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Address by the Minister of Mines and Energy, Hon Tom Alweendo at the Economic Association of Namibia’s conference on inequality

Address by the Minister of Mines and Energy, Hon Tom Alweendo at the Economic Association of Namibia’s conference on inequality

Editor’s Remark: This is such a powerful message, I have decided to run it uncut and unedited. It speaks for itself.

05 September 2018

I would like to first of all thank the organizers of this event for their invitation for me to speak at this event this morning, where the topic of discussion is inequality in society. We all know that of late the issue of inequality has become topical globally.

I would like to concentrate my remarks on three points pertaining to inequality. First, I want to reflect on why inequality matters and why should we be concerned about it. The second point is about how corruption impacts inequality; and thirdly to highlight the role of leadership in curbing corruption and therefore inequality.

In my view inequality does matter and all of us should be concerned about it. Unrestrained inequality is a poison that has the potential to destroy people’s livelihoods; it takes away people’s dignity and causes polarization in society. Inequality matters because we as human beings are social creatures and we do better when we are treated as equals. No one of us would prefer to be treated as a lesser being. We do better at our careers when we believe that we all have equal opportunities.

The contrary is equally true. We behave obnoxiously when we believe that we are being treated unequally. We adopt an attitude of “I don’t care” when we believe that we are regarded as undeserving. We become unimaginative when we live under the weight of greater inequalities. These are all very good reasons why all of us should be concerned about inequality in our societies.

There is now empirical evidence that suggests that global inequality is on the increase. While we may argue that the 21st century is characterized by economic globalization that has lifted millions of global citizens out of poverty, we have also witnessed greater social fragmentation and increased inequality.

Inequality is therefore a problem that must concern us all. However, we seem to have become immune to the inequality around us. We rationalize that it is not our problem. We say to ourselves that we did not cause it and therefore I have no responsibility to take any action. On a daily basis we witness inequality in its various forms and prefer to rather look away. That is what we have become. The question before us is therefore how much inequality in our society we are prepared to tolerate before we act. When will I cross that line and take individual action to actively promote a society of equal opportunities?

Inequality is pervasive and it affects many aspects of our lives. Some of the effects of inequality have become so entrenched in our society such that we see nothing wrong with it. Take for example education. It is said that education is the greatest equalizer of conditions of men. Therefore as parents we make all the necessary efforts to invest in the education of our children. Those of us with financial means take our children to private school for better education, so that they can have an edge over their peers.

Indeed it is a great thing to invest in the education of our children. This action on the part of the parents is admirable and should be encouraged. We now that in this 21st century Nations are competing on a global scale and those with skilled labour force will do better than those who lack the necessary skills. Those that are innovative will climb the ladder of socio-economic development much faster than those who lack innovative ideas. However, if you look at this scenario with a discerning eye – a scenario where children from well-off families receive quality education, while those from poor background receive mediocre education – you will notice that what we are doing as a society is planting a seed of future inequality. Inadvertently we are creating an environment where the well-educated young people will do better in their adult lives than those who could only afford to go to poorly-resourced state schools for their education. At times they even grow up believing that they are more deserving than their counterparts that have attended poorly-resourced public schools.

Another example that has an important impact on inequality in society is what we have come to regard as success. Today we live in the world that encourages the acquisition of material wealth. We have become so addicted to believing that more is success; that bigger is always better. Today what we consume is no longer to fulfill our basic needs, but to prove to others that we are successful. To prove that we have arrived. This phenomenon is reinforced by our adoration of material wealth. We look up to those who have accumulated so much wealth to the point where they don’t have much use for it; they become our role models. We want to be like them.

In order for us to satisfy our addiction for excessive material wealth, we adopt strategies that are exclusive; strategies that exacerbate inequality; we refuse to share with those who have less than us – justifying our position that we deserve what we have and they deserve what they do not have. For example if I am an employer, I devise measures to pay my employees the minimum wage possible in order for me to maximize my profit. We deny others economic opportunities and only take care of those closest to us.

Let me now focus on corruption and its impact on inequality. Corruption or even the perception of corruption, can have a negative effect on our socio-economic development and therefore on inequality. While Namibia ranks favourably on regional and international indices, such as the Transparency International’s Corruption Perceptions Index, the Mo Ibrahim Index of African Governance and the Afro-Barometer Survey, challenges of corruption still remain.

It must be noted, however, that the Namibian Government takes the issue of corruption in a serious light. It is therefore no coincidence that improving our institutional framework and capacity to tackle corruption has been an important feature of our Government. We have enacted laws aimed at creating an enabling environment for the prevention of corruption and promotion of ethics and integrity. These are such as the Anti-Corruption Act, the Whistle Blowers Act and the Witness Protection Act. The President, His Excellency Dr Hage Geingob, has gone a step further by, in 2015, publicly declaring his assets and those of the First Lady.

And why is corruption bad? Corruption has the potential to undermine our ability and capacity to collect tax revenue. When taxpayers evade and avoid their responsibilities to pay taxes, this is a form of corruption and it has an adverse effect on the Government’s ability to provide social services to the citizens; it diminishes the Government’s ability to fund programs aimed at poverty alleviation. Not only is corruption bad for economic growth and enterprises; it is also bad for ordinary citizens, especially the poor and the most vulnerable. When the investment cost in large public infrastructure is highly inflated because of corruption, it reduces the Government’s capacity to fund social welfare; thereby perpetuating the existing income inequality.

In my view the failure of good governance necessarily leads to corruption. It is also my contention that corruption is usually as a result of lack of ethical leadership – a leadership that is more altruistic in its outlook as opposed to a self-seeking one. Ethical leaders are those who will always aspire to leave things in a better shape than they found them. While it is necessary to have anti-corruption laws – like we do – it has been proven that laws in themselves do not prevent corruption. All what laws do is to hopefully catch those who are corrupt.

However, with ethical leadership – whether in Government, private sector or civil societies – you are assured of the absence of corruption and you are therefore likely to be effective in addressing inequality. It is therefore important that we make ethical and principled leadership a core issue in our choice of our leaders – be in the private sector or the public sector.

The American science fiction writer, Octavia Butler, had this to say about the importance of choosing leaders. “Choose your leaders with wisdom and forethought. To be led by a coward is to be controlled by all that the coward fears. To be led by a fool is to be led by the opportunist who controls the fool. To be led by a thief is to offer up your most precious treasures to be stolen. To be led by a liar is to ask to be told lies. To be led by a tyrant is to sell yourself and those you love into slavery.”

It is also important to ask ourselves the question as to what causes leaders to go astray. Does it mean that those leaders that turned out to be unethical are necessarily bad people even before they became leaders? Or did something happen to them in between?

We have heard of some famous names – either in the corporate world or in the world of politics – who fell from grace because of corruption. Iconic names that were admired and during their heydays every corporate leader or political leader wanted to be like them. They were admired; they were held in awe. And when you follow the stories of all these former icons that fell from grace, invariably you will find that the main cause of their troubles is that they lost their moral compass.

And why do leaders lose their moral compass, you may ask? There are a number of reasons why leaders lose their moral compass. The thing is that the more successful you become as a leader, the more temptations will surely come your way. As a leader in business or in public service, there will always be those who would want to tempt you to do the wrong things. There will always be those who will offer you inducements in exchange for what seems, at the time, to be a career-enhancing opportunity. It is therefore important – as a leader – to always be on the outlook for what could turn out to be career-ending rather than career-enhancing.

Another aspect of ethical leadership is that of examining my motive of wanting to be a leader. There are wrong reasons why someone may want to become a leader; and there are also the right reasons to become a leader. It is therefore very important to ask myself the question – why do I want to become a leader?

Do I want to be the CEO of a company or the Minister of Mines and Energy because of the prestige that accompanies the leadership position? We all know that when you are the CEO or the Minister, most people tend to be polite to you. They even forget that you have a name and only call you sir or honorable; they will even stand up for you when you enter the room; they will insist to carry your bag even when it is empty. It feels rather invigorating.

If these are the most important reasons why I want to become a Minister, why you want to be the leader; then you are at risk of losing your moral compass and more often than not the end result is likely to be personal devastation. But it can be avoided if you stay grounded, if you continuously strive to be an ethical leader.

There are also cases where successful leaders fell from grace not necessarily because they did something wrong. These are leaders who year-in-year-out they deliver great results. Corporate CEOs who have made their shareholders wealthy. Political leaders who won elections with huge margins and in the process making their political parties symbols of success. In the process such leaders become famous; they receive accolades and they become sought-after keynote speakers at important events.

Unfortunately for some such leaders, the success becomes an end in itself. They start to desire more and more success, in the process becoming addicted to the prestige and the fame they have obtained. When that happens, such leaders start to believe that they are the alpha and omega – and nothing can happen without them. It is when they start to lose their moral compass.

The challenge to all leaders will be to master the necessary self-discipline to always do what is right and to do so even when it is not a popular thing to do; and also to do so irrespective of the consequence. It is not easy and it requires great courage, but it is what it takes if you as a leader wants to leave a lasting positive legacy.

We also need to realize that the world has changed where things no longer work as before. We live in times where trust between the leaders and the followers is no longer as strong; times where those we lead are no longer prepared to follow the leaders blindly. They demand integrity from their leaders; they want leaders with integrity; they want their leaders to be held to the highest standard of integrity where corruption is regarded as an abomination by all citizens. It therefore looks like if I want to be a successful leader, if you want to be a leader of note, you have no choice but to be a leader with a steady moral compass.

Let me conclude my remarks by saying that I am convinced that we as Namibians can do better in addressing inequality in our society, because we are not an ordinary country. We are a country that is capable of extraordinary things. Think of the remarkable men and women who – against all odds – waged a liberation war and today we have a free and sovereign Nation. Think of the exceptional leadership that, over the years, managed to promote and keep the peace and stability we all enjoy today.

Given what we were able to achieve over the years with regards to our socio-economic development, I see no reason why we should not be able to address the inequality in our society. In steering Namibia to the next level of development and prosperity, we need to create a caring Nation. A caring Nation where the strongest among us feel compelled to protect the weakest among us; where minorities do not feel to be made objects of scorn by the majority; where the most vulnerable are made to feel not abandoned; and where the younger ones are made to feel afforded the necessary opportunity to fulfill their dreams. A nation that feels as one, the one that recognizes and encourages the contribution of everyone, is in a better position to overcome the challenges that lie ahead, including that of inequality.

Going forward, all of us must make it our responsibility to address social ills in our midst. Our pledge should be to do everything in our collective abilities to make Namibia a better place to live in for all Namibians. Albert Einstein once said that “The world will not be destroyed by those who do evil, but by those who watch them without doing anything”. To my mind the man-made inequality we are witnessing today can be equated to evil.

The question I want to leave with you is this – Where do I stand and where do you stand in addressing inequality in our society?

I thank you.


 

About The Author

Sanlam 2018 Annual Results

7 March 2019

 

Sanlam’s 2018 annual results provides testimony to its resilience amid challenging operating conditions and negative investment markets

Sanlam today announced its operational results for the 12 months ended 31 December 2018. The Group made significant progress in strategic execution during 2018. This included the acquisition of the remaining 53% stake in SAHAM Finances, the largest transaction concluded in the Group’s 100-year history, and the approval by Sanlam shareholders of a package of Broad-based Black Economic Empowerment (B-BBEE) transactions that will position the Group well for accelerated growth in its South African home market.

Operational results for 2018 included 14% growth in the value of new life insurance business (VNB) on a consistent economic basis and more than R2 billion in positive experience variances, testimony to Sanlam’s resilience in difficult times.

The Group relies on its federal operating model and diversified profile in dealing with the challenging operating environment, negative investment markets and volatile currencies. Management continues to focus on growing existing operations and extracting value from recent corporate transactions to drive enhanced future growth.

The negative investment market returns and higher interest rates in a number of markets where the Group operates had a negative impact on growth in operating earnings and some other key performance indicators. This was aggravated by weak economic growth in South Africa and Namibia and internal currency devaluations in Angola, Nigeria and Zimbabwe.

Substantial growth in Santam’s operating earnings (net result from financial services) and satisfactory growth by Sanlam Emerging Markets (SEM) and Sanlam Corporate offset softer contributions from Sanlam Personal Finance (SPF) and Sanlam Investment Group (SIG).

Key features of the 2018 annual results include:

Net result from financial services increased by 4% compared to the same period in 2017;

Net value of new covered business up 8% to R2 billion (up 14% on a consistent economic basis);

Net fund inflows of R42 billion compared to R37 billion in 2017;

Adjusted Return on Group Equity Value per share of 19.4% exceeded the target of 13.0%; and

Dividend per share of 312 cents, up 8%.

Sanlam Group Chief Executive Officer, Mr Ian Kirk said: “We are satisfied with our performance in a challenging operating environment. We will continue to focus on managing operations prudently and diligently executing on our strategy to deliver sustainable value to all our stakeholders. The integration of SAHAM Finances is progressing well. In addition, Sanlam shareholders approved the package of B-BBEE transactions, including an equity raising, at the extraordinary general meeting held on 12 December 2018. Our plan to implement these transactions this year remains on track.”

Sanlam Personal Finance (SPF) net result from financial services declined by 5%, largely due to the impact of new growth initiatives and dampened market conditions. Excluding the new initiatives, SPF’s contribution was 1% down on 2017 due to the major impact that the weak equity market performance in South Africa had on fund-based fee income.

SPF’s new business sales increased by 4%, an overall satisfactory result under challenging conditions. Sanlam Sky’s new business increased by an exceptional 71%. Strong growth of 13% in the traditional individual life channel was augmented by the Capitec Bank credit life new business recognised in the first half of 2018, and strong demand for the new Capitec Bank funeral product. The Recurring premium and Strategic Business Development business units also achieved strong growth of 20%, supported by the acquisition of BrightRock in 2017. Glacier new business grew marginally by 1%. Primary sales onto the Linked Investment Service Provider (LISP) platform improved by 5%, an acceptable result given the pressure on investor confidence in the mass affluent market. This was however, offset by lower sales of wrap funds and traditional life products.

The strong growth in new business volumes at Sanlam Sky had a major positive effect on SPF’s VNB growth, which increased by 7% (14% on a comparable basis).

Sanlam Emerging Markets (SEM) grew its net result from financial services by 14%. Excluding the impact of corporate activity, earnings were marginally up on 2017 (up 8% excluding the increased new business strain).

New business volumes at SEM increased by 20%. Namibia performed well, increasing new business volumes by 22% despite weak economic conditions. Both life and investment new business grew strongly. Botswana underperformed with the main detractor from new business growth being the investment line of business, which declined by 24%. This line of business is historically more volatile in nature.

The new business growth in the Rest of Africa portfolio was 68% largely due to corporate activity relating to SAHAM Finances, with the East Africa portfolio underperforming.

The Indian insurance businesses continued to perform well, achieving double-digit growth in both life and general insurance in local currency. The Malaysian businesses are finding some traction after a period of underperformance, increasing their overall new business contribution by 3%. New business production is not yet meeting expectations, but the mix of business improved at both businesses.

SEM’s VNB declined by 3% (up 6% on a consistent economic basis and excluding corporate activity). The relatively low growth on a comparable basis is largely attributable to the new business underperformance in East Africa.

Sanlam Investment Group’s (SIG) overall net result from financial services declined by 6%, attributable to lower performance fees at the third party asset manager in South Africa, administration costs incurred for system upgrades in the wealth management business and lower earnings from equity-backed financing transactions at Sanlam Specialised Finance. The other businesses did well to grow earnings, despite the pressure on funds under management due to lower investment markets.

New business volumes declined by 13% mainly due to market volatility and low investor confidence in South Africa. Institutional new inflows remained weak for the full year, while retail inflows also slowed down significantly after a more positive start to the year. The international businesses, UK, attracted strong new inflows (up 57%).

Sanlam Corporate’s net result from financial services increased by 4%, with the muted growth caused by a continuation of high group risk claims experience. Mortality and disability claims experience weakened further in the second half of the year, which is likely to require more rerating of premiums in 2019. The administration units turned profitable in 2018, a major achievement. The healthcare businesses reported satisfactory double-digit growth in earnings, while the Absa Consultants and Actuaries business made a pleasing contribution of R39 million.

New business volumes in life insurance more than doubled, reflecting an exceptional performance. Single premiums grew by 109%, while recurring premiums increased by a particularly satisfactory 56%.

The good growth in recurring and single premium business, combined with modelling improvements, supported a 64% (71% on a comparable economic basis) increase in the cluster’s VNB contribution.

Following a year of major catastrophe events in 2017, Santam experienced a relatively benign claims environment in 2018. Combined with acceptable growth in net earned premiums, it contributed to a 37% increase in gross result from financial services (41% after tax and non-controlling interest). The conventional insurance book achieved an underwriting margin of 9% in 2018 (6% in 2017).

As at 31 December 2018, discretionary capital amounted to a negative R3.7 billion before allowance for the planned B-BBEE share issuance. A number of capital management actions during 2018 affected the balance of available discretionary capital, including the US$1 billion (R13 billion) SAHAM Finances transaction. Cash proceeds from the B-BBEE share issuance will restore the discretionary capital portfolio to between R1 billion and R1.5 billion depending on the final issue price within the R74 to R86 price range approved by shareholders.

Looking forward, the Group said economic growth in South Africa would likely remain weak in the short to medium term future, and would continue to impact efforts to accelerate organic growth. The outlook for economic growth in other regions where the Group operates is more promising. Recent acquisitions such as the SAHAM transaction should also support operational performance going forward.

“We remain focused on executing our strategy. We are confident that we have the calibre of management and staff to prudently navigate the anticipated challenges going forward,” Mr Kirk concluded.

Details of the results for the 12 months ended 31 December 2018 are available at www.sanlam.com.