Finweek UK 13 March 2014

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13 March 2014
2 million
DEATH
As an investment
strategy
Entrepreneurs:
WHEN LESS IS BETTER
Start-up
Meet Anthony le Roux of
Uber
9 771024 740005
11940
SA: R23.50 (incl. VAT)
Other countries: R20.61 (excl. VAT)
security guards can help YOU
CASH IN on a booming industry
How SA’s
MAKE
money
WITH
MPACT
METROFILE
TEMPLETON’S EURO
GOVERNMENT BOND FUND
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®

Inside
finweek

www.finweek.com
13 March 2014
2 million
DEATH
As an investment
strategy
Entrepreneurs:
WHEN LESS IS BETTER
Start-up
Meet Anthony le Roux of
Uber
9 771024 740005
11940
SA: R23.50 (incl. VAT)
Other countries: R20.61 (excl. VAT)
security guards can help YOU
CASH IN on a booming indus
try
How SA’s
MAKE
money
WITH
MPACT
METROFILE
TEMPLETON’S EURO
GOVERNMENT BOND FUND
P10
CASHING IN ON
CRIME FEARS
4 Feedback From our readers

6 Rewind & Trending N
ews review and preview
8
Context SA’s online shopping market
10 Cover C
ashing in on the booming security industry
16 Insight T
he economics of bigotry
18 Infographic: Hollywood by the numbers
20
Cross-border expansion: The fast and the fleet-footed
22
Poor roads claim more tolls from Sanral
24
Venezuela’s angry students
28 The Gab Shhh
, don’t tell anyone!
31 Investment W
hat are unit trusts?
33 End in sight for platinum strikes
34 Impala’s hoping to coin it on Mandela
36 Pro Pick S
atrix Balanced Index Fund
37
House View Punts
39
Simon Says Don Group, Old Mutual, EOH
40
Killer Trade: Mpact: Bullish on recycling
41 Small Cap

Modular business plan pays dividends
42
Fund Focus Templeton Euro Government Bond Fund
43
Invest DIY How to position and protect your portfolio
44 Money B
anking on death; Property feeding frenzy
50 Entrepreneur T
he story of a sale
52
Start-ups: Introducing Uber Cape Town
56 Technology T
ested: Nokia Lumia I520
57 One operator to rule them all
58 Life T
he week that was in SA sport
60 Directors & Dividends Dea
lings and payouts
62 In Brief Cr
ossword
P46
Property frenzy
P6
Be careful what
you wish for
Cover story: Tandisizwe Mahlutshana
Cover concept: Zandri van Zyl
Cover story layout: Tshebetso Ditabo
Photographer: Rowyn Lombard
Model: Aubrey Rathaka

P28
Shhh, don’t
tell anyone!
P41
Modular
business plan
pays dividends
FEEDBACK
4 FINWEEK 13 MARCH 2014
Feedback
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EDITORIAL ACTING EDITOR WILLEM KEMPEN DEPUTY EDITOR TANDISIZWE MAHLUTSHANA
MANAGING EDITOR NICOLE BOUCKAERT JOURNALISTS AND CONTRIBUTORS SIMON BROWN,
SIMON DINGLE, GLENDA WILLIAMS, JESSICA HUBBARD, DAVID MCKAY, BRUCE WHITFIELD,
KRISTIA VAN HEERDEN, GLENDA WILLIAMS, DANIELLE GARRETT, BLAIR BURMEISTER,
WARREN DICK, SUB-EDITORS STEFANIE MULLER, JUSTINE OLIVIER OFFICE MANAGER
THATO MAROLEN LAYOUT ARTISTS BEKU MBOTOLI, TSHEBETSO DITABO, ZANDRI VAN ZYL
GENERAL MANAGER CHARLENE BEUKES PUBLISHER LEE-ANNE COOSNER PROJECT MANAGER
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TION MANAGER ARMAND KASSELMAN
021-443-9975 SUBSCRIBER ENQUIRIES ELMARIE EYGELAAR 021-443-9828
DRAWING A LINE
I refer to Bruce Whitfield’s article entitled
A leap to the left (27 February edition).
I have little interest
in politics as such. All I
want from Government
is a secure environment in
which to work and reap
rewards according to my
efforts.
There is indeed cause

for concern. However,
there are certain things
that we have to accept
and understand when
dealing with the ANC
Government.
The first is that their
objective is not to gov-
ern the country for the long-term benefit of
its people. Their primary objective is to stay
in power no matter what it takes. In order
to stay in power they obviously need votes
and the fact that the majority of the elector-
ate is unsophisticated and easily manipulat-
ed makes it easy for a ruthless organisation
to get them. The majority won’t be able to
understand that they are voting their own
future prosperity down the drain.
The second is that the struggle in South
Africa, as with most freedom struggles on
the continent, had little to do with freedom
and prosperity for the people but every-
thing to do with power and privilege for the
leaders – Robert Mugabe said: “Zimbabwe
is mine.” The actions of our ANC ‘leaders’
certainly suggest that
they regard our coun-
try as their personal
property to milk and
do with as they please.

(I say ‘leaders’ because
leadership implies posi-
tive motivation and the
courage and ability to
make unpopular deci-
sions for the long-term
good.)
It does not take great
academics to formulate
economic policies that
uplift populations. By
looking around the world and noting what
the most prosperous nations are doing and
following their examples would be a good
start.
It is time for a strong opposition to
draw a line in the sand and say “so far
and no further”. The removal of property
rights will utterly destroy Nelson Man-
dela’s ideals for a prosperous Rainbow
Nation and is likely to plunge the country
into anarchy.

Nigel Peddie
Contact Finweek, P O Box 785266, Sandton 2146, tel (011) 217-3000 or
THIS WEEK’S
CONTRIBUTORS
Kelly Berold

Simon Brown

Simon Brown heads justonelap.com, a free resource of
financial information and investment education.

Blair Burmeister
blairb@finweek.co.za
Warren Dick

Simon Dingle
simond@finweek.co.za
Moxima Gama

Craig Gradidge

Jessica Hubbard
jessicah@finweek.co.za
Graeme Joe

Tandisizwe Mahlutshana
tandisizwem@finweek.co.za
David McKay

Gareth Ochse

Gareth Ochse is the founder of ValuationUp.com.
James-Brent Styan


Gavin Symanowitz

Dr Gavin Symanowitz is an actuary and founder of
BlockbusterInnovation.com
.
Garth Theunissen

Bruce Whitfield
brucew@finweek.co.za
Glenda Williams
glendaw@finweek.co.za
For more
information,
visit
finweek.com
e
s
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i
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J
ust how much political heat is
the ANC feeling ahead of the
poll on 7 May? A significant
amount, according to research
by the South African Institute of Race
Relations (IRR), which maintains that
the country is tee-
ing itself up for a
Zimbabwe-style
land grab and, to
make matters
worse, says its
CEO, the off icia l
opposition is com-
plicit. It’s easy to
dismiss the cl aims as fanciful. La nd rights
are constitutionally protected, besides
which, an economically prudent ruling
part y could not feasibly contemplate poli-
cies that would be destructive to already
delicate foreign investor sentiment.
“Nobody thought so in Zimbabwe
either,” says Frans Cronjé, CEO of the
think tank that has published a con-
troversial assessment of two pieces of

pending legislation it argues could be
as destructive to rural South Africa as
Lord Kitchener’s scorched earth policy
was during the South African War at
the dawn of the last century.
“It could result in the expropriation
of commercial farming operations with
zero compensat ion,” cautions the IRR.
The first of these is the Restitution of
Land Rights Amendment Bill of 2013
(the Restitution Bill). The a im of the
le g islation is to open a new five-year
window during which land claims can
be lodged. It’s estimated there could be
more than 375 000 of these as dispos-
sessed South A fricans seek a mechanism
to redress some of the economic wrongs
of the past.
The IRR is not opposed to the prin-
ciple of land res-
titution but notes
with alarm that
the cost could
amount to nearly
R180bn. The res-
titution budget,
however, sits at
a paltry R3bn.
Hence the concern that something infi-
nitely more sinister is afoot.

Cronjé says that another piece of
pending legislation is being crafted to
achieve precisely t hat. The Promotion
and Protection of Investment Bill makes
provision for the State to play the role of
custodian over d isputed land. Ownership
would not shift, and therefore it would
not be a case of outright expropriation.
“The Constitutional Court has
already ruled in a case involving mining
rights – the deprivat ion of property f rom
an existing owner is not matched by the
acquisition of that property by the State.
A leap to the left
INSIGHT
6
FINWEEK 27 FEBRUARY 2014
Rewind
This means t hat there is no expropriation
– and no right to any compensation,” says
Cronjé. “There is precedent.”
Sound fanciful? Perhaps. But Cronjé
is concerned that the ANC is facing
mounting political opposition among
disaffecte d youth who might be tempted
to cast a vote for Julius Malema’s Eco-
nomic Freedom Fighters. DA support
for re-opening land claims could aid the
process.
“Together,” says Cronjé, “these two

pieces of legislation could spell the end
of private propert y rights in South Afr ica
– not just in agriculture but across the
economy. We suggest that the Govern-
ment and the Africa n National Congress
[ANC] may be preparing the ground to
confiscate private propert y and distrib-
ute it to poor communities if and when
they feel the need to do so. That time
will come when the politica l pressure on
the ANC is so great that it fears losing a
future election.”
■
BY BRUCE WHI TFIELD
would not
shift, and
therefore
it would
not be a c
ase of out
right expr
opriatio
n.
“The Const
itutiona l
Court has
already ru
led in a c
ase involv
ing mining

rights – t
he depriva
tion of pr
operty f ro
m
an existin
g owner is
not matched by the
acquisitio
n of that
property b
y the Stat
e.
future ele
ction.”
■
Frans
Cronjé
“TOGETHER, THESE TWO
PIECES OF LEGISLATION
COULD SPELL THE END
OF PRIVATE PROPERTY
RIGHTS IN SOUTH AFRICA.”
Gallo imag es/ Getty image s: Foto 24
/Denzil Maragele
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F
or decades big business hoped
for a weakening of the tripar-
tite alliance. The ANC/
COSATU/SACP coalition
was seen as damaging to business. Now
that the alliance is fraying at the edges
– many are wondering whether or not the
status quo was more palatable than the
heightened levels of political and eco-
nomic uncertainty with which managers
are contending on a daily basis.
It really is a case of being careful what
you wish for.
Both Government and big business
have been taken unawares by the rapid
radicalisation of the workforce particu-
larly in the platinum belt, and the state
is stretched to deal with the rapid rise in
violent service delivery protests. For ever
watchful ratings agencies, concerned
about the sustainability of a South Afri-
can turnaround without the economy
finding innovative ways to include grow-

ing numbers of disaffected young people,
the rise in activism cannot be ignored.
A dramatic change in political climate
following the May elections could force
the hand of the state and that of big busi-
ness to greater levels of co-operation in
the face of a leftwing backlash. Finance
minister Pravin Gordhan is a strong pro-
ponent of greater co-operation between
public and private sectors.
But the ANC is vulnerable to a back-
lash from first-time voters, who believe
that they have little to lose in voting
for what they might regard as a radical
alternative. Julius Malema’s Economic
Freedom Fighters (EFF) is shaking up
the political landscape and is likely to get
more than a handful of seats in parlia-
ment. That would provide the EFF with
a level of political credibility that it craves
to achieve and will do one of two things
– lead to greater sustainable co-operation
between public and private sectors, or a
kneejerk jump to the left of traditional
ANC policy to placate voters.
So far the state has remained reso-
lute and focussed on prudent long-term
financial planning. Gordhan may have
got away with a couple of percentage
points on the marginal tax rate if he’d

chosen to follow a populist agenda. But
with just 168 000 South Africans earn-
ing over R1m a year, the impact could
have been more negative from a compli-
ance point of view than positive.
For now sceptical ratings agencies are
giving the finance minister the benefit
of the doubt.
In as much as big business was hoping
for a breakdown in the tripartite alliance,
the EFF and its supporters are eager to
plunder the coffers of the rich. They, too,
should also be careful about what they wish
for. The super rich are globally wealthy and
although it might pain them to do so, they
are able to pack their bags and take their
money generating ingenuity with them.
■
Be careful what
you wish for
INSIGHT
6 FINWEEK 13 MARCH 2014
Rewind
If SA were a company and Pravin
Gordhan was its financial director
with executive authority over the
departments and divisions beneath
him, he’d probably have a far bet-
ter chance of limiting the profli-
gacy of his colleagues.

Markets are keen to know
whether he will serve another term.
Like Trevor Manuel before him, he
is regarded as a safe pair of hands.
While he is politically powerful and
remains influential in ANC circles,
his austerity drive in Government
departments is not popular. His
post-budget tea and biscuits
replaced what is traditionally more
lavish fare as he seeks to lead by
example. His attempt to drive the
same behaviour into other depart-
ments is not going down well.
Politics is a messy business. If he
were to be dropped or moved after
the elections, the ANC should con-
sider whether his successor would
have any other easier choices they
would be able to make.
Politicians, too, need to be careful
about what they wish for.
THE
PRAVIN
POSER…
BY BRUCE WHITFIELD
INSIGHT
FINWEEK 13 MARCH 2014 7
MOBILE FINANCIAL SERVICES
are

moving into the radar of mobile oper-
ators, financial institutions, technology
firms and governments, particularly
in regions where financial inclusion is
limited – like Sub-Saharan Africa (SSA).
McKinsey reports that close to
500m people are unbanked (in Sub-
Saharan Africa) while there are 502m
active SIM connections representing
around 253m mobile subscribers in the
region. This gap between unbanked
individuals with access to a mobile
phone is the foundation of opportunity
for mobile money.
BREAKING NEW GROUND
Out of the African nations, Kenya and
N
igeria are leading the way in terms of
adoption of mobile payment technology.
“This is a growing trend that is help-
ing the two countries introduce more
unbanked citizens to formal financial
services,” says Sachin Shah, head
of cash management products at
Standard Bank.
Standard Bank saw the number of
payments to mobile wallets in Kenya,
on behalf of its clients, increase by
300% in 2013.
Millicom, a global telecom group,

said that mobile money was the largest
contributor to revenue growth in Africa
in Q4 2012, and that the MTN Group,
offering mobile money in 11 SSA mar-
kets, has more than 10m subscribers.
Given the growth in users, as well as
the commitment from operators, it has
become clear that Safaricom’s M-Pesa
– currently the most developed mobile
payment system in the world which
allows Kenyans with a national ID card
or passport to deposit, withdraw, and
transfer money with a mobile device –
is no longer the only success story in
this industry.
WHY MOBILE MONEY?
According to Shah, multinational cor-
por
ations operating in Africa are look-
ing at ways to eliminate the risk of
carrying and transporting cash. The
use of mobile wallets to facilitate cash-
less payments is a cost-effective and
efficient way of doing this.
Multinational corporations in the
fast-moving consumer goods sector
are particularly interested in rolling out
mobile payment solutions as it allows
them to distribute their products in
remote areas without having to take

the risk of transporting cash.
According to Wayne Cook, product
head for cash management at CFC
Stanbic Bank in Kenya, mobile pay-
ment is becoming a valid substitute for
carrying cash in many parts of Africa.
“It’s an easy and safe way to ensure
that funds reach their intended recipi-
ents, which makes it an ideal solution
for companies that have large work-
forces requiring weekly or monthly
wage and salary payments.”
THE OPPORTUNITY
As well as enabling payments, mobile
t
echnology is capable of extending
the reach of financial services through
products like insurance, credit and sav-
ings. Through effective relationships
with banks and other financial insti-
tutions, mobile operators can meet a
broader range of customers’ financial
needs.
In the savings and credit space,
Safaricom is leading the way through
the launch of its banking and loan
product, M-Shwari. M-Shwari is a bank-
ing product for M-Pesa customers
that enables them to save and borrow
money through their phone while earn-

ing interest on money saved.
M-Shwari was launched in Novem-
ber 2012, in partnership with Com-
mercial Bank of Africa, and now has
more than 2m active customers with
deposits amounting to 20bn Kenyan
Shillings and outstanding loans of 60m
Kenyan shillings.
When digital payments take hold,
as it did in Kenya, consumers eventu-
ally profit from the related savings. The
cost of making payments via M-Pesa is
about half that of other formal domes-
tic-payment services. Moreover, cus-
tomers can instantly send payments
from their mobile phones instead of
travelling an hour or more to distant
bank branches.
Clearly, there is significant oppor-
tunity for digital payments in many
markets of Sub-Saharan Africa.
Widespread consumer acceptance of
mobile-communications technology
is also highly encouraging.
For players who are able and will-
ing to move in the near future, there
are also opportunities to win first-
mover advantages.
■
Trend ing

r
oa
de
r
ra
ng
e
of
c
us
to
me
rs
’
fi
na
nc
ial
Tapping into Sub-Saharan
Africa’s cashless society
BY BLAIR BURMEISTER
Kenyan
Shillings
Gallo Images/Thinkstock
INSIGHT
Context
www.finweek.com
SA’S ONLINE SHO
8 FINWEEK 13 MARCH 2014
45.1%

Gauteng
1.2%
22.6%
3.2%
2.5%
3.6%
3.3%
11.9%
9.1%
1.6%
5%
East London
Other Eastern Cape
EASTERN CAPE
2.5%
Port Elizabeth
WESTERN CAPE
17.6%
Cape T
own
5%
Other Western Cape
FREE STATE
1.6%
Bloemf
ontein
1.6%
Other Free State
LIMPOPO
MPUMALANGA

NORTHERN CAPE
NORTH WEST
7.3%
1.
1%
3.5%
Durban
Pietermaritzburg
Other KwaZulu-Natal
KWAZULU-NATAL
10.9%
26.5%
7.7 %
Pretoria
Johannesburg
Other Gauteng
5.33%
6.61%
19.86%
6.35%
0.80%
5.70%
24.57%
27.36%
13.01%
8.30%
27.15%
15.92%
11.11%
23.37%

12.41%
18.37%
45.77%
5.01%
40.29%
WHAT KIND OF PRODUCTS HAVE YOU
PURCHASED ONLINE IN THE LAST 3 MONTHS?
% OF ONLINE SHOPPERS PER GEOGRAPHICAL AREA
Other specify
None/Don’t know
Videos/DVDs/games
Toys/dolls
Sports memorabilia
Sports goods
Music
Hotel reservations/Tourism services
Home equipment (kitchenware, furniture, etc)
Groceries
Event/Concert/Sports tickets
Electronic equipment (camera, music player, TV)
Cosmetics/Health supplies
Computer software
Computer hardware
Clothing/Accessories/Shoes
Books
Automobiles and Parts
Airlines tickets
4
G
33%

3
3
M
M
PUMA
L
L
L
A
NG
N
NG
A
A
WEBSITE UNIQUE AUDIENCE
kalahari.com 99
2 420
amazon.com 935 858
bidorbuy.co.za 701 720
groupon.co.za 685 726
takealot.com 678 684
computicket.com 521 411
picknpay.co.za 475 135
ebay.com 474 302
woolworths.co.za 442 695
game.co.za 398 438
superbalist.com 327 022
mrp.com 303 028
zando.co.za 290 116
click.co.za 280 855

edgars.co.za 269 420
yuppiechef.com 229 778
amazon.co.uk 207 408
wantitall.co.za 197 094
dionwired.co.za 190 423
spree.co.za 167 166
style36.co.za 161 803
incredible.co.za 147 034
truworths.co.za 126 523
hificorp.co.za 125 508
capeunionmart.co.za 124 734
exclus1ves.co.za 113 701
ebay.co.uk 111 154
spar.co.za 107 799
builders.co.za 104 921
ackermans.co.za 100 388
These figures are based on the Eective Measure panel of
9 000 panelists in SA and excludes classified sites
LEADING RETAIL SITES VISITED BY
SOUTH AFRICANS – DECEMBER 2013
PPING MARKET
INSIGHT
ORDER ONLINE – PICK UP NEARBY
19.45%
DESIRED/PREFERRED WAITING
TIME FOR PRODUCT DELIVERY
1-4 working days
14 days +
5-10 working
days

10-14 working
days
38.31%
38.03%
14.54%
9.22%
80.62%
NoYes
SOURCE: Effective Measure
SOUTH AFRICAN E-COMMERCE IN 2013
A recent study conducted by the Effective Measure and IAB SA eCommerce found that mobile traffic to online retailers over
the past three months have increased to 47% from an average monthly figure of 32%. Over 10 000 South African internet
users were surveyed on their online shopping habits and found that the majority of South African online shopping is de-
voted to South African sites. Finweek takes a look at their key findings and how this growing trend is enhancing our economy.
% of shoppers who would be willing to pick up their
items from a nearby shop and pay on collection
COVER
10 FINWEEK 13 MARCH 2014
BY TANDISIZWE MAHLUTSHANA
IF YOU TYPE THE WORDS ‘SOUTH AFRICA’ INTO AN
INTERNET SEARCH ENGINE, GRAB A NEWSPAPER AT
YOUR NEAREST NEWSSTAND, LISTEN TO A NEWS
BULLETIN ON THE RADIO OR WATCH ONE ON TV, YOU
ARE ALMOST GUARANTEED TO FIND A NEWS STORY
RELATING TO CRIME IN THE COUNTRY.
IN HIS 2014 BUDGET SPEECH, THE MINISTER OF
FINANCE, PRAVIN GORDHAN, ANNOUNCED THAT THE
SA POLICE SERVICE WOULD RECEIVE A 5% INCREASE
TO R78.1BN IN ITS BUDGET ALLOCATION TO CARRY
OUT ITS PROGRAMMES FOR THE SAFETY AND

PROTECTION OF SA AND ITS CITIZENS.
HOWEVER, THE INESCAPABLE REALITY OF CRIME HAS
DRIVEN MANY SOUTH AFRICANS TO INVEST A GREAT
DEAL IN THEIR OWN SAFETY, FROM HIGH
ELECTRIFIED FENCES TO HOME PEPPER-SPRAY
SYSTEMS AND ARMED RESPONSE UNITS, TO NAME BUT
A FEW. AND LET’S NOT FORGET INSURANCE!
STEPPING UP
WHEN POLICE
FAIL
COVER
FINWEEK 13 MARCH 2014 11
COVER
12 FINWEEK 13 MARCH 2014
N
omatter Ncube stays with
her parents and her brother
in Diepsloot, north of
Johannesburg. She is part of the
50% of households in the country
who, according to Statistics SA,
have taken physical measures to
protect their homes.
Diepsloot has been grabbing
media headlines lately with events
ranging from the raping and killing
of young girls to burglary and xeno-
phobic attacks.
In September last year the coun-
try reeled in shock after a five-year-

old girl was murdered and found
dumped in a rubbish pile in Diep-
sloot. She had been missing for two
days.
Ncube says that this horrific story
as well as a series of other violent
crimes in the area, including a burg-
lary next door to her home which
resulted in a young girl being
abducted and raped and then shot
(and miraculously surviving), drove
her to to take measures into her
own hands by taking out an armed
response contract with private
security group ADT at a cost of
R250 a month.
She says that private security
responds much quicker to threats of
violence. “When my alarm goes off,
ADT call me within minutes and the
security guys are usually here with-
in 15 minutes. In 2012 there was a
fight at home, and when I called the
police around 7pm they only came
to my house after 9pm,” Ncube
recalls.
She adds: “Two weeks ago my
brother saw a group of people beat-
ing up a man on the street and the
police were there but they didn’t do

anything about it. Instead, when the
man ran to them for help, they
lingly low levels of savings, as Ncube
confirms: “For me, safety comes
first because what’s the point in
saving money for retirement when
I’m going to get robbed and lose
everything or die and not even get
to use the retirement money?”
Bigbrain Moloi, a businessman in
Diepsloot, says that in order to
ensure the protection of his busi-
ness assets and his cli-
ents’ information he
needed insurance.
That would not be pos-
sible if he did not have
any private security on
his premises.
“I couldn’t get busi-
ness insurance without
security on my prem-
ises,” he says, adding
that “the prices for the
armed response con-
tract are, however, rea-
sonable”.
■
R
esearch funded by the United

Nations Development Pro-
gramme in South Africa, and
compiled by Jenny Irish in 1999,
showed that the private security
industry had been growing at an aver-
age rate of 30% per annum since 1970.
In 1999 there were approximately
350 000 registered private security
guards, with over 5 300 active, regis-
tered security businesses in the coun-
try. At that time the estimated value
of the industry was as high as R11bn.
Experts estimate that the industry is
now worth around R55bn.
One has to wonder what this
growth can be attributed to. Julie
Berg from the Centre of Criminology
at the University of Cape Town
attributes this growth to the open-
ing up of the SA market to interna-
tional companies post 1994, the
amount of ex-military and ex-police
being displaced after the demise of
apartheid and moving into the pri-
vate sector to continue using their
skills, as well as high crime rates, fear
of crime, demands from insurance
companies and perceptions of the
inadequacies of the police.
MEET A DIEPSLOOT FAMILY

GROWTH OF THE PRIVATE
SECURITY INDUSTRY
closed their car windows and drove
off. I can’t depend on the police, I
think they are useless.”
According to Stats SA’s Victims of
Crime Survey (VOCS) of 2012, about
two thirds (65.6%) of households in
Gauteng and Western Cape (64.4%)
indicated that they had taken physi-
cal measures to protect their homes.
This helps to explain SA’s appal-
Bigbrain Moloi (right)
speaking to Finweek
COVER
FINWEEK 13 MARCH 2014 13
Dr Barbara Holtmann of Social
Transformation Securities also points
to good marketing, targeted at the
psyche of a fresh democracy. “South
Africans don’t know each other and
we come from a place of very low
trust. Good marketing by the security
industry has found a ready market in
which those who have things are eas-
ily convinced that they should protect
themselves against those who don’t,”
she says.
In her study, Irish wrote: “The South
African private security industry is

increasingly performing functions
which used to be the sole preserve of
the police. Care needs to be taken,
however, not to confuse the object-
ives of the two. While the police seek
to protect the public at large, the pri-
vate security industry operates on a
profit motive and is accountable to its
clients only. Moreover, the police gen-
erally apprehend criminals after they
have committed a crime, thus deter-
ring potential criminals from commit-
ting future crimes. The private
security industry, by contrast, seeks
to prevent crimes from occurring in
the first place.”
Actually, it was supposed to be the
other way round. Author, widely syn-
dicated journalist and former crime
reporter Max du Preez writes in his
book A Rumour of Spring that the
SAPS adopted an approach of crime
prevention rather than law enforce-
ment at the advent of democracy.
He writes: “We’re a caring nation
now; unlike the apartheid police, our
new men and women in blue will serve
the people was the thinking. Along
with it came a new approach of crime
prevention rather than law enforce-

ment: community policing. We have
too many people in jail, most of them
young, black men, and it would be
better to prevent people from com-
mitting crime than to catch and lock
them up after they have done so.
“This policy shift from catching
criminals, prosecuting and giving
them stiff jail sentences to preventing
crime before it happens, led to a ter-
rible neglect of our criminal justice
system.”
The 2013 annual report of the Pri-
vate Security Industry Regulatory
Authority shows that there are now
nearly 2m registered security officers
(1 953 605) and 9 031 registered busi-
nesses. It is also estimated that there
is at least another 3 000 unregistered
businesses.
The industry employs 445 407
security officers, much higher than
the members of SAPS (197 946) and
the defence and military (78 725)
combined. The current police/popula-
tion ratio stands at 1:341.
Irish adds that another reason for
the continued expansion of the sector
is that Government often outsources
the guarding of state institutions,

buildings and events to private se-
curity companies (largely because
private security firms can perform
these duties more cost-effectively
than the state).
The Department of Correctional
Services has entered into a Public Pri-
vate Partnership with private security
groups, including UK security group
G4S, to manage two of its facilities,
the Mangaung Correctional Centre in
Bloemfontein and Kutama-Sinthumule
Correctional Centre in Limpopo. As a
result, the department incurred a total
cost of R878 385m for the 2012/13
financial year compared to R819 666
in the previous period. The contracts
are in place for 25 years.
If we take the current expenditure
for the aforementioned contracts and
fix them for the 25 contractual years,
the department would have spent
over R21bn on its private security con-
tractors.
Security expert and managing
director of Elite SA Security Herman
Mulder says that people have lost
confidence in the police. He adds that
the SAPS lack adequate resources to
keep all South Africans safe.

“They don’t have the will, all they
do is arrive at a scene and take state-
ments. People know that, so they only
really need them [SAPS] so that they
can have a case number for their
insurance claims.”
Dries Lombard, an employee of
Elite SA Security, whose house in Pre-
toria-West was recently burgled, says
that the police, who are located about
15 kilometres away, only made it to the
scene after an hour and a half while
the armed response was there within
10 minutes.
He concurs that he only needed the
police in order to obtain a case num-
ber. “There wasn’t any detective work
done around the house, no neigh-
bours were spoken to either. All they
did was ask me what had happened,
what I saw when I got to the house,
and what exactly was stolen. The
police did not even look around to see
if there could be any clues that could
link this particular robbery to any
others around the same area,” says
Lombard.
■
Elite SA Security
MD Herman Mulder

COVER
14 FINWEEK 13 MARCH 2014
L
ate response, perceived lazi-
ness and corruption are some
of the fundamental dynamics
leading to public dissatisfaction with
the SAPS, according to Stats SA.
The highly publicised convictions
of former police commissioner
Jackie Selebi and the irregular
R1.3bn tender for police headquar-
ters presided over by his successor,
Bheki Cele, who was subsequently
fired, would not have done the pub-
lic’s perceptions of the police any
good. According to Africa Check,
there are 1 448 serving police offic-
ers who have been convicted of seri-
ous crimes and 8 846 pending
criminal charges against the mem-
bers of the SAPS. The Independent
Police Investigative Directorate
(IPID), who are tasked with inde-
pendent oversight of the SAPS,
reports that for the period April 2012
to March 2013, 6728 cases were
lodged with the directorate. See
breakdown below:
Given these shocking stats, it’s not

surprising that the majority of South
African’s are taking their safety into
their own hands and are bolstering
the private security economy. How-
ever, the private security industry is
not without its flaws. Inspections
conducted by regulatory body
PSIRA (Private Security Industry
Regulatory Authority) in 2013
revealed that 10% of
the companies were
deploying unregis-
tered security offic-
ers, while 9% were
deploying untrained
security officers.
Further investiga-
tion reveals that the
industry recorded 1
301 outstanding
criminal cases with
SAPS in the same
financial year, with
401 arrests made.
WHY ALL THE FUSS?
KwaZulu-Natal (397 cases), the West-
ern Cape (297) and the Eastern Cape
(157) are the leading culprits while all
the other provinces combined had
450 reported criminal cases, aver-

aging 75 cases per province.
■
X 120
April 2012–March 2013
X 6
April 2012–March 2013
X 670
April 2012–March 2013
X 47
April 2012–March 2013
CORRUPTION
MISCONDUCT
SYSTEMIC
CORRUPTION
COMPLAINT OF
THE DISCHARGE
OF FIREARM(S)
CASE INCIDENTS
Deaths in police custody 275
Deaths as a result of police action 431
Rape in police custody 22
Torture 50
Assault 4 131
Other criminal matters 703
Non-compliance with Section 29 of IPID Act 127
TOTAL 6 728
Minister of Police Nathi Mthethwa (left)
and National Commissioner of SAPS
Riah Phiyega (right)
Riverwalk Office Park,

Pretoria
Pan Africa Shopping Centre in
Alexandra, Johannesburg
COVER
FINWEEK 13 MARCH 2014 15
ARE THERE POSSIBLE BUSINESS OPPORTUNITIES?
THE SECURITY SECTOR IS LIKELY TO SEE FURTHER GROWTH
GIVEN THE UNABATED BUILDING OF SHOPPING CENTRES,
OFFICE PARKS AND RESIDENTIAL DEVELOPMENTS.

Mulder says this checklist should provide you with the framework for
starting a security business:
đ You need a registered business.
đ You must apply for PSIRA registration for the business.
đ You must get a certificate from PSIRA.
đ Owners must also be registered with PSIRA.
đ Then start looking for clients.
đ Get guards that are PSIRA registered.
đ Ensure that monthly fees are up to date.
đ Get a BEE certificate/ VAT certificate.
đ Register for COID (Compensation for Occupational Injuries and
Diseases) with the department of labour as injury on duty is very likely.
đ PSIRA must inspect your premises before you are allowed to trade
from the premises.
IF YOU MANAGE TO GET A CONTRACT TO PROVIDE SECURITY FOR A
RELATIVELY SMALL SHOPPING CENTRE, THIS IS WHAT YOU CAN
EXPECT TO EARN ANNUALLY BY PROVIDING 10 SECURITY GUARDS:
*FORECASTED EARNINGS
đ 7 C-grade guards at R16 500 each, totalling R115 500
đ 2 B-grade guards at R19 000, totalling R38 000

đ 1 A-grade guard at R16 000
đŏ Total: R169500.00 x 12 = R2 034 000.00 excl Vat per year
*
*TOTAL COST TO COMPANY
đ R1
1 452.51 per security guard, totalling R80 167, 57
đ R13 296.97 per security guard, totalling R26 593.94
đ R14 882.85
đŏ Total: R121 644.36 x 12 = R1 459 732.32 excl Vat per year
*
Forecasted earnings (quotations) provided by Elite Security SA as
**Total cost to company are regulated figures by PSIRA
W
ith a $2tr economy and
a third of its nations
reaching annual GDP
growth of over 6%,
Africa is now the fastest growing contin-
ent on the planet. It has become a for-
midable incubator for some of the more
dynamic emerging markets in the de-
veloping world. It is also home to mil-
lions in the lesbian, gay, bisexual and
transsexual (LGBT) community, whose
cultural identity, not to mention their
freedom and safety, is threatened daily in
the 38 African nations that have system-
atically outlawed homosexuality. The
continued implementation of such dra-
conian measures could have worrisome

long term effects on the economies that
Africa has invested so much time and
energy building. Finweek explains these
effects in further detail.
“The West can keep their ‘aid’ to
Uganda over homos, we shall still
develop without it,” Uganda’s govern-
ment spokesperson Ofwono Opondo
announced on Twitter last month.
Opondo was responding to the deci-
sion made by several Western nations to
revoke foreign aid after President Yoweri
Museveni signed the country’s anti-gay
bill into law on 24 February 2014.
In the case of Uganda’s anti-gay le-
gislation, which has been pushed across
government desks since 2009, the bill
imposes harsh penalties on those who
engage in, condone, and/or refuse to
The economics
of bigotry
INSIGHT
16 FINWEEK 13 MARCH 2014
report homosexual activity – a practice
that now carries a maximum sentence of
life imprisonment. While much of the
media attention has been redirected to
the social and cultural implications of
what this bill means for the disenfran-
chised gay community, to suggest that

the country’s fiscal health might suffer a
knock would be an understatement.
Reacting to the news, Norway, Den-
mark and the Netherlands immediately
moved to withhold or divert up to $26m
in development aid and other financial
donations. The World Bank announced
last week that it had postponed a $90m
loan to Uganda while countries like
Sweden, Austria and the US were said
to be reviewing their aid relationships
Insight
BY KELLY BEROLD
Gallo images/ Getty images: Malcolm Park
INSIGHT
FINWEEK 13 MARCH 2014 17
with the country. On the day of the bill’s
signing, US Secretary of State John Kerry
said that his department was “beginning
an internal review of our relationship
with the government of Uganda” to make
sure that “assistance programmes uphold
our anti-discrimination policies and
principles,” a review that could see the
US freeze a reported $456m in aid set
aside for the coming fiscal year. More-
over, human rights organisations and
prominent voices in the business world
– including Virgin chairman Richard
Branson – sounded calls to boycott trade

and tourism in response to the move.
Worldwide castigation of the law
was swift and punitive, which triggered
a ripple effect that hit the country’s key
indicators. According to Bloomberg,
“Standard & Poor’s cut Uganda’s credit
rating one level last month to B, five
below investment grade, in response
to concerns that its budget deficit had
increased due to bad press, aid cuts and
consequences stemming from the World
Bank and the UK’s decisions to revoke all
financial support in 2012 due to corrup-
tion.” For Uganda, whose $20bn econ-
omy (East Africa’s third largest) relies on
aid for roughly 20% of its annual budget
and foreign trade exports to make up
the rest, a Western crackdown on once-
collegial aid and trade agreements could
create problems for Uganda, despite what
Opondo admits to the press.
THE SPECTACULAR DROP
OF UGANDA’S CURRENCY
The once salubrious Ugandan shilling
lost three months of gains within three
days, reporting a 2.9% slump against the
dollar. This forced the central bank to
intervene in the foreign exchange mar-
ket by selling dollars in order to stabilise
the currency. This, according to NKC In-

dependent economist Jacques Nel, could
pose a significant problem.
“If the self-off persist or is not reversed
over the short-term, the pressure on the
currency would have detrimental conse-
quences on various other economic indica-
tors. These include a depletion of reserves
as the central bank attempts to defend the
currency, a deterioration in the terms of
trade as import costs increase and the sub-
sequent effects on external accounts.”
The shilling’s falling exchange rate
could easily be dismissed as an overhyped
and fleeting reaction to recent aid-cut
announcements and while the recoil of
several foreign donors and investors has
been hard-hitting, it is impossible to pre-
dict the long-term consequences of those
measures or to what extent foreign mar-
kets will punish the shilling given that
the economic fundamentals of the coun-
try have not changed.
ECONOMIC PROBLEM AREAS
The bill could have more enduring con-
sequences in three very important areas.
The first is tourism, which is a crucial
cog in Uganda’s economic machine, par-
ticularly in its ability to secure invest-
ments and employment (it contributed
$1.88bn to the country’s GDP last year).

The nature of the anti-gay bill could very
well deter both tourists and investors
from pumping money into the economy,
which could in turn cause government
to inflate the fiscal deficit or cut public
spending in order to negotiate the long-
term impact of lower tourism rates. Even
NGOs, whose association with govern-
ment is already limited, “could slowly
shift their aid and assistance to more
friendly regimes” should a government’s
policy fail to align itself to the organisa-
tion’s core values, notes Nel.
Second, anti-gay laws could play a
significant role in adding to already
hostile work environments for gay and
lesbian employees. According to Dr
Mark Ellyne, adjunct associate profes-
sor of Economics at UCT, this may end
up marginalising some 5%-10% of the
population that could actively contri-
bute to Uganda’s economy and tax base.
Third, the punitive measures outlined in
the bill could lead to not only the con-
viction of those accused of homosexual-
ity, but also citizens who condone and/
or abet homosexual conduct, increasing
the number of arrests and interments per
annum. According to World Prison Brief,
Uganda’s prisons are already operating at

200% capacity – with a total of 38 477
inmates – and with an estimated total gay
population of 500 000, the anti-homo-
sexuality bill could put significant strain
on Uganda’s judicial and prison systems.
So why does Uganda claim it isn’t
worried? According to Ellyne, Uganda
recently discovered oil and are scheduled
to start production on reserves in 2018.
“Anti-homosexuality nations like Nigeria
and Russia are also large oil producers,
less dependent on donor aid and less in
need of official donor aid. Thus, Uganda’s
need for foreign aid will greatly dimin-
ish and eventually it will become more
sustainable.” Ellyne says.
However, as profitable as Uganda’s
venture into oil production may turn out
to be, 2018 is still a way off and despite
what Opondo tweets, the collective force
of bilateral aid cuts, trade bans, invest-
ment boycotts, increased prison spend-
ing, decreased tourism and retracted
NGO involvement are likely to harm the
country’s economy short term and could
have dire economic consequences going
forward.
■
WHY NIGERIA MAY BE
BETTER OFF

THAN UGANDA
“The Nigerian government
receives a large amount of re-
v enues from oil exports, and is
therefore not dependent on inter-
national aid,” NKC economist
Melissa Verreynne told Finweek.
“As a result, the enactment of the
anti-gay legislation is not expected
to have a notable impact on the
economy. At most, it may alienate
some foreign investors and human
rights organisations but given
Nigeria’s economic importance
and potential, any fallout is likely
to be small and transitory. In
Ni geria, as in most other African
countries, such laws are generally
popular. As such, the passing of an
anti-gay law in Nigeria may be
seen as another attempt by Presi-
dent Goodluck Jonathan to boost
his popularity ahead of elections in
February next year.”
INSIGHT
18 FINWEEK 13 MARCH 2014
$1.8bn – The total global spend-
ing on product placement in
movies in 2013.
100 – The number of product

partners Warner Bros. picked up
for Man of Steel.
94% - of American teenagers
THE HOLLYWOOD
MARKETING MACHINE
BY THE NUMBERS:
Ever wonder what big Hollywood studios make from big budget
films, and what they fork out to ensure that you end up watching
them? The 86th Academy Awards took place on 2 March, and to
celebrate US marketing website Adweek put together a by-the-
numbers look at the Hollywood marketing machine.
The average cost to market a feature film
distributed by a major Hollywood studio.
HERE’S WHAT
THEY FOUND:
44
%
of consumers aged between
say that they trust trailers
when deciding whether
or not to see a film.
PRODUCT PLACEMENT
12 and 74
$40m-$50m:
Source: adweek.com
$3.2bn –
The total motion picture
industry advertising spend
in 2012. An overwhelming
majority of that was spent

on television advertising,
followed by newspapers
and outdoor:
đŏ !(!2%/%+* (86.5%)
đŏ !3/,,!./ (6%)
đŏ 10 ++.ŏ(3%)
đŏ *0!.*!0ŏ(2%)
đŏ  %+ŏ* ŏ)#6%*!/
(less than 1% each)
ADVERTISING:
2013
worldwide
gross of the big
Hollywood
s
tudios:
see at least one movie a year.
$1.22bn – The amount Iron Man
3 (Walt Disney Pictures) grossed
worldwide in 2013.
$863 million – The amount The
Hunger Games: Catching Fire
(Lions Gate) grossed worldwide.
đŏ ŏċŏčŏ
$5.04bn
(annual media
spend: $582m)
đŏ ŏŏčŏ
$4.73bn
(annual media

spend = $582m)
đŏ ŏč
$3.67bn
(annual media
spend: $485m)
đŏ ĂĀŏŏč
$3.51bn
(annual media
spend: $303m)
First National Bank - a division of FirstRand Bank Limited. An Authorised Financial Services and Credit Provider (NCRCP20).
MetropolitanRepublic/13803/E
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F
or South African businesses
eyeing expansion and seek-
ing new markets, Africa is
an obvious first step. Indeed,
given the sluggish growth rates and

widespread insecurity plaguing much
of Europe and the US, the booming
growth stories of many of Africa’s star
performers is proving to be irresistible
for many local firms, despite the in-
herent risks associated with the region.
Yet the interest is unsurpris-
ing, given that by 2020, 17% of the
world’s population will live in Africa,
this according to market researchers
Euromonitor and the African Devel-
opment Bank. Perhaps more import-
antly to impatient investors and
consumer-facing businesses is the
impressive, and well-documented,
rise of the African middle class.
There is ample evidence
to turn to: a Bain’s Con-
sumer Products report, for one,
revealed that there will be 56m
middle-class households with
disposable incomes total-
ling more than $680bn over
the next eight years in five
major countries alone (Alge-
ria, Egypt, Morocco, South
Africa and Nigeria).
FEATURE
20 FINWEEK 13 MARCH 2014
SafeTrade

MARKET INTELLIGENT FIRM
IDC’S MARK WALKER HIGH-
LIGHTS UNIQUE OPPORTUNITIES
THAT TECHNOLOGY IS
CREATING FOR ‘THE SMALLER
GUYS’ IN AFRICAN COUNTRIES:
AGRIFIN: This is an initiative that will
offer bundled, mobile agricultural and
financial services to smallholder farm-
ers. Launching in Uganda and Zim-
babwe (as well as Indonesia), the plat-
form aims to enhance productivity and
boost the incomes of smallholder farm-
ers, addressing the challenges of food
insecurity and poverty. Mobile services
will potentially include farm and crop
management tools, financing, micro-
insurance, and access to markets for
smallholder products.
BUDGIT: This is a tool that aims to re-
define participatory governance. Many
Nigerians, with little or no knowledge
of accounting and public financial man-
agement, are lost when they see (if they
ever get the chance to) the budgets of
the different arms of government. The
maze of millions and billions in the ‘thick’
budget documents tend to confuse
people and it is difficult to understand
how public funds are actually spent. This

tool aims to demystify and breakdown all
the complexity.
BY JESSICA HUBBARD
Cross-border expansion:
The fast and the fleet-footed
CONSUMER FACING
This growth is spurring a noticeable
shift in focus on the part of investors,
who are finally looking at Africa as far
more than a resource-rich region suited
only for short-term, extractive projects.
With its swelling middle classes, the
African telecommunications, financial
services and retail sectors in particular
are fast attracting the attention of major
South African players.
“Consumer-facing businesses have
the greatest potential in the region,”
explains Dr Martyn Davies, CEO of
consulting group Frontier Advisory.
t
researc
h
ers
f
rican Deve
l
-
m
ore im

p
ort-
v
estors an
d

s
ses is t
h
e
u
mente
d
,
e
class.
idenc
e
Con-
o
r one,
b
e
5
6m
d
s wit
h

o

ta
l
-
ov
er

five
l
g
e
-
o
uth
consulting grou
p
Frontier
A
dvisory.
“Almost all of the success cases one
hears about in Africa are those that are
focusing on rising consumer spending.”
Local businesses are clearly recog-
nising the opportunity, with foreign
direct investment (FDI) projects by
South African firms skyrocketing by
more than 500% over the past decade,
according to a 2013 report by consult-
ing firm FDI Intelligence. The report
highlighted that SA invested in more
new FDI projects in Africa than any

other country in the world in 2012.
While the lion’s share of this invest-
ment is being driven by large, estab-
lished corporates, there are undoubtedly
increasing opportunities for small- and
medium-sized businesses. The key
to cornering a piece of the African
consumer spending pie, according to
Davies, will be about making the right
move, at the right time.
FIRST-MOVER ADVANTAGE
“The ‘Africa Rising’ narrative is all
about companies seizing the ‘first-
mover’ advantage and capturing con-
sumers in African markets,” says
Davies. “Capturing, consolidation,
and finding sustainable revenue are the
strategies that will drive the shareholder
value of companies expanding into the
African region.”
For smaller businesses and entrepre-
neurs, leveraging technology will be
central to seizing this ‘first mover’
advantage, and, if used correctly,
can pave the way for entry into
highly complex and challenging
new markets.
“Technology has enabled
entrepreneurs to overcome
barriers presented by regu-

lation, distance, culture
and language in ways
never considered before,”
explains Mark Walker,
director of Insights and
Vertical Industries for mar-
ket intelligence firm IDC
in Middle East, Africa and
Turkey. “By using online
means such as websites and payment
mechanisms, South African business-
people can raise awareness of their
‘MOST IMPROVED’ GOES TO…
IN THE 2014 Ease of Doing Business rankings (released by the World Bank and
International Finance Corporation), 31 of 47 economies in Sub-Saharan Africa
implemented at least one regulatory reform making it easier
to do business (between 2 June 2012 and 1 June 2013).
According to the report, since 2005 all economies
in the region have implemented business regulatory
reforms in the areas measured by the Doing Busi-
ness report. Rwanda implemented the most num-
ber of reforms in the region with 34 reforms during
this period, followed by Mauritius with 23 and Burundi
with 21.
Interestingly, Rwanda has made the greatest progress
globally since 2005 in narrowing the gap with good, global
practices, and Burkina Faso and Burundi among the top 10
most improved. The top 50 ranked countries include 18 Afri-
can economies.
products by using targeted advertising

and social media based campaigns to
proactively showcase and promote their
wares or services in other African coun-
tries.”
Walker adds: “This can be followed
up with online purchase/payment tools
and scalable CRM and delivery appli-
cations that allow items to be paid for
and shipped in a highly efficient and
integrated manner… similarly, the busi-
nessperson can source African goods
and services.”
TIME ON THE GROUND
With all the benefits that it offers,
however, technology cannot stand in
for what many analysts consider the
most critical factor to succeeding in
new markets – and especially in cul-
turally diverse African markets: time
spent on the ground forging strong
partnerships and getting to know the
ins and outs of highly dynamic and
complex business ecosystems.
“Doing the necessary research, due
diligence and of course time spent in
the market getting to understand the
local environment are all essential fac-
tors,” adds Davies, emphasising that
the ‘fragmentation’ of certain African
markets often poses significant chal-

lenges for new entrants.
■

FINWEEK 13 MARCH 2014 21
FEATURE
Dr Martyn
Davies
conomies

in

Sub Saharan

Africa

a
king it easier
e
2013)
.
omie
s
lato
ry
s
i
-
m
-
ng

r
undi
t
progress
o
od, global
g
the top
10
c
lude 18 Afri
-
Rwanda:
doing OK
T
he South African National
Roads Agency Limited (San-
ral) is set to take over a total of
1 628km of the Limpopo
province’s provincial roads. In future,
Sanral will manage the upgrading and
maintenance of these particular roads.
South Africa’s total roads network
amounts to around 700 000km, with
Sanral currently managing around
19 704km of this total amount. This,
however, is projected to grow to almost
35 000km as more and more provinces
transfer some of their roads to the agency.
This means that Sanral’s workload is

set to nearly double. At the same time
however, Sanral is not receiving the
increases in funding necessary to finance
the additional work. The budget alloca-
tion that Sanral receives from treasury
has not been allocated proportionally
with the added kilometres. The length
of the non-toll road network that Sanral
manages for example, went up by 27% in
2012/13 but the budget allocation only
grew by almost 9%.
The DA believes that handing over
more than 1 600km of Limpopo provin-
cial roads to Sanral could result in more
tolling in other provinces. Ian Ollis, DA
MP, says that giving Sanral a larger por-
tion of SA’s road network to manage is
problematic because not only is the entity
cash-strapped, but the National Treasury
has maintained that it would not allocate
any further funding to it. “Since it [San-
ral] will have no access to provincial road
grants, in order to repair and maintain
the additional road network assigned
to it, Sanral would have to raise its own
funding. This raises genuine concerns
that an already cash-strapped Sanral is
going to be forced to pass the burden on
to South Africans. We cannot let this
Poor roads claim more

tolls from Sanral
INSIGHT
22 FINWEEK 13 MARCH 2014
happen,” says Ollis.
Vusi Mona, communications head at
Sanral, says that the state-owned entity
can do the job but admits there are ‘fund-
ing constraints’.
“Our network is increasing dispropor-
tionately to the funding. This is where
the participation of the private sector
in infrastructure development becomes
appreciable,” he says.
Mona says that the Limpopo move
follows a request by the province to
have the roads incorporated into Sanral.
“The national agency was asked to step
in because of the lack of capacity at pro-
vincial level and the road maintenance
capacity it has.”
According to Sanral the interven-
tion in Limpopo is particularly vital
because of the province’s booming min-
ing industry and its strategic agricultural
sector which both need, over and above
BY JAMES-BRENT STYAN
Damaged roads caused by flooding on 19 January 2012, in Hoedspruit, Limpopo
Gallo image/ Getty imafges: Foto 24/ Liza van Deventer
INSIGHT
rail connections, an excellent road infra-

structure.
Mona says that Sanral, however,
often has to spend much more money
on provincial roads that it takes over
than should be the case. “Because of
the backlog in maintenance on the pro-
vincial roads, Sanral has to spend up to
three times more to rehabilitate and do
preventive maintenance work on these
newly added roads,” he says. The back-
log in road maintenance countrywide is
estimated to be worth around R150bn.
The concept of e-tolls is already a
controversial one with ongoing protests
in Gauteng a regular occurrence and
many inhabitants of the province still
boycotting the system by choosing not
to buy e-tags, a gadget necessary for the
e-tolling system to bill motorists. E-toll-
ing was introduced as a method to assist
in collecting tolls levied on the Gauteng
Freeway Improvement Project (GFIP).
Mona says that the monies collected
from e-tolling go towards road mainten-
ance and servicing the debt incurred
while Sanral built road infrastructure on
Gauteng’s freeways.
The GFIP is expected to cover around
560km of the freeway network in Gau-
teng. The first phase of this system covers

around 185km, meaning that the tolled
network is still set to more than double.
Future routes to be tolled in Gauteng
alone include the N14 to Pretoria and N3
to Heidelberg. Ollis says that Sanral and
the Department of Transport also hinted
last year that more toll roads and e-tolls
were being considered elsewhere in the
country, too.
Nazir Alli, CEO of Sanral, revealed
that as part of Sanral’s 2012/13
Strategic Plan, the entity is consid-
ering building new toll roads in the
following areas:
■
N3 Durban to Pietermaritzburg.
■
N12 Kimberley to Johannesburg.
■
N1 Ring Road at Musina.
■
N1 Kroonstad to Winburg.
■
N1 Botlokwa Interchange.
Other groups opposing the e-toll sys-
tem have called on Government to use
the fuel levy as a means to fund the
new road infrastructure. According to
National Treasury, this is not a viable
alternative.

Treasury spokesperson Phumza
Macanda says that SA already collects
less (through the fuel levy) than what
gets spent on roads. She says that the
fuel levy is also not ring-fenced for road
expenditure but goes into the general
pool – the National Revenue Fund.
“A ring-fenced fuel levy would place a
strain on the ability of the fiscus to tar-
get expenditure to where it most need-
ed. Allocations from National Revenue
Fund go through the normal budget
process and decisions about allocations
are made by Cabinet.”
■
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INSIGHT
BY ENRIQUE KRAUZE

Venezuela’s angry students
M
any of the young students
protesting in the streets of
Venezuela have no memory
of any government other
than that of President Hugo Chávez. But
now that he has been gone for nearly a
year, they know that they don’t want to
grow old under the same type of regime.
So they are demonstrating against the
government of President Nicolás Maduro.
They aren’t calling for the government to
cease helping the poor; they’re protest-
ing against the government’s economic
ineptitude and the ever-tighter limits on
free speech in the national media.
Politically active students number in
the tens of thousands in Venezuela. The
vast majority of them sympathise with
opposition to Chavismo, the populist
social movement inspired by Chávez, and
they rightly accuse the Maduro govern-
ment of being hugely corrupt.
The students are well aware of how
Chávez effectively took control of the
country’s legislative, fiscal, judicial and
electoral processes. During his more than
14 years in office, under the cover of florid
rhetoric, Chávez made unregulated and

wasteful use of tens of billions of dollars
earned each year by the state-owned oil
company PDVSA.
The students also know that infla-
tion in Venezuela is the highest in Latin
to have turned against them, with various
newspapers as well as a surprising number
of young Twitter users voicing support for
the Maduro government’s repression and
condemning the students as ‘reactionaries’
and ‘fascists’.
In Venezuela, the power of ideology
is easily understood: the vast spell cast by
Chávez endures, and millions of people
remain convinced that Chavismo in fact did
good works. There is a practical side to that
loyalty as well since many people depend
directly on financial and material aid from
the government while private enterprise and
investment continue to languish.
Political backwardness in Latin Amer-
ica is explained mainly by loyalty to what
is largely a myth: that social revolution,
not democracy, is the preferred route. Our
political idols have not been democrats but
rather redeemers, like Fidel Castro. In fact,
Cuba continues to be the nerve center of
progressive ideology in Latin America.
As a testament to its weight, almost every
Latin American president attended the

summit late last month in Havana of the
Community of Latin American and Carib-
bean States, at which Fidel Castro was
hailed as the ‘political and moral guide’.
But the young people risking their lives
to demonstrate against their government
aren’t especially interested in geopolitics.
What they know is that democratic pro-
gress needs more than just elections to
move it forward; it requires full freedom
of speech in the media. Just how long this
particular contest will last between the
brute power of government and those who
would push democracy further along is
anyone’s guess. In any case, it will be played
out on the streets of Venezuela.
■

Enrique Krauze is a historian, the editor of
the literary magazine Letras Libres and the
author of Redeemers: Ideas and Power in
Latin America.
Distributed by The New York Times
Syndicate. © The New York Times 2014.
America and that the public debt has
become unmanageable. There is a scar-
city of basic foods, electricity, cement and
medicines – largely as a result of govern-
ment mismanagement, expropriations of
private businesses and a dearth of private

investment.
Today’s protesters are especially
resentful of the near-total suppression of
information on the true condition of the
country. Maduro has chosen to repress
dissenting voices, leaving only a single,
official version of the truth. To consolidate
its control of the media, the government
took over Globovisión, the nation’s last
independent television station. Likewise,
independent radio is also almost dead, and
the government has restricted the sale of
newsprint to the point that freedom of the
press could soon be doomed.
Clearly, Venezuela is sliding toward
dictatorship. Repression of dissent is
spreading across the country. Already,
more than a dozen people have died in
the protests, many of them students, as
the government deploys the police and the
army to crack down.
The students have the support of many
of their parents and teachers, and of at
least the nearly half of the population that
voted against Maduro in the 2013 elec-
tion. But a number of media outlets else-
where in Latin America seem nevertheless
24 FINWEEK 13 MARCH 2014
Protesters on the
streets of Venezuela

Gallo images/Getty images
KAGISO TISO HOLDINGS
A game changing move
Making the right move on the chess
board takes skill and patience.
Following a clear strategy with
commitment and perseverance makes
for a winning formula.
KTH is changing the game with the
take private and delisting of Kagiso
Media.
Kagiso Media is now 100% owned by
KTH. A bold move.
www.kth.co.za