Welcome to Mind Matters week ending 31 October 2021

Industry News 

Actuarial Society expects Covid-19 fourth wave in December

South Africa’s vaccination programme faces a race against time with a fourth wave of COVID-19 infections expected for December 2021 and into January 2022. Based on their analysis of the COVID-19 experiences of South Africa and several other countries at different stages of managing the pandemic, the COVID-19 Working Group of the Actuarial Society of South Africa (ASSA) believes that, in spite of the low current case numbers following the peak of the third wave, there is sufficient evidence to suggest that a fourth wave is likely to emerge in December. The severity will most likely depend on whether South Africa achieves its vaccination targets.

A four minute read to bring you back to "cautious mode" as you approach the end of the year and the celebrations that it brings. The article touches on the spread of the disease in other parts of the world and the three key drivers of its transmission. 

Barry Childs Wins Actuarial Society of SA’s Presidential Award 2021

Insight Actuaries & Consultants’ Barry Childs received the Actuarial Society of SA’s (ASSA) Presidential Award at the annual convention on Thursday, 21 October 2021. He was recognised for fostering a greater understanding of the Covid-19 pandemic, as well as leading the ASSA coronavirus working group and providing technical and analytical support for the vaccine rollout programme across South Africa.

A two minute read. 

COVID-19 pandemic marked by ‘lack of meaningful and respectful debate’

Dialogue relevant to the COVID-19 pandemic has been marked by a distinct lack of meaningful and respectful debate largely due to arrogance and a lack of curiosity, according to Tjaart Esterhuyse, the incoming President of the Actuarial Society of South Africa (ASSA) and Head of RGA EMEA Explore.

This article reflects more of the argument than last week's article on the same subject. A three minute read. 

Doing the work required to hold an opinion means you can argue against yourself better than others can. Shane Parrish

The Work Required to Have an Opinion

The work is the hard part, that’s why people avoid it. You have to do the reading. You have to talk to competent people and understand their arguments. You have to think about the key variables and how they interact over time. You have to listen and chase down arguments that run counter to your views. You have to think about how you might be fooling yourself. You have to see the issue from multiple perspectives. You have to think. You need to become your most intelligent critic and have the intellectual honesty to kill some of your best-loved ideas.

A three minute read from the Farnam Street blog, wise insight that echoes the thoughts of the the new ASSA president, Tjaart Esterhuyse.  

A Repeatable Model for Using IoT to Transform Commercial Insurance

Traditional insurance products focus on risk transfer. Insurers compete based on their ability to use historical loss information, data gathered during the submission process and other data from third-party data aggregators to predict the likelihood of future claims and price risk transfer products appropriately. With more and more data available in the current hyperconnected world, there are emerging opportunities for insurers to expand their product and service offerings.

Executive Summary

Learnings from early IoT experiments about customer adoption, roles and responsibilities, and conditions for generating ROI need to happen in every use case. And even though the answers may be different from one case to the next, the approach of The Hartford’s IoT Innovation Lab is highly repeatable, according to Dan Campany, the head of the Lab and CM Guest Editor Matteo Carbone.

Here, they describe lessons learned from using water damage prevention technology for the insurer’s construction segment customers; the overall benefits of IoT in supporting real-time mitigation, behavioral change of insureds and enhanced underwriting for the insurer; and the ultimate goal of transforming commercial insurance products to incorporate IoT into fee-based services beyond core risk transfer.

This is a very good article bringing to the fore the principles that you would use to incorporate the IoT into an insurers' business structure. It is a ten minute read. I advise this read and it would be useful to compare it with SA Insurers like Discovery for example, where IoT is already integrated into the business. 

This is why OUTsurance entered the agricultural sector

OUTsurance recently expanded their product offering for the agricultural sector by not only insuring fixed assets, but also catering for game and livestock, as well as transporting of animals. Owners of game farms can also get tailormade cover that includes cover for personal accident and liability claims.

A two and a half minute read. 

Climate Change and ESG

Making sense of ESG investing

Environmental Social and Governance (ESG) investing is gathering momentum. The industry has grown from $3trn in 2010 to $17trn at the end of 2019. Last year saw $51.1bn net inflows into ESG funds in the US alone, according to Morningstar. Investors are concerned about the environment and the impact of large companies on sustainability. Large fund managers have seized the opportunity to make a difference by investing their clients’ funds for good. But are they making a difference or has ESG investing become an elaborate marketing campaign that has clients fleeced?

A very balanced four minute read, showing you how divesting works in reality and that is government that holds the key to making it work for investors.  

The tundra is ablaze and we are all just watching

Where money is invested matters. Does it fund deforestation and fossil fuel extraction, or decarbonisation at scale? Rather than fighting carbon taxation, we should embrace it as a healthy market force and divert the money to newfound markets. We should lead by demanding decarbonisation throughout our supply chains and building this into contracts. Sure, there is a short-term financial risk to jumping alone. But leaders are needed, and others may join. Jumping together, we might just tilt the world enough to save those we love.

A three minute read by Hugh Montgomery who asks the question: Will finance jump together?

Ninety One launches the Net Zero Sovereign index

The index covers 115 countries across emerging and developed markets.

index (CNSI), which Ninety One and the World Wildlife Fund launched in February 2020. NZSI aims to support sovereign-bond investors’ engagements with governments so that they can hold public officials to account and encourage change, Ninety One said.

The CNSI aims to help investors measure and disclose climate and nature risks in more detail.

A two and a half minute read. 

Renewable energy

Renewable energy projects to pump R50bn into SA economy

Mineral resources and energy minister Gwede Mantashe yesterday announced 25 preferred bidders selected in the fifth round of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The opening of REIPPPP Bid Window 5 will allow 2 600MW of wind and solar to be procured and, together with subsequent bid windows, will not only allow for increased energy security but will be a critical step in SA’s energy transition towards a greener energy future.

This week, the embattled power utility said it is planning to bring more renewable energy on to the national grid.

This is good news at the start of the COP26, but it may not be enough. A four minute 40 second read. 

COJ sets sights on renewables as Eskom drops the ball

Yesterday, executive mayor councillor Mpho Moerane launched an energy mix “Energy Sustainability Strategy” for the municipality, in a bid to accelerate security of reliable power supply for residents and business.

This as state-owned company Eskom is struggling to keep the lights on. This week, the parastatal announced that due to a shortage of generation capacity, stage two load-shedding will be implemented from Tuesday until Saturday.

Potentially an answer for COJ and a company to invest in. This is a four minute read. 

Eskom in renewables drive as load-shedding bites

Embattled power utility Eskom is planning to bring more renewable energy on to the national grid as it struggles to keep the lights on.

This emerged yesterday when the state-owned company shared its Transmission Development Plan (TDP) for the period 2022 to 2031 with various stakeholders during a virtual public forum.

This is part of Eskom’s transmission licence requirements issued by the National Energy Regulator of South Africa, which calls for Eskom to publish a TDP annually.

This is a three and a half minute read. 

Solar panels on half the world’s roofs could meet its entire electricity demand – new research

Our new paper in Nature Communications presents a global assessment of how many rooftop solar panels we’d need to generate enough renewable energy for the whole world – and where we’d need to put them. Our study is the first to provide such a detailed map of global rooftop solar potential, assessing rooftop area and sunlight cover at scales all the way from cities to continents.

We found that we would only need 50% of the world’s rooftops to be covered with solar panels in order to deliver enough electricity to meet the world’s yearly needs.

A three minute read - not all the answers - but a substantial amount covered. 

Investments

Anchor: How to navigate China’s regulatory reset

How should investors contrast the value destruction against the opportunity?

China’s unbridled economic growth over the past two decades is a direct result of effective long-term planning, the deliberate allocation of resources and a somewhat laissez-faire approach to the rapid evolution of a new world economy.

The anachronistic nature of the early 2000s Chinese economy birthed a modern-day gold rush for ambitious companies that would use technology to bring Western consumerism to an underserved populace – in the process cementing themselves in China’s economy as quasi-institutions.

This is a brilliant article and I recommend that you read it as it places the new regulations China has placed on investments into historical and ideological perspective. A four minute read.  

Seeing through the market's resilience

Most S&P 500 stocks have suffered meaningful pullbacks this year, yet the tech-heavy index remains near all-time highs. Why investors shouldn’t grow complacent.

The S&P 500 Index touched a new record last week, as strong earnings reports helped erase a market swoon that began in September. And while nearly 90% of stocks in the index have declined at least 10% from their year-to-date highs, the index itself—increasingly dominated by a small group of mega-capitalization technology giants, with the top 15 names representing 40% of total market capitalization—has continued to prove resilient.

A three minute read from Morgan Stanley. 

Mauritius surpasses SA as Africa’s wealthiest country

It has surpassed South Africa as Africa’s wealthiest country, thanks to many initiatives and policies to attract investors. As of June 2021, the country’s average per capita wealth (per capita wealth) was just over $ 30,000, with South Africa in second place ($ 11,000), according to the latest reports from New World Wealth and Africa Bank is far exceeded.

New World Wealth’s growth forecast for Mauritius is strong. Intelligence companies are expecting Mauritius Wealth growth of 80% will be experienced in the next 10 years (until 2030). This makes it one of the five fastest growing high-income markets in the world during this period, alongside Australia, New Zealand, Switzerland and Malta.

A two and a half minute read. 

Bitcoin: why its value has rocketed once again

Bitcoin’s journey into mainstream finance has reached another major milestone – and another record price. The cryptocurrency was trading at US$66,975 (£48,456) following the launch of an exchange traded fund (ETF) in the US which has dramatically increased bitcoin’s exposure to investors.

The fund, which opened on October 19, allows investors to speculate on the future value of bitcoin – without actually owning it. It is the first time investors have been able to trade an asset related to bitcoin on the New York Stock Exchange, and was preceded by much media attention and hype in financial markets.

This new fund, named the ProShares Bitcoin Strategy ETF (or BITO for short), is the first to expose mainstream investors to the highs and lows of bitcoin’s value, without them having to go through the complex process of purchasing the coins themselves.

A four minute read into the heady world of crypto currency.

Ethereum: the transformation that could see it overtake bitcoin

The world’s second most valuable cryptocurrency, ether, has been touching all-time highs in price ahead of a major upgrade of its underlying platform, ethereum. Ether is currently worth in aggregate just shy of US$500 billion (£363 billion). That’s still slightly less than half that of the biggest cryptocurrency, bitcoin.

But could this upgrade, a vital step towards a much greener and faster version of the current system, put ethereum on the path to becoming the dominant platform on the internet and make ether number one?

This is an interesting four minute article because it explains the differences between bitcoin and ethereum. You need to read this if you though they operated in the same way. 

 Banking and Fintech 

The payment revolution

A recent ITWebinar, hosted in partnership with Luno, Mastercard, Nedbank and Synthesis on 30 September, examined the challenges and opportunities in emerging payment technologies.

A three minute video as an overview of the payment revolution in Africa. 

At the intersection of banking and technology: A conversation with Cross River Bank

In a wide-ranging interview with McKinsey’s Vijay D’Silva, Cross River’s Gilles Gade (CEO) and Adam Goller (head of fintech banking) talk tech, talent, cryptocurrency, and their role as one of the biggest US originators of Paycheck Protection Program (PPP) loans.

This is a great interview (17 minutes) available by clicking above on the article title. It is the story of how Cross River Bank came to be and how they now collaborate with big banks on finding  solutions for them in the fintech and banking- as- a -service space. 

ROB ROSE: Absa, Pityana and the Reserve Bank – a corporate soapie

Sipho Pityana has laid bare what happened behind closed doors in Absa’s efforts to appoint a new chair, filing a lawsuit against the Reserve Bank that drags in AngloGold and Maria Ramos

It may just be the boardroom bust-up of the year — and the last thing Absa needs right now. Already, the bank is missing a CEO after Daniel Mminele quit in April over “strategic differences” with the board after only a year in the role. It means that, amid a once-in-a-lifetime pandemic, Absa has gone six months without a CEO.

Yet this week, the persistent cloud over the bank’s boardroom darkened further when its own director, Sipho Pityana, filed court papers taking the Reserve Bank to task for “informally” vetoing his nomination as Absa’s new chair. In Pityana’s alarming 70-page affidavit, he sketches a picture of a bank scrambling to fill leadership positions, while being leant on by the regulators behind the scenes...

To read this article you will need a Business Live Premium subscription. Check with your institution as they may have one. 

Sipho Pityana sues bank regulator, claims he was blocked from becoming Absa chair

Former Business Unity South Africa president Sipho Pityana claims he was not appointed as Absa's chair after an allegation of sexual harassment was "weaponised" against him.

Pityana is now taking legal action against the SA Reserve Bank's Prudential Authority, which regulates local banks.

In a lengthy statement released on Monday, Pityana alleges that Absa submitted his nomination as chair to the authority, which then through an "informal process" consulted with third parties, including with former Absa CEO, Maria Ramos, about whether he was "fit and proper" for the role.

A three minute read if you didn't manage to get hold of the article above. Let's wait to hear if Absa reacts or not. 

About you 

THE SIMPLEST OF SLUMBERS

Evidence from evolutionarily ancient creatures is revealing that sleep is not just for the brain

Scientists have often defined sleep as temporary loss of consciousness, orchestrated by the brain and for the brain’s benefit. That makes studying sleep in brainless creatures controversial. “I do not believe that many of these organisms sleep—at least not the way you and I do,” says John Hogenesch, a genome biologist at Cincinnati Children’s Hospital Medical Center. Calling the restful, unresponsive state seen in jellyfish and hydra “sleeplike” is more acceptable to him.

But others in the field are pushing for a much more inclusive view: that sleep evolved not with modern vertebrates as previously assumed, but perhaps a half-billion years ago when the first animals appeared. “I think if it’s alive, it sleeps,” says Paul Shaw, a neuroscientist from Washington University in St. Louis. The earliest life forms were unresponsive until they evolved ways to react to their environment, he suggests, and sleep is a return to the default state. “I think we didn’t evolve sleep, we evolved wakefulness.”

Take time out (eight minutes) and read this very interesting article which shows you purely from the amount of research that is out there, that sleep is definitely a very important part of our survival. 

Coping with the COVID-19 Pandemic using Mindfulness | Research Spotlight

by Brunel University London

Dr Elena Antonova shares preliminary results from the Protect Mental Health COVID-19 study

In this online talk, Dr Antonova will share insights from theory and research on how the practice of mindfulness could help us to protect our mental health in the context of the COVID-19 pandemic and beyond. She will outline mindfulness skills that might be particularly relevant in the context of the ongoing pandemic, share some preliminary results from the Protect Mental Health COVID-19 Study, and give some practical tips on how to get started on a mindfulness practice.

This lecture is free. I encourage you to register if you're free at lunchtime on 25 November.  Remember the UK is an hour behind us at this time of year.