face value it seems highly suspect that Alexander Forbes would continue to insist Prior to the product closing its applications to that its business model remains sustainable. new loans approximately 184 loans were Perhaps its actuarial models underestimated written to the value of R48m. both the mortality rate, ie, the models assumed more people would trigger a Perhaps Viljoen is right but one has to ask if repayment event (primarily death) a lot the model was always based on securitisation sooner than actually happened? Or the why not close the product to new applicants concept of guaranteeing the borrower that back in 2008/09 when the credit markets he/she could never owe more than the sale seized up? Why did it try to keep it afloat until August 1 2010 opting for a new model Given that the product was new to the based on funding new loan issues entirely country it created a regulatory vacuum. In out of shareholder funds a position they response Forbes set up an entity called the concede was unsustainable? South African Home Equity release protection association (SAHERPA), which has since gone “We funded the small book ourselves and I into hibernation says Viljoen. mean we are not a funding institution but we piloted the funding as a proof of concept but Despite this Alexander Forbes told Moneyweb in order to secure the warehouse funding that “should borrowers have any complaints facility we had to put together a consortium or issues, SAHERPA would still to our of banks that would typically be banking knowledge handle these matters”. institutions that would be willing to provide the warehousing facility [which it never Chairman of SAHERPA Paul Rosenbrock told received] and then when you get to Moneyweb “… that similar organisations to securitisation it would typically be the longer- SAHERPA in Australia & New Zealand have term players insurance companies and the also gone into hibernation pending the like. normalisation of money supplies worldwide. “The funding is not what we bring to the “The continued existence of SAHERPA is not company it’s the intellectual property around an issue; it is a watchdog type of organisation this product which is highly complex and operating in the consumers’ interest. It very sophisticated but the actual carries on albeit also in a ‘hibernation’ mode, warehousing and securitising the paper because there are no accredited suppliers would be in the hands of the financial offering [this] product at present, and institution,” said Ossip.And despite all this therefore operations have been curtailed Ossip is adamant the product will make a accordingly”. comeback, “… it’s a complex product which is One thing is for sure it will be interesting to why it’s not an easy one to fund we’ve put it see if this product does indeed make a in hibernation for the time being but it comeback. doesn’t mean we’ve given up on the idea… we definitely believe it can work”.So how will Moneyweb people who’ve already signed up to this Estate Agents scheme be protected? The Consumer Protection Act (CPA) becomes buyer or the seller. Lake says this could be effective on April 1 2011, and those who are problematic in terms of the new Act which affected, especially suppliers, have been stipulates goods can be returned if found to urged to familiarise themselves with the be defective. In terms of immoveable legislation, or face stiff penalties. property, delivery takes place once the The Act is particularly relevant to practising transfer has been registered at the deeds estate agents, especially those who office. If, for example, it has been found that unscrupulously sell defective properties to the seller had deliberately withheld unsuspecting investors or prospective information of defects to the property, the homeowners. This is particularly relevant deal can be cancelled, if the latter can be when it comes to developers selling property proven. In the case of transfer fees having off plan. Marketing companies, who often been paid, the buyer will have to take the undertake the promotion of such matter to court and if it is found that the developments at exorbitant fees, are often seller had acted wrongfully, he or she will known for using the rather intimidating have to foot the bill for the re-transfer of fees "hard sell" tactic. This method will, once the paid. Act comes into effect, be closely monitored Advice to estate agents at this stage: make and the understanding is that if the sure your representations regarding any developer and the marketer fail to deliver property are accurate, that you have the on promises made, they can and will be appropriate insurance in place and that you taken to task. know what your obligations as a service Deneys Reitz associate, Rosalind Lake, says provider are to your consumer. Agents have real estate is only one of many areas targeted also been cautioned that whereas the by the Department of Trade and Industry due proverbial fine print tended to protect sellers to the number of people who lose large in the past, this will no longer be the case. amounts of money after being misled into Lake says any restriction of sale will have to buying less than satisfactory property or be spelled to any prospective buyer or developments. Estate agent principals will investor. have to be particularly vigilant in that that Consumers will also be happy to know that their agents are not making the dealings of developers will be heavily misrepresentations to prospective buyers. scrutinised within the new Act. Developers Also, consumers will have a five-day cooling will no longer be able to prescribe to buyers off period after entering into a transaction. buying off plan which service provider to use This will include buyers who feel they have or not to use. Hopefully this will eliminate to been short-changed. some extent "jobs for pals" and rebates and Lake says the same is not necessarily true for kickbacks. From April 1 2011, developers private sales. The voetstoots clause can still will have to prove some form of "economic be applicable. Depending on the sale benefit" in using prescribed service providers. agreement, the clause can benefit either the Realestateweb SENS DATE TIME COMPANY HEADLINE 24.03.2011 08h00 Litha Healthcare Group Lt... LHG - Litha Healthcare Group Limited - Reviewed condensed consolidated 24.03.2011 08h00 Gold Reef Resorts Ltd GDF - Gold Reef Resorts Limited - Dealings in securities by a director 24.03.2011 08h00 Exchange Traded Funds GLD - NewGold - Partial De-Listing of Newgold Debentures 24.03.2011 07h10 British American Tobacco ... BTI - British American Tobacco p.l.c.- Transaction in own shares 24.03.2011 07h05 Illovo Sugar Ltd ILV - Illovo Sugar Limited - Changes in Directorate Just for laughs Things To Do On An Elevator While Bored When there's only one other person in the elevator, tap them on the shoulder and then pretend it wasn't you. Swat at flies that don't exist Before the elevator door opens shout "DING" and then laugh and say "beat you again Mr Elevator." Stand really close to someone, sniffing them occasionally. Stand silently and motionless in the corner, facing the wall, without getting off.
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