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Market overview


Global equity markets edged ahead marginally in June. Bond yields continued to drift lower over the period against a backdrop of economic indicators that exhibited a slightly softer bias.

In the United States, non-farm payroll employment increased by a much lower than anticipated 138 000 in May, although this was enough to take the unemployment rate down from 4.4% to 4.3%. Retail sales were soft, consumer confidence dipped, and inflation moderated to a rate of 1.9%. However, viewing relatively soft economic data as being temporary, the United States Federal Reserve chose to increase the Fed funds rate by 25 basis points.

Consumer inflation in the United Kingdom, meanwhile, accelerated to 2.9% (courtesy of a weak currency) while retail sales were relatively weak. Over the three-month period to April 2017, manufacturing production declined by 1.2%. During the period, the Bank of England chose to leave interest rates unchanged.

In the Eurozone, business confidence remained upbeat although the flash Purchasing Managers' Index (PMI) reading softened to a five-month low. The inflation rate eased to 1.4% from 1.9% previously and the European Central Bank left policy rates unchanged.

Indicators held relatively steady in China over the month. Industrial production rose by 6.5% year-on-year in May which was unchanged from the previous period.

Retail sales growth was also unchanged at 10.7% year-on-year for May.

In Japan, the flash PMI hit a seven-month low of 52.0 in June from 53.1 in May. The Bank of Japan retained its accommodative monetary stance.

On the local front

There is little doubt that the local economy is struggling. First quarter GDP numbers showed that the economy shrunk for a second consecutive quarter (-0.7% quarteron-quarter annualised) with weakness on both the production and expenditure side. Moody's downgraded South Africa's sovereign risk rating by one notch (although it is still investment grade) and retained a negative outlook. Business confidence (as measured by the RMB/BER business confidence index) also plummeted 11 points to a reading of 29. Seven out of every 10 respondents were negative about prevailing business conditions. But, on a slightly more positive note, retail sales improved slightly to an annual growth rate of 1.5% in April.

Market Outlook

Globally, while the economic growth outlook remains positive overall there seems to be a slight loss of momentum and flattening yield curves suggest some concern regarding the longer-term growth outlook.

Locally, politics continues to dominate the outlook. Business and consumer confidence is low and is likely to retard economic growth. Further credit rating downgrades also remain a distinct possibility. Despite these developments, the global backdrop has proved supportive and both the rand and bond yields have proved to be relatively resilient. On the global front we are relatively neutral on our stance towards growth assets. Policy uncertainty, rising global interest rates and a trend towards nationalism and protectionism prevent a more upbeat assessment at this stage.

Turning to the local equity market, and while valuations have improved slightly (from an implied risk premium perspective) following recent weakness, the market once again faces headwinds from a constrained economic environment. The bond market notwithstanding, being relatively well anchored by a down-trending inflation rate is also likely to be hampered by the threat of further credit rating downgrades. The opportunity cost of being overweight in cash (cash yields are high) remains relatively low at present.

On the currency front we see gradual depreciation although risks to forecasts are significant on both sides of the forecast given the fluid political dynamic and substantial event risk. Offshore investment continues to retain investment merit from a diversification perspective.

Shape your wealth journey


Uncertainty often heralds new opportunities and highlights interesting trends. This is particularly true in the wealth management space where current global and local volatility and unpredictability are shaping general planning strategies for wealthier individuals.

Currently, South African wealth planners are seeing an uptick in demand for taking funds offshore, as well as a greater focus on diversification. But, in a world where uncertainty is widespread across regions, how this balances out is of particular importance within a wellconstructed wealth plan; one which takes into account exposure to a variety of currencies, products and asset classes.

James Arnold, Wealth Manager at FNB Private Wealth, notes a particular local trend around planning for future offshore tertiary education expenses. "Many individuals, on top of accessing global investments which provide additional sources of return as part of their plan, are concerned that in 10 or 15 years' time there might be a need for additional offshore funds in foreign currency to cover their children's education at a tertiary institution outside South Africa," he says.

While this is an interesting trend, other ultra-high-networth individuals might also be making plans to set up a home away from home, and enjoy part of the year in South Africa and the rest abroad. "This is applicable to those clients who like to follow the summer," says Arnold.

Another theme impacting the wealth management space is longevity. "From a planning standpoint we are finding that people are living longer and spending more years in retirement than in their working life," says Arnold. "That requires a lot more thought in terms of building a robust retirement plan."

Fortunately, the internet has provided a platform to highlight some of these risks and increased the overall awareness around longevity, regulation and investment options. For the industry this has really changed the way things are done, admits Arnold. "Clients are generally better informed, but what you Google does need to be taken with a pinch of salt," he says.

With significant and rapid changes in the legislative environment, this is particularly true currently. In fact, Arnold sees this is as a significant value-add for the wealth manager role. "We see a lot of opportunity to give value to clients and to demystify issues, by indicating what is applicable and what is not."

On the asset management side he notes a move internationally into passive investments, for example into exchange traded funds, and away from active management. In South Africa this trend is still gaining traction since "the local active management industry has been more successful than global counterparts in delivering active returns, which has stemmed the tide of passive implementation", Arnold notes.

While the big players locally remain active managers, this is a shift to note, he believes, and it presents interesting opportunities to blend the two approaches into one meaningful strategy. Again, understanding some of the unintended consequences of passive investing needs to be understood, especially in the context of underlying share exposure as a percentage of the index.

By and large Arnold believes the wealth industry is responding to current uncertainty by showing greater sophistication in how it develops solutions for clients, and treats clients. He feels the focus on client costs and experience will continue to be vital in an environment where investment returns are under pressure. Says Arnold: "The fees associated with the managing of a client's investments are the biggest detractor from longterm performance."

Increasingly legislation is also pushing in the direction of a more consultative environment, where clients have a better understanding of the costs. This is a positive move, believes Arnold, and one "which highlights more and better choices for individuals on their wealth journey".

Diversify your wealth offshore


South Africa's financial media is a barometer of prevailing sentiment in the market. So it is telling that, in recent weeks, we've been treated to a bevy of headlines like 'How to take your rands offshore', courtesy of Finweek; 'What you should know before investing offshore' (Moneyweb); and 'Exercise care offshore, say experts' (Business Day). Fuelling this focus are political and economic concerns, heightened by recent ratings downgrades and leadership re-shuffles.

At times like this, says Chantal Robertson, Head of Cross-Border Advice at FNB Financial Advisory, the one constant is the level of uncertainty and volatility in the market. "This highlights the need for diversification," she says. And, for many, this means looking offshore.

Such diversification is not only possible but is eminently doable in today's enabling legislative and technological environment. For example, using FNB's online platform, it's possible to go online and open a Global Account at the click of a button, in order to start saving in the currency of your choice. FNB also offers offshore banking via the Channel Islands branch.

The options and avenues are clearly there. It's the 'how' which often trips people up, admits Robertson.

The first thing to remember, she stresses, is that there really are very few limits. Meaning that "it's largely about the mechanism you choose to use".

For example, investors can make use of the offshore investment limits applicable to an institutional investor, like Ashburton. The first step is speaking to your wealth manager about the various investment options available. Going this route allows you to invest locally without being restricted by any individual allowances, and effectively access the offshore markets indirectly.

Ashburton, like other institutional investors, would be the principle holder of the offshore asset; so while the local investor - be it an individual, trust or company - would effect a rand investment, the performance would be determined by the offshore markets. "You don't have direct access, which is a problem for some investors," says Robertson. However, by going this route individuals and entities can invest any amount, provided it is in line with the institutional investment limits, which are usually substantial when compared to a single entity or individual.

Of course, for those investors seeking full diversification out of rands, there are several options. For instance, they have the ability to use the individual R1 million single discretionary allowance, which can be used for a number of reasons, including travel and foreign investment. But, warns Robertson, be very careful not to overreach the R1 million cut-off by using, for example, your credit card abroad while travelling, since every amount swiped counts towards your allowance.

The R10 million foreign investment allowance, for which individual investors must obtain tax clearance, is another option for those looking for exposure at this level. And FNB is able to assist clients in obtaining the required tax clearance required. "For those South Africans who are restricted by the R10 million allowance, there are options to take more money offshore, if you apply to the Reserve Bank and the South African Revenue Service," notes Robertson.

Given the various options to access the offshore markets, directly and indirectly, "wealthier clients will often use a mixture of approaches", says Robertson. "Say you've made use of your allowances, and still have an appetite for further exposure offshore, this can be done via an institutional investor or a JSE product. Once you understand the mechanisms you can customise the mix to your personal situation. It is all about flexibility and being in control as an individual."

But you have to play within the rules. "People can't always be sure about what they can or can't do if they don't take advice," says Robertson, "which leads to problems like the Special Voluntary Disclosure Programme (SVDP). Should you not have followed legitimate mechanisms, bear in mind that SVDP ends on 31 August 2017."

FNB's role is to help you determine the best options open to you. "Your dedicated Private Banker is your point of contact in this entire process," says Robertson. "They can pull in the expertise of a wealth manager or expert into the mix, depending on your needs. While online is often the first point of contact, your private banker can really assist you by streamlining the process and ensuring the right experts are in your corner."

Make the most of your share portfolio


A diversified share portfolio, incorporating a good balance of both local and offshore listed companies, is just one way in which concerned investors can protect themselves against the uncertainty surrounding the current South African economic environment. For both new entrants to the world of share investing, as well as established old hands, a solid portfolio often comes down to the right mix.

A large dose of pragmatism is also necessary, however, when investing in, for example, big rand hedge stocks like global brewer Anheuser-Busch InBev or luxury goods company Richemont, says FNB Securities' Channel Management Head, Grant Rossiter. "While such stocks may offer a good investment opportunity when looking for protection against a depreciating rand, a currency view should never be a one-way bet; if the rand strengthens, the negative impact on rand hedge stocks can be severe."

To borrow from another sage piece of investment advice, having all your eggs in one basket can be short-sighted. "If you stick to only one strategy (e.g. SA Inc only), you need to have high conviction that your strategy is correct, since an incorrect decision can have a very negative impact on your portfolio," says Rossiter. "It's the old diversification story, and that includes talking about diversification outside of South Africa."

Effectively, you can hedge your portfolio against rand depreciation and a stagnant economy in two ways, explains Rossiter. "You can take the indirect route, where you hold a portion of your investment in a selection of locally-listed rand hedge stocks, many of which, like mining company Billiton and Richemont, are dual listed on offshore exchanges.

And you could also invest in numerous Exchange Traded Funds, which give you exposure to specific foreign stock exchange indices consisting of different baskets of foreign shares."

The other way is the direct route, where you move capital offshore and invest in international stocks directly. You can achieve this by using your personal offshore allowances: a single discretionary allowance of R 1 million per person per year, or the R10 million annual offshore allowance, for which you need to obtain clearance from the South African Revenue Service. If you have more capital than this, or would like to invest in the name of a company or local trust, you could also consider using a financial entity's asset transfer capacity. With recent volatility in the currency market, driven by both political and economic influences, investors have been inclined to explore the option of taking funds offshore. "I always tell my clients to think of themselves as international citizens when considering where to invest their capital," says Rossiter. "Why would you invest yourtotal wealth in an economy (South Africa) that is only 0.42% of the global GDP [World Bank 2015 data]?

There is a big case to be made for diversifying your assets into the global economy, into global industries (many of which are not represented in the South African market) and global companies."

Of course, if one lives and works in South Africa, you still need to fund and finance your lifestyle, which means having investments in rands, which are easily accessible. "But exchange control is not onerous (at present) and you can apply and take money out of the country relatively easily," says Rossiter. "In fact, some clients take out more than perhaps they should because they are nervous about the current state of the country, but the reality is that there is no reason why you can't bring money back in from time to time to prop up your cash requirements in South Africa."

Finally, when it comes to shares and sectors which investors might keep on their radar, Rossiter believes commodities still have something to offer. "They have had a strong recovery off of their lows and I think there is still some potential for them to appreciate. Stocks in this sector include Anglo American and other diversified miners. But this would be a long-term trade."

An old theme, which is still valid, is to keep an eye on South African companies expanding into the rest of the continent or further abroad; companies which have really diversified their income streams. Any examples? "We still like Steinhoff," concludes Rossiter.

Save and invest for the things that count


Each July the financial services sector amplifies its conversations about savings. As a nation we bemoan our poor savings culture, we run national campaigns, we discuss the merits of saving, we ruminate that most small businesses are started on the back of savings. We talk a lot.

FNB Savings and Cash Investments aims to bridge the gap between talk and action by focusing on solving specific savings and investment-related needs on a day-to-day basis. This hinges on a goal-based approach, which takes into account the savings objectives of every client. For example, if you are saving towards a longerterm goal - like an anniversary, a wedding or a coming of age party - your needs are different to short-term aims like a holiday or a deposit on a new car.

Ilse Smuts, Head of Marketing at FNB Savings and Cash Investments, explains that individuals today are spoilt for choice when it comes to the range of savings and cash investments products on the market. "There is good competition, so each individual needs to understand what they are saving for and to ensure they have chosen the right solution."

Assessing which savings product is best for you, often comes down to life stages. "You can take higher risks when you are younger but older people may need to be more careful, as they don't necessarily have the time to recover from a major financial loss," she explains.

What makes investing in an FNB Savings and Cash Investments product attractive to most savers is the fact that "your capital is 100% guaranteed, as is the quoted return", says Smuts, "which means there is no risk." This gives some peace of mind in an increasingly unpredictable global world.

"Through the up and down cycles many of the savings principles remain the same," notes Smuts. "We believe you need to stay the course. Small adjustments are, of course only natural based on the stage of your life. And while wealthier clients might have more buffers against these cycles, the average client is likely to be more impacted by credit hikes and the increased cost of living."

The tried and tested approach to building a savings culture starts with paying yourself first, or, more particularly, paying into your savings first. This builds a mentality of saving which makes a massive difference to an individual's financial wellbeing over time.

The products you select and the 'how' you go about saving opens up myriad options, which many need help navigating. Generally, in the lower end of the market most savings are in smaller cash amounts, but ultra-high-networth individuals can easily invest from R100 000 or a few million. So they can move into higher income potential products, says Smuts.

"You have to balance out all these decisions on an ongoing basis by coming back to your needs and whether your savings are fulfilling these needs. And you need to review these on an annual basis," says Smuts. "As individuals we all need to update and review our budget depending on our life stage, and this applies to insurance and risk-based products as well as ensuring there is a valid Will in place."

FNB Savings and Cash investments covers the gambit of savings products for every individual's needs. Say you are a young professional, just getting a foot on the corporate ladder and earning a salary for the first time.

"Then consider starting with a cash-on-demand product, which needs an opening balance of R5 000," says Smuts. "When you've built up a bit of capital, then you could add these savings into a Money Maximiser - starting from R100 000 - and also notice products and even a fixed-deposit product to ring-fence savings for something big, like a 30th birthday bash or a wedding."

The Money Maximiser account is particularly attractive to those with R100 000 to start with, says Smuts. "You earn a money market fund-related rate and your capital and quoted returns are fully guaranteed. Money Maximiser also enables instant access to your investment. You can take out money anytime making it ideal in the event of unexpected expenses or opportunities. And there is more good news: you can now have a Money Maximiser account as part of the bundled pricing option and your monthly fee of R65 will be waived."

For more short-term investment options, there are also seven-day and 32-day notice products, where you have to place notice in order to withdraw. And fixed deposits are particularly popular with the senior market, says Smuts. "Here you can't access your funds for the selected term - say from one to five years - and the rate is fixed, so you know what you're going to get. Fixed deposits are ideal for enhancing your retirement income, if you choose to have interest paid out monthly to boost your income on retirement."

In all cases the preservation of capital is the core benefit of FNB Savings and Cash Investments' products. "The interest rate is the sweetener," says Smuts. "The real issue is how much capital you save. If you don't put the money aside, you'll never gain the reward."

Jet-set for less with eBucks Lifestyle


eBucks Lifestyle has entered into an exciting new partnership with the Air France-KLM group. Under this arrangement qualifying FNB Private Wealth customers can save 10% discount on flights with these exclusive partners.

The offer is valid for travel to Europe and North America between 1 June 2017 and 31 March 2018, affording ample time for eBucks customers to stake their claim to this select offering. The discount applies to Business Class flights on Air France and KLM, and First Class flights on Air France only. Furthermore, the discount excludes all taxes.

To quality, a minimum payment of eB50 000 per ticket is required for all Business Class flights.

With Air France, KLM and eBucks Lifestyle the sky really is the limit. The question now is which dynamic European or American destination is best suited to help you shed the South African winter blues and put a spring in your step?

Celebration city: Montréal

If you've never visited the second-largest Frenchspeaking city in the world, then 2017 is the ideal year to soak up the history and charm of Canada's second most populous city, after Toronto. This year marks the 375th anniversary of the city, which was originally called Ville-Marie, or City of Mary, by the French colonisers. As you'd expect, history abounds from the impressive Notre- Dame Basilica to the old port, the Pointe-a-Calliere Museum, the Musee d'art contemporain de Montreal, Montreal Museum of Fine Arts, and countless street markets, boat tours, walks and biking trails. But modern Montréal is never far behind; offering an enchanting mixture of old and new.

With 2017 marking a historic birthday for the city (17 May to be precise), Montréal is pulling out all the stops with more than 175 events taking place over the year from open-air museums and expos, to massive street food markets, indigenous art and culture nights, plays, pop-up galleries and installations. Make this the year you fall in love with Montréal.

The perennial favourite: New York, New York

According to the 1944 song, New York really is a 'helluva town'; there really are experiences lined up around every corner. Even regulars to this evergreen city never fail to see the charm in a visit to Central Park or a harbour tour taking in the iconic Statue of Liberty, or simply to marvel at buildings like St Patrick's Cathedral, the Empire State Building or the Metropolitan Museum of Art.

If traditional sight-seeing is not your thing, but music is, then consider some pretty awesome concerts taking place over the next few months in the Big Apple. In June, John Legend is in town, as are U2 and The Lumineers. In July, Billy Joel is in action, as are John Mellencamp, Rod Stewart and Cyndi Lauper. There is also a bevy of Broadway shows to gorge on, including the hysterical Book of Mormon, classics like Hello Dolly! or firm favourites such as The Lion King and Miss Siagon. Plus, the Public Theatre runs Shakespeare in the Park each summer at the open-air Delacorte Theatre in Central Park. Entry may be free, but the event is unforgettable.

If your stay happens to cross over into July, then hang around for the 4th of July independence celebrations, which means fireworks, hot dogs, picnics and barbeques galore.

A culture injection: Amsterdam

The popular Holland Festival is hosted in Netherlands runs from 3 June to 25 June across the Netherlands, making Amsterdam a delightful tourist hot-spot over the period. Numerous events are scheduled for free across public spaces during the month.

In 2017, the Festival unveiled one of its most packed programmes in the 70-year history of the event, featuring music, opera, theatre, visual arts and modern dance, film and architecture. The Festival affords lesser-known artists to perform side-by-side with establish performers.

Opening the Festival in 2017 at the National Opera is a performance of the opera Maria Vespers, by Italian Claudio Monteverdi. The conductor will be Raphael Pichon, from France, and the visual artwork is being orchestrated by Belgian Berlinde de Bruyckere; highlighting the cross-border appeal of the event.

In between you might want to sneak in a visit to the recently-restored Rijksmuseum, being sure to take in Rembrandt's Night Watch, or the Van Gogh or Hermitage Amsterdam museums.

Follow the Tour: Paris

Can there be anything more charming than summer in Paris? Street markets, river cruises, food walking tours, museums and the annual city-wide Fête de la Musique free music celebrations.

For cycling lovers a well-timed trip to Paris could also mean indulging in a spot of European sight-seeing for the 104th edition of the epic Tour de France, taking place from 1-23 July 2017. The world-famous event starts this year in the German city of Dusseldorf, before heading into Belgium and Luxembourg and then back into France. The 2017 Tour promises to be even more dramatic and exhausting for the peloton than before, with Frances five mountain ranges featured over the course - 1992 was the last time riders tackled all five imposing mountains in one Tour.

For those lucky enough to be in Paris for the final stage of the Tour, the sight of world-class riders clattering down the Champs Elysees will be truly unforgettable.

Dissecting the disruptors


Technology continues to make an indelible mark on the world in which we live. It has enabled disruptive technologies like Uber, Airbnb and cryptocurrencies which change the way we travel, book accommodation and transact across borders. It's seen the creation of banking innovations like nav» Home and now nav» Car, which creates a new world of convenience for you within the FNB banking ecosystem. And it has driven the creation of Secure Chat, the closest and most convenient way for you to chat to a dedicated team of Support Bankers any time of the day or night.

Across all these innovations, however, the importance of secure channels and ongoing protection of your personal information and digital devices has never been more critical. So, in this newsletter, we highlight not only the possibilities but also look to arm you with essential tips to ensure your cyber security.

In the wake of a 25 basis point drop in the repo rate, we take this opportunity to examine what this means for bonds. And, with the impact of megatrends firmly on our radar, we introduce a new segment on investment trends and what these political, social, environmental and demographic game changers might mean for the investment universe. We get the ball rolling with a look at 'globesity'.

As always, we include a segment from eBucks Lifestyle and included a "What's on?" section so you know what's happening on the social scene.

We hope you enjoy the features assembled for this newsletter and welcome any feedback and ideas.

What investors need to know about 'globesity'


You wouldn't put your money into a new product, company or sector without asking some key questions, would you? Well, neither would your financial advisor. This is why so much of our time at FNB Private Wealth goes into dissecting long-term political, environmental, social and demographic 'megatrends'; developments which impact your long-term investment returns.

There are a range of megatrends which FNB Private Wealth keeps on its radar, says Chantal Marx, Head of Research at FNB Securities. "Some are quite in-depth, such as the emergence of the sharing economy, demographic changes, the rise of 'globesity', energy and other scarce resources, the impact of disruptive technology and how Millennials are changing consumption patterns," she says. While others are more general. All, however, have the potential to change the way we live, work and invest.

In forthcoming newsletters we'll take the time to outline a number of these megatrends, giving our views and insights into the possible implications. From a South African perspective many of these global developments are likely to impact our society too, some for the better and others less so. For example, globesity - the increase in obesity around the world - is just one example of a ticking time bomb with a possible upside for astute investors.

Research from Wits University's Priceless research unit in 2016 tells us that obesity-related diseases, like heart disease and diabetes, are now responsible for 13.1% of deaths in South Africa. Compared with 13.8% attributable to HIV/Aids complications. This, says Marx, makes globesity of particular importance to the health of South Africa's citizens and also impacts healthcare resources, pharmaceutical companies and medical aids.

But it's not all bad news. With statistics from the Heart and Stroke Foundation telling us that South Africans are the heftiest in sub-Saharan Africa - with 70% of women and about 33% of men being classified as overweight or obese - this has spurred on a counter trend towards health consciousness.

"In emerging markets we have a disparity of income," explains Marx, and an associated disparity in trends. "Higher income individuals are generally in the healthier phase and they are teaching their kids these lifestyle behaviours. And while fast food is still a megatrend for this group, their choices are more health conscious, for example shopping at Woolies or Kauai or using systems like dinner kit delivery service UCook."

These healthier habits are increasing the uptake of wearables too, she explains, highlighting the likes of Garmin and Fitbit fitness trackers, which are, in turn, providing benefits for the insurance industry. "Discovery, for example, is using this data to improve its actuarial efficiencies," explains Marx. Adding these devices into the medical aid mix also makes consumers 'stickier' when it comes to retaining and using memberships to fitness and health clubs. This, says Marx, also keeps up demand for athletic-leisure wear, a bandwagon onto which the likes of Adidas, Reebok and Under Armour have been quick to jump onto in recent years. This specialisation also extends to the type of clothing that fitness fanatics need for yoga versus Crossfit versus spinning.

On the other end of the spectrum are South Africans for whom fast foods - not a Fitbit - represent an 'aspirational' lifestyle choice and, of course, there are also those who find it cheaper to eat convenience foods that to buy fresh produce. "Companies like Famous Brands benefit at this lower end of the market," says Marx. "Pharmaceutical companies and health groups benefit in the middle, although it's a challenge for medical aid companies because a lot of these individuals are employed and covered by medical aid."

After unpacking these divergent themes, the skill comes down to carefully distinguishing between a trend and a fad. Fads don't change the way people live, says Marx, but trends like globesity do. "At FNB our job is to adapt to these things, to take them seriously and to spot the opportunities." It's research and analysis like this that highlights the current - and long term - potential of a group like Brait (which owns Virgin Active), Holdsport, Mr Price Sport, Discovery and of offshore companies like Apple and Fitbit. It's this approach that keeps FNB's investing thinking one step ahead of the pack.

What you need to know about Bitcoin and blockchain


Even digital currency sceptics are being won over by the rampant surge of cryptocurrency Bitcoin over the past 12 months, a rise which saw its value touch US$5,000 a few weeks ago before coming down quite significantly to below $3,000 and now stands at just below $4,000, having overtaken the price of gold in March.

Despite the volatility of cryptocurrencies like Bitcoin, Litecoin, Dash and Ethereum, these digital currencies - which operate independently of any central bank - have surged into our collective financial lexicon in recent months on the back of uncertainty over issues like the United States and North Korea, Brexit and rising global tensions, says John Joyce, Portfolio Manager at Ashburton Investments. "This is not unlike the reaction we see from gold as a haven during uncertain times," he says.

The value of Bitcoin lies in the fact that just 21 million Bitcoins will only ever 'be mined', so, like gold, supply is limited. This gives them value. Some, like the Chinese central bank, argue that while Bitcoin's value makes it an asset, it is still not a currency and that regulation is needed. In mid-2017 German central bank member Carl- Ludwig Thiele told Handelsblatt newspaper that: "Bitcoin is a means of exchange which is not issued by a central bank, but by unidentified actors. I do not see it as a currency. If you think Bitcoin would be as safe as the euro or the dollar, you have to take responsibility for it." Some would argue that digitisation of banking has already desensitised consumers to the need to hinge a currency to a concrete, physical value or, indeed, to a central bank, opening the door for what JP Morgan calls "the audacity of Bitcoin", which is "a stateless, virtual and peer-to-peer currency".

Equally important is the vital technology behind the likes of Bitcoin. Blockchain technology, which was originally devised as the system behind Bitcoin, is essentially a public ledger of information duplicated thousands of times over a network of computers. The data isn't stored in one place, rather it is hosted on thousands of computers at the same time.

Farzam Ehsani, Blockchain Lead for RMB, is a recognised authority on blockchain technology and believes it will be as transformative to the global financial system as the internet has been to the world. "Blockchain is the underlying technology that allows a distributed and decentralised community to come to consensus about the true state of a system," he explains. "Bitcoin is an asset on top of this technology. Other assets can also use these consensus protocols and technology."

It's because blockchain data is not centralised and can't be hacked or disrupted at a single point, that it's become such a sought-after technology. So much so that even Bitcoin sceptics like American tech billionaire Mark Cuban recently told Bloomberg News that he'd be investing in 1confirmation, a fund which aims to raise US$20 million to invest in blockchain companies. Cuban might not rate Bitcoin, but he believes blockchain is a "foundation platform from which great applications can be built".

Ehsani points to the home buying process as one sector that is inevitably going to be disrupted by blockchain. "Imagine the ability of buying or selling a house and it being transferred into your name not in weeks or months, but in a matter of seconds or minutes. To me this is not some crazy theory, this will be reality in the not too distant future. It is just a matter of time."

Similarly, Joyce notes that the emergence of cryptocurrencies could be a significant disruptor to the banking system as we know it. "These currencies bypass the bank," he explains. While banks are unlikely to disappear as a result, being cut out of the loop will have adverse consequences for the traditional system. This is why banking groups like FirstRand are quick to investigate the potential of blockchain.

The implications of blockchain on banking, believes Ehsani, include disrupting payments - which currently makes up about 30% of total global banking revenue. "Right now, using Bitcoin, one could transfer monetary value and it would arrive in the United States or any other part of the world in 10 or 20 minutes, an hour at the most. And it would probably cost a grand total of less than R10 regardless of the amount being sent. In addition, it doesn't touch a single financial institution to get there. This can be viewed as a threat to financial institutions but can also be seen as a tremendous opportunity as costs come down and volumes increase. Banks need to start thinking creatively about this new paradigm," he says.

Right now, however, making a cryptocurrency mainstream looks unlikely, believes Joyce, citing the limited supply as just one hindrance. But the change is coming and FirstRand is working to understand the disruptions as well as the opportunities. "The idea of cross-border payments will, in the future, become as silly as the idea of cross-border email," says Ehsani. "Value is able to be transferred instantaneously, just like information. That's what the blockchain does."

What does the rate cut mean for government bonds?


When the South African Reserve Bank took the market by surprise with a 25 basis point repo rate cut in July 2017 it handed indebted consumers a fillip; a reduction in their monthly home loan and credit card payments. The general advice from the experts was, however, not to squander this relief, but rather to save through these uncertain times and build a nest egg.

But, while the average investor might be concerned with their property bond, there is another bond which is also impacted by a rate decrease, and that's government bonds. These have more of an impact on you and your investment portfolio than you might think; forming as they do a healthy proportion of any pension fund. So what does a rate cut mean for these bonds?

According to Justin Louw, Relationship Manager at FNB Securities, the 'bonds 101' fact we all need to know is that when interest rates go up, bond prices go down. And when interest rates go down, bond prices go up. "So, in a decreasing rates environment, like we have at present, government bond prices are going up. This means that our clients who have bonds in their portfolios or are invested in multi-asset funds could benefit," says Louw.

This may seem contradictory, because South Africa's sovereign debt has been downgraded to sub-investment this year, but, explains Louw, the market had priced in this downgrade possibility well ahead of time and had already reacted to ongoing South African political uncertainty and instability. So, even during this period of doubt and uncertainty, government bonds have delivered solid returns.

"What has been beneficial for us is that the carry trade [where investors borrow at low interest rates and invest in assets that offer higher returns] has been perpetuated, so there have been positive foreign bond flows following the March cabinet reshuffle and the downgrade," explains Louw. "Inflation has come lower, which is very beneficial, this has been aided by the relatively low oil price and the relatively strong rand. The rand strength came from an improvement in the current account balance and the carry trade. Because inflation has come down, the South African Reserve Bank has a bit of room to cut interest rates."

The carry trade can be explained by the real yield differentials at play, explains Louw. Assuming South African inflation averages 5.5% and the bond yield at the time of downgrade was 9%, then you had a 3.5% differential of a real yield. "If you look globally there is no real yield available," he says. "In the United States inflation is around 1.7% and the bond rate is 2.2%, so you have 0.5% yield. That explains why investors are coming here. They are looking for real yield."

While it has been beneficial for bond prices and the rand, foreign ownership of South African bonds is also a concern because it could have a massive volatility effect if foreigners sell. "At the end of the day, if someone sells something you hold, en masse, then the price can go down a lot and you can lose money. The opposite is also true so it pushes the value around," says Louw. "Volatility in something as conservative as a bond isn't great, as bonds tend to be used for more defensive stable retirement vehicles and older clients, so you don't want to be exposed to that volatility."

This volatility is evident in the fact that in 2016 bonds produced roughly a 15% positive total return, however the previous year they declined by around 16%. In summary, FNB expects further volatility in bonds and the only way to avoid this is if you hold them to maturity. "You'd have to hold the R186, for example, till 2026, to guarantee that 8.6% return currently," explains Louw. "Bonds are instruments utilised for income generation in portfolios and especially if you have an offset from a tax point of view or a tax beneficial structure they are attractive with the current real yield."

He also notes that, as a fund manager, "you cannot afford not to have a bond strategy for both sides of the coin on the table", but you do need to constantly consider the risk and timing given this volatility. "This is where a good advisor comes in," he says, noting that the timing of buying and selling bonds in volatile times should constantly be appraised.

There has been some negative sentiment around bonds lately, with the likes of Coronation shedding South African government bonds in its flagship Balanced Plus fund earlier this year. In most part this was because they regarded bonds as being too strong and, in their view, the price did not reflect the risk inherent in the market due to the political uncertainty South Africa is currently experiencing, explains Louw. "The R186 as a reference was about 8.40%, which really was too strong pre the rate cut. We also didn't think it would price in further downgrades, so we lightened our long exposure."

But that was before the surprise interest rate cut. So now, if bonds do weaken again, Louw notes that "we might push our weighting in bonds up as they are still attractive, not necessarily for individuals from a tax perspective, because the distribution is considered as interest, but if you have a pension fund then bonds are attractive due to current yields. At this point you get a percent or so higher return than in the money market, but note this does involve putting capital at risk compared with, for example, a money market."

With FNB Securities projecting at least one more rate decrease this year - potentially in October or November - and possibly another in early 2018, we are in the throes of what is expected to be a shallow interest rate decline cycle of around 75 basis points. This bodes well for existing holders of bonds.

Don't fall prey to cyber criminals


If you use a computer, a tablet or a mobile device, but you don't back up, have antivirus, a secure password and are not actively trying to protect your online identity, then read on because you are not alone. The South African Fraud Prevention Services (SAFPS) recently released statistics which show an increase of more than 200% in identify theft in South Africa over the past six years. And, says SAFPS, a staggering 8.8 million South Africans were caught out by cyber criminals in the past year.

Cybercrime is not just a plot line on popular TV shows like CSI: Cyber or Mr Robot, it is a very real threat in the real world and, as such, it's important to take active steps to protect yourself, your data and your identity.

Kovelin Naidoo, the man they call 'Mr Robot' at FNB Private Wealth, may be an expert in this field, but he still stands by some basic steps we can all take to ensure we are a lot safer in the cyber world. Some of these are just good digital hygiene, he says, like keeping all your devices up to date in terms of software.

"Run all your updates and, if it's Microsoft, keep all the security patches up to date," recommends Naidoo, who suggests making use of automatic updates. "Also make sure your security software is up to date. If you are a FNB Private Wealth client we provide you with an antivirus software licence. When you log in you can download a licence key for Trend Micro." Trend Micro is just one option, he notes, "any antivirus would do. As long as it is up to date."

Once you have these protections in place, then you need to be brutal with your password selection. The days of birthdays, names and star signs are over, today's hackers are wise to these tricks and will break through them quickly, so it is essential to ensure that you have a relatively strong password in place, particularly for your online banking. Naidoo suggests that the minimum password length should be eight characters and it should be relatively complex.

He explains: "If we look at hackers and how they operate, it is relatively easy to hack simple words from a dictionary, and family and pets names are freely available on social media. So we recommend you use password phrases - like 'My dog's name is Bingo!' - which would be incredibly difficult for a hacker to break into." So pick a favourite phrase from a book or a poem and type it as it appears in the book; capitals and spacing's included. Ensure you have applied this change to all your sensitive information, emails and applications. Social media accounts do have additional security and privacy settings, so enabling these also ensures the security and privacy of your information.

But, even if you've done all the right things, never fall in to the trap of being complacent. Cybercrime often features well-coordinated attacks and FNB works closely with law enforcement to try and identify syndicates. But there are also individuals operating in this space, says Naidoo. "We've all heard of ransomware over the past six months. And the barriers to entry there are low." To protect yourself in the event of ransomware, it is vital to back up your data on a remote storage device regularly, says Naidoo. Do so at least once a month. "So, if you can't gain access to vital information, then you can fall back on your storage and data."

But, ideally, you've put in place behaviours and security which keep you and your data safe. This includes being suspicious of any emails and attachments which seem unusual. "Most computers are affected through an email with a virus," explains Naidoo. "Cybercriminals are quite masterful when it comes to Photoshopping emails from municipalities or telecoms or banks, links might look right but that link will send you to a malicious site. So scrutinise links and attachments." Do remember that RMB Private Bank will never communicate by using links in emails, nor will be ask clients to send sensitive information or details via email.

Naidoo recommends, from a banking perspective, that you transact using the FNB Banking App. "There is strength in all our security but we believe the FNB Banking App is the way to go, because we know it is difficult for cybercriminals to target mobile applications," he says. "In the FNB Banking App you are fully in our ecosystem and you aren't reliant on other software. But outside of that App there is a whole ecosystem which we can't control."

For example, SIM swaps are an increasingly popular technique which cybercriminals use to gain access to your personal data. But, using the Banking App, allows the bank to pick up anomalous and suspicious behaviour which we can proactively block or request you to confirm via a trusted mechanism. "SIM swaps are the first step to identity theft and financial fraud by criminal elements, all they need is your cell number, a utility bill and a copy of your ID. That's it to legitimately do a SIM swap," explains Naidoo.

Identity theft is a big issue in the cyber world, but it transcends the digital sphere. In the real world you should always keep documents like IDs and passports in a secure location, says Naidoo, and shred sensitive information, like FICA or RICA documentation, once used. "Cybercriminals also look to target your garbage in the real world, and if I have your utility bill and your ID I can do a lot of damage. If you run a small business then also ensure that this security awareness extends through the organisation. If hackers can't get to you, then they will try those close to you, such as your PA or your children. So these practices should cover all devices and people in your circle."

Remember, concludes Naidoo, that all your banking needs can be fulfilled using the secure FNB Banking App, "from everyday banking, to renewing your car licence, to evaluating your property price. Many of our clients are still exploring the many things you can do with the App."

In the drivers' seat, courtesy of your smartphone


Finding the easy and the smart way to help you navigate life's hassles is central to the FNB Private Wealth nav» Home innovation. First we started with home buying, looked at the 'angst points' in the process and working out a slick system to help you with everything from instant home loan pre-approval for qualifying clients, to getting a free instant property estimate, to searching for your ideal home, and even finding schools and services in your new suburb.

Now we've rolled out nav» Car ... so you need never stand in line to renew your vehicle licence again!

With nav» Car we aim to make vehicle ownership and compliance just that bit easier, by giving you instant access to a range of tools using the award-winning FNB Banking App.

For starters, explains Orsheran Singh, Imagineer (Head of Product Development) at nav», you add your vehicle to the App by scanning your licence disc or using a manual entry method. This will give you instant access to information about your car such as value estimates, specs, licence reminders and will even alert you to traffic fines, which you can pay using the FNB Banking App.

For many the hassle-free ability to renew your licence at the touch of a button is the biggest winner. Simply make an in-App payment and your disc will be delivered to your door, says Singh. The handling and delivery fee of R199 excludes the renewal amount, and saves you queues, questions and the frustration of computer malfunctions at the Traffic Department or Post Office.

Plus, once you join up to nav» Car you can opt to take up the On-road PROTECT bundle too. For only R95 a month, this add-on puts you in the driving seat by offering:

  • Vehicle licence renewal assist: Free handling and delivery to your door for up to five vehicles (excludes renewal amount).
  • Fines assist: Instant fine notifications and discounts negotiated on your behalf.
  • Bail assist: 24/7 bail assistance at roadblocks.
  • Claims assist: Tyre repair due to pothole damage and road Accident Fund claims.

According to Jolande Duvenage, Chief Imagineer (CEO) of nav», every nav» solution is designed to free up your time and put you in control. "We underestimate how much the bank can help you," she says. "We are seeing the growth of the self-help client and we need to allow for that client." One way to do that is to ensure that the tools needed for ease of use and instant action are at your fingers tips courtesy of your smartphone.

Want to put nav» Car to the test? Simply open the FNB Banking App and select nav» Car. Right now this is the closest you will come to a self-driving experience!

Secure Chat. It's like WhatsApp, only better


The days of clients fitting in with companies are over. Today it's up to corporations to listen to their clients and deliver solutions that bring value. That's the approach which gave birth to Secure Chat, FNB Private Wealth's interactive messaging platform on the FNB Banking App.

According to Giuseppe Virgillito, Head of Digital Channel, the creation of Secure Chat started with this realisation: "Our clients require personalised service and we need to fit into how our clients' lives work." From there the team put themselves in the shoes of a busy client whose most convenient means of communication on a day-to-day basis is his or her smartphone.

"Our clients are busy and they often don't have time to call the bank, or go to the bank. So, with Secure Chat, they can, at their convenience, log in and have an open conversation with a skilled professional," says Virgillito. This puts your bank in your pocket, be it during a board meeting or while you are waiting for your next flight at the SLOW Lounge.

For those clients still learning their way around the FNB Banking App, clients can access Secure Chat by logging into the App, clicking 'More' and then opening up the 'Messages' tab. You'll access Secure Chat in the top right-hand corner.

The Secure Chat service automatically drives customers to the FNB Banking App, and this is an intentional move on the part of the bank. "The App establishes a secure connection irrespective of how you access the App, even through a public WiFi connection. Locally or internationally you can connect to a hotspot and talk to your banker with confidence because, by using the App, you are secure and authenticated," explains Virgillito. "This means that you don't have to go through the authentication process and this allows us to service you faster and let you get on with your day."

The App exists to help clients meet their daily banking needs, and Secure Chat adds to that service by giving FNB Private Wealth clients 24/7 access to a skilled professional who understands their requirements and can deal with any query. Or, if a client requires an additional level of service, the request can be rapidly escalated to the right expert.

"In time, Secure Chat will evolve into a one-stop-shop where you can talk to us day or night and where we'll be able to invite highly skilled and highly trained specialists into the conversation," says Virgillito. But, for now, you have access to a trained professionals and a personalised service which offers the following services:

  • Obtain stamped bank statements
  • Request Visa letters
  • Query debit orders
  • Get online banking and FNB Banking App support
  • Report fraud
  • Query your eBucks Rewards.

While these are all great services, Virgillito stresses that "a client should not be limited to these five things. The App and Secure Chat service are about giving you access to your information in the palm of your hand, all day and all night. Secure Chat is just a more convenient, more secure and more accessible way of delivering you the best service. Ultimately it comes back to 'how can we help you to help yourself'."

In this respect the award-winning FNB Banking App has been a huge breakthrough in banking convenience. The FNB Banking App has been analysed and ranked by MyPrivateBanking Research as the fourth best in the world, out of 70 mobile Apps from 30 leading wealth managers globally. "We are not only the first [banking App] in South Africa, but we have been renowned internationally," says Virgillito. This requires that FNB keeps innovating and ensuring that clients find personal value in using this platform, even if their support team generally deals with their banking needs or they are comfortably reliant on their private banker.

Secure Chat adds another layer to the FNB Private Wealth banking proposition. Like a WhatsApp conversation it is easy to use, says Virgillito, and a record is kept of every conversation. It's what our clients called for. And we answered.

eBucks Lifestyle brings you the definitive wine-tasting experience


eBucks Lifestyle has teamed up with Wade Bales Fine Wine and Spirits, the 'personal bankers' of the wine industry, to create three unique and exclusive Cape wine-tasting experiences for discerning FNB Private Wealth clients.

They have assembled three experiences from which you can choose:

Heritage meets contemporary flair at Steenberg

Your Steenberg experience includes a superb neo-bistro three course meal prepared by Executive Chef Kerry Kilpin at Bistro Sixteen82, an establishment rated among 20 of the world's best winery restaurants.

Marvel at the mountain views at Beau Constantia

Beginning at just R500 per person, you will enjoy a glass of Cap Classique on the steep agricultural slopes of Constantia Neck as you take in the beauty of the Beau Constantia boutique wine farm and gaze out over False Bay. Then enjoy a private tasting of all Beau Constantia's Premium Wines - each of which has been awarded more than 90 Robert Parker Points - in the owners' exclusive VIP Bronze Box Glass Conservatory.

You will be treated to the culinary excellence of acclaimed Executive Chef Ivor Jones (formerly of The Test Kitchen) who will prepare a gourmet set menu of eight tapas served over three courses at the Chef's Warehouse - a gastronomic delight that you won't want to end.

Reconnect with the land at Klein Constantia

Starting at just R1 000 per person, you will embark on an off-road 4x4 tour up into the spectacular vineyards where you will enjoy a glass of bubbly while taking in the exquisite views.

Thereafter, you'll be whisked off to the quaintly named Duggie's Dungeon for a traditional country-style lunch of succulent chicken, pickles, homemade jams and patès, freshly baked breads, delicious quiches, cured meats, cheeses and fresh salads.

Subject to his availability, you could also experience meeting Matthew Day, one of the new wave of young winemakers energising the Constantia Valley and get his personal take on the rich history of the Klein Constantia Estate.

And that's not all...

With December just around the corner, now is the perfect time to consider enhancing your Wade Bales Fine Wine and Spirits experience with additional eBucks Lifestyle special offers in order to get maximum value and enjoyment out of your Cape Town visit.

For example, you could enjoy a discount of up to 40%* when you fly kulula.com from Johannesburg to Cape Town and when you make use of Avis car rental. Or you could enjoy a discount of up to 53%* on Rovos Rail, the most luxurious train in the world, as you relax in reconditioned wood-panelled coaches and recapture the romance and luxury of a bygone era.

When you get to Cape Town, choose to stay at Rovos Rail's stately seaside St James Guesthouses fronting onto Kalk Bay at a discount of up to 53%*.

Furthermore, to ensure that you enjoy your tasting experience without worrying about drinking and driving, take advantage of eBucks Lifestyle's point-to-point vehicle transfers from Avis.

To find out more about any of these exclusive offers or to book, log in to eBucks.com and click on the Lifestyle tab.

* Discounts exclude all taxes. Terms and Conditions and Disclaimers, including Tax Disclaimers, located above apply to your participation in the eBucks Rewards Programme. By participating in the eBucks Rewards Programme you acknowledge that you have read the latest version of our Terms and Conditions and Disclaimers and consented to them. Please contact our Contact Centre 087 320 3200 if you cannot access our Terms and Conditions and Disclaimers.

What's on?


Coffee and Chocolate Expo Cape Town 2017 7-8 October 2017, Durbanville Racecourse, Cape Town
If you're a coffee aficionado or lover of chocolate then brace yourself with a celebration of cocoa and beans during the third instalment of Cape Town's Coffee and Chocolate Expo. Find out about the origin of your favourite hot beverage and learn how to pour the perfect cup at the Chocolate Theatre. Additional highlights include a chocolate pairing with various liquors, whiskies and, of course, fine wines. Plus expert chocolatiers who be on hand to discuss the craft of fine chocolate making.

Prince Albert Leesfees 2017 3-5 November 2017, Prince Albert, Western Cape
For the sixth consecutive year this charming book festival returns to the picturesque town of Prince Albert. Words in all their manifestations are the focus of the Leesfees, and this year comedy and satire join the programme in the form of comic talent Nik Rabinowitz. For all the readers out there, this festival is a must!

Ficksburg Cherry Festival 2017 16-18 November 2017, Ficksburg, Free State
This annual festival, held in the sleepy town on the foothills of the Maluti Mountains, is the longest-running crop festival in South Africa, dating back to 1968. It is also Ficksburg's main opportunity to grab some of the action on the South African tourism circuit. A number of programmes run concurrently throughout the festival, including children's events, and live music to workshops. Popular events include wine and chocolate pairings, an introduction to cooking with cherries, and a range of sports events, including a fun run and road cycling race. A great event for the whole family.

Celebrating the 'can do' spirit


Entrepreneurs are the lifeblood of any successful and sustainable modern economy. Their innovation, drive and passion is to be applauded and supported. So, having celebrated entrepreneurship week in November, we turn the spotlight on the creators, the drivers, the entrepreneurs, the future business magnates in this, our last newsletter of 2017.

Not only do we look at the ways in which to foster business development for entrepreneurs, we also explore the world of young entrepreneurs and unpack ways in which to spur on children's instinctive entrepreneurial spirit. It's a fascinating world and one which holds great promise for the future of this country.

Despite this positive potential, entrepreneurship too is being hamstrung by the current spate of uncertainty in our economy and politics. Therefore many hopes are being hinged on the ANC Elective Conference in December to restore a sense of normality. As a result of the importance of this event to the future of our country, we take an in-depth look at the possible scenarios on the table and what each might mean for South Africa and for your investments in the year ahead.

A trend we have observed in 2017, which could be due to the political uncertainty in South Africa currently, is emigration. At this juncture we would like to remind clients looking to relocate to other countries to discuss the process and implications with FNB Private Wealth. For those simply looking to externalise more wealth, there are a number of options on the table, from taking advantage of the R1 million annual Single Discretionary Allowance, the R10 million annual Foreign Investment Allowance and a more regulated ability to take amounts in excess of R10 million offshore. In all instances we can provide further guidance and, where necessary, assist you via Ashburton Investments and FNB Securities.

Finally, with the festive season upon us, we take the opportunity to run through some essential security tips and insights. Our message is simple: Enjoy a hardearned rest and recharge your batteries, but remain ever vigilant in both the real and online worlds.

The FNB Private Wealth team would like to take this opportunity to wish you and your family a happy and peaceful holiday season. We look forward to finding new ways to help you in 2018.

Best wishes

Bell rings on a bruising year


Every year since 2008 commentators have looked back and described the years that was as a 'rollercoaster' ride filled with uncertainty. Egged on by Nenegate in December 2016, 2017 was billed to deliver more uncertainty to South Africa. And it certainly delivered.

The beginning of the year set the tone for a period during which South Africa - like the rest of the world, was impacted by external economic factors, as well as by internal political and policy concerns. The upswing in global growth - from which South Africa usually benefits - was quickly eroded by the unexpected cabinet reshuffle in March, which was followed by an earlier-thanexpected credit ratings downgrade by Standard & Poor's. Moody's and Fitch followed shortly thereafter. The economy entered a technical recession and, as I write, confidence remains weak with no signs of recovery, unless we see aggressive and forward-thinking policy amendments coming on stream rapidly. Furthermore, government finances have disappointed and it appears that fiscal consolidation has been placed on the back burner. This has increased the risk of another sovereign downgrade, as the country witnessed in late-November when Standard and Poor's again led the pack by downgrading South Africa's local debt. This time, Moody's and Fitch stood firm on their assessments.

But it's not all doom and gloom. There are green shoots worth noting on the economic, social and political front; all of which come together to paint a more positive picture of the future for our somewhat tender country.

We are currently living through a time during which previously hidden issues are being aired in public, from allegations of state capture, to the condition of our stateowned companies. This rising level of transparency is heartening, both from a civil society and a political perspective. In particular, we have seen a rising involvement in 2017 of business both taking a stand and being compelled to walk the compliance talk, putting the spotlight - quite rightly - on ethical practices, responsibility and integrity. In this context, the fact that people can voice their objections openly speaks to the strength of our Constitution and judiciary, as well as the country's strong culture of civil action. This trend will certainly continue in 2018 and beyond.

From an economic perspective, South Africa has just weathered a significant drought to produce what is likely to be the largest harvest of grain in 36 years. Broadly, and most fortunately, the economic underperformance experienced over 2017 has been cushioned by an upswing in global growth, commodity prices, and a search for yield. And, despite unsettling events at home, the rand has remained resilient. Inflation continues to moderate and this has allowed the central bank to ease interest rates. Our external balances continued to improve over the year the current account deficit for the first six months of the year is -2.2% of GDP, notably better than the -3.3% recorded for 2016.

These positives highlight the fact that, fundamentally, South Africa remains an attractive investment destination. And yet we have the threat of additional ratings downgrades hanging over our heads. Why? Well, these pending downgrades are a function of weak economic growth and the lack of implementation of growth enhancing policies. With that said, there are low hanging fruits which could boost confidence in the short term but which require follow-through in the medium to long term. In short, it is possible to turn the situation around. In the absence of action, however, South Africa will unfortunately find itself not only out of the World Government Bond Index, but facing multiple downgrades.

Much hinges on the outcome of December's ANC Elective Conference and the certainty or uncertainty which comes from that key vote. South Africa should know the outcome by 20 December 2017; this will give us guidance as to which policies will be adopted by the ANC and who will be leading the party into the 2019 elections.

Uncertainty and the undoubtedly rollercoaster year to come are, of course, also opportunities to examine how we do things, how we innovate and how we improve our service offering. Both from a strategic perspective and from a technological vantage point, we will continue to build on our digital, efficiency and client-centric focus of 2017. This trend will continue and accelerate in 2018 and beyond as we strive to constantly improve the way you transact, lend, invest and insure.

Like 2017, the next 12 months will raise challenges and bring up uncertainties. At FNB Private Wealth, we approach years like this with the conviction that how we steer ourselves through these events will set us up well for the future. In the words of the great statesman Winston Churchill: "Difficulties mastered are opportunities won."

Diversification key to managing uncertainty


Most countries around the world are currently living under a pervasive and globally relevant trend: Uncertainty. "The world has become a lot more uncertain over the last five or six years and this is not just South African politics," admits Chantal Marx, Head of Research at FNB Securities.

Marx cites the recent Kenyan elections, Brexit in the UK, the leadership uncertainty in China as Xi Jinping's tenure comes to an end, as well as geo-political tensions between North Korea and the United States as examples. "Globally there is a lot going on at the moment and, locally, the ANC Elective Conference in December is just our version of this same uncertainty," she says.

Much of this South African uncertainty springs from who the ANC will elect as its next leader and, most likely, the next president of the country. While much speculation about the ultimate outcome is engulfing the country currently, what is crystal clear is that whomever the victor, they will be faced with a strong need to prioritise economic growth if South Africa is to lift out of the stagnation.

"While political uncertainty remains extremely high, the adoption of appropriate polices will help lift sentiment and economic growth," says Mamello Matikinca, Chief Economist for FNB. FNB Private Wealth is, therefore, focusing less on the candidates and more on the macroeconomic policy and institutional regimes that could shape the macroeconomic outlook of the country. They are:

Positive structural change

In this scenario, says Matikinca, South Africa would experience domestic structural change that lifts productivity as well as business and consumer confidence meaningfully. Measures which need to be adopted to achieve this could include: ensuring political certainty against a market-friendly policy backdrop; privatisation of state-owned enterprises; increased infrastructure spending and an improvement in education outcomes, health delivery and a clamp down on corruption. In this regime, South Africa experiences strong economic growth, lower inflation and repo rate, and South Africa will eventually earn back its investment grade status.

Reformist stalemate

This stalemate outcome, explains Matikinca, would see a high degree of policy uncertainty being maintained and structural reform stagnation continuing. Business and consumer confidence would not improve if such a scenario were to play out. In fact, trend growth would remain weak, resulting in further pressure on government finances. South Africa would lose its investment grade status and sovereign ratings would remain under downward pressure. However, the independence of South Africa's institutions is seen as remaining relatively strong.

Stagflation

Populist policies that lead to more government intervention in the economy and a shift from fiscal prudence to fiscal carelessness would be adopted under such a scenario. The shift to popular spending would lead to increased domestic demand, which would be met by low production capacity. Consequently, inflation would lift notably and monetary policy would rise in response to higher inflation. Confidence and investment activity would decline yet further. In this situation, South Africa would experience a protracted recession from 2020 onwards which would translate into the further deterioration of government finances and multiple downgrades, says Matikinca.

In light of the above, it is clear that South Africa has everything to play for as it heads towards the December ANC Elective Conference.

What does this mean for your investments?
Irrespective of the outcome of the ANC Elective Conference in December, diversification will continue to be the dominant theme in the year ahead. This ensures that portfolio risk is reduced, while taking advantage of the growth opportunities inherent in a diverse investment portfolio. In this way clients will be well positioned to maximise their risk-adjusted returns.

Based on the above scenarios, our base case of the most likely outcome is the Reformist Stalemate which, we believe, had already been largely priced into the asset class valuations. So, our weightings are not too far from their respective benchmarks. More specifically:

  • Bond yields have already more than priced in junk status. We are close to a neutral positioning here.
  • Equity positions (neutral weighting) are very well diversified. There is a natural rand hedge bias with 65% of the portfolio likely to benefit from a weakening rand. Of this 57% reflects positions where assets, costs and revenues are derived from offshore, 6% reflect positions where costs are randbased, but where revenues flow from offshore, and 2% where positions reflect an element of import substitution. Exposure to South African economic sensitives, where revenues and costs are South Africa-based, make up 28% of the portfolio, while a further 8% of the portfolio reflects positions with an import cost component but where revenues are South Africa based.
  • South African listed property reflects a slight underweight position given the very challenging local economic outlook. There is, however, a significant rand hedge component with 41% of the portfolio exposed to offshore assets.
  • Offshore exposures also reflect a neutral stance right now, ahead of the December conference.
  • South African Cash exposures are slightly elevated to ensure that we have some powder dry to invest on any meaningful market-moving outcomes.

Looking offshore? We have your back


With talk of looming downgrades and amidst economic and political uncertainty, many South Africans are looking to externalise their wealth. Fortunately, explains Chantal Robertson, Head: Global Wealth Solutions at FNB Wealth and Investments. FNB Private Wealth's simple and effective processes and systems for building your wealth also extend to sending your money offshore.

South African residents have the broad ability to invest offshore and, as an FNB Private Wealth client, you have various options to diversify and access international markets. South African resident individuals of 18 years and older are entitled to:

Single Discretionary Allowance of R1 million

This may be used for a range of cross-border transactions, including travel, gifting and foreign investment. No tax clearance is required should you wish to avail yourself of all or part of your Single Discretionary Allowance for foreign investment.

Foreign Investment Allowance of R10 million

These funds can be used to invest in any foreign asset and you have the freedom to structure such investments using an offshore trust and/or company. This allowance is subject to tax clearance, but fortunately FNB Wealth and Investments can assist you with the tax clearance application process.

Foreign investment in excess of R10 million

Not many people are aware that an individual may apply to take out more than the allowances mentioned above. This application requires tax clearance, a full South African Revenue Service audit as well as approval from the South African Reserve Bank. Certain conditions are imposed on how and what you invest in offshore, however thr FNB Wealth and Investments team can guide you through the process.

With FNB Private Wealth's innovative solutions your investment strategy can be fairly flexible whilst remaining within the regulatory framework, thereby giving you the freedom to choose how and where you would like to invest your wealth.

Plus by using FNB Private Wealth's online banking service or the FNB Banking App, (login and go to the Forex tab) you can transact internationally while saving on transaction charges, securing a better exchange rate, and even enjoying eBucks rewards on Global Payment and Global Receipt transactions (standard eBucks Rewards rules apply). For more information about the Foreign Exchange services search for 'Forex' on the FNB website. If you're looking to invest offshore and require more information please get the ball rolling by speaking to your Private Banker.

A gentle reminder...

Any unutilised portion of your Single Discretionary Allowance (SDA) and Foreign Investment Allowance (FIA) will fall away on 31 December 2017. Should you still wish to make use of the 2017 FIA, we encourage you to get in touch with us as soon as possible to get the process moving as the tax clearance process can take up to one month.

Wealthy 'angels' getting behind entrepreneurs


Each November, a week is dedicated to celebrating the world's entrepreneurs. Globally this takes place through discussions, presentations and the active support of current and would-be entrepreneurs. Business owners, large and small, are the lifeblood of any economy; and fostering their development and success is widely regarded as boosting a nation's bottom line.

Anyone who enjoys history, and particularly unpicking the makings of the United States of America, will point to the spirit of innovation which spurred on that country's 'start-up' culture and capitalistic credentials. In his book, Americana: A 400 Year History of American Capitalism, Bhu Srinivasan looks at the influence of entrepreneurs like Andrew Carnegie and John D Rockefeller on that country, and highlights the United States's gold-rush past and make-it-big dream. "I think that the cultural aspect is certainly there," Srinivasan said in an AEIdeas podcast in October 2017. "I mean, we do encourage entrepreneurship in very big ways. The fact that you have a lack of stigma in this country with failure - that I think is a very big thing."

In South Africa, this failure-friendly, risk-open approach to starting a business is less evident, which is likely why we have fewer Zuckerbergs, Gateses and Jobses rising up. However, in the ranks of the wealthier segments of society, many high-net-worth individuals are increasingly willing to take on more risk when investing in promising business start-ups. Often, this investment finds its expression through early-stage angel investing (which tends to provide seed capital courtesy of affluent families or individuals) or, in more formalised cases, venture capitalism (for start-up businesses or to facilitate expansion).

In South Africa, the match-up between willing angel investors and good entrepreneurial ideas holds great potential. It also presents endless opportunities for wealthy individuals who have a keen eye for talent and are eager to back viable concepts in order to make a good return.

"However, angel investing remains highly risky and can result in financial losses if proper due diligence is not conducted," cautions Eric Enslin, CEO of FNB Private Wealth. This includes investing in expert advice. You need to be adequately informed about the sector, the type of business, current and past trends, as well as risks, in order to determine if you are making a good investment, says Enslin. Seeking advice from knowledgeable experts who have earned their stripes in this field can only work to your advantage.

He points out that would-be angel investors should also bear the following in mind:

  • Beware of the risks

To be successful you need to have an appreciation for entrepreneurship. Given the high failure rate of new businesses that get started in South Africa, you have to make room for failure. Success is never guaranteed.

  • Don't factor in overnight returns

Patience is important. You may only begin reaping the rewards after 5 to 10 years.

  • Look behind the concept

While you may be captivated by an innovative concept, don't lose sight of the basics, like a comprehensive and succinct business strategy, drive and determination of the leadership, passion, risk appetite, expertise, financial management and business culture.

  • Get involved

Angel investors often offer more than just capital injection, but have a good level of involvement in the businesses they are supporting. This can be in the form of mentorship support or offering strategic direction as an executive board member.

"Angel investing is a long-term investment strategy and should not be rushed into, but rather carefully considered and researched in order to prevail as part of a sustainable wealth building plan," adds Enslin. Investing in the personal and professional growth of the entrepreneur is also of the utmost importance. As much as affluent individuals enjoy the input of wealth advisors and specialists working behind the scenes, so too do entrepreneurs need financial support and know-how. In this respect FNB Business, voted South Africa's Top Business Bank by the Sunday Times Top Brands Survey 2017, is structured to work with entrepreneurs to streamline their financial operations.

FNB Business provides free accounting services, such as Instant Accounting, online documents reservation services, and is currently forming a partnership with the CIPC to digitise South Africa's business registration processes. All pain points for the average entrepreneur.

"Our message to entrepreneurs is that we understand that it isn't just business to them and that is why we remain committed to providing meaningful solutions to help them grow," says Mike Vacy-Lyle, CEO of FNB Business. "Going forward, we have some exciting developments that will take us further in our digital journey, and through this we will continue to launch amazing services, products and partnerships, all aimed at taking the anguish out of doing business."

For all young entrepreneurs willing to take the plunge of being a self-starter in an effort to make their own mark, there are some fundamentals to success, believes Enslin. Entrepreneurship can only be successful if a solid wealth management plan, which encompasses goals and aspirations, has been established. When executed correctly the model and principles can be replicated across multiple generations, he says. That includes building a profitable venture which can be sold for a premium, being open to diversification, looking towards the long-term future of a business, and taking each step along the road seriously.

Launching, running and nurturing a business is not a short-term game, it is a responsibility which - for some - will be handed down from generation to generation; all the while growing communities and empowering individuals. This is why we celebrate entrepreneurship and those who dare to dream.

Outwit villains with vigilance


December may be the season to be jolly, but it also goes hand-in-hand with fraud attempts, theft and mall robberies. While some events are thrust upon us, others we have full control to avoid. You can outwit the scammers and the skelms, here's how and what to be aware of:

ATM shoulder surfing

Since the first ATM changed the way we get cash, deposit cash and bank, back in 1981, ATMs have sprung up around the country. Today there are over 29 000 ATMs around South Africa, reports BusinessTech, making these handy machines a simple, effective and efficient way to bank. But that doesn't mean you don't need to be vigilant when using these machines, warns Cheryl Odayar, Head of Legal, Risk and Compliance at FNB Private Wealth. She points out that 'shoulder surfing', a method used by fraudsters to take your card and view your PIN details while you are using an ATM, is something of which you should be particularly aware of.

'Shoulder surfing' can happen anywhere and to anyone, but there are some habits you can get into to protect yourself:

  • Don't allow anyone to help or interrupt you while using the ATM.
  • Be aware of your surroundings and who is around you.
  • If you need help, only ask an FNB appointed official.
  • Cover the keypad as you input your PIN with the other hand and stand as close to the machine as possible to shield the keypad with your body.
  • Put your cash, card and slip away before stepping away from the machine.

If you are a business owner and you deal regularly in cash deposits, then you must exercise particular caution, says Odayar. If anything seems dubious or out of the ordinary, then cancel the transaction and report your suspicions by calling the number on the back of your FNB card.

Stay alert to avoid card skimming

Another common technique used by criminals is card skimming, where a skimming device is installed into an ATM or a POS device (mobile point-of-sale terminal) to obtain the details of the card. If, when inserting your card, the port seems unstable or 'wobbly' then cancel the operation immediately and report the machine. An ATM machine will always ensure a snug fit for your card.

Keep your card, PIN and digital login details secret

Never compromise your PIN details, as it is your personal gateway to your account. This includes never writing it down or sharing it with anyone - even your family, friends and bank officials.

Similarly, when it comes to online banking login details, these too should be private and for your eyes only. Nobody should have your login information but you.

This also applies to online shopping, where you have to input your credit card details onto external websites. "Always use secure and reputable websites for online shopping," says Odayar, "when in doubt make sure that the web address starts with https:// and that there is a padlock image in the address field." If not, you might be handing over your details to someone nefarious.

SIM swap fraud: Beware of signal loss while transacting digitally

SIM swap fraud occurs when SIM card details are changed so fraudsters can access your One-Time Pin (OTP) codes and SMS notifications. "If you are banking and you lose reception while expecting a notification, then log off, call your network provider and check if a SIM swap has been activated and change your login details immediately. Remember, if you use the FNB Banking App there is an additional layer of security to avoid SIM Swap Fraud.

Save FNB Fraud's contact details

Keeping an open line of communication with the bank is essential. If your cellphone is stolen, or if you change cellphones, you should immediately let the bank know in order to de-link your FNB Banking App from the previous device and reconnect to your new or replacement cellphone. This can be achieved via Online Banking or by contacting FNB.

There are also instances where things go wrong with technology so, if your card is swallowed by an ATM, ensure you call FNB immediately to cancel the card.

Keep the FNB Fraud number saved in your phone:
087 575 9444.

Remember: When in doubt, err on the side of caution. Leave the risk taking for the roulette table and not for the banking universe.

Card & account control at your fingertips


If you can remember the days of pre-online banking, when lengthy queues and branch visits were the order of the day, then you'll also remember how any change to your banking profile or account required time and patience. These days, using FNB Online Banking and armed with the FNB Banking App, you have full control over your cards and your accounts.

No matter where you are, sunning yourself on a tropical beach or exploring a new city, FNB Private Wealth's digital channels allow you to quickly and securely manage your cards. At the touch of a button or the swish of a screen you can:

  • Cancel lost/stolen cards or order replacements*
  • Activate new cards
  • Control your transactional limits (both internationally and domestically)
  • View or change your PIN
  • Temporary block misplaced or stolen cards on the FNB Banking App and lock/unlock when required.

There is no better travel companion than the peace of mind which comes with secure, flexible, self-sufficient banking, courtesy of the FNB Banking App and Online Banking. Now the only queues you need to worry about involve getting into a renowned Michelin starred restaurant or one of the world's finest galleries or museums.

*Simply download the FNB Banking App, select the arrow next to the Account Number, then "Cards". Select the card, then the "Cancel Card"/ "Update Limits" option and follow the prompts.

eBucks Lifestyle unveils frontrow sporting experiences


eBucks Lifestyle has combined its expertise in travel with the best in sport to bring you the ultimate in sports travel experiences for the new year. What does that mean for you as a valued eBucks Lifestyle client? Well, this new offering affords you the opportunity to enjoy some of the world's most iconic sporting events courtesy of our tailored sporting getaways.

For 2018 we've created an array of unforgettable opportunities for the sporting enthusiast, here are four to whet your appetite:

GOLF: ABU DHABI HSBC GOLF CHAMPIONSHIP

Golf's most famous names kick of the year by competing for the coveted Falcon Trophy at the Abu Dhabi HSBC Golf Championship. As an eBucks Lifestyle client you'll not only enjoy four days of up-close excitement, but you are invited to play three rounds at any of the following prestigious golf clubs: Saadiyat Beach Golf Club, an unparalleled location skirted by the cobalt waters around Saadiyat Island; Abu Dhabi Golf Club, a 27-hole oasis in the desert dotted with palms and saltwater lakes; and Yas Links Golf Club, a magnificently designed course which is renowned for testing professionals, enthralling amateurs and exciting beginners.

When: 17 to 24 January 2018
From R21 320 per person sharing

FOOTBALL: ENGLISH PREMIER LEAGUE MAN UNITED VS LIVERPOOL

Be there for the most anticipated match of the 26th English Premier League Season as Manchester United face Liverpool at home. You'll be treated to the finest Lanchashire hospitality courtesy of your eBucks Lifestyle credentials, while being entertained by outstanding action from the uninterrupted views of the luxurious Sir Alex Ferguson Stand.

When: 9 to 12 March 2018
From R24 800 per person sharing

TENNIS: WIMBLEDON CHAMPIONSHIP

Enjoy summer in July at the All England Lawn Tennis Club as the world's best tennis players battle it out for the prestigious title of Wimbledon Champion. Your eBucks Lifestyle membership will secure you Platinum Hospitality and a sought-after reserved seat for one day on Centre Court to enjoy the atmosphere and enchantment that comes with the world's oldest tennis event.

When: July 2018
From R40 070 per person sharing

GOLF: US MASTERS

The US Masters is one of golf's most prestigious events. This invitation-only tournament is in its 82nd edition at the celebrated Augusta National Golf Course and continues to attract the cream of the world's golfers. Through eBucks Lifestyle, enjoy access to the Rocky Patel premium cigar lounge and grab the chance to show off your skills at the three-hole putting course.

When: 1 to 9 April 2018
From R42 580 per person sharing

As we move into 2018 now is the ideal time to pen some downtime into your diary and secure your front-row seat When: 17 to 24 January 2018 at some of the world's finest sporting extravaganza.

Foreign exchange made easy


There are countless things to do before you jet off for a well-earned break: checking your phone has roaming, getting the dogs into kennels, reading up on your chosen destination and ensuring you have sufficient travel insurance in place.

High on your list of things to do is likely to be foreign exchange. Fortunately, FNB has your back when it comes to quickly and easily placing your order, be it in foreign notes, a Multi-currency Cash Passport™ (travel card) or a combination of both. Simply log into your Online Banking profile, order your forex within 60 days of departure and, hey presto, it will be delivered at no charge to your home or office. You can also top up the balance using FNB Online Banking while travelling, if something appealing unexpectedly catches your eye.

Plus you'll benefit by earning 50% back in eBucks on your transaction charges when you spend foreign currency online to pay for the likes of accommodation, car hire or theatre tickets in advance. Showing that it really does pay to plan ahead!

With the rand likely to come under more pressure in the months ahead, given poor fundamentals in the economy, there are many travellers who are looking every further ahead, to next year's holidays or even 2019 and beyond. If, like these individuals, you are worried about the exchange rate's impact on your vacation plans then consider opening a FNB Global Account, which allows you to save in foreign currency at any time of the year. Off to Greece? Then save in euros and spend in euros? Heading to the Big Apple? Then save in euros and spend in euros.

In addition to this, travellers who have a Multi-currency Cash Passport can transfer funds from their Global Account and use the Cash Passport to make purchases and withdraw from ATMs displaying the Mastercard acceptance mark in any of the four currencies available on the card.

Safety tips for trips


While you are on the road or outside the country this festive season, remember that your team of dedicated FNB Private Wealth support bankers are just a message away. Connect via Secure Chat or by using the FNB Banking App anywhere in the world and enjoy the same convenience when banking at home.

The FNB Banking App universe is fully secure, making transacting via the App your best option for international banking transactions. Simply log on via a Hotspot and we'll take care of the security. Plus, for your peace of mind, enable overseas roaming to get SMS alerts to help you monitor your spending while travelling.

By virtue of using the FNB Banking App we'll know if you are travelling abroad, but it's always better to be safe than sorry so do notify your Private Banker about your trip, where you are visiting and how long you'll be away. This will ensure we keep a vigilant eye on your accounts in the event of any suspicious activity.

Bear in mind that fraud is not just a South African affair - international gangs and syndicates prey on overseas tourists so, if you are out of the country or even just out of town, be mindful of protecting your personal information against identity theft. Don't leave cards and passports lying around your hotel room, rather make use of the safe in the room. Also, never forget that FNB will never communicate with you via email or SMS in a manner that requires you to open links, so be aware of the nature of emails and SMSes you may be receiving on your cellphone. When in doubt, delete.

The Ins and Outs of Priority Pass

While travelling abroad FNB Private Wealth clients have the option of kicking back in a variety of independent airport lounges between flights by making use of the complimentary Priority Pass service courtesy of eBucks Lifestyle.

To qualify for your complimentary Priority Pass Membership, you need to order a Priority Pass card online. You can do this through the FNB Banking App or via eBucks.com (log in and then select the Lifestyle tab). It takes 17 working days to process your Priority Pass order, so don't leave the application process to the last minute if you are planning to travel in the near future.

Priority Pass gives FNB Private Wealth clients access to a network of more than 700 airport lounges worldwide, provided you have booked in advance and have the required reward level. Because Priority Pass works on a tiered rewards level, make sure to check that you qualify for the benefit before applying by checking on the FNB Banking App or calling the Service Suite on 087 730 6000. Entries which exceed the number of complimentary visits available to you, will be billed to your account at US$27 per entrance per person. Rather be safe and view your remaining available visits ahead of time via the FNB Banking App or eBucks.com.

Remember, Priority Pass is exclusively for international airport lounge access; not for domestic lounge access. Domestically you can make use of the the home-grown SLOW lounge, which is found at OR Tambo International, Lanseria International, Cape Town International and King Shaka International Airport.

To view your complimentary SLOW lounge visits available to you, please log into the FNB Banking App > eBucks Rewards > Airport Lounges.

Please note: If you do use a Priority Pass lounge in South Africa the charge will be US$27 per entrance per person.

Budding business owners need skills, guidance and faith


It is often said that South Africa is a microcosm of the world, a fact that is reflected in the country's youth employment statistics.

Globally those under 24 years of age comprise 40% of the world's population and 41% of the world's unemployed, according to the United Nations. In South Africa, those younger than 34 comprise 66% of the total population and, in 2017, Statistics South Africa noted that more than 54% of youngsters under 24 were unemployed.

So, not only does South Africa mirror the global state of affairs but the situation here is worse. Faced with these daunting statistics, entrepreneurship has been touted as an elixir for the country's youth and as a possible engine to ignite economic growth across the board. The question is: How best to nurture the instinctive entrepreneurship of young South Africans to enable them to spot opportunities and have the confidence in their abilities to start businesses across multiple sectors.

Within the FirstRand Group, two avenues for youth entrepreneurial support exist: Leveraging off the expertise within divisions such as FNB Private Wealth for the entrepreneurial children of wealthier individuals and, for young hustlers making their own way in the world, FNBy's youth accounts have been especially tailored for those younger than 25. The FNBy package includes a yCard, free online and FNB Banking App usage, unlimited internal transactions, and unlimited card swipes. Perhaps the biggest benefit of this package is access to a library of educational videos to upskill the young in terms of their money saving and spending habits.

For FNB Private Wealth clients, their future business tycoons do have the added advantage of access to an incredible platform of experts from investment to offshore lending, business advice and family services. This access is vital not only from an entrepreneurship perspective, but also from a legacy point of view. According to a study published by the Williams Group wealth consultancy in 2015, 70% and 90% of wealthy families lose their wealth by the second and third generation respectively. For such families, the need to pass on legacies to a younger generation of leaders who will be responsible for breathing new life into wellestablished corporations or scaling high-growth potential businesses to new levels is essential.

Entrepreneurship in this wealth context can only be successful if a solid wealth management plan, which encompasses goals and aspirations, has been established. When executed correctly the model and principles can be replicated across multiple generations. But, getting this right requires expert input and guidance.

Mentorship is not only vital for wealthier individuals, it is an essential component when fostering business abilities. HDI Youth Marketeers's Client Service Director, Cuma Pantshwa, believes access to mentors can help young people to examine their business plans and ideas, and set clearly defined goals. This, together with the ability to learn relevant skills, is of utmost importance to this generation - particularly those looking to embark on an entrepreneurial path. "What we've found is that young adults want money. And, in this space, they seek brands that will help them to achieve. They seek brands that will get them to the next level and help them achieve their dreams. They are worried about their futures and whether they will get a job, and that is where entrepreneurship comes in, because they've identified that in the midst of huge unemployment there is a gap," she says.

HDI, which shares its youth insights annually through the Generation Next report, points to a youth generation that is hungry for success (22% want to be rich and 27% want a good career, according to the 2017 report) and who prize quality education (29%). They have all the ambition, resilience and drive required of entrepreneurs, but they are being let down by their know-how. Pantshwa notes: "The missing link in South Africa, I believe, is that the education system is not giving young adults practical entrepreneurial skills and key business tools to enable them. We've also identified that young adults want brands that can help them get these skills; from how to sell yourself to how to turn your business idea into something lucrative. They are looking for these skills."

When it comes to know-how, business management and executive skills rank way above all other abilities (at 20.9%) and 19% of the youth polled in the Generation Next report regard being their own boss as the coolest job imaginable - an insight which shows a decided affinity with being in control of their own destiny.

Because this group is so aspirational, because they want cars and luxuries, international travel, property ownership and the ability to study further, they are well suited to entrepreneurship; they just need greater exposure to this as a career option. That said, a whopping 40% of youngsters polled by HDI already want to open their own business, says Pantshwa, who believes South Africa's youth are well able to succeed in their entrepreneurial ambitions. "They are innovative and they are wellconnected in terms of digital, so they are in a good space to evolve. They have what it takes to come up with businesses, so we have to help create an environment for them - and critically their parents and families - to see this as a viable career choice."

In line with this thinking, HDI runs a knowledge-sharing platform called Shift which aims to inspire and encourage youngsters towards greatness by exposing them to talks at university as well as through online interactions. At the younger level, educational institutions like Future Nation Schools - founded by former FirstRand CEO Sizwe Nxasana and his wife, Dr Judy Dlamini - and SPARK Schools are also changing the way they educate children to develop more inquisitive, technologically savvy and self-motivated youngsters; all traits which future entrepreneurs need.

Where businesses and brands, parents and families across the spectrum of society can play a role is by encouraging youths to take action and then supporting their efforts; this is critical if South Africa is to pave a better way forward for the next generation and encourage entrepreneurship among the youth to bloom. For companies, there is much value to be imparted by working to understand the pain points for young business owners, be it around registering a business or opening an account, how to get market access and funding, or even accessing basic how-to information, all while increasingly shifting services into the digital realms with which youngsters are so comfortable. "It's also important that brands and organisations help these young entrepreneurs by investing time and skills which will, in turn, unlock massive potential since youth entrepreneurship offers innovative solutions for economic growth among our young people," says Pantshwa. Make no mistake: their future is our future.

A game-changing year


Already 2018 will go down in history as a game-changing year. From a delayed State of the Nation Address by President Cyril Ramaphosa, to a challenging Budget Speech, which saw the first increase in VAT for 25 years this eventful few months has spurred on positivity and cautious optimism in the future of South Africa. Moreover, the ratings agency upgraded the country's credit rating outlook from negative to stable. As a result, we've seen investor confidence come out of hibernation.

This positive upswing in sentiment is the reason why we are focusing on a "leveraging" solution. Securities Based Lending is an underutilised alternative to unlocking liquidity or to introduce gearing into portfolios. This is an interesting option and certainly has a place within client's wealth portfolios. We remain focused on providing holistic solutions that address the diverse needs of our clients. As a result, we continue to enhance our Global Wealth Solutions platform to enable our clients to effectively diversify their portfolios offshore.

Finally, we proceed with our mega-trends series, taking an intriguing look at the 'sharing economy' and examining the implications this shift has for established businesses and investments. And don't forget to view the latest offerings from eBucks Lifestyle.

A positive and optimistic tone has certainly been set for 2018. We look forward to helping you harness these opportunities.

Best wishes,

Eric Enslin, CEO of FNB Private Wealth

Banking and investing for the global citizen


Travel, information at the touch of a button, and 24/7 news has made the world a smaller place. South Africa is no longer a million miles from New York or Beijing and we no longer see ourselves as just citizens of a single country. As our identities have transcended geographies and political borders, so too have our banking and investment requirements changed. Today we have, and in fact demand, the freedom to cross borders and transact anywhere in the world.

But where to start?

"When articulating the freedom that individuals now have, we talk about global citizens, and this encompasses a varied audience with different needs," explains Chantal Robertson, Head: Global Wealth Solutions at FNB. "Some are young professionals who are starting their journey, while others are established business owners who are seasoned travellers with different requirements. Global Wealth Solutions is a complete offering comprising the best that the FirstRand Group has from a forex, banking and foreign investment perspective. It caters for the first-time international investor to the seasoned pro by providing an end-to-end cross-border solution that can be tailored to suit your specific needs."

What that means in practice is an offshore investment solution that encompasses foreign exchange (forex) online, a variety of offshore saving options, tax clearance assistance, and ongoing advice and expertise. "Our role is to deliver a customised solution based on your personal circumstances and investment goals, whether you are looking to invest offshore for your child's tuition at an international institution, if you wish to acquire an apartment in London, New York or Berlin, or you are simply looking to hold a portfolio of foreign equites," explains Robertson.

When transacting across borders each rung of the ladder invites more questions and requires specific expertise. Often the initial conversation starts with a discussion around forex and the annual allowances, and the question 'what can I do and how?' arises. In some cases the single discretionary allowance of R1 million per South African resident of 18 years and older is sufficient, while some clients require assistance with tax clearances to take advantage of the annual foreign investment allowance of R10 million.

Once a client has made the decision as to which foreign currency to move into, then the conversation becomes: 'But I don't have an offshore bank account, how can I open one?' Here FNB Private Wealth has two options on the table: the FNB Global Account or a FNB Channel Islands account.

What is the difference between the two accounts? And which one do you need?

The FNB Global Account, explains Robertson, is a simple currency account that can be opened online within a few minutes. "You can see your Global Account on your FNB Private Wealth banking profile and it is easy to fund." For a first-time offshore investor this is the best way to start and it allows for monthly amounts to be accumulated in your chosen offshore currency. "Should you be using the Single Discretionary Allowance, no tax clearance would be required," notes Robertson.

Your Global Account is extremely beneficial when you are travelling, as you can fund your Multi-currency Cash Passport from this account using the FNB Online Banking platform. When it comes to investing, this account can also be regarded as a stepping stone to foreign currency exposure.

If you have built up a tidy balance then it makes sense to use these funds to fund a new FNB Channel Islands account or, if you are looking to shift from one fund to another then your Global Account can serve as a handy investment clearing account; allowing you to move foreign funds without having to switch back into rands and out again.

FNB Channel Islands is a branch of the FirstRand Group, based in Guernsey. It is regulated in the Channel Islands, and provides all the benefits that one would expect from an offshore bank account, including online banking and a debit card. In addition, you can link your Channel Islands account to your FNB profile in order to keep an eye on your funds, but you cannot transact due to the different jurisdictions. For that you have access to online banking via the Channel Islands website as well as the FNB Channel Islands team, who are fully versed on the regulatory environment and saving options available.

An excellent benefit is that your FNB Channel Islands account will not attract any fees, provided that you have a minimum balance of £2500.

When you have acquired sufficient offshore change, then the next question becomes: 'What now?' And, again, Global Wealth Solutions can seamlessly step in with a FirstRand-tailored solution courtesy of FNB Securities or Ashburton Investments. With the help of skilled experts you take advantage of the market-leading advice of FNB Securities, voted Intellidex's Top Advice Broker in 2017, or buy directly offshore funds such as the Ashburton Global Growth Fund or the Ashburton Chindia Equity Fund, a repeat winner of the prestigious Raging Bull Award. Or ask for advice on investing in other third-party funds.

"Being a global citizen is no longer in question, but it is a different journey for each one of us," says Robertson, "and offshore investing is not only the domain of the super wealthy or the well connected. Global Wealth Solutions as a client value proposition is accessible across the bank's client base, in that it is exactly the same offering for FNB Private Clients and FNB Private Wealth. This means you can grow into your account and investment options as your wealth grows." And FNB will grow with you each step of the way.

Take note

Remember that South African residents over the age of 18 can take funds offshore using the following allowances for 2018:

  • Single Discretionary Allowance of R1 million:
    Individuals can use this for travel, gifting or foreign investment and no tax clearance is needed. But be careful not to exceed the R1 million limit. And remember that if you wish to use any part of this allowance for foreign investment, you must be registered for tax purposes.
  • Foreign Investment Allowance of R10 million:
    You will require tax clearance to take advantage of this allowance, but once received you can invest the funds in any foreign asset and can also make use of offshore trusts or companies to invest. We have an experienced team who can assist you with your tax clearance application.
  • Foreign investment in excess of R10 million:
    This process requires approval from both the South African Revenue Service (SARS) and the South African Reserve Bank (SARB), and can take from four to six months as it entails a full SARS audit. In addition, the SARB imposes certain conditions on the proposed investments and the holding thereof. While we cannot assist with the SARS process, FNB Private Wealth can provide guidance on and the submission of the SARB application.

Securities based lending lets your assets work for you


Globally the use of Securities Based Lending (SBL) has found particular favour in the United States with the likes of Morgan Stanley and Bank of America leading the way. Both recognise that borrowing is an important component of wealth management and achieving key financial goals, so making use of SBL within a portfolio puts more options on the table for the client.

So, what is SBL?

Mishaal Desai, Head: Securities Based Lending at FNB Private Wealth, explains that the concept involves using investments in listed shares, unit trusts and offshore shares (among others) as collateral in order to raise finance for a range of activities. "The beauty of the product lies in its simplicity," says Desai. "SBL allows clients to gain access to liquidity without having to liquidate existing investments."

In short: SBL allows you to leverage off your assets, but on your terms. Rather than liquidating an investment account or shares when you need access to funds, often incurring hidden costs such as tax liabilities and a loss of future growth along the way, SBL offers a lending solution that is time sensitive, flexible, simple and effective. Which is why international investors are increasingly interested in including SBL among their wealth management tools.

This same interest is increasingly being observed among South African investors, particularly those in the high-networth category. In terms of FNB's SBL offering, Desai says it has certainly been attracting attention. "Word of mouth has spread quickly across our client base, with particular interest from existing clients with security portfolios and senior executives with vesting share options," says Desai. "Together with favourable interest rates and turnaround times to implement, there are no restrictions on where the funds can be applied. So the SBL product is a powerful tool in unlocking liquidity and preserving wealth."

When to use your SBL?
Since FNB launched its SBL product, clients have been eager to take up the facility to gain exposure to other business ventures, to obtain property overseas, for vehicle financing and, in increasing numbers, to pay off tertiary education fees or MBA study costs at the start of the year. According to UBS Bank in the United States, the most common uses for SBL in that market are to fund real estate purchases and business opportunities, to refinance high-interest debt, to pay tuition fees, taxes and other large yet unexpected expenses.

Desai explains that, in South Africa: "The most successful deals concluded to date have been to introduce gearing into the clients' portfolios, thereby increasing the rate of return on the investment. By making use of a geared portfolio, the client can then set stop-losses in line with his or her appetite, while enjoying the full appreciation in portfolio value. Given the performance of the markets over the years, clients have been able to generate substantial value through the gearing effect."

Desai notes that structures implemented for clients with cyclical cash flows have also been a popular use of the SBL product. "Clients in cyclical industries may have excess cash on their balance sheets for large periods of time, which is a major hindrance to investing for the long term. In these instances, the client may elect to invest cash into higher-yielding investment portfolios and make use of an SBL facility to access liquidity for the shortterm against their long-term investment strategy," says Desai. "In essence, SBL is able to create a solution for clients in cyclical industries or professions."

How it works
Once the investment portfolio has been accepted as collateral, the client may choose from two repayment profiles offered by the bank: an interest-only option, which involves monthly repayments on the interest portion, and an interest roll-up option, designed to work around client cash flows. The interest roll-up portion is particularly useful when providing tailor-made structuring solutions to match interest payments with a client's cashflow constraints.

Step one
While there are several applications for SBL within your investment universe, it is important to start this journey by educating yourself about the facility and working with your trusted advisor to determine if SBL has a place in your portfolio. Certainly as a holistic wealth management tool there is growing demand for the inclusion of such lending options, but taking the time to assess the appropriateness, risk and potential for you or your business is vitally important.

Involve your family in financial decision-making today


Often a failure by families to deal with important financial decisions as a unit can hamper members of the family from fully understanding complicated - and sometimes not so complicated - money matters. This is why involving your spouse and children in finances, and empowering them to make the right financial decisions on their own, is a worthwhile undertaking.

This family-focused approach starts, believes Preenay Sathu, Head of Advisory at FNB Private Wealth, by encouraging your spouse and your children to be financially informed. You could start by introducing your spouse to your private banker and inviting them to attend important annual reviews. This level of exposure can help to ensure that your spouse is capable of managing your estate in the event that you cannot, or at least be fully informed of the process and who will be managing it.

Including your spouse in wealth planning decisions also has implications for the structuring of your estate, where, for example, you save exponentially on estate duty by bequeathing most of your assets to your spouse. "Similarly," explains Sathu, "you would want to ensure that, where appropriate, there are beneficiaries nominated on your insurance policies so that your estate is able to save on executor's fees." These are discussions to be had as a family, to ensure that everyone understands why your estate is being structured the way it is. It is also vital that one's spouse and loved ones are fully aware of all assets and liabilities held as part of your total financial portfolio.

Central to this approach is your FNB Private Wealth Banker. "Your private banker, working hand-in-hand with a team of experts, will advise not only you but will take a holistic family approach which considers the needs of the household. Your private banker will then work to find the most appropriate experts to respond to the financial needs of yourself and your loved ones, including the traditional banking services you require," says Sathu.

Yes, it can be complicated when you bring another person into your financial decision-making, admits Sathu, particularly when philosophies diverge, but there are distinct benefits to this approach in terms of planning, approach, execution and risk diversification. Men and women have different strengths and perspectives when it comes to money management, and your superconnected, confident and socially-minded Millennial children can bring a different level of understanding to any financial discussion. So creating a space for all parties to be heard is important.

For many parents learning to speak the same financial language as their Millennial children is a challenge, so creating space for meaningful conversations about money, legacy, risk-taking behaviours, borrowing and the future is vital. In 2017 the Wells Fargo Millennial Study in the United States painted a worrying picture of a Millennial generation that is anxious about finances, with 98% focusing on financial security as important but only 32% feeling confident in their financial status.

At the time of the report's release, Wells Fargo Asset Management CEO Kristi Mitchem told a media gathering that: "Millennials tend to put their money worries in a box, separate from the rest of their lives. They need to take them out of the box and deal with the things they can."

Over and above talking to not only Millennials but all upand- coming generations about money, parents can and should leverage off the range of FNB Private Wealth expertise to put in place trusts, insurances and retirement planning strategies, as well as instilling healthy savings habits, to give children and young adults peace of mind in an uncertain world. Learning to talk about money and sharing and discussing the deep insights and pertinent information which is available to FNB Private Wealth clients is just one way to build financial confidence.

This approach has veracity for spousal partnerships too, which is why FNB Private Wealth's spousal offering has been tailored to foster solid relationships and deliver consistent and expert wealth investment advice. Says Sathu: "We believe that successful financial and investment planning should reflect the concerns and aspirations of both partners or spouses." This is why, through FNB Private Wealth's spousal offering, your spouse or life partner can benefit from the same private banking experience that you enjoy.

Having the same team of trusted advisors on hand to guide you, your spouse and your children is hugely important when it comes to crafting specialist financial solutions for your family, says Sathu. "Our experts take the time to understand your family's wealth goals and that makes our approach unique, because we consider not only the individual, but the business and the family as well." This extends to helping to guide your children's prudent financial behaviours, being there to assist in opening their first FNBy account to offering advice on offshore investing, risk cover, study loans - in later years - their own family and fiduciary considerations.

Share and share alike: Welcome to the sharing economy


If you've ever played with a toddler, you'll know that sharing doesn't come easy to the human psyche. But it seems that humankind may finally be growing out of its infancy; that is if you note the rise of the 'sharing economy'.

The term refers to the phenomenon of collaborative consumption, which is facilitated by technology. Services which began as niche digital offerings are now making a pervasive impact on the world around us, so much so that FNB Private Wealth now regards the sharing economy as one of the major disruptions - or megatrends - to watch over the next decade and beyond.

Elaborating on what collaborative consumption means for the way we live, invest and establish businesses, Chantal Marx, Head of Research at FNB Private Wealth, explains that technology, usually Apps or websites, facilitate the sharing of underused assets of services for a fee. "The sharing economy is concerned with the better utilisation of resources. A car, for example, is an underutilised asset as it lives in a garage at home and a parking lot at the office for the majority of its life. So ask yourself: what are you paying per second for the time you drive your vehicle? Then consider how the likes of ride-sharing App, Uber, has revolutionised how we use these assets. It's about eliminating waste from the system."

In the process of creating a new form of resource sharing, this collective mentality is fundamentally changing the way established businesses operate. "One does not have to look far to see the impact of disruptive technology, even in South Africa," says Marx. "Just think of the arrival of Uber, which had rendered the meter taxi almost obsolete and resulted in the significant disruption of old, outdated business models."

While the world's leaders and well-connected gathered at Davos in Switzerland in January 2018 to discuss 'creating a shared future in a fractured world', the conversation remained predictably around growth, tackling inequality, global instability, the rise of populism and climate change. The focus on technology, which continues to evolve at a rapid pace, offered few new insights into a disruption which is expected to collectively have a US$14 trillion to US$33 trillion direct global economic impact by 2025, according to consulting firm McKinsey. But it is the likes of Uber, short-term rental giant Airbnb, Cohealo (which allows hospitals to share equipment), BlaBlaCar (for sharing long-distance road trips) and RelayRides (where people can borrow cars from their neighbours) that will change the way the world consumes. This, in turn, will ultimate affect turnovers and disrupt business strategies.

"Platforms like Airbnb have disrupted several industries," says Marx, who points out that many Airbnb rentals are running at 60% occupancy, which is on par with established hotels. This should send out a warning to investors about how and where they funnel their funds in the future. Right now you can't invest directly in the Airbnb platform or the Uber platform, but "these Apps are coming to market eventually", says Marx. "The other way, rather than waiting for the inevitable IPO, is to invest in the underlying assets, like a second property which you can put on Airbnb."

There are, of course, challenges and risks which are already evident with some of these disruptive sharing platforms, not least of which is social resistance to some of the innovations. Uber, for instance, has encountered heavy push back from meter taxies and that, says Marx, "is a big problem". So, for investors looking at these new businesses with interest there should be a healthy appreciation of the current lack of regulation and also the potential risks involved.

"As an investor you might not want to invest in these platforms right now, but what you should be doing is looking to avoid investing in industries that are likely to be disrupted," says Marx. And that raises questions around hospitality and logistics, education, media, travel, insurance, banking and even healthcare equipment. That said, forward-thinking companies in these sectors that are investing in technology and learning from the agility of App-based platforms, still have merit. Locally banks are still holding their own in the heavily-impacted financial sector and, despite the rise of ride-hailing Apps, "there is still value in car rentals", says Marx, in part thanks to South Africa's strong tourism numbers.

But, make no mistake, as the appeal of the sharing economy grows so will the list of companies unsettled by a new way of doing things. Most importantly, this type of peer-to-peer consumption is going nowhere. It holds huge appeal to the Millennial market (those born between 1982 and 1999), which is five times more likely to share than the Baby Boomer generation (mid 1940s to mid-1960s), says Marx, referencing Bank of America Merrill Lynch research. As for the Centennials (born between 2000 and 2017) this is their 'normal'.

While Millennials and Centennials make up a staggering 70% of the South African population and 49% of the world population, they are not the only drivers. "Interestingly, Boomers are the fastest-growing demographic of Airbnb hosts in the United States," says Marx. "After all, they have the assets while 75% of Millennials prefer to spend money on an experience rather than a material possession."

In South Africa, Baby Boomers are also getting in on the act, says Marx, who recently encountered her first Boomer Uber driver. "If the Boomers are already involved, then the shared economy has gone mainstream," she declares. "So mass adoption is imminent."

eBucks Travel: Your passport to a European escape


Just like there are numerous ways to earn eBucks, there are countless ways to enjoy and travel through Europe. eBucks Travel has selected a range of unique and interesting ways in which to savour the magic of Europe: from sailing and touring, to rail travel and self-drive options. Getting there should also be part of the fun, so get up to 40%* off when you book with Emirates, the airline promises to get you into a holiday mood even before you book into the SLOW Lounge.

Simply start by selecting the summer destination which gets your heart singing and eBucks Travel will take care of the rest, leaving you free to experience Europe your way.

ISLAND HOPPING IN GREECE
Immerse yourself in the vibrancy of life amidst Greece's island paradises. From Naxos to Paros, spoil yourself with a hassle-free island-hopping experience with all your flights, transport and accommodation covered. From R22 492 for 9 nights per person sharing.

RIVER CRUISE IN FRANCE
Fall in love with the romance and splendour of the French Riviera as you sample the playground of the world's rich and famous. This French cuisine dining experience perfectly complements this incomparable offering. From R10 904 for 4 nights per person sharing.

CYCLING IN FRANCE
The picturesque, historical and enchanting Loire Valley is just a short distance from Paris and yet it transports you back to the very foundations of French culture and gastronomy. What better way to experience this huge UNESCO World Heritage Site than to meander through the valley on two wheels. From R17 719 for 7 nights per person sharing.

SAILING IN CROATIA
Exploring Croatia's cities, coastlines, national parks, medieval towns and cobalt waters is an opportunity of a lifetime. Only a sail boat experience can capture the magic of this tourism gem. From R13 695 for 7 nights per person sharing.

TUSCANY TOUR IN ITALY
Journey to Tuscany and travel back in time to a period of creativity, artistic expression, fine wines and superb cuisine. Take in must-see sights like Pompeii and Capri as you fall in love with the beauty and majesty of the region. From R29 721 for 8 nights per person sharing.

SELF-DRIVE TOUR IN IRELAND
Looking for the ultimate authentic Irish experience? Then a self-drive journey of this enchanting island gives you the freedom and time to explore the Irish countryside, while still keeping an eye on a handy itinerary designed to get you seamlessly from A to B. From R16 392 for 7 nights per person sharing.

RAIL TOUR TO MUNICH, VIENNA & PRAGUE
These three impressive European capitals are best savoured courtesy of a romantic rail experience. Enjoy Prague's breath-taking Old Town, Vienna's musical past and Munich's mixture of artistic history and modern-day high-tech industries. From R22 261 for 6 nights per person sharing.

Why book through eBucks Travel?

eBucks Travel boasts world-class deals to destinations all over the world, compiled by a team of highly professional industry experts. Furthermore, as an eBucks Rewards client you can bank on convenient and flexible payment options, which allow you to pay with your FNB Private Wealth cards, eBucks or a combination of both.

Book with eBucks Travel and our partners become your partners:

  • Uber: Sign-up and use the promotion code EBUCKS to get R200 off your first ride or earn up to 15%* back in eBucks
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eBucks Lifestyle: Wade Bales Wine offers


eBucks Lifestyle has teamed up with Wade Bales Fine Wine and Spirits, to bring you three exclusive wine offers for discerning FNB Private Wealth clients.

PAY WITH YOUR FNB CARD, EBUCKS OR A COMBINATION OF BOTH.

1. South Africa's First Growths

6 bottle case @ R1650
Receive 1 bottle of each of these
6 wines @ R998 (Save 40%)
Klein Constantia Cabernet
Sauvignon Shiraz 2016
Delaire Graff "De Caelo" Red
Blend 2016
Rust end Vrede Estate Syrah 2014
Rustenberg Peter Barlow 2015
Tokara Reserve Cabernet
Sauvignon 2014
De Toren Z 2014

(High profile producers with long track records of premium quality.)

2. Prestige Red Collection

6 bottle case @ R650
Receive 1 bottle of each of these
6 wines @ R398 (Save 40%)
Buitenverwachting Meifort 2012
Waterkloof Circle of Life Red
2011
Bilton Sir Percy 2009
Mischa Estate Shiraz 2014
Le Riche Private Blend 2015
Louis Strydom Shiraz Cabernet
2016 (Ernie Els)

(Rare and Exclusive reds selected for their remarkable value for money.)

3. Premium Imported Bordeaux

6 bottle case @ R2 300
Receive 2 bottles of each of these
3 wines @ R1 380 (Save 40%)
Chateau Potensac 2011
Prelude de Frombrauge 2014
Les Allees de Cantemerle 2014

(Just landed from France, these are classic Bordeaux blends of predominantly Cabernet Sauvignon and Merlot.)

Our youth are our wealth


Celebrating Youth Month is more than just an acknowledgement of the past and the sacrifice made in the fight against apartheid in 1976. Youth Day 2018 also represents an opportunity to focus on the future, a way to celebrate the wealth of talent and potential that exists in South Africa's young people.

According to research firm GfK, South Africans under the age of 23 (the so-called Centennials) comprise 37% of the country's population, followed by the Millennials (those in their 20s and 30s) who make up 27%. Given the size of the youth market in South Africa - and not withstanding a 38.6% unemployment rate for youths aged between 15 and 34 - brands, companies and researchers are increasingly determined to know and understand these individuals and their motivations.

Experts suggest that they are demanding, impatient, socially-minded and digitally driven. They prize education, have lofty ambitions for themselves and care deeply for humanity and the planet. These individuals, particularly the Millennials who are increasingly moving into the workplace, are beginning to reshape key industries and sectors with their unique approach to life. Philanthropy, as you'll read in this newsletter, is adapting to their influence; savings and investment firms are taking notice of this group's pressures and pleasures; trends like gamification are influencing the way we all learn and earn; and our economy is also adapting to the youth's more collective mentality (just think about how Airbnb and Uber has changed the way we travel).

Current leaders and high-status individuals in society - many of whom come from the Generation X and Baby Boomer cohorts - have much to learn from the youth in this country and how they are challenging old ways. A sterling example of an innovation which holds merit across generations is nav» Money, a financial tool which puts control of your finances in your pocket. Like other FNB nav» solutions, nav» Money is changing the way our clients bank and oversee their portfolios, and their expectations of financial services.

South Africa's youth are revolutionising how we view work, balance, skills, social responsibility, wealth and flexibility. They are the future of our country, and our planet. This makes Youth Day an opportunity to understand and appreciate our future, and celebrate the dynamic generation poised to shake up our understanding of the world.

Trends: Get in the game with gamification


What is it about that Fitbit on your wrist or the pedometer app on your smartphone that inspires you to clock 10 000 steps a day? Why does real-time feedback on your driving spark better habits? The human psyche responds to these forms of 'gamification'; a fancy way to describe the confluence between the real and the virtual worlds. The question is why? As part of FNB Private Wealth's megatrends series, we get under the skin of this emerging trend.

The gamification sector is expected to grow into a US$11 billion industry by 2020, according to Research and Markets in the United States. This is being driven not only by user uptake but also by a growing realisation that incentivising people through gamification can improve not only customer relations but employee engagement. Investing is no different; something which global asset management firm BlackRock's co-founder, Rob Kapito, told a conference in London last year when he stressed that financial services institutions would have to become more like game developers to appeal to younger investors. "It's a game," he was quoted as saying by the UK's Business Insider. "All of the technology is gamification... What we need to do is find the financial game that makes people feel comfort and safety. The winners, in my opinion, are going to be the people who have that game, have the technology, and have the brand."

The reasons for this are manifold, and include the feel good factor associated with the rewards offered by gamification platforms, the fact that these offerings are designed to be fun and engaging, and that they celebrate achievements (even if it's just moving up a level in recognition). Furthermore, researchers suggest that because the human brain can get bogged down by information and the myriad options we are exposed to daily, having an app on hand to direct your behaviour helps to relieve cognitive overload.

Most of us, of course, don't associate these benefits with the word gamification, which instead conjures up images of virtual reality headsets and military-style 3D operations. "It's a word that sounds like you'll get stuck in a video game and be a digital version of yourself," admits Chantal Marx, Head of Research at FNB Securities. "But what gamification does is optimise human behaviour by making it fun to do things that you don't always enjoy."

An example of this is Discovery's Vitality innovation, says Marx, who explains: "Discovery is basically de-risking their own book while encouraging people to look after themselves." Loyalty and rewards programmes, such as FNB's eBucks Rewards and Dis-Chem Pharmacies' Loyalty Benefit Card, have a similar ethos of rewarding 'good' behaviours. In the case of eBucks, the focus is on rewarding customers for how they bank and enabling them to save money and do more when they spend their eBucks. "Dis-Chem Pharmacies is an example of how giving people points for purchases makes them want to frequent your establishment," explains Marx, and this rationale works across retail, the health sector, insurance and education.

In fact, says Marx, "studying or learning a new skill is often not a massively fun experience, but gamification is changing the face of education and how we learn".

Language app Duolingo is a great example, which uses cartoons, quizzes and short learning sessions to impart vocabulary and grammar in a fun and interactive way which rewards you as you climb from level to level, much like a video game. "They make it fun for you to learn and it's less of an effort than going to a language school where it's all about sentence construction," says Marx. "This approach can work for both easier and more complex subjects. Just look at Stanford Online or Coursera to see how much more gamified education has become and how opening up learning from home has made education far more accessible."

A less flashy example of gamification is using this approach in the workplace, harnessing this fun and interactive approach to improve employee morale and productivity. "If you can get a really good interface going, where employees can make career goals and plot their way forward and track their progress, then you have a smart tool for guiding employees through their careers while retaining talent," says Marx. This level of gamification is slowly coming to South Africa, but in Hungary professional services firm PwC makes use of a free game called Multipoly which simulates what it is like working in an accounting firm by presenting similar business problems to work through. Aimed at college students, PwC Hungary claims a 78% increase in candidates looking to work for them as a result of the game. This is precisely the sort of approach which BlackRock's Kapito finds so exciting. "Millennials want to game. It's a game society," he said at the 2017 conference.

Given the digital focus of gamification, it makes sense that this type of approach appeals to Millennials (those in their 20s and 30s) and Centennials (under the age of 23), says Marx, but it also works across generational lines. How many 60 year olds do you know with an Apple Watch? "While they are fixating about making their points, they are become a healthier version of themselves. At the same time the company's risk has been reduced."

It's hardly surprising, therefore, that companies are jumping on the bandwagon and looking to adapt their way of doing business to the 'game society'. This, explains Marx, is creating investment opportunities. BlackRock, for example, invested €30 million into Scalable Capital, an Anglo-German digital investment platform, in 2017; putting its money where Kapito's mouth is. Marx believes the savvy investor should also be paying attention to companies that are innovating in this space by launching their own programmes. She also singles out companies that are creating this gamification content, "those tech start-ups in the US as well as IT companies, the guys who are building the apps that are being deployed into businesses to help improve efficiencies through gamification".

In South Africa's tech space most of these companies are conglomerated, so you'll have some exposure even though it may be diluted, notes Marx. And that's a good thing, after all gamification is here to stay and with the youth hungry for more engagements of this nature, gamification is likely to be a meaningful for years to come.

Youth battered by stubborn, persistent unemployment


As Statistics South Africa (Stats SA) unveils another Quarterly Labour Force Survey replete with negative numbers, the country is once again forced to take stock of a stubbornly high official unemployment rate of 26.7% and a high and rising youth unemployment rate.

For youngsters aged 15-24, the data shows that 52.4% of South Africans in this age bracket are unemployed (up from 51.1% in the final quarter of 2017). Broaden that to the 15-34-year-old age group and the number sits at 32.4%, the highest in the world ahead of Greece (25.2%) and Spain (22.2%).

These statistics are deeply worrying, and the negative impact on both the economy and the psyche of the country cannot be overstated. Unless South Africa is able to rein in these numbers, any chance of meeting the National Development Plan's stated objective of reducing youth unemployment to 6% by 2030 will continue to be just an unrealistic vision.

Until policy interventions, the promised jobs summit (mentioned by President Cyril Ramaphosa during his State of the Nation Address in February 2018) and a notable improvement in South Africa's growth figures are achieved, any chance of wrestling these figures to more acceptable levels will remain a pipe dream, says Jason Muscat, Senior Economic Analyst at FNB.

"We continue to remain downbeat on the prospects for meaningful declines in the unemployment rate," says Muscat. "Despite the forecast for economic growth of approximately 2%, GDP (gross domestic product) will have to grow at more than double that rate to impact the unemployment rate."

This is not to say that some attempts to address the problem are not unfolding. In March 2018, Ramaphosa launched the Youth Employment Service (YES) which aims to bring government and business together in an effort to create a million paid work experiences for young South Africans over the next three years.

Initiatives like YES are important since the longer someone is unemployed, the deeper their discouragement, the more chance they will continue to miss out on opportunities and, eventually, the higher the likelihood that they will stop looking for work altogether. South Africa is not short on such initiatives, be they government- or private sector-driven, but to date such efforts have failed to make a significant and perceptible dent in unemployment numbers, particularly among the youth. Furthermore, in an economy dogged by slow growth and weighed down by structural inequalities and inefficiencies, the precarious position of the youth becomes even more precarious, says Muscat, as they are often the first to lose their positions and the last to be rehired.

One role which corporate South Africa can fulfil to counter this worrying trend centres on supporting the entrepreneurial focus of the country's youth. This means ensuring ongoing education around business ownership and, in the case of the financial services sector, working hard to share tips and insights around developing sound financial behaviours, both personally and for young business owners. Mentorship plays a substantial role too, and has the potential to guide young people towards business ownership in a supported fashion with a longterm and sustainable focus. Working closely with tertiary institutions to ensure that graduates enter the workplace armed with the right skills is another avenue ripe for collaboration; one which has the potential to ensure that opportunities and skills complement one another in the economy.

However, more needs to be done to get all stakeholders onto the same page. Just recently Business Day newspaper noted that unless the private sector substantially increases its fixed-investment spending in the country, the rise in business confidence fuelled by the optimism around Ramaphosa's presidency will not translate into meaningful numbers of jobs being created. This disconnect between the private sector, the government and unions is very real and its impact on prospects for job creation are tangible, says Muscat. So initiatives like YES do have an important role to play in bringing all economic players to the table.

In this respect it is important to take notice of inputs from the likes of the World Economic Forum (WEF), which touts an approach to turning around youth unemployment that hinges on five strategies:

  • Boosting job creation and labour demand
  • Better preparing youth for the job market
  • Creating pathways towards productive work
  • Improving financial well-being
  • Fostering entrepreneurship.

In order to get each of these steps into play, the need for intelligent collaboration across all players in society is a must. There is no way around this, as Sean Rush, President of JA Worldwide, a youth-focused global nonprofit organisation, wrote in a recent WEF blog: "Only through the concerted efforts of several parties - and a willingness to stick with it over the long-term - can we address the world's youth unemployment challenge and achieve lasting change."

Muscat agrees: "The reality is that the faster an economy grows, the more jobs are created. Over time, as the fourth industrial revolution gains traction and jobs are increasingly replaced by machines and software, this relationship will break down, so it is all the more reason to tackle our systemically high unemployment rate before it is too late."

Philanthropy embraces the Millennials


"Philanthropy is the thing that I am really excited about, and having success means I can do more." These are the words of will.i.am, entertainer, actor and Grammy Award winning musician. This modern-day poet's view encapsulates what philanthropy is all about and, having sown the seed, 43-year-old will.i.am and his more socially-minded Generation X cohort have certainly set the stage for the new Millennial grouping (those individuals currently in their 20s and 30s) to build on this culture of giving back.

While South African philanthropy body Inyathelo's 2017 Annual Survey of Philanthropy in Higher Education shows a substantial rise in the number of high-net-worth individuals in South Africa giving to worthy causes, like education, the truth is that many in this space have been giving consistently for years. Increasingly, these high-networth individuals are involving their children - and grandchildren - in their efforts.

According to Prince Siluma, Head of the FNB Philanthropy Centre, the next generation of philanthropists is clearly coming through. These individuals are savvy, digitally driven and socially minded. "For the Millennial, philanthropy is more about alignment to their values and about creating long-term relationships," says Siluma, who believes this aspect of the Millennials, and other even young generations, will reshape the sector. "Non-profit organisations need to start thinking how they communicate their stories to these individuals," he says, noting that "if you get hooked up with a Millennial then you have a partner for life".

This insight applies equally to the work being done by the FNB Philanthropy Centre, which caters to the social investment needs of affluent individuals and corporates, by assisting them to create their own philanthropic social investment foundations. The centre facilitates and guides clients through the establishment of the necessary legal structures; applies for tax exemptions and rebates; assists with identifying qualifying causes; undertakes ongoing fund and investment management in accordance with best practice governance; and monitors and reports on the impact of these social interventions.

The Philanthropy Centre also keeps a keen eye on trends in this space, and the generational shift is an interesting one. "For many of our clients who start family or private foundations, a major focus is getting their children into philanthropic causes and encouraging them to participate. With the Millennials being more socially conscious than other generations, this sets up these foundations well for a sustainable future," says Siluma.

Citing a recent example, Siluma explains: "We started a foundation for a client at the end of last year and she has roped in both her kids, one is a trustee and the other is managing the foundation as the MD. Both youngsters are working with the foundation on a full-time basis and both are in their early 30s. They love it. I follow them on Twitter and they are always promoting the foundation's work."

While a foundation such as this has no shortage of passion and dedication, often the input of experts is needed to help create the largest impact. "There are a lot of causes out there, and you can't help everyone," stresses Siluma, "so when I engage with my clients I encourage them to focus on a particular cause and then decide what they want to achieve. If you want to help previously disadvantaged children around education, that's too broad. Rather narrow it down in order to make an impact which you can monitor."

This practical approach to philanthropy is in line with a more action-driven generation that wants to see rapid improvements on the ground. "People always ask me what the difference is between philanthropy and charity," says Siluma, "and I always use the old-fashioned saying about teaching someone to fish. That's what philanthropy is all about. If you solve a systematic problem you solve a social problem. If you invest in the systematic problem and you solve it permanently, then you have a more sustainable solution."

Over the years wealthy individuals have thrown themselves into supporting good causes, either through giving or putting their skills to good use. Often these actions go unnoticed and unreported, frequently at the behest of the philanthropist. "I don't think we give enough credit for these actions," says Siluma. "Philanthropists do this because it is the right thing to do, so they tend to shy away from the media and talking about what they are doing. Look at education, a number of foundations I know are doing magnificent things when it comes to education. Do you hear about it?"

But, as the social, digital and collaborative nature of the Millennials grows in this space, there is every possibility that this more siloed, behind-the-scenes approach will give way to sharing, circulating stories and real collaboration, something the sector certainly needs, believes Siluma. "The reporting in this space is not that great and collaboration is still in its infancy," he says, explaining that many foundations and companies just don't like to collaborate and prefer instead to hold onto their projects. "We need to get to a point where collaboration is the norm because when we are focusing on complementary areas then the impact can be huge."

As former Public Protector Thuli Madonsela remarked during the recent Business in Society conference in Johannesburg: "Most Millennials are about creating the world they want to live in." And that opens the door for a philanthropic future driven by action more than by words.

Millennials do money management their way


Being a 'youth' can be a complicated label. It comes with assumptions about vigour, but also expectations of irresponsible financial behaviours. Fortunately, the current crop of young South Africans are turning these negative suppositions on their head; particularly when it comes to money.

In 2017 market research firm GfK performed a crossgenerational study of South African Centennials (younger than 23), Millennials (20s and 30s), Generation X (40s and mid-50s), Baby Boomers (50s and 60s) and the Silent generation (70 and above). Far from highlighting a flighty and financially irresponsible youth market, GfK revealed that South African youngsters aged between 20 and 34 are vibrant, well-educated, individualistic peoplefor whom authenticity is essential.

"With greater access to education they are more selfassured and believe that they control their own destiny," noted the GfK researchers. "Following this sense of control, they are more optimistic about their economic future."

Not only are the Millennials well placed to take control of their financial futures, they also have clear savings priorities. When the Sunday Times Generation Next 2017 survey, conducted by HDI Youth Marketeers, asked youth participants how they would prioritise saving goals they went for: Paying for a car (16.5%); international travel (14.2%); buying a property (11.7%); paying for my studies (11.2%); and opening my own business (8.4%).

While the GenNext study shows that these youth certainly respect money, they don't regard wealth with the same importance as previous generations; putting family first. But they do crave information and guidance around planning for their futures.

HDI's Client Service Director, Cuma Pantshwa, says this explains their appreciation for mentorship and guidance. "Young adults want money. And, in this space, they seek brands that will help them to achieve that; brands that will get them to the next level and help them achieve their dreams."

When it comes to sound financial behaviours they are open to learning about money management, saving, investing and financial planning. They just need exposure to the right thinking, says Pantshwa, who urges companies to bridge the gap between an under-par education system and the skills the youth of South Africa need to navigate today's complex modern world. This means running educational workshops and roadshows, hosting talks and online discussions and visiting universities to share real-life case studies. FNBy's youth accounts, which offer savings options specifically created for those younger than 25, are a great example of this approach. Not only do they include a yCard, free online and FNB Banking App usage, unlimited internal transactions and unlimited card swipes, but also access to a library of educational videos related to saving and investing.

A recent article by Wealth Management magazine went even further in its focus on education by recommending that financial institutions adapt their communication and education efforts to the Millennial customer by adopting a more open, convenient and educational approach. They suggested blogging about financial concepts and money management and even "incorporating some type of gamification, or videogame-like tasks and achievements, into the financial planning process.

For example, if a client connects all their financial accounts to the client website you provided, reward them with a set of points they can later cash in for a gift certificate."

In case you think this approach is age specific, Chantal Marx, Head of Research at FNB Securities, adds: "You would typically think that gamification appeals only to Millennials and Centennials, but it works across generational lines." The popularity of eBucks is a case in point, with the appeal of this popular rewards programme spanning generations.

However, rewards and innovative communication channels aside, consulting a trusted advisor is essential for young professionals looking to outline appropriate goals and select products that are suited to their specific life-stage needs.

The financial decisions facing today's young professional are more complex than savings products alone, says Marius Pentz, Regional Head of FNB Private Wealth. Take, for example, the cost of pre-tax debt and how you can "create liquidity by leveraging off your assets in a tax friendly manner"; exploring the impact of cryptocurrencies on the market and understanding how the workings of the market (both local and global) impact your investment portfolio. "The latter involves among other things knowing and understanding what impacts the rating agencies view of our economy and political environment," he says.

It also requires understanding the advantages of tax-free saving (using your R33 000 Tax Free Savings Account limit annually), opening up a modest retirement annuity earlier rather than later, and having the foresight to start saving early for your own children's education and future needs as this could include tertiary or even secondary education off shore.

All of these behaviours should begin to take shape in your 20s and 30s; helping you to capitalise on the power of compound interest (as it is never ever too early to start).

Another consideration is when, for example, Millennials start having financial discussions with their own children and involving them in the family's wealth discussions. Such discussions are the backbone of future savings success and financial security and are the only way to turn around South Africa's poor savings rate.

As National Savings Month opens up an annual discussion around saving and investing, it's hard to gauge exactly how the Millennials are performing; where they sit on the saving continuum depends on who you talk to. In the United States, the Bank of America conducted a 2018 survey which declared that one in six Millennials had already saved US$100 000. But a 2017 GoBankingRates survey (also in the United States) found that nearly half of those surveyed had nothing at all saved. In South Africa, with many Millennials (particularly those from previously disadvantaged background) shouldering inordinate family responsibilities, this rate may well be higher.

Despite these challenges, if the Millennials who make up 27% of the South African population can put their strategic intent and determination to work, alongside their ambition for social recognition and status, South Africa may well be able to turn around its poor savings culture in less than a generation. It just takes the youth to step up.

A helicopter view of your finances


Like the name - nav» - suggests, FNB's unique series of navigation tools give you control over your buying decisions, your financial outlay and the property selection process by bringing together all the expertise within the FirstRand banking family and putting them at your fingertips via the FNB Banking App.

To complement the 'My Net Worth' balance sheet functionality already available on the FNB Banking App, FNB introduced nav» Money, a digital money management solution, which follows hot on the heels of nav» Home and nav» Car. nav»Money gives you a helicopter view of your finances to enable you to make solid financial decisions.

Both nav» Home and nav» Car started by looking at the 'angst points' in the process of buying a home or licencing a car, then worked backwards to create a slick and easy-to-use solution.

Since launching two years ago nav» Home has attracted one million visitors to the App and facilitated R2.7 billion in home loan payouts. Similarly, in the year since nav» Car was brought to market 182 000 vehicles have been loaded on to the system, which has processed 10 000 licence renewals. The uptake for both services highlights the real need in the South African market for userfriendly, digital tools designed to put banking clients in the driver's seat.

Now nav» Money steps in to give you a consolidated view of your wealth, explains Etian Louw, Imagineer (Head of Product Development) at nav», your financial GPS through life.

What is nav» Money?
The beauty of nav» Money lies in its simplicity, as it allows you to:

  • Track your spending by helping you manage your monthly spend, while also providing tips to help you improve your monthly cash flow.
  • Check your available funds by giving you instant calculations that take your schedule payments and debit orders into consideration. This helps you to plan for upcoming payments.
  • Determine your credit status by giving you an overview of your payment history and financial health, including credit limit usage, your credit track record and more.

The tool can quite easily be used by a young executive or professional, a seasoned businessman or youngsters just learning to take charge of their finances.

"On 16 May 2018 significant enhancements were launched to the FNB Banking App to create solutions that prioritises our helpful, innovative and customercentric digital solutions, and the nav» Money App became available for download," says Louw. The FNB Banking App requires no data to run and has been designed making use of conversational language. This is vitally important in bringing greater financial inclusion into the South African banking environment.

"Some of us have been very fortunate to grow up hearing conversations about money management, others haven't," says Louw. "So the tips provided through nav» Money come back to simple habits like paying yourself first, or making use of your eBucks to pay for fuel or bigger purchases. The key thing is that this helps to instil correct financial behaviours; a saving and investment theme that will be built more into future upgrades."

Why nav» Money?
Critically, in a world debating issues of personal safety and data privacy, Louw stresses that no personal information is requested by nav» Money and all recommendations are made based on your accounts and interactions with FNB Private Wealth. nav» Money does, however, provide an overview of your credit rating, and offers meaningful steps for improving your credit history. "This can be very helpful in determining your financial fitness," says Louw.

While any long-term decision around taking on debt, saving or investing necessitates a conversation with your trusted advisor, Louw believes that with nav» Money at your fingertips you can empower both yourself and your children to care for your financial legacy and their financial futures. "No longer do you have to deal with spreadsheets and calculators, we do it all for you," says Louw. "It's all available to you at the click of a button on one convenient view."

Plan your next move


The world we are living in is becoming increasingly more uncertain. Factors affecting our day-to-day lives and financial futures often circle back to global geo-political events which are causing economic instability: be it United States' trade war or local politicians posturing ahead of the 2019 general elections. Whether we follow it or not, politics has an impact on our lives and our economic stability.

The more we can help you understand the trends that are contributing to market volatility, the more we can ensure that you stay one step ahead of the curve and keep a firm hand on your finances and your peace of mind. In this latest edition we will delve into some of the more topical issues facing investors, both at home and abroad.

To gain a competitive advantage in an uncertain world, we are seeing an increase in the number of FNB Private Wealth clients who are looking to facilitate an international education for their children. If this is an avenue you've considered, we take you behind the scenes as we explore what you need to know about planning your finances to fund a world-class university education for your child and also how to prepare them for the demanding application process.

As we position ourselves for the future, understanding the way the world is moving is vital.

The more knowledge you have about megatrends that will impact your life in the future, the more control you have when it comes to decision making around your investments, retirement or the career choices open to your children. The future of mobility represents a profound shift in how we commute, interact, consume and invest and it's the focus of our article this edition. But, unfortunately, no matter how well informed you are, there will always be some things you can neither plan for nor control. The only thing you can do is manage the situation. An excellent example of this is US's trade war. We look at how Trump's economic policy, although not aimed specifically at emerging markets, has impacted these economies and we ask what this means for South Africa.

Another issue that is affecting South Africa is the issue of rising fuel prices. The almost R4 per litre increase in the petrol price since the beginning of the year can be felt by everyone, not only because of the extra outlay when we visit the filling station, but because it has impacted virtually every aspect of our monthly shop. We investigate the impact of rising fuel prices on the local economy.

We hope you find this newsletter interesting and informative and, as always, we welcome your input and your comments on the articles assembled here.

Best wishes,
Eric Enslin
CEO, FNB Private Wealth

The future of mobility


In 2017 France announced that it would ban all petrol and diesel vehicles by 2040. The declaration came just days after car maker Volvo said it would only build electric and hybrid vehicles from 2019. The Netherlands and Norway, as well as Germany and India have announced similar plans to ban combustion-powered cars by 2025 and 2030 respectively. Could this provide the thrust needed to turn the future of mobility on its head?

Right now, says Chantal Marx, Head of Research at FNB Wealth and Investments, penetration levels for electric cars in particular are low. "But it is likely to work in much the same way as we saw mobile phones and PCs: very slow and steady until it isn't. That is, until there is a big shift or a tech break."

John Joyce, Portfolio Manager at FNB Wealth and Investments, acknowledges that a lot of R&D is being thrown at this topic by the big manufacturers, all of whom are taking a view that down the line there is going to be a push for cleaner burning cars. If countries like France deliver on their announcement then we could well see a jump in the growth rate of electric and hybrid vehicles."

While one can never discount the impact of leapfrog technologies, agrees Joyce, right now the rate of change is incremental, not dynamic. However, a shift in human behaviour could well provide the important push.

The growing influence of the more socially-conscious Millennial generation (those in their 20s and 30s) is likely to spark a change, says Joyce, as is the fact that consumers of all generations are tapping into the shared economy. "Most cars are only used for 4% of their life, which is a huge amount to outlay for a big ticket item which is being used inefficiently. Add in maintenance, insurance, downtime and fuel costs, and compare that to taking an Uber, and those numbers add up," says Joyce.

Where this behaviour shift of behaviour could ultimately shift mobility, believes Marx, is towards self-driving vehicles operating as an Uber pool. "It would be safe and more cost effective. That would be the end state."

Huge strides are already being made in the autonomous driving sector, with the likes of Alphabet's self-driving arm Waymo working with Land Rover and Chrysler; with Amazon's Alexa signing up Volvo, Toyota and Ford; with Microsoft's Azure services finding favour with BMW, Renault-Nissan and Volvo; and with Kia and Hyundai opting for Google Assistant. "It will ultimately be these platforms that drive the autonomous driving revolution," says Marx. "Big tech companies investing in these types of platforms will be the winners in this sphere."

Other companies to watch include battery manufacturers, cybersecurity experts, robotics innovators and electric car manufacturers.

Certainly this confluence of factors is important for the electric car sector; which has been battling to fly the flag for 'greener' transportation. One reason for this was the drop in oil prices in 2014, from more than US$100 a barrel to US$29. With North American oil coming on stream the urgency to push ahead with renewable options was dampened, and the nascent industry was knocked back.

Electric vehicles will continue to be impacted by the oil price as they gain in popularity, warns Marx, noting that this too would probably spark a dip in the oil price and further "slow down the move to an ideal world".

Right now, explains Joyce, electric cars comprise less than 1% of all vehicles sales globally, and although they are growing quickly it's still a small portion of the bigger car market. As a result, there are fewer choices and costs are high. "In countries like South Africa there is the added complication of charging electric vehicles using Eskom power and therefore, indirectly, through oldfashioned dirty coal. This is likely to remain the case unless, like in Denmark and Norway, government drives the uptake of renewables." Having just embarked on a 10-year build to bring the coal-burning power stations of Kusile and Medupi on line, Joyce thinks a fundamental shift towards renewables in South Africa will be a slow process.

Marx agrees that regulation will play a role, but notes this will differ by region. "In Europe, for example, regulations are already stringent when it comes to emissions, but you might have a different situation in the United States where there is less focus on the environment." But, as countries like France prove, this can change on a dime.

What are the broader implications of these trends? Well, admits Joyce, there are big implications for jobs and the sorts of skills required to construct electric vehicles.

There are a lot of knock-on effects, says Marx, such as the need for less road infrastructure investment due to fewer cars on the road, and fewer parking lots. "Insurance companies might be impacted since selfdriving cars would eliminate human error, and you'd obviously see an improvement in environmental impact. Plus the rise of ride-hailing platforms like Tencent's DiDi or an Uber or Lyft would increase too."

On a more human note, a shift in mobility trends could mean more time to be productive and less time in traffic, says Marx. Or simply more time to stream TV shows and engage on social media. And that brings with it a whole range of additional opportunities and implications.

Global citizens value an international education


In an increasingly competitive world, keeping one step ahead of the pack is essential. But giving your children a world-class private school education is no longer enough. Today's parents are looking further afield in the hopes of also giving their children a world-class tertiary experience.

Head of Global Wealth Solutions, Chantal Robertson, explains: "More and more South Africans are looking beyond the South African education system and thinking that, if they have the means, they want to offer their kids an international education".

In the opinion of Rebecca Pretorius, Country Manager of Crimson Education, a global admissions counselling and mentoring organisation: "Students who study abroad get a range of real benefits. They include getting coveted intern opportunities at organisations like Microsoft, Google and General Electric. These students also graduate having strong alumni networks and associations. In addition, students from Ivy League or top-tier schools can demand significantly more impressive starting salaries, which can range from being 20% to 50% higher than traditional starting salaries."

Although it can be argued that the rewards from attaining an Ivy League or international degree from a top-tier institution far outweigh the cost of the investment, this level of education remains out of the grasp of many. However, Robertson acknowledges that this is a typical discussion with FNB Private Wealth clients. Part of such conversations entail outlining the additional costs associated with sending your children to study abroad. Although Pretorius notes that these costs can be partly or fully funded through financial aid and scholarships - in fact, applying for financial aid is one of the services offered by Crimson. Children who study overseas also need accommodation and living expenses. Then there are the additional travel overheads that are incurred by both parents and children.

In this respect, the Global Wealth Solutions team works with families to help them strategize the best way to move and manage their money in a foreign jurisdiction. Planning is essential. "There are so many considerations when sending children overseas to study. As a starting point, the use of a Global Account or an offshore account with FNB Channel Islands can help you cover all sorts of expenses," explains Robertson.

Most importantly, it depends on each family's circumstances. If your children are close to finishing their schooling, then your priority may be to simply manage rand volatility and convert rands into a foreign currency. This can easily be achieved by having access to a foreign currency account to deposit any residual from a client's annual R1 million discretionary allowance. If the children are younger, then it would be beneficial to look at longer term saving options that are available using a Channel Island account.

In addition, we have Wealth Management and Portfolio Management capabilities in London and Jersey. As each client's needs differ, FNB Private Wealth can offer a range of solutions to help clients to manage their money abroad.

Robertson adds that parents need to remember that current Exchange Controls allow them to pay tuition fees directly to the relevant institution offshore, outside of the individual allowances. This is a major benefit given that the foreign tuition may be substantial in rand terms. This means that depending on the value of their foreign savings and investments - together with the strength of the rand - fees can be paid without touching funds already invested offshore. FNB Private Wealth can also help clients who are looking to take it one step further and buy property overseas, should they prefer this option to accommodate their children abroad.

Of course, affordability is only one consideration when it comes to securing your child a quality international tertiary education. Pretorius says that in an increasingly competitive environment world-class learning institutions are requiring a lot more from children than mere academic prowess. She explains: "The admission rates for foreign students at competitive schools are very low, typically less than 5%. It is important therefore, to consider their overall application. It is no longer only about considering the one pillar of academics, but also about their extracurricular activities and leadership abilities."

It is for this reason that Crimson advises parents to ensure that their children develop this aspect of their lives in preparation for their application. Pretorius suggests parents start the process from Grade 10 through to Grade 12. This, she says, will give them enough time to build their extracurricular and leadership abilities. "What one of our programmes will look like is having them start their own business, community or other project that will help them demonstrate skills, knowledge, experience and the impact they can have on society at large. Essentially these are the qualities they need to demonstrate in their application," she advises.

The downside, however, of sending a child overseas to study is that a large number of these students may find employment and settle overseas. But there is a significant upside, as Pretorius notes in conclusion: "When these students' vision has been expanded exponentially based on experiences and networks gained from their time abroad, and from getting a top-tier international degree, they can do amazing things when they come home."

Understanding the full impact of fuel price hikes


Despite the high levels of attention and service which South African motorists receive at our service stations, filling up at the pump is becoming less pleasurable by the month. Fuel prices are continuing to rise and, in the short term at least, it seems there's little prospect of relief.

Unfortunately, even giving up your gas-guzzling luxury sedan or 4x4 in favour of something more fuel efficient won't insulate you from the pain. The ramifications of a high fuel price extend to every corner of the economy and impact everyone from the very poor to the extremely wealthy.

"Fuel is a necessity in our economy. The most obvious and direct impact of the higher fuel price is on transport costs: it is more expensive for people to travel and to get to and from work in cars, buses and taxis," explains FNB Senior Economic Analyst, Jason Muscat.

"But the impact is much broader than that. Fuel is required to produce many of the products we consume on a daily basis. The agricultural sector is a good example: farmers use diesel in their tractors, their harvesters and to power the trucks that take their produce to market. So their costs go up and the price of food increases."

He adds that, because the South African rail system is inefficient, goods are usually delivered by road to distributors, retailers and other end users. This, in turn, raises the cost of most items, including the packed goods that consumers buy in supermarkets, malls and spaza shops.

"Ongoing price rises translate into wage increases and all of these factors feed into inflation. If inflation isn't contained within the target range of 3%-6% then the Reserve Bank will raise interest rates. A hike in interest rates means you pay more on your credit card, your bond, your vehicle loan and any other personal or business loans that you may have."

According to Muscat, sometimes the impact of a fuel price rise is more immediately noticeable than at other times. At present, consumers are under pressure and unable to absorb additional costs, so manufacturers and retailers tend not to pass these on in an effort to maintain sales and preserve market share. In easier economic times, however, there is no hesitation in passing on costs to end users.

If the fuel price eventually comes down, will other prices come down with it? Muscat says that in theory they should, but this seldom seems to happen. "That's because businesses, public transport providers and others may have had to give away margin in order to keep their customers. So they won't adjust prices downward and will try to make up for the lost margin."

There's a general reluctance by corporates around the world to drop their prices, Muscat observes. However, if businesses were to be under significant margin pressure indefinitely, the result could be retrenchments or even closure. "Companies also need to give a return to shareholders and investors. So it is a bit of give and take," he explains.

As a country, South Africa is overly dependent on fuel and therefore highly susceptible to fuel price fluctuations. "We could be doing more in terms of battery powered vehicles, electric vehicles and so on," Muscat states. "But then we have another problem in that we have very high electricity costs. So do you use expensive electricity to charge your vehicle, or expensive oil to power it? Right now I don't know the answer to that, but it seems we are not quite as advanced as many other economies in terms of finding alternatives to oil and, consequently, we are particularly vulnerable."

Ideally, the best way to mitigate the impact of oil price hikes is to grow the domestic economy. If the economy grows, the exchange rate begins to strengthen and then the rand-per-barrel cost of oil comes down.

Muscat believes there would be other benefits too. "If we were a stronger economy, chances are that tax revenue would be growing and there would be less pressure on National Treasury to use fuel as a mechanism to increase tax revenue. In a stronger economy, corporates would be doing well and would be paying more tax. They'd also be hiring more people, so there would be more personal tax flowing into the fiscus. Plus, more people in jobs means more consumer spending and additional tax revenue in the form of VAT."

Currently there are two taxes on fuel: the General Fuel Levy and the Road Accident Fund Levy. Combined, these constitute R5.30 of every litre of fuel sold in the country, according to the Automobile Association of South Africa. "When the next Budget is announced in February, more taxes will inevitably be added," predicts Muscat. "Unless the rand appreciates substantially, or the oil price decreases substantially, we believe the fuel price will go sideways to slightly higher. Either way, it's not good news for South African consumers."

Implications for SA in a Global trade war


In August the rand dropped to two-year lows triggered, in part, by fallout from a spike in United States-Turkey diplomatic and trade tensions. With the United States also instigating trade wars with the likes of China, the European Union and even fellow North American Free Trade Agreement members Canada and Mexico, what are the implications for the South African economy and for local investors?

According to Mark Appleton, Head of Multi-Asset and Strategy at Ashburton Investments, even though South Africa isn't directly in US's firing line, it is suffering significant collateral damage simply because it's an emerging market.

"Our currency tends to be a hedge against emerging market nervousness - we have a very highly-traded market in terms of the rand," he explains. "When there are issues in other emerging markets, like we're seeing at the moment in Turkey and China, then international investors tend to sell the rand because it is a mechanism for developed market investors to reduce their exposure to emerging markets."

Jason Muscat, FNB Senior Economic Analyst, says the rand has also weakened on the back of concerns that the higher tariffs the United States is imposing on Chinese products will reduce China's demand for imports. China is among South Africa's biggest trading partners. "For example, we export a lot or iron ore to China for them to manufacture steel. Higher tariffs on Chinese products make them less attractive and China may need less iron ore from us. This introduces volatility which impacts our currency."

Given that South Africa is a small, vulnerable and open economy, there may be further implications if the United States-inspired regional trade wars continue to escalate and impact the global economy. "Trade wars are negative for global growth," notes Appleton. "There is a strong correlation between global trade and global economic growth. In general, global trade is good for productivity - and productivity enhances global growth. When you mess with that basic economic formula then the cost of goods, services and imports goes up." Various studies indicate that a full-blown trade war could negatively impact global growth by anything between 0.5% and 1.5%.

What do these potentially gloomy scenarios mean for South African investors? Appleton says his advice is not to panic and to have a diversified portfolio. "South African investors tend to want to take their money out of the country when the rand is weak and emotions are running high. They panic and typically get out at the wrong time."

Rather employ a measured investment approach, he urges. "Having some offshore exposure is very important from a balanced point of view. You get diversification and you get currency protection. Use your offshore allowances and regulatory permissions to get that exposure."

Careful structuring of your local portfolio is equally important. The South African equity market has significant rand hedge qualities and there are a number of globally exposed South Africa-listed companies in which you can invest. BHP Billiton, Anglo American and British American Tobacco are all examples of businesses that will derive value from a weaker rand.

South African investors should also note that there's value in emerging market currencies and yields, Appleton advises. "For example, you can buy a 10-year South African bond at the rate of 9%. With our inflation rate forecast of 5% to 5.5% over the next two years and around 6% in the longer term, you achieve a real yield of around 3%, which is attractive compared with the yields available in developed markets. In the United States for example, the 10-year bond yield is 2.83% and their inflation rate is currently running at about 2.9%. Also remember that the long-term growth prospects for emerging markets - in terms of demographic profile - are positive."

Given the exceptionally strong performance of the United States economy, is there a case for South African investors to put their money there? Appleton believes there is, but points out that United States markets are not cheap. "The market could get a bit stronger in the short term. But from a valuation point of view, we think the rest of the world will probably catch up over time."

Fortunately, there are some positives to be had from a weaker currency. An immediate benefit is that the weaker rand makes South African exports more attractive. Another piece of good news is that the rand looks cheap and could well make a comeback before year-end. "Our view is that the rand has been oversold and is excessively weak because there's quite a bit of emotion around it," Appleton advises. "It's difficult to predict how long this will continue, but we anticipate it will strengthen from its current levels before resuming a gradual weakening over the longer term."

Also expect US's current hard-line trade war stance to soften, predicts Muscat. "Trade wars benefit nobody in the long term. Trump is unpredictable, but he may step back once he realises the impact of his tariff hikes on his own economy. For example, Apple's iPhones are imported into the United States from China, so he is actually putting tariffs on a United States product that is made in China. It is not going to be good for the United States economy. It creates inflation."

Roll on 2019


If we subscribe to the thinking of philosopher Friedrich Nietzsche, that "the future influences the present", then welcoming in 2019 is not necessarily a case of starting a completely new slate and erasing the impact of the past year, or even the past decade. But it is a chance to take stock and turn our attention to the 12 months to come.

With this crystal ball firmly in hand, we wrap up our coverage for 2018 by outlining some of the emerging trends which we believe have the potential to shift markets and impact industries. We start with our own sector by looking at the trends likely to shape financial services (and specifically banking and insurance) in the year to come. There are some interesting developments afoot in South Africa, with the arrival on the scene of TymeBank, Bank Zero and Discovery Bank. Ultimately, this means more competition and better choice for consumers, and that's to be welcomed. It also means a greater focus on wealth management and budgeting tools to make your financial experience simpler, more effective and more understandable. This is something FNB Private Wealth's nav>> innovation does with aplomb, so we caught up with the team about the uptake of their client-focused tools.

Casting a wider net, we also take a look at the expectations for emerging markets in the year to come. The developing world seriously underperformed in 2018, but there may be room for optimism as the new year rolls around.

With South African heading towards a critical election, and with issues like growth, unemployment, political wranglings and inequality dominating the conversation, individuals and businesses will undoubtedly continue to look beyond our borders in 2019. In this issue we take a look at offshore business investment and how the recent simplification of a complex administrative and regulatory system has dramatically streamlined the foreign direct investment process for South African business owners looking to invest offshore or open subsidiaries.

Similarly, with the continuing rise of ransomware attacks and online security scams, we take this opportunity to remind you to be ever vigilant during the holiday season and to share with you some of the cybersecurity measures we have in place to protect you and your wealth.

With the holidays upon us, now is the ideal time to plan in your downtime throughout the year, so eBucks Travel has put together a stellar line-up of packages for your delectation.

No matter where you go this December - if you are gorilla spotting in Rwanda or sipping cocktails on a beach in Mauritius - we wish you and yours a peaceful festive season.

Banking, insurance trends for 2019


Technology, cybersecurity, digitisation and innovation were buzzwords for the banking and insurance sectors in 2018, but what lies around the corner for 2019?

Chantal Marx, Head of Research at FNB Wealth and Investments, outlines six trends which she believes will continue to shape the South African sector.

Integration of financial services
Across the world we are seeing insurers with a focus on investments and banking, and banks with a focus on investments and insurance. This trend is likely to continue well into 2019 because there is a natural cross-sell opportunity, explains Marx. She notes that in South Africa's low growth environment companies are trying to grow their revenue streams and service clients across platforms.

"You want to ensure that your banking client transacts through you, invests and ultimately insurers. And likewise for the insurance client," she says.

An evolving landscape
New entrants like TymeBank, Bank Zero and Discovery Bank are also bringing more competition and greater choice for consumers.

The important thing to consider is what these new arrivals are hoping to achieve, says Marx. TymeBank is positioned as a 'digitally smart' bank with no monthly fees, but it's Bank Zero which is particularly interesting. "Bank Zero is opening the doors to financing for small and medium-sized businesses," she says. "I'm sure the traditional banks do their part but there are still a number of entrepreneurs who battle to get any sort of financing."

Marx believes the arrival of Bank Zero could be good for economic growth - and the sector as a whole - if they get it right. "Increased activity in the sector is good for everyone, especially if a bank is focused on a new avenue or a previously underserved segment."

Discovery Bank, which is due to open early next year, is likely to play heavily on the cross-sell angle, says Marx, envisaging a key role for Vitality. This was borne out in mid-November 2018 when Discovery Group CEO Adrian Gore said the new 'behavioural bank' would include Vitality Money to tailor interest rates and offer rewards. While their exact target market is still unclear they are likely to position themselves for a higher income consumer. "This does raise questions for the private banking market currently. You'd have to see what the impact is on private banking and private wealth, and that might be quite challenging next year."

Ultimately, however, increased choice is a good thing and it will make value propositions vital and increase the role of loyalty programmes. "Something like an eBucks or a Discovery Vitality becomes vital to incentivising people to participate in this cross-sell offering," she says

Robo advice
The expansion of robo advisory in wealth management continues to be a big theme globally, and 2019 will be no different.

Marx explains that robo advice works when you have a very simple savings requirement, which makes it perfectly aligned to South Africa's growing middle class. It brings down costs and also reduces the time it takes to get a financial plan in place. "If you can do your own eFiling then robo advice is probably something you'd be comfortable with," she explains, possibly with an initial one-off meeting with a financial planner just to address any questions. "From there the robo structure would recommend any changes to your portolfio on an annual basis."

Things get more complex in the high-net-worth (HNW) space, where clients have trusts and different sources of income and different jurisdictions. These individuals will continue to need expert one-on-one attention.

The rise of budgeting apps
Global budgeting apps like Mint and Acorns, as well as Old Mutual's local offering 22seven, highlight another user-friendly trend to watch. FNB is also improving its budgeting capabilities, with nav» Money offering a helicopter view of finances to enable clients to make solid financial decisions.

"People want to know where their money is going and its more practical and fun to do this via an app, which automatically imports all your information [across service providers] and categorises it so you can see where you are spending your money," explains Marx. "The challenge there is how to monetise it, unless you can get people to save through that app it's almost impossible."

Impact of technology on skills
The likes of robo advice will, adds Marx, have an impact on jobs and could also create opportunities as more skilled wealth managers and financial planners are focused on the HNW segment. "This opens up the industry to new, younger planners who can service people who are guided by robo advice," she says.

In addition the more widespread rollout of these new technologies will also foster greater demand for the capabilities required to develop and support the likes of robo advice and app creation; opportunities traditionally out of the scope of financial services.

Socially responsible investing
The final trend to watch is exemplified by Fedgroup's new Impact Farming app, which gives investors the option to put their money into 'impact investing' opportunities, in this case by buying bee hives, blueberry bushes or solar panels and earn returns of between 10% and 16%. This sort of crowdfunding investing is exciting, says Marx, who notes that the fact that this is being offered by a recognised financial entity makes it a less risky form of venture capital while offering individuals the opportunity to feel that their money is making a difference. The app is easy to use and explains returns, risk, sector exposure and the duration of the investment.

"This type of investing is small in South Africa currently," says Marx, "but it is picking up gradually." This follows a global trend set by the likes of Newday, which allows investors to choose from six funds for a little as US$5 aims to deliver social returns without sacrificing financial returns. "This is probably a Millennial-driven trend, and it's positive," she concludes.

Emerging markets in 2019: Uncertainty and cautious optimism


Emerging markets tended to be significant underperformers in 2018. This was driven by a US dollar that performed strongly as a result of United States President Donald Trump's home-based economic stimulus package, which sucked up excess liquidity in global markets and injected it into the vibrant American economy.

So, can emerging markets - including South Africa - recover to deliver a better performance in 2019? Mark Appleton, Head of Multi-Asset and Strategy at Ashburton Investments, believes there's reason for cautious optimism, although with a high level of uncertainty.

"Emerging markets thrive on external dollar liquidity and in 2018 there wasn't much of that around because the United States economy was so stimulated," he explains. "Economies with high levels of US dollar-denominated debt were particularly hard hit because their currencies were weakened by the strong dollar."

There were signs, however, that 2019 could paint a brighter picture. For example, Trump's loss of control of the House of Representatives following the United States' midterm elections will limit his ability to implement economic programmes as he wishes.

"On that basis we don't think there will be additional United States fiscal stimulus going forward and the US dollar will likely not continue its strong upward trend," says Appleton. "We predict the US dollar will move sideways in the short term and, in 2019-2020, the movement will potentially be sideways to down, which could provide relief for emerging markets."

There may also be relief as a result of the recent softening of trade war tensions between the United States and trading partners Mexico and Canada. In general, trade wars impact global economic growth and emerging markets are particularly vulnerable to the fallout. However, Appleton warns that trade war tensions between the United States and China still remain high and must be resolved if emerging markets are to benefit.

"Mr Trump is a hard man to read and so we don't know if the situation will escalate or not. Hopefully there's a meeting of minds, but it could still be a bumpy road. The Chinese economy has taken some strain due to the trade war and we must remember that emerging markets, including South Africa, are very dependent on Chinese trade, particularly when it comes to commodities.

"Even without the impact of its United States trade war, we think a Chinese slowdown is on the cards, although they seem to be implementing stimulus measures so as to mitigate the rate of slowdown. But it would be unfortunate for everyone if the Chinese economy slowed dramatically."

Emerging markets to watch
Despite the possibility of a slowdown, China will still be one of the emerging markets to watch in 2019. Others that are expected to perform positively include India, Mexico and Brazil.

"China will still be interesting from an investment point of view next year," observes Appleton. "We are overweight on India and it looks good from an economic growth perspective. But the Indian elections are coming up, so it's important to watch developments."

He adds: "Mexico is also doing okay and the peso looks cheap to us. There is a new socialist-leaning government in place, but it is expected to be economically responsible. In Brazil, interest rates have gone down and the economy is picking up. The recent election saw a move to the right and there has been a remarkable bounce in terms of its currency."

Emerging markets to avoid include Turkey, which has been ravaged by political turmoil and economic mismanagement, and Venezuela. The latter has long been in economic freefall, despite its oil-rich status.

And what of the emerging market outlook for South Africa and the African continent in general?

Appleton says South Africa's performance in 2019 is difficult to predict because it is so dependent on reforms being implemented. "The world is desperate to see signs of a new way of administering state-owned enterprises like Eskom. It is critical that we see reform and that the cost of business comes down. If we achieve that, South Africa could be an attractive investment destination - certainly from an offshore investment-flow point of view."

As for the rest of Africa, Egypt and Kenya are highpotential markets to watch. While the continent has been under strain recently, the Ashburton team believes the African demographic will underpin its economies in the longer term. "In sub-Saharan Africa we are looking at GDP growth rates in excess of 5%. Sometimes Africa can be a difficult place to invest, but in the longer term it looks an interesting and constructive story," Appleton says.

In conclusion, he emphasises that there's cautious optimism around emerging markets in 2019, but still uncertainty. "Global GDP growth is peaking in 2018 and we are seeing signs of deceleration coming through. But the path of the US dollar remains critical to emerging markets and if the dollar strengthens - even though this isn't our base view - then the painful emerging market experience could be extended for a little while longer."

Treat yourself in 2019


Some people are beach holiday enthusiasts, others love nothing more than high-adventure experiences, exploring the great outdoors, communing with nature or getting up close and personal with some of the world's greatest sporting heroes. Which are you?

No matter what your preferences, eBucks Travel has a range of thrilling/relaxing/appealing/heart-warming packages to choose from and to start 2019 off on the right note.

WILDERNESS SAFARIS

Rwanda - Gorillas and savannah
From US$7 794 per person sharing

The Virunga Mountains are the ideal place in which to fulfil your dream of coming face-to-face with mountain gorillas. With 12 habituated Gorilla groups in the park, this unique safari is ideal for tracking and experiencing these magnificent creatures in the wild.

Validity:
01 March 2019 to 29 February 2020

Includes:

  • 6 nights' accommodation (2 nights Magashi Camp and 4 nights at Bisate Lodge)
  • Gorilla trekking

Additional highlights:

  • Visit to the Kigali Genocide Museum
  • Guided game drives, walks and boating trips
  • Visit to Volcanoes National Park
  • Community visits, birding, golden monkey tracking and helping to reforest the area
  • Visit Twin Lakes of Ruhondo and Burera, as well as Dian Fossey's grave

SEA, SUN AND SAND

Mauritius - 5-star One&Only Le St Geran
R62 200 per person sharing

The recently transformed One&Only Le Saint Geran remains a legend of island privacy and luxury. Located between a sheltered lagoon and the Indian Ocean, enjoy beach-inspired interiors, state-of-the art sports facilities and feel the sand beneath your feet as you savour rustic beach dining.

Validity:
9 January to 14 March 2019

Includes:

  • Return private standard car transfers
  • 5 nights at Shangir-La Le Touessrok and 2 nights at Bubble Lodge
  • All land and non-motorised water sports (as per brochure)
  • Daily entertainment
  • Free green fees at Ile Aux Cerfs Golf Course
  • Access to the exclusive island, Ilot Mangenie

Added Value:

  • 20% Early Booking Discount included (90 day advanced purchase applies to qualify)
  • 2 kids under 12 fly free (you pay for taxes and transfers)
  • Free access to Business Class lounge in South Africa
  • 1 free ticket for the bride when travelling on honeymoon (you pay for taxes and transfers)
  • Complimentary evening cocktails daily and complimentary mini bar

Mauritius - 5-star One&Only Le St Geran
R62 200 per person sharing

The recently transformed One&Only Le Saint Geran remains a legend of island privacy and luxury. Located between a sheltered lagoon and the Indian Ocean, enjoy beach-inspired interiors, state-of-the art sports facilities and feel the sand beneath your feet as you savour rustic beach dining.

Validity:
9 January to 14 March 2019

Includes:

  • Return direct flights from Johannesburg to Mauritius
  • Return private standard car transfers
  • 5 nights at the One&Only Le St Geran and 2 nights at Bubble Lodge
  • All land and non-motorised water sports (as per brochure)
  • Daily entertainment
  • Mini golf, football playground
  • Free water-skiing, HobieCats, kayaks, snorkelling, windsurfing, water bikes, glass bottom boat trips

Added Value:

  • 20% early booking discount included (90 day advanced purchase applies to qualify)
  • 2 kids under 12 fly free (you pay for taxes and transfers)
  • Free access to Business Class lounge in South Africa
  • 1 free ticket for the bride when travelling on honeymoon (you pay for taxes and transfers)
  • Complimentary evening cocktails daily and complimentary mini bar

Zanzibar - 5-star Zuri Zanzibar Hotel & Resort
R30 974 per person sharing

Located in the north-west of Zanzibar, just 50km from Stone Town and the international airport, this new hotel in the Kendwa village has been carefully and consciously designed to have as little impact on the environment as possible. The architecture takes into account the natural beauty of the sloped terrain and the amazing setting provides visitors with stunning white-sand beaches, turquoise waters and unforgettable sunsets.

Validity:
10 January 2019 to 28 February 2019

Includes:

  • Return flights from Johannesburg to Zanzibar, including airline levy
  • Return airport to hotel transfers
  • 7 nights' accommodation at the 5* Zuri Zanzibar Hotel & Resort Hotel in a Garden Bungalow
  • Breakfast and dinner daily

Added Value:

The hotel offers its own private spice garden where guests can enjoy cooking classes with the hotels chef and enjoy an interactive and authentic way to discover more about Swahili cooking.

SPORTING EXPERIENCES

South Africa - Rovos Rail Golf Safari R59 900 per person sharing A golfer's delight awaits you on the luxurious Rovos Rail as you travel between Pretoria, the Pilanesberg, Ladysmith, the Drakensburg, Durban, Swaziland and the Kruger Park where golfing enthusiasts can play the challenging Leopard Creek course (dependent) while non-golfers enjoy a game drive in the world-famous Kruger Park. Replete with options to experience some of the best courses in South Africa, this unique getaway also boasts optional excursions for non-playing guests.

Validity:
Departure dates on 30 January, 21 February, 28 March, 3 October or 14 November 2019

Includes:

  • 8 nights' accommodation with meals, alcoholic drinks and beverages
  • 24-hour full rook service and bar facilities
  • Golf activities: green fees, carts, halfway house and beverages

Australia - 2019 Australian Open Tennis
R17 300 per person sharing

Head Down Under in January 2019 to experience the great tennis moments that the Australian Open offers as you soak up the atmosphere at the Rod Laver Arena. See current and future greats in action, enjoy the National Sports Museum at the legendary Melbourne Cricket Ground, and revel in your exclusive 'Super Suite' access to the Melbourne Arena section of the world-class National Tennis Centre.

Validity:
14 to 27 January 2019

Includes:

  • Various night's accommodation at a 3-star hotel in Melbourne (4- and 5-star hotels available)
  • Official Australian Open Ground Pass and Category 3 Entry Rod Laver Arena reserved seating
  • Exclusive behind-the-scenes experiences
  • Admission to the National Sports Museum located in the Melbourne Cricket Ground
  • Official Australian Open merchandise and event guide
  • Entry into the exclusive 'Super Suite' at the Melbourne Arena (P&O Cruise and middle weekend only)
  • Private viewing suite, with air-conditioning, private bathrooms and stylish furniture
  • Access to the Atrium Bar located in Garden Square with food and beverages available for purchase
  • All booking and ticket handling fees

Get connected with FNB Connect

Need better network signal? Sorted.

Connect more with our improved LTE network coverage. Search FNB Connect for more info on our month-to-month SIM packages and other great offers like these:

GARMIN FENIX 5x PLUS
R569 pm x 24 months

The ultimate multi-sport GPS watch with wrist heart rate technology, a wrist-based Plus Ox Acclimation sensor to monitor bloody oxygen saturation levels, a rugged bold design, Bluetooth enabled and Garmin Pay ready - meaning FNB Private Wealth clients can leave their cash and cards at home and still make convenient payments.

MacBOOK AIR (13-inch) 128GB SSD
R759 pm x 24 months

  • 1.8 Ghz Dual-core Intel Core i5 processor
  • Intel HD Graphics 6000
  • Fast SSD storage
  • 8GB memory
  • 1 year warranty

iPHONE X - 64GB
R189 pm x 24 months (includes Connect Top Up M)

  • 6.1-inch (diagonal) all-screen LCD Multi-Touch display with IPS technology
  • Liquid Retina HD display
  • 12MP wide-angle camera
  • 792-by-828-pixel resolution at 326 ppi 1400:1 contrast ratio (typical) True Tone display
  • Gibabit-class LTE with 4x4 MIMO and LAA4 802.11ac Wi-Fi with 2x2 MIMO Bluetooth 5.0 wireless technology
  • 256GB
  • 1 year warranty

More exciting innovations on the cards for nav»


Around 1.5 million users have already taken advantage of the unique offerings that enable FNB Private Wealth customers to better navigate their financial and life journeys. But the development team behind the popular nav» app is not resting on its laurels and is continuing to seek new solutions to client needs.

Launched in mid-2016, the app currently offers the nav» Home, nav» Car and nav» Money functions, each with various sub-functions aimed at solving particular problems that clients encounter on a daily basis. But there's still more to come.

"We have several exciting launches lined up for next year that will further enhance the nav» app and the convenient solutions we can provide to our customers," says Orsheran Singh, Imagineer at nav» responsible for marketing, product development and innovation. "The app is one of the ways that we can do more to help our customers, not only when it comes to meeting their core banking needs, but in other ways that will enhance their financial and life journeys."

He adds: "Ever since FNB won the Global Banking Innovation Award in 2012, the bank has been synonymous with innovation and it is something that our customers expect of us. The broad aim of nav» is to satisfy demand from a growing segment of customers for innovative digital self-service channels that can be accessed 24/7."

nav» Home
The first solution, called nav» Home, was unveiled in June 2016 as a new way for FNB Private Wealth clients to buy and sell property. Users can use the app to list a home for sale, search for a property to buy, get pre-selected for finance, check associated costs, arrange to view a listed property, negotiate the price, check on the value of a property, and get real estate reports for specific areas.

"Known FNB sellers can connect with known FNB buyers in a reliable, cost-saving and secure environment," explains Singh. "Through this solution, they can engage, arrange to view a listed property and negotiate the price via Secure Chat on the FNB Banking App. Sellers and buyers need only disclose personal contact information when they are comfortable to do so."

At present, nav» Home has one million unique users and R4.7 billion in home loans have been approved for transactions done via the app.

nav» Car
Launched in April 2017, nav» Car provides simple solutions to the daily challenges of vehicle ownership. After a one-off scan of their licence disc, users can arrange for their licence to be renewed annually and for the disc delivered to their door. Annual licence renewal reminders can also be programmed into the system, while owners who are considering selling their vehicle are able to access an estimate of its current market value.

In addition, instant fine notification allows for minor traffic infringements to be viewed and for these to be settled via an easy in-app payment.

According to Singh, 250 000 vehicles are loaded into the nav» Car 'garage'. "That's a quarter of a million customers we are helping with their daily automotive journey," he says.

nav» Money
The third solution, nav» Money, was launched in May this year and is at the heart of the app concept. It allows customers to better manage their monthly spending, from tracking upcoming payments to monitoring their overall income and expenses.

It includes a Track My Spend feature, which shows users how much money is flowing into their account, checking it against known upcoming payments, and monitoring expenses. The feature enables users to see where they are overspending or using credit suboptimally, and will deliver money management tips to customers.

nav» Money also includes a My Credit Status tool, which intelligently monitors the customer's credit status, showing them how they are currently ranked and how they can improve their credit score. Singh says the data FNB Private Wealth collects on its customers allows it to help users improve their money management skills and leverage a team of experts to provide them with sound financial advice. "nav» Money gives you a helicopter view of your finances to enable you to make solid financial decisions," he observes. The solution has 200 000 registered users at present.

Apart from the vehicle licence renewal service, which costs R199 and can be paid in-app, all the other solutions are available at no cost to clients.

"We are happy with the uptake thus far, it has been great," notes Singh. "The customer interest in the three services highlights the real need in the South African market for user-friendly, digital tools designed to put banking clients in the driver's seat."

FNB Private Wealth customers wishing to download the nav» app can do so via the App Store (Apple users) or the Google Play Store (Android users).

Offshore opportunities open up for business investment


Offshore investing has, in recent years, become an increasingly popular way for successful South African individuals to achieve diversification in their investment portfolio. The allowances that individuals have access to in moving money offshore for foreign investment purposes has provided the flexibility for this. Spreading hard-earned resources and ensuring that everything you have isn't subject to a single set of economic, political and social pressures simply makes good sense.

South African residents, 18 years and older, are entitled to an annual Single Discretionary Allowance for R1 million, which may be used for travel, gifting, foreign investment etc. In addition they are also entitled to an annual foreign investment allowance of R10 million, subject to tax clearance.

"Today's investor is a global citizen and, as such, they are mobile, unrestricted by borders and boundaries, and wired in to a world of potential opportunities," says Chantal Robertson, Head: Global Wealth Solutions at FNB Wealth and Investments. "So while conversations on diversification are common, they focus on solving for you as an individual. Now there's no reason why savvy business owners can't adopt a similar strategy to ensure the long-term financial health of the business they've worked so hard to establish."

While it wasn't too long ago that South African businesses wanting to invest offshore or open subsidiaries had to deal with a fairly complex regulatory process, over recent years this has been significantly simplified. The current foreign direct investment (FDI) policy has broad parameters and one key aspect is that authorised dealers (local banks authorised to deal in foreign exchange) can now approve applications in this regard based on certain criteria. The success of these applications hinges on the business case and assuming that the proposed acquisition falls with the authorised dealer parameters, then the bank can approve business investments up to R1 billion. Larger investments would require South African Reserve Bank (SARB) approval. Other changes include the relaxation of the percentage shareholding relating to offshore businesses, and the requirement to repatriate dividends back to South Africa.

"The rules around FDI have changed significantly in the last few years," Robertson observes. "The SARB and Treasury want South Africans to replicate their successful business models outside our borders. They want to encourage South Africans to go into new markets and create success stories."

Operating businesses only Robertson emphasises, however, that the current FDI rules apply solely to bona fide offshore business investments and not to South African companies wanting to make a passive investments offshore in, for example, property. "The focus is on operational entities that are going to set up shop or acquire an existing business in another country. Passive investments may be acquired using an institutional investor and, while FNB could certainly help with that, it is not part of the FDI process."

Currently, the SARB's rules allow registered banks to vet and process FDI applications for acquisitions up to a value of R1 billion - covering equity contributions, shareholder loans and any necessary guarantees which may need to be issued from South Africa. Applications in excess of R1 billion require SARB approval.

"The value of this revised process is that you, as a business owner, control it and drive it," says Robertson. "There are still some administrative elements like the annual reporting that still needs to be submitted to the SARB, but it is much more user-friendly than earlier policies. From a timing perspective, the bank in most instances has the ability to authorise these applications fairly quickly. Obviously, when businesspeople spot an opportunity, time can be of the essence."

Working through the process
The Global Wealth Solutions Team at FNB Wealth and Investments are experienced cross-border specialists who are able to guide clients on the FDI process. The first step is to understand what the client wants to achieve via an offshore business investment and determine whether it falls within the FDI requirements. Thereafter, FNB will assist clients to understand the guidelines and walk them through the relevant processes.

Among the requirements are a well-motivated business case and a cash-flow forecast that substantiates the outflow amount being applied for.

"Applicants must clearly articulate their business case," notes Robertson. "And the current process allows you to pursue different business opportunities offshore, meaning that it does not have to be in the same line of business that you're involved in within South Africa. The policy is far more pragmatic."

She continues: "Another benefit is that, once the transfer of funds has been approved, there's no need to move the full amount offshore from the get-go. You can transfer as and when you need the funds on the other side."

FDI rules require that the SARB receives regular progress reports and financial statements from the offshore business. However, there's now a greater acceptance that forecasts and reality may differ due to unanticipated circumstances.

She concludes: "The important point is that a new world of offshore investment opportunities is open for South African businesses via the FDI process. It is key, however, that you have access to our specialists who can provide guidance on the entire process from start to finish."

FDI inclusions and exclusions

South African entities that qualify to make foreign direct investments (FDIs) are as follows:

  • Private companies (e.g. Pty Ltd entities)
  • Public companies
  • JSE-listed companies

South African entities that do not qualify to make FDIs are as follows:

  • Sole proprietorships
  • Partnerships
  • Close corporations
  • Trusts

FDI regulations apply to all countries, with the following exceptions:

  • Lesotho
  • Namibia
  • Swaziland

Constant vigilance essential in the face of ransomware attacks


Fortunately, experienced IT professionals, cutting-edge cybersecurity technology and continually refined response procedures are in place to repel the would-be intruders and keep data secure.

Chief Cyber Security Officer, Kovelin Naidoo, explains that there are different types of Ransomware attacks. At its most prevalent form ransomware attack involves malicious software which installs mainly through a phishing email this software then gain access to a victim's sensitive data, or to prevent someone from accessing their data by illegally encrypting it. The victim must then pay a ransom to either prevent dissemination of the sensitive information, or to have their data unencrypted. These extortion demands are also commonly targeted at large organisations.

Victims range from large organisations, such as financial institutions, to small businesses or even individuals. Indeed, the latter are usually easier to compromise because they lack the sophisticated cybersecurity detection mechanisms of large organisations and it is here that sensitive data, including bank account login details and other sensitive information stored on your computer, are usually compromised.

Like most global financial services, the FirstRand Group has seen quite a few attempts over the past few years, says Naidoo. "But it's something that we anticipate and we build into our defences. It's important that, as a bank, we stay ahead of the curve. The way we do that is by investing in the right skills, systems and cyber awareness programs this includes having security analysts who are in touch with the latest trends in the organised crime world, because this is where targeted high profile cyberattacks mostly stem from. We have to know how the bad guys are innovating and then bolster our systems through collaboration with the other banks and with law enforcement globally and locally."

According to Naidoo, banks around the world share intelligence on new methods and technologies used by cybercriminals. In this country, the South African Banking Risk Information Centre provides a forum for banks to distribute information. "This ensures that if Bank A is attacked in some way, other banks are aware of it and can strengthen their defences in that area," he explains.

Targeted Cyber-attacks may be carried out from anywhere in the world and criminals often use Virtual Private Network or similar anonymising technology to disguise their country of origin. This makes it difficult for law enforcement agencies to track offenders but not impossible.

Perpetrators fall into three broad categories: Those who do it for the money; those who do it for a social or political agenda (called 'hacktivists'); and those who are somehow able to lay their hands on the cyberweapons of extraordinary proportions that were originally created by nations to protect their sovereignty. In the wrong hands, the latter become highly effective tools of cyberattack.

Figures contained in the Verizon 2018 Data Breach Investigations Report, published in April, indicate that there were 53 000-plus data 'incidents' and almost 2 200 confirmed data breaches worldwide in the previous 12 months. Not all related to financial institutions, but a 2017 study by enterprise security firm Positive Technologies reported that banks sustained an average of 983 attacks per day targeted at web applications. A large South African financial services group suffered a data breach in June this year and, in 2016, the Bangladesh Bank lost US$81 million when custom malware was introduced into its IT systems in a highly sophisticated cyberattack.

"If there is a cyberattack on the bank, an incident response plan kicks in," explains Naidoo. "There is then a whole raft of procedural steps that take place, including involving law enforcement, forensics experts and others. We also run exercises and simulations to constantly improve response times." Naidoo says RMB Private Bank is particularly concerned at ransomware and other forms of cyberattacks aimed at its customers. The more secure the bank makes its systems, the more cybercriminals target clients through phishing and other forms of social engineering. The RMB Private Bank App also provides an additional layer of security. Especially if you're the victim of a SIM-swap scam, the RMB Private Bank App has additional layers of security to protect you. "So, we urge customers to use the app at all times," says Naidoo.

Cybercriminals will normally target a customers' email, usually through phishing, malware or simply a weak password.

If you regularly interact with your private banker via email, or if you do your business/investment banking via email, you become a person of interest to those with nefarious intentions. He continues: "If you're on social media and you have a public email address like a Gmail or a Hotmail account, make sure you use complicated passwords and enable two-factor authentication (something that you know - your password, and something you have - your mobile phone). So even if the bad guys compromise your user name and password for your email, they still can't get in because they need access to your mobile phone as well. Two-factor authentication is available on most social media platforms and most public email addresses."

We implore clients to use best practice when protecting their digital ecosystem, advises Naidoo. "Ensure your software is always up to date with the various security updates on all your devices you use for transacting and accessing your emails. Ensure you have a reputable anti-virus - we provide free anti-virus for customers to enhance their device security." Finally, evaluate your email communications carefully and be on the lookout for phishing and social engineering attempts. If you are uncertain, contact your trusted advisor or our fraud teams for assistance.

Ensure you keep the FNB Fraud number saved in your phone: 087 575 9444.

Disclaimer


You use the information contained on this page (the "Information") at your own risk. First National Bank, a division of FirstRand Bank Limited ("the Bank"), provides no warranties or guarantees, whether express, implied or otherwise, in respect of the Information, its accuracy and/or reliability. Without limitation, the Bank does not warrant that the Information will ensure your compliance with accounting, auditory, financial, legal, business and/or tax requirements or will improve your business' performance. The Information does not constitute advice and should not be used as a substitute for obtaining professional or other advice where necessary. Neither the Bank nor its holding company, subsidiaries or other group companies will be liable to you for any claims, demands, expenses, costs, losses or damages, of whatsoever nature, suffered or incurred by you in respect of your use of the Information.

The Bank is the owner of the copyright in all content on this page. You may not publish, modify or adapt this content in any medium or format without the prior written consent of the Bank.

Life and Times

Roll on 2019


If we subscribe to the thinking of philosopher Friedrich Nietzsche, that "the future influences the present", then welcoming in 2019 is not necessarily a case of starting a completely new slate and erasing the impact of the past year, or even the past decade. But it is a chance to take stock and turn our attention to the 12 months to come.


 

Looking back into the future

Banking, insurance trends for 2019


Technology, cybersecurity, digitisation and innovation were buzzwords for the banking and insurance sectors in 2018, but what lies around the corner for 2019?

Chantal Marx, Head of Research at FNB Wealth and Investments, outlines six trends which she believes will continue to shape the South African sector.


 

Emerging markets in 2019: Uncertainty and cautious optimism


Emerging markets tended to be significant underperformers in 2018. This was driven by a US dollar that performed strongly as a result of United States President Donald Trump's home-based economic stimulus package, which sucked up excess liquidity in global markets and injected it into the vibrant American economy.


 

Treat yourself in 2019


Some people are beach holiday enthusiasts, others love nothing more than high-adventure experiences, exploring the great outdoors, communing with nature or getting up close and personal with some of the world's greatest sporting heroes. Which are you?

No matter what your preferences, eBucks Travel has a range of thrilling/relaxing/appealing/heart-warming packages to choose from and to start 2019 off on the right note.


 

More exciting innovations on the cards for nav»


Around 1.5 million users have already taken advantage of the unique offerings that enable FNB Private Wealth customers to better navigate their financial and life journeys. But the development team behind the popular nav» app is not resting on its laurels and is continuing to seek new solutions to client needs.


 

Investment trends & security

Offshore opportunities open up for business investment


Offshore investing has, in recent years, become an increasingly popular way for successful South African individuals to achieve diversification in their investment portfolio. The allowances that individuals have access to in moving money offshore for foreign investment purposes has provided the flexibility for this. Spreading hard-earned resources and ensuring that everything you have isn't subject to a single set of economic, political and social pressures simply makes good sense.


 

Constant vigilance essential in the face of ransomware attacks


Fortunately, experienced IT professionals, cutting-edge cybersecurity technology and continually refined response procedures are in place to repel the would-be intruders and keep data secure.