In 2017, Damian Gawlowski, a South Africa insurance contractor based in the City of London, uncovered the hidden impact of intermediary fees with the more risk an investor took on
DAVOS, Switzerland, January 25, 2019/ — In the Financial Times’ (www.FT.com) report on Innovation in South Africa today, Aziza Coin (www.Aziza.io) simulates how to beat high fees and shows why “excessive profits in UK fund management industry handicap growth on the African continent.”
In 2017, Damian Gawlowski, a South Africa insurance contractor based in the City of London, uncovered the hidden impact of intermediary fees with the more risk an investor took on. Up to 78% of returns from private equity are consumed by intermediary fees. Gawlowski investigated and found that while this was the case, the underlying equity and bond returns were over 4% rather than the 1% he actually received. Undisclosed fees added, he calculated, made intermediaries consume over three-quarters of the underlying returns generated by the bond portfolio that was ultimately invested in. Gawlowski considered putting his pension into higher risk investments such as private equity funds and as the mutual fund returns resulted in real depreciation of his pension by 1.3% per year after fees. He modelled a dummy private equity portfolio where he calculated that the portfolio would need to make 140% over a typical seven-year period simply to cover the fees and to keep up with inflation. This meant that an (annualised) internal rate of return of 13.3% would be required to simply retain his 2017 buying power by achieving UK inflation of 2.7%. *
The Financial Conduct Authority has expressed concern about the level of fund management profits when it was quoted as saying in a report lambasting the statutorily-protected revenues of the United Kingdom’s £6.9 trillion fund management industry’s’ profit margin of 36%. It found that “firms do not typically compete on price with their retail active funds in the UK [and that] there is some evidence of a negative relationship between net returns and charges.” **
These fees, which the FCA regards as excessive, have real societal costs. As Einstein is alleged to have said, compound interest is the most powerful force in the universe. A pension that appreciates by 13.3% per annum (ie gross returns without the 78% intermediary fees will return 140% in seven years time, whereas with the fees added, an annual return of 2.7% will only appreciate by 20%. These fees have already broken the defined benefit company pensions system and has the potential to cause real poverty in the Western world, where their effect is not well understood by the general population. The fact that the UK financial services PR industry is worth £2 billion per year does not help. Furthermore, if the fund management industry is taking three-quarters of returns, with 40% of funds disappearing upfront, it becomes distinctly more risk averse, as any loss of retail investor capital will invite scrutiny and therefore shed light on the level of their fees.
This risk aversion is manifested in the fact that 0.02% of assets under management or only 8 billion Euros were allocated to startups in 2016. This matters since start-ups create more jobs than the rest of the economy combined. Pre-ICO, Damian invested in the Aziza Project, which seeks to use distributed ledger technology to automate and disintermediate the layers of fund management costs. The Project was careful to avoid the usual pitfalls that have beset other cryptocurrencies:
- From the outset, it avoided the argument as to where it was a security or a utility, by registering under Reg D exemption in the United States as a security token.
- Every buyer and seller of coins has been vetted and subject to the level of KYC required to open a high street bank account as well as being checked as being recorded as a taxpayer.
- It became the first cryptocurrency in the world to integrate its reporting systems with a tax authority when it became a third party data provider to South African Revenue Services (SARS), ensuring that investor gains were reported and taxed as capital gains. 4. It is asset-backed by seven oil and gas concessions in Southern Africa. Aziza Coin offers something Damian could not find anywhere else – low transparent fees where investor fees are limited to 10% upfront with no further fees. Its Ethereum-based smart contract automates the annual fund management function with a mere 800 lines of code. So if the underlying exploration projects deliver the same underlying returns as Damian’s fictitious portfolio – 140% in seven years, his returns after fees will increase from 20% using traditional fund management fee structures to 126% — over six times times the returns.
Aziza Coin offers something that excites Damian more than reducing the fees. He has starting working on Acqumine, which has had discussions with the South African Revenue to internalise commodities taxation into a smart contract and eventually a pan-African commodities exchange that will enable host countries and local communities in the developing world to receive royalties due to them, while giving end customers piece of mind as to the true source of the minerals that make up consumer goods they buy.
Learn more about Aziza Coin at: www.Aziza.io
Based on IFA trail commissions of 3% upfront plus 0.5% per year, pension fund fees of 1.o% per year, fund of fund fees of 1% per annum and 10% profits and private equity fees of 2% per annum and 20% of profits on exit. Based on a dummy portfolio of five investments delivering an average of 140% over a seven year period.
Asset Management Market Study – Final Report Market Study – MS15/2.3-June 2017 recommendations 1.9 1.10 and 1.11 page 4 https://bit.ly/2tnjKVw
Note: Aziza Coin is not available for sale.
Distributed by APO Group on behalf of Financial Times Africa Representative.
Post Covid-19: The social impact of 4IR enabling technologies on the African continent
Tshiwela Ncube is the Co-Founder and COO at VUUQA.com
During this global pandemic, I have been thinking of how the world will change post corona. Will this pandemic thrust Africa into the Fourth Industrial Revolution (4IR)?
In this article, Tshiwela discuss the social impact that 4IR enabling technologies will have on the African continent and how they will assist in addressing various problems facing the continent mainly in the following sectors:
- Health–This sector will be impacted the most; technologies like AI will enable diagnosis where there are shortages of doctors and enable the inventory management of medication in rural areas.
- Agriculture – Technologies such as the Internet of Things (IoT) have the power to enable African farmers to optimize productivity and reduce wastage through “precision farming” which relies on testing and data analysis to assist in the managing of field variations.
- Financial – 4IR will increasefinancial inclusion in Africa by enabling the unbanked to participate in the economy through retail electronic payments platforms and virtual savings and credit supply technological platforms. Technologies such as blockchain are providing the informal sector with opportunities to gain access to credit.
Most of these 4IR technologies have been implemented in Africa and many more are currently in testing phase. Africa continues to push innovation;however, a few challenges have the potential to impede the advancement of 4IR in Africa.
- Skills Deficit: To take full advantage of 4IR, Africa needs to invest heavily in cultivating the skills and capabilities of their labor force,lack thereof may result in job losses with technology replacing humans. When the labor is skilled it can work hand in hand with the technology.
- Infrastructure: Africa needs to improve its digital infrastructure in order to be able to access the advanced technology that enables 4IR. In countries like South Africa where data prices are expensive, the average man on the street can’t afford data therefore cannot connect to the internet affordably and easily.The result of poor digital infrastructure is that it reduces crucial connectivity which makes it difficult to effectively activate technologies like AI.
- Regulations: Africa needs to tighten and increase its cyber security to ensure the safety of people data and any possible fraud.Regulations should also be placed to enable African digital leaders to scale cross border, most especially with the new Continental Free Trade Agreement, this should be the time for Africa to align their processes and procedures in order to take full advantage of the rapid changes that 4IR is bringing.
4IR has the power to bring real fundamental social changes to Africa and to enable Africa to compete globally. It is up to African leaders to ensure that the environment is equip and conducive to forester such efforts. There was never a better time than now for Africa to move forward with the 4IR agenda and not only become a participant but a key player.
Article by: Tshiwela Ncube is an E-commerce thought leader, Co-Founder and COO at VUUQA.com
Facebook launches Tools to keep faith-based communities connected during COVID-19
The tools are part of Facebook’s ongoing efforts in keeping communities safe, connected and informed during this pandemic
JOHANNESBURG, South Africa- Facebook has launched key resources to help faith groups stay connected and engaged during the current COVID-19 outbreak. The resources include the “Faith on Facebook Resource Hub“ and the Faith on Facebook toolkit, both providing guidance and step-by-step tips that faith-based groups can use to keep their communities engaged while observing social distancing. The tools are part of Facebook’s ongoing efforts in keeping communities safe, connected and informed during this pandemic.
Download document: https://bit.ly/2VicyFs
Some of the tools that faith-based groups can use to connect with their communities during the COVID-19 outbreak include:
- Facebook Pages: Explore how to build an active and engaged audience of faith communities, advice on posting interesting content, as well as creating events and using Groups for discussions.
- Facebook Groups: Groups allow people to come together around a common cause, discussing issues and ideas, posting photos and sharing related content.
- Facebook Events: Host virtual events using Facebook Events to spread the word.
- Utilising WhatsApp: Consider sending bite sized sermons or recordings through the voice note feature on WhatsApp to members, using either the dedicated broadcast list function or creating a New Group list.
- Watch Party: Host a Watch Party for your Group, choosing videos that are relevant to your community and invite members to join and discuss.
- Facebook Live: Stream live stream events and performances on Facebook, utilizing interactive features such as reactions, shares and comments enabling you to further engage your audience.
Commenting, Facebook Africa Regional Director Nunu Ntshingila said, “At a time like this, our mission has never been more relevant, to give people the power to build community and bring the world closer together. We know that faith leaders across Africa are grappling with the unexpected challenges in serving their members digitally, and we’re committed to providing them with the resources and tools to support them as much as possible”. She added, “Our ultimate goal is to equip faith-based communities with the tools to help them continue faith conversations throughout the pandemic.”
Zindi set to offer free hackathon and tailored online problem-solving sessions
Cape Town based online data science competition platform Zindi will during the COVID-19 lockdown offer businesses free hackathon and tailored online problem-solving sessions.
Zindi recently launched a new hackathon space on its platform. The space will enable those companies with data science teams that are now working from home a private space to continue to upskill on problems that are important to their businesses while strengthening teamwork and cohesion in their free time, even while kilometres apart.
The offer comes in the wake of a 21-day lockdown imposed by the South African government with effect from 27 March.
“It really feels like we are stepping through that threshold that separates the world as we knew it from the uncharted territory that lies ahead. The situation is evolving rapidly and every day seems to bring new revelations about how COVID-19 might impact our lives, our economies, our companies, and our professional teams in the months and years ahead,” says Celina Lee, CEO Zindi.
“We realise that even during these challenging times, business doesn’t stop,” adds Lee.
“At Zindi, we also find ourselves having to adapt to the changing landscape. But we are driven by our mission to make AI accessible to everyone and every company. We see the current climate as an opportunity for our online community of over 12,000 data scientists to apply their skills to problems that matter most now, and to be an engine for productivity even during this unusual time,” says Lee.
“One thing this experience is teaching us is that physical location no longer matters. As an online platform, Zindi is uniquely positioned to harness the power of data scientists around the world to keep businesses and teams going during these challenging times. As a support to you, our valued partners, we’re pleased to offer you a free hackathon for your data science team or an online problem-solving session tailored for your business. Remember, we’re all in this together,” she adds.
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