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NEWS
Henley offers scholarships to investigative journalists
Henley offers scholarships to investigative journalists

5 trends that can keep the South African MBA relevant
5 trends that can keep the South African MBA relevant

We need to realign government, business and civil society
We need to realign government, business and civil society

Life as a full-time MBA student
Life as a full-time MBA student

Brexit delay provides breathing space for SA
Brexit delay provides breathing space for SA

MSA joins the ADvTECH family
MSA joins the ADvTECH family

SA plunges to 117 out of 149 in gender wage equality
SA plunges to 117 out of 149 in gender wage equality

UCT’s Executive MBA recognised for its distinctive approach
UCT’s Executive MBA recognised for its distinctive approach

GIBS Executive MBA programme debuts in top 50
GIBS Executive MBA programme debuts in top 50

Can Africa fill the glass?
Can Africa fill the glass?

YALI AFRICA launch at Unisa
YALI AFRICA launch at Unisa

The fake resurrection of South Africa
The fake resurrection of South Africa

Don't panic: The digital revolution isn’t that unusual
Don't panic: The digital revolution isn’t that unusual

Why Agile works
Why Agile works

How firms can avoid the mediocrity trap
How firms can avoid the mediocrity trap

How a 100000-strong company is relearning how to innovate
How a 100000-strong company is relearning how to innovate

The changing shape of the MBA
The changing shape of the MBA

Adding climate change to curriculum is a top priority
Adding climate change to curriculum is a top priority

The MBA should turn you into a business disruptor
The MBA should turn you into a business disruptor

Innovation in SA organisations driven by C-level support
Innovation in SA organisations driven by C-level support

UNISA SBL a torch-bearer of training for military veterans
UNISA SBL a torch-bearer of training for military veterans

Scaling up the MBA for relevance in the 4IR
Scaling up the MBA for relevance in the 4IR

Moody's: SA not out of the woods yet
Moody's: SA not out of the woods yet

GIBS manufacturing-focused MBA kicks off in Durban
GIBS manufacturing-focused MBA kicks off in Durban

Henley’s Makhoalibe selected for sought-after programme
Henley’s Makhoalibe selected for sought-after programme

Personal potential, a source of power
Personal potential, a source of power

Reach your business leadership potential with a MBA from WBS
Reach your business leadership potential with a MBA from WBS

MPC: SA needs a period of stable interest rates
MPC: SA needs a period of stable interest rates

SA’s energy problems just the tip of the iceberg
SA’s energy problems just the tip of the iceberg

What's really driving disruption?
What's really driving disruption?

Why has there been such a failure of leadership?
Why has there been such a failure of leadership?

Steinhoff: Exactly where does responsibility stop and start?
Steinhoff: Exactly where does responsibility stop and start?

The cure for the loneliness of command
The cure for the loneliness of command

How to survive in the age of digital transformation
How to survive in the age of digital transformation

New MBA timetable starts in 2016
New MBA timetable starts in 2016

EVENTS
Henley MBA & PGDIP Preview Day
Henley MBA & PGDIP Preview Day
29 May 2019,
Pretoria

UCT GSB MBA Information Sessions
UCT GSB MBA Information Sessions
15 October 2019,
Johannesburg



09 OCTOBER 2018
Old Mutual’s move signals that business sees a future in SA

by John Luiz: Professor at the UCT Graduate School of Business, specialising in International Business Strategy; Business, Society, and Government; and Emerging Markets.
In June this year, Old Mutual Limited celebrated what it called its 'homecoming'. The company, which is the emerging markets business of the former Old Mutual Plc, relocated both its headquarters and its primary listing back to South Africa.

This reversed the steps that Old Mutual took nearly 20 years ago when it headed to London following its demutualisation. The company had set out with grand plans of international expansion, and in the uncertainty that surrounded South Africa in the late 1990s, many saw this move as astute. There were pronounced risks in the local economy, and, to many minds, Old Mutual was securing both its future and the capital of its shareholders by locating itself in a stable, developed market.

It is therefore somewhat ironic that Old Mutual should return at a time when South Africa's economic future is once again broadly perceived to be in the balance.

According to figures from the World Bank, the country's GDP per capita has been in decline for the better part of this decade. Both in real terms and relative to the rest of the world, the average South African is poorer today than they were in 2010. After the Zuma years, everyone is also well aware of the perilous state of our state-owned enterprises, the country's unsustainable debt-to-GDP ratio, and the struggle to maintain the integrity of important institutions like the South African Revenue Service. Business confidence remains low, and private sector investment has slumped.

South Africa's official unemployment rate has climbed to 27.2%, and it has been rising fairly consistently over the last ten years. Even more concerning is the unemployment rate amongst those under 25. If one includes those who are no longer looking for work, it sits at 67.1%.

At the same time, the ANC has announced that it will seek to change the constitution to allow appropriation of land without compensation. This has fundamental implications for property rights in the country, which is likely to spook investors.

This hardly seems like a welcoming environment for Old Mutual's return. Despite how difficult the company found it to compete in international markets, many people would argue that the prospects here are poor.

It is however worth remembering that the company's biggest local competitor, Sanlam, is significantly better off for having remained in South Africa. By focusing on the local market and opportunities on the rest of the continent it has done exceptionally well for its shareholders.

Could it be that the perceived security of a developed market base for Old Mutual was always an illusion? In reality, very few South African companies have been successful in entering the highly competitive markets of developed economies. Many have destroyed significant value in their attempt to diversify their risk and earnings.

Old Mutual's return is not insignificant in this respect. It shows not just that big business recognises a future here, but also a tacit acknowledgement that it is willing to work towards ensuring that future is sustainable.

The company can be under no illusions about the challenges in South Africa. It must therefore also know that if they are to be overcome, it will require active participation from the business community, and a recognition of its role in society.

South Africa, collectively and with the involvement of business, has already shown great resilience in ending the Zuma presidency. The private sector now has to be prepared to work with government to find solutions to major problems such as policy uncertainty and enhancing the productive capacity of the economy.

The country has suffered material setbacks, but it hasn't lost its real competitive advantages. We still have world-class businesses in a number of sectors, excellent IT and financial services sectors, superb logistics infrastructure, and a strong commercial legal system. South Africa is also still the most important gateway into the rest of Africa, which is the future of growth.

Government and business together have to make this count, and this has to start with both parties increasing their levels of investment. At the moment, the share of government spending going towards consumption, especially wages, is far too high and reducing this is imperative to free up space in the budget for spending on infrastructure. At the same time, government needs to encourage companies to start investing the huge amounts of cash sitting on their balance sheets by creating a more attractive environment.

Encouragingly, the leadership team in government in charge of the economy is the most sensible we have seen in a long time. There is a genuine recognition of the ailments facing the economy.

There is a long way to go, but the state is finally recognising the importance of simultaneously addressing both the social and economic problems we are facing. This is critical, because without addressing social inequities and rebuilding a social contract, we will not have a pathway to long-term growth and stability.

The country does face significant issues, but they are not insurmountable, and even small improvements can lead to meaningful economic gains.

Old Mutual's return is important because it recognises exactly this. South Africa is a country with enormous potential if we just get a few things right. That doesn't mean that there isn't a bumpy road ahead, but development is never a linear process in emerging markets. We shouldn't expect our experience to be any different.
Source:

University of Cape Town Graduate School of Business
UCT GSB is internationally renowned as one of a few business schools in Africa with the prestigious triple-crown accreditation with endorsements from EQUIS, AACSB and AMBA. As a top school with more than five decades of experience in Africa and other emerging markets, UCT GSB has a responsibility to engage with its socio-political and economic context. Its teaching, learning and research are directed towards addressing the complex and pressing economic and social challenges of our world today. Visit our InfoCentre or website.

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