What a long, strange year it has been

How has 2022 been overall?

Magda Wierzycka, founder and executive chair of Sygnia, and author of Magda: My Journey: This year has come as a shock to most people. Russia invaded Ukraine when we barely started to recover from the Covid-19 pandemic. The war, and the Western sanctions that followed, have led to shortages of everything from fertilisers to wheat and oil. Unsurprisingly, inflation followed, as did massive interest rate increases worldwide. In SA, the most pressing problem has become electricity provision. Hence 2022, which can be only defined as devastating on so many levels, has, once again, illustrated that investment markets can be precarious and geopolitical co-operation a short-term illusion.

Busisiwe Mavuso, executive director, Business Leadership SA: The year came with a few challenges, lessons and lots of opportunities. Business Leadership SA (BLSA) worked on some exciting projects. We have made some great strides towards making SA good for business, and business good for SA.

Adrian Gore, CEO of Discovery Group: This past year has been a challenging one for business leaders given the aftershocks of a global pandemic, Russia’s war with Ukraine creating massive dislocation, polarising politics, and a struggling global economy. There has been a coalescing of considerable tail events, which has created a world in flux. But despite the knock-on negative effect on businesses, most local business leaders have coped reasonably.

What events stand out?

Wierzycka: Sygnia’s retail assets under management continued to grow, with the company gaining a more significant market share in a space dominated by large asset management houses. Great flexibility in working hours has become the norm and, given that the pandemic led us to hire more staff than we have desks, this is a blessing.

On the negative side, our assets under management have not grown, reflecting market volatility and outflows due to a shrinking savings pool. We have had to tighten our belts, not easy in a growing company. From an investment perspective, our most “loved” products have been passive thematic funds focused on innovation, such as technology and health care. Perversely, “demand for the future” has shrunk, with many investors reverting to investing in dinosaur companies. However, over the longer term, we strongly believe that our approach to backing what we believe will be the major trends driving global growth is correct.

Mavuso: Over the past year, BLSA and its partners have worked on a number of initiatives that aim to create a prosperous and inclusive SA, create jobs, capacitate the state, and make SA a compelling destination for investment.

We've signed a memorandum of understanding with the National Prosecuting Authority to enable it to implement one category of judge Raymond Zondo’s recommendations in his state capture report — the prosecution of those implicated in corruption.

We’ve also strongly advocated on the need for the government to urgently intervene and address the energy crisis, including the Nersa bottlenecks, the Renewable Energy Independent Power Producers Procurement Programme, and to usher in the next rounds of bid windows.

We've been actively involved in a gender-based violence (GBV) project, partnering with Matla a Bana, an NGO that fights GBV And, of course, there’s our Eyes and Ears (E2) Initiative, which is a joint crime fighting venture between Business Against Crime SA, the SA Police Service and private security companies.

Gore: For Discovery, it has been an existential test of who and what the business is about, putting our core purpose to the test like never before. As a life and health insurer, I’m pleased we were able to make a difference to our members. As an industry, we managed risk well and I’m proud of how we have come through this difficult time. It might be counterintuitive to be building in a difficult time, but that’s exactly what Discovery has been doing, scaling at a rapid pace and continuing to make a significant investment into Discovery Bank, as well as growing into markets beyond SA.

The pandemic has created a revitalised narrative about health and wellness, and increased the expectation on businesses to make a positive social impact and prioritise more than just profits. As a company founded on and directed by a core purpose of making people healthier, we take seriously our responsibility to be a force for good in society.

What lessons can we take from the year?

Wierzycka: The main lesson is to expect the unexpected. When the unexpected happens, all bets are off, with a much wider divergence of polarised views, not only about investments but global politics and events. The other is to better prepare for a world of high inflation, which requires a different and broader approach to advising savers. Standard investment advice of sitting it out and not switching to less risky assets in a downturn has gone out the window, with tolerance among investors running short. In this environment, higher absolute investment returns do not translate into higher real returns after taking inflation into account. Economist John Maynard Keynes said “markets can stay irrational longer than you can stay solvent.”

Mavuso: Adapt quickly to what comes. After two years of working from home, employees had to quickly adapt to the new normal. The ability to adapt to an evolving landscape is what helped most organisations excel during uncertain times. From a broader SA perspective, we need to move far faster in unlocking barriers to growth and development.

Gore: Businesses have a fundamental role to play in SA’s economic recovery and I remain convinced that our country’s challenges are not intractable and that solutions are available. The Covid-19 vaccine rollout was a good example of the government and  private sector working together to find solutions to a national challenge. We need to replicate that in other areas including energy, logistics, water, law and order and infrastructure.

Many view the country as moving in the wrong direction, but I think there are areas of progress in which the direction is positive, albeit the pace of reform and execution of initiatives is often slow. Ironically, desperation provides an end point, and the energy crisis has resulted in the private sector being allowed to self-generate electricity, and opened the doors to investment into power generation.

South Africans — and business leaders in particular — are well placed to become constructive activists to help rebuild the economy. We all need to make an impact.

What can we do better next year? 

Wierzycka: Regarding Sygnia, we need to refocus on managing costs. The investment environment will only get tougher, with more unhappy investors who do not have an outlet for their emotions other than their asset managers. Hence, we must prepare our approach to client service for precisely this trend.

In terms of SA, this is a complex question. We desperately need a solid economic strategy and a tighter budget. This is almost impossible to achieve in the face of having to cater to most people’s demands in a high-inflation environment. It does not help that short-term populist policies are likely to be deployed before national elections.

We need a collective imagination in resolving problems plaguing Eskom. We need skills that will have to be imported; this means making SA more attractive to foreigners and being more flexible about work permits. We need foreign investment, not short-term flows into our equity and bond markets, but on-the-ground job creators building factories and starting new businesses. We need to become more competitive and create an attractive tax environment rather than demanding higher taxes from a shrinking tax base. However, that requires a stable electricity supply.

Mavuso: SA has a long list of critical challenges and needs to work on sufficiently capacitating the state — from law enforcement to Sars to front-line municipal workers — to resolve the implementation gap. We need policies that will enable growth, such as public-private partnerships, allowing the private sector to invest and participate in sectors of the economy that are currently state monopolies. The private sector can bring in much-needed capital, skills, and operational wherewithal to unlock a number of our most problematic constraints.

Gore: I am an optimist by nature but far from a naive optimist. It’s not that I am blind to our unacceptable levels of poverty, inequality, unemployment and corruption. These issues need urgent and intense reforms. However, I believe that the pessimism and negative framing surrounding our country detracts from and derails the very progress and leadership we need to create and implement those reforms.

SA is a uniquely beautiful country, with diverse people and considerable potential to ignite the development of the African continent. Leaders, however, cannot afford to be pessimists. Their role needs to include providing a sense of hope and a road map on the way forward. We should never forget just how resilient we are and that there are solutions to the many issues facing the country.

As a company, moving forward, we will continue to invest in high-growth, scalable businesses such as Discovery Bank while increasing our global footprint.