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Attending to SA’s trust deficit

Old Mutual’s Ralph Mupita calls for support of the NDP.

JOHANNESBURG – South Africa suffers from a tremendous trust deficit, according to Ralph Mupita, CEO of Old Mutual Emerging Markets (OMEM), a division of Old Mutual Plc.

“Business, government and labour think they are in different boats; we’re all in one boat,” Mupita told media on Thursday. Although trust has improved, Mupita said it was not at a level of “surplus” required to take the country forward.

To improve engagement, institutions and forums that are fully supported by all parties are needed, Mupita said. “Nedlac isn’t delivering on its mandate,” he commented.

With no obvious catalysts to boost low economic growth, Mupita said the implementation of the National Development Plan (NDP) is critical to South Africa’s future. “We need to stop debating whether this is the right or wrong plan. It is not a perfect plan, but no plan ever is. The NDP, we believe, is the best plan possible for South Africa,” Mupita contended.

Among the most important priorities in the NDP is power generation, the insufficiency of which is a “handbrake on growth prospects,” he said.

He proposed greater involvement from the private sector in base electricity generation, suggesting China’s hybrid model where aspects of electricity generation are in private hands while its distribution is in public hands.

Mupita argued that more of the R5.5 trillion in long-term savings in South Africa needs to be directed towards infrastructure investments, and not only capital markets, in order to address a “massive infrastructure deficit” and help alleviate some of the burden from government.

Old Mutual’s Alternative Investments business has R51.4 billion in assets under management and invests policyholder money into infrastructure, affordable housing and quality schooling. “These have generated good returns, uncorrelated with equity markets,” Mupita said.

Finally, he highlighted good quality and affordable education as a third critical outcome of the NDP. “Old Mutual has donated R350 million in pre-tax profits to support education initiatives,” he added.

NDP needs PPPs – Sanlam

Earlier this month, at the annual Association for Savings and Investment South Africa (ASISA) Conference, group CEO of Sanlam, Johan van Zyl said structural deficiencies in South Africa’s economy “have the power to sink us” if government and the private sector continue to point fingers at each other.

“There is growing impatience among domestic and foreign investors who want to see the situation change,” Van Zyl warned. “The absence of solid funding plans in the NDP is in my mind a real constraint,” he said.

“The successful implementation of the NDP requires public private partnerships. Each of ASISA’s objectives is therefore aligned with at least one NDP objective.”

Van Zyl, who is also chairman of ASISA, said South Africa was “fraught with red tape” when it comes to starting new businesses and it is becoming tougher to do business here, particularly amidst regulatory uncertainty.

“South Africa needs to play a much greater role in the economic integration of the rest of the continent,” Mupita said on Thursday. He said regional bodies such as the Southern African Development Community (SADC), the Economic Community of West African States (ECOWAS) and the East African Community (EAC), are not as effective as they should be.

South Africa, which accounted for 78% of Old Mutual’s profits in 2014, remains the group’s home base, Mupita said. “We still see a lot of opportunity to grow and expand in South Africa.”

Recently appointed CEO of Old Mutual South Africa, Dave Macready, said there were powerful opportunities that could be unlocked within the South African businesses by driving internal collaboration.

Macready was group managing executive of Nedbank Wealth and has experience in wealth management, asset management and insurance.

He highlighted collaboration between Old Mutual and its banking and short-term insurance arms – Nedbank and Mutual & Federal – as opening up opportunities in the middle market, where Old Mutual is particularly keen to grow its footprint.

For instance, iWYZE, Old Mutual’s general insurance business for the mass market, could work in the middle market, which was suited to direct insurance, Macready said.

The April appointment of former Liberty CEO, Bruce Hemphill as CEO of Old Mutual Plc, is a clear indication of Old Mutual’s intentions to maximise synergies between group businesses.

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