Welcome to Mind Matters week of 12 September 

Local economic perspectives

Government has ruined South Africa’s economy: economist

Senior economist at Efficient Wealth, Dr Francois Stofberg says that the South African government has ruined the country’s economy through “unhealthy” policies like broad-based black economic empowerment and leaders who meddle in big business and are not held accountable.

In a note published this week, Stofberg said that the government is by far the biggest player in the economy, accounting for 35% to 40% of economic activity. Because of this, “it all starts, and ends, with government,” he said.

What are your thoughts on what appears to be a sweeping statement? Is it well founded? 3 min read

Rich people are leaving South Africa

Eunomix economist Claude de Baissac has warned that South Africa is too dependent on tax from rich citizens, who are leaving the country in droves.

Speaking at the recent Tax Indaba, De Baissac said a large part of personal income tax comes from higher-income earners and that working-class taxpayers are disappearing.

What do you think we can do to change things around and get the economy moving? 3 min read

What South Africa must do to grow the economy

A new discussion document – COVID-19 and the South African Economy – provides practical policy changes to help grow the economy.

The document, authored by Matthew Stern and Chris Loewald, looks at how South Africa can navigate itself out of the Covid-induced recession and restore economic growth.

Stern and Loewald said the existing policy framework is not working fast enough and that policy reforms are needed to alter the trajectory of the slow-growing South African economy.

This is a good read and you could do even better by looking at the discussion document which is freely available, downloadable and merely 14 pages. This article is a 3 min read. 

‘Repurposing’ coal infrastructure can boost South Africa’s energy transition, International Energy Agency says

South Africa is the most coal-dependent country in the world for its energy needs, and coal is the most harmful fossil fuel in terms of its impact on health, global warming and human-induced climate change. The country, however, also suffers from a toxic mixture of staggering unemployment levels with entire towns and livelihoods tied to the coal value chain, persistent energy insecurity and a power utility that is financially incapable of investing in cleaner forms of power generation.

In the context of this quagmire, a recent report by the International Energy Agency (IEA), Security of Clean Energy Transitions, suggests one pathway to address all of these issues: repurposing coal infrastructure.   

Read more about how repurposing would work in SA. 3min 30 sec read

Events worth watching unfold

Largest corporate renewable energy PPA in Africa reaches financial close

Renewable energy investment company African Rainbow Energy and independent power producer SOLA have reached financial close on 200MW solar PV projects, worth R4 billion, for Tronox Mineral Sands.

The Patrice Motsepe-owned African Rainbow Energy and SOLA announced the closing of the transaction today, calling it “the largest corporate renewable energy power purchase agreement in Africa”.

This initiative is being touted as a potential breakthrough for the private energy market and the parties to the deal say it has paved the way for more projects like it.

Developing renewable projects for private buyers is expected to increase on the back of the growing power crisis in SA.

Surely this is a move in the right direction - what are your thoughts? 3 min 30 sec read

Standard Bank to take cashless taxi payments national

Big-four bank Standard Bank says it plans to collaborate with more taxi associations and owners to grow the national footprint of its Taxi Yam cashless payment solution.

This, after the bank rolled out the solution to 10 taxi associations in KwaZulu-Natal (KZN) earlier this month.

Comprised of a mobile app and card, Taxi Yam aims to help simplify taxi payments for commuters and drivers, says Motlatsi Mkalala, head of main markets at Standard Bank.

There has been some negative talk that this project won't work. What are the risks in this roll out and how would you mitigate them if you were a Taxi owner on the one hand or the bank on the other? 3 min 30 sec read

Diversity: progress or lack thereof

Alpha Female 2022: Drive for gender diversity stalls

Citywire’s Alpha Female report, which tracks the progress asset managers are making on gender diversity in investment roles, reveals the positive change of recent years has all but ground to a halt

In South Africa, the picture is even less encouraging. Just 11% of the local portfolio managers in the Citywire database are female. This number has essentially stagnated for four years.

The full report, which compares countries and sectors as well as listing all the most consistent female fund mangers and analysing the performance of mixed teams, can be found here.

2 min read, but go to the report for more. 

Women in fund management: Courage doesn’t always roar

Following the release of Citywire's 2022 Alpha Female report, top-performing local asset allocator Natasha Narsingh reflects on her working experience and offers advice to women looking to make a career in asset management.

When it comes to being a woman in a male-dominated profession, what’s important is to ‘take up your space’ at the investment table. Hold it and occupy it!

Listen to Natasha's advice and be empowered. Natasha is head of absolute return at Sanlam Investments.3 min 30 sec read

Industry news 

Call for entries for new world-class actuarial research awards

First of its kind in short-term insurance field in South Africa.

Old Mutual Insure, in partnership with the Association of South African Black Actuarial Professionals (ASABA), is inviting students and young professionals to enter the new OMI/ASABA Research Awards 2022. This is an exciting competition aimed at developing research excellence in the short-term insurance industry.

This is a very exciting opportunity as short term insurance is the fastest growing sector in the industry currently. 3 min 30 sec read

Administrators, funds will need 18 months to prepare for two-pot system, says Asisa

Addressing the National Assembly’s Standing Committee on Finance on Tuesday, Asisa senior policy adviser Rosemary Lightbody said the proposed implementation date of 1 March next year was not feasible, not least because there were many issues with the draft legislation that must be resolved.

Asisa’s presentation touched on some of these issues, including the tax treatment of retirement fund contributions that exceed the tax-deduction threshold and how defined-benefit (DB) funds will function within the two-pot system (see below).

This is a must read for anyone in the industry as all pension funds are affected. However, defined contribution funds (DB) are not catered for in the legislation. 7 min read. 

Two-pot retirement legislation must provide for immediate relief, says Cosatu

Cosatu has called for fund members to be allowed to access their accumulated savings when the two-pot retirement system takes effect, to prevent them from resigning and cashing out their savings.

This was one of three key changes to the draft two-pot legislation proposed by Cosatu during its presentation to the National Assembly’s Standing Committee on Finance on Tuesday.

This is another side of the story, what has the two -pot retirement legislation unleashed? Does it assist those struggling or does it compound the scourge of debt.  Think of all the parties involved. How would you solve this conundrum? 5 min read

All the buzz in insurance markets

Studies reveals that the insurance market is not only growing, it’s also shifting in a series of interesting ways. Here’s what you need to know as a job seeker, brokerage owner or insurer. By Vanessa Rogers on behalf of Executive Placements.

Good background to have in the lead up to your job search, broad as it is. 4 min 

NHI plans still on track despite court ruling, says Minister

Despite a recent High Court ruling declaring some sections of the National Health Act unconstitutional, Health Minister Joe Phaahla says this won’t impede plans to roll out the National Health Insurance (NHI) scheme, and that the government will continue work on its implementation.

In June, the High Court found that sections 36 to 40 of the NHA were unconstitutional (the sections refer to provisions for issuing health establishments with a “certificate of need”).

Reading this article is confounding as the government and the Department of Health seem to be on opposite sides. What is your understanding of the situation? 3 min 30 sec read

Grey-listing will have ‘muted’ impact on SA’s banks, says S&P

The credit rating agency said it did not expect that South Africa’s banks would lose their correspondent banking relationships if the country was grey-listed in February next year by the Financial Action Task Force (FATF).

However, the prevalence of cash transactions because of the country’s large informal sector and indirect exposure to other sectors with less rigorous anti-money laundering and counter-terrorism financing (AML/CFT) management than the banking sector could pose some risks to the banks.

Keep up with the debate on the topic as each week a different angle is exposed. 3 min read

Was the tribunal’s decision on causal event penalties warranted?

In an article about a case in which the High Court in Johannesburg ordered the South African Special Risk Association to pay Blackspear, the judge noted that, despite the complexity of the relevant clause of the insurance contract, “The striving for business sense must prevail.”

This was also a strong argument in the various cases concerning contingent business interruption resulting from the Covid-19 pandemic.

Familiarise yourself with the features of the cases and the rationale for judgement presented. What do you think is fair treatment? 3 min 30 sec read but a lot to think about. 

Investments

Attractive investment opportunities for those who can navigate the current fear and uncertainty

Significant uncertainty, marked by rampant inflation, fears of a looming recession and growing geopolitical risk, clouds the near-term global outlook. The knee-jerk reaction is to retreat to safe assets and preserve capital until the storm has blown over. However, we believe that investors should look past the noise of the simple narratives and take a longer-term view based on more enduring factors. Some assets that historically acted as safe havens could in fact amplify risk over the next few years, but investors that maintain and build exposure to carefully selected equities are likely to be well rewarded for weathering near-term volatility.

This article is by Kevin Cousins Head of Research at PSG Asset Management. Notice the use of prose the investment world has come to reflect in articles for example " look past the noise of the simple narratives".  Can you find some verbs that typify the world of investment in this short excerpt? 

This is an excellent 5 min read which also offers an historical perspective on investments. 

10X brings you Not The Daily News with Michael Avery

10X Investments has partnered with Michael Avery and Classic Business to create a new weekly radio insert, Not The Daily News, that will largely ignore the daily news in favour of focusing on longer-term themes that are driving the market.

The insert will air on Classic Business on Fine Music Radio (101.3 FM) on Thursdays from 6pm.

Episode #1:

In the launch episode, on Thursday September 8, Michael Avery talked to 10X’s Chief Investment Officer, Anton Eser, about global recession. Michael asked Anton questions about the potential arrival of a global recession, what form it could be expected to take and how long it might last.

Find out more by listening to the 14:53 min podcast: Classic Business, 8 Sep Classic Business – 08 Sept 22 · Fine Music Radio – iono.fm

PERFECT MATCH

The JSE and FTSE’s two-decade collaboration has unlocked many advantages and set benchmarks for the local market. 

Proving that the JSE is committed to running a local market that is world-class yet locally relevant too is the 20-year partnership with FTSE Russell. Mark Randall, JSE Director of Information Services, recalls the game-changing significance that the relationship manifested, in 2002. ‘At the time the suite of JSE Actuaries indices, published in conjunction with the Actuarial Society of South Africa, was not keeping pace with global developments in index methodology or calculation technology, raising questions around reliability, global acceptance and growth opportunities,’ he says.

There has been much in the news lately about the shrinking JSE, maybe this article will provide some reassurance. 4 min read

Blockchain in banking and crypto

Crypto markets brace for historic upgrade of Ethereum blockchain

Ethereum’s revamp – known as the Merge – will make it vastly more energy efficient and over time pave the way for it to scale up and become quicker, according to the network’s developers. They say an update years in the making will go smoothly, though some investors are wary of possible hiccups.

2 min 30 sec read from Bloomberg. That the new software is more energy efficient is a plus in my book. What do you think?

What’s happened: “The Merge”, a major upgrade to the Ethereum cryptocurrency platform, was finally completed early this morning after a six-year buildup. Ethereum now uses proof of stake, a way to approve new transactions that promises to cut the blockchain’s energy requirements by 99.9% and usher in a new era for the second-largest cryptocurrency. 

Why it matters: It would be hard to overstate how much industry excitement there has been around this shift. Many hope it can both rehabilitate the reputation of crypto for skeptics and improve the efficiency of Ethereum’s enormous ecosystem of businesses and developers, cutting fees and helping it to scale.

What’s next?: We won’t know right away whether the Merge lives up to its transformative promise. Power dynamics are still a concern, and some of the scaling efficiencies that supporters are most excited about may not arrive until well into 2023. But there’s no doubting the fact that one of crypto’s biggest players investing in a less destructive, more efficient ecosystem is, in itself, a huge achievement. Read the full story.

—Rebecca Ackermann

Metaverse, blockchain on FNB CEO's radar

Buoyed by the ever-increasing number of digitally-active customers, big-four bank First National Bank (FNB) is looking to tap into the opportunities presented by emerging technologies such as the metaverse and blockchain.

So said Jacques Celliers, CEO of FNB, yesterday in a video call with ITWeb after the bank posted a strong set of financial results for the financial year ended 30 June.

According to FNB, during the period, digitally-active customers increased from 6.09 million to 6.48 million, while digital logins totalled 1.6 billion.

This is a great article because it shows you where a bank like FNB is using and may extend use to metaverse and blockchain.  5 min read

The blockchain investment case

Known for its role in cryptocurrencies, blockchain technology is driving the digitalisation of various business sectors. The technology, which increases efficiencies, transparency, and the security of traditional business systems, is attracting major venture capital funding and interest from the world’s largest businesses and investors.

Not this week's article, but relevant to your understanding of blockchain and how it will permeate in time to be a criterion on some people's list of investment criteria. 3 min read 

AI and and cyber

Computational evolution leads to smarter AI

Every five years, computers become 10 times cheaper – something that has been happening since 1941.

This is according to professor Jürgen Schmidhuber, director of the Artificial Intelligence Initiative at King Abdullah University of Science and Technology, and scientific director of Swiss AI Lab IDSIAI (Istituto Dalle Molle di Studi sull'Intelligenza Artificiale).

This is interesting, more history! We can't successfully inhabit the future without understanding the past. 3 min read

Africa’s cyber strategy matures

The findings of KPMG Africa’s Cyber Security Outlook 2022 survey unpacks the state of cyber security across the continent.

According to KPMG, the report highlights that the cyber landscape in Africa is highly dynamic and rapidly evolving – fuelled by widespread digitisation and matched by adequate investments in protecting assets and data from cyber threats.

Africa has a chance to take the lead in this area. 2 min read

When AI becomes harmful to humans

While the development of artificial intelligence (AI) is on track to propel societies and industries to unprecedented levels of progress, its unintended negative consequences have caused great harm to some sectors of society.

This was the word from Elizabeth M Adams, CEO of EMA Advisory Services, giving a presentation on human-centred design and AI bias at the second Global AI Summit in Riyadh, Saudi Arabia.

Please read this article as very good examples are given of how effective machine learning is on transmitting our biases. 3 min read

About YOU

"Knowing the name of something doesn't mean you understand it."

You've encountered lots of technical jargon while studying for actuarial exams. It's easy to memorize the name of something (and it's definition/formula) without truly understanding the concept.

The most eloquent explanation of this distinction comes from the physicist Richard Feynman. Check out this article (8 minute read) for more details on this critical part of the learning process.

While studying, you'll want to check yourself on what you've learned. Have you been memorizing names or learning concepts?

Here's a simple rule of thumb to tease out the difference:

Without using the new word, try to rephrase what you have just learned in your own words.

Tie this into your daily study routine - at the end of your study session, ask yourself the question above.

Study Smart, Pass Fast, Live Life

Mike & Roy

It’s a matter of choice – your choice

I recently had the pleasure of talking at length to a young woman who joined an asset manager after graduating in actuarial science with ten exemptions. She was very excited to be part of their team as she was passionate about asset management. She learnt a great deal. When her internship ended, she had the opportunity to join them in their London office, but she realised that she wanted to pursue the actuarial qualification. However, the asset manager wanted her to qualify as a CFA. 

Perhaps you too will face a crossroads one day. The important thing is to ask yourself what excites you more, what aligns with your character and would you be willing to relocate for the opportunity? 

Make sure you look at the following page on 80000hours.org which provides a decision making tool supported by research on how best to weigh up options.

I would like to share this quote from James Clear with you 

"The first step—perhaps the most enormous step—is to find what you are genuinely interested in.

If you are genuinely interested, you will discover endless opportunities for improvement. But if you are disinterested, even obvious improvements will feel like a chore.

And, if you can maintain your genuine interest and curiosity as the years accumulate, you will become hard to compete with because you will have skill to go with your passion. If you're interested, you're dangerous."

Waking up to the importance of sleep

For decades, sleep and its associated disorders have been considered a Cinderella branch of medicine. The subject receives little attention in undergraduate education, training is an adjunct to other more established specialties, and funding for sleep research is woefully deficient. The reasons for such neglect are embedded in the disparate nature of the conditions grouped together under the heading of sleep disorders—ranging from sleep apnoea, dealt with by an ear, nose, and throat specialist or cardiologist, to restless legs syndrome, handled by a neurologist or primary care physician—as well as a lack of understanding of their causes and the sparsity of treatment options.

However, things are beginning to change. Partly responsible for this shift were three scientists who won the Nobel Prize for Medicine or Physiology in 2017 for their work on the genetic basis of circadian rhythms. Thanks to the discoveries of Michael Rosbash, Jeffrey Hall, and Michael Young, we now know that humans have a molecular clock—a network of timekeeping genes and associated proteins that are transcribed, translated, and degraded in a daily cycle. These genes have also been found to be associated with bipolar disorder, depression, and other mood disorders.

Read the full editorial for the series on sleep, which is available to on the Lancet website. We will bring you more of the papers in the coming weeks.