SA Retail Trade Sales Forecast for 2012 Festive Season

Recent research shows December 2011 South Africa retail trade was up 12.8% on the prior December, however retail sales in December 2012 should increase between 7% and 9% – slightly above inflation – to levels between R80 billion and R82 billion, based on current prices.

The South African Council of Shopping Centre’s (SACSC) predicts that while retail trade sales growth will comfortably outpace inflation in December 2012, it is unlikely to reach the extraordinary peaks of last year’s festive shopping month.

CEO of SACSC Amanda Stops says: “Our research by Dr Dirk A Prinsloo of Urban Studies shows December 2011 was one of the best December months since the high growth period of 2006. In 2011, December retail trade was up 12.8% on the prior December. However, retail sales in December 2012 should increase between 7% and 9% – slightly above inflation – to levels between R80 billion and R82 billion, based on current prices.”

The prevailing economic uncertainty in 2012 and non-retail consumer pressures are the main contributing factors.

“Uncertainty in international and local macro economies defines 2012. Most key indicators show no clear upward or downward trend. They are moving sideways, clearly displaying much uncertainty,” says Stops.

“Hefty inflationary pressures from school fees at 9%, petrol at 17%, electricity at 10% and water and services at 9%, are all placing strain on consumers. Public transport is 15% higher than a year ago, hurting the commuter market. Unsecured loans also increased by 21% during 2012.”

On the other hand, Stops notes consumer inflation on clothing, household products and homeware is much lower than the current inflation rate, making these mostly essential products attractive to consumers. For this reason, Stops says, it is likely that Christmas shopping will be focused in these categories, as well as home improvement products.

The plethora of new competing IT and electronics products will also prove popular on festive shopping lists, as prices have dropped substantially in most instances. This is especially true for high-quality cameras, e-readers, smartphones and tablets.

Most local festive shopping will be through traditional channels – in shopping centres and central shopping districts. E-commerce and smartphone retail applications have yet to gain significant traction.

“In South Africa we are two to three years behind what is already happening in the US and Europe for smartphone shopping. In the US more than 15% of all sales are already linked to e-commerce,” says Stops.

However, online and smartphone shopping are gaining importance as retail channels in South Africa. Well-known US department store Macy’s, and others, are making products available to South African shoppers in Rands with a six- to eight-day delivery, and local retailers like Mr Price are becoming decidedly more active in e-commerce.

“With Apple and Samsung selling millions of smartphones each month, South African retailers will have to move into giving customers apps instead of expecting them to work through websites,” says Stops. She also anticipates shopping, driven by input through social media, will also become much more attractive in future.

“Social media in South Africa is still in its infancy stage and high growth could be expected during the next couple of years,” says Stops.

Stops sees the rise of the social media manager in South Africa’s shopping centres. “They will be tasked with getting conversation going about different products in stores and for the shopping centre as a whole,” says Stops.

Source: fastmoving.co.za

Too Big To Fail Banks Turn To Ma And Pa Investor To Make A Buck

Banks such as Wells Fargo & Co, JP Morgan Chase & Co and Goldman Sachs, under pressure from a host of national and international laws meant to stop a repeat of the events of 2008, have now found themselves a new moneymaking opportunity:

You.

According to an article published today by Bloomberg.com, these global financial behemoths “have rediscovered the appeal of the mundane business of managing money for clients” and are looking to grab “market share” from such mutual fund superstores as Fidelity Investments, and Charles Schwab.

Unfortunately, what’s good for the consumer is unlikely to be good for the banks.

The vast majority of investors, from individuals trading at home to high profile mutual fund managers, will not beat the markets on a consistent basis. As a result, almost all of us are best off with a group of diversified indexed mutual or exchange traded funds and ones that come with low expense ratios.

But that ain’t what the bank is likely to be selling you on. That’s not where the money is unless your company’s name begins with the word Vanguard. No, the money is in getting naive customers to buy into actively managed funds where they pay as much in fess as possible. Performance is not the name of the game. As Bloomberg pointed out, more than half of Goldman Sachs’s actively managed mutual funds performed worse than their peers over both a five and three year period, with those of JPMorgan Chase and Wells Fargo only doing a little bit better.

So how exactly does a bank make a buck with such a host of sad sack offerings? Well, hello hard sell. For all-too-many customers, visiting the bank has become as fraught as stepping into an automobile sales room, with salesmen pitching them on this year’s hot model investment.

That’s how we’ve gotten such events as the New York Times’ summer reveal that JPMorgan Chase was putting pressure on their brokers to sell customers on sub-par but high fee funds to fellow Forbes blogger John Wasik’s excellent work detailing how the financial services industry is selling elderly security seeking men and women on so-called structured products. As Wasik wrote:

From a seller’s standpoint, bank lobbies are an ideal place for brokers to pitch these products. “Elderly people are often more comfortable with brokers who work in their banks,” says Geoff Evers, a Sacramento, California-based lawyer.

Before you say “call in the authorities” know it is unlikely they can or will do much about this. That’s because just about everyone selling you on an investment at a bank is, despite calling themselves by the high falutin’ term financial advisor, is nothing more than glorified broker, not bound by the fiduciary standard to place their client customers in the most appropriate investment but instead one that they simply deem suitable, a rule that gives brokers lots of latitude.

So why not change? Well, maybe the good folks at Wells Fargo, JPMorgan Chase and Goldman Sachs would like to take that one on. The Obama administration has been fighting for four years to get banks and other brokers to adhere to the fiduciary standard but has been stymied by financial services industry lobbying.

The banks claim that if they have to act in the best interests of their customers, they can’t afford to service a good chunk of them when they come in looking for help with, say, their Individual Retirement Account. Seriously. If a car mechanic publicly admitted to that business model, they would lose their clients mighty quick, but when it comes to our college and retirement savings, this sort of sentiment is just business as usual.

Forbes

How to keep a lid on debt during the holidays

MOST South Africans are looking forward to a break in December, and after a long, hard year feel they deserve to spoil themselves.

But beware of getting carried away and ending up with huge debt in the New Year.

Credit ombudsman Manie van Schalkwyk says: "By the time December swings around, many consumers feel they deserve to spend money on luxuries such as branded clothing and footwear or going on a much-needed holiday.

"But borrowing or cutting back on your credit payments to fund these can leave you with a nasty hangover come January."

Van Schalkwyk has this advice on how to avoid getting into, or further into, debt this holiday season:

* Be smart and do not let advertising deals draw you in. These campaigns are designed to manipulate consumers into spending more over the holiday period;

* Avoid buying from stores with limited return policies - you want to know that if you need to return the goods, you will be able to. Exchange policies are also not good because you still do not get your money back - you will have to swap your product for something else;

* Before going out and buying, take the time to compare prices between stores and on websites such as pricecheck.co.za;

* Work out how much the monthly instalment on your credit repayments will be, and don't forget to add in the interest;

* Do not borrow money to pay off debts;

* Be honest with yourself and your family about how much you can afford to spend over the festive season. Once you have calculated this amount, stick to it and do not overspend;

* If you get a bonus in December it can be very tempting to blow it, but remember January, with its back-to-school necessities, is just around the corner. Use all or some of it to cover these additional expenses;

* If you apply for a loan, be honest when filling in the affordability assessment;

* Be wary of offers for "cheap" short-term loans that require no credit checks as they may be loan sharks who will charge very high interest rates; and

* Instead of taking on more debt and paying interest on it, commit yourself to saving a little extra each month so you will be in a better position this time next year.

5 Tips for Negotiating with Your Creditors

During tight economic times, both individuals and businesses struggle to keep their heads above water financially. However, many people and companies alike do not know they can successfully negotiate with bill collectors and creditors to reduce payments and make arrangements that work for both parties. The following tips will give you successful negotiation strategies for a win-win solution.

Take Proactive Action

As soon as you know you will have problems making any payments, talk to the credit company to make a payment arrangement before they send the bill to collections. You will probably harm your credit by making late payments, but most companies hope to avoid sending the bill to collections as most charge a percentage of the amount collected. Collection accounts cause your credit score to drop even lower than if the original agency keeps working with you.

Pay What You Can

Look at your budget realistically and come up with a plan to pay your bills. Remember that a budget is a tool to serve you and help you stay on track financially. Only promise to pay what you can. Credit companies take a dim view of breaking payment agreements. It’s almost always better to negotiate a lower amount and pay the company more if you are able to do so.

Tell Your Story

As you talk about your situation, remain calm. You need to share some details of your story without drawing out the explanation. Tell the truth about your difficulties and explain what you plan to do to work out your issues. If you start to become angry or overly emotional, tell the collector you will speak with them later. Let them know you will record the conversation if needed.

Document Everything

Collectors might threaten you with a lawsuit, property seizure or garnishments. Know your legal rights. While most collectors practice ethically, some do make illegal threats. Written notes and documentation help you remember what the collector said to you. Take the collector’s name and identification number, if they has one, for further reference. Take notes, including times and dates. This will help you track what was said and focus on the conversation as you write. Sometimes companies promise you a reduced pay-off total. Ask to see it in writing before you pay anything. You don’t want any old balances to come back to haunt you months or even years later. Keep track of mail from your creditors.

Seek Help

Sometimes, you need outside help. While credit counseling is commonly associated with individuals who require assistance with getting their finances back on track, many companies offer credit counseling for businesses in need of the same. Make sure the company has been approved by the Better Business Bureau. If you do not qualify for debt assistance, you may need to contact a bankruptcy lawyer. In any case, he will tell you if a creditor’s actions are legal. If you do need to file bankruptcy, don’t beat yourself up over the situation. Do what you can to move forward and prepare for the future. Work to rebuild the credit of your business as soon as you feel comfortable doing so.

Clearing up franchise misperceptions

For any aspiring businessperson, franchising presents an opportunity to dip their toes into the business world. The industry itself is developing and growing at a rapid rate and it is apparent that this sector is a viable business option that can offer significant returns. 

However, some misperceptions need to be cleared up before franchisees begin their venture.

One of the most common notions is that buying a franchise with an established brand is a guarantee of financial triumph and therefore does not require consistent hands-on involvement. On the contrary, whilst a recognised franchise brand and system can increase chances of success, the prospects are ultimately determined by the franchisee's own competence and commitment to running the business practically.

Many franchise owners also tend to think that they now have the power to call all the shots, but decisions regarding the franchise group will be made by the franchisor and the franchisees will have to comply with these decisions.

It is important to remember that initial and ongoing training is vital, and the franchisee should understand the business system inside out, as this would prevent money from being wasted through unnecessary mistakes. Further, franchisees should take the lead in implementing marketing initiatives and not solely rely on the franchisor in this regard.

Potential franchisees should also be aware that the learning process within a franchise is on-going and it is of benefit to attend meeting and training sessions regularly and to ask for assistance from the franchisor if and when it is required.

Once franchisees have wrapped their head around these factors, they are ready to enter a world that offers valuable experience and provides a stepping-stone to a rewarding and sustainable business career.

bizcommunity

Suggestion: Emerging markets forecast to drive dairy industry boom

At a time when SA's dairy industry is losing milk producers because of the sector's limited viability, an international index has forecast growth for the industry from an expected rise in prosperity and buying power among consumers in emerging markets including Africa.

The index, conducted by global food processing and packaging company Tetra Pak, claimed that more people would increasingly consume packaged liquid dairy products, opening new business and job opportunities o n the continent.

However, according to the Milk Producers' Organisation there were 30000 dairy farmers in SA in the late 1980s, and only 2600 today. Its chairman, Dean Kleynhans, blamed big milk buyers in SA for holding farmers to ransom by paying less than R3/l for milk while the retail price was well above R10/l.

Last year, the Overberg and the George district recorded the highest number of dairy farmers quitting the industry, some branching into other sectors, a factor some saw as contributing to higher milk prices.

According to the index - a bi-annual report released on Friday, 4 May 2012 - the market for dairy products has the potential to grow by 2,7-billion people, largely from low-income consumers in developing countries.

It forecast consumption by these consumers to increase from about 70-billion litres last year to almost 80-billion litres in 2014.

Low-income consumers living on US$2 to $8 a day made up about 50% of developing countries' population, and consumed 38% in developing countries. Half of these consumers live in India and China.

However, the research also included consumers in Indonesia, Pakistan and Kenya whose populations were expected to grow in affluence, shifting from low to middle incomes by the end of this decade. Rae McGraw, communications cluster leader at Tetra Pak sub-Saharan Africa, told Business Day that statistic showed that there was no longer a reason for milk farmers "to bail out or quit".

Urban migration was driving the need for convenient and ready-to-drink packaged products.

Tetra Pak president and CEO Dennis Jönsson said low-income consumers represented one of the biggest growth opportunities for the dairy industry.

"The key to tomorrow's success is reaching these consumers today. They live in economies driving our industry's growth and they are growing more affluent," he said.

Source: Business Day

Avoid buyer's remorse this festive season

The festive season is again likely to bring on an increase of spending. The Spark Cash Index, which measures withdrawals across its ATMs throughout the country, reported a 2% year-on-year increase for the period 1 to 18 December last year, increasing from R436 in 2010 to R445 in 2011.


All too soon, January arrives and many are faced with maxed-out credit with the festive spirit replaced by buyer's remorse. With just under a month until Christmas arrives, careful planning and safer choices now becomes key to survive the season. Here are some tips to help you along the way.

Plan a Christmas budget

One of the biggest reasons people may panic during the festive season is due to a failure to plan. So rather than worry, look to establish a Christmas budget at the start of the holiday season. That way you know how much you have to spend and whom you will be spending it on. Remember to consider your usual expenses, as it is advisable to pay all those expenses first. More importantly, do not forget expected January's costs in your planning and budgets. So where do you start?

Straighten out your to do lists, whether they be work goals, personal goals or holiday/festive-related goals. Go on holiday knowing that you have completed as much things on the list as possible and that you have tied up all the loose ends. Nobody wants to worry about those things while on holiday. Ensure you 'standard' monthly bills are paid, holiday expenses have been accounted for and you understand what is needed to get through the January period.

Do not spend all your cash in one place. Your bonus or 13th cheque should not be finished by the end of December. Think of this extra cash as a financial buffer that is there to help you make it until January's pay cheque comes around. A portion of it could even be deposited into a savings account or used to pay back credit card debt will create a smooth financial transition into the New Year.

The holidays are times of excess in many arenas. There is nothing wrong with treating yourself, but do not over indulge. This goes for finances as well as food and alcohol. After the craziness of the year, you are definitely entitled to spoil yourself but don't do things that you will regret. Rather look to start the New Year knowing you will not have to struggle to get back on track with your goals.

Credit-wise

An example - credit is not always the most 'convenient' option, especially if you consider that the interest you may end up paying down the line on items like clothing and food bought today could hinder any future savings you may want to examine.

Don't get into debt - Unsecured lending in South Africa is at an all-time high due to our poor economic climate and this type of lending tends to increase during the festive season. Being able to delay immediate gratification has a direct impact on your success in life. Exercising self-control means you won't be so quick to buy things on credit cards.

Consumers may think that taking advantage of the credit payment terms associated with holiday specials makes immediate sense, but consider the long term effects or the so called fine print before committing to this to ensure you do not start the New Year with any buyer's 'remorse'.

Online bargains

Going Christmas shopping during the height of the season (about 10 days before Christmas) the festive shopping frenzy is a flurry of purchasing drama. In this case, the adage of 'the early bird catches the worm' is often true, so get to the shops early and avoid the drama of overpriced and marked up goods. Try to do all your shopping in one day, avoid browsing and stick to your list. An even better option - try shopping online this year which is less stressful and often more cost-effective because you can look for better deals and compare prices.

Travel well

Travel safely this festive season. We all know that the large traffic volumes that this time of year brings increases the risk of accidents on the roads. Statistics from 1Lifedirect indicate that 23% of all death claims result from accidents, while 45% of accidental deaths result from motor vehicle accidents. According to the Road Traffic Management Corporation, more than 1475 people died in motor-vehicle accidents between 1 December and 10 January 2012. So take it easy on the roads, rest often and do not be in a rush to get to your destination - keep a safe following distance and become a courteous driver, allowing others to pass while ensuring your keep your headlights on when it is dark.


bizcommunity

Repo rate unchanged at 5%

The repo rate is to remain unchanged at 5%, Reserve Bank Governor Gill Marcus said on Thursday following the Monetary Policy Committee's last meeting of the year.

"The MPC is of the view that the current accommodative stance remains appropriate and has therefore decided to keep the repurchase rate unchanged at 5% per annum.

"As always, the MPC will monitor developments closely and will not hesitate to act in a manner consistent with its mandate," said the governor, adding that the decision had been unanimous.

Market expectation was that the repo rate would remain unchanged.

According to an Absa Capital research note, the bank has previously been focused on growth but that developments on the inflation side since the last MPC meeting in September have been decidedly negative.

"We now believe that there is a material risk that inflation could print above the top end of the target range in early 2013. The SARB is now caught between a rock and a hard place, with the inflation trajectory deteriorating even as the outlook for growth remains fragile.

"We expect that the SARB will take the middle of the road scenario, keeping the emphasis on growth," said Absa earlier on Thursday.

The October Consumer Price Index (CPI), released by Stats SA on Wednesday, showed that inflation rose slightly more than it was anticipated at 5.6% up from 5.5% in September. The bank targets inflation between 3% and 6%. The October number had edged up closer to the upper limit of the target.

By edging up closer to the target, the number reduced the central bank's ability to cut interest rates to incentivise economic activity in an environment of slow growth.

The MPC said the balance of risks to the inflation outlook to be on the upside, given the continued pressure of food prices, uncertainty of the exchange rate movements and the reweighting and rebasing of the CPI. Stats SA has recently announced the reweighting of the CPI.

"The inflation forecast of the Bank reflects a deterioration in the inflation outlook for 2013 compared with the previous forecast," Marcus said, adding that inflation was now expected to average 5.6% in the last quarter of 2012 and 5.6% the year.

It is expected to peak at 5% in 2014, with a peak of 5.7% in the first quarter of 2013.

"This near-term deterioration is mainly due to higher expected food price inflation as well as the recent depreciation of the rand," said the Governor. These forecasts do not incorporate the new CPI weights and rebasing

Higher wage increases could exert upward pressure on inflation, while it could also have a negative effect on employment.

The bank expressed concern at recent wage settlements.

"The MPC is concerned about the recent trend in wage settlements and the potential negative impact on the economy, particularly on growth and investment. These developments could also result in lower growth in employment creation or an absolute decline in employment.

"Although the reported headline increases granted in some of the settlements are higher than the actual average increases, there is no doubt that the increases granted are well above inflation."

Meanwhile, the rand is expected to "remain sensitive" to unfolding domestic economic and political developments, in addition to global risk perceptions.

At the MPC meeting in September, the central bank cut its 2012 growth forecast to 2.6% from 2.7% due to the weak global growth.

Domestic economic growth, said the MPC on Thursday, has deteriorated largely due to the continued global slowdown and domestic events, including labour unrest.

The Bank's forecast of GDP growth has been revised downward from 2.6% cent to 2.5% in 2012.

Growth in 2013 is now expected to average 2.9 % 3.4% previously.

Is lowering interest rates really desirable?

Despite the biggest monetary and fiscal policy expansion in advanced countries in history, the post-recession recovery has been weak. Economists are now beginning to ask whether continued monetary easing - pushing interest rates towards 0% - is really desirable.

It makes sense when economic activity is depressed for central banks to ease monetary policy to boost investment and so create the jobs. But Chris Hamman, head of fixed interest at Sanlam Investment Management (SIM), argues that lowering interest rates even further is "tantamount to pushing on a piece of string".

Very low interest rates do affect the economy, he concedes, but in a different way to what people expect - the public sector is the main beneficiary and this comes at the expense of long-term economic performance.

The idea that lower interest rates will stimulate investment rests on two important assumptions, he explains. Firstly, that interest rates will remain low for a prolonged period, and secondly, that projects will generate sufficiently positive cash flows to meet financial obligations towards funders. Neither holds up.

SA 10-year government bonds are at 6,5%, roughly at their lowest level since the late 1960s. With inflation having averaged 5,3% over the past decade one can question whether this is sustainable.

"Investors in the real economy are investing over the lifetime of a project, 20 years or more, so they have to believe the current very low level of interest rates is sustainable or it will not trigger investment," says Hamman.

The cash flow assumption is equally troublesome. In lowering interest rates to multigenerational lows like in SA, or multicentury lows like in the US, the monetary authority is signalling that the economic outlook is bleak and profit expectations ought to be scaled right back.

"Rational investors will not fund projects when the potential returns are declining amid lower interest rates and, at the same time, the riskiness is rising amid increased economic uncertainty," says Hamman.

Faced with the alternative of risk-free government bonds, investors all over the world have been channelling their investments into sovereigns bonds. This is helping governments to finance debt at levels last seen during the 1940s.

US gross government debt breached 100% of GDP by end-2011 - a level last seen at the end of World War 2. In Japan, the UK and Italy, gross government debt in 2011 amounted to 230% of GDP, 82% of GDP and 120% of GDP respectively.

Given the size of this debt mountain, governments will at some point need to run primary budget surpluses to achieve a return to fiscal sustainability, notes SIM economist Arthur Kamp. This implies less spending and/or higher taxes - neither of which are politically palatable, especially at a time of low real GDP growth.

"Hence, governments will need to live with debt, which means they have a clear incentive to keep borrowing costs low and to channel available savings towards the purchase of government securities," says Kamp.

This strategy - dubbed financial repression - enables governments to finance their deficits and minimise their debt costs and so delay the implementation of fiscal austerity measures. Unfortunately, the cost is that of a declining long-run potential growth rate.

Of course, if a government uses the debt it raises to invest in infrastructure this would raise the long-run potential of the economy, Hamman concedes, but he argues that most SA government spending is not on infrastructure but on wages. Essentially, SA is borrowing to pay wages and the interest on existing debt.

The bottom line is that the very easy monetary policy being practised by the UK, the US and even SA is likely to have a limited effect on boosting growth while leaving these economies at the mercy of fickle foreign investors.

The lesson is that SA should be putting far less faith in fiscal and monetary policy to stimulate growth and much more weight on industrial, trade and labour policy.

FM

Consumer inflation rises faster than expected

INFLATION rose more than expected in October, cementing views that the Reserve Bank will leave interest rates unchanged on Thursday.

Statistics South Africa figures released on Wednesday showed that on average, prices increased 0.6% between September and October. Inflation was recorded at 5.6% year on year in October, from a 5.5% year-on-year increase in September. The market was expecting a 5.5% print.

"We still think the Reserve Bank will find it very difficult to cut rates when inflation is rising notably and the rand is at risk of further depreciation. The safest option at this juncture seems to be to stay put," RMB economist Carmen Nel said.

As expected, the food and nonalcoholic beverages index and the transport index were mainly responsible for the jump in inflation.

The food index alone recorded a monthly increase of 2.8%, its highest monthly jump since August 1994.

Investec Group economist Annabel Bishop said "higher grain prices at the agricultural level fed through into higher bread and cereal prices, while meat and dairy prices also experienced upward pressure due to higher feed prices".

A petrol price increase of 21c a litre during the month led to higher fuel costs, which fed into the increase in the transport index.

Absa Capital economists expected the latest inflation figure to weaken the rand as it came in higher than anticipated.

The Reserve Bank is now widely expected to revise upwards its current forecasts which are for inflation to average 5.3% in the final quarter of this year, 5.2% next year and 5% in 2014. The bank has already cited higher food costs as an upside risk to the inflation outlook.

Higher food price inflation is expected to lead to a continued rise in headline inflation for the rest of this year.

Business Day

Wheat down on import competition

South African maize prices closed the Tuesday session slightly lower due to the expectation of local rain soon‚ while wheat closed softer due to price competition with imports.

“Rain is expected soon and over the weekend‚ and it is dawning on the market that the maize crop will be bigger than previously expected‚ which has had a depressing effect on the maize price‚” Paul du Plessis‚ trader at Brisen Commodities in Pretoria said.

“Local wheat is too expensive when compared to imports. It is wheat harvesting season and silos are full of imported wheat‚ so local farmers are competing with that. If they want to sell their wheat now‚ the price has to drop‚” he said.

White maize for December delivery‚ the most active contract on the South African Futures Exchange‚ dipped R1 to close at R2‚441 a ton.

Yellow maize for December delivery‚ the most active contract for yellow maize‚ lost R7 to close at R2‚491 a ton. The grain is used mainly as animal feed in SA.

Wheat for December delivery closed R26 lower at R3‚629 a ton.

Meanwhile US corn futures rose on Monday‚ boosted by favourable outside markets and hopes for greater export demand for US corn‚ Dow Jones Newswires reported.

Chicago Board of Trade December corn futures settled up 11 3/4 cents or 1.6% at $7.38 3/4 a bushel.

Wheat futures rose on concerns about dry soil for wheat crops in the US southern Plains‚ and other signs of tighter world supplies. CBoT December wheat Friday settled at a four-month low for the front-month contract. CBoT December Monday wheat rose 3 3/4 cents or 0.4% to $8.41 3/4 a bushel. - I-Net Bridge

IOL

TOP 10 HOSPITALITY INDUSTRY TRENDS FOR 2013

The upcoming year is projected to be a better and brighter one for the hospitality industry, but what are the new factors driving the market in 2013?


The landscape is evolving quickly as content marketing replaces advertising campaigns, mobile merges even more with social networks and travelers are open to spending more on getaways that are worth it.

To understand the market and to help hoteliers capitalize on what’s to come, Robert Rauch, otherwise known as the HOTEL GURU and president of R.A. Rauch & Associates, the leading San Diego-based hospitality management company, has compiled his list of Top 10 Hospitality Industry Trends for 2013:

Increase in Travel’s Personal Value

Despite the recent years of a contentious and challenging economic climate, we’re seeing the revival of the most powerful motivation for traveling -- the emotional connection between vacations and quality of life. Leisure travelers are doing less of the things that characterized the economic hardship of recent years and are now adopting more behaviors that confirm the importance of travel in their emerging lifestyles, according to the newly released MMGY Global/Harrison Group 2012 Portrait of American Travelers, a nationally-representative survey of 2,527 U.S. households.

This annual survey shows that while the number of overnight leisure trips is almost equal to that of last year, the drivers of these vacations are changing. Cost-effective “staycations” and other money-saving getaways that emerged in the midst of the recession has weakened. This year, expect a boost in travel spending due to a renewed belief in quality experiences that are worth the splurge.

Expect More International Visitors

Average rates and occupancy levels in the US are likely to increase over the next few years for a very new reason. “Leisure demand from abroad, fueled in part by the new Discover America campaign, will stimulate new demand” according to Arne Sorenson, president and CEO of Marriott Hotels & Resorts during a GBTA panel discussion in Boston last month. Brand USA, the DMO behind Discover America, is the national marketing engine promoting US travel to international visitors.

The U.S. has about 5 million hotel rooms and almost no new supply in the construction pipeline, Sorenson noted. At the same time, China is ramping up to send about 100 million leisure tourists into the international market every year. If the U.S. gets its typical share, that will mean an additional 10 million visitors from China alone.

The average Chinese leisure traveler spends a week in the U.S., Sorenson said. That means an additional 70 million room nights in a market where prices are already rising due to growing domestic demand. And that doesn’t count growth from other inbound markets, such as Brazil and India, Sorenson said. “The globalization of travel is a massive force.”

A Second Look at Refinancing

When moving from your business plan to your actual budget, remember that while a zero-based budget is time consuming, it will save you tens of thousands of dollars on your bottom line. Each dollar on the bottom line increases the value of your asset by about $16 depending on capitalization rates. So a savings of $60,000 means an increase in value of about $1M!

If refinancing is an option, remember that interest rates are unbelievably low right now and that debt is actually available! As a matter of fact, though it is limited, there is even some new development activity in the pipeline. While there is still some economic uncertainty, this industry is cyclical and we are already in the fourth inning of the recovery. Look back and remember 1996-2000 and 2004-2008. Compare them to 2012-2016. The money is made in the middle innings and we are there.

Social Media and Mobile Will Be Inseparable

Social media and mobile already live in symbiosis and this year we will continue to see them merge. Now, people can create social media updates from their phone, while tagging friends or checking in. Mobile has allowed social media to truly become real time.

Smartphones represent more than 50 percent of new mobile devices being purchased. And, the growth of connected devices will only continue to soar throughout 2013. In fact, Ericsson estimates there will be over 50 billion connected devices in circulation by 2020, including laptops, tablets and smartphones. In North America, 2013 will mark the first year that online access is greater from mobile devices than desktop or laptop.

Smart hotel marketers will keep their eye out for authentic ways to make use of emerging social/mobile applications in 2013.

Photo-Sharing Will Dominate

Photo-sharing sites like Pinterest and Instagram saw their coming of age this year. By curating cool content through images, the Pinterest provides a powerful way to visually communicate lifestyle messages exuding from brands in the hospitality business. Pinterest is, at its core, a master of content curation. And with Pinterest API coming sooner rather than later, hotels will be presented a unique opportunity to curate, collect and highlight the very best of the pinning service through their own digital channels. Copycats are bound to arise, but 2013 will certainly provide us with new players on this field.

More Unrehearsed Marketing Videos

Video is one of the most effective ways to make an impact on web visitors and the opportunities to use videos are endless. In 2013, video is predicted to be an even more vital element in a hotel marketer’s arsenal with more and more people viewing and sharing videos online, including hundreds of thousands of consumers regularly streaming videos on their mobile devices. Did I also mention that videos can strengthen your organic SEO efforts? Contrary to what your boss might think, your video doesn’t have to “go viral”. More importantly, it doesn’t have to be a literal walk-through of your lobby and rooms. First and foremost, your social videos should showcase interesting and useful information. The content featured in your videos should highlight the uniqueness of your property, as well as the destination and area attractions. Plus, try different ways of presenting, including interviews, instructions, demos, reviews, or coverage of special events, activities or nearby attractions.

Content Marketing Will Replace Traditional Advertising

Traditional advertising is rapidly losing out as hotel marketing professionals begin to realize the advantages and effectiveness of content marketing. Marketing’s new mantra of “Brands must now acts as publishers,” has arrived in part because of social media and its potential to engage in meaningful conversations with their loyal fan base and potential clients alike. In short, content marketing is the new advertising. By investing in the sharpest media tools like blogs, social media, newsletters, webinars, ebooks, photo-sharing, or videos and shared media, you’ll drastically reduce the hefty investments in traditional paid media. Plus, your SEO efforts will be affected if you “opt out” of being a producer. Google is now weighing current content, social proof and author scores in their results ranking. Simply put, you need to create and share content, while being of interest to lots of people to even be a player going forward.

Renewed Focus on Property Websites

Direct bookings are king. And, finding ways of encouraging direct bookings will be one of the most important parts of a marketing director’s job in 2013. As travelers are increasingly taking their transactions online, the hotel’s own Website has grown into the most important avenue for them to gain the highest ROI. In 2010, American hotels spent an estimated $2.7 billion on OTA commissions. Now, as those rates rise and rate parity restrictions tighten, hotels are looking at any and all ways to increase direct bookings through their websites. To achieve this, hotel Web sites must find compelling ways to convey the advantages of going through them, rather than the OTA’s. Today’s hotel website needs fresh content, constantly updated promotions, and rich media. Then all of this content needs to be marketed across all channels, including desktop Web site, the mobile site and social media profiles.

Guests Will Crave Food, Not Celebrity Chefs

Foodies have driven hotel culinary offerings these past few years, with chefs creating meals like pieces of carefully crafted art. Plus, investments to woo celebrity chefs to helm hotel kitchens have skyrocketed because of the rise of big-name chefs emerging from Food Network shows. Hotel owners used these chef’s newfound celebrity status to bring in F&B business. However, now meeting planners and leisure guests aren’t focused so much on the chef in the kitchen, but the food on the table. What they’ll care about now are menus filled with healthy and organic options, and more options for diet restrictions. F&B directors should reevaluate where their ingredients are coming from, and highly consider procuring from local farmers and vendors if they’re not already. Showcasing where your food is coming from will allow guests to connect more with the property, the restaurant and their experience overall.

More Meeting Planner Via Social Networks

More and more, meeting planners are utilizing social media tools to research, compare and read reviews of hotels and conference centers. Plus, they are using social networks to strengthen professional relationships like the rest of us. Hotels should designate a sales team member to oversee the property’s LinkedIn profile and engage the entire sales team to actively connect with planners online on a daily basis. Some ways hotels can attract meeting planners with their own social media? Have a separate customer service-focused Twitter account to manage questions or issues during conferences. Use webinars to educate planners about things that matter to them. Share positive reviews from other planners on all your sites. Last but not least, make sure you’re monitoring and answering review sites like TripAdvisor. Use your hotel blog to write about meeting ideas. Planners are increasingly using former guests’ reviews to see if they want their attendees staying with you.

In Closing

Remember that our industry is now more of a science than an art…great stewardship of your properties will reward you in the millions over the next few years. This will include digital marketing, social media marketing, revenue management, distribution channel management and mobile web marketing. May the wind be at your back and the occupancy, rate, net income and values make you happy this coming year and for many years to come!

Robert Rauch is president of R. A. Rauch & Associates, Inc and is nationally recognized as the HOTEL GURU, a hotelier serving clients in all facets of the industry.

Source: HBR Eprop

BMR ECONOMIC GROWTH INDICATOR DECLINES

The BMR index‚ which points to trends in the economy six months in advance‚ declined to 108 points in September from 109 points in August


“This trend is expected to continue on the back of further anticipated labour activity‚ continuing dismissals and retrenchments up to the end of November 2012‚”.

Thousands of miners were sacked after a series of wildcat strikes across the industry in the past few months‚ which began with a violent uprising at Lonmin's platinum mine at Marikana.

Many have been taken back after negotiated wage settlements‚ but the unrest has undermined investor confidence in SA and led to two credit rating downgrades.

A spike in household consumption ahead of the year-end holidays was likely to provide some impetus to the indicator‚ which includes the JSE All Share Index‚ platinum prices and oil prices‚ the BMR said.

“This optimism could be enhanced or depressed depending on the policy decisions flowing from the ANC (African National Congress) conference in Mangaung‚” said BMR analyst Andries Masenge.

The ANC will hold its elective conference in Mangaung next month. It will decide whether President Jacob Zuma will remain head of the party and is expected to usher in changes to economic policy.

SA’s official leading indicator for the business cycle nudged higher for the second month in a row during August‚ but the pickup did nothing to dispel the view that economic growth is losing momentum.

Analysts have been revising down their growth forecasts to take account of the effects of the deepening global slowdown and widespread strikes in mining.

Consensus forecasts predict the economy will expand 2.5% this year after growth of 3.1% last year‚ but the risks of downward revisions are mounting.

Source: I-Net Bridge

SEEK EQUITY, PROPERTY TO EARN REAL RETURNS

In light of the pessimistic economic outlook, it is important to look for good quality equity and listed property shares that have strong dividend/distribution payment histories, attractive current yields and are going to grow the dividend/distribution income stream in the future

There have been two meaningful changes in the global investment landscape over the past six weeks. Firstly, various economic and corporate earnings data, both globally and in South Africa, have started to show signs of deterioration. Secondly, the labour unrest and violence-ravaged strikes in SA have raised the political temperature in the country ahead of the ANC's elective conference in Mangaung in December 2012. Pessimism about the future prospects for SA and the world abounds.

Notwithstanding these concerning facts, our investment outlook and asset allocation have not perceptibly changed at this stage. Investors may well ask why. Are we not being irresponsible and complacent by not adopting a more cautious or conservative approach for our clients' hard-earned cash? The answer is no.

We emphatically believe the larger risk to investors, particularly retirees, is inflation risk. To be clear, our starting point for portfolio construction is always to seek assets that can deliver returns in excess of inflation over the medium to long term. Yet when we look at asset classes globally, fewer and fewer of the mainstream asset classes are able to jump this basic hurdle rate for inclusion in the portfolio.

The policy aftermath of the global financial crisis drove short-term interest rates sharply lower and they have remained at record low levels since 2009. Importantly, they are likely to remain at these levels until sometime in 2015. In SA, the South African Reserve Bank (SARB) has adopted an aggressive monetary policy with the repo rate at 5%. In both instances, these interest rates are below the respective official inflation measures, meaning that negative real interest rates are on offer.

In the bond market, yields are not much more attractive. In the US, 10-year Treasury bond yields are below CPI and in SA bond yields are marginally above CPI. Corporate bond yields are slightly more attractive, but are still insufficient to offer a meaningful improvement in the outcome. Unless we see further declines in bond yields, investors are going to struggle to deliver CPI-matching returns from bonds, let alone the CPI + 5% return outcomes the liability profiles of many investors require.

Therefore, two important sources of positive real returns over the past 10 years will be the source of negative real returns for the next three to five years. Accordingly, investors are going to have to focus their attention on asset classes that at least have a fighting chance of beating CPI in the future. Investments in listed equity, listed property, private equity and hedge funds may provide the potential inflation-beating return solution.

The Grindrod Asset Management approach has been and will remain focused on looking for good quality equity and listed property shares that have strong dividend/distribution payment histories, attractive current yields and are going to grow the dividend/distribution income stream in the future.

We believe that while this approach may be somewhat more volatile in the short run, it is the only sensible course of action looking forward three years and beyond in a world starved of yield and increasingly exposed to unintended consequences of aggressive policy risks. Eprop

Further interest-rate cuts for South Africa?

Nov. 7 (Bloomberg) -- The case for further interest-rate cuts in South Africa is building as the global economy slows and recent labor disputes hurt output, according to the International Monetary Fund.

The central bank unexpectedly cut the benchmark interest rate by 0.5 percentage point to 5 percent in July to bolster the economy as the European debt crisis eroded demand for South African exports. On Oct. 25, Finance Minister Pravin Gordhan cut his growth outlook for this year to 2.5 percent from a February estimate of 2.7 percent, partly reflecting a loss of production at gold, platinum and coal mines because of strikes.

“The deterioration in the global economy, as well as the internal domestic strikes that you have in the mining sector, as well as other sectors of the economy, has without doubt had some impact on growth,” Calvin McDonald, the South African delegation chief in the IMF’s African department, told lawmakers in Cape Town today. These developments “strengthen the case” for South Africa to “rely increasingly on monetary policy to support economic recovery if conditions in the global environment continue to deteriorate.”

The central bank’s Monetary Policy Committee will make its next rate decision on Nov. 22.

Ratings Cut

The IMF regards the central bank’s 3 percent to 6 percent inflation target band as appropriate and allowing sufficient flexibility, and sees no need for it to be adjusted, McDonald said.

He urged the government to stick to its commitment to rein in borrowing to buoy investor confidence, contain growth in spending on civil servant salaries and reform labor laws to encourage hiring.

Standard & Poor’s and Moody’s Investor Services have lowered their ratings on South Africa’s sovereign debt since Sept. 27, citing an increased risk of the government missing its deficit targets. The downgrades have “taken a toll” on South Africa’s reputation, McDonald said.

The government is monitoring the effect of the downgrades, and taking steps to prevent a further decline in perceptions of South Africa, Gordhan said in a written reply to a parliamentary question today. This will include increased interaction with rating companies and investors to ensure they don’t have to rely on “sensationalist” media reports for information, he said.

‘Completely Sustainable’

The “government remains committed to taking the necessary measures to lift the growth potential and competitiveness of the South African economy,” Gordhan said. “The government has committed to a process of fiscal consolidation. Government debt is well controlled and completely sustainable.”

The IMF said on Oct. 9 that Africa’s largest economy will probably expand 2.6 percent this year and 3 percent in 2013, forecasts that were prepared before a wave of strikes broke out in August. The estimates have yet to be revised, McDonald said.

“We haven’t had any discussions with the government yet,’ he told reporters. “Things seem to have stabilized somewhat, which is good.”

Bloomberg News

Ban these financial products

I met with a new client recently who came to see me because she has two retirement annuities that mature this month. She does not want to take income from them at this stage and certainly does not want to continue them with the company concerned. Who can blame her, the annual compound return on one of them is around 5% since 1983. But that is not the issue here.

What really irks me is that when she presented me with the documents that she had received from the insurance company, I noticed that firm had included a quote for a life annuity, without any escalation on it! Who (with any sense of morality) offers a 55-year-old a non-escalating life annuity? There is surely only one reason that the company would do this and that is because it’s trying to hide its poor annuity rates and the fact that the initial income would look really poor if it had an escalation on it.

National Treasury has a lot to say about annuities – and is very critical of living annuities, but surely, if it is serious about improving the annuity market, it should ban non-escalating annuities! In fact, if insurance companies were more honest, they would refer to this kind of annuity as a “decreasing annuity”, as your income is effectively decreasing by inflation each year. In the above instance, if inflation is 6%/year then by the time the lady turns 75, her income would be equivalent to 30% of the current income and at 80 it would be around 22% of the current income.

So how about it, if Treasury and the insurance industry insist on keeping these kinds of annuities, perhaps we should push for them to be renamed as “decreasing life annuities”. Somehow I don’t think there would be a market and if they won’t ban these products, then at least lack of demand would ultimately result in their demise!

What you need to know about annuities:

There are essentially two kinds of annuities available to you when you retire, namely a life annuity and a living annuity. Both of these are what are referred to as compulsory annuities (ie you have to use part or all of your retirement funds to buy one or more of them).

Life Annuity: You purchase an annuity from an insurance company and it guarantees to pay you the annuity until your death, when the capital “disappears”. Simplistically, the annuity you will receive is a function of your age, sex and interest rates. Women tend to live longer than men and so a 65-year-old woman is likely to receive a lower initial annuity than a 65-year-old man. You are also likely to receive a lower income when interest rates are low (like now). Annuity rates change on a regular basis, and quotes would have to be obtained at the time of purchase.
You have the following life annuity choices:

1. A single life annuity, where the capital dies with you. Very often this kind of annuity will have an initial guarantee period such as five or 10 years, which means that even if you die in the first month of receiving the annuity, your estate (beneficiary) will continue to receive an income for the remainder of the guaranteed period.
2. An assured annuity, where an insurance policy is purchased to pay out the capital on your death. While this might sound appealing, as a rule, the insurance product is quite expensive and you could see a significant percentage of your annuity being used up to pay for the insurance.
3. A joint life annuity (with your spouse), where the annuity would cease on the death of the second annuitant (and the capital as well). This form of annuity is often structured so that annuity decreases by a third on the death of the first person (this allows for a greater initial income).

Beware: Most quotes do not show an escalating income and it’s essential that there is an escalation on the income taken – you do not want to have the same income in 20+ years’ time!

Living Annuity: you purchase an annuity from a (linked product or unit trust) company – your money is invested into a few unit trust funds (that you can choose) and then you have to draw an income from these funds. The minimum income is 2.5% of the capital and the max is 17.5%. This amount can be amended once a year on the anniversary of the annuity. With this annuity, the income is a function of the remaining capital amount and if the capital is badly invested, you could erode your income. The theory (and practice in my experience) is that as long as you have growth at a greater rate than the income drawn, you will get an ever-increasing income (ie if you get 9% growth and you draw 5% income, then your capital should grow each year). On your death, any remaining capital passes on to your beneficiaries who can use it to provide an income for themselves. This process is then repeated until all the capital is depleted.

You can move from a living annuity to a life annuity if you ever change your mind, but you can never ever move from a life annuity to a living annuity. It is also possible to split your capital (subject to certain minimums) and purchase both a life annuity and a living annuity thereby guaranteeing some income as well as providing the possibility of some growth.

Things to consider before purchasing an annuity:

1. Do I really need to purchase an annuity at this stage or can I defer drawing an income until a later stage? Just because your RA or preservation fund has matured does not mean that you need to draw an income from it – you may be able to defer drawing an income until a later date (eg if you are still working you might want to defer it until you are no longer drawing a salary).
2. Is there any tax difference between the two annuities? No, both are taxed as income… except that you can determine the amount of income you receive by using a living annuity. So if you are still earning an income (salary) then you could draw a lower income from the living annuity and thereby decrease your taxable income.
3. Make sure that you get quotes for both a living annuity as well as an escalating life annuity so that you can compare the incomes (initial and on-going). As a rule, you probably want to stay away from life annuities when interest rates are low or if you have financial dependants that you need to provide for at your death.
4. Find out what the fees on the annuity are. As a rule, the maximum upfront commission on the annuities is limited to 1.5% of the capital. There are no on-going fees on life annuities but there are on living annuities – one of these fees is the on-going adviser fee. The “norm” used to be 0.5% per annum, but this seems to have crept up to 1% a year… make sure you know what you are paying and why you are paying it (the 0.5% difference in fees could reduce the longevity of the annuity by around three to four years).
5. Be realistic about the income level you draw – make sure that you draw a lower income in the first few years. As a rule, this should not be more than 5% – we know, on balance of probability, that if you draw 5% income that your capital should last for around 30 years (conservatively). If the income is 8% then this drops to around 16 years and at 10% you have about 12 years income.
6. Make sure that if you opt for a living annuity and if you are using an adviser, that he/she is suitably qualified and experienced to advise you (as a minimum, I recommend that you use a certified financial planner). Ask to speak to a few of their existing annuity clients to find out what their experience has been. Also, find out how they choose the underlying funds and how often they will report to you about them and then, as far as the fees are concerned, what are you paying them and why are you paying this amount?
7. There is no reason that you can’t go direct when purchasing an annuity – if you opt the living annuity then remember this: your biggest enemy in mitigating against the success of the annuity is going to be you and your emotions. As such, it makes sense to have someone that you can turn to when the markets get volatile and who can help you to stick to the plan. Financial planners who do this are more than worth the fees you pay them.

Gregg Sneddon is a certified financial planner with The Financial Coach in Cape Town.

Investing in Art as an asset class

Investing in art is very different from buying a painting that matches your lounge suite. While some investable art may be visually beautiful, like a Claude Monet hanging over a fireplace, more often art is there to provoke a reaction, to question and challenge, and to put a spotlight on the darker side of society. 


Edvard Munch’s The Scream, which recently sold for $120m (R955m), is not exactly a painting for the bedroom wall, but it is possible to blend aesthetics with investment.


Art is not an investment in the true sense of the word. It does not generate dividends or interest and, in fact, costs you money to maintain.


The value is often only truly recognised when it is sold. The capital value is the only upside and is therefore a store of value rather than an investment.


However, art is certainly an asset class that can provide significant returns, but usually over a long period of time – the average collector holds on to their artwork for about 27 years.


So while it may not be ideal for your basic retirement plan, it certainly can over 30 years develop into a very valuable asset.


The best way of approaching this asset class is to see art as an interest that has the potential of becoming a very valuable asset class.


It is one of the few interests or hobbies where you can educate yourself while at the same time create an asset base of great value.


While there is nothing wrong with buying a piece of art because you like it, it is not the same as investing in it.


One needs to learn about the world of arts just as one would investigate and read up about a share or a unit trust before investing.


Most of us will buy an artwork in our life time, but we seldom take the time to do our homework.


A good starting point is to visit galleries and art auctions. Stephan Welz, founder of Stephan Welz & Co auction house, which represents Sotheby’s interests in South Africa, says when starting an art collection you should stick to the recognised artists, in much the same way as a share portfolio should be made up of blue-chip companies.


A good auction house or gallery will be able to advise you on who the recognised artists are and what they are worth. But you should also be doing your own homework by attending auctions and seeing what prices certain artists are commanding.


It is only in an auction that the true market value of an artist or specific artwork can be determined because art is only physically worth what someone else is prepared to pay for it.


There is, however, also room for a new artist in a collection.


As one may invest a small portion of one’s portfolio in newly listed companies, a well-chosen newcomer can increase significantly in value.


However, this is not for novices and it is, as with investing in a small company, even more important to do homework. New artists also create opportunity for the small-budget collector.


If you are buying into the blue-chip league, you need a starting investment of R50 000.


For half that amount, you could pick up a new artist.


However, the risks are far higher.


The risk with new artists is that sometimes their prices can be overinflated as they are still to be tested in the auction environment and they are harder to resell.


But when it does, the payoff can be immense. For example, a William Kentridge etching in his early days went for R8 000.


Today that is worth about R500 000. But not every new artist is a Kentridge and is far more likely to remain in obscurity than to succeed.


If you have a smaller budget and want to buy into more established artists, you can start with collecting limited edition signed lithographs (prints) of well-known artists.


You don’t need to be rich to be an art collector, although it does help. There are many famous collections by people of ordinary means.


For example, a book-keeper built up a collection worth many tens of millions of rands, yet he never owned a car because he could not afford it. His investment was his passion.


Some people would rather buy an artwork than take an overseas trip.

- City Press

Asian shares 7 month high as U.S., China data eases worries

Asian shares struck a seven-month high on Thursday as worries about a sharper slowdown in global growth eased after a slew of Chinese data signaled stabilization in the world's second largest economy, and the U.S. produced positive economic news.

China's third-quarter gross domestic product grew 7.4 percent from a year earlier, the slowest pace since the first quarter of 2009 and the seventh straight quarter of slower growth, but matching expectations.

Other Chinese data such as fixed asset investment, retail sales and industrial output slightly exceeded forecasts.

"This is within expectations, the economy is showing signs of stabilizing, that is good news," said Dong Tai, economist at Credit Suisse in Hong Kong. "We think that with rebounding property markets, stabilizing export orders, resuming consumption, we probably have seen the bottom of the economy."

The MSCI index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.5 percent, rising for a third day in a row, with its energy .MIAPJEN00PUS and materials .MIAPJMT00PUS leading the increase.

Hong Kong shares .HSI rose 0.7 percent and Shanghai shares .SSEC advanced 1.2 percent. Australian shares .AXJO were up 0.7 percent at a 15-month high, supported by the resources sectors which drew strength from signs the slowdown is drawing to an end in China, Australia's largest export market.

"Investors are adding more risk to their portfolio right now, with funds trying to improve their performance as the year comes to a close," said Alan Lam, Julius Baer's Greater China equity analyst.

European shares will likely edge higher, with financial spreadbetters expecting London's FTSE 100.FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI to open 0.2 percent higher. U.S. stock futures were steady. .L .EU .N

The commodities-sensitive Australian dollar touched a two-week high of $1.0397 after the Chinese data, and last traded at $1.0380.

The benchmark Thomson Reuters-Jefferies CRB index .CRB has recovered less than one-third of its drop from its recent peak in September, offering more scope on the upside.

"The data for September suggests China's economy likely bottomed in July-August and is set to recover, and this will help ease fears about further downside risks to the Chinese economy," said Hirokazu Yuihama, a senior strategist at Daiwa Securities. "There aren't clear signs that demand from China is picking up but sentiment for commodities is improving and this should eventually support growth-sensitive assets," he said.

Japan's Nikkei average .N225 jumped 2 percent to its highest in nearly three weeks on a weaker yen. .T

YEN SLIPS

The dollar rose to a one-month high of 79.22 yen, with traders keen to see if it will test its 200-day moving average, which stands around 79.40.

"The broad USD is battling between its use as a funding currency to invest in emerging markets, and a rise in its value linked to higher yields and growth expectations," Societe Generale said in a research note.

"For now this translates into a higher USD/JPY as the most yield sensitive currency," the note said, explaining the dollar's advance against the yen

While both the yen and the dollar tend to weaken when the tone for risk assets brightens, the yen's fall against other currencies such as the Australian dollar and the euro helped deepen the Japanese currency's loss against the greenback.

Osamu Takashima, chief FX strategist at Citibank in Tokyo, said the yen's weakness is also related to concerns that Japan's exports may suffer due to a sharp fall in sales in China following after a territorial row between the two countries.

The dollar's appeal increased as benchmark 10-year U.S. Treasury yields jumped to a one-month high of 1.81 percent on Wednesday for its biggest two-day rise since late July, after data showing U.S. housing starts surged 15 percent in September, the fastest pace in over four years.

The housing report followed a fall in the U.S. jobless rate and strong retail sales, lifting Wall Street despite concerns that sluggish world economic growth would curtail corporate America's year-long streak of profit growth.

The euro inched down 0.2 percent to $1.3096, after reaching a one-month high of $1.3140 on Wednesday.

While hopes for highly-indebted Spain to ask for aid remain intact, investors were cautious ahead of a meeting of European leaders in Brussels on Thursday and Friday, eyeing possible discussions over bailouts for struggling Spain and Greece.

European leaders will try to bridge deep differences over plans for a banking union at the summit, but no substantial decisions are expected, reviving concerns about complacency in tackling the three-year-old debt crisis.

Clear decisions on helping Cyprus, Greece and Spain may also only come at a finance ministers' meeting next month, officials say.

Asian credit markets firmed, tightening the spread on the iTraxx Asia ex-Japan investment-grade index by 4 basis points.

U.S. crude futures were steady at $92.14 a barrel while Brent inched up 0.3 percent to $113.56. <O/R>

(Additional reporting by Hideyuki Sano in Tokyo and Clement Tan in Hong Kong; Editing by Richard Borsuk)

(Reuters)

Tait Brands: R400m venture fund launched in SA

Tait Brands are proud to announce that Business Partners Limited, a specialist risk finance company for formal small and medium enterprises (SMEs), has announced the launch of the R400m Business Partners Limited Venture Fund, one of the largest SME financing funds in South Africa.

According to Gerrie van Biljon, Executive Director at Business Partners Limited, SMEs are key drivers of wealth in South Africa and it is reported that SMEs contribute 40% of GDP and employ 60% of the workplace in formal employment.

He says that although South Africa is ranked 37th out of 144 countries for venture capital funding by the Global Competitiveness Report 2012 / 2013, small businesses, particularly those in the concept or start-up phase, struggle to find funding as financiers are reluctant to enter this high-risk arena. This is due to the high failure rate of start-ups and the lack of security available for financiers to compensate risk and the high gearing required for seed capital.

“This limited funding and support for SMEs often results in innovative business ideas, many of which are developed at tertiary institutions, incubator programs, innovation hubs and industry groups, never getting off the ground. The Business Partners Venture Fund can now plug this hole,” says van Biljon.

The fund will consider first round finance deals up to R10m, with the focus on the venture’s viability and high potential for growth. Consideration will be given to early stage investments after the research and development phase.

“We recognise the potential benefit that innovative and high growth enterprises can bring to the country. It is for this reason that the company is launching the fund – to finance exactly this type of high impact entrepreneur.”

Van Biljon says that often, the majority of financing deals are made available to SMEs in typical lifestyle businesses, such as coffee shops or small manufacturing outlets, which are considered the ‘safer’ option.

“We feel that all businesses with the potential to reach ‘blue sky’ should be considered for funding, as SMEs within all sectors have the potential to flourish. We currently see great potential and opportunity within clean energy, agri-processing, bio-tech and ICT sectors, and want to give entrepreneurs the opportunity to develop new products or to take existing businesses to a new level.”

He says that in order to achieve the goal of 5 million jobs created by 2020 set by government in the New Growth Path, businesses and in particular, SMEs, need to expand and provide more job opportunities for South Africans.

Finweek

Lessons for SA in growth elsewhere in Africa

IT is no secret that African manufacturing output has roughly doubled in the past 10 years and that Africa could be on the brink of an economic takeoff, much like China was 30 years ago, according to the World Bank. The bigotry of low expectations is fading away and a new expectation of African creativity and technical prowess is gaining hold across the world.

What’s less well known is the effect innovation and development in other African economies are having on SA’s entrepreneurs, workers and policy makers. I am constantly travelling across Africa, meeting everyone from factory workers to CEs, and what is remarkable is how much we South Africans can learn from them. For too long we have held a bigotry of our own: we have looked to Asia and the West for the best ideas and viewed them as our natural competitors, as opposed to our African neighbours.

Nothing could be further from the truth: moving across the continent, I am struck by the creativity, vigour and sheer ambition of Africa’s growing middle class.

Ethiopia is the perfect example. Its economy is expanding by 7.5% a year and it is not just traditional industries such as farming and mining that are growing, but also manufacturing. Just outside the capital, Chinese shoe maker Huajian has built a factory employing about 500 workers. An economist at the World Bank who recently wrote a report on light manufacturing in Africa cites this as an example of how Africa could overtake Asia to potentially become the world’s next manufacturing hub.

Low labour costs, readily available natural resources and preferential (duty-free and quota-free) access to the US and European Union markets are among the advantages of operating in Africa.

Africa’s demographic trends are also extremely positive. By 2035, its labour force will be bigger than any individual country in the world. Nigeria and Ethiopia will add a total of 30-million workers by 2020, while SA is expected to add 2-million. As opposed to western economies, which are struggling with an ageing population, a younger population gives Africa a huge boost, especially in the form of reduced entitlement spending.

A more developed manufacturing base is also likely to reduce the costs of some products that are currently cheaper to import from China than Africa. The boom is waiting to happen: Africans already spend more each on goods and services than Indians, according to some reports.

However, it’s not just manufacturing at which Africa is excelling and challenging SA. The Economist recently named Nairobi an "African tech hub" because of hundreds of start-ups in the past few years — quite an achievement given that the magazine labelled Africa "the hopeless continent" a decade ago. Kenya’s exports of technology-related services have risen from $16m in 2002 to $360m in 2010. It is also a world leader in mobile payments — far ahead of China and India.

Although mobile payments are used widely in other developed countries, Kenya has — to its credit — "leapfrogged" the traditional stages of economic development to get there. This readiness and ability to implement new technologies is encouraging and it is this attitude of ambition that we can learn from our African neighbours. Within a few years, Kenya could emerge as a world leader in mobile payments and export the technology to countries across the world.

SA can also learn a lot from some of Africa’s creative industries, such as the Nigerian movie industry, which has overtaken SA’s to become the strongest in Africa. The Nigerian movie industry — known as "Nollywood" — is now worth $500m and produces more films than Hollywood every year. The films may not be international blockbusters, but they have huge appeal across Nigeria and the rest of Africa and prove that Africans have the creativity to compete in nontraditional industries.

This innovation across Africa is having an effect on SA in two ways. Most obviously, it’s an opportunity for us to export our products and knowledge and generally expand trade with other African nations, which in turn will generate jobs for the youth of our country.

SA has some great assets — its infrastructure, a well-developed services sector, the JSE — that give us the opportunity to provide a range of goods and services to help grow our own economy, but we can work harder to maximise these advantages.

The second effect is psychological. The reality is that countries such as Ethiopia, Kenya and Nigeria are tearing ahead and emerging as serious competitors for foreign capital. In short, this is forcing our government and business leaders to look more closely at their policies and approach to business and consider an extra dimension in their policy making. If SA is to retain its position as the leading economy in Africa, it can’t for a minute rest on its laurels.

We are not in competition with the rest of Africa, but we can learn from each other, which is why it is essential that we share technologies and collaborate to build strong regional industries that bolster intra-African trade. In the past I have called for the creation of a pan-African Brics as a way of achieving greater collaboration and working towards our collective economic interests.

Despite the growing confidence of our neighbours, SA is still an economic leader, coming up with ground-breaking ideas that challenge conventional thinking. But we mustn’t get complacent, which is why learning from our African neighbours, and adopting a more mature concept of the competition we will face from them, will ultimately enable SA to remain the economic leader.

• Ichikowitz is the executive chairman of defence and aerospace company Paramount Group and founder of the Ichikowitz Family Foundation.

BdLive

Stay ahead of the financial scamsters

BANK robbery has come a long way from the brazen operations of the Stander gang in the '80s. Things are a lot more subtle these days and attacks are more personal - it's your money they're after.

Scams abound, and despite the banks' efforts to educate customers about how to avoid them, people are taken in regularly.

Here are some of the more common ones and what you can do to safeguard yourself.

ATM FRAUD:

How it happens:

THERE are a few ways people can rob you at an ATM. They can physically take the money you have drawn or they can copy your card and enter your pin to draw the cash themselves. The card needs to be taken from you for a mere moment to copy the salient details, which can then be cloned on to another card. Your pin, a vital detail, also needs to be discovered. Card-copying or skimming machines can be hidden in a person's palm and pins worked out through looking over your shoulder, or with a well-positioned camera. Also, your card can be stolen from an ATM that appears to have jammed or "swallowed" it.

How to prevent it:

Take the time to assess who is in the vicinity . Try to choose an ATM you are familiar with and that is well lit and make sure you are visible to people in the area. Have your card in your hand so you don't have to fiddle in a bag or wallet and possibly be distracted.

Don't let anyone stand too close to you while you are at the ATM. Also, don't ask strangers for help, not even a security guard.

Shield the keypad when entering your pin. Don't ever force your card into an ATM. If it's jammed for any reason it might have been tampered with. If you think the ATM is faulty, cancel your transaction immediately and contact the bank.

Don't ever write down your pin.

When you've finished transacting put the card and money away before you leave the ATM.

Check your balance regularly and report discrepancies immediately.

Don't let your children, even teenagers, use your card because they are often soft targets.

PHISHING

How it works:

THERE are hundreds of variations, but essentially you get an e-mail that appears to be from a familiar bank, using recognisable and apparently legitimate logos and payoff lines. You might be told a debit order has gone off - one you didn't authorise - and if you have any queries you should "click on the link"; you might also be told your account will be frozen in the next 12, 24 or 48 hours if you don't open an internet banking session and update your details. The e-mail might also tell you the bank has installed new security software and they need you to log on to the banking site to test the functionality. Once you click on the link you are taken to a dodgy website where your details are recorded.

How to prevent it:

Assume unsolicited e-mail correspondence from your bank is a scam and check with them before you reply or otherwise respond. Don't ever enter your personal banking details into an e-mail or website - no bank will ever ask you for these to be sent through an online platform or on a telephone.

Delete suspicious e-mails immediately. Just opening the site might expose your computer to a virus.

There are differing views about how to access your online banking site most safely. Some banks say you should type in the web address physically rather than saving it as a favourite or bookmark, as phishers are able to reprogramme aspects of your browser with the right virus. Similarly, don't go to internet banking via a saved page or a hyperlink - a URL that often appears underlined and in a different colour to the rest of the page and which you click on to go to a new site.

You can ensure a site is legitimate by checking for the padlock icon in the lower right-hand corner of the banking site. By clicking on it you can verify who operates the site.

Also check the web address of your internet banking site before you enter your details. Make sure it is prefixed with https and not http, a sign the site is secure. If the address looks overly long there might be a problem.

Because of the virus threat don't ever access your bank from a public computer such as an internet cafe.

When you finish your online banking session, click the log off tab and close the browser window.

Most banks offer antivirus and anti-spyware software free to online customers. Make sure you have yours installed and up to date.

CARD SKIMMING

How it works:

AS with ATM fraud, your card needs to be taken from you for a moment so it can be passed through a skimming device. Skimming might happen when you voluntarily hand over your card to make a payment or when your waiter carries your card to the point-of-sale device in another part of the restaurant. Common scenarios are where the cashier moves the card below counter height to where the POS device - and the skimmer - are kept, or where they appear to be cleaning your card by rubbing it on a piece of their clothing. In a matter of seconds the information on the magnetic strip is copied, allowing your card to be replicated.

However, most cards nowadays require a pin to be entered before funds are released, and getting this detail often requires a second person to watch what you key in, or a camera might be positioned to record your pin.

How to prevent it:

Never let your card out of your sight. If the POS device can't be brought to you, get up from your table or out of your car and walk to it. Shield the keypad when you key in your pin and make sure you aren't distracted and that no one is peering over your shoulder.

Most banks now send you an SMS every time a transaction occurs on your card. It's a facility worth getting if you aren't already on this system so you are immediately aware of transactions not effected by you. Also, regularly and diligently assess your posted or online bank statements for anything you don't recognise. Get hold of your bank immediately if this is the case.

SIM-SWAP FRAUD:

How it works:

THIS scam is usually used in conjunction with phishing because your banking details are vital for the operation to succeed. Once fraudsters have your cellphone number they can approach your service provider and request a replacement sim card. Once they have this they are able to get the security messages and one-time passwords your bank sends to your cellphone when you add beneficiaries or transfer money out of your account.

How to prevent it:

Unless you are a rock star it's virtually impossible to limit the people who have access to your cellphone number, especially with companies actively selling our personal information to each other. But you can make sure you are alert to information coming in on your phone and immediately opt out of unsolicited advertising. Just SMS a reply using the words "quit" or "stop".

If you get an SMS warning that a sim swap has been conducted on your cellphone number and you have nothing to do with it, immediately contact your cellphone service provider and your bank.

If you suspect illegal activity is going on, change your internet banking log-on credentials on your internet banking site. This will make access to your account virtually impossible.

Never disclose your ID or cellphone numbers on a website unless you have verified the legitimacy of the site. Your bank already knows this number and won't ask you to give it again unless they need to verify your identity for an activity you have specifically requested.

Make sure your contact details are up to date at your bank and on your internet banking profile.

419 SCAMS

How it works:

YOU get an e-mail or fax, or even a posted letter, asking for your assistance in the movement of funds, for which you will be compensated.

The content of the correspondence can differ but essentially you are offered money to provide access to your account.

You might be asked to travel to meet the person, possibly even to a neighbouring country.

How to avoid it:

Use your common sense: if it sounds too good to be true, it probably is.

Never travel to meet the person. According to the South African Banking Risk Information Centre, victims who have been lured to foreign countries have been robbed, held for ransom and even murdered.

Never provide blank letterheads, invoices or your banking details unless you are sure of the recipients.

Be careful with your pin

Choosing a pin you can remember isn't easy, which is probably why thieves have about a one-in-11 chance of guessing it.

The Guardian newspaper reports that a study by cryptographers at Cambridge University found that one in 20 people use numeric patterns such as 4545.

One in 10 use a pattern on the entry keypad, like 2580 or 0852 (down or up the centre of the keypad). About 23% of users choose an important date, a third of these choose their own birthday. Since most of us keep evidence of our birth date somewhere in our wallets or bags, this sequence of numbers is clearly not a great choice.

Cambridge researcher Joseph Bonneau said if a thief finds the cardholder's date of birth, the chances of successfully guessing the pin are about 9%.

Another study reported by the Daily Mail revealed that nearly one in nine of us goes for 1234, with 1111 and 0000 close behind. These three make up nearly 20% of all pins.

The rarest code of all is 8068.

* This article was first published in Sunday Times: Money & Careers