Nigeria has ratified the Trade Facilitation Agreement (TFA), making it the 107th World Trade Organisation (WTO) member to do so. Only three more ratifications from members are needed to achieve the two-third threshold that will bring the TFA into force.
 Nigeria&#8217;s instrument of acceptance was submitted to the WTO today by the Minister for Industry, Trade and Investment Dr. Okechukwu Enelamah (<a href="http://www.fmiti.gov.ng/">www.FMITI.gov.ng</a>).
 Enelamah met with WTO Director-General Roberto Azevêdo on the margins of the World Economic Forum in Davos, Switzerland, to mark the deposit.
 “Nigeria&#8217;s ratification of the Trade Facilitation Agreement is a reflection of our commitment to the WTO and a rules-based economy. It is evidence of President Muhammadu Buhari&#8217;s commitment to rapidly implement his presidential initiative on the creation of an enabling environment for business,” Enelamah said.
 “Nigeria would like to see a strengthened WTO that reflects the development principles of developing countries like Nigeria and we praise the effectiveness of DG Azevêdo in this regard,” he added.
 On November 10, 2014, Nigeria submitted its Category A notification to the WTO outlining which substantive provisions of the TFA it intends to implement upon entry into force of the Agreement.
 The TFA will enter into force once two-thirds of the WTO membership has formally accepted the Agreement and ratification is a means of expression for a country to be legally bound by a treaty.
 Concluded at the WTO’s 2013 Bali Ministerial Conference, the TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area.
 According to a 2015 study carried out by WTO economists, full implementation of the TFA would reduce members’ trade costs by an average of 14.3 per cent, with developing countries having the most to gain. The TFA also has the ability to reduce the time to import goods by over a day and a half while also reducing time to export by almost two days, representing a reduction of 47 per cent and 91 per cent respectively over the current average. The TFA also has the potential to increase global merchandise exports by up to $1 trillion.
 In addition to Nigeria, some other African countries that have ratified are Botswana, Niger, Togo, Côte d’Ivoire, Kenya, Zambia, Lesotho, Mali, Senegal, Swaziland, Gabon, Ghana and Mozambique.
 The TFA broke new ground for developing and least-developed countries in the way it will be implemented. For the first time in WTO history, the requirement to implement the Agreement was directly linked to the capacity of the country to do so. In addition, the Agreement states that assistance and support should be provided to help them achieve that capacity.
 A Trade Facilitation Agreement Facility (TFAF) was also created at the request of developing and least-developed country members to help ensure that they receive the assistance needed to reap the full benefits of the TFA and to support the ultimate goal of full implementation of the new agreement by all members.

Nigeria ratifies the Trade Facilitation Agreement

<div class="event-banner"><a href="https://www.weforum.org/events/world-economic-forum-annual-meeting-2017">This article is part of the World Economic Forum Annual Meeting 2017</a></div>
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Watch a Special Address by Theresa May, Prime Minister of the United Kingdom from the World Economic Forum&#8217;s Annual Meeting 2017 <a href="https://www.weforum.org/events/world-economic-forum-annual-meeting-2017/sessions/special-address-by-theresa-may-prime-minister-of-the-united-kingdom">here</a>.
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It’s recently become fashionable to worry that the fabric of democracy is being undermined as people feel left behind by globalization and automation. I think these fears are to some extent well founded. But this isn’t a new problem: it goes back at least as far as the 1980s. Our failure to recognize it then, and act on it since, is why it has now reached crisis proportions.
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Are there lessons we could learn from those decades-long failures of policy? Yes. Will we learn them? Perhaps not, although there are a few promising signs.
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The most fundamental lesson is that to address a problem, you first need to notice it. One of the striking features of the Brexit vote, and the response in some other places to various manifestations of rising populism, has been the surprise of many voters in wealthy, cosmopolitan cities at discovering how differently some of their fellow citizens are thinking.
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These tend to be people living in towns and smaller cities where traditional jobs began to disappear a generation ago and have never been adequately replaced. Whole communities have experienced their real incomes stagnating or falling since well before the financial crisis.﻿
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A decade ago, Benjamin Friedman made the case in The Moral Consequences of Economic Growth that democracy requires a growing economy to lubricate the necessary give and take. When people see their own lives improving, they tend to be sanguine about others’ lives improving more quickly. However, when their own living standards have declined, and they expect their children’s to be even worse, resentment against others who are doing better is inevitable.
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For at least three decades, since automation and globalization started radically changing industry, whole swathes of geography have been struggling even as economies have grown overall. For the most part, this has barely registered on policy-makers’ radars.
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Statistics existed that could have alerted us to the brewing crisis – but nobody was looking. It took Thomas Piketty, in his 2014 work Capital, to put in the huge amount of effort necessary to make the data clearly tell the story of how many workers were being left behind.
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But all Piketty has done is start the conversation: we still need to develop a serious policy response. It’s not too late to start doing what we should have been doing since the 1980s &#8211; essentially, taking regional policy much more seriously. I see three main elements to this:
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<h2 class="st__content-block st__content-block--heading">Infrastructure</h2>
Large cities will always be the best incubators of economic growth, because the more people you have in one place, the easier it is for their knowledge to spread to each other. But we can narrow the natural disadvantage of smaller cities and towns by improving the infrastructure that connects them to each other.
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This recommendation implies making fast broadband universal, but it also points to the need for better transport, like high-speed rail, because virtual and physical communication are complements, not substitutes.﻿
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<h2 class="st__content-block st__content-block--heading">Education</h2>
I claim no expertise in how we should be educating our children for the technological state of the world they will face when they graduate, but I am fairly certain we’re currently getting it wrong. Most schools still resemble factories for turning children into expensive and not very good computers.
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One obvious and much discussed improvement would be teaching more coding – something we struggle with, partly because we don’t have enough teachers with the necessary skills. Another improvement would be to help children develop the human skills that machines seem furthest away from mastering, such as creativity in problem solving.﻿
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<h2 class="st__content-block st__content-block--heading">Devolved power</h2>
Every region is different in terms of what jobs it could create, and the kind of education it needs, which brings me to the final priority: giving local levels of government more power. If education policy is being set by a bureaucrat in a distant city, it can’t reasonably be expected to equip students with the appropriate skills for the local economy.
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The same is true of other policy areas. One clear lesson of last year’s electoral shocks is how many people felt a lack of agency. They see decisions that shape their lives being taken by people who aren’t like them, in places that feel far away, whether in central banks, multinational boardrooms or booming capital cities, and seem disconnected from their hinterlands. During the UK referendum campaign the slogan that resonated most was the promise to “take back control”.
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If part of what’s undermining democracy is people feeling disconnected from power, part of the answer must be looking for ways to return power closer to people.
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<h2 class="st__content-block st__content-block--heading">Public sector investment and political will</h2>
All of this is easier said than done. It would require a very serious redirection of resources to create opportunities in the regions or towns that have been left behind – high quality education and infrastructure do not come cheap. In addition, the initiative needs to come from the public sector, because public capital is the only kind of capital people in left-behind regions can access.
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Some may see this as unrealistic given current fiscal challenges, but the problem is less about resources than political will. Get serious about ending tax breaks for corporations and wealthy individuals and the money for investment could be found.﻿
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Globalisation has left people behind – this is what we should do about it

At the World Economic Forum Annual Meeting 2017, ministers of G20 countries called on members to continue on the path of inclusive growth, warning against protectionism. “If you want to get more inclusive growth, you need more free trade,” said Wolfgang Schäuble, Federal Minister of Finance of Germany, which holds the G20 presidency. Schäuble added that the G20 should be redoubling efforts to promote inclusive growth as part of free trade.   Nicolas Dujovne, Minister of Treasury of Argentina, said that, after being closed to international trade, his country will embrace globalization. “The new administration is opening the economy and wants to open up and receive the benefits of globalization to generate more inclusive growth,” he said, acknowledging that trying to avoid competition and openness is not good for Argentina. Argentina will take over the G20 presidency after Germany.   Mehmet Şimşek, Deputy Prime Minister of Turkey, said that protectionism is bad for global growth. He added that inclusive growth – a key focus of the 2015 Turkish G20 presidency – is important for creating jobs and reducing income inequality. “Evidence shows that inequalities constrain global growth,” he said. Despite a drop in the value of the Turkish lira, he reassured investors that the fundamentals are still there.   While too early to comment on the incoming US administration’s policies, Pravin Gordhan, Minister of Finance of South Africa, said that, he expects the US to continue to play a key role in enabling global growth and creating the right framework for inclusivity. “Collective determination can lift global growth and ensure all economies benefit at the right time,” he said.   Responding to a warning from Theresa May, Prime Minister of the United Kingdom to not threaten Britain for leaving the European Union, Schäuble countered, “We don’t’ want to punish the UK [for Brexit].” He explained: “We’re not happy with the decision and I don’t think it’s good for the UK or Europe … We need to minimize the damage to the EU and UK.” Schäuble added: “If you want to make our economies stable, we all agree the direction is for more growth inclusiveness and sustainability.”   The 47th World Economic Forum Annual Meeting is taking place on 17-20 January in Davos-Klosters, Switzerland, under the theme Responsive and Responsible Leadership. More than 3,000 participants from nearly 100 countries will participate in over 400 sessions. ﻿

Ministers call on G20 to aim for inclusive growth from WEF

<a href="http://gavi.us1.list-manage1.com/track/click?u=3e72d00b5705ce6f4def92fa1&amp;id=df9bf7beb0&amp;e=15ee1deaa5" target="_blank">Google.org</a> and Gavi announced a new partnership today to help tech start-up <a href="http://gavi.us1.list-manage.com/track/click?u=3e72d00b5705ce6f4def92fa1&amp;id=8e6830660a&amp;e=15ee1deaa5" target="_blank">Nexleaf Analytics</a> strengthen vaccine cold chain equipment for developing countries.
Google.org’s contribution of US$ 2 million, which will be matched by the <a href="http://gavi.us1.list-manage.com/track/click?u=3e72d00b5705ce6f4def92fa1&amp;id=ab244afdbe&amp;e=15ee1deaa5" target="_blank">Bill &amp; Melinda Gates Foundation</a>’s funding to the <a href="http://gavi.us1.list-manage1.com/track/click?u=3e72d00b5705ce6f4def92fa1&amp;id=e9aa21e678&amp;e=15ee1deaa5" target="_blank">Gavi Matching Fund</a>, will be used to help countries to make evidence-based decisions on the purchase and maintenance of vaccine refrigerators.
 Over the next years the volume of vaccines in Gavi-supported countries is expected to rise significantly. Vaccines are highly sensitive to high and low temperatures, and <a href="http://gavi.us1.list-manage.com/track/click?u=3e72d00b5705ce6f4def92fa1&amp;id=70d0d409ab&amp;e=15ee1deaa5" target="_blank">high-performing and well-maintained cold chain technologies are essential for ensuring vaccine potency</a>.
 “The Vaccine Alliance plays a pivotal role in encouraging innovation in immunisation and health system strengthening”, said Dr Seth Berkley, CEO of Gavi. “Many health facilities in Gavi-supported countries lack the equipment they need to keep vaccines safe and efficient. With support from private sector partners like Google, innovators like Nexleaf Analytics can help us modernise the cold chain”.
 “Nexleaf’s use of innovative, low-cost sensor technology to support data-driven decision making is the kind of cutting edge work we need to address big global challenges like vaccine delivery,” said Jacquelline Fuller, Director of Google.org. “This new partnership will drive more impact at scale, helping to ensure safe vaccines for everyone.”
 To help developing country governments make informed decisions about their cold chain equipment needs, Nexleaf will create an analytics framework that will aggregate data from every point of the health system to improve vaccine cold chain performance. This will yield useful real-time data on cold chain performance and inform best practices across all countries.
Easy access to key analytics will enable health system personnel to take action to procure and maintain the equipment necessary to safeguard and amplify their resources and investments in immunisation.
 “Objective, real-time data paired with targeted analytics provides visibility into root causes of cold chain failures in the field, which allows for prioritization of resources, efficient repairs, and informed procurement” said Nithya Ramanathan, President and Co-Founder of Nexleaf.
 The new collaboration is a result of Gavi’s <a href="http://gavi.us1.list-manage.com/track/click?u=3e72d00b5705ce6f4def92fa1&amp;id=20ba31b8d8&amp;e=15ee1deaa5" target="_blank">INFUSE platform</a> (Innovation for uptake, scale and equity in immunisation) which connects private sector partners and funders with high-tech innovators. <a href="http://gavi.us1.list-manage.com/track/click?u=3e72d00b5705ce6f4def92fa1&amp;id=d9facb9238&amp;e=15ee1deaa5" target="_blank">Launched at the 2016 World Economic Forum Annual Meeting</a>, INFUSE helps to find solutions to challenges that have led to almost 19 million children per year not receiving a full course of the most basic vaccines.
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Google & Gavi partner to scale up innovations for vaccine delivery

Two days before stepping down from office, US Vice-President Joseph R. Biden called on the United States and Europe to confirm the transatlantic alliance and continue to work together to defend the liberal international order that has brought stability and peace in Europe since the end of World War II.   “History has proven that the defence of free nations in Europe has always been America’s fight,” Biden said in a special address to participants on the second day of the World Economic Forum Annual Meeting. “The United States should fulfil our historic responsibility as the indispensible nation, but we have never been able to lead alone. It is only through championing the liberal international order that we will retain our position of leadership.” Noted Biden: “There will be a new president in the US, but the challenges and choices we make as an international community do not hinge exclusively on Washington’s leadership. Whether we reinforce the ties that bind us or they unravel, these choices will be made by every single nation.”   Recognizing that recent economic and social challenges in the US and Europe have allowed nationalist and populist forces to capitalize on citizens’ concerns, Biden rejected the politics of fear. “Impulses to hunker down, to build walls, are precisely the wrong answer,” he argued. “We can and we must take action to mitigate the economic trends that are stoking unrest in so many advanced economies and undermining people’s basic sense of dignity.”   Economic stresses that are leading to the hollowing out of the middle class and the social disruptions caused by technological change have to be addressed, Biden told participants. Unskilled workers are losing their jobs, while higher-paid skilled workers are getting paid more and more. “Globalization has not been an unalloyed good,” the vice-president said. “It has deepened the rift between those racing ahead at the top and those hanging on in the middle or falling to the bottom.” He added: “We cannot undo the changes that technology has wrought in our world, nor should we try.”   The complaints of those who feel that they have been left behind are legitimate, Biden said. “Continuing education whether you are an astrophysicist or working on an assembly line is going to be required.” Tax reforms will also be necessary so everyone pays their fair share. “The top 1% is not carrying their weight,” Biden remarked. Retreating from the world, however, is not a solution, he insisted. “We cannot rout fear with retrenchment.” While the US has not always been its perfect defender, “we need urgently to defend the liberal international order – to sustain it.”   In his last official speech as US Vice-President, Biden said that he had come to Davos to issue a valedictory call for Europe and the US to come together and renew the “fight for democracy wherever it is under threat”. He underscored the importance of European unity and the integrity of the European Union, which he said is in America’s interest. Biden stressed that the transatlantic alliance is of utmost importance and that “the American commitment to NATO (the North Atlantic Treaty Organization) is thoroughly bipartisan” in the support it has in Washington. He described NATO as the “single greatest bulwark of our transatlantic partnership.” ﻿

Biden issues call for Europe and the US to defend the Liberal International Order

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“In the last few years, progress has slowed down,” said Christine Lagarde, Managing Director, International Monetary Fund (IMF), Washington DC, adding that gender inequality is not conducive to good inclusive economic growth.
According to the Forum’s Global Gender Gap Report 2016, the slowdown is partly due to chronic imbalances in salaries and labour force participation.
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Isabel de Saint Malo de Alvarado, Vice-President and Minister of Foreign Affairs of Panama, said that women should have the opportunity to be in positions based on merit and not quotas, but admitted that it may take quotas to change the situation. “I don’t think it will happen unless there are quotas,” she said. Lagarde added that gender quotas are in place at the International Monetary Fund (IMF).
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Robert E. Moritz, Global Chairman, PricewaterhouseCoopers International, PwC, USA, a strong advocate of gender equality in the workplace, stressed that disruptive leadership is needed to improve diversity in the boardroom. He recommended, however, that gender programmes within a company are the way to go as opposed to quotas.
PwC is a supporter of the UN HeForShe initiative to promote gender equality around the world. But Moritz cautioned: “If males are not in the conversation, you will miss it [reducing the gender gap].”
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Cynthia Castro, Vice-President, RBA &#8211; Reinventing Business for All, Costa Rica, agreed. “Gender inequality affects men because they think it is an issue about women,” she said. Castro also underlined the importance of addressing gender bias in the recruitment process, paternity leave and equal parenting, and educating consumers. “You can’t be gender-blind in 2017; you have to be gender-smart.”
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Sharmeen Obaid-Chinoy, Documentary Filmmaker, SOC Films, Pakistan, and a Co-Chair of the World Economic Forum Annual Meeting 2017, said she took offense when people labelled her a female filmmaker. “I am a filmmaker, not a female filmmaker. What’s a female filmmaker?” The award-winning documentary maker also credited technology for improving women’s lives and business opportunities. “Women are starting their own businesses using social media, forming networks online.”
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Mortiz added that technology is useful to manage the balance of professional activities with family responsibilities, and provides data to identify gender problems within a company or organization. “With this information, we can change policies and get to individuals from that information to have an intervention.” At a more basic level, de Saint Malo de Alvarado said that mobile phones can provide family planning information for rural women in developing countries who never previously had access.
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The 47th World Economic Forum Annual Meeting is taking place on 17-20 January in Davos-Klosters, Switzerland, under the theme Responsive and Responsible Leadership. More than 3,000 participants from nearly 100 countries will participate in over 400 sessions.﻿
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Closing the gender gap through quotas and technology

Re-orienting investment tax incentives towards sectors of the South Africa economy that have high productivity and a comparative advantage would stimulate growth, create additional jobs and support poverty alleviation, according to a World Bank report released today.
The ninth South Africa Economic Update estimates growth in 2016 to be 0.4 percent, making it the third year of declining GDP growth, leaving South Africans worse off on average.
GDP is expected to accelerate in 2017 and 2018, to 1.1 and 1.8 percent, respectively, a modest recovery propelled by improving commodity prices, dissipating drought effects, and domestically by strengthening consumption and cautiously, exports. Stronger growth is also expected to be supported by a markedly improved supply of electricity and smoother labor relations.
Although accelerating, growth will still fall short of the pace that is needed to create 11 million jobs in order to reduce unemployment to 6 percent by 2030, and achieve significant reductions in poverty and inequality envisaged in the National Development Plan (NDP).
The Update suggests that encouraging private investment is one area where policy can help to decisively turn around the South African economy and enhance growth.
 “Accelerating the implementation of the NDP with strong coordination of implementing stakeholders, improving the execution of key public investment projects, strengthening cities as South African powerhouses and reducing political uncertainty are all areas that can raise gross fixed investment crucial to raising the growth potential of the South African economy and generating sustainable jobs,”says World Bank Senior Economist, Marek Hanusch.
The report’s special focus section examines the role played by Private Investment for Job Creation. Using firm level data, the report examines the effectiveness, cost, and impact of investment tax incentives (ITIs) granted to the various economic sectors for additional investment and job creation. It contends that if targeted well, ITIs can result in increased investment and job creation as intended and support poverty alleviation as each job created lifts about one person out of poverty.
However, the report reveals that the current set of ITIs, which the government of South Africa has deployed among other policy instruments that are aimed at promoting industrial development, have not yielded a significant reallocation of private capital toward industrial sectors, nor produced higher industrial employment as expected. Instead, private investment has in recent years increasingly gone to less productive sectors, generating negative total factor productivity growth.
The report shows that in order to generate a post-tax return of 10 percent on investment, a pre-tax rate of return of 8.8 percent is needed in mining, against a pre-tax rate that is nearly three time higher in manufacturing which stands at 29.6 percent. This may be have resulted in investment moving away from productive sectors such as manufacturing.
“What we observe is a negative composition effect since 2012 in which capital went to sectors such as mining, electricity, transport and other services that recorded a decline in their capital productivity and away from sectors recording increases in capital productivity such as agriculture, manufacturing, construction, trade and finance, thus reducing average capital productivity,” saysWorld Bank Program Leader, Sebastien Dessus.
The report argues that re-orienting investment tax incentives to favor agriculture, manufacturing, construction, trade and other services sectors more would increase job creation at no additional fiscal cost as overall, tax incentives have generated additional private investment which exceeded foregone fiscal revenue.
Furthermore,sectors which would benefit from re-oriented incentives are also those enjoying the largest employment multipliers, thus amplifying the impact of incentives on jobs creation. The positive impact of re-oriented tax incentives would be further magnified by the emergence of new comparative advantages in sectors such as manufacturing resulting from the recent evolution of South Africa’s terms of trade.﻿

Re-orienting Tax Incentives Could Boost Growth &Jobs

The political earthquakes of 2016 have upended conventional thinking about the global economy and have ironically brightened the outlook, according to new analysis released today at the World Economic Forum in Davos by IHS Markit (Nasdaq:INFO), the world leader in critical information, analytics and solutions.  Global growth is  expected to increase from 2.5 percent in 2016 to 2.8 percent in 2017 and 3.1 percent in 2018.
“In 2017, the global economy will see a rebound in growth for first time since 2014,” said <a href="https://twitter.com/N_Behravesh">Nariman Behravesh</a>, chief economist, <a href="https://ihsmarkit.com/">IHS Markit</a>. “The expectation that the incoming Trump administration will enact sizeable fiscal stimulus has increased optimism about the U.S. and the global economies. U.S. stock indexes are at record highs and interest rates and the dollar are rising. Data such as IHS Markit’s PMI surveys are already pointing to 2017 starting on a solid footing, with growth at the end of 2016 having gained momentum.”
Emerging markets may finally get a break
“Emerging markets have really struggled in the past few years,” Behravesh said. “But, a growing global economy will mean that emerging markets can finally take a breath.” Economic fundamentals in most emerging markets have improved in the past couple of years and, with the exception of China, overall debt ratios are mostly down.  Commodity prices are rising and both consumer and business sentiment have improved. This means that these economies will be able to enjoy the fruits of a more upbeat global outlook.
Protectionist populism could rain on the parade 
“Unfortunately, political and policy uncertainties as well as risks are higher now than they were a year ago,” Behravesh said at the World Economic Forum. “The rise of anti-globalization movements in the U.S. and Europe could result in policies that hurt growth. In particular, a trade war could push the U.S. and global economies into recession.”
However, business-friendly policies (including lower corporate taxes and a roll-back of regulation) could boost both short-term and long-term growth, the IHS Markit analysis said. “Based on recent statements by President-elect Trump, his advisors and Congressional leaders, IHS Markit believes that the latter scenario is more likely than the former,” Behravesh said.
The mood in Davos
“Compared with 2016, the mood in Davos this year can best be characterized as a mixture of anticipation and anxiety,” Behravesh said. “On the one hand, the global economic outlook is a little brighter. On the other hand, the rise of anti-establishment, populist sentiment in both the United States and Europe is a huge challenge for global leaders. Whether “pro-growth populism” or “protectionist populism” becomes the dominant theme of the next few years will depend crucially on responsive and responsible leadership.”
“There is a lot of optimism at Davos this year about the role of new technologies across industries,” said Lance Uggla, president of IHS Markit. “Applying new kinds of data in smarter ways can lead to more intelligent investment and risk management. Advanced analytics help companies better understand the market, driving innovation and disruption. Across industries, I sense real excitement about the new environment that we are seeing in the Fourth Industrial Revolution.”﻿

Global Growth to Rise as Political Earthquakes Ironically Unearth Brighter Outlook

The coming ‘<a href="https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/">Fourth Industrial Revolution</a>’ is set to drive the convergence of technologies that blur the lines between the physical, digital and biological spectrums, but if access to reliable energy, banking and the internet are neglected, 30 percent of the world’s population are in danger of being left behind.
To ensure that these basic economic tools don’t go overlooked amongst responsive and responsible leaders at this year’s <a href="https://www.weforum.org/events/world-economic-forum-annual-meeting-2017">World Economic Forum Annual Meeting</a>, <a href="http://www.dlight.com/">d.light</a> co-founder and CEO Ned Tozun plans to discuss progress of decentralized energy systems for those living at the bottom of the pyramid with leaders working to improve the state of the world. Throughout Africa, Asia and Latin America, this revolution is taking hold and providing economic benefit to local populations.﻿
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Habitual spending on kerosene, candles, generators and other fossil fuel-powered energy sources creates a massive drain on economic and social development. Solar-powered products offer safer, less expensive, more reliable, and higher quality energy solutions. In eight short years, transformations in off-grid solar have led to a significant improvement in the delivery of energy access. As of June 2016, <a href="https://www.gogla.org/sites/www.gogla.org/files/recource_docs/global_off-grid_solar_market_report_jan-june_2016_public.pdf">100 million people have moved off of kerosene</a> and other fossil fuel sources for lighting, resulting in $4.33 billion in energy-related savings.
“Progress in energy access through off-grid solar can catalyze a chain of events that move the developing world into new forms of financial inclusion and internet connectivity, which will in turn significantly increase GDP,” said d.light CEO Ned Tozun. “Growing these sectors requires massive support. Attending the World Economic Forum Annual Meeting gives us the opportunity to engage with leaders from all walks of life, and we look forward to collaborating on solutions for societal and global concerns that have been neglected for too long.”
As a leading provider of off-grid solar solutions, d.light also announced today the raise of $10.5 million in investment from <a href="http://www.norfund.no/">Norfund</a>, <a href="https://www.usaid.gov/powerafrica/beyondthegrid">Beyond the Grid</a>, and <a href="http://www.shellfoundation.org/">Shell Foundation</a>. This brings the company’s total raise in the past four months to $40 million.
Since its founding in 2007, d.light has impacted over 65 million people through its sales over 15 million solar light and power products in 62 countries. The company continues to sell hundreds of thousands of units per month, while maintaining excellent quality at scale. d.light has a goal to impact 100 million lives by 2020.
The World Economic Forum Annual Meeting takes place in Davos-Klosters, Switzerland between January 17 &#8211; 20, 2017. It remains the foremost creative force for engaging the world’s top leaders in collaborative activities to shape the global, regional and industry agendas at the beginning of each year.

Don’t leave 30% of the world behind

The key to boosting growth in Africa is more private investment and responsible policymaking, a CNBC Africa panel at the World Economic Forum heard on Wednesday.
African politicians and business leaders want to see a stronger relationship between the public and private sector to ensure better regulation and clearer policy certainty to ultimately attract infrastructure spending.
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&#8220;The most fundamental issue is, will there be consistency between the public and private sector,&#8221; Phuthuma Nhleko executive chairman of the multinational telecom company MTN said, asking for stronger policy certainty and regulatory environment. 
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&#8220;Then there&#8217;s no shortage of funds,&#8221; he said. &#8220;It all comes back to certainty.&#8221;﻿
The President of Rwanda, Paul Kagame, acknowledged that if indeed governments put in place policies that are investment-friendly, there will be economic development.
&#8220;We have to accept the fact that the private sector holds huge resources that could be deployed together with the government for the benefit of infrastructure whether it is energy, transport, IT, telecoms and so forth. But then government has to make sure we put in place policies …that work to encourage this kind of investments and partnerships to happen,&#8221; Kagame told an audience in Davos.
According to the International Monetary Fund, Rwanda has been successful in implementing some growth-friendly policies.
&#8220;Early evidence suggests that the short term adjustment policies have been effective in addressing external imbalances,&#8221; the IMF said in a report last week.
&#8220;The government&#8217;s home-grown &#8220;Made in Rwanda&#8221; initiative, which seeks to substitute domestic production for some key imported goods, and export promotion efforts. Performance under the program has been strong, with almost all program targets set through end-June 2016 and structural reforms through end-September 2016 being achieved,&#8221; the IMF added.
Trade is exactly one of the areas that African countries need to work on. According to the IMF, &#8220;Substantial opportunities for further regional and global trade integration still lie ahead&#8221; for the entire sub-Saharan region.
&#8220;Intra-African trade is still at a dismally low percentage,&#8221; Nhleko of MTN said in Davos. &#8220;And for that to increase, I&#8217;m afraid there&#8217;s going to be a choice on how much sovereignty a certain state wants to retain ad to what extent they have a vision of making things, more, more and more boardless.&#8221;﻿

African leaders debate how to fix Africa’s infrastructure gap

The World Economic Forum today issued a report proposing a shift in economic policy priorities to respond more effectively to the insecurity and inequality accompanying technological change and globalization. The Inclusive Growth and Development Report 2017 concludes that most countries are missing important opportunities to raise economic growth and reduce inequality at the same time because the growth model and measurement tools that have guided policymakers for decades require significant readjustment.
The Report finds that annual median incomes declined by 2.4% or $284 per capita across 26 advanced economies between 2008 and 2013 (or most recent period available). Developing countries fared much better, with median incomes rising by an average of 10.7% or $165. However, 23% of them experienced a decline in median per capita income of 9%, as compared to 54% of advanced countries experiencing a decline of an average 8% or $1044 per person equivalent to $2,505 per average household.
The Report argues that sustained, broad-based progress in living standards, a concept that encompasses income as well as economic opportunity, security and quality of life, should be recognized by policymakers as the bottom-line objective of national economic performance rather than GDP growth.  It proposes a new policy framework and set of measurement tools to guide the practice and assess the performance of countries accordingly. 
Inclusive Development Index (IDI). The report ranks countries based on 12 Key Performance Indicators of inclusive development. Providing a more complete measure of economic development than GDP growth alone, the Index has three pillars:  Growth and Development, including GDP growth, labour force participation and productivity, and healthy life expectancy; Inclusion, including median household income, poverty and two inequality measures; and Intergenerational Equity and Sustainability, including adjusted net saving (including natural capital depletion and human capital investment), demographic dependency ratio, public debt and carbon intensity.
51% of the 103 countries for which these data are available saw their IDI scores decline over the past five years, attesting to the legitimacy of public concern and challenge facing policymakers regarding the difficulty of translating economic growth into broad social progress. In 42% of countries, IDI decreased even as GDP per capita increased. A chief culprit was wealth inequality, which rose in 77% of economies by an average of 6.3%.
Some countries rank significantly higher in the IDI than GDP per capita, suggesting they have done a relatively good job of making their growth processes inclusive, including countries as diverse as Cambodia, the Czech Republic, New Zealand, South Korea and Vietnam. By contrast, others have significantly lower IDI than GDP per capita rankings, indicating that their growth has not translated as well into social inclusion; these include Brazil, Ireland, Japan, Mexico, Nigeria, South Africa and the United States. 
Richard Samans, Member of the Forum’s Managing Board said, “There is a global consensus on inclusive growth, but it has been far more directional than practical. To respond more effectively to social concerns, economic policy needs a new compass setting, broad-based progress in living standards, and a new mental map in which structural reform is reimagined and reapplied to this task, with chief economic advisers and finance ministers prioritizing it every bit as much their traditional focus on macroeconomic, financial supervisory and trade policy.”   
New Framework or “Growth Model.”  The Report suggests that 15 areas of structural policy and institutional strength together constitute the underlying “income distribution system” of modern market economies and are the crucial tools available to policymakers to strengthen economic growth and social inclusion in tandem. It argues that rising inequality reflects mainly “a lack of attention to this policy ecosystem rather than an iron law of capitalism.” Moreover, for many countries such a reimagined process of structural reform encompassing both demand- and supply-side elements also offers the best hope for boosting economic growth given their limited monetary and fiscal policy space in the aftermath of the 2008-09 financial crisis.     The Report also includes policy metrics &#8212; 140 Policy and Institutional Indicators across the 15 policy domains that have the potential to drive both stronger growth and wider social inclusion. These permit countries to benchmark their institutional strength and policy incentives in these areas against their peers.   Education and Skills Development – access; quality; equity Basic Services and Infrastructure – basic and digital infrastructure; health-related services Corruption and Rents – business and political ethics; concentration of rents Financial Intermediation of Real Economy Investment – financial system inclusion; intermediation of real economy business investment Asset-building and Entrepreneurship – small business ownership; home and financial asset ownership Employment and Labour Compensation – productive employment; wage and non-wage labour compensation Fiscal transfers – tax system; social protection   An Agenda for Global Inclusive Growth.  Based on its findings, framework and tools, the Report proposes a coordinated international initiative to combat the prospect of secular stagnation and dispersion (chronic low growth and rising inequality) by placing progress in median living standards – people – at the heart of national policy and global economic integration:
<ul>
<li>Major economies to undertake mutual effort to address their structural weaknesses within this Frameworkwith support of OECD and other international organizations, potentially by expanding and reprioritizing the G20 Enhanced Structural Reform Agenda, launched during China’s recent presidency.</li>
<li>All countries experiencing labour market challenges related to the Fourth Industrial Revolution toset national investment targets and public-private implementation strategies across five areas of human capital formation:  active labor-market policies (training); equity of access to quality basic education; gender parity; non-standard work benefits and protections; and school-to-work transition. Data indicate few countries are well positioned.</li>
<li>International financial institutions toembrace this reformulation and reprioritization of structural economic policyin their public signaling, country advice, and development cooperation programs as well as catalyze a scaling ofblended, public-private financing of sustainable infrastructure– crucial for attainment of the SDGs &#8212; by shifting from direct lending to risk mitigation, co-investment, aggregation and project development.</li>
<li>Trade and investment cooperation to be refocused from the negotiation of formal new norms such as free trade agreements to the facilitation of trade and investment activity within as well as among countries, particularly in respect of SMEs, services and value chains, encouraging convergence around best practices and standards to reduce frictions and boost development impact, while increasing capacity-building assistance for these purposes.</li>
</ul>
The Report was developed as part of the Forum’s multistakeholder System Initiative on <a href="mailto:https://www.weforum.org/system-initiatives/economic-growth-and-social-inclusion">Economic Growth and Social Inclusion </a> and includes written contributions from five international organizations, three companies and one G20 government highlighting their contributions to this challenge.

Decline in living standards in advanced countries highlights need for new model

Eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity, according to a new report published by Oxfam today to mark the annual meeting of political and business leaders in Davos.
Oxfam’s report, ‘An economy for the 99 percent’, shows that the gap between rich and poor is far greater than had been feared. It details how big business and the super-rich are fuelling the inequality crisis by dodging taxes, driving down wages and using their power to influence politics. It calls for a fundamental change in the way we manage our economies so that they work for all people, and not just a fortunate few.
New and better data on the distribution of global wealth – particularly in India and China – indicates that the poorest half of the world has less wealth than had been previously thought.  Had this new data been available last year, it would have shown that nine billionaires owned the same wealth as the poorest half of the planet, and not 62, as Oxfam calculated at the time.
Winnie Byanyima, Executive Director of Oxfam International, said:
“It is obscene for so much wealth to be held in the hands of so few when 1 in 10 people survive on less than $2 a day.  Inequality is trapping hundreds of millions in poverty; it is fracturing our societies and undermining democracy.
“Across the world, people are being left behind. Their wages are stagnating yet corporate bosses take home million dollar bonuses; their health and education services are cut while corporations and the super-rich dodge their taxes; their voices are ignored as governments sing to the tune of big business and a wealthy elite.”
Oxfam’s report shows how our broken economies are funnelling wealth to a rich elite at the expense of the poorest in society, the majority of whom are women. The richest are accumulating wealth at such an astonishing rate that the world could see its first trillionaire in just 25 years.  To put this figure in perspective – you would need to spend $1 million every day for 2738 years to spend $1 trillion.
Public anger with inequality is already creating political shockwaves across the globe. Inequality has been cited as a significant factor in the election of Donald Trump in the US, the election of President Duterte in the Philippines, and Brexit in the UK.
Seven out of 10 people live in a country that has seen a rise in inequality in the last 30 years.  Between 1988 and 2011 the incomes of the poorest 10 percent increased by just $65 per person, while the incomes of the richest 1 percent grew by $11,800 per person – 182 times as much.
Women, who are often employed in low pay sectors, face high levels of discrimination in the work place, and who take on a disproportionate amount of unpaid care work often find themselves at the bottom of the pile.  On current trends it will take 170 years for women to be paid the same as men.
‘An Economy for the 99 percent’ also reveals how big business and the super-rich are fuelling the inequality crisis.  It shows how, in order to maximize returns to their wealthy shareholders, big corporations are dodging taxes, driving down wages for their workers and the prices paid to producers, and investing less in their business.
Oxfam interviewed women working in a garment factory in Vietnam who work 12 hours a day, 6 days a week and still struggle to get by on the $1 an hour they earn producing clothes for some of the world’s biggest fashion brands. The CEOs of these companies are some of the highest paid people in the world.   Corporate tax dodging costs poor countries at least $100 billion every year. This is enough money to provide an education for the 124 million children who aren’t in school and fund healthcare interventions that could prevent the deaths of at least six million children every year.
The report outlines how the super-rich use a network of tax havens to avoid paying their fair share of tax and an army of wealth managers to secure returns on their investments that would not be available to ordinary savers.  Contrary to popular belief, many of the super-rich are not ‘self-made’. Oxfam analysis shows over half the world’s billionaires either inherited their wealth or accumulated it through industries which are prone to corruption and cronyism.
It also demonstrates how big business and the super-rich use their money and connections to ensure government policy works for them. For example, billionaires in Brazil have sought to influence elections and successfully lobbied for a reduction in tax bills while oil corporations in Nigeria have managed to secure generous tax breaks.
Byanyima said: “The millions of people who have been left behind by our broken economies need solutions, not scapegoats. That is why Oxfam is setting out a new common sense approach to managing our economies so that they work for the majority and not just the fortunate few.”
“Governments are not helpless in the face of technological change and market forces.  If politicians stop obsessing with GDP, and focus on delivering for all their citizens and not just a wealthy few, a better future is possible for everyone.”
Oxfam’s blueprint for a more human economy includes:
· Governments end the extreme concentration of wealth to end poverty. Governments should increase taxes on both wealth and high incomes to ensure a more level playing field, and to generate funds needed to invest in healthcare, education and job creation.
· Governments cooperate rather than just compete. Governments should work together to ensure workers are paid a decent wage, and to put a stop to tax dodging and the race to the bottom on corporate tax.
· Governments support companies that benefit their workers and society rather than just their shareholders. The multi-billion Euro company Mondragon, is owned by its 74,000 strong workforce.  All employees receive a decent wage because its pay structure ensures that the highest paid member of staff earns no more than 9 times the amount of the lowest paid.
· Governments ensure economies work for women. They must help to dismantle the barriers to women’s economic progress such as access to education and the unfair burden of unpaid care work.
Oxfam is also calling on business leaders to play their part in building a human economy. The World Economic Forum has responsive and responsible leadership as its key theme this year.  They can make a start by committing to pay their fair share of tax and by ensuring their businesses pay a living wage.  People around the global can also join the campaign at <a href="http://www.evenitup.org/" target="_blank" rel="noopener">www.evenitup.org</a>.
Contacts
Anna Ratcliff: <a href="mailto:anna.ratcliff@oxfaminternational.org" target="_blank" rel="noopener">anna.ratcliff@oxfaminternational.org</a> or +44 (0) 7796993288
Notes to editors
Winnie Byanyima, Executive Director of Oxfam International will be attending the World Economic Forum in Davos, Switzerland from the 17 – 20 January 2017 to highlight the urgent need for action to tackle inequality.   For more information on WEF see <a href="http://www.weforum.org/" target="_blank" rel="noopener">www.weforum.org</a>
The following materials are available for download here: <a href="https://oxfam.box.com/v/an-economy-for-99-percent" target="_blank" rel="noopener">https://oxfam.box.com/v/an-economy-for-99-percent</a>
* Full report and executive summary of ‘An Economy for the 99 percent’ 
* A document outlining the methodology behind the statistics in the report
VNR footage and shot list featuring the stories of people in Kenya, Vietnam and Brazil who face a daily struggle with inequality are available at the following links:
The world’s 8 richest people are, in order of net worth:
1. Bill Gates: America founder of Microsoft (net worth $75 billion) 
2. Amancio Ortega: Spanish founder of Inditex which owns the Zara fashion chain (net worth $67 billion) 
3. Warren Buffett: American CEO and largest shareholder in Berkshire Hathaway (net worth $60.8 billion) 
4. Carlos Slim Helu: Mexican owner of Grupo Carso (net worth: $50 billion) 
5. Jeff Bezos: American founder, chairman and chief executive of Amazon (net worth: $45.2 billion) 
6. Mark Zuckerberg: American chairman, chief executive officer, and co-founder of Facebook (net worth $44.6 billion) 
7. Larry Ellison: American co-founder and CEO of Oracle  (net worth $43.6 billion) 
8. Michael Bloomberg: American founder, owner and CEO of Bloomberg LP (net worth: $40 billion)
Oxfam’s calculations are based on global wealth distribution data provided by the Credit Suisse Global Wealth Data book 2016: <a href="http://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=AD6F2B43-B17B-345E-E20A1A254A3E24A5" target="_blank" rel="noopener">http://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=AD6F2B43-B17B-345E-E20A1A254A3E24A5</a>
The wealth of the world’s richest people was calculated using<a href="https://www.geekwrapped.com/archive/forbes-billionaires-full-list-of-the-500-richest-people-in-the-world"> Forbes&#8217; billionaires list last published in March 2016</a>.

Eight men own same wealth as half the world

Let’s get straight to the point: although there might be many investors who have made money by seemingly timing the market correctly (in other words, predicting market movements and selling or buying shares accordingly), it’s likely that many of these success stories are due more to luck than skill.  It might be different for seasoned traders, but for the average investor it is not only difficult to foresee market upswings and downswings, but also challenging to make decisions that aren’t tinged by emotion.
Instead, the advice “It’s about time in the market, not timing the market” is far more valuable to investors. Markets do not move up in a straight line and volatility is inherent in equities as an asset class. And while it may be very tempting to try and predict wins and moves in the equity market, the only true alternative is time, or buying and holding.
US financial services giant Fidelity Investments makes the point that it is “very, very difficult to predict when is the best time to enter or exit the market. The speed at which markets react to news means stock prices have already absorbed the impact of new developments. When markets turn, they turn quickly.”
Investors would have seen evidence of this extreme volatility at the start of 2016, especially locally on the JSE. Daily moves of double-digit percentages have not been uncommon.
An <a href="https://www.fidelity.com.hk/static/pdf/investor/en/volatile-market/time_in_the_market.pdf">analysis</a> by international asset manager Fidelity, based on daily returns from the MSCI World Index from 31 December 2002 to 31 December 2012, illustrates that missing out on just the 10 best days over that decade would’ve “left your assets in negative territory”. Cumulative returns over the 10-year period for someone who had stayed invested were 68.96%. Missing the 10 best days meant a 4.64% loss, missing the 20 best days translated into a 32.19% loss and missing the 30 best days saw a 49.08% loss!
In a separate study covering the period from 1980 to end-2012, Fidelity proved that “investing in global stocks for periods of 12 years or more has resulted in no negative returns”. This proves the value of time.
Merrill Lynch says “one of the biggest costs of market timing is being out when the market unexpectedly surges upward, potentially missing some of the best-performing moments. For example, an investor, believing the market would go down, sells off equities and places the money in more conservative investments. While the money is out of shares, the market instead enjoys a high-performing period. The investor has, therefore, incorrectly timed the market and missed those top months.”
Citing a separate Wealth Management Systems study, Merrill proves the point utilising the S&amp;P 500 over a three-decade period from 1985 to 2014. $1 000 left invested over that period would be worth over $25 000. Miss the 10 top-performing months and your returns slump to under $10 000; miss the 20 top-performing months and you’d have less than half of that.
This phenomenon is not just confined to US or global markets. <a href="http://www.moneyweb.co.za/investing/equities/timing-market-mugs-game/">Research</a> from Investment Solutions, based on I-Net Bridge data, shows that a R100 investment on the JSE (using the All Share Index as the proxy) would have grown to R1 760 over the two decades between 1995 and 2014. If you’d missed the 10 best days, your investment would be worth almost half that (R965). Miss the 60 best days and your investment would be worth a tiny R143.﻿
<img loading="lazy" decoding="async" src="/media/19302931/timing_600x1080.jpg" width="600" height="1080" alt="Timing"/>﻿Advocates of market timing will point to the results had an investor missed the worst days. Indeed, the results are astonishing. The same R100 investment would be worth R3 697 had you dodged the 10 worst days on the JSE in the 20-year period. But its far easier said than done, and over a sustained period is all but impossible.
The other problem, aside from the mathematics that proves the irrationality of trying to time the market, is that following this strategy introduces unnecessary emotion into investing. A market’s best days tend to occur immediately after a market crash. Trying to time share purchases in a period of such enormous uncertainty is unworkable, precisely because of emotion.
Canada’s TD Bank Group says “market timers can be hard on themselves when they get the timing wrong and very excited when they get the timing just right. This emotional investing can lead to mistakes and stress. Rather than having the peace of mind that comes with a well-developed and implemented long term strategy, market timers are more likely to worry about their investments and the market in general as they constantly try to stay one step ahead.”
Instead, TD argues, investors should look to follow a disciplined strategy, focused on asset allocation, diversification, investment selection and ongoing monitoring. The last of these means that even though you have a long-term horizon, you don’t simply buy and hold and ignore circumstances altogether. Any fundamental changes should trigger a review of your portfolio, with necessary adjustments. An investment professional like an accredited financial adviser would typically be best-placed to help with this reassessment.
And to help offset market movements when buying, cost-averaging is a very important tool for an investor. This is when you invest an equal rand amount in an investment at regular intervals, ensuring that the price you pay for the investment averages out over a period of time. “When the price is high, you buy less: when the price is low, you buy more,” says TD, and “there is no guesswork whatsoever in cost-averaging.” This may mean you miss out on some of the gains, but it certainly helps reduce the sting of downturns.
 
For more information on investing for retirement, speak to your financial adviser.
This article is part of an investment series by Discovery Invest.
Discovery Invest is an authorised financial services provider. Registration number 2007/005969/07. For more information on Discovery Invest, contact your financial adviser.
This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell investment funds.﻿

Timing the market: method or madness?

Traditionally, financial advisers, savers and retirees have relied on the so-called “4% rule” when working out how much to save for retirement and/or what kind of annual income retirement savings would provide. The rule was first proposed by Californian financial planner William Bengen in the 1990s.
The theory of the 4% rule
Simply put, the rule says that that if retirees withdraw 4% of their savings annually (adjusting this amount for inflation every year thereafter), their nest egg will last at least 30 years. The rule also requires that retirement savings are split equally between shares and bonds. ﻿
<img loading="lazy" decoding="async" src="/media/19298997/4pct_599x606.jpg" width="599" height="606" alt="4pct"/>﻿
This method is also used to determine the lump sum investors need when they retire in order to provide an acceptable annual income.
For example, assume you are retiring today with a final salary of R480 000 a year. You need a “<a href="https://www.discovery.co.za/portal/individual/investment-news-aug15-saving-for-retirement">replacement ratio” of 90% of your final salary</a>. Ninety percent of R480 000 is R432 000. In order to ensure that you do not use all your saved retirement capital in 30 years, R432 000 should be 4% of your total savings. This means you would need R10.8-million saved in order to draw 4% or R432 000 annually. Put another way:
<ol>
<li>You need R432 000 a year (90% of R480 000).</li>
<li>R432 000 must be 4% of your total savings at retirement if you don’t want to deplete your nest egg.</li>
<li>R432 000 is 4% of R10.8 million</li>
<li>Therefore, you need R10.8 million saved at retirement in order to give you R432 000 a year.</li>
</ol>
Does it have relevance in a new century?
This retirement theory is not without its critics, however. Those who question the 4% rule’s relevance say it doesn’t take into account issues such as taxes or varying investment horizons, and also observe that financial conditions when the rule was formulated were very different to the reality in this century. For example, Bengen’s rule is based on the average long-term annual returns (since 1926!) of shares and bonds being 10% and 5.3%, respectively.
 “The 4% rule started in the US in the 1990s when interest rates were a lot higher. With rates at an all-time low, the rule has broken down there – another reason to not use rules in planning,” says Craig Gradidge, investment specialist/director at Gradidge-Mahura Investments. “In South Africa, rates and dividend yields are low, but still high enough to sustain the rule, but that could also change in time – and highlights the pitfalls of following any rules when planning for retirement.&#8221;
And a <a href="https://www.onefpa.org/journal/Pages/The%204%20Percent%20Rule%20Is%20Not%20Safe%20in%20a%20Low-Yield%20World.aspx">2010 paper</a> by Wade Pfau pointed out that the “US enjoyed a particularly favourable climate for asset returns in the twentieth century” and argued that “from an international perspective, a 4% real withdrawal rate is surprisingly risky.”
Tracy Jensen, Product Architect at 10X Investments, says although “the 4% rule still applies to retirement investing “, it needs to be applied differently in South Africa: “Whilst the 4% rule still applies to retirement investing, South Africa is unique in the sense that regulation restricts the income drawn each year from 2.5% to 17.5% of your investment balance. As a result, investors could have sufficient money to draw the income they desire but are restricted once they reach the 17.5% cap. Therefore, an adaptation of the rule is required in our context.”
Gradidge also adds that while the basis of the 4% rule is sound, it still might not be relevant to many would-be retirees: “The 4% rule is simple mathematics; the less you draw from your capital, the longer the capital will last. Given historical data, the 4% rule suggests that capital can last into perpetuity if the investor only withdraws 4% of capital as income. Mathematically, this is true. Practically, however, the majority of people have not saved sufficient capital to allow them to take advantage of the mathematics.”
A broad guideline
And so, says Jensen, the 4% rule is “more of a broad guideline to help people make decisions in a complex environment” rather than a hard-and-fast rule when working out how much of your retirement income you can spend.
The Association for Savings &amp; Investment South Africa (Asisa) has also offered guidelines on the issue of safe withdrawal amounts (or drawdowns) from investment-linked living annuities and produced the table below, which helps indicate how many years it is likely to take before your pension starts declining significantly.
Using the table above, someone who earns 7,5% on their investment and uses a drawdown rate of 7,5% can expect to receive a real level of income (that takes inflation into account) for 10 years before their level of income starts to quickly diminish.﻿
 <img loading="lazy" decoding="async" src="/media/19299004/years_598x672.jpg" width="598" height="672" alt="Years"/>﻿
Perhaps the last word on the subject should go to Bengen himself. In <a href="http://www.nytimes.com/2015/05/09/your-money/some-new-math-for-the-4-percent-retirement-rule.html">an interview</a> with the New York Times, his advice to those saving for retirement is perhaps applicable to every person saving for retirement: “Go to a qualified adviser and sit down and pay for that,” he said. “You are planning for a long period of time. If you make an error early in the process, you may not recover.”
 
For more information on investing for retirement, speak to your financial adviser.
This article is part of an investment series by Discovery Invest.
Discovery Invest is an authorised financial services provider. Registration number 2007/005969/07. For more information on Discovery Invest, contact your financial adviser.
This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell investment funds.﻿

Is the 4% rule still relevant for retirement planning?

South Africa&#8217;s ruling African National Congress (ANC) needs a bold leader to launch a &#8220;second revolution&#8221; redistributing wealth to the black majority, said the head of the party&#8217;s youth wing, which helped propel President Jacob Zuma to power.
Zuma is expected to step down as ANC leader in December and Nkosazana Dlamini-Zuma, the head of the African Union and Zuma&#8217;s ex-wife, along with Deputy President Cyril Ramaphosa are widely seen as the two leading candidates to replace him.
But ANC Youth League President Collen Maine said the candidate it would endorse to run for leader at a party conference in December would send &#8220;shock waves&#8221; through the ANC, suggesting the youth branch will not back either frontrunner.
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&#8220;These candidates who have been mentioned are part of the system. They have been part of the system we want to change,&#8221; Maine told Reuters in an interview.
&#8220;We need bold leadership. We need a second revolution that will cause ruptures in the economy.&#8221;
Dlamini-Zuma, 67, and Ramaphosa, 64, are both anti-apartheid activists and ANC stalwarts, though neither has declared their intention to run for the ANC leadership at this point.
Given the party&#8217;s dominance since the end of apartheid in 1994, whoever succeeds Zuma as ANC leader will most likely replace him as the country&#8217;s president too when elections are held in 2019.
Maine, who has been a staunch defender of Zuma against party critics, said every ANC leader had failed to deliver on the promise to transform South Africa, which remains starkly unequal more than two decades after the end of white-minority rule.
 
REVOLUTION DERAILED
Maine said he wanted a new leader to take radical measures, such as the redistribution of land, to disperse wealth from white elites to the black majority, as well as to limit the influence of foreign companies and give the poor free education.
&#8220;Our leaders have derailed the revolution. We were supposed to get more than just the vote. We need to shake up the economy. You don&#8217;t have a revolution without pain,&#8221; Maine said.
The Youth League was established in 1944 by ANC leaders Nelson Mandela, Walter Sisulu and Oliver Tambo and it became one of the major disruptive forces in the fight against apartheid.
Under its last president, Julius Malema, the group was instrumental in forcing out President Thabo Mbeki and installing Zuma. Maine was elected youth leader unopposed in 2015, three years after Malema was expelled for turning against Zuma.
Maine says the Youth League has 600,000 members and a significant voting block at party conference, though the complex leadership election process means it is unclear exactly how much influence the group will wield come December.
Ramaphosa, who was once touted as a successor to Mandela, would be first choice for many investors because his business background suggests he will support more pro-business policies than many in the traditionally left-wing ANC.
Dlamini-Zuma was regarded as a capable technocrat during her time as South Africa&#8217;s minister of home affairs from 2009 to 2012 and has since gained international exposure as the first female head of the African Union.
The ANC&#8217;s Women League endorsed Dlamini-Zuma last week and President Zuma, who will have a major say in who succeeds him, is also expected to back his ex-wife if she runs.
 
RAND SHOULD FALL
Maine has courted controversy by saying a sharp devaluation of the rand currency would force South Africa to make tough economic decisions and turn the tables on the white business elite, even if it caused near-term pain for the general public.
South Africa&#8217;s economy is barely growing and ratings agencies have threatened to downgrade the country&#8217;s sovereign debt rating to &#8220;junk&#8221;.
The policies espoused by Maine would spook financial markets but he said in the interview with Reuters that should not be a worry for politicians bent on change.
&#8220;We should not be concerned with markets. Once we hear the rand is going to fall, or we are going to &#8216;junk&#8217;, we get very nervous. Black people are already in junk,&#8221; Maine said. &#8220;If some white people want to leave South Africa, let them leave.&#8221;
&#8220;Investors will not leave. They need South Africa.&#8221;
Maine has also openly admitted to meeting several times with the Gupta family, Indian businessmen close to Zuma who have been accused of influencing cabinet appointments and winning government tenders unfairly.
A report by a government watchdog found evidence that the family held undue influence over government decisions. Zuma and the Gupta family deny any wrongdoing.
&#8220;The only mistake the Guptas made was going into a space reserved for white people,&#8221; Maine said. &#8220;If you want to see who has captured this country, look at white monopoly capital.&#8221;
 
(Additional reporting by Nqobile Dludla; editing by David Clarke)﻿

South African youth leader predicts political "shock waves"

When investing and saving, performance and diversification aren’t the only factors to monitor. It’s also critical to understand how costs &#8212; which are a fact of life, and part and parcel of the process of investment – fit into the picture.
All investment vehicles have costs, whether you buy shares directly or invest in a unit trust or structured entity like a Retirement Annuity. Even an investment in physical property has costs, such as once-off transfer duties, payments to a managing agent or monthly levies.
Generally, within the financial services industry, fees on investments are payable to three parties:
<ul>
<li>Platform fee (or administration fee)</li>
<li>Asset Management Fee</li>
<li>Financial Adviser Fee</li>
</ul>
Some of these fees will be paid upfront, while others will be paid for the duration of the investment.
 
Platform Fees
You may be liable for a platform fee if you’re accessing a savings product/fund on a linked investment service provider (LISP).
A LISP is defined by the <a href="http://asisa.org.za/en/transformation-education/consumer-education/linked-investment-service-providers">Association for Saving and Investment in SA</a> as a “company that enables you to invest in a wide range of collective investment schemes, such as unit trust funds, via one source”. In other words, you might use Company A (a LISP) to purchase a unit trust from Investment Company B and a unit trust from Company C, or you might buy a retirement product from Company A that includes unit trusts from Company B and Company C. For example, Discovery Invest is a LISP – and Discovery Invest clients are able to invest with various fund managers via the Discovery Invest platform.
The benefit of using a LISP is that it provides one point of contact for the consumer, while providing access to a range of investment options. Also, as Asisa points out, another advantage of investing via a LISP is that the “collective investment scheme fees are often negotiated down significantly by the Lisp and the saving passed on to investors”.
As a rule, the fees charged by a LISP for the use of the platform are low but not insignificant. They’re also often forgotten as investors tend to only focus on the fees related to the fund. Most LISPs now charge ongoing fees rather than an upfront fee, although there are exceptions to this rule.
 
Asset Management Fees/Fund Manager Fees
Also known as the fund-manager fee or service fee, this is the charge levied by an investment manager for managing an investment fund.  This fee can be a fixed fee, or performance-based (in other words, rewarding a manager for outperforming a pre-determined benchmark), or a combination of the two.
The asset manager fee is typically expressed as a percentage charged annually, and covers the costs of running the unit trust. However, there are more costs related to the management of an investment fund, and in order to make these clearer to investors, these are now stated as part of the Total Expense Ratio (TER), and will be published on fund fact sheets.
Like the platform fees, asset management fees are generally ongoing rather than upfront, although there are exceptions to this.
 
Financial Adviser Fees
These are the fees paid to financial advisers for advice – which will either be upfront or ongoing. Fees paid to a financial adviser are effectively for professional services rendered, in the same way that any other profession charges for advice. Warren Ingram, the executive director at Galileo Capital, says there are typically three ways that advisors charge clients.
The traditional model is where “advisers charge a percentage of assets advice”. In structured savings products, this is disclosed in detail on the application forms. On the opposite end of the spectrum is the model where investors pay advisors per consultation (effectively a rate per hour). And halfway between the two is the situation where the advisor is paid to develop an overall investment and retirement savings plan for a client, which the client then implements themselves.
Ingram says that in his experience, many of those who elect to follow this last option tend to return 6-18 months later and ask their advisor to take over the management of their investments. “There are many reasons for this,” he says, “sometimes investors realise just how intimidating and demanding this work is. Or there’s a realisation that they’re not suited to being this diligent.”
“There’s a considerable benefit of paying an advisor when you know the plan will be implemented.”
 
Comparing fees
When comparing costs, it’s important to compare apples with apples. Thankfully, this is becoming easier. For most savings products (like unit trusts), the costs are typically disclosed as a total expense ratio (or TER), as mentioned previously. This <a href="http://www.asisa.org.za/en/transformation-education/consumer-education/collective-investment-schemes/facts-on-collective-investment-portfolios/total-expense-ratio">figure</a> – an industry standard, and one that is published on fund fact sheets – includes expenses such as:
• Management fees (including performance fees);
• Fixed operating costs (such as audit fees and bank charges); and
• Value Added Taxes
 
As part of efforts to simplify disclosure as part of the Financial Service Board’s Retail Distribution Review and to help consumers compare like for like, fund and product providers will soon start publishing a standard “Effective Annual Cost” or EAC, developed with the Association of Savings and Investment South Africa (Asisa). This will include management fees (currently the base of the TER), advice charges, administration charges, as well as any other charges (including termination fees).
 
Making your money work
It may be easy to see fees as a “necessary evil”, but remember that your money will still be working harder when it’s being actively invested. If you decide to keep your money under a mattress or even in a cash account, the fees will certainly be lower, but the returns will definitely be lower as well.
However, Ingram does suggest reassessing the fees you’re paying regularly – keep a tab on these in the same way you would your car or household insurance premiums – and make sure the fees you’re paying are comparable to the market.
 
For more information on investing for retirement, speak to your financial adviser.
This article is part of an investment series by Discovery Invest. ﻿

What you need to know when you’re investing

When planning for retirement, many people establish how much they need to have saved when they retire so that they are able to live off the interest. In theory this sounds like a wise decision – investing your capital so that it creates interest, and then living off this interest while not touching the capital amount.
However, living off a set amount of interest won’t allow you to maintain a constant standard of living for your full period of retirement. This is because inflation will affect the buying power of your capital amountandthe interest earned on your capital amount.
 
Effects of inflation
Warren Ingram, Executive Director at Galileo Capital, says he is frequently exposed to cases of retirees who live off their investments’ interest. “This is not viable,” he says, “because interest has no ability to track inflation.” Over long periods of time, using the local Short-term Fixed Interest Composite Index (STeFI) as a benchmark, he says you’ll see a real return of 1%, before tax. (“Real return” is the annual return of an investment, adjusted for changes in prices due to inflation or other external effects.) “Effectively, you’re standing still,” Ingram points out.
As an example, with an interest-focused investment of R1 million, generating a return of 6.7% over the last 12 months will mean a return of R67 000 for the year. But, consumer price inflation is at 6.3% during that same period. Living off the interest means your capital amount will remain relatively fixed. However, because inflation erodes the value of your R1 million, you will be going backwards because the capital amount (and the interest it produces) is worth less and less over time. At an average inflation rate of 5% a year, your R1 million will halve in purchasing power in less than 15 years. And the interest earned on this money will also reduce in purchasing power.﻿
<img loading="lazy" decoding="async" src="/media/19289929/1_600x574.jpg" width="600" height="574" alt="1"/>﻿
Investing to draw an income
Considering the above, a fundamental aim of investing for an income in retirement should be to provide an income that keeps pace with (or outperforms) inflation. There are various ways to do this.
 
Linked annuity
“I would caution against having 100% of your capital in interest-bearing (cash only) investments because it will decline in real terms over time,” says Ingram. By comparison, he says that a classic balanced portfolio accessible through a linked annuity with a linked investment service provider, invested two-thirds in equities with the remainder in property, bonds and cash, will generate a real return of 4% to 5% a year over the long term, based on historic long-term averages. With a balanced portfolio, your income is much more likely to outperform inflation, which means you could comfortably draw down a portion of these returns while your capital continues to grow.
 
Life annuities
A life annuity, also known as a compulsory annuity, is one way of ensuring regular and predictable income during retirement. This annuity factors in your life expectancy when you purchase it, and as such has “obvious merit if you are retiring relatively young, and have a history of longevity in your family,” points out Ingram. This would be because life expectancies are actuarial averages, and you would be on the right side of that equation. The one downside of annuities is the “high correlation between the income rates you get and the interest rate environment when you buy them.”
Many people also look to property as an answer to the income problem because this investment provides an income in the form of rent, which tends to be adjusted for inflation. But Ingram argues that, unless you have a large, diversified portfolio of investment properties, he “would always look for this exposure via listed property” because it offers better diversification.
 
Determining your drawdown
Once you’ve retired, the amount of money you withdraw from your savings on a monthly or annual basis  – your “rawdown amount – is critical. If your drawdown is too large, you risk reducing your capital amount. Also, your drawdown needs to keep pace with inflation, so it will need to increase over time.
“You definitely require professional advice from a financial adviser, even if it’s just to do this calculation,” says Ingram.
With a drawdown of “3% or less per year, you can be reasonably sure you won’t draw down on your capital in nominal or in real terms,” says Ingram. “At a drawdown of 6% or 7%, it’s very possible that over time you will start to erode your capital.”
In some ways, this corroborates the so-called <a href="https://www.discovery.co.za/portal/individual/invest-news-mar16-retirement-planning">4% rule</a>, but the shortcomings with a one-size-fits-all type number like this is that the answer will necessarily be different for each individual. The difference between 3% and 5% seems small, but has massive consequences over time.
 
For more information on investing for retirement, speak to your financial adviser.
This article is part of an investment series by Discovery Invest. ﻿

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Nigeria ratifies the Trade Facilitation Agreement

Globalisation has left people behind – this is what we should do about it

Ministers call on G20 to aim for inclusive growth from WEF

Google & Gavi partner to scale up innovations for vaccine delivery

Biden issues call for Europe and the US to defend the Liberal International Order

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What you need to know when you’re investing

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