When rules MUST be broken

Today’s technology is amazing. We control a special rover on Mars remotely from our planet, and can fly to the other side of the earth, (Hawaii, if you are interested,) within 24 hours.
Devices capable of millions of calculations per second are strapped to our wrists, and 3-D printing means that we can “print” various prototype models, food and even a whole house in a very brief time period. I’m looking forward to buying my first self-driving car just as I retire, and I can pop a whole packed meal into my microwave to eat two minutes from now. (Well, maybe not everything about the new world of technology is that amazing.)

But, with all our incredible advancements, there are still some businesses that seem to have been left in the Dark Ages.

For example, it seems impossible for me to get a replacement credit card in less than around eight to ten days. Where’s the customer service in that? I was sitting at a coffee shop at the end of a meeting with a client, and as I handed over my card to the waitress, she said it had been declined. I knew it wasn’t because there wasn’t any cash, so I was a bit worried about fraud, but, now embarrassed, I took out some cash and paid with that. In my mind I just knew what my business companion must have been thinking.

Before the bank even had a chance to text me about this personal rejection, I called the number on the back of my card to find out if I should be in a desperate panic or just mildly stressed. A few minutes later the pleasant young man gave me a rather generic answer: “Mr. Kalliatakis, I’m afraid that your card has been blocked, and for your protection we will need to send you another one.”

I asked him to be more specific, but he muttered something incomprehensible, and then brightly reassured me that there would be no additional cost to me for a new card. I asked about the last few transactions, hoping that there wasn’t any cash stolen, but nothing untoward seemed to have occurred. It was then that I realised two things: First, it wasn’t my fault, and second, they had cocked up something – something that was awkward for them but which, come hell or high water, I’d never get to the bottom of. So now my card was cancelled and I’d have to wait for a new one.

I was, however, more relieved and grateful that it wasn’t going to be a fight to prove theft from my account – until he said it would take five to seven working days to get this sorted. I couldn’t believe it! How difficult can it really be, after all? How complicated is the process of issuing a duplicate credit card to a customer who, because of a mistake the bank had obviously made, now had to be inconvenienced? And, even more irritating, using words like “to safeguard your account,” and “for your protection” is clearly a way of deflecting the blame by confusing the customer.

Call me naïve, but I really think that there’s a death of common sense here. I know that there need to be rules and processes to take care of issues like this, but a sense of urgency and the ability to bypass the bureaucracy seems called for here. Clearly, they didn’t have my best interests at heart in this sorry saga.

Many people in my industry – consulting and training – travel a lot, and therefore there are an extravagant number of stories and case studies that are written about travelling – and flying in particular. Most of them are negative.

We don’t talk about air travel to show off about how glamorous our work is. (On the contrary, I have now come to the point after 30 years in the consulting business where I just dread the thought of flying.) But flying is just another category of transport: my car takes me to clients and events near where I live, and airplanes take me to clients and events that are further away or even on the other side of the world.

But when we write about our experiences of flying it is because airports and air travel are usually the stressful events – even when they go reasonably smoothly. In this astonishing world where engineers have created the miracle of jet travel, and clever programmers have prepared software that is the envy of many other industries, I have to conclude that airlines and airports are led and operated by staggeringly stupid people.

Even airlines which boast about great customer care have a knack of screwing things up for passengers. One of the most successful and reputable is based in the global travel hub in the U.A.E. In my view, I am a loyal customer, although from their perspective they probably see me as one of the “rats and mice.” Checking-in at Heathrow recently at the end of a tiring 10-day trip, my baggage was way under the 30 kilogram limit. But I really wanted to take my sons’ bulky toys and wife’s gifts in my carry-on luggage.

I’m a good customer, and really asked as nicely as I could for them to do me a favour by allowing me to take them on board with my briefcase. The answer was “No!” I turned on the charm and begged, explaining who I was and waving my loyalty card about. They were even more emphatic. The supervisor threw out the “Rules is rules” defence, and was indifferent – no, he was absurdly stubborn – to my needs, especially since I explained that my final destination was SA where we’re infamous for stealing desirable stuff from passenger’s suitcases. He folded his arms and gave me a glazed look.

Now, if this policy was applied consistently to all passengers, I wouldn’t mind too much, but as soon as I got on the plane, I saw literally dozens of people with two, even three really large luggage bags – over and above shopping from the duty-free shops. The hypocrisy of it all made me miserable for the next sixteen hours, and added to the stress I already felt about my family’s presents.

It confirmed that airlines and airports are run by really reckless policies and witless people. From three to six flights a year, they will be lucky to see me once more. What rules and policies does your business enforce that create frustration for your customers?

Aki Kalliatakis is founder of The Leadership LaunchPad.

Employee engagement in future flatter structures

Employee engagement is a fascinating subject, and can be very challenging for a manager to tangibly gauge and measure.
The process of disengagement is sometimes dramatic and distinct i.e. someone doesn’t get the promotion they thought was on the cards; or the company merger deals a nasty blow to a team member’s sense of significance – and they suddenly seem distant and aloof. In other cases the disconnect is a slow creep.

Definition: Employee engagement is the emotional commitment the employee has to the organisation and its goals. Kevin Kruse – Forbes

I am going to briefly provide a matrix by revisiting Patrick Lencioni’s profound insight into the three primary reasons why employees disengage. I will then expand on his third point by looking through the lens of the emerging workforce, and flatter organisational structures.

Lencioni is his book, ‘The Truth About Employee Engagement’ pens three foundational principles that smart managers need to reflect on:

1. Anonymity: the sad conclusion a worker reaches when they realise that their manager is primarily interested in them for their output and shows little interest in them as a human, their life context, interests or future aspirations.

2. Irrelevance: this takes root in an employee’s mind when they cannot see how their contribution is making a difference. People need to know they are making an impact somewhere: be that with a client, a co-worker, or that of lightening a supervisor’s load through their excellent execution.

3. Immeasurement: this is Lencioni’s descriptor when a worker is unable to assess how they are contributing to the success of the organisation. These employees are not able to objectively quantify their efforts on a given day or week.

Flatter structures are on the rise and have appeal to the Emergents. Fewer layers, less bureaucracy, more autonomy, flexi-hours, tangible outputs, small high-performance work gangs … However, in a flatter organisation it can be harder to mark promotion and progress, and to know when someone should be paid more.

Whilst enjoying a cup of coffee with a friend, my friend recalled that when he started out as an Auditing Clerk, there were 17 different clearly identifiable roles between Junior Clerk and Partner. Twenty years later there are as few as seven big steps to the top.

In a personal conversation I had in the process of interviewing 30 employees in a company; some of the younger staff who were thriving in the flat structure were appealing for their equivalent of Google Map Route – to navigate promotion in their dynamic organisation. Future talent are not preoccupied with titles but they do need their significance and contribution to be recognised. Understandably there is an obvious connection between contribution, progress and remuneration.

An additional resource I found useful outlines how a company can plot someone’s journey and contribution on a graph with the descriptors: Novice, Advanced Beginner, Competent, Proficient and Expert on the ‘Y’ Axis and Executor, Leader, Manager and Strategist on the ‘X’ Axis.

Here are some questions to ask yourself as a Management Team, and to task your Emergents to answer too: (including them could catapult their engagement)

1. What is important to us? What are we going to measure? How are we going to measure?
2. What competencies are needed by our various Technical Specialists and Project/Talent Managers?
3. What descriptors can we use to recognise different levels of: expertise, IP, working knowledge of our company and industry and our clients?
4. What creative solutions can we use to differentiate the remuneration that specific employees receive?
5. What ultimately motivates our workforce?

Iain Shippey is a Partner at Change Partners.

The real business of digital transformation

Sensationalism. What better way to provoke a response from an audience than through sensationalism? It is a tool used often by the famous, but while their use may be a lot noisier, it is not exclusively theirs for the taking.
It is used by media and business to ignite responses in the corporate space just as effectively, but it has its downsides and should be accompanied by three simple words: use with care.

Using sensationalism to achieve a result can bring unnecessary complexity to the situation and may blur the message the business is trying to convey. Instead of a simple outline, it becomes a complicated enigma which people struggle to, or don’t want to, understand. This casual misuse of sensationalist terms and commentary has played no small part in the adoption and understanding of digital transformation.

A few seconds on Google searching for the term ‘Digital Transformation’ will return attention grabbing terms like: science fiction, human cost, jungle survival and futuristic reality. While the goal of the media outlet and writer is to attract attention, the result out of context can be sensationalist and confusing. Organisations looking to invest in the potential of digital transformation are put off by the obscurity of reference and the idea that digital transformation is nothing more than a new hype cycle built on a foundation of glass.

This is fundamentally untrue and we need to simplify the conversation to show the reality behind digital. It is about increasing access to information, allowing richer use of data and harnessing advancements in technology to drive efficiency and simplicity.

The goal of the organisation is to enable an ecosystem of shared value creation between its customers, environment, people and shareholders. In this context, digital transformation enables us to satisfy constantly evolving customer demands and create a sustainable and environmentally responsible business, allowing for the consistent growth of shareholder value.

Digital transformation is a process. It lets the business utilise all available digital technologies and information, engaging with and creating better value for the customer, while improving operational efficiencies. Business models are transformed and the organisation remains relevant and competitive. It is about agility, flexibility and the sustainable use of resources to take the business from tomorrow and into the future. That’s not sensationalism, it’s reality …

Desmond Struwig is the General Manager: Digital at Decision Inc. (Pty) Ltd.

SA multinationals need to collate evidence

Offshore companies that are, directly or indirectly, owned by South African residents may be regarded as Controlled Foreign Companies (‘CFC’) for South African income tax purposes.
As such, a proportionate amount of the ‘net income’ of such entity may be taxed in the hands of its South African shareholders, unless an exemption or exclusion applies.

One of the key exclusionary exemptions relates to the “substance” of the ‘business establishment’ of the foreign company. In this regard, the CFC must have a ‘fixed place of business ‘that comprises the physical infrastructure – in the form of ‘suitable’ premises, staff, equipment and facilities – to perform the primary operations of that business.

It may happen that a CFC does not itself meet the substance requirements, for example by not renting premises in its own name, or not itself having full-time employees.

However, it is able to carry on its business because it can occupy premises of another CFC forming part of the same group of companies and use the facilities and employees of that other company. In these circumstances, the first-mentioned CFC may nevertheless be able to qualify for the substance based exemption.

This usually takes place where the businesses of different CFCs are substantially similar (for example, banking subsidiaries), so that two or more CFCs use common office space and the employees working in that space are able to perform the administrative and operational functions of all of the CFCs.

Typically, the lease, equipment and employees are assigned to one of the CFCs, but they are occupied by, used by or perform functions for and on behalf of all of the CFCs located in that space.

If this principle were applied to companies in South Africa, there would typically be a recharge of all of the expenses by the ‘host’ CFC to the ‘guest’ CFC for facilities and services enjoyed by the latter. This recharge would largely be driven by domestic tax considerations in terms of which: Companies in South Africa are subjected to tax on an entity-by-entity basis; and, deduction of expenses is denied if the expenditure is incurred otherwise than in the production of the entity’s income and for the purposes of the entity’s trade.

However, not all jurisdictions tax on an entity-by-entity basis. A number of countries in Europe and the US tax groups of companies as a single entity on the basis of common economic ownership.  Where group taxation applies, the taxable income is based upon the income derived from the expenditure incurred by the various entities in transactions with third parties, being persons who do not form part of the consolidated tax group or fiscal unity. Transactions between the members of the group are ignored.

Where employees and facilities are common to a number of companies in a fiscal unity, there is no necessity to perform a reallocation of expenses between the entities, as the reallocation would be neutral for the purpose of determining the tax liability of the entity. In these circumstances, it may practically be more difficult to substantiate the sharing of resources if the matter is only viewed from a South African perspective.

How does a resident prove to the South African Revenue Service (SARS) that two or more CFCs have conducted business through a foreign business establishment based upon the ‘shared substance’ principle?

Financial records are however not the only way in which sharing of employees and facilities can be proved. The use of a common operational base is demonstrated by reference to addresses on letterheads and invoices. Furthermore, employee e-mails can substantiate that the employees perform functions for all of the businesses interchangeably and seamlessly. Internal telephone lists and organograms can show that individuals deal with customers of all of the businesses and have roles and tasks assigned to them that necessitate that they perform services for all of the businesses. Documents of original entry used for accounting purposes typically identify the originator and the approver. All of these forms of evidence may be assembled to form a coherent and clear picture.

Where, for whatever reason, costs have not been recovered or recharged, shared substance is still a question of fact and must be proved by gathering alternative evidence.

Multinationals may be called upon by SARS to substantiate ‘shared substance’ of their CFCs and they should be prepared to defend their presence in these countries. They need to be adequately prepared for the eventuality as there does not seem to be a clear and exhaustive definition of commercial activity in the context of shared substance. Failing which, additional South African tax liabilities for South African shareholders may arise.

Cor Kraamwinkel is a Tax Partner at PwC International.

Back pain causes headaches for South African employers

Low back pain is one the top five reasons for workplace absenteeism, and a leading cause of disability in South Africa.
An extremely common global health problem, low back pain is among the top ten high burden diseases and injuries globally according to the Global Burden of Disease Study 2010.

A study by the World Health Organization revealed that 37% of low back pain was deemed attributable to occupational risk factors.

South Africa is no exception, and low back pain is causing significant financial loss and a decrease in quality of life which in turn affects performance at work. Employers should focus on occupational exposures that result in preventable measures.

Between 60-70% of people can expect to experience low back pain during their lifetime, peaking at between the age of 35 and 55. As the population ages, low back pain will increase substantially due to the deterioration of bones and cartilage in the back.

Low back pain is non-specific. Symptoms vary across patients and may be experienced as aching, burning, stabbing, sharp or dull, well-defined, or vague with intensity ranging from mild to severe. The pain may begin suddenly or develop gradually.

Many patients with self-limiting episodes of acute low back pain did not seek medical care and instead self-medicated with over-the-counter medication. But up to one third of patients report persistent back pain of moderate intensity one year after an acute episode and have substantial limitations in activity. At present low back pain is treated with analgesia and rehabilitation, with the aim of decreasing pain. Surgical intervention is a last resort.

Exposure to stressors in the workplace such as heavy lifting and unnatural body postures result in preventable back pain, which is a modifiable risk factor, meaning something can be done about it. Manual labourers and professions that involve lifting, such as nurses, need to be taught correct lifting procedures and aids to assist in heavy lifting. In addition, workplace monitoring and regular reminders need to be implemented to prevent injuries.

Office workers can spend up to eight hours in a seated position that is not natural. Ergonomic office furniture, regular breaks and wellness programmes in an office environment can alleviate incidence rates.

Psychosocial factors also appear to play a substantial role in the frequency of low back pain.

People with depression, increased level of stress and anxiety are more prone to low back pain.

With the modifiable risk factors identified, the most promising approach for employers includes exercise, appropriate education and support at the workplace. Each industry needs to tailor-make their own approach to form the foundation of an integrated wellness approach. With continued momentum and monitoring, this will result in a happier and healthier workplace.

Dr Fathima Docrat is the medical advisor at Alexander Forbes Health Management Solutions.

Leave in business – critical to understand flexibility

With skills in short supply and the level of unemployment in South Africa rising, the issue of how best to manage people in business continues to gain traction.
Aspects like leave and leave policy often makes the critical difference as to whether a business can retain talent or not.

The various forms of leave accrual, and entitlements as set out in the Basic Conditions of Employment Act (BCEA), provide for the minimum – however no limit is placed on maximum amounts which a business may decide to make available to employees.

However, they should remain within the confines of objectivity, consistency, transparency, ethical practice and good governance – or risk becoming subject to discrimination and complaints of unfair labour practice.

This is the reality of the market today.

The four main types of statutory leave are enacted in the BCEA; including annual leave, sick leave, family responsibility leave and maternity leave, but these do not in any way limit additional leave types and entitlements which the employer may wish to offer – such as study leave, paternity leave, cultural leave and marriage leave.

It should be noted that even though employers may offer the above additional leave types at their own discretion they should have appropriate reasons for approving or declining the applications or they could be at risk of having an unfair labour practice or a discrimination complaint leveled against them.

Another challenge facing most businesses is how best to manage issues such as accrued leave, leave encashment and additional paid leave.

Accrued Leave is the amount of leave time that an employee has accrued as per the BCEA, Bargaining Council, Sectoral Determination, Company Policy or any other reason recognised by legislation, but which has not yet been used or paid. This is a financial liability for the employer.

In terms of the BCEA the accrual of leave is only applicable to annual leave, the employee is entitled to 15 working days per annum on full pay. The Act states “21 consecutive days” and reference to a calendar will show that 21 consecutive days equals 15 working days based on a five day week, or 18 working days based on a six day week. ‘Consecutive’ means that an employee has an entitlement to take the accrued leave in successive days.

This doesn’t mean that an employee immediately has 15 days leave due to him/her from the first day of employment, this leave has to be accrued before it comes due and it is accrued by a simple formula, as follows: 15 days divided by 12 months’ equals 1.25 days leave accrued per month. In other words, this leave is only available to the employee once it has been accrued.

However, other statutory leave types become immediately available, with two variations, during the first six months of employment –  sick leave, which is accrued at one day paid sick leave for every 26 days worked, where after the employee’s full entitlement becomes available and is not subject to accrual. Family Responsibility Leave becomes available after four months of employment.

Leave encashment

Leave Encashment is a term used to describe what is in effect the selling of one’s leave and amounts being paid out for the financial value of leave days.

The BCEA is quite clear on this based on section 21, employers may not pay workers instead of granting leave, except on termination of employment.

However, many companies do still encash leave without terminations taking place. In terms of the BCEA this is not allowed, or is it?

Yes, within certain conditions it is allowed. The BCEA makes provision for minimum leave entitlements either 15 or 18 paid days depending on a five or six day work week. If, as per company policy, employment contract or mutual agreement, an employee receives a leave entitlement larger than the minimum, it is not regulated by the BCEA because this is a benefit over and above what is provided by the BCEA.

This means that additional paid leave over and above the statutory minimum, can be regulated by the company policy, and may be paid out.

The MEIBC provides for additional paid leave over and above the minimum entitlement provided for by the BCEA.

The issue of leave management in general is one that many businesses will have to grapple with as staff satisfaction and retention are major issues in the digital age.

Alternatively, those that are intent on growth and for whom issues like digitisation and agility remain challenges, will have to come to terms with and understand these issues thoroughly if they are to successfully evolve.

Nicol Myburgh is the Head of HR Business Unit at HR and HCM specialist services provider at CRS Technologies.

The tonic for SA’s healthcare delivery

A flourishing healthcare sector that embraces all citizens is an essential foundation for South Africa to achieve sustainable prosperity and growth.
In reality: there are many challenges that today deny the citizens of South Africa access to affordable and reliable healthcare.

There are a number of variables that will not change, like, the ratio between clinicians and patients will increase; the rapid increase in lifestyle diseases; the improving healthcare dichotomy where the increase in life expectancy increases the burden of healthcare costs on the country tax base.

In this difficult climate, both public and private healthcare centres are under pressure to limit costs while simultaneously delivering enhanced quality of care, and serving an increasing numbers of patients.

Within our public healthcare institutions, in particular, the challenges of managing highly complex operations are brought starkly into focus. With its emphasis on trying to deliver the best healthcare services, administrative issues in the areas of billing and claims management often cause revenue leakage that compound the problems. Under recovery of costs whether from Public funds or from Medical Aids negatively impacts hospital budgets.

Technology’s advantages

Managed ICT services that are powered by the latest IT Technology advancements and integration into specialised medical technology, can act as the catalyst that improves healthcare delivery.

Technology can empower healthcare providers with a number of advantages:

• Provide a single view of the patient throughout their entire care lifecycle
• Improve the patient experience with regards to admissions and discharge
• Improve revenue per bed and cost controls to drive better return on hospital assets and ensure all costs that can be claimed are processed to the funder
• Provides end to end transparency of the financial and materials processes to manage expensive drug stocks
• Create more productive and engaged staff where a material reduction in administrative functions provides more patient time
• Create less audit exceptions and associated audit costs so management can focus on core functions that benefit the patient

Technology cannot be enabled without strong and committed business project sponsorship. In addition well managed Organisational Change Management initiatives to ensure that all participants take the journey with the organisation is not a non-negotiable today and is a key ingredient in successful projects.

The starting point to achieve these benefits is to connect the three primary areas of the healthcare operation: enterprise management (such as financials and materials), employee management (HR, payroll, performance management, access) and patient management (including clinical records, patient administration, and billing).

By digitising every aspect of their operations, healthcare facilities build up rich stores of data that provide a ‘longitudinal’ view of patients’ health over time. It also lays the foundation for more advanced medical services made available by technology – such as telemedicine, and home-based aftercare that enables hospitals to safely discharge patients earlier – freeing up space to treat more incoming patients on the premises.

For patients, this means simplified processes all the way from admission, to discharge. For management, integration between every aspect of the operations enables better strategic planning, and a consolidated view of every patient enhances the delivery of care.

Capital and operating Expenses

Healthcare facilities want to retain their scarce CAPEX Budgets for medical equipment and theatre upgrades and they are reticent to invest in ICT Technology.

Being the first company in South Africa to offer a Partner Managed Cloud offering with SAP we offer a number of financing and structured project and support models that allow Customers to access their required CAPEX for their core business.

With lives at stake, critical system downtime is simply not an option – so service availability guarantees like Zero Outage are a non-negotiable. And with the cost pressures we introduced above, fixed prices, described as a ‘price-per-bed-per-month’, help to ring fence costs and guarantee value.

The right partnerships

It becomes critical to partner with managed services providers that combine dedicated healthcare practices (often with staff from a primary healthcare background. Choosing the right ICT Partner is not just about the immediate projects but encompasses a long term relationship that allows access to the latest healthcare technology trends both on a local and international level.

The right partnership is about having access to a trusted advisor that ensures that Customers embrace new technology trends when they are relevant and mature so that any negative business impact can be negated.

We continue to invest and expand our Africa healthcare practice to ensure we offer our Customers the best and most affordable and sustainable technology solutions with access to emerging local and international technology trends.

Peter Mills is the Head of Systems Integration Sales at T-Systems South Africa.

Encryption at the heart of data security

In today’s information-driven market, data is a sought-after commodity. Like any other critical resource, it needs to be protected. Given that data grows exponentially and businesses are faced with the challenge of having to store and manipulate ever-increasing volumes, security strategies have come under scrutiny as to whether they can actually meet the challenge.
Let’s liken the info to grain. As the population increases, the people need more food, which means silos need to store more grain to feed this population. However, due to the dependence on these grain storage silos, the world needs to create more security, to ensure food security is not affected. The same rules apply to data and any other commodity.

Another reality of operating a business in today’s market is that, inevitably, a business will be impacted by what experts call ‘the nexus of digital force’, including the Cloud, mobility as well as the Internet of Things.

Decision makers are more often than not inclined to immediately encrypt communication – but that is not always the best course of action.

Most IT professionals will say ‘when in doubt encrypt’. Although this is sound advice, one needs to look at the information before making a decision. Just ask a simple question – ‘what would happen if our competitors received this information?.

In some cases, marketing materials, company flyers, and different company-specific information would almost have no value to anybody outside your company. In this situation, evaluate the risk and then we suggest create different risk profiles based on the data.

Mobile response

The response by companies to the widespread use of mobile devices (including personal) is generally considered to be an Achilles Heel within the IT security space.

Many businesses have struggled to cope with BYOD (Bring Your Own Device), much less the inter-linked BYOA (Bring Your Own App). The advent of mobile technology – from tablets to smartphones – in the workplace is also widely seen as a vulnerable point offering easy access within the corporate setup.

It requires a focused, disciplined approach that should also include encryption. Storage and backup solutions should be in place, and companies should not just have the IT systems in place, but also the policies and procedures to protect company and client information.

In some cases, encryption should be applied, one can also procure software that simply wipes the devices clean if they are stolen. If the staff member uses their laptop from a home office, then encryption would be logical to protect any company information which is being transmitted.

Mobile Device Management and overall strategy is certainly a consideration, but the decision-maker today also has to think about Cloud and the security or integrity of files before the Cloud resource is engaged.

Encryption should be done before files are uploade, advises Hall. This is because most data theft will occur during the transmission of data over the web. It’s much easier for the cybercriminal to intercept traversing data. The Cloud provider will also need to have encryption security in place, and all the normal firewall and security systems to protect their clients. One would expect a cloud provider to already mitigate the risk for their clients.

But what type of encryption?

It is good practice to bear the role of encryption in mind as a standard procedure, but it is just as important to consider the multiple levels, modes of travel, and types of applications for encryption.

The SSL layer which secures the path of the data is just as important as the type of encryption.

Having an HTTS site with quality standards applied will help ensure that the encryption meets the best practice standards. As most integration is currently done on a web services level the security of the websites needs to be paramount. The security certificates also need to be carefully managed, to make sure all the right data handshakes happen seamlessly. The standard 256bit encryption should be used in most cases, however the 64bit and other 126bit options could also provide enough protection for some users.

There are also different types of applications for encryption, based on the protocol and the underlying database which needs to be used.

The suggestion would be to look at the quality of the internet and the speed required on the local network, before one decides on security measures. It would also be beneficial to look at the complete IT landscape, not just a portion of the data network.

South Africa at a crossroads

As South African companies continue to deal with the implications of Popi (Protection of Personal Information) legislation, the country has emerged as a ‘hotspot’ for cybercrime – fuelled by an increase in the number of internet users and broader access to online resources.

The very fact that mobile data is shooting into the stars is creating growth that will require planning and careful consideration.

In the African context, users prefer mobile devices and other wireless modes of connectivity, and one would need to look at the users of these devices, and understand how security concerns can be dealt with on mobile devices, without affecting the usability and effectiveness of these applications.

Business users will simply start turning off security features if they believe the devices are not performing. One needs to educate and explain the risks of data protection to these users, and suggest some alternatives if they are having bad user experience.

Kevin Hall is the National Sales Manager at Elingo.

Why is SA business slow to embrace “innovation” economy?

South African companies are slowly waking up to the concept of disruption and radical innovation but they are still not taking the impact it can have on their business seriously enough. According to Grant Thornton’s second quarter International Business Report (IBR) research, which researched awareness of disruption and risk among South African businesses, almost two thirds of companies (63.4%) in South Africa believe disruption and innovation will have little to no impact on their operations.

The IBR provides tracker insights from around the world on a quarterly basis. These findings are from the IBR’s second quarter tracker data for 2016 to end June, revealing findings from business executive interviews held during May and June 2016. Regional and national perceptions are also researched every quarter for South Africa, from executives at 400 privately held business annually (100 executive interviews per quarter) regarding crime, service delivery, B-BBEE, IT security and disruptive innovation risk and political climate.

Disruption, which goes hand in hand with radical innovation, encompasses the way that completely new processes, products or services are created, sometimes creating entire new markets and marking a dramatic shift away from existing business models, products and services.

Asked specifically whether their businesses were actively investigating or experimenting with possible radical innovation to change or introduce new business models, products or services, 18% of South African business executives indicated that they were not taking any steps to address disruptive innovation; 35% said it would not be applicable to their business; and 10% had no idea if they would be affected or not.

In contrast, of the 100 business executives surveyed during the second quarter of 2016, 11% were seriously planning to launch a new business model, products or services and 25% were investigating possible innovative and disruptive ideas.

It was clear that companies have difficulty in developing foresight and were not doing enough to gauge just how much future possible events and technologies would affect their industries. He said the IBR data made it clear that innovation and disruption were clearly not part of business risk registers and strategies of companies across industries. And foresight is missing in business strategies in general.

South African companies need to be  aware of the new technologies and developments/innovations that can be advantageous  to their operations. My concern is that, according to our research, so many companies did not even know what disruption entails.

What Uber has shown us is how simple it is to completely disrupt a market and at the same time create a new market. It has opened the doors to people who would never have used metered cabs while at the same time, the disruption on the vehicle rental industry is still unknown.

Of the 64% of respondents who indicated that they had a business risk strategy in place, just more than half indicated that their risk plan factored in disruption. This means that almost 50% businesses still do not consider disruption as a serious risk (or even ‘Black Swan’**) during risk strategy formulation. Not to mention the opportunity to disrupt their own industry.
 
According to the 2016 Global Innovation Index, South Africa ranked 54th, behind countries like Mauritius, Thailand and Chile. The Global Innovation Index surveys the innovative capacity of more than 100 countries around the globe. The ranking is based on 82 indicators across seven areas: institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and both technology and creative outputs.

South Africa’s position indicates that research and development spend is well below average which makes it susceptible to new technologically savvy entrants from other markets.  

It was imperative to embrace the fact that while disruption or radical innovation could pose a threat; it also offered exceptional opportunities to forward-thinking businesses. Innovation was also a vital driver of economic growth and particularly during low growth cycles and it should not be viewed in isolation.

Too many businesses still think they don’t have to think of disruption and that’s alarming. Technology disruption – such as 3D printing; robotics; digital medicine; and nano-technology – in particular has the ability to affect entire industries. Although there is more awareness these days, there is not enough attention given to it at a strategic level.

Some industries think they are not susceptible but any sector can be affected. Take 3D printing which can be used to manufacture mining and engineering components to spec and on site. This would affect importers,  freight forwarders, and of the course the manufacturers of the components as well.

And while businesses generally treat technologies in isolation, the real opportunity (and risk) presents itself in the convergence of these technologies. The convergence of 3D printing and another technology like the nano-material Graphene, which is 300 times stronger than steel yet flexible, presents both possibilities and threats.

Increasingly companies needed to understand how technologies converged, and appreciate the speed at which technology was improving; while simultaneously ensuring that executives had the foresight to anticipate the effect on its operations.

Many people don’t know that Kodak invented the first digital camera. Yet the company decided not to embrace the technology because they opted to focus on their (perceived) core business of paper and chemicals. Today Kodak no longer exists.

In the end, the challenge for every business is to disrupt itself. Those who refuse to do so will be disrupted by others or new players in the market. At a macro level, the economy needs creative destruction in all industries to spur the next economic growth period.

Michiel Jonker is the Director of Advisory Services at Grant Thornton.

Challenges, opportunities and road ahead for International Arbitration in BRICS

On 27 August 2016, the Conference on International Arbitration in BRICS: Challenges, Opportunities and Road Ahead took place in New Delhi, India.
The conference was initiated by the Indian government within the spirit of the theme of India’s chairmanship of BRICS to, amongst others, foster new co-operation mechanisms for the BRICS nations. The purpose of the conference was to discuss and debate the need to develop and establish an efficient and effective international arbitration mechanism for BRICS member states.

At the conference, the government of India pledged its full support for the development and establishment of an international arbitration mechanism for the resolution of commercial and investment disputes amongst BRICS nations. The BRICS nations regard themselves as the de facto vanguard of emerging economies, duty-bound to ensure that an international arbitration mechanism is developed which has regard to factors relevant to emerging economies in the resolution of disputes.

Whilst there was absolute consensus regarding the need for an arbitral mechanism, independent from the established arbitral bodies of the developed world, that caters for the unique needs of emerging economies, it was less clear whether this mechanism would be developed as an independent arbitral body, or whether the arbitral bodies already established in the regions concerned should be utilised for this purpose.

During the conference the following salient features were identified as necessary for the development of a BRICS international arbitration mechanism:

a forum for the resolution of intra-BRICS commercial and investment disputes;
a forum which is neutral and fosters an unbiased applicability of laws;
uniformity between domestic laws governing international arbitration to ensure a uniform approach between respective jurisdictions;
flexible and innovative rules for the resolution of disputes;
ease of enforcement of arbitral awards in any BRICS member state, as well as any other nation;
developing the expertise and skills of legal professionals in international arbitration among BRICS nations to support and ensure the success of the BRICS international arbitration mechanism;
adequate representation of arbitrators from emerging economies to avoid structural bias and partiality or the perception thereof by arbitrators originating from the developed world;
reforming the existing investor state arbitration mechanism under ICSID and bilateral investment treaties to account for, amongst others, the following features:
the unique circumstances and challenges of emerging economies, specifically with reference to cultural and socio-economic factors when assessing the merits of a bilateral investment claim or the quantification of the damages that flow from such claim;
a mechanism to summarily dismiss frivolous claims by investors;
measures to prevent/avoid forum shopping.

The Honourable Minister Arun Jaitly, India’s Minister for Finance and Corporate Affairs, has committed his government to the establishment of a task team in collaboration with other BRICS nations to initiate the process of developing the BRICS international arbitration mechanism. As part of this initiative, it will be important not to duplicate efforts, which have already been realised with the establishment of the BRICS Dispute Resolution Shanghai Centre under the auspices of the BRICS Legal Form. It will further be important for the success of the BRICS international arbitration mechanism to ensure all stakeholders, specifically the relevant governments and their judiciaries are actively involved in this development.

Notwithstanding the (substantial) challenges facing the BRICS nations in this endeavour, the economic opportunities and benefits for cooperation and ultimate success appear to far outweigh such challenges. Following the establishment of the task team, the next step is to map-out the road to be followed to establish an independent and inclusive mechanism for the resolution of disputes amongst BRICS participants and nations, by means of international arbitration.

Jackwell Feris and Jonathan Ripley-Evans, International Arbitration sector and services, Cliffe Dekker Hofmeyr. 

Empowerment: an interesting ruling regarding a BEE transaction

In 2016, the BEE regulatory landscape has seen a number of changes introduced. These include the final regulations that were issued under the Broad-Based Black Economic Empowerment Act, No 53 of 2003 (BBBEE Act), the release of the Black Industrialists Policy and the publication of draft regulations to the Preferential Procurement Policy Framework Act, No 5 of 2000 (PPPFA).
In light of these developments, it is fitting to discuss Binding Private Ruling 241 (Ruling) dealing with an award received for a BEE training initiative, which was issued by the South African Revenue Service (SARS) on 13 June 2016 and with a number of aspects in the Income Tax Act, No 58 of 1962 (Act).

Facts of the proposed transaction

Company A, a South African resident listed company, implemented a BEE initiative and for this purpose SPVCo was incorporated and it acquired 10% of Company A’s issued ordinary shares at market value. The Applicant is a South African resident private company that was incorporated by BeeCo, a South African resident private company and Company B, a South African resident public company, for the purpose of recruiting, appointing and training individuals to become economically independent (training initiative). Trust A, a South African resident trust of which the Applicant is a beneficiary, holds 49% of the ordinary shares in SPVCo. SPVCo funded its acquisition of Company A shares with third-party funding and will settle this debt by using dividends received from the Company A shares and the proceeds from the disposal of some or all of these shares.

Once this debt has been settled, SPVCo must distribute the remaining shares as a dividend in specie to its shareholders. In terms of Trust A’s trust deed, a number of units were created which would give the holders (most likely the beneficiaries of the trust) thereof the right to participate in the trust fund, which trust fund vests in these holders when SPVCo distributes the remaining shares to Trust A. The trustees of Trust A must make an in specie distribution of the trust fund. The Applicant’s memorandum of incorporation and shareholders agreement limit its activities to that of conducting a training initiative, and provide that the benefits received from Trust A are used only for this purpose. The Applicant will dispose of a sufficient number of shares annually to fund its operations and until it is in a position to do so, its shareholders or a company within the group will provide bridging finance. It will not operate to generate a profit or earn any income for its shareholders and will use all amounts generated through its operations for the training initiative. The Applicant received an award of units from Trust A which was made unconditional, free of charge and subject to the terms and conditions of the trust fund and entitles the Applicant to participate in the trust fund.

Ruling

SARS ruled on a number of aspects of this transaction, including the capital gains tax consequences arising from the in specie distributions made by SPVCo to Trust A and by Trust A to the Applicant, which are regulated by paragraphs 11, 13, 20, 38, 75 and 80 of the Eighth Schedule to the Act. With regard to the award of Trust A’s units to the Applicant and expenditure incurred by it, SARS ruled as follows:

The award of Trust A’s units gives rise to an amount that must be included in the gross income of the Applicant.
The Applicant will qualify for an allowance in respect of future expenditure under s24C against the amount referred to in the previous bullet to be included in gross income. The amount of the allowance in each year of assessment remains subject to the discretion of SARS.
The cancellation of the units following the distribution of the shares and any surplus cash will not give rise to any capital gains tax in the Applicant.

Comment

One should always be cautious when interpreting a SARS ruling, as SARS does not provide all the facts at its disposal when issuing rulings. However, it is interesting to note that SARS ruled that the award of Trust A’s units gives rise to the inclusion of an amount as gross income in the Applicant’s hands. No mention was made of the losses that might be triggered pursuant to the cancellation of the units following the distribution of the shares and any surplus cash.

Louis Botha and Dries Hoek, Tax and Exchange Control practice and services, Cliffe Dekker Hofmeyr.

Mass equal pay for equal work referral: arbitration or adjudication?

The impact of the amendments to the Employment Equity Act, No 55 of 1998 (EEA) are starting to emerge as the Labour Court delivers judgments that provide much needed guidance on how to deal with the amendments.
The EEA was amended to include what is commonly referred to as the equal pay for equal work provision. The provision states that a difference in terms and conditions of employment between employees of the same employer performing the same or substantially the same work or work of equal value that is directly or indirectly based on any one or more grounds listed in the EEA amounts to unfair discrimination.

The EEA prohibits unfair discrimination. A dispute concerning unfair discrimination may be referred to the CCMA within 6 months of the act constituting unfair discrimination.

The CCMA will initially try to resolve the dispute through conciliation. However, if the dispute remains unresolved, the dispute may be adjudicated by the Labour Court or, in certain circumstances, arbitrated by the CCMA.

The option to have the dispute arbitrated by the CCMA also came about as a result of an amendment to the EEA. In terms of the amendment, “an employee may refer the dispute to the CCMA for arbitration if:

    the employee alleges unfair discrimination on the grounds of sexual harassment;”
    in any case other than sexual harassment, if the employee earns less than R205 433.30; or
    the parties to the dispute consent to the dispute being arbitrated.

In the recent Famous Brands Management Company (Pty) Ltd v CCMA and Others (JR738/16) [2016] ZALCJHB 290 case what essentially had to be determined was whether, in terms of the EEA amendments, the CCMA could arbitrate an unfair discrimination dispute regarding equal pay for equal work which involved more than one employee. In this case, approximately 632 employees had referred an unfair discrimination dispute regarding equal pay for equal work to the CCMA for arbitration.

The employer argued that the CCMA did not have jurisdiction to hear the matter involving 632 employees as the amendment to the EEA only permits “an employee” to refer the dispute to the CCMA for arbitration and not a number of employees. It was the employer’s case that the amendment only allows individual disputes to be arbitrated at the CCMA and disputes involving more than one employee should be referred to the Labour Court for adjudication.

The CCMA ruled that it did have jurisdiction to arbitrate the matter involving approximately 632 employees. The ruling was taken on review to the Labour Court.

The court held that just because more than one individual is involved in the dispute does not mean that the dispute is more complex even though there may be additional logistical challenges when dealing with a dispute involving many employees. The court referred to several sections in the Labour Relations Act, No 66 of 1995 where the term “employee” in the singular has been interpreted to mean “employees”.

The court dismissed the review application and confirmed that more than one employee can refer an unfair discrimination dispute the CCMA for arbitration.

Although the judgment does not deal with the merits of the equal pay equal work claim, it does confirm that the option to have an unfair discrimination dispute arbitrated at the CCMA is not confined to circumstances where an individual employee refers the dispute. In terms of the amendment, the CCMA is permitted to arbitrate an unfair discrimination dispute relating to equal pay for equal work where more than one employee is involved, where the employees involved earn less than R205 433.30 per annum.

Aadil Patel and Samantha Coetzer, Employment practice and services, Cliffe Dekker Hofmeyr.

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