Author Archives: M Strydom

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Renewed focus on corruption

Maybe it’s electioneering, maybe it’s a New Year’s resolution or maybe I am being optimistic, but I am noticing a renewed focus on corruption in SA over the year to date. Whatever the reason, may it continue and build even more momentum. Unless actively countered, corruption will rear its ugly head, whether in politics, sport or business. Corruption does not care about income level, political affiliation, profession, race or religion. All that corruption cares about is opportunity, lack of transparency and lack of repercussions.

I would like to reiterate Robert Klitgaard’s corruption formula (which I discussed in a previous blog): corruption (C) = monopoly (M) + discretion (D) – accountability (A). The first term means that in a country or institution where the leadership has a great deal of power, either because it is a dictatorship (no elections being held) or where opposition is weak, corruption is likely to be much greater than in a democratic or free country or institution. The second term means that corruption is more likely in a country or institution where there is limited transparency of processes, where processes are not clearly defined and where there is limited oversight. The third term means that in an environment where corruption goes unpunished or where punishment is light, corruption is much more likely to be prevalent. What I take from this equation is that, especially in large institutions controlling large amounts of money, corruption is the most likely outcome, unless it is actively countered.

We have been speaking about it for a long time in SA, but there does seem to be a renewed focus on corruption in 2016 so far. Not just are opposing political parties going out of their way to identify corruption (or perceived corruption), institutions (including political parties) are speaking out about corruption in their own ranks. There have been numerous examples during this year so far.

According to the Sunday Times, Cosatu and SACP leaders “went public with their growing irritation at the influence the Guptas are said to have” at “the ANC’s NEC lekgotla”, while the EFF called for a “Gupta-linked” minister to be removed from parliament. It will be interesting to see whether the concerns about the Guptas gains momentum.

The DA raised concerns about a letter by Beaufort West mayor, Truman Prince, in which he discussed upcoming tenders and his desire “for these companies to inject funds into our election campaign process”. The ANC in the Western Cape was quick to respond, condemning Prince’s “lapse in judgement” and his “misguided attempts to raise funds” for the party. Whether further steps will be taken against Prince and whether he will be named as mayoral candidate for Beaufort West is still to be seen.

During last week, Cosatu wrote an open letter to Cape Town mayor, Patricia de Lille and Public Protector, Thuli Madonsela about alleged “nepotistic practices” relating to the employment of two individuals in the Provincial Government and the City administration. The DA has yet to respond to this letter publicly.

The EFF has recently stated that it is “ready to take President Zuma head-on again during the opening of Parliament”. In an interview this weekend, EFF president, Julius Malema, said “Zuma will have to explain why he fired minister Nhlanhla Nene before addressing the nation”. The state of the nation address occurs two days after the Constitutional Court hearing which the EFF brought to compel President Zuma “to pay back the money” relating to Nkandla.

Following allegations of “financial mismanagement” against SARU CEO, Jurie Roux, the DA’s shadow minister of sports and recreation called for him to be suspended. SARU has not yet announced any actions against Roux, but have denied any knowledge of “an inquiry into his employment at Stellenbosch” during his appointment process.

Last week Cricket SA imposed a 20-year ban on former Proteas cricketer Gulam Bodi who was charged with “contriving to fix, or otherwise improperly influence aspects of the 2015 Ram Slam T20 tournament”. They stated that “Our attitude to corruption will always be one of zero tolerance”.

On top of all these developments, there was also some good news last week with SA moving from 67th to 61st place on Transparency International’s Corruption Perceptions Index (CPI) in 2015 (out of 168 countries). According to Corruption Watch, “The opinion makers surveyed for the CPI see evidence that key pockets of government are deeply concerned about corruption” and that this was “particularly true of important opinion shapers such as National Treasury”. However, it is not all good news, with 83% of South African surveyed by the Global Corruption Barometer (GCB) believing that corruption was increasing. According to Corruption Watch, “Their perceptions are equally valid. The good work of those serious about combating corruption is overshadowed by those who continue to behave with impunity.” It will be interesting to see what steps the reappointed Minister of Finance, Pravin Gordhan, will take to combat corruption. In my opinion, he is in a very strong position to take positive steps.

We certainly have too much corruption in SA, which reduces the efficiency of our institutions, affects our ability to achieve targeted outcomes and negatively impacts the perception of the average South African. However, corruption remains top of mind and there is a good chance that the situation will improve as the year progresses. There is nothing like elections to focus the minds of politicians on looking for corruption amongst their competitors, but also t0 keep their own house in order. In my opinion, we are heading towards the most closely fought municipal election in SA since the democratic dispensation. May this encourage our ruling party and opposition movements to do just that, to target corruption. And once the elections are a thing of the past, may we retain some of that focus going forward.

 

Do you see an increased focus on corruption in SA? Do you think more is being done about it than before? Do you think the elections have something to do with this? Do you think that increased political competition will lead to reduced corruption? I would love to hear your feedback.

 

In the mean time, keep your talking straight!

 

#Corruption #MyHandsAreClean

 

Marius Strydom is the CEO of MLAX Consulting

https://www.facebook.com/straighttalkingstrydom

https://twitter.com/Marius_Man


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Are constant law changes ruining rugby?

Category : Rugby , Sport

It is Super Rugby time and once again, we have to deal with further changes to the laws. It must be the only sport where at the start of the season only the coaches, players and referees know exactly how the new laws work (maybe). It will take the spectators some time to get used to it and in the mean time there will be complaints about the referees’ interpretations after every match. What does it say about my beloved game of rugby when every year, the administrators imply that they are not happy with how the game was played last season and it needs to be changed to be better?

The 2015 version of the laws for Rugby Union comes in a tome of 212 pages with total of 22 laws taking up 144 pages. This year the 14 amendments that were piloted in 2013 entered the law (including laws on substitution, clothing, third match official jurisdiction, conversion, knock-on, ruck, maul, line-out, scrum and penalty & free kicks). In addition, refinements relating to in-goal, rucks and line-outs were also introduced.

The 2013 overhaul of the laws of the game follows a large overhaul in 2009, which made 13 changes to laws, including introducing the assistant referee, changing to 22 play, quick throws, line-outs, scrums and changing the laws surrounding corner posts. Over the previous period since rugby became a professional sport in 1995, many laws had changed surrounding substitutions, yellow & red cards, tackling, scrums, line-outs and many others. To most rugby supporters, the laws of the current game are unrecognisable from the format they learnt when they were children.

I understand the arguments that the changes to laws were mainly done for safety reasons, but I believe that there is more to this. There also appears to be a trend towards changing laws to try and make the game more attractive and to allow teams to be more evenly matched. There is also to some extent a tug-of-war between the Northern Hemisphere and the Southern Hemisphere to introduce laws that suit their style of play.

Regardless of the reasons behind law changes, I believe that the end is by no means in sight. Rugby law changes appear to have become an industry into itself with more new laws being proposed and trialled as we speak. In the Varsity Cup (competition between University Rugby teams) there is already a new set of laws being applied with a different scoring system, 2 referees on the pitch and different laws on calling a mark.

I would not be surprised if the powers that be are once again itching to introduce the next large overhaul to the laws of the game. As a spectator, I am concerned that if this trend continues, it could do more damage to the game than good and I am worried that it will be a permanent feature of our rugby enjoyment (if past track record is anything to go by).

In comparison to Rugby Union, FIFA’s 17 football laws are dealt with in a short 46 pages and have remained largely unchanged over the past 20 years. The last significant change occurred in 1992 with the introduction of the back-pass law for goal keepers and the introduction of goal-line technology in 2012. The introduction of red and yellow cards is but a distant memory and occurred in 1970.

I do not dispute that football is a simpler game than rugby with much fewer intricacies and risks when it comes to contact and fixed play and as a result requires fewer laws. I am however, concerned with the fact that rugby lacks the continuity in laws that football has. Football fans understand the laws of their game much better than rugby fans and it is easier for new players to be introduced to the game and to move through the ranks (with fewer law changes between school and professional football). At least in part, I think that the simplicity and continuity in football adds to its attraction, prevalence and strong growth worldwide. Rugby, on the other hand garners much less support, is much less prevalent and is not growing as fast. I, as a lover of rugby, would like to see this change.

In my opinion, as a spectator of the game, the constant changes to rugby laws, damages the game in a number of ways:

  1. It reduces the potential enjoyment that supporters get from the game – so many stoppages during a regular game of rugby do not make sense to the audience until the referee states what the infringement was. In my opinion, the supporters of rugby should understand the game and the majority should agree with every decision (but law changes and complexity makes this difficult);
  2. It opens up each match to additional interpretation – the role of the referee becomes more and more important with constant law changes and the risk of incorrect interpretation increases, which could lead to wrong decisions affecting the outcome of games. So often after a match, there is more discussion about the referee than the teams’ performances. That can’t be right.
  3. It increases barriers to entry for new players and players that want to continue with the game as they constantly have to learn new laws;
  4. It adds an additional burden on coaches, trainers and teams – much time has to be spent on understanding and learning new laws that could have been spent training to play the game better;
  5. It puts a burden on development – much of the time, money and effort spent on creating, perfecting, rolling-out and learning new laws could have rather been spent on getting more people involved in the game of rugby (including in previously disadvantaged communities); and
  6. It limits the growth of the game – in addition to the reasons mentioned above, I think it send the wrong message when a sport is constantly saying (in effect by changing the laws) that we are not happy with the game we played last year and we have to change it. If we, the insiders of the world of rugby are not happy with the game, why should new entrants be happy with it?

So, what am I asking for? I am saying that the powers that be in our game of rugby should adopt a new and different approach to law changes. Do not change laws for the sake of changing laws. Do not change it to more evenly balance teams or hemispheres. Do not change it to make the game more “enjoyable” for the audience. Only make changes that are crucial (to safety) and please make them very infrequently.

Please give us a break. Let us enjoy this beautiful game, let us understand it, let it be about how teams perform and not about how laws are interpreted and don’t make it so much work for us.

What do you think of my view? Do the constant law changes bug you or don’t you mind? Do you think these changes are necessary to make the game safer, more enjoyable and better? Am I making a mountain out of a mole hill? Let me know what you think.

In the mean time, keep your talking straight!

 

Marius Strydom is the owner of MLAX Consulting

https://www.facebook.com/straighttalkingstrydom

https://twitter.com/Marius_Man


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Lower AIDS deaths can save you money!

Category : Uncategorized

People who are HIV+ are living longer when receiving anti-retroviral treatment (ART) and this trend can put more money in your pocket. In this blog, I will explain why lower AIDS deaths can save you money, even if you are not HIV+.

Many people in SA buy and own only one type of life assurance product, namely a funeral policy. The problem with funeral products are that although the premiums (amount you pay every month) are quite low, the death benefit that your family receives upon your passing (the sum assured) is also very low and you typically don’t receive anything if you survive for a long time, i.e. you don’t get to save anything in these policies.

The main difference between a funeral product and other forms of life assurance is that a funeral product is typically not underwritten. That means that you can get the policy without having to submit to an AIDS test, you don’t need to go for a medical examination and you usually don’t even have to answer a questionnaire. Without underwriting, the life assurer charges a much higher premium as they have no information about your health. A simple way to reduce the premium that you pay is to buy an underwritten policy. However, you will have to submit to those tests and answer some questions.

However, even if you decide to stick with a funeral policy, my academic research (done in conjunction with the University of Stellenbosch and Deloitte) has shown that this situation is very likely to change in the light of lower AIDS mortality (fewer people dying of AIDS and HIV+ individuals living longer on average). The research shows that funeral products should become better value for money (more sum assured relative to premium), should start offering larger benefits, should start to reward clients that remain loyal and should allow clients to start saving more.

There are two reasons why funeral policies do not currently offer as good value for money as they will in the future. The first reason is AIDS and the second is lapses (when people buy a funeral policy, but do not stick with it).

As a result of AIDS, in 2005, the average person in SA only lived for 54 years. Today that number is 62 years. We forecast that life expectancy of the average South African will rise to above 65 years in the next decade. The maths is simple, the longer you live, the more premiums you can pay on a funeral policy and therefore the higher your sum assured will be. As a result, as life expectancy improves, funeral policies will become cheaper. They already have to some extent, but life assurance companies are conservative and will not re-price based on an expected improvement. They will only re-price on an actual delivered improvement.

Lapse rates on funeral policies are more than twice as high as on other life assurance policies and by year 5, less than half of funeral policyholders still have their products. This makes these policies poorer value for money for all policyholders. Why? Because a broker or agent typically receives a commission when you buy a policy and if you do not stick with the policy long enough, there is not enough time for this commission to be paid back through your premiums. Hence, the premiums are higher for everyone.

In our research, we have shown that the increased life expectancy of South Africans as a result of lower AIDS deaths, creates the opportunity to incentivise policyholders to stay with their policies longer and as a result obtain better value for money for themselves and help all policyholders to get better value for money. What incentives am I talking about? Two examples would be a cash back benefit (in our research we spoke about a cash back every 5 years) or a surrender value after 5 years (that means that if you keep your policy for at least 5 years and then decide you don’t want it any more, you will get money out).

In our research, we have modelled an improved mortality scenario (that is the number of deaths in South Africa going forward) and have considered different lapse scenarios (where lapses are lower than the current high levels). We then applied this to two policy examples, namely a cash-back funeral policy and a funeral policy with a surrender value. The examples are mutually exclusive.

We show that with the expected improved mortality, policyholders could get more than 1 year in premiums back every 5 years and with lower lapses (people staying with their policies longer), this could increase to 18 months premiums every 5 years. Alternatively, we show that a surrender value equal to 30% of premiums paid could be offered after year 5 allowing for improved mortality and this could increase to 50% if lapses also improve. What is interesting is that life assurers should be able to offer these improved benefits without it impacting their profitability. This should be a win/win situation.

I see a near future where people in SA will start to get better value for money on their policies, especially if they are currently buying funeral policies. I see more people getting higher life cover to better look after their dependents when they die. I see an increased opportunity for people to save and for the country’s savings rate to go up. At the same time, I see life assurers doing more to get more people covered, without having to sacrifice their profitability. This future is likely to happen and you can play your part in making sure it happens and that you benefit from it.

So what can you do to save money?

  1. Get tested for AIDS and if you need to, get treatment ASAP;
  2. Get an insurance policy that requires some form of underwriting – medical questionnaire, physical, AIDS test as in most cases you will pay less;
  3. Once you have an insurance policy, especially one with a savings element (like a surrender value), try and stick with it, even through the bad times as it will allow you to get more out of the policy;
  4. If you are buying a funeral policy, ask for a policy that will give you something back if you survive and stay with the policy; or
  5. If you are buying a funeral policy, ask for a policy that will give you some form of savings, probably through a surrender value; and
  6. If you notice that you are paying less for your insurance, save the difference – RSA retail bonds through the post office may be a good option as the fees are low.

What is your perception surrounding funeral policies? Do you have one? Would you take more cover if the premiums were lower? Do you like the idea of getting a cash-back or surrender value benefit? Would you consider submitting to medical tests and questions if it will save you money? Let me know what you think. Until next time, keep your talking straight!

You can download our full paper on AIDS mortality at http://www.actuarialsocietyconvention.org.za/assets/pdf/papers/2014%20ASSA%20Strydom.pdf and the presentation that we gave at the 2014 Actuarial Convention at http://www.actuarialsocietyconvention.org.za/assets/pdf/presentations/Strydom.pdf.

 

Marius Strydom is the owner of MLAX Consulting

https://www.facebook.com/straighttalkingstrydom

https://twitter.com/Marius_Man


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