AN EXCLUSIVE INTERVIEW WITH
CHRISTO WIESER S A : R 1 4 5 . 0 0 ( I n c l .VAT ) U K : £ 8 : 0 0 U S A : $ 12 . 0 0
011 232 8000 [email protected]
REAL PEOPLE. REAL SOLUTIONS.
Seaparo Phala
Chief Information Officer, Department of Arts and Culture
CHALLENGE:
· Control escalating printing costs
· Simplify management of devices across five sites
SOLUTION:
· Reduced number of devices from 450 to a fleet of 56
networked multi-function printers
· Print management software
BENEFITS:
· Cut printing costs by 30%
· Decreased electricity consumption
“Besides these benefits, we’re using less paper, which means we’re saving more trees, helping us with our ICT initiative for a greener environment.”
bran
dinc
/636
/e
636_Nashua_DAC_DPS_297x430.indd 1 2015/10/28 10:14 AM
011 232 8000 [email protected]
REAL PEOPLE. REAL SOLUTIONS.
Seaparo Phala
Chief Information Officer, Department of Arts and Culture
CHALLENGE:
· Control escalating printing costs
· Simplify management of devices across five sites
SOLUTION:
· Reduced number of devices from 450 to a fleet of 56
networked multi-function printers
· Print management software
BENEFITS:
· Cut printing costs by 30%
· Decreased electricity consumption
“Besides these benefits, we’re using less paper, which means we’re saving more trees, helping us with our ICT initiative for a greener environment.”
bran
dinc
/636
/e
636_Nashua_DAC_DPS_297x430.indd 1 2015/10/28 10:14 AM
INSIDE TOP 500 UPFRONTContributors and featured clients 4
Editor’s letter 5
Foreword 6
FEATURESInterview with Christo Wiese 8
Taking stock of GDP 14
Top 500 - how the winners are decided 20
The Top 500 companies in South Africa 22
The big five of banking 36
Special economic zones 42
Retail possibilities in South Africa 60
The future of state-owned companies in South Africa 70
Leadership, structure and people 76
Special economic zones
T O P 5 0 0 / 7 t h E D I T I O N2
70
60
The future of state-owned companies in South Africa
Retail possibilities in South Africa
Feeding our nation
42 48
by Lynne BrownMinister, Public Enterprises
by Christo Wiese
by Fiona Wakelinby Rob DaviesMinister, Trade and Industry
ARTICLESKeeping buoyant 46Feeding our nation 48BPO industry in the spotlight 54Making South Africa a winning nation 88President Jacob Zuma maps the way forward 96Government initiatives stimulate the economy 98
INDEXA-Z of the Top 500 companies 107
UPFRONTCONTENTS
T O P 5 0 0 / 7 t h E D I T I O N 3
The Wiese factor 8
CreditsTOPCO MEDIA
CEORalf Fletcher
Editorial DirectorRyland Fisher
EditorFiona Wakelin
National Sales ManagerJudy Twaambo-Chileshe
Head of Sales/Project ManagerGuy Chicken
Brand ExecutiveStephani Ferreira
Business SolutionsNina ZaniResearch
Sandra Bock
TOPCO STUDIOProduction Director
Van FletcherEditorial Assistant
Jocelyn StiebelCreative Director
Emil LimeDesigners
Kamiela AbrahamsMichelle Rademeyer
Traffic ManagerCandice Land [email protected]
Distribution & SubscriptionsIngrid Johnstone
Proof ReaderDawn KatovskyPhotographerMarnus MeyerMake-up Artist
Kirsti Van ZylPrinters
Paarl MediaImages
©shutterstock®GalloFlickr
Head OfficeTop Media & Communications (Pty) Ltd
T/A Topco MediaBree Street Studios, 2nd Floor
17 New Church Street, Cape TownTel: 086 000 9590
Fax: +27 (0) 21 423 7576Email: [email protected]
Website: www.topco.co.za
DISCLAIMERAll rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Top Media & Communications (Pty) Ltd T/A
Topco Media Reg. No. 2011/105655/07. While every care has been taken when compiling this publication, the publishers, editor, and contributors accept no responsibility for any consequences arising
from any errors or emissions. ISBN: 9780620531054
An interview with Christo Wiese
Bestmed Medical Scheme ….…...….. Pg 86
Bidvest Protea Coin ….…............…… Pg 34
Claremart ….…….........................…... Pg 19
EXPOCENTRE ...………................... Pg 106
FleetAfrica….…..........................…..… Pg 82
GIBB ….…...........................…...... Pg 74
Grid Worldwide .................................... Pg 93
JHB Water .......................….…....……. Pg 58
MSC ….……...................................…. Pg 84
Nashua ........................…. Inside Front Cover
PG Bison ............................................ Pg 66
SANRAL ............................................... Pg 102
UCT Graduate School of Business .... Pg 101
VKB Agriculture .................................. Pg 52
BRIAN KANTOR
Brian Kantor serves as Chief Investment Strategist and Economist, Investec Wealth and Investment. He was the founding Chairman of Victoria and Alfred Waterfront (Proprietary) Limited, leading that company and the redevelopment of the Cape Town Waterfront from 1988 to 2001 and is Professor Emeritus, University of Cape Town.
Pg 14
ANDREW OLIVIER
Andrew Olivier is managing partner of the Working Journey, an Australian consulting company with offices in Sydney and Adelaide. The Working Journey (www.theworkingjourney.com) has strong links in South Africa. Andrew’s most recent book is “Organisational Design: What Your University Forgot to Teach You” (2013).
Pg 76
ANCHEN VAN ANTWERPEN
Anchen van Antwerpen is the founder of 3flow Consulting, a Cape Town based company specialising in master data analytics and insight management. She has over 15 years’ experience in the online retail sector, h aving had a front row seat to the development of South African ecommerce.
Pg 36
CHRISTO WIESE
Christo Wiese is an independent non-executive director at Steinhoff International Holding; non-executive chairman of Invicta Holdings; and chairman of Pepkor and controlling shareholder of Shoprite Holdings, Africa’s largest retailer. He was recently awarded an honorary doctorate for his contribution to the South African economy.
Pg 60
JEREMY GARDINER
Jeremy Gardiner joined Investec in 1991. He has been a Director at Investec Asset Management and Investec Fund Managers since December 1999 and is responsible for communicating Investec’s views on global and domestic markets and economies to the investing public and the world at large. Pg 3
Pg 46
CHANTELL ILBURY
Chantell Ilbury is an independent scenario strategist, facilitator, speaker and author. She specialises in the use of scenarios and game-playing strategy to guide corporate teams through strategic conversations.
Pg 88
LYNNE BROWN
Lynne Brown is Minister of Public Enterprises and served as a Premier of the Western Cape Province from 25 July 2008 to May 2009. Prior to her appointment as a premier, she was MEC for Finance and Tourism in the Western Cape.Pg 36
Pg 70
ROB DAVIES
Rob Davies is Minister of Trade and Industry. He holds a doctorate in Political Studies from the University of Sussex and a Master’s in International Relations from the University of South Hampton. He was a member of the South African Ministerial delegation to the World Trade Organisation in Cancun in 2003 and Hong Kong in 2005
Pg 42
CONTRIBUTORS
FEATURED CLIENTS
UPFRONT CONTRIBUTORS & FEATURED CLIENTS
T O P 5 0 0 / 7 t h E D I T I O N4
Whilst at times it may feel as if technology has made the world a
crowded house in which to live, it has fundamentally changed the way
we do business, banking, communicate and even conduct conflicts.
Farmers across regions, astronauts in space, surgeons on different
continents and school children in rural areas are now connected
in a way that was inconceivable 50 years ago. We have redefined
the term 'community' – and Toffler’s third wave continues to gather
ever-increasing momentum. The only constant is change and, like the
dinosaurs, if we are not adaptable and agile in our response to changing
external forces, then the light at the end of the tunnel may just be a train.
As editor of Top500 I am privileged to be in conversation with leaders in
industry and government who are in the vanguard of seizing challenges
and turning them into opportunities. This leading B2B publication
provides invaluable business intelligence in the form of the listing of the
top 500 best-managed companies in the country together with incisive
features and articles written by industry experts, top of their game.
On our front cover is the iconic Christo Wiese, who was recently named
the richest man in South Africa and who has blazed a trail in the retail
industry as well as on the mergers and acquisitions front.
In this edition we have included: an article by, and an interview with,
Dr Christo Wiese; Prof Brian Kantor, Chief Strategist and Economist
from Investec, who unpacks the GDP; Rob Davies, Minister of Trade
and Industry, speaking about the Special Economic Zones and Lynne
Brown, Minister of Public Enterprises, who updates us on the status
of state-owned companies. The article on the banking sector presents
an overview of 'the Big 5', and the feature on requisite organisations
addresses success from a level of work and complexity paradigm. The
'Big Issue' feature takes a look at the state of our nation from different
perspectives.
This publication truly provides business intelligence in every sense of the
word and I hope you enjoy engaging with the research, the articles and
the features as much as I have.
Fiona Wakelin Editor
BUSINESS INTELLIGENCE IN EVERY SENSE OF THE WORD
UPFRONTEDITOR'S LETTER
T O P 5 0 0 / 7 t h E D I T I O N 5
SOUTH AFRICAA NEW PLATFORM FOR BUSINESS It gives me great pleasure to pen this Foreword on behalf of South
Africa’s tourism industry – with particular reference to business
eventing.
Tourism continues to play a meaningful role in contributing to
the economic development of our country and our people and
remains one of the six economic growth sectors, as identified by
government, on which to focus its efforts to support investment
and facilitate growth.
One particular offering of this sector is business events, which was
identified by the Department of Trade and Industry as one of three
niche tourism segments. In response to this and the mandate
articulated in the National Tourism Growth Strategy, South African
Tourism established a business events unit within the organisation
to help grow the industry by taking advantage of the international
interest in the country as a destination for conferences, incentives
and exhibitions.
T O P 5 0 0 / 7 t h E D I T I O N6
FOREWORD
A Foreword by Thulani Nzima, Chief Executive Officer, South African Tourism
The South Africa National Convention Bureau (SANCB) was
launched in 2012 and promotes the country as a preferred
business events destination by focusing on its infrastructure and
facilities, from telecoms to modern transport and healthcare,
world-class hotels and cuisine to a vibrant cultural life. Our
business also focuses on the unique selling proposition that
South Africa offers the global business events market, for being a
‘value for money’ destination, possessing accessible and reliable
infrastructure and a professional industry.
At the time of the launch of the SANCB, we agreed with industry
partners and stakeholders on the following five year goals and
targets to grow the South Africa business events industry:
• Increase the size of South Africa’s business events industry
by 50%
• Double the impact of business events on tourism yield and
geographic distribution
• Broad recognition in South Africa of the business events
industry as a major driver of job creation, skills development
and transformation of the nation’s knowledge and creative
economy
It is safe to say that, since then, South Africa’s business events
industry has continued to soar, securing 163 international
association conferences for the country over the next five years,
which will attract over 150 959 professionals. This in turn will
create 753 event days and generate an estimated R3.19-billion in
economic impact.
The significant wins have thrust South Africa onto the global
stage and fast-tracked our global rankings. According to the
International Congress and Conventions Association (ICCA), the
most accurate and reliable gauge in the world of how destinations
perform in the association market, South Africa hosted 124
international and regional association meetings moving South
Africa from 34th positing in 2013 to 32nd position in 2014.
This makes South Africa the top business events destination on
the Continent ahead of Kenya, Senegal and Egypt, which fared
impressively - and ahead of other global destinations, such as
Hong Kong, the UAE and New Zealand.
The wider impact of the industry’s success is evident beyond the
foot and air traffic we see, or the lengthy awards and accolades
our destination receives. Our successes demonstrate to the world
how rich we are in intellectual and human resources, highlights our
professional and able business events industry that is on hand to
deliver exceptional experience and our intimate understanding of
the economic sectors where South Africa is a leader globally.
But perhaps more importantly, our success is evident in the
lives and livelihoods of the people who are directly and positively
impacted by these meetings and big events.
Tourism (including business events) continues to support one in
ten South Africans in employment and contributes about 9.5%
of the country’s GDP in total. From mining, manufacturing and
information and communication technology to creative industries
and medical sciences, hosting events in these sectors contributes
significantly to the macro-economic benefits for our country. It is
because of this contribution that tourism has become one of our
country’s bedrock industries for growth, for development and for
socio-economic progress.
These are the benefits we want our local industry and corporates
to know about and our counterparts across the continent to
experience.
While South Africa is the undisputed leader in business events
on the African continent, the country still has to work hard to
attract and host more regional association conferences. The
continent hosted 308 association meetings out of the 11 565
held worldwide. We are changing this through our business trade
show platform, Meetings Africa. The business event trade show
offers ample opportunity for African exhibitors to network and do
business with hosted buyers from the rest of the Continent.
It is now the leading, biggest and longest running business events
trade show in Africa. It is also highly regarded as a quality show
that is fast changing the way global business events industry
views the Continent.
South Africa’s business events are globally competitive, locally
relevant and on an all-round winning path. We invite all who want
to be part of this growth and contribute to it, to work with us to
see its full impact realised.
FOREWORD
THULANI NZIMAChief Executive Officer, South African Tourism
T O P 5 0 0 / 7 t h E D I T I O N 7
T O P 5 0 0 / 7 t h E D I T I O N00
The year 2015 marks the golden anniversary of the opening of the first Pep store in Upington. Fifty years later, Christo Wiese, chairman of Pepkor and controlling shareholder of Shoprite, speaks to Fiona Wakelin about his journey – and doing business in South Africa today.
THE WIESE FACTORA SOUTH AFRICANSUCCESS STORY
T O P 5 0 0 / 7 t h E D I T I O N 00
INTERVIEW WITH CHRISTO WEISE ARTICLE
THE WIESE FACTORAN ICON IC SOUTH AFR ICAN SUCCESS STORY
“I was born in 1941 and we lived on a farm
until we moved to Upington in 1947. It was
a fascinating place to grow up in because,
in those days, it was still very much a
frontier town. It was out in what people
would refer to as ‘the bundu’.
“People were isolated in a very harsh, very
beautiful part of the world. They had to work
hard to do well for themselves – but the town
itself was dynamic. It was post the Second
World War. There were lots of things that
just weren’t as available as they are today.
But what was fascinating is how, in one
generation, in my lifetime, I saw people who
had been a relatively poor but very proud
community, becoming very prosperous.
“I was fortunate in that I grew up in a
business home. My father had a farm but
he also had a business in town. Eventually
my mother had her own business. And
so I learned about those things, in a way,
almost subconsciously. Today I notice
how many people there are that are well-
educated but simply have no idea as to
how a business works. Sitting around the
dinner table while things are discussed
– you become aware of the very basic
principles. You know that the customer is
king and you’ve always got to be ready to
render the best possible service. So for me
it came very naturally.
“Although when I grew up I didn’t plan to
make business my career. I wanted to be
a lawyer, actually. I started off by saying
I wanted to be a magistrate – I thought
that it was quite romantic. Intellectually it
appeared to be challenging. But as I say
I’m very grateful for the fact that I grew up
in the home that I did with parents who
loved life but had very clear beacons.
My dad died young, he was 64. But my
mum lived to the age of 94 – she was a
remarkable woman.
“I left Upington at the age of 15 to go
to school at Paarl Boys High; then I
went to university and until my 24th year
never even considered not going back to
Upington, because it was my world. And
then, one day I got up and I knew that I
would never go back there permanently.”
AND THE HISTORY OF PEP?
“PEP started as a very, very small
business. It was literally one room.
There wasn’t an abundance of capital
and it started out there in Upington.
Infrastructurally, it was adequate, because
it had rail and one plane a week to Cape
Town and it had roads, although mostly
gravel, to the big city. But in terms of
starting a small business, we experienced
all the challenges that every small business
experiences – there was never enough
money and it was difficult getting credit.
We had to find the right people to work
in the business. – the list of challenges
that every small business person will
be painfully familiar with. But the point
I always make is that all big businesses
have one thing in common, they all start
out as small businesses.
“There were a few other challenges that
I would rank pretty high in priority. We’ve
been through our share of recessions,
where the economy just slowed
dramatically, where it currently is very slow
going. We’ve gone through all the political
turmoil of the ‘80s and then the speech
in 1990 and the advent of the new South
Africa. Those were all challenges that we
had to face. But there’s nothing unique
about it. People in other countries, other
societies go through far worse upheavals
and the trick is to adapt and to learn to live
with it.”
‘TIMING IS EVERYTHING’ BUT SO IS CHOOSING THE RIGHT PEOPLE. WIESE SPEAKS ABOUT VALUES AND THE IMPORTANCE OF A BUSINESS CULTURE.
“Right at the outset Renier van Rooyen,
founder of PEP, who is one of South
Africa’s great entrepreneurs, said we had
to articulate our values, or our philosophy,
very clearly so that everybody would
know the kind of drumbeat to which we
march. We used five words: faith, positive
thinking, hard work, enthusiasm and
compassion. Faith can mean many things
– faith in yourself, faith in your fellow man,
faith in a higher being, in your country.
Hard work speaks for itself. I always say
to people when they ask ‘what is the
secret to success?’ – very simply, it’s a
four letter word, spelled W-O-R-K. If you
work the solutions will come. Somehow
some people think they can skip that and
it will all happen. If your business culture
is based on sound principles, people who
are not comfortable with that culture,
will stick out. So it is a sort of a natural
process of weeding out those who do
not contribute.
“One of the strengths in PEP was that
it was like a family business. Family
members all joined and then friends and
then the family of the friends. So that
formed the nucleus and that, I believed,
contributed to establishing and developing
the culture. And today, one of the things
I’m very proud of: PEP is totally reflective
of the demographics of South Africa –
and has always been, even in the really
bad, old apartheid days. So that’s been a
wonderful experience.”
MOVING ON TO THE CURRENT SITUATION IN SOUTH AFRICA
“The one point I often try to make to
people, when they complain about South
Africa, the question always has to be –
compared to what? Just look around you.
What must it be like to run a business
in Iraq or Afghanistan or Yemen? But
people always want to compare South
Africa to Switzerland. And then you go to
Switzerland and you find they’ve got their
own problems.
“South Africa is going through a tough
patch currently in its trajectory but it’s not
the toughest patch that its been through.
Look at the South African war and you
can imagine what happened to the rural
people, both white and black after the
scorched earth policy. They had nothing
left – and they’d entered a new century
and the world was changing. So the patch
we’re going through at the moment may
seem pretty tough – but if you compare it
to others, it’s actually less so.
“That is not to say that there aren’t
enormous challenges or huge problems.
I don’t get discouraged but I do get very
frustrated – only because it is so easy to
do a few things that will make life so much
better for so many more people.
“The one area in which South Africa has
T O P 5 0 0 / 7 t h E D I T I O N10
“I always say to people when they ask ‘what is the secret to success?’ – very simply, it’s a four letter word, spelled W-O-R-K.”
T O P 5 0 0 / 7 t h E D I T I O N 11
FEATUREINTERVIEW WITH CHRISTO WIESE
“The patchwe’re going through at the moment may seem
pretty tough - but if you compare it to others it’s
actually less so.”
T O P 5 0 0 / 7 t h E D I T I O N12
“If you’re not positive about life, how do you get on?”
T O P 5 0 0 / 7 t h E D I T I O N 13
consistently outperformed the rest of
the world since 1994 has been tourism,
which is a tremendous, miracle industry.
And then suddenly we get new visa
rules. Now China and India are not
promoting South Africa anymore as a
tourist destination – because if someone
from China wants to get a visa he has
to personally travel to a South African
embassy or consulate. The result is
already a noticeable decline In tourist
numbers from those areas, I am told.
“So those things are extremely frustrating.
How do we get through it? We talk about it,
we put the case forward and we know that
things change – and sooner or later the light
will dawn. It’s an old cliché but everybody
in South Africa, across racial and ethnic
groups will sink or swim together.”
WIESE CONTINUES TO BE OPTIMISTIC ABOUT SOUTH AFRICA’S FUTURE. HE SPEAKS ABOUT SPREADING THE OPTIMISM AND GETTING PEOPLE TO STAY AND INVEST IN THE COUNTRY’S FUTURE.
“It’s my perception that South Africans
are among the people in the world
who beat up on themselves the most.
Everything that happens here is a
calamity. Again, coming back to my
earlier point, compared to what? If I
could have my way, I would like people
to understand something that I’ve been
struggling with, which is – what is the
benefit of being negative?
“I’m not starry eyed, I don’t close
my eyes to the challenges and the
problems, but how do I benefit myself or
my community or my country by being
negative? Nobody has ever been able
to explain that to me. It comes back to
those five words, positive thinking could
actually be number one – if you’re not
positive about life, how do you get on?
“To be an entrepreneur, you’ve got to
be positive. Because if you get up in
the morning thinking about what can
go wrong in your world today - that can
wipe you out. You’ve got to just be that
little bit adventurous. You don’t focus on
what can go wrong, but what you can
make right and build your business. And
this leads me to what can we, as South
Africans, do about the troubled times
we find ourselves in. The first thing we
can do is stop beating up on ourselves.
We need to have conversations, public
conversations. No one person has all the
wisdom to solve South Africa’s or the
world’s problems. We know it will be a
huge joint effort, but the prize of success
is enormous.”
SPEAKING OF SUCCESS, WIESE KEEPS POWERING AHEAD – NAMED AS SOUTH AFRICA’S RICHEST MAN FOR 2015 – THIS YEAR BRAIT, IN WHICH HE IS MAJORITY SHAREHOLDER, PURCHASED AN 80% SHARE IN VIRGIN ACTIVE AND 90% OF CLOTHING RETAILER NEW LOOK.
“As you know Virgin Active was bought
by Brait. Brait focuses on businesses
with very good management, with
high growth potential and businesses
that are highly cash generative. Virgin
ticked all three of those boxes. What is
interesting is that Richard Branson, the
entrepreneur, retains a 20% stake, which
we feel is important.
“Virgin Active is already the dominant
player in that industry, in both South Africa
and the UK. It has started rolling out in
high growth economies in South East
Asia, where they see tremendous scope
for that kind of business. So it has a very,
very high growth profile and excellent
management and we are very excited
about it. But obviously Brait will from time
to time, as they normally do, update the
market on how the business is going.”
WIESE’S BUSINESS ACUMEN AND PASSION IS ALL ENCOMPASSING. HE SPOKE AT LENGTH ABOUT HIS INVOLVEMENT WITH THE FREEMARKET FOUNDATION INITIATIVE WHICH IS MAKING A PROFOUND DIFFERENCE TO THE LIVES OF THOSE WHO ARE NOT ABLE TO PARTICIPATE IN THE ECONOMY BECAUSE THEY DO NOT HAVE TITLE DEEDS TO THE LAND ON WHICH THEY LIVE.
“Poor people around the world own
trillions of dollars of assets but can do
nothing with them, because they do not
have legal title. The land on which their
homes are built, whilst legally belonging
to the state or municipality or provincial
government, in practice belongs to the
occupier. Hernando de Soto, Peruvian
economist in his book The Mystery
of Capital said that what government
should do is simply, through a stroke of
a pen, make those people owners.
“The Free Market Foundation, after years
of knocking at doors and lobbying, finally
made a breakthrough in Free State and
Western Cape to convince government
to give the land to the occupant. They’ve
managed to bring that cost down to
R1 850 per unit.
“My family donated 100 units in the
Free State and 100 units in the Cape.
The point I made at that handing over
ceremony was that in the preamble to
our Constitution it is stated that South
Africa belongs to all the people who live
in the country. This initiative gives body to
that concept because now it is possible,
if we get this initiative rolling the way
I’m hoping it will, for every household in
South Africa to have title deed.
“This is something in which every South
African can participate. We can, literally,
in a year or two, transform South Africa.
It’s not just about the monetary value
but about human dignity. There are 12
million formal housing units in South
Africa. If each one of those housing
units donated one title then everyone
would own their land. And the South
African landscape would be completely
transformed.”
FEATUREINTERVIEW WITH CHRISTO WIESE
“Everybody in South Africa, across racial and ethnic groups will sink or swim together.”
The SA economy in Q2 2015 was not as it appeared – after taking an inventory. According to the first readings of gross domestic
output (GDP), in real terms for Q2 2015 the SA economy performed very poorly. It is estimated by stats SA to have shrunk by 1.3%
on a seasonally adjusted annual rate in the quarter.
Investec Chief Economist, Brian Kantor takes a close look at South Africa’s GDP in the second quarter in 2015 – and finds all is not as it seems ...
TAKING STOCKOF GDP by Brian Kantor
T O P 5 0 0 / 7 t h E D I T I O N14
2010
-1
Quarter to Quarter*Year on Year
*Seasonally adjusted annualised rates
0
1
2
3
4
5
6
2011 2012 2013 2014 2015
REAL GROSS DOMESTIC PRODUCTPercentage Change
Source: SA Reserve Bank
(All figures are taken from the Quarterly Bulletin of the SA Reserve Bank, September 2015.)
FEATURETAKING STOCK OF GDP
On a second reading for the second quarter of figures provided by
the SA Reserve Bank, which include estimates of the demand side
of the economy, the outcomes seem even worse. Gross Domestic
Expenditure (GDE) is estimated to have declined by as much as a
7.2% rate in the quarter.
The outcomes were not nearly as dire as might be inferred from
either the GDP or GDE estimates. Final demand, the sum of
spending by households, firms and the government sector, actually
grew by about 1%. That final demands continued to grow at a very
modest pace is consistent with our own measures of economic
activity. What turned final demands into very weak GDE growth rates
was a dramatic decline in inventories. Inventories in Q1 grew by
R8.8-billion on a seasonally adjusted annual rate. In Q2 they declined
by the equivalent rate of over R38-billion. This decline in inventories
was enough to reduce real GDP in the quarter by as much as 6.2%.
REAL GROSS DOMESTIC EXPENDITURE AND FINAL DEMAND
Final demandGross domestic expenditure
Percentage change from quarter to quarter
2010-10
-5
0
5
10
15
2011 2012 2013 2014 2015
Seasonally adjusted annualised rates Source: SA Reserve Bank
T O P 5 0 0 / 7 t h E D I T I O N 15
Much of the action is attributable to the large seasonal
adjustment factor interpolated to the estimates of
inventories, the consistency of which may well be
questioned. It is normally the case that the second
and third quarters are periods when inventories are
built up and the fourth and first quarters are normally
associated with a general run down in inventories. But
as the Reserve Bank comments, inventory events in Q2
were anything but normal in the mining and oil sectors.
To quote the Economic Review of the Reserve Bank for
Q2 2015:
“Following a modest build-up in inventories in the
first quarter of 2015, real inventory levels declined
significantly at an annualised pace of R38.9-billion (at
2010 prices) in the second quarter. The rundown of real
inventories in the second quarter of 2015 was mainly
due to the destocking in the mining and manufacturing
sectors, partly reflecting subdued business confidence
levels and a decline in import volumes.”
In the mining sector, inventory levels at platinum mines
in particular contracted during the period on account of
a significant increase in the exports of platinum in order
to fulfil offshore export obligations. The rundown of
inventories in the manufacturing sector partly reflected
lower crude oil import volumes due to scheduled
maintenance shutdowns at major oil refineries over
the period. Consistent with a slower pace of increase
in retail trade sales, the level of real inventories in the
commerce sector rose in the second quarter. Industrial
and commercial inventories as a percentage of the non-
agricultural GDP remained unchanged at 13.8% in the
first and second quarters of 2015.
Inventories can run down because firms lacking
confidence in future sales plan for a reduction in goods
held on the shelves or in warehouses. They may also
run down in an unplanned way because firms are
surprised by the actual sales they were able to make.
The planned reduction in inventories can represent
bad news for the economy as orders decline. The
unplanned reduction can mean better news should
firms attempt to rebuild inventories. Similarly, a planned
increase in inventories can reflect a more confident
outlook for sales to come. An unplanned build-up of
inventories may also reflect unexpectedly poor current
sales volumes and so fewer orders to come in the
quarters ahead.
Making the distinction between planned and unplanned
inventory accumulation will be all-important for any
forecast of economic growth. In the case of the SA
economy in Q2, it seems clear from the Reserve Bank
statement that the run down in inventories in Q2 was
for largely idiosyncratic reasons, making the application
of seasonal adjustments particularly subject to error.
T O P 5 0 0 / 7 t h E D I T I O N16
FEATURETAKING STOCK OF GDP
Judged by the estimated growth in final demand, the
economy did not deteriorate in Q2 as the statistics
on the pure face of it may suggest. In our judgment
of the National Income Accounts released for Q2, the
economy continues on its unsatisfactorily slow growth
path as other indicators of the economic activity,
including our own Hard Number Index, have revealed.
The economy is growing slowly and not shrinking, nor
is it about to do so.
There is, moreover, at least one silver lining to be
found in the latest statistics: as much as inventories
subtracted from the growth rate, net exports added
as much, due to the growth in export volumes and the
stagnation of import volumes. The trade balance went
into surplus and the current account deficit declined
thanks to the weaker rand and the relative absence of
strike action.
T O P 5 0 0 / 7 t h E D I T I O N 17
Another development this year, essential to lessening the
tax burden on the productive part of South Africa and
so increasing potential growth, is the further decline in
public sector employment in Q1 noted by the Reserve
Bank. Lower tax rates and less spending on employment
benefits for a bloated public sector and also lower
interest rates, will help stimulate a recovery in the all-
important household spending that is essential for faster,
sustained growth over the longer run.
A combination of export growth and a stronger trade
balance, combined with a smaller budget deficit
accompanying fewer expensive public officials, of the
kind revealed in Q2 2015, is some of the right stuff
necessary to recalibrate the SA economy in the collective
mind of the global capital market from a fragile to a
resilient economy.
http://www.zaeconomist.com/sa-economy/
taking-stock-of-gdp/
September 17th, 2015
“As much as inventories subtracted from the growth rate, net exports added as much, due to the growth in export
volumes and the stagnation of import volumes.”
T O P 5 0 0 / 7 t h E D I T I O N18
100 000 members of the public attend our auctions annually 57 000 website visitors to our website per month1000 auctions carried out by us in a year80+ Properties on auction every month65 different newspapers used to highlight our properties60 repossesed vehicles on offer every month
0% is the amount of commission our sellers have to pay
Leading The Industry
021 425 8822 I www.claremart.co.za I 49 Somerset Rd, Green Point, Cape Town, 8001
What it takes to be a TOP 500 Auctioneer
T O P 5 0 0 / 7 t h E D I T I O N20
HOW THE WINNERS ARE DECIDED
The Top500 research methodology has been designed in conjunction with the University of Cape Town’s Development Policy Research Unit
Top 500 aims to identify the top five companies in each of the 100 business sectors monitored by Topco Research Department. In order to do so, some measure of the qualities that we consider to be characteristic of top companies must be designed in order to rank companies. To be classed as one of South Africa’s best companies, we expect companies to excel in three key spheres, namely financial performance, empowerment, and policy and accreditation.
The criteria within financial peformance speak to the ideas of top companies being large, growing and productive institutions that are leaders by virtue of their size and dynamism. Financial performance is measured by four indicators: turnover, rate of turnover growth, rand turnover growth, and turnover per employee.
Size is both an indicator and an outcome of whether or not a company is a top company. From the perspective of financial performance, turnover is used to proxy company size and this indicator has a large weight within the measure. The dynamism of top companies is reflected in their ability to expand and grow, and so we include two indicators – one relative, one absolute – of growth in the scoresheet. The former indicator is the rate of turnover growth over the year, since top companies are faster-growing, while the latter is the rand value of the turnover growth. Absolute turnover growth is included to account for the fact that top companies’ growth should make a large contribution to increased total output. These two indicators have a medium weight within the scoring system. Top companies are more productive than other companies and the final performance indicator, turnover per employee, which has a medium weight, speaks to this characteristic.
The business sector has an important role to play in promoting equity and social transformation. Top companies are committed to fulfilling this role, and this commitment is measured using six criteria. Two of these criteria focus on companies’ commitment to the goal of transformation as
SOUTH AFRICA’S TOP500 COMPANIES
w w w . 2 0 3 0 v i s i o n . c o . z a
8 - 9 J U N E 2 0 1 6E M P E R O R S P A L A C E
S A V E T H E D A T E
AN EXCLUSIVE INTERVIEW WITH
CHRISTO WIESER S A : R 1 4 5 . 0 0 ( I n c l .VAT ) U K : £ 8 : 0 0 U S A : $ 12 . 0 0