South Africa’s economic picture is all but rosy at the moment. For example, in the days leading up to the election day, the country underwent 26 days of load shedding. At the same time, fuel and energy price hikes exacerbated rising household and food costs. The Reserve Bank predicts that if load shedding had persisted for the rest of the year, the country could have lost 100 000 jobs. Can investors find opportunities during these times?

Election, energy and economic woes page 3

ecsponewsMay 2019

South Africa: info@ecsponent.com • 087 8080 100 • 1st Floor, The Wedge, 43 Garsfontein Road, Waterkloof, 0145, Pretoria, GautengEswatini: info@ecsponent.com • +268 2417 1616 • Office No. 5A, Ezulwini Shopping Centre, Portion 15 of Farm 706, Corner Plaza, Ezulwini, EswatiniBotswana: botswana@ecsponent.com • +267 391 8756 • Unit G3, Victoria House, Plot 132 Independence Avenue, Gaborone, BotswanaAll content is for information purposes and should not be regarded as investment advice.

IN THIS ISSUE

COMPANY NEWS

Secure your attendance

Investing during uncertain times: Follow the money

Uncertain times call for smart investment strategies and, more than ever, you need to take charge of your financial future. Retreating to the sidelines out of fear is not a prudent option, and timing market can prove to be hazardous.

Join us for a company and market update, and discussions about how you can protect your investments and find opportunities amid uncertainty.

National roadshow

Limited seats available, click here to confirm your attendance or to find out more.

George28 May | 16:00 for 16:30

Port Elizabeth29 May | 16:00 for 16:30

Somerset West30 May | 16:00 for 16:30

Bloemfontein4 June | 16:00 for 16:30

Umhlanga5 June | 16:00 for 16:30

Pretoria6 June | 16:00 for 16:30

The gender pay gap is not a new discussion point but we sometimes don’t consider its long-term effects. Women generally earn less and as a result will have significantly less than men come retirement. But there’s an easy way to shrink this wealth gap: Women should be investing more and this requires knowledge, confidence and skills. This coming Mother’s Day is a time to celebrate the women who raised us, but it is also the time to remember that an investment in financial knowledge pays the best interest. Our mothers do not only provide comfort and support, but also shape our financial culture, which is why the financial literacy of women is critical.

Financial literacy empowers families page 2

In our personal finance feature, we consider the role of a financial advisor. Some people think financial planning is only for the wealthy, but that is not the case. A good financial advisor will help you make informed decisions about your finances, but what makes a good partnership between investor and advisor and how can this relationship influence your long-term financial health?

Do you have a Financial Advisor? page 4

page 2

While the annual tradition of Mother’s Day involves thoughtful

words and gifts, we often do not fully appreciate everything our mothers do and the impact they have on our lives.

Our mothers do not only provide comfort and support, but also shape our financial culture, which is why the financial literacy of women is critical.

While fathers tend to take the lead on big purchases, mothers tend to manage a household’s day-to-day money issues. Moreover, 81% of people say that their mothers were responsible for sharing basic financial knowledge with them, according to a survey conducted by The Omnibus Company. The same survey found the majority of their respondents said their mothers taught them about shopping smartly, how to approach and use “sales” and setting budgets. This is particularly important because financial lessons learnt in childhood, can set the tone for the rest of your life.

Despite this impact and role of women, they still continue to suffer the effects of gender inequality. Worldwide they suffer a lack of financial inclusion and financial literacy. Generally, women earn less, are less likely to have access to credit facilities and, as a result, are less able to break from the shackles of generational poverty.

These obstacles, and others such as the inequalities highlighted by the #MeToo movement and gender pay gap debate, feed into the broader narrative of gender inequality and the plight of women today. While many initiatives aim to redress this inequality, women are less able than men to transcend their circumstances through economic empowerment. So, in this context, how do we correct the gender imbalance and why is it important?

Why does gender inequality remain prevalent? The Women’s Legal Centre points out that gender inequality is ingrained in South African society. Furthermore, black women are especially vulnerable, owing to the racial and gender impact of poverty and unemployment. In a rural setting, these problems are aggravated.

Inequality often starts at home with the country’s high levels of violence against women, which are exacerbated by a complex criminal justice system, despite a strengthened legislative framework. These realities undermine women’s ability to empower themselves from the outset -- often with lasting consequences.

In addition to these challenges, women own less property and earn approximately 25% less than their male counterparts in the same job. We also see that fewer women are financially literate.

This financial illiteracy results in women’s inability to uplift themselves through sound financial decisions. And, as more women are single parents, they pass this lack of understanding on to their children. It makes generational upskilling difficult, which perpetuates the cycle of financial illiteracy.

How financial literacy brings about economic empowermentA term that has gained much momentum in South Africa is ‘economic empowerment’. It refers to tangible and measurable upliftment of society, breaking the shackles of poverty. Empowering women in this way will achieve the same.

Anecdotal experiences link financial literacy to real, measurable economic empowerment, especially for women.

These are supported by several studies, including those published in the paper ‘Women and Financial Literacy’. This paper asserts empirical research has led G20 leaders to conclude that financial literacy among women and girls will improve their financial empowerment and opportunities. This makes sense because sound financial decisions are impossible without some financial literacy.

While financial literacy means different things to different people, an accepted working definition is: “A combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and achieve individual financial well-being.”

Financially-literate individuals do better at budgeting, saving money and controlling spending. They also tend to plan for retirement, partake in financial markets and saving instruments, while continuing to work beyond retirement has even linked physical and emotional well-being. Studies have further suggested that such individuals have improved physical and emotional well-being. Clearly such individuals take responsibility for their own financial wellness and reduce the drain on resources of the fiscus.

How to bring about financial literacy among women, particularly the vulnerableAccording to Nomsa Daniels from the Open Society Initiative for Southern Africa (OSISA), women in the informal sector contribute financially more than is officially recorded. Yet they have substantially less access to credit. She adds that one of the main barriers to female entrepreneurial success in the informal and rural setting is having inadequate access to credit.

Financial literacy empowers familiesThis coming Mother’s Day is a time to celebrate the women who raised us, but it is also the time to remember that an investment in financial knowledge pays the best interest.

The basics of budgeting, how

and why a budget is important, and how a

budget holds you accountable.

THE INFORMATION ECSPONENT PROVIDES INCLUDES:

The importance of saving and

understanding the different types of

saving.

Understanding interest and how

it works.

Credit and how to differentiate

between good and bad credit.

Behavioural patterns and how changing habits

can go a long way to unleashing your

true economic potential.

SPOTLIGHT

ON

page 3

She points out how rectifying this could lead to closing the financial gap and broader women empowerment.

This thinking is aligned with that of the Ecsponent Group, which provides entrepreneurs who had previously been shunned by mainstream banks with niche credit solutions. The Group also includes financial literacy as part of its product. It offers, in line with its policy, that providing credit without skills will only succeed to exacerbate the problem. It knows full well the power of unleashing SMEs in Africa and beyond, many of which are run by women.

But how is this achieved? Financial services enabled by fintech has the ability to go where no one has gone before and has made a marked impact on the barriers to inclusion in the mainstream economy.

The aspects of financial literacy which are earmarked for women in Africa by companies like Ecsponent, may not seem like rocket science to the financially savvy, but they form the foundation that underpins the types of decisions that will lead to economic empowerment. Giving access to this information is as empowering as the provision of credit. Both change lives.

Conclusions on women’s empowermentThere is a need for bold and concerted action on the part of governments, regulators, policymakers and all stakeholders in the financial sector to address the obstacles to meaningful financial literacy among women.

The resourcefulness of women and mothers offer a tiny glimpse into the greater economic potential for under-empowered regions if women are truly empowered economically.

Solving the problems goes beyond paying lip-service to equality as a grand ideal. It is an economic imperative that will unlock immense economic prosperity for communities, society and all businesses operating in these regions.

What may seem like simple financial concepts to some can change the lives of others and unleash sustainable economic prosperity. Coupled with fair credit access, the potential is limitless, for women and society in general.

This is a new era for South Africa. On 8 May 26.8 million voters exercised

their democratic right, 25 years after South Africa became a democracy on 27th April 1984. Upon the New Dawn of 1994 under Nelson Mandela there were expectations, dreams... But what have become of them?

The state of affairs in South Africa is by no means rosy. Compared to most upper middle-income countries, our average annual GDP growth of 1.7% was piteous to say the least. The World Bank expects even a lower growth rate of 1.5% and the growth may slow further, unless there is a change in policy.

In April, the Bureau for Economic Research announced that the consumer confidence index has plunged to the lows experienced in 2017. In the same week, Bloomberg’s misery index declared South Africa the most miserable economy in the world after Venezuela and Argentina. It found that in a range of social, economic and governance measures, the country had deteriorated more than any other nation not at war over the last 12 years.

Politics are at the heart of the country’s woes, as the Reserve Bank states in its monetary policy review for April: “It is becoming clearer, however, that the damage done by ‘state capture’ is worse than previously understood. Capital expenditure, especially by state-owned enterprises, has been less productive than anticipated.

“To take one highly visible example, the economy has less electricity than it had a decade ago, despite massive Eskom investments in new generating capacity. Repairing the state, and parastatals, is also proving expensive, requiring higher administered prices and taxes.”

In the days leading up to the election, the country underwent 26 days of load shedding. At the same time, fuel and

energy price hikes exacerbated rising household and food costs. The Reserve Bank predicts that if load shedding had persisted for the rest of the year, the country could have lost 100 000 jobs.

Yet as recently as 2001, Eskom was considered the world’s best electricity supplier. It provided cheap, reliable electricity to everyone connected to the grid. Today it represents a huge economic risk as an unreliable electricity supply exacerbates labour and skills issues. It is also continuing to extract taxpayer’s cash as it remains plagued by a lack of working capital and a mass of other ills.

Focus on opportunity, not chaosDespite these and other challenges, South Africa has proven to be resilient. It has strong core institutions, judiciary and a solid financial sector. The country’s challenges also create opportunities which investors can turn into profit.

Ecsponent’s investment philosophy remains unchanged during uncertain market behaviours. We invest across a wide spectrum to diversify the types of assets we hold, across geographies, currencies and profit horizons.

This strategy has allowed us to thrive during the past seven years and invest in an asset base which is diversified across different growth sectors. In addition to that, our operational investments in credit and investment services continues to focus on niche areas where consumers are under-served through existing channels. This includes significant investments in energy that does not rely on coal-fired sources.

As an agile organisation, we are well positioned to respond to market challenges as they appear and find the opportunities when the challenges seem to outweigh the solutions.

Election, energy and economic woesThe 2019 election day is behind us. Now the crucial question is whether our newly elected leaders are capable of implementing meaningful policies that are likely to deliver sensible policies that have the potential for economic change and growth.

Financial Services

PERSONAL

FINANCE

page 4

Ecsponent Financial Services (Pty) Ltd is a wholly-owned subsidiary of Ecsponent Limited and authorised financial service provider registered with the Financial Sector Conduct Authority (FSCA) (FSP 32968)

All content is for information purposes and should not be regarded as investment advice.

Do you have a Financial Advisor?A good financial advisor will help you make informed decisions about your finances, but only if you are willing to disclose all your financial information.

You may feel uncomfortable with disclosing sensitive personal

information, such as your earnings, debts and savings to a stranger. But, the more your advisor knows, the better the insight to give you optimal assistance.

The advisor (make sure it is an accredited and licensed advisor) needs to understand your persona and circumstances. For example, they need to know how you feel about money, what you want to achieve and whether you are prepared to make some financial sacrifices.

It is a relationship of trust which develops over the years. In time, the advisor, you and your family become part of a team where challenges and successes are shared together. It is similar to your relationship with your family health practitioner, based on mutual respect, honesty and trust.

As with your doctor, you should also regularly see your advisor and adjust the financial plan or strategy (medication) as circumstances (physical condition) change.

Also take care not to postpone financial decisions. Be sure to have an advisor you can trust, rather than trying to solve your own financial problems without comprehending its complexity.

Never try to say what you think the financial advisor would like to hear. Without your full disclosure, your advisor will not understand your financial situation and goals and may then give inappropriate advice.

A good advisor is objective and will see to it that you make rational, rather

than an emotional, decisions. This will support you in times of uncertainty and help to avoid your deviating from the financial plan for all the wrong reasons. An advisor will ensure that a disciplined savings and investment process is followed and prevent you from delaying decisions and losing valuable investment time. See it as a helpful educational process.

You will sometimes be faced with uncomfortable realities, such as spending more than you earn and falling into debt. Or not saving enough for your retirement... or can't afford the house you are living in. Once you acknowledge these sometime harsh realities, you can adopt fresh habits around money, which can swing your financial situation for the better.

With the help of your advisor you will have a plan of action, with instructions ranging from how to use your credit cards to how your finances will be linked to your long-term money plans.

We all go through different phases of our financial life and then need advice for the next phase. For example, you are suddenly inundated with debt and don't know how to get out of it. You change jobs and don't know what to do with your retirement money. You marry or get children or maybe divorce. You might even be so lucky to inherit or win money but not know how to invest it wisely.

Investors who do not use financial advisors will often: ▪ Focus on the short term and ignore

the long term; ▪ Do not quantify different financial

needs;

▪ Be poorly disciplined and not set financial goals

▪ Not stick to a financial strategy; and

▪ Fail to provide adequate retirement and fail to protect their families from unforeseen events.

There are often misconceptions about advisors. Some people think financial planning is only for wealthy people, but that is not the case. Or they think financial planners all give the same advice, but in fact you get specialists in specific areas. Or they think advisors only act in their own interest to make money out of you. But an ethical advisor will, in fact, put the interests of the client first.

In addition, advisors are compelled by legislation, such as the Financial Advisory and Intermediary Services Act (FAIS), to exercise caution on clients' information and not to disclose personal information of clients to unauthorised persons.

Victims of a lack of financial planning abound around us. Make sure you are not one of them and get your personal financial advisor to ensure wealth and security for you and your family. With the right financial advice you can only prosper.

Some people think financial planning is only for the wealthy, but that is not the case.

Ecsponent’s Wealth division and its advisors focus on long-term financial planning, offering a wide range of products such as annuities, life insurance, unit trusts, medical funds and wills.