Our 2024 financial year concluded at the end of March. It was a demanding year, but in true WOW style, our team embraced the challenges to deliver encouraging results.

FY2024 saw WOW welcome 17 new clients, including a global and two African organisations domiciled outside South Africa. We are also pleased with the healthy uptake of additional WOW products by existing clients. 

While any client loss is always concerning and triggers introspection on how we can do things better, we value our loyal client base and were encouraged by a further year-on-year improvement in our client retention rate, which is currently 97%. It is gratifying that the past year also saw us welcome back four previous clients.

A review of our clients’ WOWEB usage between the 2022 and 2023 calendar years revealed pleasing growth across most data categories. In particular, we celebrated a 25.6% increase in the number of industry research reports downloaded by clients, up from 18,182 to 22,839 reports. It is good to see the investment in continuous improvement of our research paying off. 

Interesting to note is the change in most popular industry segments between 2022 and 2023, with only four industries featuring in the top 10 of both years:

To conclude, growth in our content statistics were pleasing. At the end of March, unique shareholding relationships in the WOW database amounted to 5,399,322 and a few other content growth highlights include:

We are looking forward to another year filled with growth opportunities.

The importance of the glass manufacturing industry in South Africa

Glass is one of the most ubiquitous inputs in multiple industries and used in many applications in automotive, architecture, food and beverages, cosmetics, electronics and robotics. It might be imperceptible, but glass production has experienced high rates of innovation.

Fibreglass is bringing high-speed internet to homes, and safety features in automotive glass save lives every day. This is well articulated in the WOW report on the manufacture of glass and glass products in South Africa. The importance of the glass industry cannot be understated given its contribution to job creation, economic activity and innovation. Glass also has a place in art and culture, as far back as the Middle Ages with artistic windows in cathedrals.

The role of SOEs in glass manufacturing

Unfortunately, the glass manufacturing industry in South Africa is perhaps a microcosm of how the government and its SOEs impede progress in local industries, contrary to our recent blog titled The third biggest SOE that is pioneering clean governance in South Africa, where you can read up on one of the few successful SOE’s in South Africa.

The country does not manufacture beads, particularly the small ones used in traditional regalia and artifacts, even though the establishment of a bead manufacturing business does not require high capital investment.

Electricity, an energy source for the energy-intensive manufacturing of beads, has now moved from among the cheapest to the most expensive in the world, with no abatement in sight, adding a level of difficulty to the manufacture of beads.

Eskom would not agree to subsidise the high energy costs of a new bead manufacturing business sponsored by one of the SOEs for this project to become sustainable. The project was a boost to the manufacturing industry and empowered unemployed women in the rural community of Giyani. Their leader had been sent for training in Japan and India to learn about beadmaking.

Glass manufacturing differentiation

Beads by themselves do not have high differentiation features. Differentiation is created in bead applications in fashion and jewellery, meaning that at manufacturing level, cost leadership outweighs differentiation as a sustainability strategy. With the high cost of electricity, and in the absence of a gas connection, the bead manufacturing project succumbed to cheaper imports, and South Africa, in the absence of industrial scale bead manufacturing, will continue to mostly consume imported beads.

Performance of the glass trade in South Africa

The WOW report on glass and glass product manufacture includes a graph, reproduced here, which points to great possibilities and opportunities for the industry. The government could do well to encourage and support this steadily-growing industry.

What are the opportunities in the glass industry?

The glass industry will continue to embrace innovation and sustainability by continuously developing new products, technologies and processes. Advancing energy-efficient glazing systems, lightweight materials and recycled content contribute to resource conservation, environmental stewardship and carbon footprint reduction.

These benefits can only be realised by complementing private sector investment with the creation of many smaller-scale investments in different types of glass manufacturing plants, of which beads is a prime example, to create much more employment, uplift the marginalised and improve the trade balance.

Burials of lost loved ones always have, and continue to have, deep traditional and emotive values reinforced by perceptions of dignity and respect. With South Africa’s diverse communities that have unique cultures and religions, burial methods continue to evolve. Funeral service events are an opportunity to showcase fashion and expensive cars to the extent that families are increasing funeral insurance cover to make sure their loved ones’ burials are lavish – from the choice of casket and decor to the type of food and drinks catered at the event.

Is South Africa running out of burial space?

However, South Africa is running short of cemeteries to bury the dead in the traditional method. There are space-saving alternatives, but culture and some religions are obstacles when considering more environmentally-friendly burial methods.

Cremation, which has been an alternative for some time, is slowly gaining acceptance. In India, the practice of burning the body has for a long time been accepted as a mainstream method.

Other, newer methods that are found to have a much smaller carbon footprint such as aquamation, with 90% less energy consumption than cremation, have been developed. Yet, the description of the process would hold many people back from using the method, as it is perceived to infringe on the notions of dignity for the dead.

Trends and burial methods in the funeral services industry

Growing trends in this industry according to the WOW report on funeral services and related activities industry are:

• A move from rigid traditional religious or cultural traditions to a more personalised approach;
• Rising popularity of environment-friendly operations and management by funeral parlours; and  
• A steady increase in cremation as socially acceptable, convenient, and cost-effective.

Other methods that are starting to gain acceptance are terramation and tree pod burial methods, which may have more appeal but are expensive.

This brings us to the financial aspect of funerals, where, partly because of the emotional attachment to people passing, there is a flourishing funeral insurance industry.

Funeral insurance policies are offered by all big insurance companies and by funeral undertakers themselves. The WOW report on funeral services and related activities in South Africa describes the sector as consisting of very many small enterprises with less control over compliance with existing laws and regulations.

In poorer communities, funeral undertakers guarantee proper burial of a person for a small monthly contribution (insurance premium). That contribution is smaller than the formal insurance premiums on offer for a funeral service. Instead of paying out a defined amount to a member, the funeral undertakers take care of the funeral on agreed terms.

The role of regulation in the funeral services industry

While strict regulation is required for health and safety standards, the requirements should not be so onerous that they increase the cost of carrying on this business, particularly for those serving poorer communities, which remain in the majority in South Africa. A judicious balance in terms of policy and regulation of funeral services is needed.

Striking this balance in an industry that faces challenges including cemetery shortages and regulatory issues, is necessary, considering that smaller enterprises serving poorer communities are providing services to burial providers and communities. Convincing them to switch to newer methods will come in time.

SAFCOL is leading the SOE landscape in South Africa

South African Forestry Company Limited (SAFCOL) is the third largest state-owned entity (SOE), while it is not often reported on in the media, might be the best case study for other SOEs in South Africa.

It tells a story of good, clean governance that demonstrates that with the right leadership, government entities can be run successfully. The outgoing CEO, Tshepo Monaheng, joined in December 2017 and has managed to turn SAFCOL around. During the 2021/22 financial year, revenue increased by 33% to R1.2bn, and operating profit grew from R40m to R387m. The after tax loss of R45m improved to a profit of R84m.

This is an encouraging tale of an unsung hero. These results were achieved while its peers Eskom, Transnet, SABC, SAA, PetroSA, Denel and others are perpetually in the news for the wrong reasons and continually seeking bailouts from government.

According to the WOW report on forestry and related services industry in South Africa, SAFCOL has eucalyptus, pine and wattle plantations in KwaZulu-Natal, Limpopo, Mpumalanga and Mozambique, and a sawmill that produces structural timber in Limpopo. It manages 189,000ha of plantation areas in South Africa and 100,000ha in Mozambique.

The company has received three consecutive years of an unqualified audit opinion, meaning its financials appeared fair and transparent. Irregular and wasteful expenditures amounted to less than R1m in financial year 2022.

Previously it had received many qualified audits and irregular wasteful expenditure of R600m in financial year 2018. With revenue of about R1bn, the R600m highlights the extent of maladministration due to incompetence, theft, and corruption.

The fact that SAFCOL has come back from such depths illustrates that no task is too momentous and cannot be done. It is no surprise that the government is looking to Mr Monaheng to replicate his achievements at Denel.

Lessons learnt from SAFCOL

The appointment of Monaheng in 2017 led to the turnaround. He was able to bring all the management layers on board for this incredibly difficult journey and reach his objectives through focused and unrelenting efforts in achieving transparent and clean governance.

Not to downplay the effort, SAFCOL’s staff complement of 1,736 would have made the transition more manageable than it would have been at Eskom, with 40,000 employees, and Transnet, which had 55,827 employees in 2022. The World bank pointed out that Eskom is at least 50% overstaffed. The recent Eskom investigation by German consultancy, vgbe energy pointed to complex, confounding and unnecessary levels of management being counterproductive.

While it may be harder and it will take longer at other SOEs, the example of SAFCOL should not go unheeded. It is evidence that in the face of major challenges, a state-owned company can be turned around given the right leadership and the political will.

If SAFCOL’s achievements are replicated at other major SOEs, government’s credibility can be restored, and this could be a prelude to better public acceptance of establishing new SOEs such as the state bank or NHI. Without supporting evidence that the state can oversee the efficient running of such institutions with a clean governance record, doubt will always shroud these plans.

During Monaheng’s presentation to the Parliamentary Monitoring Group (PMG), he committed to keeping costs down and improving efficiencies. He further explained that had appointed an independent entity to investigate those who were responsible for SAFCOL’s irregular expenditure and thereafter initiated a consequence management process.

The importance of SAFCOL in a changing world

SAFCOL has an important role to play at a time when the world is grappling with the effects of climate change. It must do this while navigating the complexities of running an SOE which requires concerted efforts to address governance, financial, and operational challenges.

SOE’s, if well run, can drive economic development, and contribute to sustainability goals.