In 2022 digital advertising spend increased four times faster than traditional adspend, fuelled by the increasing number of internet users. This is according to the WOW report on the advertising industry in South Africa.

What has changed in the advertising industry?

The industry has fundamentally changed since the 1960s when Stephen King of agency J Walter Thompson first conceptualised account planning to respond to the increasingly crowded marketplace. The structure and business models of the industry have seen unprecedented evolution as a result of new technology that has made it more accessible and affordable for advertisers to reach end users (targets) via new digital advertising channels.

What was also a reality in the field of content development in the 1960s was the cost and complexity of producing video content. Advertising agencies had to invest in sophisticated equipment and infrastructure to produce a fraction of what today can be produced in an ordinary office with just a phone, tripod stand and a microphone.

These developments, coupled with the increasingly crowded marketplace, have resulted in clients putting enormous pressure on agencies to contribute to increasing revenue and market share. Agencies are increasingly less measured on their ability to produce 30-second video content and more on what is best for the brand’s objectives and strategy. This creates tension between agencies and clients, with agencies demanding more detailed briefs in order be able to provide campaigns that deliver measurable outcomes.

How smartphones have changed the way we consume content

The increase in smartphone penetration and new tools and platforms in the hands of consumers are driving the appetite for video content as they engage with brands through their smartphones from anywhere in the world.

This has led to businesses becoming more aware of the need to create visually-captivating content that is entertaining and informative. The need for brands to provide valuable and informative content has taken on increased importance to establish trust and credibility with customers. Value and innovation have become the cornerstone strategy for building brands that last. Customers are more discerning and demanding in their expectations of what brands have to say and offer. In instances where they do not like content that is being pushed to them, they have the technology to block it through ad-blockers.

The role of artificial intelligence in the advertising industry

Artificial Intelligence has made it possible for brands to push personalised content, compelling advertisers to continually adapt their strategies based on the data they collect through engagements.

We have all experienced instances where we searched for a product online and then got flooded with adverts for similar products. This is useful for fast-moving consumer goods as they are repeat purchases, but for longer-term and big-ticket items, the challenge is to reach the consumer before the purchase decision is made. Big data-driven predictive behaviour patterns facilitated by AI, and lightning-fast responses to online queries to reach consumers ahead of decision time will provide a competitive advantage.  

With evolving technology, agencies are now prioritising brand strategy over content production, adapting to the changing demands of a discerning audience. The advent of AI-driven personalisation is driving the move towards the digital advertising realm and challenges advertisers to engage consumers in meaningful ways, especially for high-value purchases, and foster lasting brand relationships.

Africa has plenty of minerals and mineral elements such as bauxite, coal, diamonds, gold, platinum-group metals (PGMs), iron ore, copper, lead, lithium, manganese, nickel, cobalt, phosphate rock, semi-precious stones, silver, tantalum and niobium, tin, titanium minerals, tungsten, uranium, zinc and zircon, rare earth elements, graphite, chromite, beryllium, boron, caesium, fluorine, but for the longest time, mining has remained underdeveloped. This blog will look into the opportunities and how countries can use policy frameworks to leverage their mineral wealth to become sustainable.

The biggest companies in mining on the African continent

There is a shift in the presence of large multinational mining companies on the continent. The traditional big names are well known (Anglo American, Gold Fields, De Beers, Glencore, Kumba, Rio Tinto, Vale, Barrick, Newmont etc), and all long-established names and South Africa owing to their historically dominant role in gold production. The shift in ownership in the mining landscape is due to ownership structures changing due to policy shifts, economic conditions, geopolitical factors, and evolving industry dynamics.

Many African countries are now demanding increased local ownership and participation in mining operations and pushing for a higher percentage of ownership or involvement by local entities, communities, or governments themselves to ensure that more benefits of mining stay in the country.

The large-scale mining of traditional minerals such as gold, PGM, copper, zinc, tin and diamonds has gradually been expanded to more and different minerals. Demand for different minerals has been triggered by the imposition of climate change goals and the breakthrough of electric cars. Lithium and cobalt required for energy storage systems are crucial to produce lithium-ion batteries, while graphite is used in fuel cells and other advanced technologies. There is also increased demand for rare earth elements that are essential for various modern technologies including smartphones and wind turbines.

There is continued demand for cars, and in 2022, global motor vehicle production increased by 5.7% to 85.4 million vehicles compared to 2021.

Transition to electric vehicles (EVs) has led to a massive increase in demand for batteries and battery components that consist of several minerals, including lithium, manganese, cobalt, nickel, and graphite.

Changing demand for minerals

Africa is a large continent with many of the minerals in current demand. Therefore it is no wonder that we are seeing the presence of several Chinese and Australian companies exploring and exploiting those minerals in many African states. There are two recent WOW reports that provide a deep dive into this aspect – The Mining Industry in West Africa and Lithium Mining in Africa.

More and more African countries are moving away from colonial-type exploitation and want meaningful participation in the value chain of their precious minerals. Shareholder participation in the mining ventures and in-country beneficiation are high on the list of demands for exploration permits.

Most disputes arise out of disagreements on these issues alongside the ever-present bribery issues, not helped by political instability in many African countries.

Importance of balanced policies

National governments need to strike a balance in the face of the high cost of exploration and developing mineral mines, aggravated in many countries by the lack of infrastructure, transport networks and distance to ports.

Poor economic policies and governance saw South Africa lose the crown of the largest gold producer to Ghana. Ghana regained the title of Africa’s largest gold producer from South Africa as gold production by companies increased to 95.8t in 2022 after output fell by 29.9% year-on-year in 2021. Artisanal and small-scale miners produced 20.4t, bringing the total to 116.2t, a 32.5% increase from 87.7t in 2021.

The WOW reports highlight that Africa’s mineral wealth is huge, but the continent is largely unexplored, unmapped, and under-resourced. A previous Eskom CEO once said that we have a lot of coal, but coal in the ground is not the same as coal at the power station, and changing environments and demand are set to make coal a lot less valuable. Mining investment is costly and long-term and requires policy certainty to realise a return on investment. Technological innovation and political change may lead to losses in value and markets.

South Africa has experienced first-hand that supporting infrastructure is critical to mining, having lost export opportunities in the mining industry due to failing transport infrastructure in rail and ports.

Tax regime on the African continent

Tax regimes and inadequate governance in African countries are facilitating illicit trade, especially in countries where artisanal mining represents a significant share of production. For example, in Mali, which has a favourable export tariff, minerals are being smuggled in for export. Situations like these result in neighbouring countries participating in the illicit trade that does not contribute to the country’s tax coffers.

This is a challenge that governments should keep in check when devising new policies. Companies use legal skills to maximise avoidance, while small-scale operators often use evasion to reduce tax burdens, and as a result, operate in the grey middle. 

With the mining landscape rapidly evolving in Africa, countries are strategically positioning themselves to leverage their mineral wealth while fostering sustainability. They are embedding this through local participation, but need to enforce sound governance to grow their economies and improve the livelihoods of their citizens.

The importance of capital formation for infrastructure development

Infrastructure development has many elements including fixed capital formation, a statistical term for just about everything that constitutes investment in physical assets of a country’s economy. These investments are intended to be productive assets and generate income over time. Insulated wire and cable have a significant impact on infrastructure development, playing a crucial role in several sectors that drive the country’s growth and modernisation.

Assessing Infrastructure Development Priorities and Public-Private Contributions

There are two fundamental questions that need to be asked in connection with fixed capital formation. Firstly, how much should be allocated to fixed capital formation in a country for it to remain competitive and to increase its economic asset base? In practical terms, this would, for instance, relate to expanding and improving port capacity, roads and transport logistics, increasing electricity generation with cost-effective power supply to support economic growth, and increasing investment in telecommunications networks, including internet, phone, and data transmission systems.

Secondly, how much do government and public sector entities contribute to fixed capital formation compared to the private sector? As government collects the lion’s share of GDP through taxes, it is expected to assume responsibility for public sector infrastructure.

Beyond actual investment in productive assets, government has the responsibility to create an environment that is conducive for the private sector to carry out industrial activity that will grow the economy.

On the first question, emerging markets need to spend about 20-30% of GDP to bring build infrastructure and manufacturing capacity to the level of developed markets. South Africa does not score highly, as illustrated in the Trading Economics graph of infrastructure investment in South Africa as a percentage of GDP. This shows that South Africa is falling behind in relation to other emerging markets. The level of spending on infrastructure investment is at dismal levels of less than 15% (14.06%) in 2022, according to World Bank statistics (10% of South Africa’s GDP short on capital formation equals over R700bn)

On the second issue, the share of emerging markets’ public sector investment in infrastructure should be between 30% and 50% or even higher. Thus at 50%, government underspends in the region of R350bn.

South African Infrastructure Investment as a Percentage of GDP

The South African Reserve Bank (SARB) also provides a statistic on capital formation in the graph below.

The disconnect between private and public infrastructure investment

Construction of the Medupi and Kusile power stations, as well as locomotive investment, are behind the increased share of the public sector in overall infrastructure investment. But it is only half of the story, as illustrated in the SARB graph, where it is evident that government infrastructure spending has remained low over several years.

Where the disconnect comes in is that while public sector infrastructure investment is at the very low end of accepted benchmarks, the tax take in South Africa is high compared to other African countries.

South Africa’s tax-to-GDP ratio in 2020 (25.2%) was 9.3 percentage points higher than the average of the 31 African countries in the OECD Revenue Statistics in Africa 2022 (16.0%).

A recent International Monetary Fund estimate is found in the table below.

How does South Africa compare to its BRICS peers on infrastructure investment?

In the BRICS structure, South Africa has the lowest infrastructure investment, but the highest tax collection except for Brazil, whose infrastructure investment is however almost 5% higher than South Africa’s. South Africa has the lowest economic growth rate in BRICS, as illustrated in the table.

Economic data on BRICS countries

Source: IMF

South Africa imposes a high tax rate compared to its BRICS peers, but does not provide the required services in terms of infrastructure investment that it is supposed to deliver in support of economic growth. The few large-scale investments in public entities such as Eskom, Transnet, SAA, Denel were marred by underperformance in terms of execution delays, cost overruns, and design flaws that will forever cause suboptimal outputs.

It is time for South Africa to grasp the nettle and, as per Treasury’s advice, reduce wage expenses so that funds become available for infrastructure investment.

Digital transformation in the real estate industry

Technology is pervasive in all spheres of our lives and the property industry is no exception. It has enabled the real estate industry to be more efficient, transparent, and accessible, benefiting consumers, agents, developers and investors. Continued innovation is expected to further shape and optimise the real estate landscape.

As stated in the WOW report on real estate activities in South Africa, two of the main enablers are big data and the new tools that are available to collect and analyse data, providing developers of new property with access to valuable information on supply and demand in specific areas, giving landlords access to information on property values and deeds office records of all sales, and data alerts for information about vacancies, rental demand and price points.

For municipalities, which collect rates on all properties, tech tools like drones, Google Earth and software tools have made it possible for them to have a much more efficient and accurate way of establishing and updating property values.

Benefit of real estate technology for consumers

Consumers can now search any area in most of the world, specify search criteria, and get meaningful and useful information. South Africans who plan to emigrate can buy property in countries they are moving to ahead of their move and save on renting and relocating twice. This is all made possible with the availability of the right information, including visuals and virtual tours of the properties they intend to purchase with detailed descriptions and price comparisons.

That does not mean the old-fashioned cost-benefit analysis is no longer relevant. Everything has a cost and the technology revolution does have downsides. Storing and handling large amounts of sensitive personal and financial data on digital platforms raises serious concerns about data privacy and security. Real estate companies must invest in robust cybersecurity measures to protect against potential breaches and unauthorised access.

The impact of technology on jobs in the real estate industry

Automation and digital technologies have displaced certain traditional roles, especially those involving routine administrative tasks, but have also created new positions in the real estate sector related to data analysis, tech support, digital marketing, and software development.

The architectural field has been significantly impacted by new technology which has transformed how architects design, plan and construct buildings.

Computer-aided design (CAD) and building information modeling (BIM) software allow architects to create precise and detailed digital models of structures, facilitating design visualisation, collaboration, and error detection.

This has streamlined design processes, improved accuracy, and facilitated better collaboration among architects, engineers and stakeholders throughout the design and construction phases.

The downside of technology in the real estate industry

Not all individuals or communities have equal access to advanced technology, and this can create an uneven playing field, potentially marginalising those without the necessary technological resources.

Addressing the various downsides of technology in the industry requires a thoughtful and balanced approach, focusing on leveraging technology’s benefits while mitigating its drawbacks through adequate training, cybersecurity measures, and strategic decision-making.

The world has grown exponentially more populous and the need to be able to keep track of information has grown more complex, and technology has been the saviour.

Conclusion

For now, we accept the drawbacks willingly because the benefits far outweigh those moments of inconvenience, which only happen occasionally, while we almost continuously derive the benefits of today’s technology.

Technology benefits are, however, not to be confused with economic realities. In South Africa, technology gains have not translated into economic gains due to service delivery lagging behind. While efficiency gains made it possible for the valuation of properties to become more accurate due to technology, high rates and costs have depressed the potential value of properties.