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The Crash – 10 Years On




The world is still reeling from the shock of the financial crisis of 2008. For South Africa, the biggest takeaway was there are no substitutes for strong institutions.

It has already been 10 years since the collapse of Lehman Brothers in the United States (US), an event that shook the world and triggered the biggest financial crisis since the Great Depression of 1929.

People from New York to London, Hong Kong to Johannesburg, lost billions as stock markets crashed and the global economy plunged into recession.

Watching it all happen was Russell Loubser, the former boss of Africa’s largest stock exchange, the Johannesburg Stock Exchange (JSE), located on Gwen Lane in the plush suburb of Sandton. For him, memories of September 15, 2008, are as clear as day.

“I will never forget it, I was too scared to leave the building,” says Loubser.

Russell Loubser.

“I was convinced the world financial markets were on the brink of collapse.”

He wasn’t alone.

Never before had the world seen such a crash of that magnitude. Finding an investor that thought rationally was almost impossible. Panic was the name of the game. This showed in the 40% plunge in share prices across the JSE. The JSE all-share index nosedived from about 32,000 points to just below 18,000 as investors tried to save as much money as possible by exiting the risky bourses. The rand’s fortunes were no different (it weakened from XXX to the dollar and settled at XXX).

And despite repeated calls for calm, there was very little bosses like Loubser could do.

“I remember I was contacted by my regulator, the FSB (known today as the Financial Sector Conduct Authority or FSCA) and the South African Reserve Bank (SARB), and asked what we were doing about stabilizing markets.

“Other stock exchanges stopped trading and banned short selling. I said we would not do the same thing because short selling is a vital exercise that allows overvalued share prices to be brought back to market levels under controlled circumstances. And we had that,” he says.

Turns out, the former JSE boss made the right call as stock exchanges in New York and Europe that had banned trading, eventually reversed what they had panicked into.

So what was really behind the crisis?

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Simply put, greed, reckless lending, poor management and loose regulations. Bankers from mainly America cashed in on opportunities to make big bucks from buying up cheap US home loans, packaging them with better quality mortgages and then selling them on as risk-free assets known as mortgage-backed securities.

They lent recklessly even to people whose credit scores were not up to scratch. In 2006, when interest rates in the US started rising, many Americans could no longer afford their home loans and defaulted. House prices subsequently fell and the securities initially deemed risk-free were revealed to be toxic resulting in big losses. The collapse of Lehman Brothers was the match that set the crisis alight.

Big US banks like Citibank, JPMorgan and Merrill Lynch had to be bailed out by the Federal Reserve. Then chair Ben Bernanke, along with other central bank chiefs in Europe, entered uncharted waters. They printed trillions of dollars to starve of the drought of liquidity in the financial system. These unconventional monetary policies were known as quantitative easing (QE), something Japan had been doing prior to 2008.

Many South Africa banks, however, suffered minimal losses and remained sound. Even those with their headquarters in New York and London like Citibank, Goldman Sachs and HSBC. The South African Reserve Bank (SARB) governor at the time, Tito Mboweni, explains why.

“Mine was a basic Tzaneen approach”, says the former governor referring to the tropical garden town located in the Limpopo province of South Africa. “You don’t adopt what you don’t understand,” he adds, speaking of the synthetic derivative products used by American bankers in the build-up towards the crisis.

“Thank God I didn’t understand a damn thing. Growing up in Tzaneen helps, it kind of makes you slower but that saved the situation,” he says with sarcasm.

Looking back at what the former South African governor describes as a traumatic time when headline inflation reached 11.5% – the worst in two decades – and prime lending rates spiraled to 15%, he says one of the most revered institutions in the country did the right thing by sticking to its mandate of inflation targeting.

He says its ability to act independently during that time was and still should be, sacrosanct.

Sizwe Nxasana, the former CEO of FirstRand, one of the biggest banks in South Africa, agrees SARB played a big role in averting a banking crisis in the country and a run on the banks.

“Clearly, there was a lot of concern at that time. What helped calm people down was the messaging from the SARB that the risk for retail depositors (losing their money) was low. That assurance helped.”

He also agrees that global central bankers made the right call by implementing QE.

“When you look at what was going on at that time, the response was absolutely correct. They injected liquidity, which is the lifeblood of the banking system. The impact was that confidence was returned to the banking system, although this has had some unintended consequences,” he says.

One of these consequences that arose with tighter lending criteria has made banks more cautions to lending to small business and startups, deemed more risky, even though these enterprises are pitted as the future economic-spinners and job creators for Africa’s economies.

So what are the lessons learned from the biggest stock market crash the world has seen?

For Donna Nemer, the ex-CEO of Citibank South Africa, one of the American banks that lost billions during the crisis, it’s a return to basics.

“What we saw after that were very significant changes that happened in banking. There was a far greater focus on compliance, security and risk… I believe the world has learned a lot, some of that regulation may have been too tight but the bulk of regulation was good,” she says in reference to the Twin Peaks and Basel codes that caution banks to exercise greater prudence in lending and risk management.

For governor Mboweni, the biggest lesson is to never allow the banks to run away with products that banks can’t regulate. And for the former boss of the JSE – the biggest takeaway from the historic crash is that there are no substitutes for strong institutions like the SARB and the FSCA. “People come and go but institutions must be left to continue.”

When I asked the experts whether the 2008 financial meltdown is the last the world has seen or are we at risk of another crisis? The response of caution, that there would be another seismic event that would shock the financial system, was unanimous. It’s not clear, however, where it would come from.

One of the potential triggers was the looming trade war between the world’s biggest economies – China and the US. The end of QE, rising US interest rates and lower US corporate taxes, was also flagged as a risk. Unconventional monetary policies benefited emerging markets, which offered investors better financial returns than their US counterparts, helping their currencies strengthen. The risk is that the reverse will happen or the unexpected may occur because the reverse of QE has never been tested before. The 2008 crisis took the world by surprise and many continue to worry about it 10 years on. The world is wiser, but really, is it?

– Fifi Peters


A Statement On The Skyline



South Africa is on its way to another record with Africa’s tallest building.

A new superstructure is making its mark in Sandton in the heart of Africa’s richest square mile.

The $3 billion project is expected to be completed by the end of 2019 and beat Carlton Centre’s reign as the tallest building in Africa since 1973.

The 223-meter, 50-storey Carlton Centre in Johannesburg has for 46 years stood the test of time as a skyscraper dominating the skyline in South Africa and the continent.

The new building coming up in Sandton will be a 55-storey, 234-meter classical Italian eponym paying homage to Leonardo da Vinci, the Italian artist of the Renaissance era.

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It adds to the luxurious portfolio of hotels by the Legacy Living property group.

As The Leonardo rising from the bedrock and gradually etches its presence on the skyline, Gijs Foden, Director of Retail Management in Legacy Living, says it is a beacon that represents economic growth far beyond the surface.

“From a development perspective, everyone knows about the crisis in construction. There is light at the end of the tunnel, through a tough economy. It is a tough market and we are working our way out of it. We are going up. We are part of the beacon of hope through tough times,” he says.

South Africa has nine out of 20 of the continent’s tallest buildings, amounting to 1,277 meters in total and 5,000 steps up a staircase.

While most of these buildings were erected in the 1900s and early 2000s, records have stayed the same.

Johannesburg’s Ponte City Tower standing as the third tallest building in Africa, coming in after Kenya’s Britam Tower at 200 meters.

The Leonardo was initially set out to be a mixed-use building with 33 floors but has since escalated to dominating the South African skyscraper inventory.

Foden says the development will not only provide investment opportunities for South Africa, but it will celebrate African authenticity.

Set to be completed in the year of Leonardo Da Vinci’s 500th death anniversary, African art will be the center-piece of the tower.

You look out of the window and that is your canvas. Internally, the art in the building is African art.

“We are supporting the African artist, it is what it is. The art defines the building. Keeping the essence of the building and at the same time the warmth and lifestyle will be an attraction, irrespective of the Italian name,” Foden says.

By following due processes in getting the height approved, overtaking Carlton Centre’s record, Foden says: “It [Carlton Centre] is still an icon and no one has been able to beat it. It is different times and it is also different generations. This is our generation which is going to be a timeless building for many years to come. It is an urban flight.”

However, the record by The Leonardo may be short-lived as yet another African skyscraper may overshadow it by the end of 2021.

 The Pinnacle, currently being built in Nairobi’s financial hub, is set to be a 70-storey mixed-use development.

According to a yearly study published by The Council on Tall Buildings and Urban Habitat (CTBUH), Beijing’s China Zun 528-meter skyscraper was the tallest building completed in 2018, making it the eighth-tallest building in the world.

 The study reports that 16 new buildings entered the 100 tallest lists in 2018; up from 14 in 2017, 76% of these were in Asia.

Co-Arc Director, Francois Pienaar, says the influx of skyscrapers in Africa is a way for property investors and developers to exploit the options of sites.

“Sites can become very valuable. There are a lot of things to do with money – [for] better returns for the investment of the land, and that is why people go up. It takes quite a lot of courage, to go 55 floors.

You need to have a client who is inspired to do it. Especially, with the volatility of Africa,” Pienaar says. 

Despite the competition for a piece of the sky, none of the 2019 projected top 30 tallest buildings will supersede the world’s tallest building in Dubai at a towering 829.8 meters with 163 floors above the ground.

The Burj Khalifa has boasted this record since its completion in 2010.

According to Pienaar, the opportunity to build a structure of this magnitude does not come by every day in Africa.

Breaking his 30-storey skyscraping record, Pienaar, who is currently working on The Leonardo, adds:  “It takes a lot more when it comes to delivering services and the kinds of aesthetics that take place.

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“The building has a skin outside which is imported from Spain. It is a new invention from Spain that reduces the heat load on the glass. We have produced a building that is responsible for the climate. We are trying to keep the building energy-efficient,” he says.

As the global economic outlook develops, there is fierce competition for a piece of the sky.

The taller the building, the more money it pulls in.

As the South African economy picks itself up, the lingering shadow of the Leonardo will represent a symbol of growth and a new dawn.

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Lab-grown Diamonds: Never Mined, It’s Man-Made



Turns out there is literally no difference between lab-grown diamonds and natural diamonds, well, apart from the price.

Ever wondered what the difference between lab-produced diamonds and natural diamonds was? Well, nothing. They are exactly the same.

As with most things of value, a great deal of information has been produced over the years about the price of diamonds. In short, many believe the real price of diamonds is far lower than what ‘big business’ would have us believe and that it is driven up by our insatiable hunger and the social importance we place on the stones.

In line with this, there is a widely-held belief that they are not rare and the market is being deliberately controlled to create the façade that they are difficult to produce. Therefore, their price is dictated by the fact that they symbolize the most enduring of all human emotions – love.

 With that out of the way, in recent times, society has developed a pragmatic relationship with diamonds, rather than a romantic one that has long sustained the industry.

It might be that we live in the era of instant gratification or that we have stopped romanticising the idea of waiting millions of years for the precious stone, but more people have embraced the idea of purchasing lab-grown diamonds.

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Unlike an imitation gem like cubic zirconia, it has the same physical characteristics and chemical components as a natural diamond but production time is much shorter, enabling producers to create it in a matter of weeks.

Lab-grown diamonds producer Ross Reid offers FORBES AFRICA a very sobering perspective with the following analogy to describe man-made diamonds.

“If a couple can’t fall pregnant using conventional methods, they do IVF where the baby’s origin of life is manmade. Is that not a real baby when it’s born?”

The room falls silent as all contemplate this question.

“So by that logic, it is a real diamond,” Reid states emphatically.

Reid is the Co-Founder and Managing Director of Inception Diamonds, One of South Africa’s first Diamond companies to offer lab-grown diamonds and fine jewelry.

The world’s leading diamond producer, De Beers, however, has a different perspective.

“We view natural diamonds and lab-grown diamonds as very different products as they have completely different production processes. Natural diamonds are created in the earth, under intense heat and pressure over billions of years. Each diamond is rare, finite and unique,” says Bianca Ruakere, a De Beers Group spokesperson.

De Beers Lightbox range. Picture: De Beers

Reid says he recognizes the market potential for global growth in being able to offer conflict-free, environmentally-friendly lab-grown diamonds, especially to the millennial market.

“With the creation of laboratory-grown diamonds, it allows you to offer the consumer the same thing optically, physically, and chemically at a big discount. So you can have the same beauty, the same hardness, the same look and the same feel for less money,” Reid says.

Large diamond producers have also recognized the same potential.

De Beers Group has been producing synthetic diamonds for industrial purposes for more than 50 years. “Last year, we launched Lightbox in the United States to market a range of fun, fashion jewelry using lab-grown diamonds. They are accessibly priced, and a distinct product offering compared with natural diamonds,” Ruakere says.

 Price is not the only reason that encourages the market to opt for lab-grown diamonds. They are also other ethical factors such as having a guarantee that the rock on your finger is conflict-free.

 Shogan Naidoo, who proposed to his fiancé, Preba Iyavoo, on Valentine’s Day at the popular independent cinema house, The Bioscope, did so with a healthy bank balance and clean conscience.

They were traditionally engaged in July last year, so by the time the ring engagement happened, Iyavoo was caught completely off-guard and was pleasantly surprised.

“Shogan is the most endearing person, but he’s not romantic in the slightest,” says a giddy Iyavoo, who recalls the proposal that happened in a filled theater, with a movie Naidoo had created just for her.

The couple are besotted with their lab-grown diamond. Naidoo says after doing exhaustive research to find the perfect ring to propose with, all conventional options had failed him.

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 He says his final ring choice far exceeded his expectations in price and design. Naidoo explains that Iyavoo has a very specific preference and that he was not willing to compromise in getting her the perfect ring but the one he initially wanted was in the range of R80,000 ($5,500).

  “We were planning a wedding and we’d just bought a house,” he says. The exorbitant cost of retail rings led him to search out of the box, and eventually the box returned with the perfect gem.

 The couple who lead a very environmentally-conscious lifestyle, say they are especially proud to be the custodians of this ring because they are guaranteed it’s conflict-free and no miners were exploited.

 Reid says he has to grapple with a great deal of scepticism because many are not ready to fully embrace the idea of lab-grown diamonds despite their advantages.

“The Federal Trade Commission has changed the definition of a diamond. It does not need to come from the ground.

“We have opened up the market for people to be able to afford beautiful pieces without compromising on quality,” Reid says.

Change is inevitable and with that, there will always be those resistant to it. But one thing is for sure, society’s relationship with diamonds are changing.

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A New Language Doesn’t Hamper Kids Learning. Other Things Do




South Africa is a linguistically and culturally diverse country. There are 11 official languages and several other minority languages. But English continues to be preferred as the language of learning and teaching.

Many South African children are still in the process of learning English by the time they first start going to school. In a single English-medium classroom, one can find children with various levels of English proficiency; from children with English as their mother tongue to children who have never learnt English before.

This situation poses a range of challenges for both the teacher and the children. One of the biggest challenges is that a certain level of proficiency in English is required for the children to be able to perform well academically in an English-medium school. It’s a widely known factthat academic success is very much dependent on language competence and proficiency.

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This means that there’s a great need to understand how language develops in children’s early school careers. It is also important to understand the cognitive mechanisms that underlie language learning. To further explore how this happens in the early years of schooling I did a study involving pre-primary children in an English-medium school in Cape Town.

The group consisted of children who were still learning English as well as children whose mother tongue was English. The children were very diverse – there was a total of nine different home languages in the group of children who were still learning English.

The findings showed that the ability of children to develop their language skills didn’t depend on whether they were proficient when they started out. Their ability to learn and advance – or not – was in fact dependent on a range of other factors, none of which had to do with English language proficiency.

The findings

The research aimed to understand the link between language and working memory development. I did this by tracking how working memory developed for the children chosen to take part in the study.

Working memory is the ability to store and use information in the short-term and is important for our everyday lives. For example, we use working memory when we need to remember an address that we just heard while we are looking for a pen to write it down. Working memory also underlies many important academic competencies, like reading and mathematics.

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The children were broken into two groups: those with English as their primary language, and those still learning English. They were given the same tasks; these were an English language assessment and working memory tasks. They were assessed three times over the course of the year – at the beginning, middle and end.

The results showed that both groups improved over the year on the assessment of English language abilities. The results also revealed that great improvements were made in language development during the first year of formal schooling.

Results from the working memory tasks indicated that children who were still learning English, as well as the children who have English as their mother tongue, performed the same on these tasks and achieved comparable scores. Children in both groups saw their language abilities and working memory abilities improve over the year.

The most interesting finding is that the route, or trajectory, the children’s cognitive and language development followed was the same for both groups, regardless of the English abilities they had at the beginning.

Importantly, the result that working memory scores between groups were comparable also indicated that the amount of knowledge of English that a child had didn’t affect their working memory abilities.

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What this points to is that, if a child’s working memory scores are low and the trajectory of the development is not the same as their peers, there may be cause for concern. In this case, the children should be referred to an occupational or speech therapist for further assessment. Our research shows the fact that they’re struggling can’t simply be explained away as a “symptom” of the child not knowing English well enough.

Falling through the cracks

Studies like these are important for giving professionals better ways of seeing if a child has a disorder or is only struggling because they have not acquired a sufficient level of English yet.

In the context of a classroom with various languages and proficiencies of English, it is easy for a child with a disorder to be overlooked.

Along with the under-resourced schools and over-burdened teachers, heterogeneity among learners results in them not receiving the support that they need, be it academic or linguistic. Those whose primary language is English as well as those learning English suffer alike. The upshot is clearly seen in the worsening educational crisis in South Africa.

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