Young Professionals Quarterly Newsletter – Issue 2 2019

LETTER TO MY YOUNGER-SELF by Malungelo Zilimbola, Chief Investment Officer, Mazi Capital

Dear Malungelo,

Sitting here at the age of 47, I am writing to you – my younger-self. It feels rather bizarre, especially because looking back on my career and mapping out my path I did not envisage being the founder of an asset management company that manages assets worth billions. As the first-born son of two farmers, it felt intuitive to name my company MAZI, which is the Nguni word for “cow”. For many years, livestock has been and still is the original system of African wealth.

I began my career in the technical space as a quantity surveyor and, in 1997, I stumbled upon the world of investments when I was in varsity and all I knew at that stage was that I wanted to be successful. I wanted to drive a lot of impact and I wanted to change the status quo. As with most of us who were raised in the farmlands, I did not have much guidance in terms of my career path and hardly knew anyone within the Asset Management industry at that time.

Fortunately, my path led me to Investec Asset Management. Starting there, I could already sense many cultural differences and had to navigate a white-dominated industry through one word, FOCUS. I realised that I needed to be focused; I needed to have a game plan in order to survive and, as I write this letter to you, I implore you to focus! Avoid taking the easy route of moving within divisions prematurely without a focused plan. If you do not have a game plan you will get very frustrated very often because you don’t know where you are going and who are. This will affect your confidence, and in the world of investments, confidence is a minimum requirement, as you often need to be able to back your views in an audience of more experienced portfolio managers.

The tools that one can use, especially for today’s generation, is information. As a younger lad, I used to read a lot of biographies of successful investors such as Peter Lynch, George Soros and Warren Buffet and I would learn from their stories to motivate me to speer on through the corporate world.

Which brings me to the point when I realised that it was the right time for me to set up Mazi, there really is no substitute for time spent in learning. Firstly, one learns a lot from going through different cycles by analysing companies, managing funds, building an exceptional track record and going through different market cycles 1998, 2001, and 2008. Being able to manage funds through the cycle is important. For me, spending time in the market is very important, don’t rush to be promoted until you’ve mastered your current role. Every role is building a foundation of knowledge that you can use to elevate your career to levels you never thought you would reach. Secondly, you have to be an entrepreneur at heart. Starting a business requires a person with persistent character traits, you almost have to transform into a rubber band and bounce back each time.
I recall that there were (and still are) tough times, when we started Mazi.

The first three years were the toughest, we hardly had a record of accomplishments and limited funds at the time. We were struggling to get people to believe in our philosophy and invest with us. However once we built a strong track record of five years and beyond, things became a bit easier and we have a number of Raging Bull Awards to show for our diligence I must admit that I am a finisher, something I inherited from my mother. Quitting was never an option for me and it should equally never be an option for you.

One of the most challenging, but crucial leadership skills that I had to develop was people management. When you’re running a business like mine, you realise that your greatest resource is people. You can have all of the systems and processes in place to succeed, but without the right people, they are nothing more than sunk costs. People have and will always be at the core of my business and one of the things that I spent a lot of time on, in the beginning, was building a culture where people feel motivated to be the best and feel equally appreciated and valued by others around them. Leading people can be very difficult for many of us in investments who started as analysts and made our way up the ladder only because of our technical skills and not our soft skills. I am not aware of any business school that can prepare one for that but if there’s one skill I can advise you to develop, it’s people management.

Before I leave you to take your own path and fulfil your own dreams, the last thing I want to leave with you is to be selfless in everything that you do. The worst advice that I ever received from someone that I looked up to was that you can never have enough – make as much money as possible and kill competition. He almost encouraged a ruthless mentality to business. You can never lose by being selfless – this character trait is sorely needed in the financial industry and together with that be a team player. There is great success and impact from a team than from an individual. Lastly, just as I am doing, do not forget to give back to other people, through mentoring and motivating. In my career, I was never given the guidance which today I have the ability to give. No matter where you are in life, there are always many others that we can and should give back to.

FEATURE | Yanga Duma – IF Insurarnce

IF Insurance is a financial service intermediary specializing in funeral insurance.
The company was established by Yanga Duma in 2015, after the tragic passing of his father and sister in the same year.

The tragic passing of his loved ones led him to discover that the cost of funeral insurance was materially overpriced, thus he established the IF Insurance with a vision to challenge the status quo by searching and developing suitable insurance covers that would assist those like him who have the responsibility to contribute towards the burial of their loved ones.

The company has enjoyed considerable growth and success since its inception – with Yanga even earning himself the nickname of “The Insurance Evangelist”.

Yanga is passionate about building this business into a strong financial services practice and help families and professionals to have value-adding covers at reasonable prices.

Managing Your Own Career – Career Planning!

My career started out in the Financial Services sector, I was an Investment Consultant at a distinctive bank. I changed gears and moved into HR, Talent Acquisition to be specific, and recruited for the same industry for a decade. The most interesting thing for me with young professionals in this space is that they are ambitious, they want to know where their careers’ with lead, and what steps to take to get them there, but sadly most don’t put their thoughts on paper. By this, I mean putting together a Career Plan – a practical strategy that allows you to determine your skills and interests, set career goals and put actions in place that will help you reach them. It’s a continuous process, and it includes an overview of your current skills and experience.

Managing your own career, from the start, is probably the best thing you can do for yourself. I get that most progressive organisations have Talent Management teams that assist with this, however, my thing is that one needs to always have their own personal five-year career plan. This plan needs to clearly outline the career goal, for example, if your aspirations are to become a Financial Director in 10 years, you need to be very clear on how the next five will look like, that planning needs to craft the journey to your longer-term goals.

Most of us have been asked in interviews, “where do you see yourself in five years?”, and we answer that question brilliantly because we have probably done a lot of research on the company and the type of roles that they have, and who is in those respective roles. Which is fine because at the start of any career, it’s not easy to define goals, so we generally look at people who inspire us and point to them as “goals”. I know for sure that most people do not pen those goals down, and as a result, never reach them.

“If you fail to plan, you are planning to fail” – whoever said this, is right. We cannot leave it up to chance, or for someone else to do it for us. Most Executives that I speak to, tell me that they wrote down their career plans, “there is something about writing things that, that helps to cement them in my mind” one of them said, and it is true, almost all of them also give credit to a mentor/career coach. They say that having someone who is more experienced to chat to, has definitely helped them achieve their goals.

The other day, I saw a list of future-proofed jobs, this is the perfect start to any planning. We need to, first of all, ensure that our desired role will be available in the future. We then work back from there to determine what steps need to be taken to get to our destination. Normally this includes learning and development interventions, as well as on-the-job training activities, and actual experience needed for growth. There are templates, and resources available online, whichever you choose is fine, just as long as you remember to review it every six months at least, and share it with your mentor so that they can keep you honest.

All the best, and happy planning!

Transformation Series: Prudential Investment Managers

The ABSIP Young Professionals hosted a transformation series with Prudential Investment Managers, held on 23rd May 2019. The Transformation Series events allow attendees time to engage with corporates on issues around transformation in the workplace. Prudential CEO, Bernard Fick, presented the company’s statistics, tracking its performance on recognisable transformation metrics thus far.

The key discussion points were around Prudential’s strategy and commitment to transformation, including measures being put in place to fast-track the pace of transformation. The discussion also dealt with the skills shortage; particularly with black talent leaving Cape Town for Johannesburg and how the company aims to address this challenge.
Some other challenges noted by the company:

  • Historically very low staff turnover, and limited overall expected headcount growth in the future. This poses a challenge to increase the pace of staff transformation.
  • Fairly flat organisational structure, means limited “promotion-in-title” opportunities, with some staff find this challenging
  • Generally, the expected career progression for an investment analyst role is to become Portfolio Manager, however both roles require different skillsets. Given this context, they have become more deliberate in creating a ‘career analyst’ role progression
  • Bernard Fick ended off the presentation with advice to young black professionals in asset management and how they can manage despondency wherein attendees felt there were ceilings within their own organisations. He also shared his personal commitment to transformation in the country.
    The Young Professionals received positive feedback from attendees, expressing that they found the session to be informative and engaging.

    We look forward to seeing you at the next one!

    MARKET COMMENTARY by Bright Khumalo, Portfolio Manager at Vestact Asset Management

    Another quarter of 2019 is finished, and the first half of the year is now done. How are those New Year’s resolutions coming along huh?

    The year so far has been good for US markets, the S&P 500 has had its best first half since 1997 with growth of 17% so far. The broad JSE All-share index is up over 10% for 2019, so going along nicely and the best start in 12-years. This is after a very poor close to 2018.

    Note though that the largest stock on the JSE Top40 Index, Naspers is up well over 30% (when you add back the current price of Multichoice), meaning that the rest of the local market has seen small to almost no growth at all. Consumer-stocks that are dependent on growth in the local economy continue to struggle.

    Now to current state of economic affairs: The year started with some optimism that there will be a cyclical recovery, based on an improvement in consumer spending and accelerated policy reforms that would create jobs amongst others.
    Seven months into the year and it is evident that these were not realistic expectations. What I find interesting is that most analysts are still including growth forecasts in their valuations, although it’s quite evident that we will need something close to a miracle for the South African economy to pick up again. I guess we are wired to always be optimistic despite the realities we find ourselves in.
    The local economy grew by 0.8% in 2018, and economists are already lowering expectations for 2019 and 2020 to 1.3% and 1.7% respectively (by the time you read this these would’ve probably been revised further down). These low numbers are caused mainly by low consumer spending. Which is not surprising due to lack of job opportunities and low to little earnings growth for those that are in the job market. ESKOM remains the biggest elephant in the room to any growth prospects for SA Inc.
    Consumer inflation remains low, printing 4.5% y/y in March, following a benign 4.1% in February and 4.0% in January. The acceleration in March mostly reflects the rise in retail fuel prices and Budget-related implementation of various taxes.
    However, behind the March headline acceleration was a very sharp drop in rentals and owners’ equivalent rent to 3.5% y/y and 2.6% y/y from 4.2% y/y and 3.5% y/y, respectively. Rentals are typically slow moving, and the sharp deceleration reflects a very constrained consumer and housing environment. With food inflation at 2.3%, this further moderation in rental (services) inflation provides a large anchor for headline CPI.
    This is why investing and making predictions about the future is not easy, which reminds me of a quote by Yogi Berra: “it’s tough to make predictions, especially about the future”. Howard Marks always reminds us that we can never predict how the future turns out but we can only prepare!

    It is for these reasons and the current market environment that we find ourselves in; that hopefully motivates us to go back on the drawing board, to think and work harder if we still hope to achieve above average returns. It is not easy because everyone wants to make money in the markets, therefore there will always be a sucker on the losing end of most transactions. That’s how just how markets work, they take from the active and reward the patient.
    Aside from the macro factors that are negatively affecting the economy, there has been notable micro events within certain companies, such as Old Mutual, EOH etc. that affect investor confidence.
    The situation at Old Mutual has become highly politicized and one wonders whether there needs to be a review or a stronger emphasis on corporate governance and the remedies that shareholders can use when boards are at loggerheads of governance practices.
    EOH is dealing with issues relating to ‘irregular transactions’ (Greek for “corruption) to the tune of some R1.2 billion! (rookies, they should’ve called Stellenbosch for tips but we digress) Reminds me of the saying, “what happens in the dark will always come to light”. Don’t let any of these headline deter you from investing for the long-term. Headlines have always been there, the internet only accentuates them nowadays, it’s all noise.

    However, I remain optimistic about the future, we may not know when the good times will return and to quote the erudite and practitioner Howard Marks – There are two concepts we can hold to with confidence: – “Rule No. 1: Most things will prove to be cyclical. – Rule No. 2: Some of the greatest opportunities for gain and loss come when other people forget Rule No. 1.” History can attest to that.
    For now, be more vigilant and strive to think differently from the norm and look for what they have missed, because therein lies the superior investment returns.