Global economy and business News

Gloomy economic outlook as global markets go from bad to worse

Last week felt like it was pivotal, for a number of reasons. First of all were the US inflation numbers, released on 10 June. It is impossible to describe them in any way other than catastrophic. Any hope that we had seen peak inflation was extinguished within minutes of the release. On every measure – core, energy prices, housing – price levels in the US continue to rise at previously unthinkable rates.

Just to get you started on the theme of a global economy spirally downwards. 2min 30 sec read. 

US makes most aggressive interest rate hike since 1994

Faced with the highest inflation in more than 40 years, the Federal Reserve has once again turned up the heat, taking its most aggressive step yet in the attempt to curb inflation. The Federal Open Market Committee (FOMC) unanimously decided to raise the target range for the federal funds rate to 1.50 to 1.75, with further rate hikes looking inevitable. The 75 basis point hike follows an already aggressive 50 basis point increase in May 2022 and marks the largest upward step since 1994.

Read more to understand the relationship between interest rates, inflation and in the case of the USA, employment. 2 min 30 sec read. 

Schroders: There’s a 35% chance of a global recession in the next 12 months

Economist says that investors haven’t yet priced this in.

Schroders chief economist, Keith Wade, believes that there is more than a one in three chance that the world economy will go into recession within a year.

However, he added that the risks are different in different parts of the world.

‘While everybody’s got a measure of inflation risk – particularly the US and Europe – China, as an example, has a big problem in the form of its zero Covid policy. While it has had to shut down a lot of the economy in order to implement that policy, our assumption is that China can emerge from that later this year.

Important read to see the emerging interplay between inflation and investment performance. 3 min read

Deutsche Bank’s Sewing waives part of his bonus over WhatsApp use

Deutsche is among several lenders under investigation by US authorities over employees’ use of personal messaging applications, including WhatsApp

Deutsche Bank’s management board agreed to take a financial hit after criticism from regulators of widespread use of private communication channels among staff via applications such as WhatsApp. 

The lender is among several financial firms under investigation by US authorities over the use of private messaging that can’t be archived. 

This is interesting because the criterion of archiving is the reason given that WhatsApp cannot be used for client communication. What are your views on that and how would you defend your position for or against it? 3 min read

Ukraine war: as the conflict at sea intensifies, Russia’s prospects of victory look further off than ever

Published: June 23, 2022 12.18pm BST

The Ukraine war is at a strategic turning point. As the Russian offensive intensifies in the Donbas without resulting in any substantial gains, western leaders warn that the war will be long, and supporting Ukraine must be sustained in the long term. At the same time, a less perceptible change is happening. The war at sea is intensifying.

There is much talk about who is winning or losing this war, you don't know what articles to believe. Personally we are all losers here. However this is an interesting article showing the vast complexities of this geopolitical struggle. 5 min read

Insurance and financial services

How the Ukraine war is benefiting Russian insurers – and pushing up insurance premiums everywhere

An EU/UK plan to ban their insurers from providing cover to ships transporting Russian oil is causing tensions with Washington. America contends that Europe’s dominance of global insurance will make it very difficult for Russia to export oil if this goes ahead, potentially pushing oil prices far higher than they are already.

How Russia is turning sanctions into an opportunity to take over business previously held by those sanctioning her! A 4 min 30 sec read

New banking laws proposed for South Africa

South Africa’s latest state capture report recommends the introduction of new banking laws – including regulations around when accounts may be closed.

The report’s author, chief justice Raymond Zondo, made the recommendations following the closure of four bank accounts linked to the controversial Gupta family.

As a result of banks’ enormous power, no serious business would be able to run in the country if bank accounts could be terminated unilaterally, said Zondo. Depending on the size of a company, this could have dramatic effects on people retaining their jobs, he said.

What are your thoughts on the new law proposed? Would you say that some good has come out of the Commission? 2 min 30 sec read

Are your insurance partners cut out to be a cut above the rest?

There are massive challenges in the market and the country, with underinsurance, dated risk management practices and/or complete lack thereof, aging risks and little to no maintenance or risk improvement, and one of the biggest, the uninsured populace. 

Great article on the risks of underwriting and the importance of partnering with insurers who know what these are per product. Good general knowledge useful for ARM. 5 min 30 sec read.

What is an UMA?

The underwriting management agency (UMA) concept is uniquely South African. Where similar structures are encountered in other parts of the world they are typically referred to as underwriting and claims binder facilities. In the simplest possible terms a UMA is an agent of an insurer.

2021 Claim Stats Show What’s Ailing South Africans

Petrie Marx, product actuary at Sanlam Individual Life says, “It’ll take time to fully appreciate what Covid-19 did – and did not – impact directly. For example, deaths resulting from cancer and heart conditions increased somewhat between 2020 and 2021. This may be related to the indirect effects of Covid-19, which saw lower levels of routine health checks during hard lockdown, or it may be caused by another factor. This is a trend we will have to watch closely.”

Interesting that we can't state categorically what a direct impact is, rather we speak of an emerging trend, which in itself needs to be watched closely. 4 min 30 sec read.

Short-term insurance clients must be prepared to weather more storms

It’s not just the landscape of verdant KwaZulu Natal that’s been changed forever by two recent mass flooding incidents that followed last year’s riots and unrest, all hot on the heels of the COVID-19 pandemic – the insurance industry that has to pick up the tab for all the damage to insured assets has had to respond and adapt too, with more change likely in the future.

Another bigger picture perspective on risk for insurers in the current era. Somewhere along the line there will have to be a rethink on the old model. Do you think it's possible for insurers to still thrive given the risks in this age? 3 min 30 sec read. 

Rural assets may be ‘uninsurable’

As SA’s municipalities collapse, businesses and insurers are voicing concerns about increasing risk, warning even of assets becoming uninsurable

As SA’s municipal infrastructure crumbles, businesses, especially those in rural areas, are raising red flags about their assets becoming uninsurable. And the biggest risk insurers must stand in for — trumping even riots and floods — is fire.

In February, Pick n Pay chair Gareth Ackerman threw down the gauntlet when he said his company is struggling to get insurance in certain local municipalities. It’s no small concern, when you consider the retailer employs more than 90,000 people in 1,910 stores across the country...

You will need a subscription to Business Live to read this article, but it is very similar to the one above although this one has a specific focus. 

Discovery Bank hits 1 million accounts, expands banking and lifestyle benefits

Over the past year, Discovery Bank has seen strong deposit growth and considerable traction of its shared-value banking model amongst its client base; the appeal of a full service, shared value, digital bank is reflected in Discovery Bank’s strong growth to over 1 million accounts since its public launch in 2020.

This article shows the integration of services across Discovery, aligning with its clients' needs and desires. 6 min read. 

Woes pile up for troubled financial firm N-e-FG as FSCA appoints statutory manager

In a press statement released on Friday last week, the FSCA says: “The authority has appointed Krishen Ganas Sukdev as the statutory manager of N-e-FG Administrators, effective from May 30, 2022. Sukdev is a qualified actuary with extensive experience in the retirement funds sector. He has been appointed in terms of Section 5A of the Financial Institutions (Protection of Funds) Act. The appointment must be confirmed by the High Court on application by the FSCA within 30 days. The FSCA is currently working on this application and will file its papers with the Court within the prescribed period.”

Why choose to give you this article? To show that good governance trumps non compliance for whatever reason. The detail makes for interesting reading too, giving you insight as to why a statutory manager would need to be appointed. 6 min read. 

Investments no longer the same old same old?

Sygnia: SA managers out of their depth managing offshore assets

In contrast, First Avenue Investment Management believes local managers have the wherewithal to do the job.

South African fund managers do not have the resources to analyse the universe of international stocks, according to Sygnia chairman Magda Wierzycka (pictured).

First Avenue Investment Management CIO Hlelo Giyose (pictured), speaking during the same panel discussion, took exception with Wierzycka’s viewpoint.

Read the article and formulate your own opinion - or maybe reserve your opinion for when you have done more research on the topic. 2 min 30 sec read

Fancourt files: The debates local fund selectors are having about offshore

WATCH: We spoke to four delegates at the Citywire South Africa Retreat 2022 about the discussions their investment teams are currently having about offshore exposure.

What is currently top of mind for local multi-managers and DFMs when considering their offshore exposure?

Their responses were as diverse as they were fascinating.

A five minute video. Interesting and clear. Alluding to Regulation 28

What is a DFM?

A Discretionary Fund Manager or 'DFM' exercises their professional discretion to buy and sell investments on your behalf. A discretionary management service can deliver highly tailored investment portfolios based upon your individual circumstances and objectives.

The Perfect Blend

Our roundtable panellists debate how to get the global equity mix right.

A great eight minute video providing a lot of insight and broadening your knowledge on global equity. 

Asset manager Camissa is not buying the hype about big four banks

Camissa says SA’s low growth prospects will weigh on the big four banks as digital disrupters chip away at their earnings

Camissa Asset Management, which oversees R45bn in assets, has broken ranks with some of its larger peers by dismissing the investment case for SA’s big four banks, on the grounds that the cosy market dominance they have enjoyed for years is in the process of being upended by more nimble digital disrupters.

The Cape Town money manager, which announced its rebrand from Kagiso Asset Management in February, outlined downside risks to the likes of FirstRand, Standard Bank, Absa and Nedbank in an investment presentation on Tuesday...

This article is reserved for Business Live subscribers and you may find that your institution has a subscription for students via your library. What is also of interest besides the dwindling margins of profit on transactions for the top four banks, is the profile of Camissa Asset Management. See article below. 

Out with Kagiso Asset Management, in with Camissa

KAM’s management and staff have taken control of the business, with a 74% joint shareholding, and Sinayo Capital owns a substantial minority stake of 26%. 

“It is important for staff to be able to control their own destiny in high IP companies like ours,” says Roland Greaver, who co-founded the business with Gavin Wood 20 years ago.

A three minute read from 21 Feb 2022. What do you think of Camissa's investment and shareholder philosophies?

Healthcare

Fix the issues, don’t fight them

There is a particularly apt old African saying: When elephants fight, it is the grass that suffers.

In his opening address at the 2022 Board of Healthcare Funders annual conference, the Minister of Health, Dr Joe Phaahla, made a compelling case for a major overhaul of the healthcare system.

“We are aware that the passing of the (National Health Insurance) Bill is not in itself going to be the silver bullet to transform our health service, but we believe that it will lay the foundation through which we can timely start to fundamentally transform our health services towards equity.”

Some important points raised on the issue. A 5 min 30 sec read

Health minister’s comments at virtual event indicate a continued role for medical schemes for at least several years to come

The government plans to implement National Health Insurance (NHI) incrementally and gradually phase out the role medical schemes play in funding private healthcare services, health minister Joe Phaahla told delegates at a virtual event hosted by medical scheme administrator Momentum Health Solutions on Tuesday.

“NHI is not going to be something that happens at a go, at full blast,” he said on Tuesday. “Medical schemes will continue to cover those aspects that NHI is not covering at the introductory level,” he said...

This article is for Business Live subscribers, but you may also get the gist of the conversation from the article above. 

Health professionals unite in "I Am" movement against state victimisation

A 130-strong group of senior, highly-regarded health professionals have come together to publicly highlight the deteriorating conditions at state health institutions and stand united against victimisation and intimidation of those who raise such matters.

In what the Daily Maverick describes as an "unprecedented" move, the health professionals, calling their cause the "I Am" movement, have written an open letter to the Minister of Health and the Premier of Gauteng.

Another perspective on whether the NHI will operate with transparency, fairness and without victimisation. 4 min read 

Scarce training opportunities a major hurdle in addressing doctor shortage

The critical factor limiting local doctor supply and exacerbating the already severe shortage of doctors in SA is the constraint on the number of doctors being trained in the first place.

And while race is a criteria factored in the selection process of all SA medical students to address historical imbalances, recruitment of more black students in itself may not be the answer, notes MedicalBrief.

A highly informative 7 min read

Karoo dust, diet & diabetes: Why ‘lifestyle disease’ is an unfair label

Diabetes is different from other non-communicable diseases, this author says. It can’t be spread in a literal sense and is instead often forced upon people by factors beyond their control. What happens when you have no say on your genetics or all you can afford is processed food?

Diabetes is prevalent in South Africa and an NCD which is growing. This article shows you how easy it is for people on the poverty line to develop the disease. 

South Africa's first online living-will service launches to support financial planning

Digital living-will start-up, Swansong, has recently launched in order to make the difficult conversations about illness, facing death, and planning a good life to the end easier, and more financially efficient.

Swansong is the brainchild of South African women, Dr Linda Holding, a palliative-trained doctor with 20 years of clinical risk-management experience, and Shivani Ranchod, a healthcare actuary and academic.

3min 30 sec read

Global warming: have we been here before?

Hidden carbon layer may have sparked ancient bout of global warming

Rift between Greenland and Europe implicated in 56-million-year-old hothouse

There is no perfect parallel in Earth’s past for present-day climate change—human-driven warming is simply happening too fast and furiously. The closest analog came 56 million years ago, when over the course of 3000 to 5000 years, greenhouse gases soared in the atmosphere, causing at least 5°C of warming and pushing tropical species to the poles.

Such an interesting read. They say that the more you need to plan for the future the further back into the past you need to go. 4 min read

New Green Power Projects signed

Standard Bank, mandated lead arranger and underwriter, has successfully supported three new independent electricity generation projects signed into Government’s 2000MW Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), together with British International Investment.

Looks like we're heading in the right direction. Good news which has been in the offing for a while coming to fruition. 3 min read

About human behaviour...in times of scarcity

Insight

"In July 1968, four pairs of mice were introduced into the habitat. The habitat was a 9-foot (2.7 m) square metal pen with 4.5-foot-high (1.4 m) sides. Each side had four groups of four vertical, wire mesh "tunnels." The "tunnels" gave access to nesting boxes, food hoppers, and water dispensers. There was no shortage of food or water or nesting material. There were no predators. The only adversity was the limit on space.

This is a three minute read from Farnam Street Blog. The above extract sets the scene but you would need to read the whole excerpt to make sense of it. Please read it reflecting on human behaviour in times of scarcity. 

How exercise may help prevent Alzheimer's

Exercise could be a powerful defense against Alzheimer’s disease. Three dementia researchers explain how it works.

Your brain loves it when you exercise. Of course, you yourself may not love every sweaty minute of your kickboxing class or Saturday afternoon run—but your brain revels in it. That’s because exercise doesn’t just increase muscle tone. It doesn’t just goose energy levels and enhance mood, fighting depression and anxiety. It also heightens problem-solving skills and memory. And, research has increasingly shown, it protects against Alzheimer’s disease—both delaying onset of the disease and slowing decline in patients who have already been diagnosed.

This article will help you understand how important it is for you to exercise or move. Mobility is the key to longevity! 4 min 30 sec read