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Chilling Words From The Man Who Broke The Bank Of England



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Another major issue in Davos was Artificial Intelligence. This promises not only the development of new technology to take the backbreak and tedium out of life, but also to replace workers with robots. Exciting times for many, yet maybe worrying times for us all if one of the many briefings was anything to go by – one man’s bank account can be another radical’s cash cow. Experts painted a bleak picture of threats and radicalism lurking on the dark web.

 “I wouldn’t put my credit card into a machine today. This is happening right now,” exclaimed retired US Marine Corps’ four-star general, John Allen, a former commander of NATO’s International Security Assistance Force. I had asked him about how far away we were from cyber-terrorism cleaning out bank accounts.

“A cyber terrorist can open a bank account on a Monday, start cleaning people’s accounts out on a Tuesday and start supplying money to their cause on a Wednesday. I saw a case of a bank in Bangladesh that was cleaned out of $80 million in one day. We have to develop strong systems to defend our financial systems.”

READ MORE | Big Four Accounting Firm Deloitte Confirms Cyber Attack

Cyber- terrorists are becoming ever more clever and ubiquitous, warns Karin von Hippel, a former senior advisor to the US Department of State, who worked on security for the United Nations and European Union in Somalia and Kosovo. The Islamic Isis movement, in Syria, attracted 40,000 volunteers from 120 countries and many used internet to further their cause, she says.

“They are all out there in the cloud and the dark web doing their work. They move so fast that it is very hard to keep up with,” says Von Hippel.

“If we spent half as much money on easing the causes of this terrorism, as we do fighting it, we would not drive so many youths into the arms of the radicals,” says Allen.

Don’t panic, too much, cautions Von Hippel.

“Despite all of this, you’ve still got a bigger chance of dying in the bathtub than you do in a terrorist attack,” she quips to ease the tension at the end of a worrying, yet eye-opening, session.

If you listened to South African President Cyril Ramaphosa at Davos, on a cold Wednesday night, you would have bathed with abandon and slept soundly in the snow afterwards.

“We are casting our nets here and finding big fish,” says Ramaphosa, the master of the metaphor, at the press briefing earlier in the day.

In Davos, Ramaphosa would have faced awkward questions from investors over why his government is propping up loss-making state enterprises, taking time to cut back government expenditure and the civil service, plus the thorny issue of expropriation of land without compensation.

That night, at the customary presidential dinner, in Davos, Ramaphosa, with microphone in hand, was as optimistic as a leader should be in an election year.

“When we see people here, they ask us how we manage to get business, government and unions working together for the economy of our country,” says Ramaphosa.

“They say tell us what magic you have. What I tell them is that there is a renewal and determination to make South Africa work. ”

The most chilling view of the future was yet to come. It came from the lips of grey-haired global investor George Soros, the man who broke the Bank of England, who invited us to the plush Seehof Hotel, one icy Thursday night, for an icier speech.

The 88-year-old hedge fund tycoon, worth $8.3 billion according to FORBES, reportedly made $1 billion in one day, in Britain’s sterling crisis of 1992, by shorting the British pound.

  “I want to use my time tonight to warn the world about an unprecedented danger that’s threatening the very survival of open societies,” were the dramatic opening words.

Soros delivered a potted history of his early life in the shadow of oppression. When he was 13, in 1944, the Nazis invaded Hungary and deported Jews to concentration camps. His father, a lawyer, understood the system and arranged false papers and hiding places for the family.

When the Soviets moved into post-war Bucharest, Soros took refuge in England where he put himself through the London School of Economics by working as a waiter and railway porter. He became a leading hedge fund manager by analysing the weaknesses of prevailing theories guiding investors.

 “Running a hedge fund was very stressful. When I had made more money than I needed for myself or my family, I underwent a kind of midlife crisis. Why should I kill myself to make more money?” he says.

Then, Soros began his philanthropic work, in 1979, by supporting scholarships for black students at Cape Town University. To this day, his Open Society Foundations aims to protect the human rights and freedom he fears are under attack.

“An alliance is emerging between authoritarian states and the large data-rich IT monopolies that bring together nascent systems of corporate surveillance with an already developing system of state-sponsored surveillance. This may well result in a web of totalitarian control the likes of which not even George Orwell could have imagined. Tonight, I want to call attention to the mortal danger facing open societies from the instruments of control that machine-learning and artificial intelligence can put in the hands of repressive regimes,” says Soros.

George Soros, billionaire and founder of Soros Fund Management LLC, speaks at an event on day three of the World Economic Forum (WEF) in Davos, Switzerland, on Thursday, Jan. 24, 2019. World leaders, influential executives, bankers and policy makers attend the 49th annual meeting of the World Economic Forum in Davos from Jan. 22 – 25. Photographer: Simon Dawson/Bloomberg via Getty Images

“China isn’t the only authoritarian regime in the world, but it’s undoubtedly the wealthiest, strongest and most developed in machine learning and Artificial Intelligence. This makes Xi Jinping the most dangerous opponent of those who believe in the concept of open society. But Xi isn’t alone. Authoritarian regimes are proliferating all over the world and if they succeed, they will become totalitarian.”

Soros also criticized US foreign policy on China. “My present view is that instead of waging a trade war with practically the whole world, the US should focus on China. Instead of letting ZTE and Huawei off lightly, it needs to crack down on them.

If these companies came to dominate the 5G market, they would present an unacceptable security risk for the rest of the world. Regrettably, President Trump seems to be following a different course: make concessions to China and declare victory while renewing his attacks on US allies. This is liable to undermine the US policy objective of curbing China’s abuses and excesses.”

The final chilling words for anyone who loves freedom: “My key point is that the combination of repressive regimes with IT monopolies endows those regimes with a built-in advantage over open societies. The instruments of control are useful tools in the hands of authoritarian regimes, but they pose a mortal threat to open societies.”

Journalists at least closed a heavy night with a lighter moment. They asked Soros whose side Facebook and Google were on.

“I think Facebook and the others are on the side of their own profits,” says Soros to a gale of laughter.

All the time we were listening to these predictions of AI surveillance doom at Davos, in a warm lounge at the Seehof Hotel, we were surrounded by armed police, airport security, surveillance cameras and cell phones that tell the world where you are, who you are and what you are doing, or saying, maybe doomsday is already here.

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Africa In The Alps




Fancy a cup of coffee? How about a chocolate? Or a fresh cream waffle with syrup?

These were some of the treats offered to delegates on the Davos promenade, enroute the congress center of the World Economic Forum’s (WEF) 31st annual meeting in January.

With temperatures plunging below -17° in Switzerland, it was hard for many to say no to the delights.

The promenade is a stretch of road where residents of the town located in the Swiss Alps, go about their everyday activities of shopping, banking and socializing.

This would be the case any other time but not in the month of January, when the high street is overhauled into one of the most important and richest in the world.

Book stores and coffee shops are shut and hired out to corporates with deep pockets.

Multinational heavyweights like Microsoft, Facebook, Amazon and Tata are intent on showcasing their products to the thousands of delegates that attend the forum.

WEF is regarded the most prestigious gathering of global leaders in business, government and society, who meet each year to discuss the world’s biggest threats and ways to neutralize them.

This year’s theme was Globalisation 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution.

What better way to tackle such a daunting task than with some steaming hot chocolate to invigorate the mind?

Back to the promenade.

The long stretch is carpeted by ice that mirrors the thick blanket of snow enveloping rooftops and walls.

Among the heavyweights battling it out to attract potential new clients, I see an African company.

It’s South Africa’s Absa bank; the only African company on the high street.

Ironically, like the promenade, which has been overhauled into a corporate marketing hunting ground, the African bank has completed its own makeover.

It was formerly known as Barclays Africa, a subsidiary of the London-based Barclays PLC.

“This year is the first time Absa comes to the World Economic Forum as a standalone entity,” the bank’s outgoing CEO Maria Ramos said.

“We’ve had a lot of our own meetings here. We’ve been able, I believe, to demonstrate that as a bank we are able to be at the cutting edge of what global financial markets are about.

“We have also demonstrated that as an African continent, not only do we have phenomenal sunshine, which we have been able to bring to Davos with technology into this fantastic space, but we’ve also got great financial institutions.”

It seemed Africa’s warmth followed relentlessly even in sub-zero climes.

Other action that took place on the sidelines of WEF included bilateral engagements between business and government.

Old Mutual CEO Peter Moyo told me of his private meeting with Zimbabwe’s Finance Minister, Mthuli Ncube.

Ncube had to lead the Zimbabwe delegation after President Emmerson Mnangagwa ditched plans to attend WEF at the eleventh hour to deal with the latest crisis in Zimbabwe.

Videos of deadly protests in Zimbabwe over the doubling of fuel prices overnight had gone viral.

“I was pleading with the Minister of Finance for him to take us into his confidence so we can actually work together with them and see how we deploy the capital that we have for the benefit of our customers and we protect value for shareholders,” Moyo said.

Old Mutual is the largest listed company on the Zimbabwe Stock Exchange.

For MTN CEO Rob Shuter, the sideline meetings at WEF provided a platform to deal with a crisis in Uganda with speed.

News broke that three MTN Uganda managers had been deported for allegedly compromising national security.

Shuter told me he met with Ugandan President, Yoweri Museveni, to address the matter.

“We had a cordial meeting. We assured [President Museveni] of MTN’s commitment to Uganda. We have been 20 years in the country and we are in the process of renewing the license,” he said.

Shuter also met with Oscar Onyema, CEO of the Nigerian Stock Exchange.

I asked if this was to discuss the much-anticipated listing of MTN on Nigeria’s stock exchange but he declined to comment.

It was time for another cup of steaming hot coffee.

– The writer is a presenter-producer on CNBC Africa.

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South Africa’s Precious Metal Mining Industry Is On Shaky Ground




The 1970s are known for political scandal while the 1980s are known for pop culture. They are also known for South Africa’s boom in the mining economy. I write this article from Johannesburg dubbed eGoli (the city of gold) for its once rich gold mines.

At the peak of those glory days, for every R100 the economy produced in 1980, R21 was from mining. In fact, during this boom, in 1987, the industry employed 760,000 people.  

 Today, the story of South Africa’s mining sector makes for grim reading. The once mighty sector is a shadow of its former self as precious metals continue to struggle. Statistics South Africa (Stats SA) reports that gold has lost ground over the last three decades. The annual production index for gold is now 46% lower than it was in 2007.

In 2016, the industry contributed only 8% to the economy. That is R8 for each R100, which is R13 less compared to the 1980s. The problem is in 2019; the mines are old, deep and lack investors.

According to Stats SA, “mining production decreased by 5.6% year-on-year in November 2018”.

The largest let-downs were the once flourishing gold and diamonds. 

“The bulk commodities and base metals have performed in line with the global industry. Metals like coal, manganese and chrome have performed very well for South Africa. Unfortunately precious metals haven’t performed that well,” says Andries Rossouw, partner at PwC South Africa.

In its 2017 report, PwC revealed that gold and platinum had witnessed devastating dips in market capitalization. Gold, for instance, saw a dip of a shocking 52%, which translates to R114 billion ($8 billion), while platinum’s market capitalization dropped by 21%. Last year, the market capitalization for gold dropped by 4% from 25% while platinum dropped 5% to 29%.

Rossouw, however, stresses that it is important to note that other commodities are performing well.

Coal is among them.

“The coal industry has been performing well in the last year at the back of higher coal prices. Eskom still demands a large number of coals for their coal-powered plants. So, it is important that our coal industry delivers that demand from Eskom. We are also exporting big quantities of coal mainly to India because they also need quality coal for their power generation,” Rossouw says.

The good performers helped “mineral sales increase by 8% year-on-year in November”. It’s not enough. Even so, most companies are facing a painful drop in rankings and profits.

For instance, “Impala Platinum and Sibanye-Stillwater dropped by two and four positions respectively in the top 10 companies in the country,” according to the PwC report.  

In fact, Impala Platinum dropped from R27 billion ($1.9 billion) in June 2017 to R15 billion ($1.06 billion) in June last year. It is forcing the company to restructure and cut jobs.

“The only option for conventional producers today is to fundamentally restructure loss-making operations to address cash-burn and create lower-cost, profitable businesses that are able to sustain operations and employment in a lower metal price environment,” says Impala Platinum CEO, Nico Muller.

Over the next two years, the company will downgrade from 11 to six operating shafts, reduce future production from 750,000 platinum ounces per year to 520,000 and cut jobs from 40,000 to 27,000.

Gold Fields is another company facing challenges.

Its South Deep mine, one of the biggest gold mines in the world, continues to make losses. It lost R4 billion ($283 million) over the past five years. Last year, it retrenched 1,082 employees at its South Deep mine.

“South Deep is a complex and unique mine, that has faced persistent issues that need to be addressed in a holistic manner which include, rising operating and overhead costs, consistent failure to meet mining and production targets; poor equipment reliability and productivity impacted by poor maintenance practices and operational conditions,” said the company in a statement released last year.

The problem is so big that according to a report by the Department of Mineral Resources, there are about 6,000 abandoned mines in the country and massive job cuts.

“We have about 454,000 people now employed in the industry compared to 532,000 employees when the industry was performing well. In the 2018 calendar year, it dropped about 3,000 employees and that is despite shaft closures,” Rossouw says.

This is a far cry from the industry’s heyday.

Due to global conditions, mining production reached a record low in 2016 in South Africa, but since then, other countries have enjoyed growth, while the domestic mining industry shrinks. It seems the bigger problem might be the relationship between industry and government.

Regulation is one of the major hold backs for the sector.   

Until recently, the Mining Charter, which addresses the distribution of mineral wealth more equally to redress the racial injustices of apartheid, has caused courtroom battles between government and industry. 

First issued in 2004 and amended in 2010, many agree the Mining Charter was a hastily and poorly written document, full of oversight, compiled without consultation with the industry. Industry heavyweights and unions disputed it, lawyers and economists argued over it and investors stayed away as a result.

“For investors to invest in the country, they would want to see a track record… We have had about 10 years of under investment, especially in our platinum sector and that will show in our lack of supply coming out of that sector in the future. Given the long-term nature of the mining investment cycle, it will impact our ability to supply in the future,” Rossouw says.

Last year, in fact, in terms of its overall investment attractiveness for mining companies, the Fraser Institute, a Canadian public policy think-tank, ranked South Africa 48 out of 91. It ranked 74 out of 104 destinations in 2016, yet in 1980, mining accounted for almost 50% of the world mining market capitalization.

“What has dropped us down the rankings in the last couple of years is the uncertainty and regulation environment largely due to the Mining Charter. Investors are cautious. They judge the government on past performance so there is still a bit of caution out there,” says Andrew Lane, Africa Energy & Resources Leader at Deloitte.

In February last year, President Cyril Ramaphosa appointed Gwede Mantashe — a former leader of the biggest union in Africa, the National Union of Mineworkers, as Mineral Resources Minister. With vast experience and trust from industry, Mantashe swooped in at the 11th  hour to save the day and negotiated a new Mining Charter acceptable to industry and government.

“It was bad in 2017 and then we got a much positive outlook in 2018 when there was good interaction between industry, labor and all the stakeholders including government which culminated in the publication of the new Mining Charter which has gone a long way to address some of the concerns raised in the previous versions of the charter.

“It doesn’t mean that it has been completely resolved but there is good engagement between the various stakeholders that only means positives for the future in terms of the regulatory environment,” Rossouw says.

Lane believes the industry has welcomed Mantashe and it has a more positive outlook.

“The issue we have here is that most of the mines are deep and quite old. A lot of our remaining resources and reserves which are left are not safely or profitably minable with current technology. We are looking to technological advances to bring a lot of what remains in those commodities into a decently profitable environment,” Lane says.

At February’s Mining Indaba in Cape Town, President Ramaphosa, a mining man to the core, said significant work still had to be been done to remove the uncertainty that held back the development of the industry.

“As part of the package, government is reprioritizing spending, within the existing fiscal framework, towards initiatives that are aimed at driving economic activity, including financial and non-financial measures to turn around the economy,” Ramaphosa said.

Lane says there is a trust deficit which makes the investors adopt a wait-and-see attitude. 

“We have further recognized the challenges raised with us by investors, among other things, administered prices for ports, rail and electricity, as well as infrastructure bottlenecks…We are working in earnest to address the constraints that were raised with us as we implement the Stimulus and Economic Recovery Plan.

“We are addressing issues that are of concern to companies such as visa regulations, reducing the cost of doing business, eliminating many bureaucratic constraints and making it a lot easier to conduct business,” Ramaphosa said.

There has been positive movement in the regulatory environment but, for companies, the cost structure is, by far, the biggest challenge especially with labor and electricity prices and shortage. In February, investors and credit rating agencies flagged Eskom’s rolling power cuts which weakened the rand. The power cuts also cost the mining industry productivity.

“We have the deepest mines in the world here. Certainly, the energy costs going up over the years have impacted productivity. Our mines are quite expensive to operate. We are not the most attractive destination for mining investment right now,” Lane says.

Ramaphosa said the government would announce its plans to stabilize and improve Eskom’s financial, operational and structural position and to ensure security of energy reserves in the country.

“Eskom’s contribution to the health of our economy is too great for it to be allowed to fail. It is too important and is too big to fail; and we will not allow it to fail. Restoring and securing energy security for the country is an absolute imperative,” he said.

Lane says government needs to continue to send a message of regulatory stability, act on Eskom and reliability of energy to start shifting the sector towards a more investor-friendly option.

There is also inadequate transportation in the industry. Some economists have said improving the costs related to exports such as port tariffs and railway costs would make the sector more profitable.

“Last year for example, we had to truck manganese to Durban which is inefficient. We should have freight rail in place to take care of those commodities,” Rossouw says.

Another concern is the socioeconomic conditions around mining companies.

“Mining companies are quite often the main providers of employment in rural areas and that means it creates expectations by community and when our economy is struggling as it is at the moment, it means the pressure of the communities around that mine provides pressure on the mine environment. We have seen mines being closed down by communities and not by employees in the last couple of years,” Rossouw says.

Minerals Council CEO Roger Baxter says the council has engaged extensively with government and other stakeholders on the challenges that have prevented mining from reaching its true potential.

“A collaborative approach is needed to develop and implement solutions that will see our industry grow and thrive in the future for the benefit of all. We need to get investment back in mining. We, as the industry, are fully committed to play our part,” he says.

There is also a push for green coal to boost the industry and according to Rossouw, however, the green economy won’t replace coal in developing regions like Africa, Southeast Asia and India.

“There is still a big increase in coal-fired power plants and generation capacity… The challenge the coal industry is facing, as a result of the green economy, has to do with the holding of new projects. A number of banks said they won’t fund any new coal projects and therefore some of these projects,” says Rossouw.

“There is potential for clean coal going forward and we need to invest in research and development to make coal work for us to provide cleaner energy from the vast coal resorts we have.”

Just over two in every three gold mining jobs in 1995 no longer exist. However, mining remains an important earner of foreign exchange for the country and employs one in every 40 working people according to Statistics SA. Love it or loathe it, if government and industry play the ball right, South Africa may reclaim a large slice of one of the world’s richest cakes.

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How To Better Support Business Innovators




We business schools pride ourselves on our commitment to the promotion of best practices, as well as our rigorous research and ability to produce tomorrow’s leaders today.

Globally, 81% of corporate recruiters interviewed by the Graduate Management Admission Council said they planned to hire MBAs.

 The cost of an MBA – including living fees while studying – is recouped in about three and a half years thanks to the salary increase it commands.

A nice, celebratory pat on the back all round, then? Not quite.

Business schools, the centers of innovative thinking and excellence, could offer so much more to the wider economy in South Africa. We need to extend our services to many more people than we currently do.

READ MORE |4 Ways To Develop Employment-Ready Graduates

If what we do is good, then shouldn’t more people get hold of it? We just need to step into the sunlight out of our ivory towers for a second, and look at what we could be doing to better support those business innovators who don’t have access to funding and educational opportunities right now.

In its 2018 Entrepreneurial Ecosystem Snapshot for Gauteng, the Aspen Network of Development Entrepreneurs identified 255 organizations offering support services to entrepreneurs and small businesses.

Only one of the programs listed is offered by a formal business school, which suggests that either we are not doing anything, or, if we are, what we do might be irrelevant in the wider entrepreneurial ecosystem.

Small businesses are the past, present and future of South Africa’s economy. Today, the Small Business Institute (SBI) reckons 98.5% of all companies in the country are SMEs, the vast majority of which (around two thirds) are micro-enterprises employing fewer than 10 people.

These are not the select few entrepreneurs lucky enough to have the qualifications, capital or funding to enter our program.

They’re not the high-growth startups who’ll be looking for venture capital investment at some stage in their career. But they need our help all the same.

According to the National Development Plan, small businesses are expected to provide 90% of jobs by 2030. Today, however, SBI’s figures suggest they account for less than a quarter of formal employment – well below international standards and what might be expected given their proliferation.

The most popular reason for the collapse of a small business which has been through one of the current business development programs in South Africa is that the entrepreneur was offered another job – which suggests that current programs are good at teaching entrepreneurs skills valued by business, but not the value and reward of building a business themselves.

The second most common reason is the business idea wasn’t successful, which means we could be helping them understand how to address problems earlier, understand the root issues and learn more about how to pivot before it’s too late. And teach them to build better business ideas.

  Any good business model must pass the ‘story test’ and the ‘maths test’. It’s the story test that’s hardest – visualizing how all the components fit together to reinforce themselves to build a viable, feasible, value-creating business.

READ MORE | 5 Ways Tech Can Revolutionize Education

Likewise, current programs focus almost exclusively on the person leading the business as the business itself. As a result, many struggle once an organization gets too large for one person to effectively manage.

The process of capacity-building in second tiers of management is simply not taught in entrepreneur programs today.

However, there’s a twist here. In the big picture, maybe our measure of ‘success’ is too short-sighted. To become a successful business owner, learning through trial-and-error is critical, so failing fast forwards and brings rapid growth of skills into the economy as a whole.

All the big enterprises came from small ones. Oligopolies and oppressive wealth stifle the energy of creative destruction and the renewal so needed to freshen our economies and allow great new improvements and the seeds of great new companies to thrive.

Our business schools need to paint a picture of success through experimentation, rapid marginal improvements –not through a grand, elegant masterplan and the fiction of predictable implementation in complex situations.

On business ethics too, there’s much we can share. Many small businesses, for example, go through specific enterprise development (ED) programs developing products and services for corporates and government agencies.

 If we’re really going to build the people who build the businesses who build Africa, we have to make our collective wisdom accessible to more of the people who count and fast-track their skills growth.

Jonathan Foster-Pedley, The writer is Dean and Director of Henley Business School Africa.

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