Caucasian businessman standing on wrist watch

You Only Live Twice

Bank On This Man

Many in South Africa’s private healthcare industry see the government’s plan for National Health Insurance (NHI) as a death knell to their businesses. Hermann Kohloffel, the Managing Director of NHC Medical Services, sees it as a chance to improve healthcare for all South Africans.
“No matter how you slice and dice what we see coming from NHI, how we see it as a threat or a concern, it’s an opportunity. The reason why it has to be seen as an opportunity is because healthcare has got to be available to everybody. No matter how we argue about the costs, you cannot leave somebody without care. You’re not going to leave somebody suffering with cancer and say ‘well, because you don’t have the money, we’re not going to look after you’,” he says.
Kohloffel says the reason the private health centers can turn ailing people away is because they know those patients can turn to the state for help.
“The state is ultimately the saviour of the damned and the have-nots. If this was a country that just had one system, let’s say just the private system, what would happen? You’d be forced to help that person. Nobody could in good conscience kick that person out onto the pavement&#8230; If you look at other countries’ health systems, the state is the only system. The state doesn’t turn around and say ‘because you don’t pay tax, we won’t help you’.”
<a href="http://www.forbesafrica.com/cover-story/2017/10/02/batten-down-the-hatches/" target="_blank" rel="noopener noreferrer">READ MORE: Batten Down The Hatches</a>
South Africa’s Minister of Health, Aaron Motsoaledi, says that private healthcare is sometimes unjustifiably expensive. Kohloffel agrees and says patients often pay for expensive procedures, when a cheaper option is available and will get the same outcome.
“Healthcare continues to escalate at a cost substantially higher than inflation and usually more than the GDP of the country. This automatically causes a problem because then there’s always a deficit in the funding of healthcare. As we progress as medical professionals, the technology cost is becoming a debatable factor. If you look at an X-ray, for example, the fact that today you get a digital X-ray and you get an X-ray in 30 milliseconds, doesn’t change the outcome. The patient either has pneumonia or doesn’t,” he says.
“The cost of that care, against the quality of care that you are ultimately getting, has got to be debated… It is crippling the current private healthcare system and is the main reason why patients are buying down.”
Kohloffel refers South Africa’s current health sector as an imperfect world with an imperfect system.
“You wonder how it is possible that an appendectomy in the private health system will the cost the patient between R40,000 ($3,000) and R60,000 ($4,600). In the public system you can do an appendectomy for about R3,500 ($270). You may not survive the public hospital without scars, mental and physical, but how is that disparity even possible?”
The public and private sector needs to sit together and remember that they’re both working to achieve universal healthcare, says Kohloffel. He says the private and public health sector can learn from each other.
“What we do really well is collect money, we limit our bad debts and liabilities, pay off investments and all the rest of it. What the public sector does really well is take a miniscule budget and, despite tenderpreneurship and other interesting things that come along to try and grapple at that money, they make it last for 365 days.”
<a href="http://www.forbesafrica.com/cover-story/2017/10/02/suffering-waiting-wrong-side-divide/" target="_blank" rel="noopener noreferrer">READ MORE: Suffering And Waiting On The Wrong Side Of The Divide</a>
The private sector needs to try and provide solutions, rather than criticizing the NHI.
“This doesn’t happen for two reasons; first the status quo is always more comfortable, and the second thing is a lot of people see change as a threat. It’s far easier to criticize than to come up with solutions… So the private sector is not stepping forward to embrace what the government is saying needs to be achieved, and the government does not necessarily want to hear about the stumbling blocks that are in the way of achieving a political necessity as well as what’s in the best interest of creating a sustainable solution for coming generations using a collaborative approach. Currently we need accessibility to the Department of Health so we can talk solutions and not keep having doors closed because we are the private sector.”
NHC Medical Services has four health centers in the Gauteng province – in Bryanston, Honeydew, Northcliff and Centurion. It plans to open a center in Thohoyandou, in the northern Limpopo province. It also has a network of over 1,000 doctors across the country.
Kohloffel says <a href="https://nhcltd.com/" target="_blank" rel="noopener noreferrer">NHC Medical Services</a> will need to adapt once NHI is introduced. He sees it treating patients in a preventative manner.
“In winter, we all sit there like vultures hoping for the flu season to come in. The flu comes in via some Boeing from the northern hemisphere, drops the flu here, and suddenly everybody is sick and we rub our hands together because we’re making more money. Now you’ve got to change the mindset to a system where you don’t want that plane to arrive with sick tourists and, if it does, have a strategy to reduce the chances of us catching it through other preventative measures, such as flu vaccines and vitamin boosts.”
“We are going to go from being a fee-for-service providing care organization &#8211; so when you’re sick you see me, when you’re not sick, you don’t see me &#8211; to being a preventative care-based organization. We’ll have to start to look at how to screen our patients for cardiac problems, diabetes, cholesterol and all the rest of it. It’ll no longer be for patients to have an event and then we say now we need to manage your cholesterol. So, now we don’t want people to be in hospital, we want to prevent them going to hospital.”
Private healthcare will focus on areas that NHI won’t cover.
“NHI does not cover cosmetic dentistry, it will not cover breast enlargement, and so on. People will have to buy private insurance for that,” he says.
Kohloffel’s optimism over NHI doesn’t mean he is burying his head in the sand.
“I think we’re in for a big wake-up call… NHI, for us, is going to be a big challenge. Is it going to be a financial threat? Well, people have to get used to the fact that life is going to change. Life is going to change as you know it as a consumer, and as we know it as a provider of care, if this system is implemented in its current shape and form.”

‘Healthcare Has Got To Be Available To Everybody’

John D. Rockefeller said the secret of success is to “get up early, work late and strike oil.” Uganda has struck oil; around 6.5 billion barrels are scheduled for commercial production in 2020. This drive towards production, which government estimates will attract investment of up to $8 billion, has raised the prospect of increased demand for auxiliary services, including insurance.
“An oil and gas co-insurance syndicate has been established to pool the industry’s technical and financial capacity thereby better positioning us to underwrite oil and gas risks,” says Miriam Magala, Chief Executive Officer at industry lobby, Uganda Insurers Association. “In addition, the syndicate is serving as a capital pooling mechanism.”
Insurance companies in Uganda held around $177 million worth of gross written premium in 2016, up by 3.6% from the previous year, according to the Insurance Regulatory Authority of Uganda (IRA). But this compares poorly with average growth of 17% in the last five years, even as assets increased by 9.3% to $114 million, says Kaddunabbi Ibrahim Lubega, the IRA’s Chief Executive Officer. The market paid $72.8 million in claims, while life insurance registered the most growth at 32.7% in sum assured.
<a href="http://www.forbesafrica.com/focus/2017/09/18/africa-ditch-ubuntu/" target="_blank" rel="noopener">Should Africa Ditch Ubuntu?</a>
Premium growth will likely more than double to 8% this year, according to Magala, on increased regulatory enforcement of workers compensation, motor third-party, ring-fencing of marine insurance, and implementation of a $1.4-million government subsidy for agriculture insurance. The industry expects penetration to increase from just less than 1% of GDP to 3% by 2025, she adds.
“We expect a stimulus effect from large public investments intended to address infrastructure constraints and prepare Uganda for oil production,” says Lubega. “In readiness of the market, an oil and gas syndicate on a co-insurance basis was approved.”
As prospects increase, two of the continent’s largest reinsurers, Africa Re and Zep Re, have set up offices in the capital, Kampala, as they seek to tap cessions emerging from the oil and gas sector.
In anticipation of increased activity, the government pushed reforms through parliament last year to improve the financial system, introducing risk-based supervision where an insurer’s capital requirement will be automatically adjusted – depending on the risk they are carrying. The amendments also covered compliance with insurance core principles and financial action task force (FAFT) regulations, according to a ministry of finance report, which also notes that the amendments also improved harmonization with the East African Community bloc requirements.
A separate amendment also introduced bancassurance, a distribution channel that is expected to promote growth of the sector due to the vast bank network in the country, says Lubega.
<a href="http://www.forbesafrica.com/politics/2017/06/05/agriculture-behind-africas-health/" target="_blank" rel="noopener">Agriculture Behind Africa&#8217;s Health</a>
In agriculture, the insurers lobby estimates companies will underwrite $2.3 million in the next six months, before applying the government subsidy, as the pilot scheme looks to guarantee returns from crop and livestock farming, according to Finance Minister Matia Kasaija.
Insurers needed to work closer with farmers to understand different crop varieties and planting windows in order to reduce commercial premium rates. Corn is covered as high as 23.9% versus a 10% average affordable to farmers, according to Shadreck Mapfumo, the International Finance Corporation’s Senior Financial Specialist.
“I don’t think we are ready to provide sustainable agriculture through insurance when we don’t have the man power,” he told an industry conference, in Kampala, in May.
According to Magala, other areas of opportunity include a new requirement to check for motor third party insurance as part of the mandatory vehicle inspection checks, which should see compliance boosting premiums. The government has also made it mandatory that policies on ships, aircraft and other vehicles registered in Uganda – as well as goods imported from other countries – be issued by locally licensed insurers in Uganda. Unlike many countries, the Ugandan government does not insure its assets. If it did it would see a windfall in excess of $27.5 million covering public sector workers compensation, fire and public liability insurance, says Kasaija.
Despite low insurance penetration in Africa, analysts remain bullish on Uganda.
“Foreign investors are interested in Uganda due to the positive growth trend and favorable business environment,” says Arthur Kamp, Investment Economist at Sanlam Investment Management. “Uganda is going to exceed Kenya in terms of total population numbers by 2040. Population growth is an indicator of development.”
Ugandan insurers are taking note. &#8211; Written by Joseph Burite

Oil And Farming A Boon For Insurers

At Mable Busagwa’s store in the central Ugandan district of Wakiso, the six kids playing on the verandah give the impression it’s a daycare center, but the branded merchandise on the cabinets quickly betrays that. Busagwa, 52, has run the store, where she also lives, for two decades, often helping take care of her neighbors’ kids as the mothers go off to work in the capital, Kampala.
A grandmother of one, Busagwa holds no insurance policy – be it for fire, accident, property or health – despite being diabetic. When she falls ill, Busagwa can count on her neighbors for nursing and her adult children to pay medical bills. If a fire destroyed her store, material and financial support would pour in from the community members, helping her rebuild.
This age-old reliance on family and community has served as an informal type of insurance for a majority of Africans on a continent where insurance penetration in most countries accounts for less than 1% of GDP.
But for Corneille Karekezi, Chief Executive Officer of Africa Re (African Reinsurance Corporation), one of the largest reinsurers in Africa and the Middle East, it’s time the continent put an end to the system commonly known as Ubuntu.
“My vision for the insurance industry on the continent is a vision where every African citizen will know that there is a mechanism of risk sharing, of solidarity which can improve his/her life,” says Karekezi at an industry conference in Kampala in May. “We cannot count eternally on our traditional structures of solidarity which are under immense transformation because of the social, economic and demographic transformation of our continent.”
“In our culture, we have developed self-insurance and community resilience based on families, communities, villages. Because of the good culture of African countries of helping each other in families, expanded families, communities, villages, that is an informal way of insurance,” he says.
“Now we are talking about a formal way of insurance where any African citizen will pay premium to an insurance company which will be ready to assist him in case of a claim or accident or loss. We have to create that trust, that education.”
<div id="attachment_33501" style="width: 511px" class="wp-caption alignnone"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-33501" class=" wp-image-33501" src="https://www.forbesafrica.com/wp-content/uploads/2017/09/Corneille-Karekezi-e1505719882877-300x199.jpeg" alt="" width="501" height="332" />Corneille Karekezi (Photo by Joseph Burite)</div>
Karekezi, a Rwandan who boasts 25 years’ experience in the insurance industry, has served as Africa Re’s CEO since 2011, rising from Chief Operating Officer and Deputy Managing Director. He previously served as the Managing Director at Sonarwa S.A. and has been a Director at Shelter Afrique. Karekezi also served as a Governor of the Eastern and Southern African Trade and Development Bank.
Africa Re, established in 1976, is owned by 41 African Union member countries which control 33.59%. The African Development Bank has an 8.17% shareholding and 111 African insurance and reinsurance companies hold 32.85%. Canada’s Fairfax Financial, France’s AXA and Proparco, as well as IRB Brasil RE of Brazil, control a combined shareholding of 25.39%. The reinsurer has opened a seventh office in Kampala, Uganda, to tap opportunities emerging from the East African nation’s oil and gas sector, says Karekezi.
Africa Re accounts for one third of Africa’s reinsurance market capacity as measured by shareholder funds, which is an estimated $2.9 billion, including South African reinsurers. The continent has 47 reinsurance companies that write only 35% of African reinsurance premium income, according to Karekezi.
Africa Re estimates the reinsurance market of Africa in 2015 fell by 12.5% in US dollars but grew by more than 15% in local currencies. It likely “contracted further in USD terms because of the massive depreciation in Sudan, Egypt and Nigeria.”
“The currency in Nigeria is really under pressure and that has impacted the topline in USD. For Africa Re, the decline in USD has been 5% but this is really a matter of conversion and reporting, but underlying business has been growing by almost 11% in different currencies,” says Karekezi.
“Insurance uptake is still very low in Africa due to the high poverty rate and lack of capital and expertise within insurance companies,” reads a report by the African Insurance Organisation. But “shifting demographics, changing cultural norms, an increasing urbanization as well as declining influence of extended family as a source of informal insurance are likely to accelerate insurance sales further,” the report, known as the Africa Insurance Barometer, says.
<a href="http://www.forbesafrica.com/uncategorized/2017/09/18/oil-farming-boon-insurers/" target="_blank" rel="noopener">Oil And Farming A Boon For Insurers</a>
While Karekezi sees a need for consolidation, African insurance companies will need help.
“More cooperation, more integration of markets and more importantly, enough capital in the insurance and reinsurance industry will be the major factor if we want Africa to retain more risks and premium income,” he says.
“Today, 65% of reinsurance premiums generated on the continent are leaving the continent because of a lack of financial capacity.”
South Africa, the continent’s most industrialized country, accounts for 72%, or $46 billion, of Africa’s insurance premiums. The other major markets are Morocco, Egypt, Kenya and Nigeria, according to the insurance barometer report. Life, motor and engineering are the fastest growing lines of insurance business, the report shows, while the fastest growing distribution channels are bancassurance and mobile phones.
“We know that in our dignity as Africans, when we had elders among us we used to accommodate them and stay with them in villages but now families are scattered with children going to study and work across the cities and countries… a child will be sending money via mobile phone to his father to help him buy this and that, to buy medicine for his cow. Very soon, the means of payment will be electronic, even in the villages, it’s coming with mobile money and other systems of payment,” says Karekezi.
“All those things cannot be managed as we used to manage them in the past. The sooner we increase the education of insurance, the better we will manage our various challenges in terms of risk management in our lives, families, communities and even state,” he says.
“If we don’t do that, we will have tremendous challenges and problems.” &#8211; Written by Joseph Burite

Should Africa Ditch Ubuntu?

You just got paid: your aunt asks for $50 for her routine medical check-up; your cousin needs an extra $30 for her tuition fees; your mother needs $20 for a new dress; your landlord is knocking on your door for his $500. Your remaining $200 is not enough for your car and insurance, young brother’s school trip and for many others who yearn for a better life through your bank balance.
This is the story of black tax that millions across the continent live with. The question is, with economies worsening, is this family support tenable, archaic, or an important part of modern African culture?
Either way, many of those fortunate to be working end up in debt because of the demands of their families.
In these tough times, debt is a growing problem. In South Africa alone, 6,000 people apply every month for debt counselling – simply put, lessons on how to get out of debt.
The South African Human Rights Commission (SAHRC) confirmed over half of South Africa’s consumers are carrying too much debt. For many young, rising professionals, black tax may not be the sole reason – but it doesn’t help.
Paul Egan, Managing Consultant at UCT Unilever Institute of Strategic Management, says black professionals are suffering more than most in these difficult times.
“Compared to their white counterparts, who felt less pressure at an early age of their working lives in terms of responsibility beyond oneself, black middle-class are exposed to much responsibility earlier,” says Egan.
Not everyone believes they have to pay.
“Just because you are my extended family doesn’t mean I owe you anything. The only person I can send money to is my mom and that’s it. Finish. Other people can go and make their own money, at the end of the day I work hard to earn my money and I won’t just give it away to people because they’re family. In other words, black tax is a definite no from me,” says Yonela Mgwali, a journalist and South African graduate.
Many share his sentiments but say nothing for fear of family backlash. Many comply privately.
If you google black tax, a name from Zimbabwe will come up: Gerald Mwandiambira, from the South African Savings Institute, who is seen as an expert. He warns that in African families, where everyone claims to have raised you, the bills can weigh heavily.
“Giving back to the community that helped raise you is not black tax, it is one’s moral responsibility that is deeply entrenched in our values as Africans,” says Mwandiambira.
“There was a time when I had no salary as every cent went to black tax,” he chuckles.
“You look after ageing parents, siblings and your own children and this leaves one financially constrained at the end of each month as 80 to 90 percent of your salary goes towards black tax.”
Mwandiambira is one of many who believe financial instruments should be designed to foot the bill.
“Of all financial products in the market today, funeral policies are the only products designed with this in mind. This is a uniquely African situation.”
Single parent homes make it worse. Then there is the allure of success which brings with it the mantle of lender of last resort.
“We put ourselves under pressure once we have vestiges of success,” says Mwandiambira.
Nozipho Mbanjwa is an anchor at CNBC Africa. She has a master’s degree from Stellenbosch University and many family responsibilities.
“I am the eldest of the three girls in my family, I have helped send some to university and I am currently building a house at home. We have a sense of pride when we plough back to our families, we have an understanding of ubuntu (humanity to others) and we are who we are not because of whom we are,” she says.
Mbanjwa believes it is a hangover from apartheid and agrees with Mwandiambira that there is need to work on investment strategies.
“We need to create sustainable structures that allow our families to be entrepreneurial and self-dependable. We need to innovate so we continue upholding our values.”
Tshepo Maota, a young accountant in Johannesburg, calls for improved financial literacy.
“We need to start teaching our people models of investments,” he says.
“Black people need to put in extra hours, compared to their white counterparts, to remain competitive and meet family obligations.”
Lebogang Mokgethi, a postgraduate anthropology candidate at the University of the Witwatersrand in Johannesburg, is also a supporter.
“I don’t want to be the only graduate in my street; it does not mean anything to me. I am playing my role by empowering my family members and high school learners with career guidance and leadership,” she says.
“We have the Italians, the Greeks and the Jewish racial groups who work collectively to help lift families from poverty. Instead of giving money to buy a microwave, we need to invest in small businesses.”
Zweli Mabhoza, a tax advisor and founder of Premier Priority Tax Solutions, sees black tax as a way of managing resources.
“A lot of people complaining about black tax are products of black tax themselves,” he says.
“Sometimes you don’t have to give anything to people who helped raise you but simply replicate what was done for you.”
Black tax, love it or hate it, if you are a young African professional, you are mostly likely to have to pay it.

Black  Taxed

Time and again, we read of celebrities who have made and lost huge fortunes. Behind the veil of celebrity, are ordinary people that make mistakes with money just like everyone else; however their mistakes can appear to be more pronounced, as they cannot be easily reversed. Here are some important celebrity money lessons for us all.
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<h4>Overspending</h4>
Celebrities are under enormous pressure to keep up appearances and often live a lifestyle far beyond their means. But spending excessively over a period of time without corresponding inflows can have dire consequences. Celebrity is almost synonymous with luxury; it is a lifestyle that is associated with visible success, not financial stability. Building wealth is not about how much you make, but how much you keep.
<h4>Poor investment choices</h4>
Seeking professional advice is always recommended, as advisors have a plethora of information with which to make informed decisions. However, not all financial advisors are honest or appreciate the fiduciary duty that comes with money management. Many celebrities delegate total responsibility to “advisors” who may end up mismanaging their money, defrauding them or making some poor investment choices. It is important to do thorough due diligence before engaging any professional.
If you pay little attention to your investments and do not understand what you are getting into, you become very vulnerable. Even though you might not have the time or expertise to manage your own finances, you ought to have a basic understanding of what you are investing in as well as the implications of doing so.
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<h4>Not paying taxes</h4>
Tax laws can be confusing and are constantly revised. Whether you are the ordinary worker or a celebrity, tax obligations cannot be ignored or they will come back to haunt you. Many celebrities have fallen foul of tax laws as they have not kept abreast of this important aspect of their financial lives. Remember that you are obliged to pay tax and if you fail to do so, the law will eventually catch up with you.
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<h4>Not having a prenuptial agreement</h4>
The pressures of celebrity, in the full glare of the media and the public, can put tremendous strain on relationships. If you bring substantial assets to a partnership, particularly where this might be a second or third marriage, it is worth considering a prenuptial agreement to protect assets before getting married. It may not be romantic, and it might not feel right to keep assets and properties separate, but it can save a couple from drawn out agony during a divorce.
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<h4>Not reviewing an estate plan</h4>
An estate plan should be updated to address any major life event, such as the birth of a child or grandchild, a marriage, or a divorce. If one fails to do this, beneficiaries that you planned to bequeath assets to might end up being left out of a will or trust.
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<h4>Not having adequate insurance</h4>
A serious illness or disability can obliterate one’s finances, especially if you have a career in sports or the entertainment industry. People tend to overlook the financial implications of a serious illness and ignore the need for insurance until a major mishap occurs; it is only then that the impact of inadequate insurance coverage or emergency savings is glaring. No matter how meticulous you are with your finances, failure to purchase adequate insurance can impair your financial future and put you in a desperate situation in an instant.
You may not be a celebrity but there are countless lessons to learn from their lifestyle. Plan for what could be an uncertain future by diversifying earning streams, investing and protecting the large sums of money earned today for tomorrow to avoid the road from riches to rags.
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For more personal finance tips, follow Money Matters With Nimi on Twitter: @MMWITHNIMI and Facebook: MoneyMattersWithNimi

Lessons To Learn From The Rich And Famous

With all the excitement and anticipation that comes with holidays it is so easy to overspend. Here are a few tips to manage your holiday finances and still have a lot of fun.
<h4>Plan ahead</h4>
By booking early, there is time to shop around for the best deals on fares, accommodation and tour packages. If your plans aren’t already in place, you will have little flexibility and will have to accept whatever is available. Last minute bookings can cost you much more than if you had booked weeks, if not months, in advance. This can get really expensive particularly for a large family.
Air miles are useful in offsetting some of your ticket or accommodation costs. However, it is a challenge to find air mile tickets during peak periods.
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<h4>Draw up a holiday budget, and stick to it</h4>
You do not have to travel to an expensive and exotic location just because everyone else is doing so. Set an overall spending limit involving your family and try to stick to this. You will need to budget for the various aspects of holiday spending. Avoid borrowing to finance a holiday unless there is some certainty of an impending inflow of funds or other compelling reason to do so.
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Credit cards, debit cards or cash?
If you plan to use your cards while you are away, notify your bank or card company; as an added security precaution, many card providers look out for suspicious activity and your account may be suspended until they have confirmed that it is indeed you using the card.
As far as possible, use your debit card for withdrawals at ATMs during bank opening hours. Always hold some cash just in case your card is lost, stolen or fails to work.
Licensed bureau de changes are usually available at airports; this is very convenient particularly when you arrive, but they tend not to be as competitive as those in town. Also, be cautious when you patronize moneychangers, as there is the risk of being shortchanged or sold counterfeit money.
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<h4>Beware of roaming charges</h4>
The new-generation smart phones provide us with instant access to the internet. We thus unwittingly leave ourselves open to exorbitant international roaming charges. The continuous activity as soon as we switch on our electronic gadgets utilizes data, leading to constant charging and a shocking bill when you return home.
Fortunately, smartphones have a range of options and you can choose which services to switch off. After disabling data services, you can still make and receive calls and send and receive text messages. In addition, you can turn this feature on and off,  so you can still check your emails periodically.
You will have access to Wi-Fi hotspots at internet cafes and your hotel. Use ‘free’ hotspots with extreme caution, particularly for transactions; they may be convenient but are not always secure and you could be compromising your sensitive information. Reduce your vulnerability by using strong passwords and security software.
It makes sense to buy a local SIM card when you arrive at your destination, making calls will be much cheaper than using your usual number.
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<h4>Are you insured?</h4>
While vacations usually go without incident, you don’t want to be caught unawares. What if someone in your family suddenly becomes ill? What if your luggage gets lost or you have to cancel your trip? Travel insurance usually includes coverage for medical bills, lost baggage and cancellations. Read the fine print to ensure that you have the best coverage at affordable rates and make sure you have your medical insurance card.
Above all, remember that a vacation is really about spending quality time with loved ones, resting and having time for yourself. It doesn’t have to be expensive; you can rediscover your own environment by visiting places close to home, revisit your hobbies, pastimes, and sports. With a little careful planning, you can find a balance between having a holiday and still keeping your finances in check.
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For more personal finance tips, follow Money Matters With Nimi on Twitter: @MMWITHNIMI and Facebook: MoneyMattersWithNimi

Managing your holiday finances

Widely regarded as one of the best business leaders to have emerged from Africa over the past 20 years, there is not the slightest embarrassment on the face of this self-taught entrepreneur as he admits to having no investments—none whatsoever—other than the shares he has in Discovery Holdings, the company he formed over 21 years ago and built into a global diversified financial services group with an annual income of more than $4 billion (R40 billion).
With glee, he says he doesn’t subscribe to the conventional investment caveat of not putting your eggs in one basket. So, he is invested to the hilt in Discovery, now the largest health insurer in South Africa, of which he owns about 9%, part of a personal fortune of close to $300 million (R3 billion).
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Welcome to the world of, the sometimes maverick, Adrian Gore.
It is a day after Gore released more than respectable annual results for the year that ended on June 30. The results showed that the group had achieved a 20% increase in normalized headline earnings, to almost $281 million (R2,8 billion), while cash generated from operations was up by 45% to over $201 million (R2 billion). All this with a 15% rise in new business to $1 billion (R10 billion), mainly in Britain, China and the United States.
An ebullient Gore intimates that taking on the rest of the African continent could be in the offing in another three to five years.
“You don’t have to be first. I see a massive opportunity. Health insurance requires private health systems not yet present in Africa.”
Not that he hadn’t tried before; the company had to reassess its strategy following a couple of dud acquisitions.
“Ours is about building a product—not buy a business and bring costs down to make a profit. We create value for customers,” he says.
Gore’s contemporary, Barry Swartzberg, with whom he left Liberty to start Discovery and remains an executive director, was asked recently how the two complemented one another.
“He’s more thoughtful, works on aspects, takes a long time to mull over ideas.”
An actuary by training, Gore has spent the past 21 years changing the world of medical insurance in South Africa. Today, the company is a fully-fledged financial services entity after adding insurance and life asset management to its portfolio.
Gore now wants to change the world, and looks like he’s very much on the way—one country at a time.
In China, Discovery has a 25% stake in Ping An Health Insurance, the country’s largest private health insurer. It does business with companies like Volvo, Unilever and Goldman Sachs. In Britain, the company has created the fourth largest insurer in an alliance with old stager Prudential. It also has ties to Humana Inc in the United States, and the AIA Group in Singapore.
“China remains a huge growth market, with the estimated total healthcare spend expected to rise by over 90% by 2020. Private healthcare spend is expected to grow even stronger over this period. Ping An has established itself as the leader in Critical Illness Insurance and related spend, a strong position to be in given that approximately 65% of deaths are classified as non-communicable diseases. By increasing their stake, Discovery has identified this opportunity,” says Nick Crail, a portfolio manager at RMB Private Bank.
“Getting into these markets is brutal,” Gore says.
“There’s no easy way or short cut. Each market takes time.”
The market appears to approve of the AIA deal in Singapore. On the day it was signed, Discovery shares shot up 6.6%.
“The AIA deal entrenches Discovery’s footprint across the growth markets of Asia, excluding Japan, giving them access to 17 markets in the region with total assets of approximately $147 billion. Discovery has entered this market through their offering in Vitality. This will therefore be a cost exercise for them for the first few years, but should realise profits into the future,” says Crail.
“I think, judging by the rally in the share price, that the market has already priced in much of these ‘blue-sky’ ventures. Their recent trading update unsettled markets somewhat and we would expect investors to be more cautious in driving up the share price too strongly. Therefore we wouldn’t expect much more in the share price to year-end. Having said that, we like Discovery and believe in their long-term outlook.”
In Britain and the United States, Discovery entered markets that were already established, with a great deal of certainty, facing a myriad of competitors and very tight regulations. It made it difficult for Discovery to innovate as much, or as well, as it would have wanted. A developing market like China, on the other hand, while posing lots of possibilities, is a frontier that still calls for a fair amount of learning and cautious optimism.
Tenacity from the pioneering years of their South African operations has made Discovery able to withstand pressure and adapt.
“South Africa is a small but more sophisticated market than we are getting credit for,” says Gore.
Paul Theron, CEO of asset managers Vestact, says Gore’s character has been one of the key factors behind Discovery’s success.
“His growth has been amazing. It wasn’t a completely unique product that he was selling, coming out of Investec to start Discovery. But to go from that tiny firm to span into a global expansion has been brilliant.”
“They had some problems in the US. But in the UK they have been able to offer a good product around Vitality. The intellectual property is certainly something that will do well there. Incentivizing people with a healthy lifestyle will certainly take off. Along with the operational expertize having been around for a good number of years. Many people can come up with a good idea, but to actually make it work and have it run successfully over a number of years is an entirely different matter,” he says.
Discovery’s latest foray is into Singapore. It was announced in July, but Gore has little to say months later.
“We haven’t divulged the details of the transaction,” he says.
It is a trait of Gore that he has little to say about his missions until they are accomplished. This has been since the day he left Liberty Life, after developing the itch to start a small medical insurance unit within financial services group FirstRand, through the listing on the Johannesburg Stock Exchange to unbundling from the parent company. It led to Discovery claiming more than half of the South African health insurance market. A story of more bite, less bark from the man who keeps to himself.
Laurie Dippenaar, who is 23rd on the FORBES list of the 40 Richest Africans and the father of FirstRand, was the man who gave Gore his shot. He has a clear memory of their first meeting.
“You could immediately see this guy was different. He was not the typical chartered accountant nerdy smart. You could see he had intelligence but he also had business sense, all the qualities that make you a success. I think he is actually one of the smartest business people I have ever met.”
According to Dippenaar, Gore’s first pitch didn’t go as well as he planned. The life insurance scheme was too much like others.
“To this day he says I got it wrong. A year later he comes up and says he’s got something completely different. From life insurance he had gone to a health insurance. He started to describe what he had in mind and I could immediately see he was onto something.”
This something was Discovery.
“When he described that medical savings account, it was a pioneer move in South Africa. I remembered when I was a bachelor and paying all these premiums for health insurance. You are young and healthy you don’t need to claim. All you do is pay premiums. Here was a product where you could carry forward some of the premiums if you were not claiming. In theory you could get into a situation where you didn’t have any premiums to pay,” says Dippenaar.
Gore left his job and Dippenaar gave him three months to draw up a business plan, in Dippenaar’s own offices.
“He never had any hesitation. He came up with the numbers. We liked it. So we backed him,” he says.
Gore is undoubtedly a darling of his shareholders, as well as share speculators, but that’s not to say he is liked by all. He has made enemies and detractors. He stands accused, for example, of squeezing competitors out at every opportunity, a charge Gore denies vehemently.
“I don’t think that is fair. We are strong competitors and more competition is good for society. We do nothing unfairly.”
It’s not only competitors who are unhappy. Doctors have taken issue with Discovery’s payment rates, where practitioners are forced to cap their rates and accept smaller fees. Gore’s defence? Nothing wrong with the practice.
“After all, we are the paymaster.”
What about the hundreds of thousands of people covered by Discovery Health? Some of them think Discovery is making huge profits on the back of above-inflation medical rate increases, while bombarding them with peripheral benefits like gym contracts.
Furious customers, writing on a business news website on the day of Gore’s announcement of financial results, complained bitterly about forever shrinking benefits, while others used words like “robbery”, “rip off” and “gimmicks” to describe Vitality, Discovery’s rewards-for-healthy-living scheme.
“These are natural issues,” Gore says, “they see the money we make.”
It doesn’t bother him much, though, as experience shows that customers stick with Discovery.
“The customer satisfaction rate is very high,” he says proudly.
Honesty and optimism have been driving forces at Discovery from the day it was established, says the man who prides himself for being, in his own words: innovative and prudent.
“Building insurance around making people healthy may be quite soppy”, he says, but it has been the key to success in international markets.
“We know where to be bold, and when to be reticent. We are pushing hard on the ground, taking no prisoners. We are ruthless.”
Gore’s steely, and ruthless, determination is often likened to that of Steve Jobs, the late genius who founded Apple and who was liked and hated in equal measure; depending, of course, who was telling the story.
There are two framed pictures of Steve Jobs in Gore’s office. One is from a business leadership article and the other is from a cover of the Economist magazine.
Gore is at pains to explain that Jobs graced the cover in the same edition that carried a story about Discovery. In the piece, the Economist hails the innovation of Discovery’s Vitality program as an example of how quickly new ideas are starting to flow out of emerging markets to challenge the world.
As for Jobs, Gore finds him very inspiring—especially for his obsession with one product.
“The obsession with a solution for society,” says Gore, who says he uses this belief at Discovery.
“Every organization must be started by someone,” Gore says, “owner-manager culture has a certain drive to it, a certain authenticity.”
Discovery’s success owes much to its founding team, most of whom are still with the company.
“But what’s most exciting about Discovery is that the future is ahead of us,” Gore says.
That future, though, may be under threat. At least, according to analysts.
The private health care industry is nervous about the announcement by the South African government—the continent’s biggest economy and a huge contributor to Discovery’s profits—that it is planning to introduce National Health Insurance (NHI). It will be funded through taxes and administered by the state; the NHI will strive to give health care to all.
Some analysts believe it will make a huge dent in medical insurance industry profits, big enough to send a few of them under. They single out Discovery as one company on the risk list because of high administration and managed care charges.
“We will have to adapt in some way, but I don’t think it’s threatening at all,” says Gore.
Gore says while NHI was excellent and rational and could strengthen the public system dramatically, it won’t supplant the country’s private health system and will take much longer to introduce than the 12-13 years the government has given itself.
If history is anything to go by, there can be no doubt Gore and his team—called the best brains in the industry—are busy preparing, which probably explains Discovery’s involvement in at least one NHI pilot project.
“Status quo is undesirable. You can’t have huge portions of the population with no access to proper health care. It’s not good for the country. I don’t think a great business exists on the back of dysfunctionality. You can’t exist at the expense of society. You’ve got to be part of society,” says Gore.
But what is he doing for that society? That is, when not ensuring that everyone is covered, or spending time with his wife, his two university student daughters, and the son he takes to school every day.
Driven by a philosophy that only entrepreneurs create jobs, Gore chairs Endeavor South Africa, the local chapter of a global non-profit organization that seeks to identify and nurture young entrepreneurial talent. It’s where he hopes to find, mentor and offer a break to future Gores – perhaps in pretty much the same way Dippenaar did for him 21 years ago. First lesson, don’t take prisoners.

A Maverick  In Rude Health

With six months to go before South Africa’s governing party, the African National Congress (ANC), goes to its elective conference, incumbent president Jacob Zuma looks set to get another term. And with that, a renewed focus on continental politics, for which his critics have chided him.
Zuma’s opponent, Julius Malema, the party’s rebellious youth league president, is not contesting the ANC presidency but is the spokesperson of a disparate group united in wanting the 70-year-old former political prisoner and intelligence operative removed from power. Their campaign though, has been dealt a huge blow.
Malema is facing several disciplinary charges and the party’s internal disciplinary committee has found him guilty on some, meaning that whatever the outcome, the young man looks set for the political rubbish dump. Unless a worthy challenger emerges between now and the December conference and goes on to defeat Zuma, he is set to remain at the helm of the 100-year-old political party and the head of Africa’s most powerful economy.
Among Malema’s most stinging criticisms of Zuma’s reign was that he had failed spectacularly where his predecessor Thabo Mbeki had done extremely well—in pursuing the African agenda. It was a criticism, and a comparison, that hurt Zuma and one that he has since looked eager to correct.
So, on March 20, when Zuma walked into the Sandton studios of pan-African television channel CNBC Africa for a live hour-long interview, with some of the continent’s CEOs and board chairpersons in the audience, he knew he had a mission to accomplish, or as his aides would have probably preferred to put it, he had a myth or two to debunk.
Sitting opposite CNBC Africa’s chief editor Godfrey Mutizwa, and occasionally fielding questions during crossings to CEOs in countries like Nigeria and Kenya, Zuma showed composure for someone who has countenanced perhaps harsher criticism than any post-apartheid president.
While some of the condemnation prior to his election had a lot to do with his indiscretions, which in turn led to sexual assault charges against him, others were in subtle ways questioning whether a man with only a primary-school education, would be able to fill the shoes of his Sussex-educated predecessor and intellectual, Mbeki. Was he best suited to preside over an ambitious country that not only likes to punch above its weight, and which likes to be loved, but is also the most sophisticated African economy?
The more Zuma sold his optimistic disposition of the continent to the CNBC viewers and the studio audience, the more friends he seemed to be making among the attendant captains of industry, many of whom wasted no time in praising him for his “insightful comments” and for “answering questions”.
One of the continent’s biggest “strides”, he said, was the formation of the African Union. “For the first time, we could define ourselves as one, as Africans and not as former British, Belgian, French colonies.”
The AU has been credited with bringing about continental political stability through promoting the culture of democratic elections as well as the principle of non-recognition of people who grab political power through coups d’état.
Zuma shared with his audience how the AU had advanced in getting member states to commit to investor friendliness, infrastructure development, better and responsible management of natural resources, environmental sustainability, education, and had now started talks about the integration of the continent’s five regional economic blocks. Asked to give timelines for the “practical implication” of the integration process, he replied: “It took two world wars before Europe could come together. Africa should be given a chance.”
A welcome sign of confidence in Africa’s future, Zuma added, was the inclusion of South Africa in BRICS, the increasingly influential group of emerging economies: Brazil, Russia, India and China. “Africa is now part of countries that are going to determine (the world’s economic) direction,” he said.
“I don’t see a crisis. I see prosperity in Africa,” he told the audience, and with a great deal of satisfaction, not to mention his trademark coy chuckle that usually signals cynicism. “Other people speak positively about Africa. Sometimes it’s Africans themselves who are negative; who feel Africa is in trouble.”

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