Deloitte SA Blog

Deloitte South Africa takes a look at the financial, figures and industries that contribute to both government’s revenue, and expenditure. Taken from the audited 2009/10 results from Treasury, the infographic assists in showing insights into a highly complex set of numbers.

Download the full infographic here: Annual Budget Infographic

Follow @DeloitteSA on Twitter for more on the 2012 SA budget and use the #sabudget hashtag to contribute to the conversation.

JOHANNESBURG, January 26, 2012 – Saturday, 28 January 2012 marks international
Data Privacy Day. The day highlights the impact technology is having on our
privacy rights and underlines the importance of valuing and protecting personal
information. While the day is recognised internationally by business
professionals, corporate South Africa is grappling with our privacy
legislation.

As South Africa’s Protection of Personal Information (PPI) Bill looms
over the county’s corporate sector, many companies are racing against time to
grasp the compliance demands of the legislation.  Unfortunately, in their haste many are
underestimating the benefits that compliance could bring to their
operations.

“The PPI Bill is a natural progression for South Africa. At its most
basic, the legislation reinforces every South African’s constitutional right to
privacy. At the other end of the scale, it brings the country into line with
most of its significant international trading partners, a factor that builds
confidence when information is transmitted across borders,” says Deloitte Legal
Director, Dean Chivers.

Looking beyond compliance, effort and cost,
there is substantial value for those implementing PPI. The value of the
corporate brand will increase with customers and business partners having more
trust in the organisations with which they do business. According to Chivers,
this customer value can translate into financial benefits.

PPI’s value for a brand is incalculable. The recent announcement that
about R41 million had been stolen by hackers infiltrating the PostBank database
illustrates perfectly the reputational and monetary loss involved when customer
information is hacked.

The recent case where Zappos in the USA was
hacked and had to notify in the region of 24 million customers of the breach
and implement preventative measures further indicates some of the potential
downside. Indeed data events like hacking, data loss, unauthorised data use,
insufficiently regulated outsourcing and cross border data transfers all
present significant value risk.

Added to this, on January 25, 2012, the
European Commission proposed increased penalties for data privacy breeches,
which envisage penalties of up to 2% of a company’s global annual turnover.

“While
companies will need to reassess their data management process, analyse their
security, amend processes and change their contracts, companies should not look
at the PPI Bill as purely an inconvenience. Rather by aligning the requirements
of the Bill to existing projects and reporting structures, PPI can offer a
sustainable and measurable return on investment” concludes Chivers.  

Contact:

Luleka
Mtongana
Magna-Carta PR
+27(0)11 784 2598
Luleka@Magna-carta.co.za

Lana-Jane Pike
External
Communication
Deloitte & Touche Southern Africa
+27(0)11 209-6214
lpike@deloitte.co.za

What are the Deloitte TMT Predictions?

What started in 2001 with ten predictions about mobile telephony has evolved and grown into one of the Technology, Media & Telecommunication industry’s most anticipated research publications, covering all three industries individually. Launched in 46 countries, translated into almost 10 languages, downloaded and viewed by tens of thousands of people around the world, the Predictions have a significant medium and long term impact for organisations in the industry.

Forecasting on topics like Social Gaming, Tablets, Mobile, Online Ads and 3D printing, the 2012 TMT Predictions highlight immediate trends, future possibilities and industry changes within these fast paced and ever-changing environments.

Download the Predictions here

Deloitte also presents its first ever South African hosted 2012 TMT Predictions seminar with global research director of Technology, Media & Telecommunications, Paul Lee. Over and above producing the Deloitte Global Mobile Consumer Survey, Paul has written five books, including Convergence Conversations and Digital Dilemmas. A TMT Predictions eventis to be held on Tuesday 31 January 2012 at The Michelangelo Hotel in Sandton, and will provide practical insight into the very real challenges facing the industry. The discussion will no doubt include discussions on the broad and often complex area of TMT and key issues all businesses should be aware of. This will be followed by an interactive dialogue with a panel of experts , clarifying important business considerations that the Deloitte TMT Predictions raise. Follow the conversation on Tuesday on Twitter. The official hashtag is #TMTPredictions or follow @DeloitteSA.

Deloitte 2012 TMT Infographic

Click here to view the full infographic

This paper, written by Stefan Schmikal of Deloitte Consulting, discusses the use Enterprise Transformation to enable an organisation to better understand itself and unlock exceptional value in its people. If you have any questions, contact Stefan at sschmikal@deloitte.co.za.

Enterprise Transformation – Transcending Traditional Organisation Design

Changing any part of an organisation, no matter how small, stands to have a profound impact on how people work and interact with each other- even if they are not directly affected by the change itself. Effective Enterprise Transformation can unleash a tremendous amount of latent ”people potential‟. At the same time, such initiatives are invariably stressful and emotionally taxing to those involved and affected.

In order to be successful, the ”traditional‟ Organisation Design and Change Management efforts need to work in concert, in the context of Strategic Clarity to guide the way. All organisations are unique, so each Enterprise Transformation initiative must be contextualised in the organisation’s history that has led up to this point.

Understanding the subtle nuances that personify an organisation is also critical, as it is these nuances which will influence the Enterprise Transformation process going forward. Rather than the rigid application of generic methods and templates, the Enterprise Transformation facilitator’s role is to act as a guide down a path less travelled- while taking cognisance of the journey to date.

Enterprise Transforming is all about facilitating a logical thought process, by asking the right questions and guiding key decisions around the organisation’s future.

Read the full article . . . . How to use Enterprise Transformation to unlock value

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This paper, written by Deloitte Consulting, provides board members and executive leaders with a practical approach and framework to evolve their relationship and optimise governance effectiveness. If you have any questions, contact Gert de Beer at gedebeer@deloitte.co.za, Garth Bell at gbell@deloitte.co.za or Carla Clamp at cclamp@deloitte.co.za.

Boards and Management renew their vows – A new era of collaborative leadership

A renewal of vows is a symbol of a renewed commitment between two parties. Sometimes parties renew their vows to celebrate relationship milestones and reaffirm their commitment to each other; other times, they renew their vows after a challenging period in their relationship, when their commitment to each other and their relationship has been tried and tested.

Arguably, the Board–Management relationship has been through a challenging time. It suffered a protracted period of scrutiny and tension due to various scandals over the past decade resulting from lack of oversight and accountability (Enron and Worldcom being the most notorious). This has resulted in corporate governance reform across a number of national and international jurisdictions, with a specific focus that boards and executive management be held increasingly accountable for the actions of their organisations. This heightened accountability has put a strain on the Board’s relationship with Management, a strain that has intensified during the recent financial crisis and which has resulted in the increase in Board oversight and involvement in corporate strategy, risk management, executive compensation and achieving sustainable, high-performance cultures. Although increased Board scrutiny on these dimensions is likely to improve business performance and better serve the interests of the shareholders, managing such a large agenda is challenging, and Boards cannot do it in isolation. The reality in this day and age is that Boards must work with Management to both inspire organisational performance and address the expanding accountability agenda. A significant challenge in this regard is the Board’s ability to engage and collaborate in a way that does not compromise its objectivity and independent oversight role.

To achieve the desired Board–Management relationship, a change from the status quo is most likely required for most private and public enterprises. For those organisations that aspire to strengthen longer-term performance and optimise governance effectiveness, the starting point is to understand the current governance culture and the Board–Management relationship, and how they need to evolve.

With this strategic opportunity in mind, this paper will provide Board members and executive leaders with a practical approach and framework to evolve their relationship and optimise governance effectiveness. Furthermore, it outlines an approach to collective leadership which should ultimately enhance organisational performance, increase shareholder value and address the need for increased accountability for inspiring and optimising the commitment of employees to strategic direction and operational performance.

Read the full article . . . . Boards and management renew their vows

We welcome your feedback and please share with your colleagues!

If everyone is thinking alike, then somebody isn’t thinking – George S. Patton

If planning, budgeting, and forecasting isn’t delivering the value your business expects, it may be time for a good scrubbing. But don’t throw it out.

How we got here

The basic tools of accounting—double-entry bookkeeping, income statement, and balance sheet—can be traced to Venetian investors who funded trade expeditions to Asia during the 1400s. These were valuable tools for high-risk ventures, even by today’s standards.

The concept of planning and budgeting came centuries later. The word “budget” derives from the old French bougette, meaning a small purse. In the mid-1700s, Great Britain’s Chancellor of the Exchequer was said “to open the budget” when presenting his annual statement. The term was extended to private and commercial finances in the late 1800s.

At the beginning of the 20th century, business leaders made a defining choice that sowed the seeds of today’s frustration. With outside investors demanding audited financial statements, managers began to rely on external financial reports as measures of internal performance. They believed it was too time consuming and expensive to produce two sets of manual reports.

The voice of reason?

Most organizations don’t have to dig very deep to find people who don’t like planning, budgeting, and forecasting. You might even be one of them. The stress associated with these activities can be enough to wear down anyone’s resolve. With business units protesting in one ear and executive management grumbling in the other, it’s no wonder finance leaders may be tempted to listen to some pundits’ advice and abandon these activities altogether.

But while the complaining may be frustrating, it can also provide clues to what may not be working. Time-consuming manual processes. Endless budget iterations. Wasted technology. Conflicting goals. Poor decision-making. These are the things you could easily do without.

But don’t get carried away. Companies count on finance leaders to be their voices of reason—cool in the heat of battle, skeptical in the face of exuberance, and above all, focused on creating value. In the final analysis, planning, budgeting, and forecasting is a powerful tool – perhaps the most powerful tool—for informing and executing your business strategy.

Download the full article . . . . Babies, bathwater, and best practices – Rethinking planning, budgeting, and forecasting

Did you find this useful? Please share with your network, and as always, we welcome your comments and feedback!

This article was written by George Tshesane and Linda Seroka of Deloitte Consulting. If you have any questions or would like to continue the discussion in more detail, feel free to contact George at gtshesane@deloitte.co.za or Linda at lseroka@deloitte.co.za

The significant gap between electricity supply and demand in South Africa, coupled with inclining power tariff increases, is compelling reasons for businesses to reduce electricity consumption. The good news is that energy cost reduction is relatively simple to achieve and can lead to significant improvements in bottom-line performance.

Energy consumes a significant portion of any organisation’s spending, accounting for 5 to 20 percent of a typical company’s costs. This is spiralling upwards as tariffs continue to increase into 2012 and companies must find ways of managing their electricity bills simply to ensure corporate sustainability. Equally compelling, however, is the motivation of ensuring a future for our country and its people.

Many organisations, however, have an awareness of their energy consumption and how to reduce it. They need to understand and actively manage their energy use – and their energy sources, including possible ways to produce their own energy. A comprehensive energy management strategy offers a number of potential advantages including significant savings, improved profitability, greater customer loyalty, a cost-edge over competitors, lower business risk and a company-wide awareness of sustainability that can rein in resource waste across the board.

Business must pay attention to energy efficiency

Cost savings, customer loyalty and sustainability all argue strongly in favour of active corporate energy strategies. But the most crucial spur for action in South Africa is the risk that a company’s operations could be disrupted by energy shortages, outages or escalating prices. The current realities of the electricity sector are therefore forcing business to re-evaluate energy consumption.

In addition, worldwide the trend is towards a greener future. If business does not adjust, it may not find many global markets in future as countries begin to demand environmentally friendly products.

Demand continues to outstrip supply

Decades of robust economic growth, low electricity prices and lack of investment in power generation in South Africa have placed our national electricity supply grid under severe pressure.

Electricity supply can hardly meet the growing demand for power. We have some of the cheapest electricity prices in the world as a result of artificial prices being set over the past few decades to attract foreign direct investment. We therefore use electricity more intensively than most other countries and our economic structure is now biased towards electricity- and capital-intensive industries.

This situation has become unsustainable and the country has to move towards cost-reflective tariffs.

Price increases

The move towards more sustainable electricity pricing is hitting business hard. The price of electricity is increasing by an overall 25% per annum between 2010 and 2012.

This effectively doubles electricity prices over three years, putting profit margins under considerable pressure. Already major energy-intensive organisations are feeling the pinch. Exxarro, for example, cites susceptibility of its zinc refinery operations to rising energy costs among its reasons for closing Zincor.

Business therefore needs to find ways of managing electricity usage before it seriously impacts profitability.

South Africa is taking energy reduction seriously

Government is committed to an aggressive low carbon trajectory and business will soon begin to feel regulatory pressure to become more energy-efficient. Incentives for reducing electricity consumption – and penalties for businesses that fail to do so – are looming.

Drivers for South Africa to reduce electricity consumption include:

Electricity supply security is critical for the country to facilitate economic growth. The costs of power outages are huge. For the government, subsidising energy efficiency or forcing companies to be more efficient is far less damaging to the economy than power disruptions.

Energy efficiency is often the least cost method of creating additional energy supply. The cost of building new capacity to generate 1Mwh can be far in excess of the cost of funding energy efficiency programmes to conserve the same amount of electricity.

The uptake of efficient technologies should assist in maintaining international competitiveness for local industries as global energy prices continue to climb. This is particularly true over the long term and for industries that must remain at the forefront of technology to remain competitive.

There is global focus on environmental protection, particularly climate change and the reduction of carbon emissions. Promoting energy efficiency can be a key tool for meeting our environmental goals and improving social welfare.

Sustainability. Effective energy efficiency will help prolong the life of finite non-renewable energy resources which remain a more cost-effective and reliable means of supply than renewable energy technologies.

Energy management is a global issue

Energy reduction is a global challenge and one that business in developed countries is taking very seriously.

According to the Deloitte resources 2011 US Study, 90% of companies have set goals regarding electricity and energy management practices. 76% have goals related to reducing electricity cost/consumption and 71% have goals targeted at improving the efficiency of the building in which they operate. These goals are significant, typically aiming for an average of 25% in electricity or cost reduction, most often with a 2–3 year time horizon.

56% of the companies have goals aimed at improving profitability through electricity reduction.

How can South African businesses achieve energy savings sustainably?

The time has come for companies to ensure they develop energy strategies. This is not about green-washing. Energy strategies are about hard-core business decisions; about going back to the basics of managing resources and resource use.

From better management of buildings and vehicle fleets, to smarter use of technology, to tighter oversight of their entire supply chain, organisations can mobilise countless tools to help transform how they use energy and other resources.

And companies can actively begin to analyse the potential to produce their own energy – from using their rooftops for solar, to land for windmills, to distributed forms of production, like micro-turbines.

Efficient management of energy consumption deliver real value by increasing revenue and decreasing costs, leading to improved profitability.

There are a number of initiatives that can help increase revenue. Demand reduction programmes, for example, allow energy users to voluntarily reduce demand at short notice and receive monetary compensation. Where appropriate, revenue can also be increased through the sale of excess energy production, and/or renewable energy certificates (RECs). This is a little understood market in South Africa but there are already 30 local projects registered with the UN for RECs.

Operational performance improvement, energy audits and supply-side cost reductions and lead to decreasing costs. Energy efficiency self-audits can determine if more efficient methods or technologies could be deployed to significantly reduce operating costs and create significant value for the company. Evaluation and negotiation of utility contracts to leverage lower rates or tariff opportunities can also lead to substantial savings.

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Posted by Josh Haims on January 6, 2011

The pressure on organisations to address enterprise risk is unlike any we’ve seen before, perhaps because the scale and scope of risk is unprecedented. Certainly, in the wake of the financial crisis and ensuing reforms, regulatory and compliance risk looms large in the financial sector, as well as in health care, with its similarly sweeping reforms. We also anticipate supply chain risk for manufactures, competitive risk for retailers and brand and reputational risk virtually across the board, given the rise in social media and the potential power of global social networks to rapidly shift large groups of people for or against a product or company.

In response, many organisations are reengineering processes, implementing policies, putting controls in place, introducing new technologies — and fine-tuning and adapting all of these as the rules evolve — to manage, avoid and mitigate risk. But with these new ways of working comes the need to consider building new employee capabilities. And that means many companies are challenging their status quo training approaches and designing, developing and delivering truly developmental and experiential learning — not check-the-box training programs.

Simply providing training about how to follow a new process or procedure or explaining how to use a new technology may not be enough. The key is to create and foster a risk-intelligent mind-set throughout the organisation and to build that into how work gets done. So, along with building risk intelligence into structured compliance and regulatory adoption training programs, organisations should step back and reassess learning opportunities holistically and the various channels and mechanisms for employee understanding and growth.

Many organisations are devoting considerable expense and time to manage and mitigate risk in their business, so to consider taking steps to increase the effectiveness of that investment is prudent.

In a recent publication, Bridge the gap between “knowing” and “doing,” we take a closer look at the link between effective learning programs and risk intelligence. Learning can be a critical bridge between an organisation’s heightened awareness of the importance of risk mitigation and the behaviors employees need to exhibit to effectively mitigate risk.

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by Johan Theron, Director at Deloitte Consulting

The new mining environment in South Africa and Africa is all about entrepreneurial flair and fast reaction to volatile commodity markets. These miners want flexible, scalable and affordable back-office support.

This article was written by Johan Theron at Deloitte Consulting. If you have any questions or would like to arrange a more detailed discussion, contact Johan at jtheron@deloitte.co.za or +27 12 482 0514

It seems like there is a new scramble for Africa under way at the moment. Africa’s rapidly urbanising and increasingly affluent populations are certainly an attractive potential consumer market, but the real driver is global hunger for Africa’s mineral wealth. There’s also no doubt that Africa’s attractiveness as a market for goods and services also ultimately depends on the profits from mining Africa’s minerals.

The markets may be hungry for African minerals but they are also highly volatile—and look set to remain so. Long-term planning is thus much more difficult, but mining still requires significant long-term investment. Strong demand has also bred strong competition: it is now feasible to exploit smaller, less concentrated ore bodies. As a result, there are many more mining operations across the continent, and ownership is not nearly as concentrated as it once was. In part, at least, this trend is driven by Africa’s determination to participate much more actively in the mining value chain in order to ensure that more benefits remain on the continent.

In South Africa, in particular, the need for black economic empowerment has seen the birth of many junior miners, some of which have been hived off from larger entities. However they were formed, these ventures are primarily aimed at spreading South Africa’s economic wealth more broadly.

This changing mining landscape is driving the emergence of a new breed of entrepreneurial miners.

A new breed of miner

These new-generation miners are a far cry from the traditional mining houses with their impressive head offices and centralised, highly skilled finance, HR and IT teams. The new miners are building up their businesses—thus they are concentrated on exploration, followed by the creation of the infrastructure to support a mining operation and get the product to market.

All of this activity is, one should not forget, taking place at a time of severe fiscal constraint. Overheads thus need to be kept low, and fixed costs are much preferred because they make planning much easier. At the same time, as I noted earlier, demand has bred fierce competition: these companies definitely need to be run efficiently and to meet their delivery commitments.

These conditions place executives in a tight spot. Their main focus has to be entrepreneurial as they help to clinch new deals and partnerships, and generally create the strategy needed to prosper. They don’t have time to worry about day-to-day back-office operations although, at the same time, of course, they are dependent on them for cash flow.

A long established solution to challenges of this nature is, of course, to outsource some of the vital but non-core processes like payroll, HR or IT. Talking to these executives, it becomes apparent that payroll and IT are the processes most outsourced, but that other processes are rapidly catching up. The benefits include reduced risk and increased efficiencies—not to mention cost savings that, in our experience at Deloitte, can reach 30%. Benefits also include the flexibility to scale operations up or down according to business strategy, better regulatory compliance, a stronger control environment and access to global skills as needed.

Next-generation mining outsourcing for next-generation miners

Mining is one of the engines of our country’s and Africa’s future prosperity. I believe that this new breed of miner cries out for a new outsourcing model in which the key non-core back office processes are outsourced to a single vendor. The reason behind this thinking is, I think, compelling.

The first element of this thinking is that mining companies need to standardise on best practices appropriate to their sector. The days of extensive (and expensive) customisation are over. Both the systems and the back-office processes they enable should become background utilities comparable to water and electricity.

This is a welcome development because at one stroke it prevents companies from remaining hostage to the status quo—especially as the status quo might not have been optimal in the first place. It also means that software upgrades are easy and quick as there is no need to undergo the expensive customisation process each time.

Another key driver for today’s miners is the need to be able to predict costs accurately. This ability helps protect the bottom line and gives companies the flexibility to invest in their core activities.

Pulling all of this thinking together, I would propose the creation of an integrated solution based on an enterprise system that is preconfigured with best-practice mining processes. I would argue that it makes sense to outsource the financial processes that are enabled by this preconfigured system to the same vendor—along with the necessary IT infrastructure. It’s a winning approach because it enables process efficiencies across what is essentially a tightly integrated ecosystem. Along with these process efficiencies come significant cost reductions, as well as an easy-to-manage relationship with a single vendor.

The benefits for the next-generation mining house are manifold. As I have made clear, these operators are entrepreneurial in nature and are heavily into the investment phase of their life cycles. This type of approach gives them the freedom to focus on their core business strategy, secure in the knowledge that their non-core business back office operations are taken care of—and are optimised for the mining environment. The fixed, “pay as you go” cost structure means that CFOs can plan better, and can focus their efforts on growth activities.

A solution constructed along these lines has the advantage of being quick to implement (anything from four to six months would be standard, in our experience)—and it gives the small or mid-sized mining house a Rolls-Royce engine that it does not need to own or manage, but that that will give it the power it needs to do great things. Deloitte makes pioneering on the world’s final investment frontier easy.

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A new book from Deloitte cuts to the core of analytics excellence.

Are you prepared to see analytics in all its grubby, geeky, potentially revolutionary glory? It all starts with asking crunchy questions to tackle your most sticky business issues — and ends with getting answers you can trust.

Many business leaders already know the inherent value of analytics insights for improving operations and driving smarter decisions. But amid all that potential, companies continue struggling to build truly fact-based cultures. They talk a good game, but when you look deep inside their organizations, there’s not much under the hood.

The benefits of analytics seem clear, and many executives can rattle off a list of potential gains. Cost isn’t the issue. The best analytics investments are self-funding. And there’s no lack of affordable technology. So what’s missing?

Learn more about the practical steps to jump-start business analytics efforts that deliver uncommon insights and breakout value in our new book, Crunchy questions for sticky issues: Using analytics to outsmart competitors.

Download the book . . . Crunchy questions for sticky issues

Do you have any questions? Contact Ashleigh Theophanides at Deloitte South Africa at atheophanides@deloitte.co.za

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