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Poor management of an SME could land you in court

Metrosmag,SA

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As the owner or manager of a privately-owned business, you may not think that you need the insurance protection that large, listed companies have for their directors and officers.  However, companies of all sizes, even non-profit organisations and membership associations need comprehensive cover for liabilities that could arise from wrongdoings by directors and officers in conducting their managerial responsibilities.  D&O liability insurance has a vital role to play in any business, regardless of size or nature of ownership.

This is according to Geoffrey de Pinchart, Business Unit Manager for Directors and Officers Liability at Aon South Africa. “Statistics over the last decade show that D&O claims against privately-owned businesses and non-profit organisations are as prevalent as in large listed entities. Yet research by Datamonitor suggests that 70% of SMEs do not have D&O cover despite the increased regulatory scrutiny and the more litigious nature of society, leaving executive management in private firms exposed.”

What is D&O liability insurance?

The main purpose of a D&O policy is to offer financial protection for executives, which provides investigation and defence costs together with awards for a valid claim. The cover that a D&O liability insurance policy provides is an absolute necessity when it comes to the protection of the personal assets of directors, officers and other employees that are charged with supervisory and managerial responsibilities, who can be held liable for wrongful acts which may occur in their day-to-day management activities.

“A D&O claim is typically made by a third party that has some relationship with or interest in the company – such as shareholders, investors, customers, consumer groups, competitors, unions, contractors and even government – who alleges that a director or officer has acted wrongfully, and in most instances, causes a financial loss to the third party.  A loss suffered by a third party will usually be followed by litigation against the individuals who own and manage it, with substantial legal costs to defend such action, and sometimes even civil damages being instituted. A wrongful act is typically defined as an actual or alleged breach of duty, breach of trust, neglect, error, misstatement, misleading statement, omission, breach of warranty or authority or any other act, but excluding intentional and deliberate acts,” explains Geoffrey. 

But does management of SMEs really have exposures to seemingly ‘corporate’ liabilities?

Although the financial quantum may differ between a large listed company versus a private owner-managed business, many of the exposures faced by D&Os in both are the same.  For example they can be held liable for pollution incidents, cyber breaches, for the debts of the company should it go insolvent, for employee injuries at work, unfair dismissals or sexual harassment charges.

In 2014, the managing director of clay-mining company Blue Platinum Ventures became the first company director in South Africa to be held personally liable for a mining-related environmental offence. The cost of rehabilitation in the Blue Platinum Ventures case was estimated by the court at R6.8-million and gave the director a five-year suspended sentence on condition that the damage was rehabilitated in three months. It was the first time that a director has been sentenced to imprisonment without the option of a fine and also the first time that a sentence has been linked to environmental rehabilitation

“There is also a perception that professional indemnity (PI) insurance taken out by the likes of engineers, accountants, attorneys, healthcare professionals and so on would respond in a D&O claim, which is not the case as PI and D&O cover serve very different purposes. The PI policy provides cover specifically relating to the professional services rendered, whilst a D&O policy provides cover for mismanagement and failure to supervise appropriately. Some insurers add a PI exclusion to their D&O policies, while others provide cover for failure to supervise should their staff cause a PI exposure to the company as a direct result,” explains Geoffrey.

The reality is that D&O claims are stressful and long-tailed, with the legal process often taking years to come to conclusion.  For a privately owned business, this can distract the key directors from running the business effectively. It’s also unlikely they will have experience in such matters, nor the access to internal HR and legal departments to counsel them through the process.  Most crucially in private companies, directors often invest their own personal wealth to get the business up and running, which means the cost of defending a claim without D&O cover could impact their family’s financial security and personal assets.

“Where a claim is lodged, the cost of legal defence and investigating an allegation, even if proved unfounded, can run into millions of Rands, draining personal financial resources, as well as the human resources that should be focused on running the business. Many small companies may be dealing with larger corporations who have legal teams and may take legal action against the board should they feel the director caused them a loss and would be prepared to take this to court as they have the funds to do so. Many directors of SMEs would not have the funds to get professional legal assistance without the protection afforded by a D&O policy,” concludes Geoffrey.

Talk to a professional Aon broker with a deep specialisation in the D&O liability environment backed with the right D&O cover to protect your business, reputation, personal assets, colleagues and financial sustainability.  Globally, Aon has driven the progression of Directors’ and Officers’ (D&O) liability insurance for over 20 years and has developed many products that are now accepted industry standards.  Aon places more than $2.6 billion in D&O liability premiums annually.

Metrosmag,sa ( inspired by Mzansi Lifestyle ) Mzansi is rich in Lifestyle, a nation diverse in race and culture. Mzansi Magazine explores the rich heritage , versitile culture and the celebrations of Life in Mzansi. Metros Magazine, SA is South Africa's informative Metropolitan lifestlye magazine with all the fresh and important news in Mzansi.

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Sim Tshabalala becomes first Standard Bank black CEO

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Sim Tshabalala has become the first black person to lead Africa’s largest bank by assets without sharing power, after his co-CEO stood down, South Africa’s Standard Bank said on Tuesday.

Tshabalala, a 49-year old company veteran who describes himself as “a Zulu boy from Soweto”, joins only a handful of black executives at the helm of one of the country’s top-40 blue-chip companies.

He is the second black person to run one of the top five South African banks after Sizwe Nxasana took the reins for five years in 2009 at rival FirstRand in a sector often criticised by politicians for a lack of diversity more than two decades after the end of apartheid.

In an unusual statement from the government on company executive appointments, Finance Minister Malusi Gigaba called the appointment an affirmation of the capacity of black professionals.

“Along with the work that is currently ongoing in parliament to address the slow pace of transformation in the financial sector, Mr Tshabalala’s appointment comes as a step in the right direction,” Gigaba said.

Tshabalala, a lawyer, was appointed alongside Ben Kruger in 2013 to sharpen the company’s Africa focus and clean up a costly blunder by then chief executive Jacko Maree to try to turn Standard Bank into a major emerging markets lender.

“The board is satisfied that the structure, which was necessary in 2013, has met and in many respects exceeded expectations,” Standard Bank Chairman Thulani Gcabashe said in a statement.

“Good momentum has been achieved in the implementation of the group’s refreshed strategy.”

In their joint 4 1/2-year tenure, Standard Bank has added branches across Africa while selling assets in Russia, Turkey, the United Kingdom and Argentina under a revamped strategy that scaled back its ambitions outside the continent.

Kruger will stay on as an executive director, and will report to Tshabalala, Standard Bank said.

Black executives’ lobby group, Black Management Forum (BMF), welcomed Tshabalala’s appointment, saying it showed Standard Bank had respect for black talent.

“The BMF trusts that this announcement will mark an end to the joint CEO appointments phenomena that we have come to see,” the group said.

BMF generally criticises the appointment of two bosses, saying it is often done when “the most deserving candidate is a black person.” It also says it stifles accountability and adds costs to a company payroll.

Synthetics fuels giant Sasol is another high profile company with two bosses. The company is led by Bongani Nqwababa and Stephen Cornell.

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Direct selling providing more opportunities for more women

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Johannesburg, 16 August 2017 – Figures just released indicate that unlike many other sectors in the economy direct selling is growing, providing more micro-entrepreneurial and income generating opportunities for women.
Currently some 1 333 223 South Africans benefit from direct selling and have the opportunity to build their own small business, of which 72% are women.
Despite the flagging economy, direct sales in 2016 were 18 percent up on 2015, totalling nearly R12.9 billion
According to Cornelle van Graan, chairperson of South Africa’s Direct Selling Association (DSASA), direct selling attracts female entrepreneurs because it offers opportunity, flexible working hours, training and the ability to work from home.
The number of women who make a full-time living from direct selling has grown by almost 30% with the majority operating in the health and wellness, personal care or household good sectors.
Van Graan says that the sector also provides opportunities for women who have an existing full-time job, but want to supplement their income.
“Direct selling is also a good way for stay-at-home mothers to make a living, while being actively involved in the lives of their children. Getting started is generally easy, low cost and low risk.”
“Mothers usually have an existing network of other moms, giving them excellent access to a market with similar needs and interests. Their personal relationships and endorsement gives buyers confidence, so these women can be very effective sales people.”
About three-quarters of all direct sales people in South Africa are involved part-time.
Besides flexibility and access, part of the appeal of direct selling may be that money can be earned immediately the sale is made. There’s no waiting until the end of the month or the next payment cycle.
Van Graan says while motivation can vary from paying for a child’s education to saving for a dream holiday, most women get involved in direct sales to provide for their families.
There are 34 direct selling companies who are members of the DSASA. There are more than a million independent business owners associated with DSASA member companies. They make sales totalling nearly R13 billion a year. Everything from financial services to beauty products and skin care, from fragrances and fashion accessories to nutrition and health supplements, from dinner services and a host of other tableware and kitchenware to household cleaning supplies are sold.
What you need to know about direct selling:
If you are thinking of becoming a direct seller here’s what you need to consider to help decide what direction you want to pursue.
1. Product selection
The direct selling industry offers a range of products within sectors such as health, beauty, homeware, financial and investment products, nutritional supplements and weight-loss management. Although it is preferable to choose products which you are familiar with or interested in, you will receive training on all products being offered by the DSA member company that you choose to join. Believing in your product is vital to effectively market and sell your product, as well as personal fulfilment.
2. Choosing which company
Visit www.dsasa.co.za for a full list of member companies and scroll down and identify the companies offering the type of product or service of interest to you or the business opportunity that appeals to you. Attend a demonstration or visit the website of the company to help decide which company you feel best suits your needs and ideals.
3. Research appealing companies
Read through all their marketing collateral and agreements to get a good understanding of the stability and history of business and of your responsibilities.
4. Investigate the start-up costs
All DSASA member companies are obliged to keep start-up costs low. Your initial investment will typically cover a sales kit with all company information, product samples and training materials. Avoid companies expecting a large investment or who push overzealous inventories, you should be allowed to grow at your own pace and affordability.
5. Study the return policy
All DSASA member companies are obligated to buy back any unsold, re-saleable product inventory, promotional materials, sales aids and kits purchased within the previous 12 months at the selling price less an administration fee of up to 10% of the selling price.
6. Fully understand the compensation
Check the member companies’ compensation plans as they all differ. Make sure you understand details of earnings and the overall business model.
Ends.

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Veolia signs landmark B-BBEE deal with Ceracue

Metrosmag,SA

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“Veolia was looking for a local development partner with strong project experience in the water treatment markets,” explains Gunter Rencken, Managing Director, Veolia Water Technologies South Africa. “In Ceracure, with whom we’ve had a less formalised working partnership for about four years, Veolia has a hands-on, active B-BBEE partner with a thorough understanding of our core business and the water treatment market.”

This close alignment in corporate vision lays the basis for a synergistic approach to increased business development in both South Africa and Africa. “With this partnership in place, Veolia can confidently amplify business development avenues and enhance our project reach in the municipal and industrial markets,” Rencken continues.

“In addition to demonstrating Veolia’s seriousness to transformation and social development, it also means we’ll be able to supply water treatment solutions encompassing a broader scope of works,” explains Langa Nxumalo, Managing Director, Ceracure. “Together, we can advance our technical and business capabilities, offering a superior and integrated solution for water treatment projects. This ‘one plus one is equal to three’ strategy will allow better project execution in line with clients requirements, all thanks to a good balance sheet and technical experience by Veolia.”

The partnership will also see Veolia South Africa taking an active approach to expanding Ceracure’s business capabilities. “We are assisting Ceracure with achieving a higher CIDB grading, and have planned for a structured transfer of technology and skills of Veolia’s water treatment expertise to Ceracure,” Rencken explains.

Veolia’s shareholding arrangement with Ceracure represents an important pillar of the company’s new vision that is enhancing the water solutions specialist’s delivery of highly efficient, low-footprint water treatment technologies in South Africa and Africa. Alongside the B-BBEE deal are a range of recent organisational and technological innovations that have streamlined the company’s manufacturing, distribution and service networks across the region. Veolia South Africa is now positioned as a key technology and manufacturing hub for Veolia’s new range of standard engineered products and systems as well the company’s range of Hydrex™ speciality chemicals.

“We are excited to welcome Ceracure on board, and look forward to a fruitful synergy with them as we continue to tackle Africa’s water treatment challenges,” Rencken concludes.

Veolia group is the global leader in optimized resource management. With over 163 000 employees worldwide, the Group designs and provides water, waste and energy management solutions that contribute to the sustainable development of communities and industries. Through its three complementary business activities, Veolia helps to develop access to resources, preserve available resources, and to replenish them.In 2016, the Veolia group supplied 100 million people with drinking water and 61 million people with wastewater service, produced 54 million megawatt hours of energy and converted 31 million metric tons of waste into new materials and energy. Veolia Environnement (listed on Paris Euronext: VIE) recorded consolidated revenue of €24.39 billion in 2016.

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