Opportunity - Issue 94

Quarterly journal for business and industry in South Africa Business unusual It has been estimated that the economy will take two to three years to recover from Covid-19 and the subsequent economic collapse. From now to there, the journey will indeed be business as unusual. My pledge, as the new editor of Opportunity magazine, is to provide cutting-edge content that guides our readers on how to rise above the current business trajectory and to circumvent the consequences that are now laid before them. In this issue, Mike Townshend from Foord Asset Management writes, in ‘The evolving politics of oil’ (page 8), that oil has caused wars, assassinations, man-made disasters, coups and still affects every person in the world today. On page 10, Rebecca Major from leading global law firm, Herbert Smith Freehills, shares her insight on how to navigate African oil and M&A deals in these volatile times. Both of these writers will present more on these topics at Africa Oil Week. The transport services sector has been severely affected by the pandemic, but help is at hand. Digital transformation is set to disrupt the sector – technology has transformed the railway industry globally and implementing technological innovations could be a game-changer for rail transport in South Africa. Read more on page 17. Celebrating Women’s Month in August, Opportunity interviews the newly appointed CEO of Petroleum Agency South Africa, Dr Phindile Masangane (page 12), as well as founder and owner of Nemesis Accounting, Shani Naidoo (page 14). The South African Chamber of Commerce and Industry (SACCI) has a pivotal role to play in guiding the business of its 22 000 members. The Chamber believes that businesses should actively engage in the strategic and recovery implementation processes towards inclusive growth – read more in the CEO’s message on page 4. Let’s work together in building a resilient, risk-savvy and formidable nation. Alexis Knipe, Editor

Quarterly journal for business and industry in South Africa

Business unusual

It has been estimated that the economy will take two to three years to recover from Covid-19 and the subsequent economic collapse. From now to there, the journey will indeed be business as unusual. My pledge, as the new editor of Opportunity magazine, is to provide cutting-edge content that guides our readers on how to rise above the current business trajectory and to circumvent the consequences that are now laid before them.

In this issue, Mike Townshend from Foord Asset Management writes, in ‘The evolving politics of oil’ (page 8), that oil has caused wars, assassinations, man-made disasters, coups and still affects every person in the world today. On page 10, Rebecca Major from leading global law firm, Herbert Smith Freehills, shares her insight on how to navigate African oil and M&A deals in these volatile times. Both of these writers will present more on these topics at Africa Oil Week.

The transport services sector has been severely affected by the pandemic, but help is at hand. Digital transformation is set to disrupt the sector – technology has transformed the railway industry globally and implementing technological innovations could be a game-changer for rail transport in South Africa. Read more on page 17.

Celebrating Women’s Month in August, Opportunity interviews the newly appointed CEO of Petroleum Agency South Africa, Dr Phindile Masangane (page 12), as well as founder and owner of Nemesis Accounting, Shani Naidoo (page 14).

The South African Chamber of Commerce and Industry (SACCI) has a pivotal role to play in guiding the business of its 22 000 members. The Chamber believes that businesses should actively engage in the strategic and recovery implementation processes towards inclusive growth – read more in the CEO’s message on page 4.

Let’s work together in building a resilient, risk-savvy and formidable nation.

Alexis Knipe, Editor


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Quarterly journal for business and industry in South Africa<br />

www.opportunityonline.co.za<br />

AUG/SEPT/OCT 2020 • ISSUE <strong>94</strong><br />

The evolving<br />

politics l of oil<br />

Uncovering the path to oil price recovery<br />

Wheels<br />

on rails<br />

Setting railway<br />

on the right track<br />

Exploring SA’s<br />

many prospects<br />

<strong>Opportunity</strong> interviews<br />

Dr Phindile Masangane<br />

CEO of Petroleum Agency South Africa<br />


EFFECT<br />

E-commerce<br />

on top of the<br />

CEO agenda

Lennings Rail operates from Boksburg in Gauteng<br />

and is the oldest mechanised track construction and<br />

maintenance business in Africa with roots dating back<br />

to 1931.<br />

Lennings Rail focuses on turnkey mechanised railway<br />

development, construction, rehabilitation and<br />

maintenance of track work systems.<br />

Lennings Rail is highly differentiated in the rail industry<br />

because of its in house engineering capabilities that can<br />

repair and build machinery components on site.<br />

Our service offering include:<br />

• mechanized sleeper replacement,<br />

• railway construction and rehabilitation,<br />

• ballast tamping, regulating and screening,<br />

• overhead maintenance,<br />

• rail profile rectification,<br />

• rail flaw detection<br />

• drain cleaning,<br />

• rail signaling & OHTE, and<br />

• smart rail<br />

Get In Touch<br />

Tel: +2711 898 6800 | Email: info@lenningsrail.africa

Operating from Kimberley in the Northern Cape, Rail 2 Rail<br />

has been in the industry for close to a decade.<br />

Rail 2 Rail manufactures pre-stressed PY and P2 concrete<br />

railway sleepers in compliance with SABS ISO 9001 2000<br />

standards. The sleepers are manufactured under technical<br />

license from Rail One.<br />

Rail 2 Rail is one of the biggest manufacturers of concrete<br />

sleepers in South Africa. Rail 2 Rail is the only majority<br />

black-owned supplier of concrete sleepers in South Africa.<br />

We have the capacity to produce 400 000 sleepers per<br />

annum, which are transported via a rail siding all across<br />

South Africa.<br />

Get In Touch<br />

Tel: +2787 330 2221 Email: info@rail2rail.co.za<br />

Your all-African solution to<br />

POWERED BY upgrading MATHUPHA the rail network CAPITAL in<br />

Sub-Saharan Africa.


usiness<br />

unusual<br />

It has been estimated that the economy will take two to three years<br />

to recover from Covid-19 and the subsequent economic collapse.<br />

From now to there, the journey will indeed be business as unusual.<br />

My pledge, as the new editor of <strong>Opportunity</strong> magazine, is to provide<br />

cutting-edge content that guides our readers on how to rise above<br />

the current business trajectory and to circumvent the consequences that<br />

are now laid before them.<br />

In this issue, Mike Townshend from Foord Asset Management writes,<br />

in ‘The evolving politics of oil’ (page 8), that oil has caused wars,<br />

assassinations, man-made disasters, coups and still affects every person<br />

in the world today. On page 10, Rebecca Major from leading global law<br />

firm, Herbert Smith Freehills, shares her insight on how to navigate<br />

African oil and M&A deals in these volatile times. Both of these writers<br />

will present more on these topics at Africa Oil Week.<br />

The transport services sector has been severely affected by the<br />

pandemic, but help is at hand. Digital transformation is set to disrupt<br />

the sector – technology has transformed the railway industry globally<br />

and implementing technological innovations could be a game-changer<br />

for rail transport in South Africa. Read more on page 17.<br />

Celebrating Women’s Month in August, <strong>Opportunity</strong> interviews the<br />

newly appointed CEO of Petroleum Agency South Africa, Dr Phindile<br />

Masangane (page 12), as well as founder and owner of Nemesis<br />

Accounting, Shani Naidoo (page 14).<br />

The South African Chamber of Commerce and Industry (SACCI) has<br />

a pivotal role to play in guiding the business of its 22 000 members.<br />

The Chamber believes that businesses should actively engage in the<br />

strategic and recovery implementation processes towards inclusive<br />

growth – read more in the CEO’s message on page 4.<br />

Let’s work together in building a resilient, risk-savvy and formidable<br />

nation.<br />

Alexis Knipe, Editor<br />

www.opportunityonline.co.za<br />

Editor: Alexis Knipe<br />

Publishing director: Chris Whales<br />

Managing director: Clive During<br />

Online editor: Christoff Scholtz<br />

Art director: Brent Meder<br />

Designer: Simon Lewis<br />

Production: Linda Tom<br />

Ad sales:<br />

Thaakirah Julies<br />

Tennyson Naidoo<br />

Tahlia Wyngaard<br />

Venesia Fowler<br />

Administration & accounts:<br />

Charlene Steynberg<br />

Kathy Wootton<br />

Printing: FA Print<br />


Global Africa Network Media (Pty) Ltd<br />

Company Registration No:<br />

2004/004982/07<br />

Directors: Clive During, Chris Whales<br />

Physical address: 28 Main Road,<br />

Rondebosch 7700<br />

Postal address: PO Box 292,<br />

Newlands 7701<br />

Tel: +27 21 657 6200<br />

Fax: +27 21 674 6<strong>94</strong>3<br />

Email: info@gan.co.za<br />

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No portion of this book may be reproduced without written consent of<br />

the copyright owner. The opinions expressed are not necessarily those of<br />

<strong>Opportunity</strong>, nor the publisher, none of whom accept liability of any nature<br />

arising out of, or in connection with, the contents of this book. The publishers<br />

would like to express thanks to those who support this publication by their<br />

submission of articles and with their advertising. All rights reserved.<br />

C<br />

2 | www.opportunityonline.co.za

ontents<br />

ISSUE <strong>94</strong> | AUGUST–OCTOBER 2020<br />

04<br />

06<br />

08<br />

10<br />

12<br />

14<br />

17<br />

20<br />

22<br />

24<br />

26<br />

28<br />

30<br />


The impact of Covid-19 so far<br />


What has been and what’s to come<br />


Uncovering the uncertain path of oil price recovery<br />


Negotiating African oil and M&A deals<br />


Interview with Dr Phindile Masangane, CEO of PASA<br />


Interview with Nemesis Accounting founder, Shani Naidoo<br />


The implementation of wheels on rails is changing<br />


A profile on rail infrastructure provider, Mathupha Capital<br />


Tshepo Kgare, ACEO of Railway Safety Regulator, shares insights on railway safety<br />


Understanding the impact of Artificial Intelligence<br />


Post-pandemic procurement<br />


Covid-19 tests supply chain resilience<br />


The pandemic has pushed e-commerce and supply<br />

chain issues to the top of the CEO agenda<br />

08<br />

12<br />

22<br />

28<br />



The impact of<br />

Covid-19 so far<br />

Like wildfire, Covid-19 has rapidly mushroomed across the globe, leaving its crippling<br />

imprint on every continent with noticeable trade disruptions and tensions, both locally<br />

and internationally – and imposing significant cuts to the global supply chain.<br />

Since South Africa announced its first case of<br />

Covid-19 on 5 March 2020, the situation has<br />

escalated to where we currently have the<br />

highest recorded case incidences on the African<br />

continent, with 225 989 confirmed cases on 8<br />

July 2020, and 3 6<strong>94</strong> deaths, despite a total lockdown<br />

which resulted in a devastating impact on every sector<br />

of the economy.<br />

Among the most affected sectors, the coronavirus<br />

has impacted negatively on agriculture, mining,<br />

manufacturing, retail, construction, transport services,<br />

real estate and personal services such as the beauty<br />

industry, causing many businesses (both small and<br />

large) to close permanently and leaving many South<br />

Africans without employment, with loss of income and<br />

food insecurity concerns.<br />

___ __ ___ __ _ _<br />

SACCI’s Business<br />

Confidence Index (BCI)<br />

reflected a marked<br />

decline of 22.9 index<br />

points between May<br />

2019 and May 2020,<br />

emphasising the<br />

substantial effect the<br />

lockdown is having on<br />

real economic activity<br />

___ __ ___ __ _ _<br />

SACCI’s Business Confidence Index (BCI), which is<br />

a composite index of economic and financial market<br />

indicators (rated by business as critical indicators of<br />

the business climate), reflected a marked decline of<br />

22.9 index points between May 2019 and May 2020,<br />

emphasising the substantial effect the lockdown is<br />

having on real economic activity. Notable negative<br />

annual impacts on the business climate were exerted<br />

by the weaker rand, depressed new vehicle sales, lower<br />

merchandise import and export volumes, and weaker<br />

share prices on the JSE. Financial conditions were<br />

somewhat easier mainly due to lower inflation and<br />

monetary relief measures.<br />

Though our government financial relief transfers<br />

are helping to substantially support the total income of<br />

households in the lower half of the income distribution,<br />

their efforts are still far from eradicating the impact<br />

of Covid-19 for both households and the business<br />

sector. This narrows the options for all efforts by both<br />

government and the private sector to be channelled<br />

towards recovery strategies for the rapid economic<br />

upliftment of the economy at large.<br />

Though the economy is slowly reopening, and<br />

precautionary measures continue to be implemented to<br />

flatten the infection epidemic, the negative fear mindset<br />

will continue to influence the perceptions around<br />

growing the economy out of this slump. The medical<br />

experts believe that South Africa is likely to see a peak<br />

demand for hospital and intensive care unit (ICU) beds<br />

between August and September. However, based on<br />

current resource levels, projections indicate that the<br />

number of available hospital and ICU beds will likely<br />

be exhausted by the end of July 1 .<br />

The coronavirus is affecting not only the health,<br />

daily life and psychological wellbeing of the South<br />

___ __<br />

Since South Africa<br />

announced its first<br />

case of Covid-19<br />

on 5 March 2020,<br />

the situation has<br />

escalated to where<br />

we currently have<br />

the highest recorded<br />

case incidences on<br />

the African continent,<br />

with 225 989<br />

confirmed cases<br />

on 8 July 2020, and<br />

3 6<strong>94</strong> deaths, despite<br />

a total lockdown<br />

which resulted in a<br />

devastating impact<br />

on every sector<br />

of the economy.<br />

4 | www.opportunityonline.co.za


African population, but is also having a significant<br />

impact on our businesses. In its efforts to cushion the<br />

business community, SACCI continues to play a pivotal<br />

role in advocating for the consideration of reasonable<br />

accommodation for essential services and other key<br />

sectors of the economy, especially for small and medium<br />

businesses, and engages with the government in<br />

strategic mitigation processes to ease lockdown for the<br />

survival of businesses, from the onset of the lockdown.<br />

___ ___ __ _ _<br />

The coronavirus is<br />

affecting not only<br />

the health, daily life<br />

and psychological<br />

wellbeing of the<br />

South African<br />

population, but<br />

is also having a<br />

significant impact<br />

on our businesses<br />

___ __ ___ __ _ _<br />

Though working remotely,<br />

SACCI continues to see an influx<br />

of requests for intervention by<br />

members for assistance in the<br />

day-to-day management of their<br />

business in these unprecedented<br />

times. The South African Chamber<br />

of Commerce and Industry has<br />

reached out to its over 22 000<br />

members with daily business<br />

updates on coping, mitigation<br />

reports, requests for comments<br />

on policy and regulatory input<br />

by members, as well as general<br />

support for business survival and<br />

return to work preparation and<br />

compliance plans, and assistance<br />

with access to financial relief<br />

platforms for small businesses.<br />

SACCI believes that businesses should more actively<br />

engage in strategic and recovery implementation<br />

processes which include contingency planning,<br />

financial recovery strategies and legislative compliance<br />

challenges, as well as communication, especially<br />

with employees, to manage the psychological impact<br />

of Covid-19 imposed changes and conduct scenario<br />

analysis towards inclusive growth. This, we hope, will<br />

pave the way towards the recovery of our economy.<br />

Alan Mukoki,<br />


___ __<br />

1<br />

Publication by<br />

Modelling and<br />

Simulation Hub, Africa<br />

(MASHA), University<br />

of Cape Town; South<br />

African DSI-NRF<br />

Centre of Excellence<br />

in Epidemiological<br />

Modelling and Analysis<br />

(SACEMA), University<br />

of Stellenbosch;<br />

Health Economics<br />

and Epidemiology<br />

Research Office<br />

(HE2RO), University of<br />

the Witwatersrand,<br />

Johannesburg; Boston<br />

University School<br />

of Public Health;<br />

National Institute<br />

for Communicable<br />

Diseases (NICD),<br />

South Africa.<br />

www.opportunityonline.co.za | 5


News & snippets<br />

Industry insights from the past quarter<br />


A staggering yet understandable 58% of households across South Africa are facing overwhelming<br />

financial stress as the Covid-19 crisis knocks savings and raises debt levels, according to the latest<br />

Old Mutual Savings & Investment Monitor (OMSIM). Just over half of those surveyed are earning<br />

less than they were at the end of February 2020, while 40% of those currently employed only have<br />

enough funds to survive for one month or less should they lose their jobs. The levels of dependency<br />

have also grown. In 2015 those with other adult dependents (excluding spouse/partner) was at<br />

35%. This year it spiked at 52%. Lynette Nicholson, Head of Research and Insights at Old Mutual,<br />

says: “A very alarming consequence of the financial pressures South African households are<br />

experiencing is that just over 50% are currently dipping into their savings just to make ends meet,<br />

37% have fallen behind on paying household bills and 23% have cashed in an investment policy.”<br />


Shani Naidoo, director of SME Warrior (Pty) Ltd, launches the<br />

SME Warrior Entrepreneur Academy in September 2020, an<br />

online learning and development platform for entrepreneurs<br />

and business owners. The academy consists of three schools:<br />

School of Legal, School of Business, Financial Literacy and<br />

Entrepreneurship and the School of People Performance and<br />

Improvement Intervention.<br />

“Our educational indoctrination system is at the root cause of so<br />

many business failures and the demise of entrepreneurship as we<br />

know it. We are being taught using old methods in a new world,<br />

expecting to succeed with high expectations. Learning material<br />

designed for the agile and purposeful entrepreneur of the future,<br />

SME Warrior will change lives and businesses alike forever,” says<br />

Naidoo. www.nemesisaccounting.co.za<br />

Perfect, pure energy<br />

“LPGas is an exceptional energy source, especially in areas<br />

where there are electricity supply challenges. It’s a portable<br />

energy solution which can alleviate energy poverty,” says LPGSA<br />

Acting Managing Director Nirvan Brijlal. This clean-burning and<br />

efficient fuel is primarily used for cooking, space and water<br />

heating in South Africa and has over 1000 applications, but<br />

importantly it also plays a role in helping to reduce indoor and<br />

outdoor air pollution. “It is extremely important that you make<br />

use of registered professionals to perform the installation and<br />

maintenance of LPG appliances and cylinders,” adds Brijlal.<br />

For more information on LPGas, visit www.lpgas.co.za<br />


Recovery from the coronavirus-induced economic and financial<br />

meltdown could take some two years, according to Prescient<br />

Investment Management’s research and baseline forecast. “The<br />

world is grappling with the worst plunge in economic output in<br />

living memory,” says Prescient Head of Asset Allocation, Bastian<br />

Teichgreeber. “The coronavirus pandemic and the lockdowns to<br />

contain it affect both supply and demand in the various sectors<br />

of the economy in unusual and different ways.”<br />

After making new all-time highs as late as mid-February 2020,<br />

equity markets around the globe made headlines for the record<br />

pace at which they fell shortly after as a result of the global<br />

spread of the Covid-19 pandemic. The price declines have been<br />

indiscriminate, with equities, listed property, bonds, credit,<br />

preference shares, inflation-linked bonds (ILBs), income assets and<br />

the rand selling off in lockstep. Correlations moved to highs<br />

we have never seen before. During April and early May, however,<br />

we saw a steep recovery, with markets posting record returns.<br />

The question everyone is asking is: How long will it take to<br />

return to the pre-corona GDP peak once the economy has hit<br />

bottom? Our base case, says Teichgreeber, is a U-shaped recovery<br />

in which losses incurred in the first two quarters of 2020 would be<br />

recovered within two years. “This might sound pessimistic to some<br />

and optimistic to others. The risks to our view are significant on<br />

the up and the downside.”<br />

6 | www.opportunityonline.co.za

PIC: spotongmag.co.za<br />


The Black Business Council (BBC) and Ubank Limited signed a historic partnership agreement in May<br />

2020 to establish an R1-billion fund for township and rural economy revitalisation. The fund will be<br />

made available to BBC members and other SMMEs to the value of R250-million per annum over the next<br />

five years, targeted at supporting township and rural black business ventures, entrepreneurship and<br />

start-up companies. The fund will focus mainly on the IT and digitalisation, manufacturing, agriculture<br />

and agri-processing, retail, infrastructure and tourism sectors. www.blackbusinesscouncil.africa<br />


South African consumers are becoming more reliant on home<br />

delivery services due to social distancing efforts. “Businesses will<br />

have to gear up to provide home delivery, or beef up existing<br />

fleets, as it is expected to play a crucial role in the coming months,”<br />

says Derick de Vries, Head of Fleet Management at Standard Bank<br />

Group (right).<br />

“The new normal is digital, the events of the last month have<br />

proved this. For businesses to remain viable going forward, they<br />

will need an online extension of their business, where consumers<br />

can view and purchase products, and a fleet of vehicles to carry<br />

out deliveries. These systems, which some companies may already<br />

have in place, should then be adapted for the current environment.<br />

“The evolution of technology in the industry means that<br />

fleet managers can access customised, in-depth information<br />

on a regular, and in certain instances, real-time basis, via online<br />

platforms,” explains De Vries. “These include daily, weekly and<br />

monthly reports on fuel cost data, and the ability to use predictive<br />

modelling for the outcome of variances to<br />

their fleet and operational data.”<br />

Standard Bank acquired a 40% stake in<br />

Payment24 to support fleet owners with<br />

digital technology solutions that work<br />

to eliminate risk and inefficiencies. The<br />

platform aims to eliminate the hassle of<br />

monitoring and controlling fleet fuelling<br />

transactions using real-time, cardless RFID,<br />

mobile and cloud technologies.<br />

Further to that, Standard Bank offers a<br />

fleet management card, issued per vehicle<br />

rather than driver, which offers convenience<br />

in paying for, monitoring and controlling<br />

vehicle running costs. This also helps<br />

facilitate savings on diesel with several oil<br />

company partnerships to choose from.<br />

pull to come<br />

info to come<br />

pull to come<br />

info to come<br />

www.opportunityonline.co.za | 7

ENERGY<br />

The evolving<br />

politics of<br />

We built the modern economy on a global logistical supply<br />

chain that could not function without oil and its downstream<br />

derivatives. This dependence on oil has enabled the broader<br />

oil industry to be remarkably profitable. It has been one of<br />

the world’s more important industrial sectors for much of<br />

the past 100 years, writes MIKE TOWNSHEND.<br />

And because of the scale of the oil industry, it<br />

has always been closely entwined with politics.<br />

Since its genesis in the late nineteenth century,<br />

the oil industry has drawn more controversy<br />

than most others. Oil has caused wars,<br />

assassinations, man-made disasters, coups and still<br />

affects every person in the world today.<br />


Iraq’s 1990 invasion of Kuwait after an oil production<br />

dispute dragged the US back into Middle Eastern<br />

conflict. US efforts to secure its oil supply, principally<br />

from major producer Saudi Arabia, has embroiled it in<br />

regional conflict ever since. Ensuring Saudi stability in<br />

the strife-torn region has demanded costly US political<br />

and defence support.<br />

More recently, elevated oil prices made new US oil<br />

fracking production profitable and the US has doubled<br />

its oil production over the past decade. The US has once<br />

again become the largest oil producer in the world,<br />

surpassing Saudi Arabia and Russia. The US is no<br />

longer reliant on imports and it is now re-evaluating<br />

its expensive and divisive Middle Eastern involvement.<br />

In the meantime, China’s economy burgeoned<br />

and the oil-dry country is now the world’s largest oil<br />

importer. Simultaneously, Putin’s Russia is smarting at<br />

its post-communism loss of geopolitical influence. Putin<br />

has been cosying up to Chinese President Xi, realising<br />

Russia and China<br />

could work together to<br />

achieve greater global<br />

geopolitical authority.<br />


In late 2016, Russia and the<br />

Organisation of the Petroleum<br />

Exporting Countries (OPEC) worked together<br />

to support oil prices from the relatively low levels<br />

of mid-$40 per barrel. Prices recovered and a new,<br />

extended OPEC oligopoly dubbed OPEC-Plus seemed to<br />

have become entrenched.<br />

When oil prices started falling from $65 at the<br />

beginning of 2020, Putin conceived an opportunity to<br />

decimate oil prices and thus strike at the booming US<br />

shale oil industry while cementing Russia’s goodwill<br />

with oil-importer, China. In early March, he chose not<br />

to support the OPEC-Plus call for production cuts and<br />

encouraged Russian oil companies to instead ramp up<br />

production. The Saudis responded by increasing their<br />

own production and the supply glut caused a further<br />

weakening of prices.<br />

The rapidly spreading Covid-19 pandemic was<br />

concurrently decimating global oil demand. The<br />

combination of slumping demand and rising supply saw<br />

Brent crude prices collapse to $25 per barrel. Investors<br />

should expect a six- to 18-month period, if not longer,<br />

___ __<br />

Oil demand is<br />

normally correlated<br />

with the global<br />

economic cycle but<br />

is now fraught with<br />

uncertainties thrown<br />

up by an entirely<br />

new set of factors.<br />

8 | www.opportunityonline.co.za

ENERGY<br />

where oil prices are volatile and likely to languish close<br />

to $40 per barrel.<br />


The shake-up of the oil sector will have a variety of<br />

geopolitical ramifications. It is still too early to establish<br />

how this will play out, but some macro consequences<br />

are becoming clearer.<br />

Firstly, OPEC’s influence should wane. As the energy<br />

transition away from fossil fuels gains momentum and<br />

the array of economically viable and less price-volatile<br />

energy sources continues to emerge, oil’s dominant<br />

position in the energy mix will decline. OPEC’s ability<br />

to set prices and thus extract geopolitical bargaining<br />

power will diminish. Conflict in the Middle Eastern<br />

arena, however, could escalate. New power blocs<br />

backed by Chinese or Russian interests will replace US<br />

involvement and look to exploit Arab nations and assert<br />

power in the region.<br />

Secondly, Sino-Russian relations should deepen<br />

on the back of this oil crisis. Their partnership is an<br />

outcome of their shared dissatisfaction with the US –<br />

both feel antipathy towards the US and its perceived<br />

___ __ ___ __ _ _<br />

Oil has caused wars,<br />

assassinations,<br />

man-made disasters,<br />

coups and still affects<br />

every person in<br />

the world today<br />

___ __ ___ __ _ _<br />

meddling in their sovereignty and interests. Russia has<br />

already become one of the biggest recipients of Chinese<br />

investments under the Belt and Road initiative. The oil<br />

war has complicated Russia’s prospects for economic<br />

growth, but its alignment with China could deliver early<br />

benefits as the latter’s economy recovers first from the<br />

Covid-19 fallout.<br />


The oil price is a factor of demand and supply. On the<br />

supply side, there is now significant excess capacity in<br />

oil and related-product inventories due to the Covid-19<br />

pandemic. This excess must be absorbed before product<br />

prices can recover. At prices below $45 per barrel, oil<br />

supply is largely in the hands of the OPEC-Plus oligopoly.<br />

At higher prices, higher-cost producers such as the US<br />

onshore fracking industry can restart production.<br />

Oil demand is normally correlated with the global<br />

economic cycle but is now fraught with uncertainties<br />

thrown up by an entirely new set of factors. These include<br />

how quickly economies can rebound from lockdowns,<br />

whether working from home becomes the new normal<br />

and whether wary office workers avoid public transport<br />

to favour self-driving. Bigger influences include the<br />

timing and extent of the recovery in global travel and<br />

tourism, the accelerating adoption of electric vehicles<br />

and how the global logistics supply chain is affected<br />

by de-globalisation, reshoring and the establishment of<br />

new supply lines. Many of these decisions will be made<br />

by politicians.<br />

Uncertainty relating to supply and demand will,<br />

therefore, result in a volatile period for oil prices and<br />

oil-related investments. So, while an oil shock of this<br />

nature offers investors rare buying opportunities, they<br />

should proceed with caution.<br />

___ __<br />

Mike Townshend,<br />

Fund Manager,<br />

Foord Asset<br />

Management<br />

Foord Asset<br />

Management is an<br />

owner-managed<br />

boutique built<br />

on the principles<br />

of investment<br />

stewardship.<br />

www.opportunityonline.co.za | 9

ENERGY<br />

A perfect<br />

storm<br />

Negotiating African oil and M&A deals in these times of low oil and gas prices, currency fluctuations,<br />

Covid-19, increased nationalism and added focus on ESG, is no easy task. Here are some considerations<br />

from REBECCA MAJOR that may be top of mind in the current circumstances.<br />

Despite the current economic, political and sanitary<br />

climate, we are seeing, and expect to continue<br />

to see, mergers and acquisitions in Africa’s<br />

oil and gas industry, including in particular:<br />

• Deals already agreed before Covid-19/the<br />

drop in oil and gas prices;<br />

• Sellers looking to sell to raise money; and<br />

• Buyers with cash/available credit lines looking to<br />

leverage opportunities.<br />

Buyers and sellers have been checking the sale and<br />

purchase agreements (SPAs) that they have already<br />

signed and have been very carefully considering the<br />

SPAs that they are about to sign.<br />


SPAs often include provisions enabling one or other of<br />

the parties to terminate the SPA between signing and<br />

closing if certain circumstances arise. Generally, the<br />

objective of the seller is to achieve as much certainty as<br />

possible. Therefore, a seller will only accept very limited<br />

rights for the buyer to terminate the SPA before closing.<br />

On the other hand, the buyer will generally not want to<br />

be bound into a deal that is not as good as was expected<br />

when the SPA was signed.<br />


This enables one or both of the parties to terminate the<br />

SPA before closing if something significantly affects<br />

the value of the target asset/company. Discussions<br />

generally revolve around (i) what kind of event should<br />

be covered: political crises in the country, significant<br />

damage to the asset, significant fluctuations in oil and<br />

gas prices; and (ii) whether there should be some kind<br />

of materiality threshold: for example, a decrease of 10<br />

to 25% in the value of the asset.<br />

These kinds of provisions are generally fiercely<br />

negotiated and may not be accepted at all. They relate<br />

to the asset and not the financial position of the buyer<br />

(or the seller) and will generally not relate to the state<br />

of the oil and gas industry as a whole (for example a<br />

decrease in oil and gas prices – although this may be a<br />

point of negotiation).<br />

___ __<br />

International<br />

investors may prefer<br />

to support companies<br />

financially rather<br />

than buy them out,<br />

because it makes<br />

legal or business<br />

sense to do so.<br />

10 | www.opportunityonline.co.za

ENERGY<br />


Representation and warranties generally do not include<br />

any kind of comfort concerning oil and gas prices,<br />

availability of reserves, production levels or political<br />

issues. However, current circumstances might give rise<br />

to breaches such as:<br />

• breach of a warranty to ensure that there is no<br />

event of default under any of the existing financing<br />

arrangements: low oil prices and/or a suspension of<br />

production may trigger events of default relating to<br />

financial covenants;<br />

• breach of material project contracts (for nonperformance,<br />

non-payment); and<br />

• the target is unable to pay debts as they fall due.<br />


For many deals, the price for the asset/company is fixed<br />

on a past date (a locked box date or retroactive effective<br />

date). In this case, there is a risk of value fluctuations<br />

____ __ ___ __ _ _<br />

As African countries are<br />

feeling economically<br />

more fragile, some<br />

will become more<br />

protectionist in terms<br />

of foreign investments<br />

___ __ ___ __ _ _ _<br />

between that date and the date of the actual closing<br />

of the deal. This can be significant where oil and gas<br />

prices or production have significantly decreased since<br />

that date. The parties may still have to close at the<br />

original price in these circumstances.<br />

If on the other hand the price is calculated based on<br />

the value at the closing date, then the parties may be<br />

better protected against any sudden increase or decrease<br />

in oil and gas prices or production levels. Deferred price<br />

mechanisms based on future performance might also<br />

be helpful. Parties may become being more creative<br />

with pricing mechanisms in future deals, with both<br />

parties looking to mitigate their risks.<br />


Some countries have found themselves<br />

short of foreign currency, particularly those<br />

countries that are dependent on exports of<br />

goods (Ethiopia is an example) or oil and gas<br />

revenues (such as Nigeria and Angola). This<br />

means that African buyers have struggled<br />

to be able to obtain the foreign currency<br />

necessary to do deals. It has also meant that<br />

foreign investors are concerned about their<br />

investments becoming cash trapped in a<br />

country. These issues have arisen on top<br />

of the already existing issues around the<br />

tightening of regulations in certain regions<br />

(like the CEMAC region) concerning the<br />

ability to maintain offshore bank accounts.<br />


Many foreign investments in Africa are through<br />

joint ventures with local partners and/or with other<br />

international investors either for legal reasons or for<br />

business reasons, or a combination of both. Many foreign<br />

companies are also dependent on local contractors<br />

and suppliers.<br />

Covid-19, combined with the oil and gas crisis, has not<br />

only made target companies and projects more fragile<br />

but has also made certain investors and contractors,<br />

particularly smaller investors and contractors, more<br />

fragile. In a company or project where the financial<br />

stability of each of the stakeholders is important (for<br />

example, an entity requiring shareholder funding<br />

or dependent on shareholder services), this can be<br />

a real issue. Foreign investors are therefore being<br />

increasingly diligent both with new investments and<br />

in relation to existing investments.<br />

These circumstances may provide opportunities for<br />

larger investors to acquire bigger stakes in companies<br />

and projects. However, it may also require them to<br />

acquire additional stakes to protect their investments<br />

from the financial difficulties of their partners rather<br />

than because they wanted a larger stake.<br />

Where local partners or contractors have financial<br />

difficulties, international investors may prefer to<br />

support them financially rather than buy them out,<br />

because it makes legal or business sense to do so.<br />

___ __<br />

Rebecca Major,<br />

Partner, Herbert<br />

Smith Freehills LLP<br />

Herbert Smith<br />

Freehills is one of the<br />

world’s leading global<br />

law firms, with<br />

27 offices globally.<br />


Before Covid-19 and the oil price collapse, ESG was the<br />

key point in the minds of most oil and gas companies<br />

and should not be forgotten. Sellers looking for a<br />

clean exit, or buyers looking to avoid having to take<br />

on past issues, should negotiate pre- and post-closing<br />

indemnities carefully on this basis.<br />


As African countries are feeling economically more<br />

fragile, some will become more protectionist in terms<br />

of foreign investments (increasing tax rates, etc).<br />

However, this is not universally the case and many<br />

countries have realised that they need the support of<br />

others either regionally or internationally.<br />

• To hear more from<br />

Herbert Smith<br />

Freehills about<br />

negotiating African<br />

M&A deals, attend<br />

the Finance Forum<br />

at AOW 2020.<br />

www.opportunityonline.co.za | 11


PASA exploring<br />

South Africa’s<br />


Dr Phindile Masangane joins Petroleum Agency South Africa (PASA) as Chief Executive Officer at a time<br />

when the country is developing a domestic gas market anchored on indigenous gas production. This is<br />

something that she looks forward to and can draw on her experience to contribute towards achieving.<br />

Please tell us about the history of Petroleum Agency SA.<br />

Petroleum Agency SA (PASA) has its roots in the Petroleum Licensing<br />

Unit of the then national oil company, Soekor (the predecessor of<br />

PetroSA). In 1999, following the Norwegian model, it was decided that<br />

regulation of the oil and gas upstream industry should be separated<br />

from the national oil company, and the Agency was formed through a<br />

ministerial directive.<br />

The Agency has successfully attracted major explorers to South<br />

Africa and facilitated the acquisition of many new large seismic surveys<br />

and some exploratory drilling, through a period affected by legislative<br />

issues and a major oil price crash. The company has grown from an<br />

organisation of about 25 staff members to 85 today and is held in very<br />

high regard by the local and international oil and gas industry that it<br />

serves. Currently, the Agency is actively involved in shaping the new<br />

stand-alone upstream legislation and in guiding government with its<br />

decisions regarding the possible exploration for shale gas.<br />

What is PASA’s core business function?<br />

PASA has three main functions, as follows. The first is to attract<br />

investment to South Africa’s oil and gas upstream industry, in other<br />

words, investment into exploration and production of oil and gas in South<br />

Africa. We have a team of geologists and geophysicists who interpret data<br />

gathered through past exploration activity to determine prospectivity,<br />

and use this to attract exploration companies to South Africa.<br />

The second function of PASA is to regulate the upstream industry in terms<br />

of the Mineral and Petroleum Resources Development Act, its regulations<br />

and other applicable legislation. The Agency has staff responsible for<br />

ensuring legal, technical and environmental compliance as organisations<br />

enter into contracts with the state to explore for oil and gas.<br />

The third function is to act as the national archive for all data and<br />

information produced during oil and gas exploration and production<br />

in South Africa and to curate and maintain this data for use and<br />

distribution.<br />

Other functions include advising the government on any issues<br />

pertaining to oil and gas as well as carrying out any special<br />

projects, as directed by the government.<br />

What is PASA’s purpose in South Africa’s energy sector?<br />

From the above, it is clear that the Agency is the regulator<br />

for South Africa’s oil and gas upstream industry. However,<br />

the Agency by no means sees its role as only reactive. On the<br />

contrary, it is one that is proactive and the Agency’s purpose<br />

is to facilitate and regulate oil and gas exploration to achieve<br />

production of indigenous oil and gas. This will ensure energy<br />

security and bolster economic growth, and play a strong role in<br />

addressing the eradication of poverty in South Africa.<br />

South Africa has committed to reducing its carbon footprint<br />

and natural gas can play a role in this. South Africa is currently<br />

heavily dependent on coal as a primary energy source and the<br />

substitution of natural gas for some percentage of electricity<br />

generation, as envisaged in the National Development Plan, could<br />

assist with South Africa reaching its goals in terms of carbon<br />

emissions. The Agency’s main role in this is to attract and<br />

facilitate the activities of explorers for indigenous gas.<br />

You have recently taken over the position as CEO of PASA – and you are<br />

the first formally appointed female CEO. Can you please share with us<br />

some of your ideas in terms of plans and strategies for growing and<br />

improving PASA.<br />

South Africa has a very good petroleum resource potential which<br />

remains unexplored. Before 19<strong>94</strong>, we didn’t have international<br />

oil companies in the country due to political sanctions. So all the<br />

exploration activities for oil and gas in South Africa were undertaken<br />

by the then state-owned company, Soekor (pre-cursor of PetroSA).<br />

Oil and gas exploration is a highly capital intensive<br />

and high-risk business that cannot be left to a national oil<br />

12 | www.opportunityonline.co.za


company to do alone. In the democratic era, we<br />

have attracted a number of international oil and gas<br />

companies including the majors like Shell, Total and<br />

ExxonMobil and have seen a number of our blocks<br />

being licensed. Significant exploration activity in terms<br />

of 2D and 3D seismic data collection has taken place<br />

since then, mainly by international oil companies.<br />

We are at the stage where we need to enter the next<br />

phase in terms of exploration – that of significant<br />

drilling activities. This is what we need: a move to<br />

proving the resources we have. That would be the<br />

game-changer for South Africa’s upstream oil and<br />

gas industry. The recent discovery by Total and its JV<br />

partners in Block 11B/12B (Brulpadda) is the first giant<br />

step in that direction.<br />

Offshore, there is currently ongoing exploration of<br />

the prospects close to the Brulpadda discovery. Odfjell’s<br />

Deepsea Stavanger oil rig is on its way to South Africa<br />

from Norway, and should arrive around the 12th of<br />

August. It will drill the Luiperd (more correctly the<br />

Luiperdpadda) prospect which is the second of five<br />

prospects in the group. There is an option to retain the<br />

rig in South Africa for further drilling. The Brulpadda<br />

well discovered light oil and gas condensate, but the<br />

phase in the other prospects can only be determined<br />

through drilling. Future development of the<br />

discovery is highly dependent on the<br />

success of this further drilling. Possible<br />

development could see gas condensate<br />

being piped to the PetroSA<br />

facility in Mossel Bay, but these<br />

decisions are ultimately up to the<br />

operator, Total, and its partners.<br />

My role is to work with industry<br />

and the department to fast-track<br />

these developments including<br />

finalising the Upstream Resource<br />

Development Bill. As we enter this<br />

phase in our industrial development,<br />

we want to ensure that it is an inclusive<br />

and diversified industry in terms of race,<br />

gender and participation of SMEs.<br />

What would you consider to be PASA’s biggest<br />

challenge/s ahead?<br />

South Africa is playing catch-up<br />

in terms of upstream oil and<br />

gas development compared to<br />

other countries in the region.<br />

With the correct policies,<br />

fiscus proposition and<br />

domestic industry off-take<br />

opportunities we can win.<br />

PASA’s challenge is to ensure that both<br />

international and local energy companies<br />

see this value proposition with South Africa<br />

and choose our country. In this low oil and<br />

gas price environment, companies are<br />

inclined to cut back on capital investments<br />

and we need to partner with them to sustain<br />

the momentum.<br />

Upstream oil and gas industry is highly<br />

capital intensive, high risk in the early<br />

stages and requires highly specialised<br />

skills. So local small and medium<br />

companies tend to find it difficult to source<br />

funding for participating in the industry.<br />

Our challenge is that as a regulator acting<br />

on behalf of the government and the people<br />

of South Africa, we have to find solutions<br />

to these challenges so that South African<br />

companies can meaningfully participate in<br />

this strategic industry.<br />

What do you predict the company’s biggest<br />

success will be in the future?<br />

A vibrant upstream oil and gas industry<br />

that contributes to the security of<br />

energy supply of the country<br />

and the economy having a<br />

substantially reduced<br />

dependence on<br />

imported gas.<br />

Dr Phindile Masangane,<br />

CEO of PASA<br />




Dr Masangane was appointed as the<br />

CEO of the South African upstream<br />

oil and gas regulatory authority,<br />

Petroleum Agency South Africa, in<br />

May 2020.<br />

Before then, Dr Masangane was<br />

an executive at the South African<br />

state-owned energy company, CEF<br />

(SOC) Ltd, which is the holding<br />

company of PASA. Dr Masangane<br />

was responsible for clean, renewable<br />

and alternative energy projects. In<br />

partnership with private companies,<br />

she led the development of energy<br />

projects including the deal structuring,<br />

project economic modelling and<br />

financing on behalf of the CEF Group<br />

of Companies.<br />

Her responsibilities also include<br />

supporting the national government<br />

in developing energy policy and<br />

regulations for diversifying the<br />

country’s energy mix.<br />

In 2019, Dr Masangane was Head<br />

of Strategy for the CEF Group of<br />

Companies where she led the<br />

development of the Group’s longterm<br />

strategic plan, Vision 2040+<br />

as well as the Group’s gas strategy.<br />

From 2010 to 2013, Dr Masangane<br />

was a partner and director at KPMG,<br />

responsible for the Energy Advisory<br />

Division. In this capacity, she successfully<br />

led the capital raising of<br />

$2-billion for the Zimbabwe power<br />

utility, ZESA/ZPC’s hydro and coal<br />

power plants expansion programmes.

Gain your competitive<br />

edge with Nemesis<br />

Nemesis Accounting was born in 2005, with the objective to bring about an holistic approach to business<br />

operations and business owner integration that ultimately flows into the sustainability of a business.<br />

<strong>Opportunity</strong> magazine speaks to the owner of Nemesis Accounting, Shani Naidoo.<br />


From 2010 onwards, Nemesis Accounting has grown steadily,<br />

broadening its client base scope to international markets. Its<br />

international clients included Ferrero Rocher, Hitachi Power<br />

Europe (a Madupi Power Station project), Springer Germany<br />

(publisher) and current KPMG international clients that operate<br />

in South Africa. Nemesis continuously adapts to market requirements<br />

so as to better service its clients.<br />

Please elaborate on the services Nemesis Accounting provides.<br />

Besides general accounting, tax and financial statement preparation,<br />

we have a specialised service profile comprising of:<br />

• Public officer services to international companies operating in SA<br />

• Strategic Business Advisory Service<br />

• Lean start-up business approach<br />

• Financial literacy/management<br />

• Financial statement reviews<br />

• Business internal reviews and compliance<br />

Shani, you are the founder of Nemesis Accounting. Please tell us about your<br />

journey before you started the company.<br />

After obtaining my CMA qualification, I started working in the<br />

insurance and banking industry for the first four years of my journey.<br />

In 1999, I had the opportunity to enter the accounting, compliance<br />

and tax fields at an audit firm in Johannesburg. I was exposed to the<br />

audit environment, tax compliance, SARS, and the execution of these<br />

services. This was the beginning of a career that was to change so<br />

much without me realising it at the time. After six years, I had to<br />

resign for family reasons. It was towards the end of 2005 that I decided<br />

to branch out and begin my career as a female entrepreneur.<br />

Since 2005 to date, I have obtained a few more qualifications. Starting<br />

with my CMA qualification, I moved on to acquire the following<br />

additional qualifications: a registered FAP (financial accountant<br />

in practice), CTP (certified tax practitioner), BRP (business rescue<br />

practitioner), Internal Audit Certification, Master NLP Practitioner<br />

(neuro linguistic programming) as well as a GCologist – GC Index<br />

accredited facilitator and trainer (UK).<br />

From 2005 to 2007, I served on the EXCO at Midrand Chamber of<br />

Commerce as financial director/treasurer. I also hosted tax workshops<br />

for small business through the Chamber.<br />

In 2010, Nemesis Accounting was nominated as Small Business<br />

Entrepreneur of the Year by the NSBC. I completed the internal<br />

audit certificate programme at the University of Pretoria in 2014.<br />

The following year marked a new venture as a director of Business<br />

Acceleration Specialist (Pty) Ltd, teaching business sustainability<br />

skills and development strategies for small business. I completed the<br />

Advanced Business Rescue Practitioner qualification that was offered<br />

by the Law Society and UNISA in 2018.<br />

In August of 2018, Nemesis Accounting hosted its first Women’s Day<br />

event at our offices in Kyalami, Business Woman of the Future. It was<br />

a very transformational experience and well received. The next month<br />

marked the birth of a new company, SME Warrior (Pty) Ltd. Geared<br />

for entrepreneurs and business owners alike, this company’s focus<br />

is training and development of SMEs using NLP and psycho-social<br />

methodologies for the application and execution of the workshops and<br />

training material. Start-ups hold a special place and we have special<br />

course formulations tailored for them.<br />

I qualified as an NLP practitioner in 2018 and in 2019, I completed<br />

my Masters in Neuro Linguistic Programming. Being able to maximise<br />

the potential of our brain functioning to be our absolute best in what<br />

we do and how we live, is what brings the magic to the table in our<br />

training and development.<br />

In March 2019, together with Y-Connect, we presented the<br />

interactive and activity-based Ignite Your Sales & What’s Your<br />

Business Money Game workshop. A very new and different approach<br />

to business and finance was showcased. NLP-based methodologies<br />

were applied in the workshop.<br />

Later that year, I embarked on studies with the GC Index in the UK<br />

and qualified as a GCologist – facilitator and trainer. The GC Index is<br />

a methodology and approach to maximising the highest-functioning<br />

element in one’s composition as a person/worker/manager/CEO.<br />

The profiling mechanism enables various levels of management to<br />

transform their existing team and organisation dynamics to that of<br />

game-changing executioner, ultimately improving the organisation’s<br />

bottom line and the people involved too. This is an exceptional business<br />

tool that I am using with my clients and will be using in SME Warrior<br />

with the training and development workshops and programmes.<br />

In January 2020, I was appointed as financial director at Safety<br />

Boot Camp (Pty) Ltd – a company involved with evolved safety<br />

training execution and implementation based on military and black<br />

ops methodology. This type of safety training is not applied in South<br />

African training situations. Safety Boot Camp focuses on mining,<br />

engineering, coal and energy safety applications, which have a<br />

14 | www.opportunityonline.co.za

of Legal, Business, Finance and Entrepreneurship and of People<br />

Performance and Development.<br />

Why should companies choose Nemesis Accounting?<br />

We are geared for the South African SME. Having been through<br />

the low end of starting a business to where we are now, puts us in<br />

a synergistic position with South African businesses. Also, the fact<br />

that we are using psycho-social methodologies in our problem-solving<br />

applications with our clients has shown us that this is the way to go to<br />

achieve impactful results. We serve an international client base and<br />

have been since 2010. Our international clients are all referrals from<br />

KPMG. We have intensive experience with the South African Reserve<br />

Bank and international transacting. The nature of our game is problem<br />

solving and advancement.<br />

huge CSI impact in terms of social development and socio-economic<br />

upliftment and sustainability. SME Warrior and Nemesis Accounting<br />

are involved from a training and learning perspective for CSI and<br />

socio-economic execution and development.<br />

What has been the highlight of your career?<br />

2010: Nomination for Small Business Entrepreneur of the Year<br />

2018: Our first Women’s Day Event<br />

2019: Qualifying as a GCologist – GC Index (UK) accredited facilitator<br />

and trainer and Masters NLP practitioner<br />

2020: The launch of SME Warrior Entreprenuer Academy. An online<br />

platform of learning and development comprising of the Schools<br />

What should we hope to see from Nemesis Accounting in the near future?<br />

As we stand now, we are restructuring our service offerings to include<br />

business advisory service as well. We have been working on this for<br />

the last year and this will be one of our new features. We will be<br />

offering this and additional customised offerings to small businesses.<br />

What is your personal mission for Nemesis Accounting?<br />

My purpose is to utilise all my qualifications and skills for the<br />

benefit and upliftment of skills development and enhancement in a<br />

forever-changing economy. The goal is to bring about life-changing<br />

sustainability and transformation to businesses, business owners and<br />

individuals in their personal capacities.<br />

How has Covid-19 impacted your business?<br />

At the onset of Covid-19, we already knew the biggest dip would be<br />

the small business clients. Fortunately, due to our international client<br />

base, this has cushioned the impact a bit. We are continuing and have<br />

made slight changes to mitigate further effects.<br />



SME Warrior will be hosting a virtual seminar looking at the<br />

current/post Covid-19 pandemic business woman. The seminar<br />

sets out to address the challenges that lie ahead for women in<br />

business current and post-coronavirus pandemic. It will probe<br />

what lies ahead for her, the new trajectory she will face, a new<br />

way of thinking, new habits and the grounded intrinsic values<br />

she will need.<br />

Founder of SME Warrior and Director<br />

at Nemesis Accounting, Shani Naidoo<br />

feels that irrespective of the Covid-19<br />

pandemic, the gains that have been<br />

made so far in addressing inequalities<br />

faced by women in business have<br />

been quite reserved.<br />

www.kearney.com<br />

“Even before the coronavirus pandemic, women have always<br />

been marginalized when it comes to the business world,” says<br />

Naidoo. In 2017, Statistics South Africa found that despite<br />

women making up just over half of the population, they remain<br />

relatively unrepresented in positions of authority and power. The<br />

same report by Stats SA found that out of the top 40 JSE-listed<br />

companies, only one company had a female CEO.<br />

Join us on 28 August 2020, as we talk about these inequalities<br />

from the past, the challenges and who women will need<br />

to become to surpass this now and continuing after the<br />

Covid-19 pandemic. For any enquiries and to reserve your spot,<br />

email info@smewarrior.biz or shani@nemesisaccounting.co.za.<br />

Follow our social media platforms: LinkedIn: SME Warrior Za<br />

Facebook: SME Warrior<br />

Twitter: smewarriorza<br />

Awaken the Warrior Within

The geographical coordinates to the new container terminal on reclaimed land at the Port of Walvis Bay.<br />

A port on the southwestern part of Africa equipped with infra and super infrastructure<br />

that gives clients fast, efficient and safe passage of cargo into and out of Africa.<br />

We are NAMPORT; Africa’s express hub to international markets.



transforming<br />

railway<br />

transportation<br />

Railway transportation has a long history. Although the basic concept of low-friction<br />

wheels on rails remains the same, the implementation has undergone significant<br />

changes, buoyed by multiple technological interventions.<br />

Technological innovations are expanding the<br />

capabilities of railway systems and helping<br />

to achieve faster speeds, greater capacity and<br />

better safety to compete with other forms of<br />

transportation. Technology has transformed the<br />

way the industry works globally, fuelled by railway<br />

operators’ eagerness to reap benefits by making their<br />

operations more efficient, safe and profitable.<br />

Technology has the potential to impact five key dimensions<br />

of rail transportation (see figure below right).<br />


The effectiveness of train operations is best measured<br />

through asset reliability, utilisation, and employee productivity.<br />

Technology can help improve asset reliability<br />

through sensor-based condition monitoring and datadriven<br />

predictive maintenance. Decision support systems<br />

can play a strong role in enhancing asset utilisation and<br />

employee productivity.<br />

___ __<br />

BELOW<br />

Technology has the<br />

power to improve<br />

five dimensions of<br />

rail transportation.<br />

Source:<br />

Kearney analysis<br />


Technology can make train operations safer by detecting<br />

flaws in the tracks, remote monitoring the tracks,<br />

digitising and automating maintenance, and improving<br />

basic processes such as welding and grinding.<br />

Improvements in signalling and telecommunication,<br />

crash safety of rolling stock, and surveillance of human<br />

operations can reduce errors and lessen the impact<br />

of accidents.<br />


Mechanised construction can enhance the speed for<br />

infrastructure upgrades (track laying and electrification)<br />

while improving cost-effectiveness.<br />

Organisation<br />

capability<br />

enhancement<br />

Passenger<br />

experience<br />

improvement<br />

Safety<br />

enhancement<br />

Technology<br />

in railways<br />

Train<br />

operations<br />

effectiveness<br />

Infrastructure<br />

upgrades<br />

www.opportunityonline.co.za | 17



The passenger experience is formed at each step of the journey –<br />

from planning a trip and booking a ticket to travelling to the railway<br />

station, arriving at the station, and travelling on the train. Technology<br />

can affect each stage of the experience. Seamless availability of<br />

information for planning, omnichannel ticket booking, smart railway<br />

stations, value-added services such as Wi-Fi and infotainment, and<br />

accurate train tracking based on GPS are just a few examples of ways<br />

that technology can enhance the passenger experience.<br />

b) For signalling-related interventions, invest in the European Train<br />

Control System (ETCS) level 2 for high-density routes to increase<br />

network capacity and maintain the required safety standards.<br />

c) For rolling stock, fast-track the switch of passenger rolling stock<br />

to Linke Hofmann Busch (LHB) coaches to minimise fatalities.<br />

d) Increase view of personnel with interior and exterior locomotivemounted<br />

video surveillance to improve monitoring.<br />


Three recommendations can lead to faster and more robust infrastructure<br />

upgrades:<br />

a) Invest in track-laying machines for mechanisation of construction.<br />

b) Increase the rate of electrification through machines such as the<br />

self-propelled overhead electrification laying train (SPOLT).<br />

c) Proliferate use of prefabrication for construction elements.<br />


Four recommendations are designed to increase asset availability<br />

and utilisation:<br />

a) Invest in technologies such as complete train scanners<br />

for improved diagnostics and maintenance.<br />

b) Use operations optimisation tools for better management and<br />

performance of trains, rakes, locomotives and crews.<br />

c) Digitise processes to enhance work quality and lower costs,<br />

thereby reducing reliance on labour-intensive processes.<br />

d) Use distributed power to improve the efficiency of train operations<br />

with coordinated acceleration and deceleration.<br />


Technology can have a powerful impact on an organisation’s capability<br />

through effective training and assisting in decision-making. With the<br />

introduction of virtual reality (VR) and gamification that can simulate<br />

real-life scenarios, training has been revolutionised. IT dashboards<br />

and management information systems have been used extensively<br />

across industries to enable data-driven decision-making.<br />

In a recent joint report by the Federation of Indian Chambers of<br />

Commerce and Industry (FICCI) and American global consulting<br />

firm, Kearney, they aimed to analyse the technology solutions<br />

and best practices used by global rail systems to understand how<br />

Indian Railways can improve the effectiveness of its operations.<br />

These solutions and practices can also be used in a South African<br />

context. The solutions are structured across the five dimensions<br />

mentioned above. Following are some of the study’s key insights<br />

and recommendations across these dimensions:<br />


To retain the passengers that the railway carries, enhancing the<br />

passenger experience will be crucial:<br />

a) Establish smart railway stations by implementing access control<br />

at entry points, provide accurate real-time information, and put<br />

interactive solutions in place.<br />

b) Upgrade the ticketing experience with seamless integration<br />

across platforms and open-loop smart cards.<br />

c) Enhance the train experience with services such as infotainment<br />

and app-based systems.<br />


Two recommendations aim to enhance capability and improve<br />

management reporting:<br />

a) Use training simulators and virtual reality training systems<br />

to improve personnel capabilities.<br />

b) Enhance decision-making by improving information management<br />

with management reporting dashboards.<br />


Four recommendations focus on achieving zero fatalities:<br />

a) For track-related interventions, introduce B-scan ultrasonic rail<br />

flaw detection (both non-stop and stop-and-verify systems) and<br />

track inspection with automated high-speed test trains.<br />

Implementing these technology solutions will be essential for rail<br />

transport in South Africa to get closer to the world-class standard for<br />

train operations. However, selecting and implementing technology<br />

as well as obtaining the optimum economic benefits will require<br />

adopting innovative procurement models.<br />

www.kearney.com<br />

18 | www.opportunityonline.co.za

SeaRail is a logistics company that operates a 3.6-hectare Dry Port<br />

facility in Walvis Bay, Namibia, located within the boundaries of<br />

the Port of Walvis Bay (known as Namport).<br />

ONE-STOP SHOP | SeaRail offers an integrated portfolio of services<br />

that position it as a one-stop shop for various logistics needs.<br />

The aim is to provide clients with total logistics solutions.<br />

CONNECTIVITY | Corridors leading to and from the port are safe<br />

and have well-maintained roads.<br />

OUR VISION | To be the leading provider of transport and logistics<br />

solutions for importers and exporters globally.<br />

OUR MISSION | Providing efficient, safe and cost-effective port<br />

and logistics services to our customers.<br />


Project cargo handling & storage | Bonded facilities<br />

Freight forwarding logistics | Customs brokerage<br />

Container & breakbulk handling | Cartage & transportation<br />

Ro-Ro vehicle handling<br />

| Reefer plug-in points<br />

General & specialised storage and warehousing<br />

Value added services<br />

• De-stuffing & stuffing containers<br />

• On-site customs/vet inspections<br />


ADDRESS Corner 5th Road & 5th Street,<br />

Lagoon, Walvis Bay, Namibia<br />

TELEPHONE +264 64 203434<br />

EMAIL info@searail.com.na<br />

WEBSITE www.searail.com.na<br />


• mechanised sleeper replacement,<br />

• railway construction and rehabilitation, ballast<br />

tamping, regulating and screening,<br />

• overhead maintenance,<br />

• rail profile rectification,<br />

• rail flaw detection,<br />

• drain cleaning,<br />

The root • rail signaling<br />

future<br />

& OHTE, and<br />

Your all-African solution to upgrading the rail network<br />

• smart rail.<br />

in Sub-Saharan Africa<br />

Operating from Kimberley in the Northern Cape, Rail<br />

Contact details<br />

2 Rail has been in the industry for close to a decade. Rail<br />

Tel: +2711 898 6800; Mail: info@lenningsrail.africa<br />

2 Rail manufacturers pre-stressed PY and P2 concrete<br />

railway sleepers in compliance with SABS ISO 9001-<br />

2000 standards. The sleepers are manufactured under<br />

technical license from Rail One. Rail 2 Rail is one of the<br />

biggest manufacturers of concrete sleepers in South<br />

Africa. With the capacity to produce 400 000 sleepers<br />

per annum, which are transported via a rail siding all<br />

of African mobility<br />

across South Africa, Rail 2 Rail, powered by Mathupha<br />

Capital, is the only majority black owned supplier of<br />

concrete sleepers in South Africa.<br />

Contact details<br />

Tel: +2787 330 2221; Mail: info@rail2rail.co.za<br />

Mathupha Capital is a 100% black-owned rail infrastructure solutions provider founded in Johannesburg,<br />

South Africa. The name Mathupha Capital was derived from the need to stay relevant and represent the market<br />

we compete in as an investment company, hence the modern take to the African name in the term “Capital”.<br />


Mathupha represents our roots. This is our Chairman’s<br />

family’s clan name and it speaks to our lineage. It<br />

represents where we come from and who fuelled the drive<br />

to create such a successful company. We believe that our<br />

foundation and where we come from propels us to be the<br />

best that we can be. Honouring our heritage daily clears the path for<br />

us to reach even greater heights.<br />

Mathupha Capital’s ultimate vision is to be the leading turnkey<br />

rail solution provider on the African continent. This is no easy task<br />

but we are confident in our ability to reach this ultimate goal. We are<br />

the future of African mobility.<br />

Mathupha Capital is the holding company and<br />

100% owner of Rail 2 Rail and Lennings Rail.<br />

We also believe in not only creating a future that<br />

benefits us and the industry, but we also believe in<br />

a future that benefits the country and continent at<br />

large and its communities, hence the establishment<br />

of the Mathupha Foundation.<br />

Rail 2 Rail operates from Kimberley in the<br />

Northern Cape and has been in the industry for<br />

close to a decade.<br />

Rail 2 Rail is the second largest manufacturer<br />

of concrete sleepers in South Africa and is the<br />

only majority black-owned supplier of concrete<br />

sleepers in South Africa with a capacity to produce<br />

over 400 000 sleepers per annum. Rail 2 Rail<br />

manufacturers pre-stressed concrete PY and P2<br />

railway sleepers in compliance with SABS ISO 9001-2000 standards.<br />

These sleepers are manufactured under technical license from Rail<br />

One, a leading supplier of innovative track systems for passenger,<br />

freight, and heavy-haul transport based in Germany.<br />

Lennings Rail operates from Boksburg in Gauteng and is the<br />

oldest mechanised track construction and maintenance business<br />

in Africa with roots dating back to 1931 and focuses on turnkey<br />

mechanised railway development, construction, rehabilitation and<br />

maintenance of track infrastructure work systems.<br />

Lennings Rail is highly differentiated in this industry because<br />

of its in-house engineering capabilities that can repair and build<br />

machinery components on-site using mostly local<br />

suppliers, thereby optimising downtime on occupations.<br />

Our service offering under this subsidiary includes<br />

mechanised sleeper replacement, railway construction<br />

and rehabilitation, ballast tamping, regulating and<br />

screening, OHTE maintenance, rail profile rectification<br />

(grinding), rail flaw detection (rail breaks) and drain<br />

cleaning.<br />

Lennings Rail also has capabilities in rail signalling<br />

and OHTE (incl. substations) as well as smart rail. Through<br />

this subsidiary, we are passionate about migrating<br />

into the digital environment by offering turnkey rail<br />

infrastructure automation, rail signalling, metering and<br />

monitoring, telecoms, theft and vandalism prevention,<br />

automatic fare collection and maintenance.<br />

Through Lennings Rail we have projects<br />

spanning South Africa and other African countries<br />

such as Mozambique and Namibia, amongst others.<br />

The Mathupha Foundation is the corporate<br />

social investment arm of the group and its<br />

subsidiaries, and its primary goal is to build a truly<br />

liberated and successful South Africa by providing<br />

and supporting every member of the family to be<br />

functional and independent. The foundation is<br />

founded upon four key pillars; supporting the girl<br />

child, boy child, entrepreneurs and also focusing<br />

on rural development.<br />

As an organisation, we believe that we have to<br />

be the change we want to see in the world, be it<br />

through our subsidiaries or the foundation.<br />

20 | www.opportunityonline.co.za


WE CAN<br />


Tshepo Kgare (Railway Safety Regulator: ACEO)<br />

shares her first-hand insight into what the RSR<br />

is doing to keep their teams, clients, suppliers<br />

and the public safe and on track for a brighter<br />

South African economic future, while making<br />

significant strides into empowering women<br />

and keeping them safe at work.<br />

South Africa is at a crossroad and need the intervention<br />

of industry roleplayers, including members of society.<br />

Since the lockdown, the rate of theft and vandalism of<br />

infrastructure has escalated exponentially. During the<br />

same time, there has also been a rise in gender-based<br />

violence where women cruelly lost their lives.<br />

While we lament the death of women who are often killed by<br />

people they know, we should be mindful that female workers,<br />

particularly female train drivers, are often victims of crime<br />

while executing their duties.<br />

The general corporate response to affirmative action in the<br />

railways has created a highly visible but often vulnerable<br />

female workforce. However, if we are to attract more female<br />

train drivers and bright young female engineers to the rail<br />

sector, we will have to ensure that they are not deterred by the<br />

prevailing external forces.<br />

“Let’s ensure<br />

we protect our<br />

rail workers.”

South African women have become increasingly<br />

prominent in sectors that were previously dominated<br />

by men. However, the representation of female<br />

engineers in the rail sector is still disproportionate.<br />

“I am passionate about young women taking up<br />

careers in science, technology, engineering and<br />

maths (STEM) sectors,” says Tshepo Kgare, RSR<br />

ACEO. The railways offer exciting career paths<br />

such as railway inspectors, human factor specialists<br />

and Overhead Track Equipment (OHTE) specialists<br />

among others.<br />

The Association of South African Women in<br />

Science and Engineering, under the helm of the<br />

University of Cape Town states that South Africa<br />

has a critical shortage of trained technological<br />

professionals to the degree that there was only 49<br />

scientist and engineers involved in research 40<br />

years back.<br />

The RSR views the empowerment of women in<br />

science and engineering as a business imperative<br />

to build an inclusive community. The Regulator<br />

follows equitable employment and skills development<br />

practices, nevertheless have to acknowledge that the<br />

sector is still miles from levelling the playing field.<br />

____ __ ___ __ _ _<br />

“I am passionate about<br />

young women taking<br />

up careers in science,<br />

technology, engineering<br />

and maths (STEM)<br />

sectors.” – Tshepo Kgare<br />

_____ __ ___ __ _ _<br />

According to the ACEO, Tshepo Kgare, we have to be<br />

the change we want to see.<br />

“We need to encourage girls to push the boundaries<br />

and to reach fearlessly for what they want. Together we<br />

can disrupt the collective barriers that impede women<br />

from entering the rail sector,” said Kgare.<br />


Covid-19 has proven to be a disruption not only to the<br />

economy and health system, but to all facets of life. To<br />

this effect, rail is no exception. The nationwide lockdown<br />

resulted in most rail operators suspending their<br />

operations, while those who remained to operate did so<br />

under strict regulations and restrictions.<br />

As the country moved to Alert Level 4 of the lockdown<br />

in May, the Minister of Transport, Honourable<br />

Fikile Mbalula issued directives to address, prevent and<br />

combat the spread of Covid-19 in the rail operations.<br />

As custodians of rail safety, the RSR played a central<br />

role in ensuring that rail operators comprehend and<br />

comply with the directives.<br />

At the heart of the directives was an entreaty to operators<br />

to demonstrate the health and safety measures<br />

put in place to ensure that their operations are compliant<br />

to the prescribed regulations. This encompassed,<br />

inter alia, the protection of rail workers.<br />

To accentuate on the clarion call to protect rail<br />

workers, the RSR launched the Siyabavikela Campaign<br />

at the beginning of June. The campaign which focusses<br />

on protecting rail workers aims to heighten awareness<br />

and reinforce the compliance that is required from<br />

operators as far as social distancing and personal protective<br />

equipment is concerned.<br />

The campaign has been received very well by rail<br />

operators who responded by sharing photos of rail<br />

employees wearing masks, maintaining social distancing<br />

and sanitizing their hands among other things.<br />

These responses, coupled with the Covid-19 response<br />

plans received from operators, as well as Covid-19<br />

reports and updates, gives the Regulator comfort<br />

that the industry is on the right track. In the words of<br />

President Cyril Ramaphosa, “The task of dealing with<br />

the coronavirus pandemic is like running a marathon<br />

and not a sprint.”<br />

The World Health Organisation has also cautioned<br />

that the coronavirus pandemic will be with us for quite<br />

some time. In light of this, the ball is in the court of<br />

all rail stakeholders to ensure that we fight with the<br />

pandemic and continue to protect our rail icons!<br />

___ __<br />

The RSR is a<br />

government agency<br />

established in terms<br />

of the National<br />

Railway Safety<br />

Regulator Act,<br />

No 16 of 2002 (as<br />

amended) to oversee<br />

and enforce safety<br />

compliance by all<br />

railway operators<br />

in South Africa,<br />

including those<br />

of neighbouring<br />

states whose<br />

rail operations enter<br />

South Africa.<br />



Are you missing out<br />

on the TRUE<br />

AI?<br />

potential of<br />

Artificial Intelligence is top of mind, but is its impact understood?<br />

Research suggests that the short-term impacts are vastly<br />

overstated and the longer-term implications remain unexplored.<br />

We see this same misapplied focus in enterprises where efforts either target<br />

micro-sized use cases with disproportionate expectations of returns or<br />

oversized, abstract dystopian concepts like replacing large chunks of<br />

the workforce. The structural implications are often unexplored. For<br />

example, with the adoption of smartphones and mobile broadband, the<br />

effect on the quality of phone voice connections is insignificant compared with<br />

the effect of Artificial Intelligence (AI) on industry value chains and the creation<br />

of new ones like the sharing economy, with disruptors such as Uber and Airbnb.<br />

A similar wave of structural change is likely with the widespread adoption of<br />

AI – embedded AI. Embedded AI refers to the deep intertwining and widespread<br />

adoption of AI in every step of the value chain (think Internet). Here’s what<br />

organisations can expect from a world of embedded AI.<br />

would be continually tested against claims, which<br />

could reimagine the “actuarial” model upon which<br />


the insurance industry is based. Insurance premiums<br />

Embedding AI in the organisation has the potential to disrupt entire business measured in cents, anyone?<br />

models, much the way Amazon is using digital technology to upend retail.<br />

For example, consider the impact these changes could have on the insurance RECONFIGURING CURRENT OPERATIONS<br />

industry. Dynamically mining consumer preference and behaviour data could The multitude of micro use cases of AI being considered<br />

lead to faster, more accurate and personalised risk profiles. These profiles today is premised on wildly unrealistic expectations of<br />

www.kearney.com<br />

4 FACTS<br />



ABOUT AI<br />


For the first time, machine-learning algorithms are beating humans in tasks such as image<br />

recognition and voice-to-text translation, and complex games such as Go. This AI boom is<br />

fuelled by a convergence of three factors: a breakthrough in deep-learning algorithms, the<br />

proliferation of big data (structured data) to train these algorithms and an exponential<br />

speedup in processing power for machine-learning hardware, such as the graphics processing<br />

unit (GPU) chipsets that cut down a machine’s training time from months to days and hours.<br />

24 | www.opportunityonline.co.za


impact. The true value of embedding AI in current<br />

operations is reconfiguration, not optimisation.<br />

For example, leveraging chatbots for customer service<br />

is a limited and narrow use case – still useful, but not<br />

game-changing. Embedding a suite of AI capabilities<br />

in the customer journey: behaviour analysis to predict<br />

issues/calls, dynamically routing queries based on<br />

customer context and mood, instantaneous solutions<br />

and “rebates”, and, yes, traditional chatbots, can upend<br />

customer service as we know it. Can you imagine a call<br />

centre without any employees, a call routing<br />

system without any prompts, or<br />

perhaps proactive information sent<br />

to the customer before they make<br />

a call? When you think about it,<br />

the answer is, of course, yes.<br />



AI has the potential to improve<br />

the lives and efficiencies<br />

of the workers in this new<br />

organisational structure. It would<br />

require companies to treat and<br />

train AI as a fundamental aspect<br />

of the business, available beyond<br />

isolated pockets of expertise. When<br />

companies enable every employee to<br />

utilise a suite of AI tools, those employees will<br />

be empowered to make the best possible decisions<br />

with the latest information. Embedded AI systems<br />

deliver data and information, freeing workers up to<br />

look at the bigger picture. This enterprise AI suite<br />

could transform knowledge workers’ jobs in the<br />

same way that Microsoft Office transformed the<br />

way we communicate.<br />


AI’s capabilities will surge in the future as we continue<br />

to develop exponential technologies, including<br />

augmented reality, virtual reality, nanotechnology and<br />

digital biology. To reach this stage of innovation, we<br />

must start with a solid foundation.<br />

So go ahead and build your micro-solutions that improve operations and enhance<br />

your operations now – they will provide good lessons, but perhaps not billions of<br />

rands, in efficiency. But as you invest in near-term efficiencies, spare a thought<br />

or two about the bigger picture: How do I embed AI in my business to deliver<br />

structural change?<br />

Consider the following when deciding where to use AI for enterprise automation:<br />

•One-time costs. Assess the initial capital outlay for a new AI solution, such<br />

as developing an algorithm and acquiring training data. Open-source access to<br />

algorithms and pay-as-you-go “AI as a service” platforms can lower the fixed-cost<br />

hurdles, but access to training data can be either an expensive bottleneck or a<br />

powerful source of differentiation.<br />

• Switching costs. Evaluate the costs associated with displacing the existing<br />

solution with an AI solution, including technical hurdles such as the ability to open<br />

the AI algorithm’s black box to trace and explain decisions and human obstacles<br />

such as political and cultural resistance to change.<br />

• Ecosystem requirements. Determine if an integrated solution will require any<br />

complementary technologies. For example, an AI solution that must be integrated<br />

with innovative IoT sensors and emerging robotics technology will be more<br />

complex to adopt.<br />

• System externality hurdles. Consider the extent to which the AI solution<br />

could negatively affect third parties that did not choose to use the new technology,<br />

bearing in mind that the value of the solution will increase as more users adopt it.<br />

AI automation is rapidly becoming a reality across organisations and value<br />

chains. Now is the time for forward-thinking business leaders to adopt a<br />

disciplined, portfolio-based approach to develop machine-learning capabilities,<br />

data and partnerships to remain relevant.<br />


Some AI applications will be adopted faster than others, even though the technical<br />

requirements are comparable. Broader solutions can ensure that a company’s portfolio<br />

of AI initiatives can unlock value in the near term while also paving the<br />

way for long-term aspirations.<br />


The Japanese insurer Fukoko plans to use AI to replace more than two dozen<br />

human agents who process claims, and Goldman Sachs used machine learning<br />

to transform its 600-person trader unit into a much leaner 200-person team<br />

between 2000 and 2016. However, not all organisational activities are suitable<br />

for AI automation under today’s narrow paradigm.<br />


So what will AI be able to do for enterprise automation in the next five to seven years? Most experts<br />

say companies will adopt narrow AI, or supervised machine learning that is focused on one task. AI<br />

algorithms will be able to use training data to learn how to automate a task, but once the task is<br />

mastered, the solution will be narrow, and in most cases, the machine will not be able to generalise<br />

that learning to perform other tasks. Widespread use of broad, human-like general intelligence, in<br />

other words, unsupervised and context-aware, could be decades away.<br />

The true value of<br />

embedding AI in<br />

current operations<br />

is reconfiguration,<br />

not optimisation<br />

www.opportunityonline.co.za | 25


Becoming<br />

risk-savvy<br />



Procurement is at the heart of Covid-19 crisis management and has taken an active<br />

role in mitigating the immediate impact of the pandemic. Now, as companies brace<br />

for the crisis’ long-term impact, a clear shift in mindset is needed.<br />

Since the Covid-19 pandemic began battering<br />

the world, procurement professionals of almost<br />

every company have been rethinking their<br />

supply risk management capabilities. Most are<br />

grappling with little else today, as they try to<br />

figure out how best to cope with the current and lasting<br />

effects of the crisis.<br />

How, and what, are they doing?<br />

To find out, international management consultancy,<br />

Kearney, recently conducted a global procurement<br />

survey on the impact of the pandemic. In the survey,<br />

Kearney asked procurement professionals how well<br />

prepared they were for the pandemic at its onslaught,<br />

procurement’s reactions to the immediate crisis, the role<br />

procurement has played in bracing their companies for<br />

the crisis’ longer-term impact, and how their mindset<br />

about broader risk management strategies has changed.<br />

Here’s what was learned:<br />

___ __ ____ _ _<br />

The pandemic crisis<br />

has put a dramatic<br />

emphasis on the<br />

need for a balanced<br />

scorecard approach to<br />

measure the full impact<br />

of procurement<br />

___ __ ___ _<br />


Procurement is at the heart of most global companies’<br />

crisis management efforts and plays an active role for<br />

more than 70% of respondents. In these companies,<br />

procurement is regarded as a peer with the other<br />

organisational functions. It has a seat at the table and a<br />

substantial voice in managing the Covid-19 crisis.<br />

As the interface between the company and its<br />

suppliers, procurement is in a unique position to<br />

understand who the most vulnerable partners in<br />

the supply chain are and take the right measures to<br />

protect those most at risk. In about 30% of the companies<br />

– especially those in smaller revenue brackets –<br />

procurement has taken on a primary leadership role<br />

and coordinates the cross-functional teams in day-today<br />

crisis management and operations.<br />

Some companies, though, are slower in getting their<br />

herd over water than their competitors as the Covid-19<br />

pandemic has exposed major weaknesses in their<br />

supply chains – in particular around S&OP processes,<br />

inventory control, and stock keeping unit (SKU)<br />

complexity – which are compounding day-to-day crisis<br />

management efforts.<br />

Nevertheless, about 60% of companies have moved<br />

beyond survival mode and started to look beyond the<br />

crisis’ immediate impact.<br />

They are operating in the current environment and<br />

starting to plan and adapt for the post-recovery new<br />

normal by assessing the impact of the crisis on their<br />

broader risk management approach and adapting<br />

category strategies based on scenario analysis for<br />

the new normal. Procurement has a significant role to<br />

play here.<br />

___ __<br />

Today, only 34% of<br />

companies have a<br />

well-defined supply<br />

risk management<br />

strategy explicitly<br />

linked to their<br />

core procurement<br />

activities and<br />

dynamically<br />

refreshed based on<br />

external situation<br />

and internal<br />

demand changes<br />

(see figure, right).<br />

www.kearney.com<br />

26 | www.opportunityonline.co.za



A clear call to action is resounding throughout most<br />

companies – a call urging procurement to do much<br />

more to improve risk management strategies and<br />

capabilities in the next 12 months. Almost 90% of survey<br />

respondents believe the C-suite is fully expecting – and<br />

is committed – to fundamental improvements in supply<br />

risk management capabilities. They are convinced that<br />

much needs to be done in the coming year – and that<br />

they must start now.<br />


Most companies today have a supply risk management<br />

strategy. But for many, the strategy is basic at best and<br />

far from robust, and the current crisis dramatically<br />

surfaced many pain points. They recognise that the<br />

strategy needs to become much more comprehensive,<br />

explicit and dynamic.<br />

It must, for example, be explicitly linked to what’s<br />

happening externally in the market and internally<br />

within the company, so it can be dynamically adjusted<br />

to address these changes. It must be comprehensive in<br />

measuring the impact on total value at risk, including<br />

other value dimensions such as cash, growth, innovation<br />

and enterprise agility. And it must be implemented and<br />

dynamically refreshed – not just developed and then<br />

disregarded. These are difficult tasks.<br />

Today, only 34% of companies have a well-defined<br />

supply risk management strategy explicitly linked<br />

to their core procurement activities and dynamically<br />

refreshed based on external situation and internal<br />

demand changes (see figure below). With Covid-19<br />

battering their operations, though, other companies<br />

are looking closely at reworking their strategies. A<br />

year from now, another 22% expect to have a robust<br />

supply risk management strategy in place, giving more<br />

than half of all companies a sound footing on which to<br />

prepare for what’s ahead.<br />

A company’s industry, of course, can affect which<br />

supply risk management approaches it chooses to<br />

use, which it uses on an ad hoc basis, and which<br />

it uses systematically. All finance institutions in<br />

the survey, as would be expected, apply financial<br />

risk management. But today 57% of respondents<br />

regardless of industry apply this approach to<br />

managing their supply risk. More and more<br />

companies now realise that to defend against a<br />

catastrophe such as Covid-19, they must use the full<br />

array of risk management approaches – and they<br />

must apply these approaches systematically, not on<br />

an as-needed basis.<br />



Many companies view cost reduction as the key<br />

– and, often, the only – value delivered by the<br />

procurement function. They operate with a strict<br />

cost competitiveness mindset. The pandemic crisis<br />

has put a dramatic emphasis on the need for a<br />

balanced scorecard approach to measure the full<br />

impact of procurement.<br />

So, in addition to applying the full array of supply<br />

risk management approaches available, companies<br />

that see procurement’s potential benefits also<br />

measure the impact of these approaches across<br />

all the dimensions in value creation. This does<br />

not mean that the pressure on competitive costs<br />

is going away, and many organisations are taking<br />

steps today to update their category management<br />

strategies (for example, in commodities in light<br />

of the recent oil price movements, or in indirects<br />

where consolidation and demand management<br />

opportunities exist in some areas). But as the survey<br />

shows, a large percentage of companies today give<br />

a high amount of consideration to each of the<br />

following value-creation dimensions:<br />

86% | CASH (working capital and terms<br />

of payment )<br />

86% | RELIABILITY (service levels, quality, etc)<br />

79% | TOTAL COST<br />

76% | GROWTH (speed to market, innovation)<br />

72% | AGILITY (end-to-end cycle time and<br />

reaction to emerging customer needs)<br />

These companies know that to successfully<br />

look beyond cost savings and to the<br />

additional benefits procurement can<br />

create, they cannot operate with the same<br />

mindset focused on “cost competitiveness”<br />

and are starting to shift their mindset to<br />

“risk competitiveness”. In essence, they<br />

are becoming risk savvy.<br />



• What stage are you<br />

in today?<br />

1. Survive<br />

(focus is on ensuring<br />

business continuity)<br />

2. Operate<br />

(operating in the period<br />

of high uncertainty)<br />

3. Adapt<br />

(preparing for what<br />

is coming next)<br />

• What are the key<br />

weaknesses the<br />

pandemic crisis has<br />

exposed about your<br />

supply chain?<br />

• What specific actions<br />

are you taking today<br />

to take care of the<br />

most vulnerable of<br />

your suppliers?<br />

• How robust are your<br />

supply risk management<br />

strategies<br />

and capabilities?<br />

• Is the mindset in your<br />

organisation focused<br />

on “cost competitiveness”<br />

or “risk competitiveness”?<br />

• What actions are<br />

you taking today<br />

to be prepared for<br />

post-recovery?<br />

www.opportunityonline.co.za | 27



of magnitude<br />



2019 saw US companies actively adapting to what then felt like a major disruption – the US-China<br />

trade war. Specifically, US companies sharply reduced imports of manufactured goods from China.<br />

The shift was sizable, but there was still a sense that manufacturing imports might revert to old<br />

patterns once the trade war ends. Then everything changed.<br />

2020 dawned with the disruption of a new order<br />

of magnitude: Covid-19. At time of writing, the<br />

full extent of the societal and economic trauma<br />

the coronavirus pandemic may cause is still<br />

unknown. But it will be historic. In multiple<br />

countries, social and economic activity is essentially<br />

frozen. Governments as dissimilar as the US, Russia<br />

and Italy are currently scrambling (and struggling) to<br />

construct a coherent and effective response. The outlook<br />

is daunting.<br />

The lessons we must learn from Covid-19 are<br />

as momentous as they are harsh. While the trade<br />

war triggered some notable tinkering, the massive<br />

operational disruption wrought by the coronavirus<br />

pandemic will compel companies to fundamentally<br />

rethink their sourcing strategies.<br />


Might such a strategic redistribution spur a dynamic<br />

resurgence of US domestic manufacturing? It seems<br />

unlikely. The limitations that held US manufacturing<br />

to flat growth in 2019, even as the trade war put Chinese<br />

manufacturing at a decided disadvantage, will continue<br />

to work against a US manufacturing revival. There is<br />

still a pronounced shortage of skilled manufacturing<br />

labour, and the long-promised productivity boom via<br />

automation has yet to be realised. Yes, companies will<br />

be more inclined to look at new sourcing options, but<br />

they will still want to place most of their eggs in costcompetitive<br />

baskets.<br />

The more likely outcome will be an accelerated<br />

scattering. Companies that began distributing their<br />

import supply risk in response to the stresses of the<br />

trade war will double down on that strategy in response<br />

to the much more severe disruptions caused by Covid-19.<br />

In that sense, the trade war may have been a blessing<br />

in disguise. Unanticipated shifts in US trade policy and<br />

the resulting retaliatory exchange with China prompted<br />

companies that had long relied on Chinese suppliers to<br />

start rethinking old assumptions about where and how<br />

to source.<br />

More broadly, by confronting US companies with<br />

costly disruptions that were largely beyond their<br />

control, the trade war triggered at least a partial<br />

awakening to the intrinsic vulnerabilities of modern<br />

global supply chains.<br />

Events in 2020 cast the trade war as a mere precursor<br />

to the far greater economic and operational<br />

disruptions being wrought by the coronavirus. What<br />

we are experiencing now demands a more profound<br />

reckoning. Covid-19 should cause companies to fundamentally<br />

rethink the criteria they use to shape their<br />

supply chains.<br />


Three decades ago, many US producers began<br />

manufacturing and sourcing in China for one<br />

reason: cost. The US-China trade war brought a<br />

second dimension more fully into the equation – risk<br />

– as tariffs and the threat of disrupted China imports<br />

prompted companies to weigh surety of supply more<br />

fully alongside costs. Covid-19 brings the third<br />

dimension more fully into the mix, and arguably to the<br />

fore – resilience.<br />

___ __<br />

Recent events<br />

illustrate, with<br />

distressing clarity,<br />

that events frequently<br />

unfold in ways that<br />

were impossible for<br />

anyone to foresee,<br />

shattering the<br />

assumptions that<br />

shaped supply<br />

chain strategies.<br />

28 | www.opportunityonline.co.za


www.kearney.com<br />

The current crisis is exposing vulnerabilities that<br />

cannot be addressed with short-term fixes and minor<br />

tinkering. Many companies quickly ran out of any<br />

inventory they were able to stockpile ahead of the<br />

Covid-19 outbreak. Some with heavy dependence on<br />

China found they had few alternatives that could help<br />

see them through the drought.<br />

We have subsequently learned that the disruption of<br />

supply from core manufacturing regions of China was<br />

just the beginning of the havoc to be wrought by the<br />

coronavirus. Recent events illustrate, with distressing<br />

clarity, that events frequently unfold in ways that<br />

were impossible for anyone to foresee, shattering the<br />

assumptions that shaped supply chain strategies.<br />

The answer? Companies need to place more value on<br />

resilience by building supply chains that can nimbly<br />

sense and pivot in response to unexpected demands<br />

and disruptions. This is the key to operating profitably<br />

in the face of ongoing disruptions.<br />

___ __ ___ __ _ _<br />

The current crisis is<br />

exposing vulnerabilities<br />

that cannot be<br />

addressed with<br />

short-term fixes<br />

and minor tinkering<br />

___ __ ___ __ _ _<br />

Many supply chain leaders have transitioned from<br />

the uncertainty by adopting new ways of working to<br />

stabilise their business. Now it’s time to begin thinking<br />

strategically about how to position operational networks<br />

for life beyond the pandemic by designing a supply<br />

chain that is both resilient and agile, can withstand<br />

risks to both demand and supply, and can quickly<br />

respond to shocks.<br />

The first step is to conduct a rigorous review of the<br />

impact Covid-19 is having on demand and the corresponding<br />

performance of the supply chain. This will<br />

require drilling down to the specifics of how the<br />

pandemic has already affected demand and how<br />

demand might change in the future.<br />

To build a framework for a post-pandemic review,<br />

considering these impacts of the coronavirus outbreak<br />

is a good start:<br />

• Demand has shifted<br />

The demand for many products saw a rapid increase;<br />

others saw a rapid decline. Some are no longer a<br />

priority and may be gone for good.<br />

• Customer behaviours have changed<br />

Internet purchasing is skyrocketing in<br />

some industries, and brick-and-mortar<br />

retail may never be the same.<br />

• There are new customers<br />

People have reprioritised their wants<br />

versus their needs, and it has affected<br />

what they buy and who they buy it from.<br />

• Portfolios are back to the drawing board<br />

Certain stock keeping units (SKUs) are<br />

no longer important, and in other cases,<br />

product needs in a post-Covid world are<br />

being rapidly redesigned.<br />

Similarly, the impacts on supply will<br />

also require a post-pandemic review:<br />

• Supply chains were disrupted during the pandemic<br />

The Covid-19 outbreak caused major shifts – from<br />

transitioning supply planners so they can work from<br />

home and finding alternative sources for suppliers<br />

that are under lockdown to keeping employees safe<br />

and manufacturing capacity available.<br />

• Some supply areas performed well, others struggled<br />

New best practices were learned and will be capitalised<br />

on, and risky practices will be eliminated.<br />

• Structural elements exacerbated supply issues<br />

Global supply chains will be questioned as geographies<br />

experienced the pandemic in phases and<br />

suppliers, manufacturers and distributors were cut<br />

off from one another.<br />

• Technology is essential<br />

Responding during a crisis requires real-time data<br />

about where materials and products are as well as the<br />

status, location and health of employees in plants and<br />

warehouses. It also requires control towers that can<br />

orchestrate operations from end to end.<br />

Historically, operations strategy focused on balancing<br />

cost reduction and investments to improve availability<br />

performance and lead times. The business risk was<br />

important, but it was typically addressed with relatively<br />

simple approaches, such as maintaining safety stock at<br />

distribution centres or establishing one-off secondary<br />

supplier relationships. Responding to a global crisis was<br />

rarely part of the picture.<br />

As the world advances towards recovery, a supply<br />

chain strategy will need to evolve to incorporate the<br />

lessons learned during this pandemic. That means<br />

moving away from a narrow focus on cost and<br />

availability to a more comprehensive perspective that<br />

incorporates risk and resilience factors. Supply chain<br />

organisations that are designed to manage the right<br />

risks in the right way will ultimately beat out the<br />

competition when the next crisis inevitably strikes.<br />

___ __<br />

Now it’s time to begin<br />

thinking strategically<br />

about how to position<br />

operational networks<br />

for life beyond<br />

the pandemic by<br />

designing a supply<br />

chain that is both<br />

resilient and agile,<br />

can withstand risks<br />

to both demand<br />

and supply, and can<br />

quickly respond<br />

to shocks.<br />

www.opportunityonline.co.za | 29


ovid-19<br />

nd its impact on<br />

-commerce<br />

The pandemic has pushed e-commerce and supply chain issues to the top of the CEO agenda – opening<br />

a window of opportunity for businesses to capitalise on the rapidly expanding online market.<br />

Covid-19 has triggered exponential growth<br />

in e-commerce and spurred many smaller<br />

retailers to get in the game by establishing<br />

their online offerings. If this shift becomes the<br />

new normal, now is the time to rapidly define<br />

omnichannel and supply chain strategies and ensure<br />

the right structures are in place to support it.<br />

As consumers become accustomed to the luxuries<br />

of online shopping, this channel is likely to become<br />

their preferred way of shopping once the pandemic is<br />

over. To win in this new normal, retailers will need to<br />

consider both the immediate and long-term implications<br />

of consumers’ changing behaviours.<br />


Establish a competitive e-commerce offering by<br />

focusing on three areas:<br />

Business planning and response<br />

The Covid-19 outbreak has highlighted the importance<br />

of being adaptable and responsive. During this<br />

time, traditional demand triggers are not as relevant,<br />

so new behaviour signals will need to be monitored by<br />

tracking leading indicators. This will require a twofold<br />

approach: qualitatively assessing government<br />

and media messaging and quantitively tracking<br />

customer data. Also, leading businesses have a welldocumented<br />

response plan to triggers so they can act<br />

quickly and decisively.<br />

E-commerce channel strategy<br />

Consumers of all ages have been forced to rapidly adapt<br />

their purchasing behaviours. In the short term, focus<br />

on establishing or streamlining your online offerings,<br />

either through an existing website or a business-toconsumer<br />

marketplace. To drive efficiency, limit the<br />

initial offering to core products to maximise profits by<br />

minimising the effort required to establish a product<br />

range. Effectively managing inventories and narrowing<br />

the window of time from purchase to shipping will also<br />

keep customers happy.<br />

Delivery services<br />

Forward-thinking businesses understand the capacity<br />

of their delivery partners and manage costs and<br />

customer expectations accordingly. To improve delivery<br />

speed and service quality, examine your delivery<br />

service agreements and consider whether alternate<br />

or additional delivery partners are needed. To create<br />

___ __<br />

Effectively managing<br />

inventories and<br />

narrowing the<br />

window of time<br />

from purchase to<br />

shipping will keep<br />

customers happy.<br />

www.kearney.com<br />

30 | www.opportunityonline.co.za


a customer-centric and economically sustainable<br />

delivery service, consider two aspects: consumers’ price<br />

sensitivity and delivery options such as same day, next<br />

day, or a specific delivery window.<br />


In the mid to long term, focus on two areas:<br />

Refine the omnichannel strategy<br />

The online competition will continue to grow as<br />

consumers are now accustomed to buying online<br />

and more businesses are embracing e-commerce. In<br />

light of these shifts, consider the best way to manage<br />

your omnichannel strategy. Most businesses either<br />

sell their products solely on their websites or they<br />

use a combination of brick-and-mortar marketplaces<br />

and websites. The most effective approach is to adopt<br />

a tailored product-range strategy, which can be<br />

implemented in one of two ways:<br />

•Offer a differentiated range of products<br />

Because consumers typically buy different types<br />

of products online than they do in stores, develop<br />

an online offering that focuses on the products<br />

that people tend to buy online. For example, online<br />

shoppers often buy bulky items that they can easily<br />

review online, such as kitchen aids and gaming<br />

consoles, rather than items they want to hold before<br />

they buy, such as a tennis racket.<br />

• Sell different products on different sites<br />

To ensure a clear distinction between product<br />

quality and to maintain profit margins on premium<br />

products, consider selling different product ranges<br />

on different sites. For example, sell premium<br />

products on your website, and sell standard products<br />

on marketplaces such as Amazon.<br />

Optimise last-mile delivery<br />

Recent events have strained supply chains and revealed<br />

that businesses with resilient and agile supply chains<br />

are best suited to adapt to unpredictability. In light of<br />

the events of the past 12 months and the acceleration<br />

of e-commerce, consider the level of outsourcing<br />

versus the strategic investment required to build lastmile<br />

capabilities. Most companies rely on third-party<br />

logistics providers. However, a self-managed supply<br />

chain allows businesses to control services, quickly<br />

switch or onboard suppliers, and increase security.<br />

The grocery category is moving toward ultra-fast<br />

delivery, defined as less than two hours from click to<br />

delivery. Consumers continue to signal that they prefer<br />

ultra-fast over in-store shopping or slower deliveries,<br />

and the Covid-19 e-commerce surge presents shippers<br />

and logistics providers with significant headwinds.<br />

There’s a non-linear relationship between cost and<br />

lead time for last-mile delivery. Lastmile<br />

costs now play an elevated role in<br />

ensuring future financial viability and<br />

sustainable growth.<br />

As a shipper or logistics provider, if<br />

you want to play in the last-mile space,<br />

you will need to tackle the complex<br />

balance between needs and cost. The<br />

good news is that your customers, your<br />

products and your needs – not the<br />

prescribed chase of the giants – are<br />

what will truly determine how much<br />

you should spend on your last mile.<br />

The needs-based segmentation can appear overwhelming,<br />

but it can be centred around some important<br />

dimensions. Three such dimensions are consumer<br />

centricity and sustainability; reliability and control; and<br />

flexibility and resilience.<br />

___ __ ___ __ _ _<br />

During this time,<br />

traditional demand<br />

triggers are not as<br />

relevant, so new<br />

behaviour signals<br />

will need to be<br />

monitored by tracking<br />

leading indicators<br />

___ __ ___ __ _ _<br />

Consumer centricity and sustainability<br />

As e-commerce accelerates and large players increase<br />

their influence, you must start obsessing over how<br />

you are going to provide consumers with unparalleled<br />

service. Two areas are crucial:<br />

• Seamless experience<br />

New e-commerce consumers expect a seamless<br />

experience across channels. You must design and<br />

implement a continuous experience across all digital<br />

(website, mobile application, alerts, etc) and physical<br />

touchpoints throughout the customer journey.<br />

• End-to-end visibility<br />

It’s not merely about delivering at hyper-speed<br />

and on time. Consumers today want end-to-end<br />

visibility into the delivery process through nearreal-time<br />

notifications and pictures upon delivery.<br />

This visibility is essential to best-in-class customer<br />

experience. You must develop the technological<br />

capabilities to provide it.<br />

___ __<br />

As a shipper or<br />

logistics provider, if<br />

you want to play in<br />

the last-mile space,<br />

you will need to<br />

tackle the complex<br />

balance between<br />

needs and cost.<br />

The needs-based<br />

segmentation can<br />

appear overwhelming,<br />

but it can be<br />

centred around<br />

some important<br />

dimensions. Three<br />

such dimensions are<br />

consumer centricity<br />

and sustainability;<br />

reliability and<br />

control; and flexibility<br />

and resilience.<br />

www.opportunityonline.co.za | 31


Reliability and control<br />

The Covid-19 pandemic emphasised the value of<br />

meeting service-level key performance indicators<br />

(KPIs) such as on-time deliveries and first-time<br />

delivery success. Covid-19 represented a reliability<br />

test for delivery networks: could their capacity and<br />

cost structures withstand such peaks?<br />

• On-time delivery<br />

You can no longer talk vaguely about “shipping<br />

in three to five business days”. As you design<br />

your last-mile delivery strategy, you need to<br />

align your network design with achievable<br />

on-time delivery targets. That’s the only way<br />

to consistently meet customer expectations.<br />

• First-time delivery success<br />

The faster you move into e-commerce, the<br />

more important it is for you to minimise your<br />

delivery quality defects – customer-reported<br />

damages, missing packages, incorrect items, or<br />

incorrect delivery locations. Such defects not only<br />

disappoint customers but are also exceptionally<br />

costly. They typically result in customer service<br />

contacts, promotions, reverse logistics, or loss of<br />

future business. To meet rising expectations and<br />

minimise your cost-to-serve, you must succeed in<br />

first-time delivery.<br />

• Experimentation to flex<br />

During the Covid-19 crisis, large players<br />

experimented with ways to flex their capacity,<br />

expanded their ability to deliver a wide variety<br />

of products at hyper-speed, and learned how to<br />

reprioritise deliveries. Most of their solutions used<br />

crowdsourcing, some existing in-house and others<br />

coming from third-party transportation providers.<br />

• Diversification to reduce risk<br />

However, when you depend solely on a crowdsourced<br />

last-mile delivery solution, you increase operational<br />

risk; you should also seek to diversify your volumes<br />

across third-party transportation providers.<br />

It all boils down to cost per package<br />

Large players keep pursuing faster delivery options,<br />

which makes it tempting to assume that all categories<br />

and product segments must be delivered within two<br />

days, or faster. But if you use this as a blanket strategy,<br />

your costs will soar. Stop chasing this prescribed<br />

strategy; instead, perform a needs-based segmentation<br />

across your products (eg groceries, apparel, furniture)<br />

and customers (eg metro/rural, subscriber).<br />

___ __<br />

During the Covid-19<br />

crisis, large players<br />

experimented with<br />

ways to flex their<br />

capacity, expanded<br />

their ability to deliver<br />

a wide variety of<br />

products at hyperspeed,<br />

and learned<br />

how to reprioritise<br />

deliveries. Most of<br />

their solutions used<br />

crowdsourcing, some<br />

existing in-house<br />

and others coming<br />

from third-party<br />

transportation<br />

providers.<br />

Flexibility and resilience<br />

If you have to respond to an unpredicted large-scale<br />

event by retroactively remodelling your last-mile<br />

network, that’s costly. Instead, you can ask upfront<br />

about how network flexibility and resilience could<br />

control unexpected costs.<br />

• Large and responsive supply base<br />

The biggest benefit of crowdsourced delivery<br />

solutions is that a large and responsive supply base<br />

can flexibly respond to spikes in demand while<br />

minimising costs during lulls.<br />

Different segments of your product-customer<br />

portfolio have different delivery needs (eg one-two<br />

hours for urban groceries, same-day for urban apparel,<br />

five days for rural furniture). Pay particular attention to<br />

the segments requiring two-day, same-day or ultra-fast<br />

delivery speeds, because the implications of increasing<br />

your delivery footprint vary. A well-executed needsbased<br />

segmentation can reduce last-mile costs by<br />

20-30% while improving service where it counts by<br />

10-20% and identifying the right carrier and technology<br />

partners for execution.<br />

32 | www.opportunityonline.co.za






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