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PSG reports growth despite challenges at PSG 2014 conference

12 May 2014 Rianet Whitehead

After an extended bull run in the international and local markets, investors are advised that they must prepare themselves for an investment period which may be filled with challenges where barriers to entry into the market may be high and will make potential investors a bit skittish of letting go of their hard earned cash.

But with this market pessimism, there is opportunity. Speaking at the first day of the PSG conference - which was held at Sun City last week - CEO of PSG Konsult, Francois Gouws, points out there is room for growth.

"Advisers and asset managers just need to be aware of their environment. There is a growing black middle class, and this is an area we need to pay attention to. If companies are going to add value to their business, they need to be aware of this trend and act accordingly,” says Gouws.

Complacency will hurt your bottom line

PSG Wealth Investment Economist, Dawie Klopper says that in addition to being aware of all the areas of opportunity, advisers and asset managers need to be aware of the current challenges which are affecting the market.

One such challenge is the industry’s perennial bugbear of regulation. Gouws points out that regulation is a worldwide challenge and has been on the increase on a global scale, not just within South Africa. "Companies need to reposition their business so that they can deal with the dynamically changing environment, and then apply that to their overall franchise. PSG has managed to do this well with business earnings growing by over 44%. This was achieved through growth by all of our franchises,” says Gouws.

Another factor is to look at what their competitors are doing. Gouws adds that monoline businesses are extending their product ranges which have major implications for PSG. An example of this is banks and insurance companies feeling the need to become financial service conglomerates.

Unique contributing factors to a slowing economy

In addition to the regulatory challenge which companies are facing, there are a number of unique factors which are adding to the outlook of a slowing local economy.

"There are a lot of short term factors which are currently affecting the economy. The elections have been playing a role leading up to 7 May, and will continue to do so afterwards. There needs to be a change in top government as investors are feeling very insecure at the moment. There is a lot of scope for growth in the private sector, but there won’t be investment unless investors know that there will be support and protection from government. The sooner government can resolve the prolonged platinum strike and Eskom bottlenecks, investment will flow,” says Klopper.

He adds that the best and the worst never happen in South Africa and that the country has a unique story to tell. "If you talk to foreigners, they will tell you that they enjoy South Africa. It is easy to do business in South Africa because for them the cost to do business is less than in the country they come from. Tourism is a major draw card to South Africa and when they see what we have to offer, they are interested in our assets,” says Klopper.

But he encourages South Africans to be the catalyst for change adding that we must be positive and start taking action. If this is the case, the worst won’t come to fruit and we can become part of the international economic revival story.

Industry consolidation will be the story of the year

The slowing economy will take its toll on smaller businesses and independent advisers who will find it particularly difficult to do business. CEO of PSG Distribution, Dan Hugo, says that regulation is a major contributing factor to this.

"How do we comply while we maintain costs? This is a significant challenge. In order for a company to survive, there needs to be the right amount of compliance which involves significant risk management as well as systems and processes which facilitates this. One cannot simply comply with regulation without making a significant investment in these areas, which is costly and excludes many smaller companies and advisers,” says Hugo.

This may point to the fact that PSG will be on the hunt for growth opportunities within the market as the company looks to spread its wings. "Regulation will result in a consolidation of advisers. It will become very onerous, difficult and costly for independents to adhere to regulation. And we may become a safe haven for advisers who want to become a part of a company that has the correct systems and processes in place to comply with regulation. We are also backed up with a significant client base and an extensive product range which we might add to as we bring new companies into the PSG family,” says Hugo.

Editors Thoughts:
The theme of the 2014 PSG Conference was 'Good to great' ('Merkwaardig tot meesterlik') and the feedback on industry trends, growth and company news were once again an inspiring experience. The format of the conference was slightly different than previous years and feedback from delegates on the changes we've seen is positive. PSG is growing and has big plans to grow even bigger. The model works and emphasizes the importance of the independent player in the industry. Please feel free to comment below.

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