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As the CoVID-19 pandemic impacts businesses across the world, the Kaizen Institute believes that its Lean Processes methodology will help companies manage the current crisis and emerge stronger after it.
In order to better understand the new environment, Kaizen Institute recently conducted a Global KAIZEN™ Barometer with companies of various sizes, sectors and locations internationally. The purpose of this survey was to gain insights into the state of the various economies, to assess worldwide challenges and constraints and to adapt our approach to an entirely new way of working.
Thanks to the Global Report that resulted from the COVID-19 Global Barometer, KAIZEN INSTITUTE SOUTH AFRICA is now able to implement new methods to assist local companies adapt to current and expected changes in their particular business environments.
The Global Report highlights 17 KAIZEN actions that can help businesses now. It suggests phases and deadlines that will allow companies, using Continuous Improvement activities, to react effectively and emerge from the crisis stronger.
All aspects of a business are included, for example:
Continuous improvement and innovation in marketing and sales: new ways to undertake digital marketing; develop new products and revisit the customer experience in the new environment; review pricing.
Organization and strategy: seize opportunities to scan and evaluate post-crisis paradigms; implement working from home projects; improve employee motivation and efficiency.
Operations: ensure efficiency in post-crisis start-up; equipment maintenance; resize the supply chain; improve service and support operations; evaluate and improve sourcing, suppliers and emergency operations.
“While the approaches mentioned in the Global Report are generic, Kaizen Institute South Africa will tailor the actions to local business conditions with its team currently researching, studying and developing new methods appropriate for local clients,” says KIZA CEO Mbuso Nkosi.
“The health and safety of our clients, team members, suppliers and communities is paramount. Most Kaizen Institute consultants are working remotely but, with the increasing reliance on virtual collaboration instead of physical meetings, they are well equipped to set up a virtual work environment,” Nkosi added.
KAIZEN™ principles and methods cannot stop the damage done by the pandemic, but they can provide support to organizations planning to weather the turbulent months ahead.
“We at Kaizen Institute South Africa will continue to be guided by our mission: Improving the World with Everyone, Everywhere, Every Day,” Nkosi concludes.
Learn more about the market analysis and how to take advantage of the crisis with Continuous Improvement activities. Download the report "COVID-19 Global Report" for free: https://www.kaizen.com/pdf-download--covid-19-global-report.html
The growth of Criminal Enterprise 4.0
The world is currently a very scary place. South Africa is facing massive levels of unemployment, and its citizens have been disrupted from their daily routines.
This has caused heightened levels of anxiety. With this anxiety comes hope that things will start to get back to normal or that there are companies who can offer relief for the risk that is faced in the market.
Criminals are aware of this anxiety and are looking to take advantage of the desperation that is starting to grow. The public needs to be aware of the following scams which are starting to become more prevalent.
Trends at SAFPS
Comparing Feb/May 2020 reported Fraud incidents with 2019 statistics from the same period:
- total fraud incidents fell by around 8%, with incidents in April falling sharply to half of the 12-month average; This is due to the fact that less credit was extended as a result of the lockdown, looking at the April/May period the fraud incidents dropped by 35% compared to the same time last year.
- Incidents of forged documents, which accounted for 38% of reported fraud incidents in 2019, almost halved, now accounting for only 22% of incidents;
- Impersonation saw a sharp increase in May after the signs of economic slowdown Misuse of bank/loan accounts rose from 2% of incidents to 23% of incidents.
The main trends in this category are:
- Interception of emails from contacts containing details which would then be changed
- Requesting admin fees be paid before a successful loan application or lottery winnings could be paid out.
- Requesting deposits before vehicles, animals or other goods be delivered
- Whilst overall fraud rates declined, Gauteng (previously accounting for 55% of all fraud incidents) jumped to 79%.
- The sharpest decline was in KZN which previously accounted for 37% of fraud incidents, now accounting for less than 12%
- We saw that the banking industry accounted for 52% of fraud incidents which is up from 32% in 2019 and actual numbers in the banking industry increased by 30%
- The unsecured lending industry saw their fraud incidents more than doubled, and accounting now for more than 15% of all fraud incidents.
“Although the number of fraud incidents were less than last year as a result of the restrictions in the country, we need to understand how the various categories of frauds have changed and how the different industries have been affected” said Manie van Schalkwyk, Executive Director of the Southern African Fraud Prevention Service (SAFPS).
Low hanging fruits
Criminals are frequently using SMS and WhatsApps go out and offer cheap loans to customers. Customers are then requested to pay an amount upfront to get the loan.
“This is totally not practice. If the consumer is receiving such an offer, you must know that fraudsters are targeting you. A number of major companies, such as Direct Axis, Bayport, Wonga and Bidvest Bank have fallen prey to this in the past few months. The practice is damaging the organisation’s brand as consumers are under the impression that the real organisation is behind these actions, said Van Schalkwyk.
A recent survey, Fraud in the wake of COVID-19: Benchmarking Report, was done by the Association of Certified Fraud Examiners (ACFE) and showed some worrying statistics
The report pointed out that, as of May 2020, 68% of survey respondents had already experienced or observed an increase in fraud levels, with one-quarter saying the observed increase has been significant.
Looking forward, anti-fraud professionals expect an even greater shift in the overall fraud level. Nearly all of our survey respondents (93%) said they anticipate an increase in fraud in the next year (i.e., through May 2021), with more than half of respondents predicting a significant increase.
The report adds that the threat that has risen the most during the COVID-19 pandemic is cyber fraud, which includes schemes such as business email compromise, hacking, ransomware, and malware. The majority of survey respondents (81%) have already seen an increase in these schemes, and 93% expect them to increase over the next 12 months.
Fraudulent death claims
“There is a definite correlation between tough economic climates (such as the one we are currently experiencing) and certain insurance policyholders trying to take advantage of the situation and defraud their insurers. One of the trends we are seeing in the market is an increase in fake death claims,” said Garth de Klerk, CEO of the Insurance Crime Bureau.
Credit life worry
As pointed out earlier; even before COVID-19, South Africa faced massive levels of unemployment. This will only increase as the movement to COVID-19 Risk Levels Two and One are prolonged.
The Insurance Crime Bureau warns their members against massive scams within the credit life industry. According to the Insurance Crime Bureau, unemployment insurance fund (UIF) claims are being placed on hold due to the exceptionally high volumes of claims being submitted to the Department of Labour. Desperate times calls for desperate measures and there has been a noticeable increase in fraudulent credit life claims because of this.
“Insurers need to protect themselves and we are urging them to be vigilant and to go through every credit life case with a fine-tooth comb before making a decision on its validity” said De Klerk.
Remote access joy
COVID-19 has changed the game when it comes to work. Companies have been forced to allow their employees to work from home. This has unfortunately opened the door for cyber criminals as the security of home internet networks are not as advanced as those of corporate internet networks.
“Hackers and cyber criminals are taking advantage of COVID-19 by sending fraudulent emails that look legitimate and attempt to trick victims into clicking on malicious links or opening attachments. According to the SAFPS, there has been a BIG INCREASE in Phishing and SMS scams that prey on the increased reliance on digital tools. The main objective for criminals is to get hold of your information, which is usually followed by account takeovers. These criminals are looking to commit insurance, banking or donations fraud related to COVID-19,” said Van Schalkwyk.
Companies are targets to
It is important to remember that it is not only the public that are potential victims during this time. Companies also face significant risks.
“Fraudsters are approaching clients, usually businesses, purporting to be suppliers advising that their banking details have changed and requesting payments to be made to a specific account number. In more sophisticated cases, legitimate suppliers’ e-mail accounts are hacked and used to send e-mails advising of the change in banking details. Losses are usually quite extensive due to the high business transaction values,” said Van Schalkwyk.
Where large financial institutions (such as banks) have multiple call centres, fraudsters are approaching various call centres purportedly as the client to change one piece of customer information at each call centre. Fraudsters will contact home loans to change a telephone number, and vehicle financing department to change an e-mail address, and in so doing changing the view of the customer without being detected in a single point of contact.
“Typically, the fraudsters would pass knowledge-based authentication protocols, as they would have the obtained the customers personal information through various means. One particular financial institution is phasing out knowledge-based authentication of clients and implementing voice biometric identification,” said Van Schalkwyk.
If it looks too good to be true, it is
“Unfortunately, criminals are smart and ruthless and will not think twice about taking advantage of a distressed individual who is experiencing a lot of risk or is going through a lot of pain during this time. We need to be aware of our surroundings and always remember: if it looks or sounds too good to be true, it probably is. View everything with a critical eye and you will be saved from fraudsters,” said Van Schalkwyk.
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ISSUED FOR AND ON BEHALF OF SOUTHERN AFRICAN FRAUD PREVENTION SERVICES GROUP
ONTHATILE MOKOBORI OF
BULLION PR & COMMUNICATION
CELL: 076 714 5171
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The corona virus has wreaked havoc on the lives of all our people in South Africa and more so our precious children. Parents have suffered financially and most need child care but simply cannot afford it. Our reason for seeking funding is to offer parents 3 months discounted fees to give them a chance to become financially fit again and the funding will assist us in achieving this goal.
Welcome to Amatus Kids Academy’s, your first ever parent-created 24 hour child care centre - A new paradigm in Early Childcare Education on the South African landscape based on a child-centric curriculum and is a Parent-Created Child Care. Each of these parents has a different child care situation, but they all have one thing in common – they want child care that is not readily available. But all is not lost! With a little help and energy, parents can create their own child care arrangements with us, being a 24-hour child care facility. We need funding to expand our child care to help more children who desperately need to be cared for.Reaching my target will mean that I can assist parents in more vulnerable areas by looking after their children at times suited to their time table and at affordable fees that they budget for
We understand the heart of a parent, and we do everything from a parent’s perspective. Day-care is a big step for you and your child. We know that you’re entrusting us with the care of your little one who is, after all, your most precious gift. That’s why we create a caring, nurturing home from home environment. Every child deserves a safe space where they can have fun and feel free to be themselves. At Amatus Kids Academy, we’ve created just that.Family child care in a “home like” setting is the best alternative there is for working parents. It provides a small secure environment for children during the most important time of their development. Family child care offers a home away from home, providing children with “siblings” of all ages, to play, socialize, and learn from. Our goal in providing quality child care for your child is to provide…A safe environment
A nurturing environmentA learning environment… learning is not necessarily the ABC’s and 123’s, but is also the learning of values. The learning of honesty, respect, self–reliance, and potential, self-discipline, and moderation, the values of being; dependable, love, sensitivity to others, kindness, friendliness and fairness are the values of giving.A centre with a safe, secure, and controlled environment.A centre where your child will be stimulated, disciplined and loved
Should we be blessed with funding we will be able to update our centres by adding an Alarm system, D6 Communication System and a variety of computer programmes to enhance the teaching offered to the children as well as the purchase of extra furniture to accommodate the needs of each child
The Covid-19 lockdown has seen home schooling become the norm, much to the distress of many parents, children and teachers struggling to manage a new and unfamiliar remote teaching experience. If you are lucky enough to have internet access at home, especially fibre internet connectivity with its stability and great bandwidth, the online learning experience becomes a lot easier and there is a plethora of excellent content to make your child’s education experience interactive, exciting and manageable.
Many children have access to a smart device of some sort - a phone, tablet or laptop – all connected to the internet. While online security has always been a concern for parents, the changed circumstances have amplified the need for greater security awareness not only on how much screen time children spend online, but most crucially, what they could be exposed to.
“As important and powerful as the internet is, and as fundamental as it is to our daily lives and tasks especially during lockdown, it also has a dark side. For any parent, the biggest concern is that children don’t have the necessary grasp of the privacy issues and any potential threats that could put them at risk. Cyber bullies, stalkers, hackers and wholly inappropriate content are also online unfortunately, so make sure you spend the time to educate your children about the risks, how to identify and avoid them before they happen, and that anything that makes them feel concerned or uncomfortable is cause for your immediate attention and intervention. Two of the most important aspects of protecting your child online come down to opening the lines of communication between you so that your child shares any concerns with you, and secondly, putting the necessary security and monitoring measures in place to keep them safer online,” explains Jacques de Villiers, Head of Fibre-to-the-Home of Metrofibre Networx.
Metrofibre Networx shares some handy tips on how to keep your child safe online while they embrace all the educational value and treasure that the net has to offer:
- Open cards and straight talk: Before you allow your child to access any digital platforms, have THE talk. Make sure that your children understand the risks and all the potential content that they could be exposed to, and what is appropriate and not appropriate. They should understand that the very same ‘stranger dangers’ that lurk in the real world, exist on the web too in many different formats. Make rules with your children such as never uploading or downloading photos of themselves or friends, never divulging any personal information whatsoever (age, gender, address and so on) and never talk to strangers online. Your children should always clear any downloads and apps to be installed on their devices with you first. Have an honest discussion and let them know that they can talk to you about anything that concerns them.
- Controlling online content and browsing: With the right online app andparental controls on your favourite browsers such as Google and Youtube, you can block inappropriate content and pop-up ads.
- Google has a child-friendly version - https://www.safesearchkids.com/- not only is it a safe search engine specifically designed for children, but there is loads of excellent material for parents and children on how to keep safe online.
- Youtubekidsprovides a version of the service oriented towards children, with curated selections of content, parental control features, and filtering of videos. You will need to set this up on your child’s devices and manage the settings, so find out how on Youtube’s Parent Guide.
- Social media platforms are not intended for children and any participation of children that are younger will need express consent of a parent or guardian. Many platforms have introduced age restrictions which have been reinforced with the European Union’s introduction of its General Data Protection Regulation (GDPR) in 2018 that set the age of 16 as the digital age of consent.
- Virtual assistants- Google assistant, Siri and Bixby could take a child to online places that they should not be. To restrict what path your smart device’s voice assistant will lead your child, read this simple tutorial.
- Monitoring apps– there are various parental monitoring apps that allow you to keep track of your child’s online behaviour and what they can access, and even set time limits. Qustudio, Net Nanny and Kaspersky Kidsare just some examples, and will even send you notifications if your child ventures into searches that are blocked.
- Keep track of time – lockdown has exponentially increased the amount of time that children are spending online and onscreen. But that does not mean that they should have unfettered access as digital media addiction is a growing and serious reality. Set timetables or rosters for when they need to do their online schooling and classes, allow some leisure and play time, and then set clear times for screens to be off. There are many handy tools and apps that allow you to manage their online browsing and what they are able to access, as well as limit their online time with handy schedulers and parental controls - such as Net Nannyor Qustodioor Screentime. Many have free versions although the paid versions offer a lot more functionality, cover multiple devices and the annual plans are typically inexpensive and well worth the investment, and peace of mind!
- Virus and Malware Protection– just like any work laptop or device, make sure your child’s devices are protected from the usual threats posed by viruses, malware and spyware, and keep these up to date. Applications such as Kaspersky Total Securityprovides protection for the whole family from computer viruses, cryptolockers, protects payments encryption, secures passwords and blocks webcam spies.
At no time in our history have we ever been this reliant on internet connectivity to work, learn, play, connect and communicate. The Covid-19 lockdown has amplified our digital reliance in unimaginable ways. Giving your family and children the gift of fibre connectivity is a massive advantage in terms of the educational progress and ability to keep pace with the new remote learning realities, as well as access some of the incredible educational and recreational content that it holds. But with that gift comes the responsibilities of keeping your children safe online. Have the all-important talk with your children about the online world, and all its benefits and risks. If you need help with setting up the necessary security and safety measures for your home devices, invest in the services of an IT techie to advise you and help set everything up – it’s likely to be one of the best investments you can make in helping your family navigate their online journey and get the best out of your internet connection,” concludes Jacques.
The SME sector is experiencing a crisis bigger than it has encountered before thanks to the Covid-19 lockdown. Sim Tshabalala, a member of the CEO Initiative, and chief executive officer of Standard Bank, said: “These are extraordinary times that require extraordinary commitment from CEOs and large corporates. The Government has asked South Africans to stay home under a 35-day lockdown. This is tough for every individual, and every business, but most especially difficult for small and medium enterprises.”It is vital that the SMME sector is strongly supported through this crisis in order to prevent large-scale liquidations, and the loss of thousands of jobs.
Now is the time for the ESD pillar of the B-BBEE Codes to come into its own. The element was designed to support previously disadvantaged businesses to allow them to actively participate in the formal economy, and to support the SME sector in general. It is said that the ESD landscape that has become predictable and stale, with an over-reliance on business incubators, for example. ESD beneficiaries receive all sorts of business training, and often hop from one incubation programme to the next in the hope of receiving funding or procurement contracts. However, these have generally not had much impact.
What is needed now are innovative, creative approaches for supporting the SME sector in general, and ESD beneficiaries in particular. ESD contributions can change from being a grudge purchase, or just the price of doing business in South Africa to becoming the mechanism to save the small-business sector and, ultimately, the economy.
Some examples of assistance that can be given include:
- Shortening of payment terms to paying on invoice,
- Relaxing of procurement policies to allow more SME’s to enter the supply chain,
- Actively pursuing policies that allow for procurement of designated goods and services from small suppliers,
- Implementing Supplier Development initiatives according to the substance of the pillar i.e. helping businesses to optimize their processes (which will ultimately benefit the corporate sponsor),
- Giving small business owners access to professional services that are essential to running a business. For example, accounting services to assist small business to fulfill funding criteria, and IT services to help them transition to digital platforms will be of enormous benefit,
Taking the time to ask small business owners about their pain points to assess where assistance can be given.Hundreds of small businesses are going to close their doors as a result of this pandemic, but large corporates should be doing all they can to ensure that they do their bit to lessen the number as much as possible.
The outbreak of COVID-19 has caused significant disruption to businesses and a degree of panic within the employee community. Companies across the globe are activating contingency and business continuity plans and are allowing employees to work from home to limit the spread of the virus. In a new reality where millions of people are working remotely, secure networks are now more critical than ever, according to Aon.
Zamani Ngidi, Cyber Solutions Client Manager at Aon South Africa outlines the practical steps organisations can take to remain cyber resilient amid the crisis.
“Concern about the spread of the Coronavirus has triggered the largest “work-from-home” mobilisation in history. The Coronavirus outbreak is highlighting the risk resilience, or lack thereof, of organisations. Not only as far as restrictions implemented from the Presidency are concerned, but also from a sustainability perspective and what that constitutes in a world where global economic activity is impacted,” says Zamani.
“Covid-19 will fundamentally change the way we conduct business in future in respect of mobile and remote working, and this has significant cyber risk implications. Organisations will need to increase reliance on technology in order to navigate a business environment that is globally restricted in terms of physical movement and presence. The ability of employees to work from home (connectivity) will become more pronounced, and when coupled with possible disruptions from load shedding, creates a unique set of risks for South Africa.
“At the very least, organisations will need to reassess internal IT policies, crystalising risk mitigation efforts and re-assessing risk transfer programmes, arising from the dramatically increased reliance on technology for remote work forces,” says Zamani.
To remain operational and secure, Aon recommends that companies take the following steps:
- Defend Against the Phishing Wave
Malicious actors will leverage the intense focus placed on the virus and the fear and panic it creates. Security researchers have already observed phishing emails posing as alerts regarding COVID-19. These emails will typically contain attachments which purport to offer information about the outbreak or updates on how recipients may stay safe. In an environment where people are stressed and hungry for more information, there is a lack of commitment to security best practices.
This is the time for organisations to remind employees of the need for vigilance and the dangers of opening attachments and links from untrusted sources. Running a simulated spear phishing campaign can also demonstrate the level of resilience to these attacks. At a more technical level, up-to-date antivirus and monitoring tools can limit the effectiveness of these attacks.
- Test System Preparedness
Organisations will be experiencing an unprecedented amount of traffic accessing the network remotely. Companies with an agile workforce have been preparing for this contingency for some time and will be well-equipped to maintain network integrity through the use of sophisticated virtual private networks (VPNs) and multi-factor authentication. Enterprise security teams are recommended to increase monitoring for attacker activities deriving from work-from-home users, as employees’ personal computers are a weak point that attackers will leverage in order to gain access to corporate resources.
For those less prepared, COVID-19 presents a challenge. There is a risk that the increased volume of network traffic will place a strain on IT systems and personnel, in addition to employees accessing sensitive data and systems via unsecure networks or devices. We recommend that these organisations migrate as quickly as possible to remote working and Bring-Your-Own-Device (BYOD) standards. VPNs should be patched regularly (for example, a vulnerability in the Pulse Secure VPN was patched in April 2019 but companies which failed to update were falling victim to ransomware in December) and networks should be load-tested to ensure that the increased traffic can be handled.
- Brace for Disruption
A remote workforce can make it more difficult for IT staff to monitor and contain threats to network security. In an office environment, when a threat is detected, IT can immediately quarantine the device, disconnecting the endpoint (i.e. the compromised computer) from the corporate network while conducting investigations. Where users are working remotely, organisations should ensure that, to the extent possible, IT and Security colleagues are readily contactable and ideally able to physically address a compromise at its source. Sophisticated endpoint detection and response (EDR) software can also be used to quarantine workstations remotely, limiting the potential for malicious actors to move through the network.
As this risk moves beyond the technical, companies should adopt an enterprise risk approach. This can include rehearsing business continuity plans (BCP) and senior management response through tabletop crisis simulations that focus on cyber scenarios as well as how pandemics and other similarly disruptive events are likely to impact upon automation, connectivity and cyber resilience.
Companies can also safeguard against the increased risk of disruption through a robust cyber insurance policy which, in the event of a digital disruption to systems, can provide cover for business interruption losses, as well as the costs of engaging forensic experts to investigate and remediate a breach.
“COVID-19 presents many challenges to businesses across the entire globe but developments in technology means companies can remain operational and nimble in the face of uncertainty. Keeping a finger on the pulse of the pervasive cyber threats in the midst of this crisis is critical to ensuring that the increased reliance on connectivity and technology don’t scupper productivity any further,” concludes Zamani.
There has been much discussion following Minister Mantashe's statements at the 26th Investing in Africa Mining Indaba relating to forthcoming legislative amendments which would allow mining companies to generate their own power without licences from the National Energy Regulator of South Africa (Nersa). Without contributing to the dialogue on what would be required under energy laws to see this to fruition, one wonders whether the Minister has consulted with other relevant departments in ensuring this policy decision is given due effect. but what does this mean from an environmental regulatory perspective?
The Integrated Resource Plan (IRP) 2019 is one the latest addition to the array of legal instruments South Africa has adopted to transition to a low carbon economy and as part of its commitment to adapt to and mitigate against climate change under the international climate change framework. The IRP 2019 makes it clear that South Africa will pursue a diversified energy mix to reduce reliance on a single energy source (coal) in line with the country’s Paris Agreement commitments to reduce greenhouse gas emissions. This has largely promoted the recent revisions to environmental legislative frameworks in an attempt to alleviate the regulatory strain on renewable energy companies.
However, it is debatable whether mining companies seeking to self-generate power under Minister Mantashe's proposed Electricity Regulation Act exemption - in order to "help close the energy gap caused by deteriorating Eskom plant performance"- will constitute the large-scale wind and solar photovoltaic (PV) energy developments contemplated in the most recent environmental law revisions. For example, applications for environmental authorisations for certain large scale wind or solar PV facilities must now follow the basic assessment procedure of the Environmental Impact Assessment Regulations, 2014, and the timeframe for decision-making purposes is a truncated 57 days. This process is, however, only available for projects where the entire proposed facility will be situated in a declared Renewable Energy Development Zone (REDZ), eight of which were gazetted in 2018 and a further three proposed in November 2019. The REDZ were promulgated primarily to aid in future bidding rounds of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and speaks primarily to the areas in which those REIPPPP projects are located.
It seems likely that the typical self-build of a mining company would be considered private power generation and not part of the Renewable Energy Independent Power Producer Programme. Private power generation will likely consider various technologies, and not all of them would necessarily be renewable or clean. Renewable energy projects are less likely to require the host of environmental approvals typically required for a power generation facility, however, when coupled with continuous technology requirements, may trigger these. These projects will therefore continue to bear the existing environmental and atmospheric emission consequences and permitting requirements which are the subject of environmental regulation - with the standard environmental authorisation application process having a lead time of 300 days for generation facilities with an output of greater than 20 MW.
The piecemeal fashion in which overarching policy determinations relating to the urgent deployment of energy and energy solutions in South Africa are being translated into law is problematic, posing significant challenges to industry, increasing the risk of misalignment between the different instruments, and fostering a continuation of legal uncertainty. It is unclear, in this case, whether the Department of Environment, Forestry and Fisheries or the Department of Human Settlements, Water and Sanitation have been consulted on Minister Mantashe's proposal and whether regulations will be published to apply a truncated environmental licensing process to self-generation projects, as one would hope to see.
Opinion by Gary Jack, Country President of Chubb Insurance South Africa.
Businesses are facing a number of major challenges as we start 2020: Global growth is slowing, Middle East tensions are rising and concerns about trade remain.
Closer to home, the economic outlook for South Africa is also troubling.
The World Bank recently cut growth expectations for 2020 to 0.9% citing policy uncertainty, fiscal pressures, business confidence and the electricity supply as key concerns. In a recent Reuters poll of economists, South African growth forecasts were reduced, suggesting the poll’s median 40%1 chance that the country will sink into a recession may be too low. The country also continues to face high levels of household debt and credit extension defaults², and the highest unemployment rates since 2008³ at 29.1%, which is especially severe among young people at 58.2%. The country can also expect lower government spending in a bid to control the spiralling budget deficit⁴.
2020 is likely to see a repeat of some of the key insurance market challenges of 2019 and the economic pressures seem unlikely to abate any time soon, making it more challenging for businesses to manage their inherent risks. From an insurance and risk management perspective, business leaders and risk managers will need to find new ways of dealing with the complexities of South Africa’s rapidly evolving socio-economic environment. However, we should not be lulled into believing that these challenges are only localised, nor that they are insurmountable: there are still real opportunities for companies which anticipate these hurdles and build resilience to overcome them.
Economies all over the world are experiencing both economic and social uncertainty and the reality is that circumstances at home and abroad have implications for local, multinational and African-based businesses in terms of their risk management strategies, business continuity plans, travel risk and decisions on where to deploy their capital.
Chubb Insurance South Africa highlights some of the key risk trends in 2020:
- Large and complex insurance placements are becoming more challenging: Insurers are calling for more stringent risk management interventions and applying stricter underwriting principles. Following a prolonged soft-market and pressure on underwriting results, the insurance sector has seen significant shifts in the property and casualty market with rates hardening and underwriting standards improving. Looking ahead through 2020, we should continue to see an even greater emphasis on risk selection and rate adequacy. Insurers will continue to drive better risk management standards to deal with our deteriorating infrastructure. Businesses in challenged risk classes should in general expect to pay more for cover with capacity becoming increasingly difficult to source – the placement process may take longer and be more challenging than has been the case in the past. There will be increased difficulty sourcing adequate well priced capacity without focus and investment on sound risk management. Lower underwriting returns for insurers after a spate of major losses have reinforced the need for greater underwriting discipline as the only route to long-term sustainable performance.
- Impact of a downgrade: If Moody’s downgrades SA’s credit rating, which looks increasingly likely, they will be the third and final rating agency to do so. Besides the repercussions that this will have for the wider economy, this will also impact the decisions made by risk managers and insurance buyers in determining where to place their risks. As an example, South African managed multinational programmes linked to a South African master policy could experience challenges with in-territory insurer partners having concerns about accepting South African insurer security. The implication of this is a loss of revenue to the local market. Large projects on the continent supported by international funding will be under more pressure to have internationally rated security. These types of issues could hinder the ability of South African insurers to participate on certain transactions in the international market.
- Weather catastrophes are increasing in frequency and severity: The past few years have made it clear that South Africa is not exempt from catastrophe events and changing weather patterns are a reality. The frequency and severity of drought, flooding, storms and wildfires has resulted in South Africa no longer being viewed as a low catastrophe region. Most recently KZN and Centurion were the scene of flooding and tornadoes. Climate change will continue to challenge businesses, and the need for pre-emptive risk management to mitigate risks to property, supply chains and business continuity are crucial.
- Intangible and emerging risks escalate: Risk managers need to look further into the future for new emerging and intangible risks that are evolving and impacting the probability and severity of existing risks. Chubb’s risk surveys with executives across the continent show that the top-three risks that are of concern to risk managers are technology, political and trade credit risk and terrorism. Cyber risk especially in large M&A transactions, as well as its implications for business interruption losses are becoming more pronounced, while the financial quantum of major cyber breaches seems to be on the increase. The speed of digital advancement and the reliance on technology makes cyber risk a particularly challenging risk for businesses and one which will continue to dominate the risk management agenda.
- Political Risk and Trade Credit Risk are on the rise: Political uncertainty continues to drive business indecision, social unrest and riot risk. As businesses continue to expand across borders, they are faced with a number of geopolitical threats such as expropriation, political violence, forced abandonment, trade agreements and exchange controls. There is a risk that more uncertainty on South Africa’s economic and political front could further erode business and consumer confidence. Given the current uncertainty, we may see a deepening of strategic risks arising from economic, political and regulatory factors.
- Enterprise Risk Management: ERM is crucial as businesses face more complex and inter-related risks, emerging faster than ever before. Clients will be relying more heavily on insurance brokers with focussed advisory expertise that provide holistic risk advice and solutions across the enterprise - helping them to analyse risk and pinpoint solutions for their complex needs, protecting both their bottom lines and their reputations. With the growing complexity and nature of risks that businesses are exposed to, the role of the risk advisor remains highly relevant to business and their decision-making executives.
Given the current state of the market and economy in an increasingly globalised, interconnected world, it is vital that businesses look to insurers with solid track records, strong financials and a global pedigree that can provide the strength and stability to navigate the risks of unknown, volatile market conditions and honour large-scale claims. There are many factors at play which are fundamentally changing the risk landscape in which we operate – creating challenges and opportunities. In preparing for some of the risk challenges 2020 will bring, it is vital that insurance buyers, risk management specialists, brokers and insurers work closely together to understand, manage and transfer these complex and interconnected risks.
From Chubb’s perspective, we expect risk exposures to continue to evolve in three key areas in 2020 – namely cyber, directors and officers and supply chain risk – and these are all areas in which we continue to invest and strengthen our approach and solutions. It is our role, as an insurance industry to help improve risk awareness and to develop insurance products that meet our clients’ evolving needs.
1 – Moneyweb, https://www.moneyweb.co.za/news/economy/sas-growth-forecasts-slashed-recession-risk-high-poll/ [accessed 17 Dec 2019]
2 – Experian release published in Business Report online; 3 Dec 2019; https://www.iol.co.za/business-report/economy/south-africans-in-higher-demand-for-personal-loans-as-consumer-debt-goes-through-the-roof-38057625 [accessed 17 Dec 2019]
3 – Trading Economics; https://tradingeconomics.com/south-africa/unemployment-rate [accessed 17 Dec 2019]
4 – Fin24; https://www.fin24.com/Budget/eskom-weak-tax-to-raise-south-africa-budget-gap-to-decade-high-20191021 [accessed 17 Dec 2019]
As we enter the next decade, local and African merchants should support payment methods that suit their customers, rather than following global trends just for the sake of it. Peter Harvey, MD of payment service provider, DPO SA, looks at five trends we can expect over the next few years.
1. Cash is here to stay – for now
Despite common perceptions, South Africa still has more than 11 million unbanked individuals and cash remains the preferred payment method for these and many other customers.
“As we enter 2020, we can expect a host of new digital payment technologies that sound like excellent options – and they may well be for some – but merchants need to carefully monitor their customer behavior before they rush to try the latest gadget or fad,” warns Harvey.
According to Harvey, the banks and card companies like Visa and Mastercard will be placing a large focus on enticing consumers to move from cash to card-based payments in the coming years.
“Overcoming the reliance on cash will take a fair amount of time and effort. For merchants trading in a cash-based community, depositing money into a bank that tracks your spending, charges you to store your money, and then charges you again to withdraw it can seem unattractive. At the end of the day consumers will make their decision based on convenience, cost, and risk,” he explains.
Card payments are expected to morph over the coming years. In South Africa, the tap and pay method is becoming more commonplace. Harvey believes this and other near field communication (NFC) methods of card payments will continue to grow in use as shoppers become more trusting of the technology and retailers see the efficiency benefits of moving customers through their purchase cycle more quickly and easily.
2. Mobile is still king
There is no doubt that the means to facilitate most digital payments in Africa will depend on mobile technology.
According to South African communications regulator, ICASA, South Africa has a smartphone penetration of 80%. In Sub-Saharan Africa meanwhile, the mobile phone penetration is 50% and the GSMA expects smartphone penetration to grow from around 40% to 66% in 2025.
Harvey says smartphone technology and wearable technology will allow for the growth in some of the newer payment tech, like Apple Pay and Samsung Pay, but these payment methods will remain in the hands of the top LSMs and have little effect on the bottom of the pyramid customer base.
“For the moment USSD technology will still underpin the majority of mobile payment methods. Until smartphones increase in penetration, payments like m-Pesa will continue to dominate. Customers know and trust the solution and its these types of offerings that will need to be beaten by any new entrant over the next two to three years at least.”
3. New decade, new banks
Harvey is upbeat about the new digital-only bank offerings like Tyme Bank, Bank Zero and Discovery Bank.
“It appears that 20Twenty was two decades too soon. The local markets are now finally ready for a new digital offering without the fuss and cost of the traditional offering. These banks stand a good chance of making an impact and making headway towards financial inclusion in the country.”
Harvey believes, that in order to boost the number of people using digital payments, the banking institutions, merchants and payment service providers need to start incentivising consumers to make the switch. Loyalty and Rewards will start playing an even bigger role in the near future.
4. New services for the payment ecosystem
Based on demand, Harvey believes forward-thinking payment service providers will work closely with their banking partners to focus on providing their mutual merchants with a ‘fully managed service’. This service includes instant sign-up; a full suite of payment products; risk screening; account reconciliation; anti-money laundering checks; access to shopping cart plugins; and a variety of other value-added services in the online digital payment space.
These services will enable digital retailers to quickly and easily start selling their services online, while protecting them from the associated risks.
The service benefits the banks as well as the broader digital ecosystem, as the payment service provider actively monitors and manages merchants and transactions, removing risk from the process and facilitating ‘good’ transactions.
5. Identity technology takes center stage
Looking at newer technologies, Harvey believes biometrics will continue to be the key focus.
Harvey says voice and facial recognition are set to take off in South Africa in 2020 and 2021 and he believes the key driver in this regard is the increasing use by the government.
“Banks and Home Affairs teaming up for the renewal of ID documents and passports is a major win for the average citizen. This falls neatly into the ‘convenience’ motivator and as people use and trust the biometrics used by the banks for this service, they will become less afraid to try it for payments,” Harvey explains.
As technology rapidly improves, the payments ecosystem can expect some exciting advancements over the coming decade. Chat commerce and even augmented and virtual reality developments will almost all come with payment features. However, Harvey cautions against over-exuberance.
“Make sure you cater for what your customer actually wants, not what you think they should want. If working closely with African merchants, banks and customers have shown us anything, it’s that the fastest way to drive away business, is to dictate how customers pay. Provide the options and let them choose,” Harvey concludes.
The keynote address by minerals and energy minister Gwede Mantashe at this year’s Investing in African Mining Indaba conference covered a range of topics of importance to the industry.
Here is the reaction from some of Webber Wentzel's Mining Sector experts to the key issues raised by the minister:
Jonathan Veeran and Manus Booysen, specialists in mining regulation
Positively, the minister was open and honest in his opening address. He contrasted global growth of 3.3% in 2020 and 3.4% in 2021 with SA’s GDP growth of below 1%. He immediately referred to the problems resulting from power outages and that mining production fell by 3.1% year on year in November 2019. His opening did not paint a rosy picture and acknowledged electricity constraints. It is encouraging to note that the minister is being realistic about the precious position of the South African economy.
On policy and regulation, he acknowledged the need for certainty to attract investment and said that government is committed to work with the sector. He acknowledged that mining companies have spent R600 million on social and labour plan implementation.
However, he did not make any suggestions on how companies can maximise the effects of their CSI spending and rehabilitation provisioning to help communities long-term. Proposed amendments to Nema allow for rehabilitation provisioning to be used to help near mine communities to develop agro-processing, possible some form of beneficiation and other ancillary industries during the life of mine which would ensure the longevity of communities and reduce dependence on mining operations. We believe the minister could use regulation to create longevity in communities after mines close. Regulation should allow for co-operation among several different companies in a region. This is partly because smaller companies do not have the scale to make a meaningful contribution on their own. Mining companies need to realise that co-operation is important and risks can be mitigated by, for example, insurance or a more structured regulatory framework.
We welcomed the minister’s comments on introducing the legislation on oil and gas but we are concerned that the new legislation is not congruent with the previous draft agreed with the industry. SA cannot afford slow regulation on oil and gas as the South African coast is very prospective. We also need a regulatory regime that encourages exploration, not one that imposes onerous compliance, as it will detract from investment.
On self-generation of electricity, we are encouraged by the minister’s comments, but we await to see the details. In an environment of weak commodities prices and slow growth, mining companies may find it difficult to fund self-generation projects. It will not be easy for a mining company, unless it is large and long-term, to put up an economically sustainable energy generation facility.
It is also positive that the minister anticipates competition in the electricity industry which will have a positive effect on prices. But these are long-term plans, while the problems facing Eskom are immediate. We are disappointed he said nothing about the immediate way forward and action being taken on Eskom.
Jason van der Poel, specialist in power and energy
The current Integrated Resource Plan does not cap the amount of distributed generation that may be produced up to 2022. From 2023 to 2030, it is capped at 500MW per year. Distributed generation refers to projects between 1 and 10MW.
As the law stands, under schedule 2 of the Electricity Regulation Act, the only electricity generation projects that are exempt from the requirement to apply for license under the Electricity Regulation Act are projects of no more than 1 MW, whether or not connected to the national grid.
Section 10(2)(g) of the Electricity Regulation Act allows the Minister of Mineral Resources and Energy to grant deviations from the Integrated Resource Plan. In May 2019, Jeff Radebe, the last Minister of Energy, wrote a letter to NERSA granting deviation from the existing IRP 2010-2030 for licensing of operation for generation facilities between 1 and 10MW. The minister has said that together with NERSA, his Department is in a process to gazette a revised schedule 2 of the Electricity Regulation Act to enable self-generation and facilitate municipal generation options under Distributed Generation. We are encouraged by the minister’s comments, but we await details.
Several mining companies will need electricity generation facilities. Under current law, these will require a ministerial deviation from the IRP, which the minister, to date, has appeared reluctant to issue. The RFI for emergency power is encouraging and we await to see the procurement process that emerges from the RFI responses from the market. A key issue will be generally how fast government can move to harness generation capacity that is ready to be engaged and whether the minister will use his powers under the Electricity Regulation Act to expedite approvals that may be needed by generators that can provide electricity very quickly.
Merlita Kennedy, dispute resolution and community issue specialist
In addressing the issue of the social licence to operate, the minister did not go far in his comments as he did last year, when he said there had to be meaningful engagement with communities in granting rights, impacts and benefits. This year he said companies must take communities seriously on whose land they mine.
The minister seemingly issued a veiled threat relating to mining communities. He said they are important and should not be seen as the enemy – if they are treated as "foreign agents" there will be disruptions. According to SAPS figures, there are about 35 protests taking place every month, rooted in socio-economic concerns in mining communities. The minister did not go far enough to address this challenge. On social and labour plans, he commended the companies that complied with their plans. However, 91% of communities recently interviewed by ActionAid SA said they were not aware of such plans.
Lizle Louw, labour and employment law specialist
It is positive that the minister was forward-looking in acknowledging the impact of 4IR in the industry. He said he does not view it as a destroyer of jobs and that he recognises reskilling of employees in the industry is needed.
More initiative and input will be needed from government on this issue, rather than a complete reliance on and responsibility shifting to the mining industry. For example, government could provide incentives such as tax breaks to companies who reskill to prepare for 4IR and consequently ensure long term gainful employment or implement joint training programmes. Government, industry and labour should be preparing now for 4IR and the retention of jobs in that environment.
Kate Collier, specialist in occupational health and safety
The significant drop in the number of fatalities that the minister mentioned, to 51 in 2019 from 81 in 2018, is certainly encouraging. We do however remain mindful that this is but one factor in assessing improved health and safety conditions of employees in the mining industry.
The drop in the number of incidents (in the broader sense) should not necessarily be relied upon too heavily to demonstrate improvement in the absence of clear comparable data such as lost time injury frequency rates across sectors or for types of injuries. Other factors such as possible lower numbers of employees, fewer shifts worked and possible increases in near misses could lead to lower injury numbers being observed for reasons other than actual increased safety performance.
Ultimately, the industry continues its focus on removing the risks to which employees may be exposed and safety statistics should be a tool in this process rather than the goal.