Quo Vadis South Africa by Hennie - HTML preview

Chapter 15: Protect Your Assets

The Arab Spring in the Middle East was a taste of what can happen overnight if things

go wrong. It started in Egypt and spread to other countries. Today we find that the

revolution rages on in Syria and Iraq. South Africa's position, however, differs

dramatically in the sense that these countries have a homogeneous population

composition but the difference is an indifferent religious foundation.

In South Africa, the struggle will be between capitalism and socialism. Consequently the

action plans that you and I should follow to protect our assets, are very different.

In a question and answer session between me and a group of MBA students recently,

one of the questions that were put to me was: "What strategic plans have you put in

place amidst the unstable political and economic climate in South Africa?"

As a starting point I should point out that South Africa is one of the best countries in the

world to operate your business, and that emigration is not in my frame of reference. I

looked at alternative ways to protect what I worked for 75 years, against nationalization

by the government as well as the other political parties... Those who take these threats

lightly might later regret that they did not take action when the opportunity was there...

In 1996 I took my first step by placing the assets in a family trust, and thereby protecting

my estate from possible extraordinary estate tax.

The next step was to unbundle the various business units and placed them in different

companies Property companies were established for the different properties and fixed

assets. Even my house is an asset in a registered company. At the same time several

operating companies were set up in which the various businesses operated .The

rationale behind this is to avoid that if nationalization were to be adopted, we would lose

all the assets, but only the land and buildings.

History in other Africa and the Fareast countries showed that land is expropriated, but

that businesses continue to exist, and that the business owner is now letting the

buildings back from the State who owns all the land and improvements after

appropriation.

Within a few years after the ANC came to power, legislation was passed that state

institutions are obliged to only support companies with black owners who was later

amended to include previously disadvantaged residents of South Africa. Included, were

Colored’s, Indians and Chinese. The program was eventually expanded to include

companies who comply with the government’s policy regarding black economic

empowerment (BEE). Businesses in South Africa were forced to sell at least 26% of

54

their shareholding to previously disadvantaged people (read black). There are also

other provisions relating to management, out-sourcing and so on.

In order to do business with the state, we converted two of our operating companies to

black empowered companies with 26% of the shares in the companies sold to a Trust in

which our black staff owns 70% of the shares and the white staff owns 30% of shares.

The purchase price of the shares was paid out of the profits of the companies. This step

posed several advantages, among others, it was a BEE company and we could deal

with all the state institutions, and we also empowered black people to share in the

profits of the companies.

We are of the opinion that it would certainly count points if the government decides to

nationalize. A White Paper issued last year stipulates that the shareholding percentage

must be increased to 40% from the existing 26% When it becomes law we will probably

again have to comply. The diversifying program we follow includes further investments

in other companies listed on the Johannesburg Stock Exchange. This provides a better

spread of interests. It mainly invests in companies that make their income from abroad.

Here we think of SAB, BATS, REMGRO, and RICHEMONT etc.

Recently we have also turned to direct investments in shares listed on the New York

Stock Exchange. The big advantage is that the return of these investments is in US

dollars, and the money is available in any country in the world.

The last strategic decision was not to invest in the near future in fixed assets. If we do

get buyers who are willing to buy the land and buildings we will sell and then lease it

back from where we will run our business. Last year we started a new branch in

Middelburg with the only fixed assets a computer, desk and chairs.

The above strategy is followed to be ready for any developments threatening our assets

by the government. If nothing happens we did not suffer any loss due to our action

plans.

UHURU which means political freedom for all the inhabitants of this beautiful country,

SOUTH AFRICA, unfortunately did not bring economic freedom As long as there is a

weak leadership, the situation will further deteriorate and a revolution for our country is

imminent.

.

55

Chapter 16: Trade unions and their negative impact.

The reason for my early retirement at the age of 50 in 1990 is due to a failed labor court

appeal hearing that took place after I dismissed 220 employees at Champions Mills in

Kroonstad...The workers were out on strike, and after three days of negotiations with

the union representatives, we could not break the strike, and we were obliged to issue

an ultimatum to the workers to return to work or else dismissal will be the only solution.

Unfortunately we were forced to dismiss everyone. In the Labor court hearing that

followed, we lost our case, but then we went on appeal to the High Court where we

came second again.

The first lesson I have learned was to settle with the other party before litigation, and do

not allow lawyers and advocates (for their financial benefit) to fight your case.

I started with this piece of history, because it brings me to one of the many problems of

South Africa, which, if it can be resolved, it will be a major step forward. Unions claim

that they are there for the worker's salvation, but it is far from that!

Currently, there are 70 000 workers who are employed at the three platinum mines in

Rustenburg, on strike since January 23, 2014, longer than five months. The reason for

the strike is claimed to be inadequate salaries. They called for a minimum wage of

R12500 per month. The current starting salary paid by the mines is R6500 per month

and they are willing to increase it by 8.5%, which was rejected by the union. Their

demands are unrealistic and unaffordable for the mines.

I do not want to concentrate on this strike but rather the National Union of Mineworkers

(NUM) recent strike at Northam Platinum mine. A strike that lasted 75 days.

I struggle to understand how NUM spokesmen get it over their hearts and claim that the

strike was a great success; this is how I see the picture. The strike lasted 75 days. Even

if a miner works a full year at seven days a week, which of course is not the case, they

were absent from their workplace for more than 20% of the time without a salary. Now

NUM has the audacity to announce that the workers won the battle because an

additional 1.5% increase was achieved. In practice, this means that the average miner

should work for more than 14 years in order to catch up for the loss of income. This will

obviously not be reached because next year's strike is already in the pipeline. Please

note this was NUM members who went on strike, while the strikes at Amplats, Implats

and Lonmin are Amco members. Both unions are fighting to get these mineworkers as

members and thereby gain increased subscriptions fees, Union leaders currently enrich

themselves.Rumours are going around that the president of AMCU has seven cars.

AMCU recently donated R50000 as a gesture of support to the 70,000 striking

56

members, less than R1/person while the workers sacrifice their salaries and the union

bosses prosper and carry on with their comfortable lifestyle.

With a strike, especially one so long, it is a lose-lose situation for both the employer and

the employee. The employer loses production and income, and it is almost impossible

to catch up, while workers lose income.

Surely there must be a better way to negotiate. Can the government not appoint a labor

expert who has financial knowledge, to participate together with the trade unions in

negotiations, as well as the reporting back to the workers? The current deadlock at

Rustenburg can only be resolved by the minister, and it must be referred to arbitration

which is also not acceptable to AMCU because they are engaged in a political strike.

Are political points more important than the workers and the future of the South African

economy? It is a sad story that is repeated year after year in various industries as well

as government institutions. We already refer to the middle of the year as the striking

season

.My personal feeling is that unions should be banned which, will only happen in the

future when we move to a socialistic dispensation.

57

Chapter 17: Expectations for 2014 and Beyond

According to the public media there will be more bad news than good news for South

Africans for the rest of the year and beyond 2014 More strikes (the Platinum's strike has

already lasted for more than five months), will have a negative impact on the economy

which will lead to the weakening of the South African rand against the US dollar and

other currencies; Electric load shedding will become a way of life especially during the

winter months Motorist will pay more for fuel, and the inflation rate will increase and an

increase in interest rates is also on the cards.

17.1 THE GENERAL ELECTION

The election took place in May and the expectation was that the ANC would won all be

it with a smaller majority, namely 62% .The participation of the Economic Freedom

Fighters Party as well as a host of other smaller parties as well as the progress of the

Democratic Party had a sharp impact on the ANC support. The decision of the

National Union of Mineworkers to withhold their support also send out warning signals

Soon after the election, the National Union of Mineworkers announced that they want

to form a political party in 2015 and this is the first sign of the split of the tripartite

alliance. What also raises many concerns with the man on the street is that the

President, with the composition of his cabinet had swung sharply to the left and more

than 40% of the ministers he has appointed are SACP supporters and most of them

have little relevant knowledge and experience.

17.2 DEPRECIATION OF THE RAND

The reasons for the weakening in the Rand exchange rate in recent years are still valid,

and the headwind will probably blow even stronger than previous years. Given the

enormous deficit on the current account as well as the decline in the growth of the

economy, it is hard to believe that the Rand can retain the existing exchange rates or

even strengthen from these levels. A weak exchange rate leads to price increases on all

imported goods (including fuel)

58

17.3 FUEL PRICE

Motorist may this year experience a number of fuel prices increases. With the rand

depreciating to its lowest level in five years, we are going to see fuel prices even above

R13,00 per liter Some economists predict a price of R14,00 especially if the

government increase the fuel tax more.

17.4 WATER CRISIS

Violence because of a water shortage erupted in Brits and Bloemhof and other towns,

Towns such as Krugersdorp, Rustenburg, Potchefstroom and Middelburg were also dry

for days and the violence lead to the death of people.

Municipal officials do not have the necessary technical knowledge and capacity to

maintain the water infrastructure, and there is also no effort to address this problem in

the near future. Further violence as a result of the poor quality or shortage of water will

escalate and may even lead to more bloodshed.

17.5 INTEREST RATES AND INFLATION

Consumers may during the next few years have even more problems to obtain credit

and will also have to pay more to the banks on loans from the banks.The pace of

recovery and consumer spending can somewhat contribute to the improvement of the

bank’s balance sheets and here is a strong possibility that interest rates may start

rising An increase in inflation might also force the Reserve Bank to change its interest

rate policy for the last few months of this year. The mine strikes and other strikes led to

a loss of income for the strikers, employers and the state. Banks and other money

lenders will be hard hit when debt repayments slow down.

17.6 YOUTH UNEMPLOYMENT

Youth unemployment is not just a South African problem. The problem is that tertiary

institutions continue to train people for jobs that do not exist.

59

17.7 LITTLE INCREASE IN INCOME TAX

The record shows that in an election year taxes are not tampered with.The focus will

rather be on the wasteful spending in the public sector, the subdued outlook for

economic growth and a rising ratio of tax to gross income, South Africans will be very

unhappy if they must see an increase in income tax as well.

17.8 CHINA MARKETS BECOME ACCESSIBLE

Chinese President Xi Jinping is being compared with Deng Xiaping who changed

China's restrictive communist economic system to a more market-oriented system in

1980...Chinese leaders in 2013 decided to extend property rights. Their government is

planning to give up control over certain industries, and relax foreign investment limits.

This is just the opposite of our government policy as well as the Economic Freedom

Fighters of Malema

17.9 AMERICA REDUCE PURCHASE OF GOVERNMENT SECURITIES

The Fed has decided to reduce gradually its purchases of government bonds. If the Fed

decides to reduce its purchases faster it can lead to a weakening of emerging markets,

such as South Africa's currencies further.

60

Chapter 18: CHANGE OFF DIRECTION IS ESSENTIAL

In the previous chapters, we dealt with the political and economic consequences of the

new democracy that was established in 1994 .The white people who left the country say

they are glad that they made the change. Others who came back say that the grass is

not greener across the wire. Those who remained behind are very disappointed with the

dramatic decline in many aspects, but they maintain their living standards amidst the

weakening conditions. A considerable number of whites are living in white squatter

camps and you see whites begging on the street corners.

A small group of the colored people experience improved circumstances in their

economic and political life, but the bulk of them are living in poorer conditions than their

ancestors 20 years ago.

Ninety percent of the black population are worse off today than was the case before

1994 and they are longing to the old days. Strange enough, they keep on supporting the

ANC. Thirty percent of the eligible voters (by far the most black), however, stayed away

from the polls during the recent election.

As long as this situation persists, we will experience economic and political deterioration

until anarchy and civil war is the only solution available to turn the tide.

I and many other people in this country (white and black) are of the opinion that there is

a solution .It will demand a new approach everyone in this country. In countries such

as China, South Korea, Indonesia, Taiwan and a few other countries, there is good

evidence that the momentum can be reversed.

Brand Pretorius, the former head of the McCarthy car group recently wrote an article

from which I like to quote: "We were on our way back from our annual Christmas holiday

at the sea. What a privilege to spend it together as a family. It's precious to me that

everyone has their boots firmly in the SA-15 of us, with 7 grandchildren under the age

of eight. "

"It was a time for reflection. What is the future of my children and grandchildren; how do

I feel about the current situation? "

"I love my country, but much of what is happening now does not appeal to me. In fact

about certain developments and behavior I am upset and disillusioned about others, I

am disappointed and even sad. In short, the dream that I had in the early nineties for

the new South Africa lies almost in ruins. The question is who is responsible? "

"The fact is that no visionary and committed leadership with high integrity does exist.

Inspirational and serving leadership is out of the question. We are almost in a

61

leadership vacuum. No wonder that many South Africans feel hopeless - even

discouraged and powerles.The key question is what we should do. Will vitriolic criticism

help? Do negative conversations around dining tables or fires really serve a goal? "

"It would be naive or even irresponsible to leave everything to the government to create

a better future. Of course the government should do their part, but things will only

improve if we all accept our responsibility in a much greater extent than in the past and

take co-responsibility for the future, let’s get involved and take action. "

"As a starting point, we must hope for a better future, keep it alive. We must invest and

focus in positive things and spend our energy on activities that will take us forward,

things that will improve the future. The impact of our personal example should never be

underestimated Does our own behavior reflects integrity and ethics in all

circumstances? Do we always honor the principles of fairness and equity Do we live

according to the values and of respect for all people of caring and compassion? Do we

greet in a friendly way and do, we ask politely, and say thank you with sincerity. Are we

bridge builders across cultural boundaries Do we reach out and join hands with

enthusiasm? Do we connect with the real SA? Are we committed to it in our personal

capacity to contribute?

"I ask myself often why relatively few people are willing to get involved in initiatives and

activities beyond their own interests. Is it due to lack of time or resources or confidence?

Could it be selfishness or is it because they do not realize that the country needs every

single contribution desperately? Precisely now, yes today! "

"Sometimes I conclude that such uninvolved and critical citizens take delight in the wave

of incompetence and corruption at the national and local level across the country. It is

destructive and serves no purpose .Nobody have to wait and hope that someone from

our country will make it a better place to live Everybody should do something and

contribute wherever and whenever we can. "

"Let's take today to pay tribute to the thousands of ordinary people who have done it.

Through their involvement in community organizations, churches, schools, social

upliftment programs, they extended goodwill .They shared knowledge and experience,

assisting to develop people; they established successful businesses strive for

excellence in everything they do. The end is the practical value of more people with

knowledge, skills and jobs, less crime and more mutual trust. Their commitment, caring

and inspirational example and contribution made a big difference. But at the same time

they also experience fulfillment. "

While I read this article, I see in front of me on my desk a photo of myself, Abre, Bertus

and Armand. This photo was taken at a function where an award by the Wesvaal

Chamber of Commerce was bested to us for being the best family business of

62

2013.Lets is proud of it, but let this award encourage us and others to improve our

contribution to the well-being of South Africa and its people.

63

Chapter 19: The Transition Phase From The ANC To A New Political

Regime

There were always two South Africa’s that existed next to each other, namely a first

world (whites), and the third world (black people) The ANC believed that they can create

a rainbow nation in South Africa. To some extent they succeeded. Because the

immigration from the countryside and the farms together with the poor, the unemployed

and homeless people are united in squatter camps around the cities, I believe it is not

what they envisaged to be a rainbow nation.

The unbridgeable social problems arising, as well as the failure of their political policy

has led to the emergence of a new political grouping to the left of the ANC which

comprises the PAC, the SA Communist Party (SACP), Cosatu, Samco and the EFF.The

rhetoric of the ANC of redistribution of wealth after twenty years in power have not

been achieved by the ANC, now has become the slogan of this grouping on the left

Will this political failure leads to the total collapse of the capitalist economic system, in

South Africa and be replaced by Socialism. The signs are beginning to pop up

everywhere.

The socialist regime to which I refer is that where production, distribution and profits is

owned and managed by the state .This all sounds wonderful. However, it is the little

brother of Communism that has not worked in Russia and other countries, and has

already been scrapped in the previous century Even China has moved away from this

failed system and was replaced to what is today known as Liberal Socialism, which is

nothing less than capitalism.

The supporters of this system (SOCIALISM) in South Africa argues that capitalism puts

power and wealth in the hands of a small group, who would then have control over

production, labor and welfare, and so they exploit the masses .This caused inequality in

social relationships and fail to create opportunities for individuals to improve their

potential and abilities.

Socialism on the other hand is a planned economy by a central body (government) who

manages and controls everything. South Africa is already on th