Welcome to Mind Matters week of 15 August 2022

Let's remember Lilian Ngoyi

Lilian Ngoyi: an heroic South African woman whose story hasn’t been fully told

Despite her key role in the struggle against apartheid in South Africa, details about Lilian Ngoyi’s life remain sparse. The short paragraphs on her legacy repeat a few well-worn phrases. South Africa’s “mother of the black resistance”, a widow and rumoured lover of Nelson Mandela, and the first woman member of the national executive committee – the core leadership of the African National Congress (ANC), the resistance movement that would later become the government of a democratic South Africa. She was also, of course, one of the leaders of the country’s famous Women’s March.

Read this article and spend a moment reflecting on the selfless way in which Lilian Ngoyi lived her life so that all South Africans could have freedom. It is sad to think that she died in abject poverty.  6 min read Also available on the site in PDF.

Women in finance, insurance, related sectors and in society!

Women’s financial needs are unique and require a different approach

You never know exactly how your future will turn out, ensure that you are prepared for any contingency and have made enough provision to be financially independent.

Although the remuneration gap between men and women persists worldwide, more and more women are economically active and are taking charge of their own financial affairs.

The female population in SA is 50,76%, and women fill 44% of skilled posts including professional and managerial positions. A concerning statistic is that 42% of women are single parents.

An article which speaks sense and speaks directly to women. 3 min 30 sec read

SA’s data centre industry sees gender pay gap narrowing

South Africa is seeing an increase in the number of women taking up technical roles within the data centre industry, with the gender pay gap slowly narrowing.

This is the sentiment shared by female industry insiders, who told ITWeb that while SA’s technology industry is not even close to achieving levels near gender parity, the local data centre industry has over the last few years seen pockets of improvement.

Akhona Nkalitshane, cyber security product manager at Rectron, an Acronis data centre solutions distributor, adds that SA’s enormous ICT skills gap has created a shift in companies not being gender-specific in the workforce they hire.

“The salary gap is narrowing in the data entre industry. Women now have opportunities to upskill themselves and it is a different generation of women altogether. It is a generation of women hungry for success and determined to break barriers.

4 min read

Global and local economic news 

Are we on the verge of an inflation regime change?

In politics, ‘regime change’ typically signifies one governing party replacing another; in economics, the same term is used to indicate a shift in various parts of the economic or financial system. While political regime changes are easy to identify, defining a regime change in economics can be more challenging.

This article looks back in history and compares actions from government reserves banks over the period to figure out whether their first responses more recently were appropriate or not. 3 min 30 sec read

Prescient analysis: Odds of recession have increased, but mixed messages prevail

Prescient's Bastian Teichgreeber and Adam de Waal examine what investors should take from the latest economic indicators.

Economic nowcasts, using high-frequency data reflecting current conditions, have increased the odds of a US recession. However, the yield curve, a valuable indicator of whether a recession is approaching, is giving mixed messages.

At Prescient, we trust our proprietary Prescient Economic Indicator, a statistical model applying a range of global macroeconomic releases, to monitor current economic themes, inflation dynamics, labour market trends and market behaviours. This indicator provides us with early insights into the shifts of real economic dynamics and their effects on asset classes in which we invest.

A well written article offering a host of technical terms and models with graphic illustrations. It is a very interesting read especially when we consider data and how we use it to serve our own biases. What does this mean? It means we have to be cautious and less certain about our predictions! They do say hindsight is perfect science. 5 min read 

Nowcasting in economics is the prediction of the present, the very near future, and the very recent past state of an economic indicator. The term is a contraction of "now" and "forecasting" and originates in meteorology. Wikipedia

What Is a Yield Curve? 

A yield curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity.

There are three main shapes of yield curve shapes: normal (upward sloping curve), inverted (downward sloping curve), and flat.

Read more by clicking on the link above. 

Industry and related sectors 

Nudge theory doesn’t work after all, says new evidence review – but it could still have a future

To understand why, we need to go into some details about statistics, and how experimental findings are analysed and interpreted. Researchers start off with a hypothesis that there is no effect (null hypothesis). They then ask, what is the probability of getting an actual effect by chance?

Last week we explored to a degree evaluating information and this article uses nudge theory specifically to show how we can (erroneously) make an hypothesis work in our favour!  5 min read with a copy of the article on the MM site in PDF

Viewpoint: Regulatory Interest in Big Data, AI More Than a Carrier Problem

The California Insurance Commissioner and the California Department of Insurance (CDI) recently issued a bulletin regarding industry bias and discrimination. The bulletin acknowledged allegations of bias and discrimination in the industry and gave notice to insurance players that the CDI is watching and that “bias and discrimination in any form will be investigated and will not be tolerated.”

Interesting to note the States is following Europe in this regard. Are we exempt from bias in big data in SA? 3 min 30 sec read

Lloyd’s Insurers Must Exclude State-Backed Cyber-Attacks to Avoid Systemic Risks

Lloyd’s insurers must exclude state-backed cyber-attacks in standalone (or affirmative) cyber policies, according to a Lloyd’s market bulletin issued this week.

The exclusion would include liability for losses arising from both war- and non-war-related state-backed cyber-attacks.

“Lloyd’s remains strongly supportive of the writing of cyber-attack cover but recognises also that cyber related business continues to be an evolving risk,” said the bulletin. “If not managed properly it has the potential to expose the market to systemic risks that syndicates could struggle to manage.”

The bulletin explained “that losses have the potential to greatly exceed what the insurance market is able to absorb.”

Understand the risks and the language that is essential in underwriting those risks. 3 min read

Banking and Fintech 

South Africa’s biggest bank delivers record earnings

Standard Bank Group, South Africa’s biggest bank when measuring capital, said Friday that it delivered record headline earnings of R15.3 billion for the six months to 30 June 2022, up 33% from the prior period, spurred by franchise growth.

In the middle of the article it mentions that inflation should slow down when tighter financing conditions take effect. This seems to agree with the earlier article on inflation globally. 2 min 30 sec read

Tymebank’s impressive growth and international expansion plans

Tymebank CEO Coen Jonker has provided insights into their finances and international expansion plans, and it tells the story of a challenger bank with great prospects. Tymebank launched in February 2019 with a value proposition based on three pillars – simplicity, transparency, and affordability.

A good read, well illustrated with graphs, showing Tymebank has to offer and how it is growing, locally and abroad. 4 min read 

Netherlands-based blockchain firm sets up SA shop

Netherlands-based fintech firm Mesh.Trade has established a presence in South Africa, and is looking to shake-up the local capital markets using blockchain technology.

Mesh is a multi-sided, decentralised, financial markets platform, where users can tokenise and trade any asset class, across any geography.

While Mesh is fully blockchain agnostic, the initial rollout of the Mesh platform is on the Stellar blockchain, a layer one blockchain that was built to support global financial markets and payment systems.

It's interesting that this is an overseas investment in SA. What reasons does Connie Bloem give for finding SA attractive? 3 min read

Being blockchain agnostic means that your different business solutions can be built or operated from different underlying blockchain technologies. (Google)

Specifically investments 

The two-bucket system could revive fund management

No less than 91% of people cash in their retirement savings early. They will soon be obliged to preserve two-thirds of it.

Can the two-pot, or bucket, system lead to a significant change in the asset allocation of a typical pension fund?

Under the new draft legislation, two-thirds of every person’s pension contributions after 1 March 2023 will have to be preserved until retirement. After that, it will not be accessible, even in emergencies.  

We have heard about the two bucket system but read this article to find out more about why investing pension funds is so tricky and how this could change with the new system.  This is also a look into the future - how you might save for retirement. Good insightful writing by Stephen Cranston. 4 min read

‘It is almost as though South Africa is on a planet of its own’

South African fund managers say local bonds offer value.

Now this is interesting, because you wouldn't have thought this to be the case. Find out why they offer value. 2 min 30 sec read

Refined index funds target above-market returns with lower volatility

Index funds ‒ widely known, somewhat inaccurately, as passive funds ‒ are exchange-traded funds (ETFs) and index-tracking unit trusts that hold securities in the same proportion as the index (or indices) they track, thereby avoiding or minimising human intervention in the investment process.

This all sounds rather complex but it is explained rather well in this article. It seems that what fund you choose to invest in will depend largely on how much expertise is required to manage the returns. 5 min read

Cryptocurrencies 

Crypto arbitrage may not be around forever, so grab it while it’s there

Tighter regulations are still some years away, but these may close the window on this opportunity.

Crypto arbitrage is growing in popularity, but it’s an opportunity that may not be around forever. Crypto regulations are coming and that may close the opportunity to profit from price differences between cryptos on overseas and local exchanges.

While investing in cryptos is high risk and prone to volatile swings, crypto arbitrage seeks to eliminate these risks by exploiting price differences between crypto assets like bitcoin between overseas and SA exchanges.

Another article which cites Future Forex and helps explain just how crypto arbitrage works.  3min 30 sec read

Cornered banks to rethink unbanking crypto accounts

Local banks say they are studying the South African Reserve Bank’s (SARB’s) Prudential Authority’s (PA’s) guidance note to the big banks to start working with crypto players.

This, as the banks may be forced to change their stance on how they handle the accounts belonging to crypto-currency exchanges.

Most of the banks previously closed the accounts belonging to crypto players citing the potential risks they pose, mostly relating to money-laundering, terrorist financing and proliferation financing.

However, in a turn of events, the PA’s guidance note urges the banks to start engaging with the crypto asset service providers (CASPs) in line with the application of a risk-based approach.

An interesting article giving context to how difficult it has been for CASPs given the hands off approach from ABSA, FNB and Standard Bank. A view which makes some CASPs welcome the regulation of the industry. 4 min 30 sec read

About YOU

Secret Weapons: Emotional Intelligence and Psychological Safety

Feeling comfortable about trying to regain a sense of equilibrium at work–whether your organization is returning to the office, embracing a fully remote experience, or experimenting with a hybrid work plan–is directly related to psychological safety. Researcher Amy Edmondson defines psychological safety as, “a belief that one will not be punished or humiliated for speaking up with ideas, questions, concerns, or mistakes, and that the team is safe for interpersonal risk-taking”. Simply put–psychological safety is a perception that we operate in a safe space, especially with our leaders.

We are all leaders although we may not be officially designated as such and we all need to feel psychologically safe to work with others, whether in the workplace or at varsity or even at home. Be reminded in this article of the four pillars of emotional intelligence (EQ) which can help you to help yourself and others feel psychologically safe.  4 min read