At University of Stellenbosch Bellville Park Campus

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Today's classroom lectures we're geared towards orienting our class to the ups and downs of South Africa's economy. Professor Andre' Roux's presentation on South Africa’s Economy: Trials, Tribulations and Triumphs was informative and very in depth. One statistic that stood out to me was the statement that the Congo River if harnessed, could provide ⅔ of the contentinent's water needs and electricity needs. Prof. Roux is of the opinion that this will never be accomplished due to the fact that of the 54 African countries, not one of the leaders would be willing to compromise in order to make this happen.




Class Notes

GLOBAL CHALLENGES

University of Stellenbosch Bellville Park Campus

Introduction by Edith Kennedy

Western Cape is run by the Democratic Alliance (DA)

1983 founded Khayelitsa but in 1985 many fled other townships and settled there. 1994 brought promise of infrastructure and many people came in from the Homelands. 1.2 million living there now vs. census records of 300k+




SA’s Economy: Trials, Tribulations and Triumphs

Presented by Andre’ Roux

International overview

Impact of 2008 market crash etc. had a significant impact on exports, etc.on SA economy

22% of exports are sent to the European Union

9.1% of exports are sent to North America

China and U.S. Producing approximately ⅓ of the world economy

India, Japan and Germany round out the top 5

20th largest economy is Nigeria (only African country in the top 20)

SA comes in at the 28th position

Gut feeling of South Africans is that SA is further down in the list

BRICS (29.3% of world economy) - Many of these countries do not have much in common

Brazil (recession)

Russia (recession)

India (Growth rate is progressing as predicted)

China

South Africa (5th and Junior member- economy is 4 times smaller than Brazil)

Fixed investment growth is slowing down

Means that they have building more machinery and infrastructure

With investments slowing down, commodity demand is also going down.

Leads to the slow down of commodity prices.

Growing Trade is slowing down

Tighter US monetary policy ...Currency Pressures

Drought is causing food issues has changed to needing to import wheat and other

Food inflation could reach 14-16%

Drought is a Southern Africa regional issue and is affecting food prices, etc.




Africa Overview

54 different countries and they are not homogeneous, but for this lecture they are grouped

Though was that economically and otherwise that Africa was Hopeless

Perceptions are improving

Inflation dropped significantly

Average incomes doubled(still an extremely low level)

If natural resource pricesl are rising that means a hugh I great increase

China has invested more in African

Rent-Seeking behavior

Number of middle income consumers

Agriculture, Industry and Services (Financial services, Information and Communications Technology (ICT) and Services

Population Growth

Has and will be the highest in the world

By 2050 Africa will be home to 25%!o(MISSING)f the world populations.

Current is 1.1 billion

Unlike other continents, the population remains fairly young.

Average age in China is 67 - population is aging significantly

Africa has a younger populations - half of africa’ scurrently population was born around 1995

Population is rapidly urbanizing

Cell phone usage is booming within the last 10 years

Access to Tele-everything (Internet to education, live streaming, money transfers)

Some obstacles

Water

Water related diseases ( contributes to high infant mortality rate)

Congo River could harness ⅔ of the contentinents water needs and electricity needs

Health and Diseases

⅙ of the worlds population living with HIV and AIDS is in Africa 6 million people

Until about 2005 there was widespread blindness and denial at government level regarding HIV/AIDS

TB and HIV/AIDS combination is deadly and problematic in Western Cape

Obesity kills more people than HIV/AIDS in SA

Education

Lowest Literacy rate in the world. 50% of adults cannot read.

Thought is that people don't need education because they only need to be able to access natural resources for selling to others

Governance Issues, Equity and Crime

(See photos)

Two Key Issues

Developing legitimate and effective leadership and governance

Developing a diversified economy , based on extensive be naturalresources

Mauritius

1970 - Sugar / Today has a more diversified economy

Have both agriculture, service and technological sectors

SA

1960 -1988 not one African leader was voted out of power. Since then more countries are now only allow inning leaders to reign for no more that 2 years.

Making Africa Work - Economist Article

http://www.economist.com/news/leaders/21696933-continents-future-depends-people-not-commodities-making-africa-work





The Hopeless Continent





The Sun Shines Bright





Africa Rising



MENA: Middle East and North Africa, Do not identify as being African



South Africa

9 Provinces

11 Official Languages

De facto language for Business and Politics is English

Population = 54 Million

More recently economic growth is is declining and feel that a recession is near

Inflation rate has begun to move upward

Stagflation - worst possible combination of recession and high inflation

Possibility that SA may be given junk bond status

Last Dec. 11th there was an announcement that the minister of SA finance was being recalled




Margie @ Woolworth’s

Founded in South Africa in 1951 and bought Country Road group in the 1990s and the David jones group in 2014

Are in 11 African countries but growth will continue more in South Africa and Australia. Some in New Zealand. Experimenting with new floor plans to expand business and sales.

Not in the northern hemisphere due to seasonality. Main focus is in the southern hemisphere.

Well cememted loyalty program

W rewards card

Items are preselected for rewards

Use it to introduce new items, drive sale on special items

Get 10%!o(MISSING)ff predefined list

My School, My Planet, My village card - separate card. Gives

W Credit Card - 50%!j(MISSING)oint venture with Barkleys - offered woolwoth’s credit card

Can be used anywhere for 1%!o(MISSING)r at W for 3%! (MISSING)

72-73%!o(MISSING)f sales are tracking on loyalty cards.

Also located in Austrailia

Have been growing ahead of market and given consistent returns to shareholders

CONTEXT

Trade will be tough · Customers will be tougher

Economy is tough, but customers are also toughening

There is a lot of economic pressure

Customer demands are becoming more challenging

Woolworth’s is focused on sustainability and responsibility

CUSTOMERS

Divide into LSM Living Standard Measured 1-10

Target LSM 8-10 this segment is growing disproportionately

Clothing LSM 7-10

100%!P(MISSING)rivate labels

Sub brands Ree - denim brand

Cow 25-30 working women

Jt1 - teem early 20s lingere

Distraction older slutier lingere



Food LSM 9-10

90%!i(MISSING)s private label ( use to be 100%!b(MISSING)ut homeowners would write brand names on domestic servers home list and if they could not find, they were leaving a and shopping at competitor even though W brand of same item)

Developing and Growing Black upper Middle Class

40-60%!o(MISSING)f spending power in the SA Economy

Largest store is 6000 sq. meters

Stock the most wanted brands and W brand

Most resilient during tougher times

Vs. Food Lover’s Market

Discount market but trying to imitate W in the same spaces. They are not well known for quality.

Vs.Spaar

Big divergence in the two store

V. Pic n’Play is thir biggest compretitheir rather market placed

They got comfortable and dropped that vs. ball

Vs. Edgars - Market share has dropped to 20%!f(MISSING)rom 40-50%!<(MISSING)br>
Don't see mass marketers as competition

Northern retailers are coming in

Gap, H&M, Jay Jays, TopShop, Cotton: On, Zara, Sephora, Forever 21, Williams-Sonomo

SUPPLIERS

Have Exclusive supply agreements with 90%!o(MISSING)f their suppliers

E-COMMERCE

2%!o(MISSING)f food sales and 1%!o(MISSING)f clothing sales

So low because of

Slow internet service

Very few home computers

Mistrust of the infrastructure - will I actually receive the item?

Too costly for delivery

Mistrust of Internet security

Tailored more for smartphone vs. PC because that is bigger audience

⅔ of customer population People are going online for research and then buying in stores or vice-versa

90%!v(MISSING)isibility online of inventory in local store. Can only purchase online from your local store. So if you cannot find it in your locations, it's not available to purchase online.

Profit Margins:

45-50%!o(MISSING)n clothing

25%!o(MISSING)verall on food ; 50%!o(MISSING)n Private Label and 10%!o(MISSING)n branded items

Sustainability

Use renewable energy by use of solar panels on stores

CSI - every business must put 2%!b(MISSING)ack into the community.

Child safety and food security at main focuses of W’s initiatives

Price Parity for items that can be found in various brands; for more unique items that can easily be differentiated prices will be 10-15 approx. more

CREDIT PROGRAM

Credit card I s the loyalty card. Everyone swipes card for rewards and pay other wise for 10%! (MISSING)But now if pay on card get an additional 5%!d(MISSING)iscount.

When item hits sell by date, staff can buy from back of store for 10%!o(MISSING)f costs. Then it gets donated to charities.

Is there a conversation to produce in South Africa to avoid high cost of labor and import fees? Still cheaper to produce offshore and bring it back in. Very good trade agreements with China that have undercut. Business profits more of the focus than goodwill in the country. “We are still a business.”

So I find it very interesting that cellular ownership and use is so high, but e-commerce is not very prevalent because the infrastructure cannot support the volume, time and security demands that a client might expect.






The Role of Business Schools in Africa

Presented by Prof. Piet Naude’



African Association of Business Schools

Only 25-26 Schools

Agenda 2063 (1963-2013-2063)

Trade with India and China has significantly increased from 1990-2008

Education is a strong indicator of escape from poverty

Research

Problem Driven

Real life problems are brought to the school to research, solve and take back to community

How do we get the unbanked banked? Through the use of technology (Cell Phone)

Evidence Based

Cannot be ideologically based.

Solution Providing

Not sectarian, solutions can be written in international forums and be understood.

Teaching

Whom?

This is an elite school. The barriers to admission are immense.

Public education is not good only

15%!o(MISSING)f graduates are eligible for university

Of those, 9-10%!c(MISSING)an find the funding

Of those, 49%!c(MISSING)omplete university in time

Then must have post graduate experience then you can enter USB

Once educated will the students return to their communities?

What?

Curricula = both global and contextual with ethics/responsibility embedded.

How?

Delivery mode via blended learning and IT platforms

Uninterrupted internet connection and consistent electricity are needed to eLearning - problem in SSA

Public Discourse

Social Role Models

Demonstrate diversity as a strength (race, culture, gender, nationality, faith)

Patriarchal issues, gender violence issues, racial issues

Demonstrate business efficiencies and strategic thinking (ROI)

Incorporate sustainability practices

Global weather changes disproportionately have negative effects on SSA

Why is USB so special?

It's a public school built with tax money

An African school in the true sense of the word (students are native, themes are native, imbedded in its own country)

A globally accredited and rated school (still need to live up to standards - full accreditation from 3 organizations

Enormous positive contributions to management education and business growth

Questions and further discussion

If was minister of education would redirect funding to preschool education

By grade four identify reading, math etc. deficiencies (at grade 2 level)

Infrastructure, lack of educated teachers,

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Photos

Making Africa Work - Economist Article
http://www.economist.com/news/leaders/21696933-continents-future-depends-people-not-commodities-making-africa-work