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Why a second network WILL make a difference

By Malcolm Driessel

The provision of the right product at the right price, accompanied by the appropriate service levels will be the key differentiating factor among competing telecommunications networks. Thus consumers can look forward to significantly cheaper telephony once the second network operator (SNO) and seven regional network operators have been appointed. In fact, the battle to provide affordable communication to the masses will result in the onset of a “price war” between Telkom and its new competitors.

This is already evident by the strong competition for connectivity between the cellular phone operators. Of South Africa’s total population, only about 12 million are economically active and only 8-10 million of these have the means to communication. Consequently, the economically active South African market is quickly becoming saturated.

Even one competitor will make a difference to the pricing tables, and there will be savings to be made. Telkom will not only have to compete against a SNO and the seven regional network operators, but they also have the three cellular network operators to contend with. Although Cell C’s tariffs are currently governed by ICASA, they are still able to offer bigger kickbacks to the vendor. These kickbacks are offset against giving the customer a cheaper and more value-for-money tariff.

Although ICASA will govern the price of calls, the new networks operators will get around the tariff tables by differentiating between time slots for differently priced calls (such as Telkom’s Callmore Time). The customer will be able to switch through different services at different times in order to achieve savings.

The entry of other network operators into the market will undoubtedly result in a loss of connectivity for Telkom, which is why the telecommunications provider is currently focussing on the provision of data services and trying to lock users into long-term contracts. They must be able to provide value-for-money to the user over the long term when there is more than one operator offering connectivity.

Service levels will therefore be the key differentiating factor in the new competitive telecommunications market.

The operator that can provide the best combination of price and service will emerge as market leader at the end of the day. Whether it will be Telkom remains to be seen. Although their service levels have improved dramatically, their pricing still leaves much to be desired.

The new regional operators will find it difficult to achieve profitability, in that they have to establish a brand-new backbone. Infrastructure telecommunications costs are high, and each operator’s life depends on the amount of users who connect to their network. They must decide whether their backbone will be wireless, or whether they are going to share networks with Telkom.

Although technology is moving increasingly closer to the wireless scenario with the emergence of technologies such as GPRS and Bluetooth, price and speed are still inhibiting their adoption by the market.

The wired LAN remains by far the cheaper and more reliable option. It will be a long time before the wireless network becomes affordable to the SMME and GPRS is still far too slow to be a major player in moving data in the corporate market. The same is true for Bluetooth. It may be good and fast, but it’s currently too expensive.

At the end of the day, the pie is only so big. Although networks will initially lose revenue, the market will eventually stabilise and move into the wireless network sectors. GPRS, for example, has tremendous potential in the rest of Africa where no backbone exists. The market leader will be the operator who not only identifies these opportunities first, but also grabs them.

Malcolm Driessel is CEO of MIA Samsung Telecommunications, part of the Samsung group, a major player in world communications with a presence in 65 countries. He can be contacted on Tel: +27 11 799 7720 or by e-mail on mailto:malcolmd@mia.co.za

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Investment insight: What to do with your annual bonus

By Bryan Hirsch

Each year around December I’m requested to provide my views on what to do with a
year-end bonus…

This year I’ve decided to pre-empt the question to give readers a chance to think both earlier and more carefully about the decision.

Hopefully, you are one of the luckier people receiving a bonus.

However, for many my suggestions won’t apply as they have already budgeted to use the bonus to pay off debt or to fund a holiday. There is nothing wrong with either decision. I am in full support.

For the rest, read on.

Wise families calculate their budgets by taking both tax and annual expenses off annual earnings. This is the only real way to budget so if you fall into this category – full marks. For those who don’t, it’s time to start doing so.

This has been a tough year for South African consumers, with higher interest rates on housing bonds and other monthly debt, such as HP and leases on cars, furniture and household appliances. The interest rate hikes were accompanied by an increase in petrol and food prices through a weaker rand for most of the year, with the resultant higher inflation creating great strain.

So what to do with your bonus?

First, reduce debt wherever possible. Borrowed money allows us to increase our standard of living, so most of us have some form of debt. If your monthly disposable income is sufficient to fund that debt, my view is to continue as is. If not, use your bonus to settle the big debts on which you pay the highest rate of interest. This is likely to first be your credit card, then your bank overdraft.

The ability to cope with debt without feeling stressed is the real issue.

Next, consider a well earned rest to recharge your batteries. Do not fall into the common trap of paying for your holiday by credit card, then using your bonus for expenditure like a TV or DVD. Rather deposit the bonus into your credit card account to pay for the holiday.

What about buying a gym membership for the family? A healthy lifestyle pays dividends, not least of all providing the motivation to build your career, probably with higher salaries and bigger bonuses in the future. Employers like energetic, healthy and motivated staff. If you’ve seemed tired, lethargic and demotivated, the new exercise regime could change your employer’s perceptions of you to your future benefit.

If you need to buy foreign currency, do it now. While the rand is reasonably strong at the moment, it could weaken in the months to come. If you are going abroad, you have most likely calculated the costs at a much higher exchange rate than it is now. So the strengthening currency should work to your advantage, bringing down the cost of foreign travel.

If you are looking to save your bonus, your first effort should be directed at receiving it in a tax efficient form. Instead of receiving the bonus in your own hands, ask your employer to investigate investments through the company, such as an increase in contribution to your pension or provident fund, or receiving a deferred compensation offer from your employer. These options will result in payment of tax on the bonus being deferred.

With the bonus in your own hands, if you are within 15 years of retirement, check whether you have the capacity to increase your retirement annuity by a single premium equal to the bonus. Other savings options that could be considered, although not as tax efficient, are the purchase of an endowment policy or unit trusts, or even making a fixed deposit investment, which is
attractive at the high interest rates currently being offered. Just bear in mind that under the age of 65 you only get the first R6 000 of interest tax free.

After tax efficient options, the best place to put your bonus is into your home loan. Remember that for every R2 500 you invest in your bond at a 15% to16% interest rate, you will save approximately R40 000 in interest over 20 years. If you have an access bond, “parking” your bonus will provide you with a tax-free return equal to the interest being charged on the bond.

Finally, don’t forget school and university fees that may need to be paid in 2003 – and in the future.

Whatever you do with your bonus, it is essential that you sit down and assess your situation before making a final decision on how to use it. This is probably the easiest aspect of a very tough year!

Bryan Hirsch is Chief Executive Officer of Pioneer International Financial Advisors. Contact him on +27 11 8804710 or by e-mail on bryanh@pioneer-jhb.co.za

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Brand trends for 2003

By Mandy de Waal and Janice Spark

What will brands do in the future based on how they’ve behaved today and in the past? Mandy de Waal and Janice Spark, look at brand trends for the coming year and beyond.

The business of branding will remain big business in 2003. Marketers will deepen their understanding of brands and appreciate the importance of building brand equity. Companies will learn more about building brands and building market share, as well as the relationship between brand relevance and customer loyalty. These are the other trends that will shape the way marketers create, manage and protect brands in the coming year.

1. Branding endures despite an embattled economy

Economists predict that a depressed climate will endure both globally, and locally, for at least the next six to twelve months. Marketers will respond by shaving their budgets, rather than slashing them. Clients will seek the best return on investment and demand more innovative solutions from their marketing partners to help them weather an embattled economy. Branding will remain a mainstay, as marketers realise the power of building brands and their value in
surviving tough economic climates.

2. A shift in strategic focus from brand awareness to brand resonance

Traditionally brand strategies have largely dealt with competitive differentiation together with the benefits and emotions associated with brands. In 2003, environmental and social issues will bring increasing pressures on brands. Alongside this, consumers will become more sophisticated, self-reliant and smarter. What this means for branding is a strategic shift that will see the
brands of tomorrow becoming more reflective of company’s attributes and its relationship with its customers. The shift of power will increasingly move from marketers to customers as consumers become more demanding and sceptical. In consumer-driven markets over-promise and under-delivery will be a brand’s death.

3. Brand experience is everywhere and everything

Building brand-driven customer touch points within the organisation will be the biggest challenge that companies face. This will be particularly true of banking and financial companies that will struggle to maintain the integrity of their brand, and deliver on its promise at call centres, service points, and through diverse channels including interactive and cellular channels. Customers will interact with brands everywhere and those companies that marry their brand
promise with its actual delivery will rise to lead market share.

4. Brand extensions will drop off, while marketers will realise the value of
old-fashioned service

In a frenetic market, marketers will learn that less is more and that the road to increasing market share is paved with good, old-fashioned service. In recent years brands have increasingly engaged in extensions to increase market share. The coming years will show that there is power in a narrower focus as brands return to the basics and companies learn that growth is often achieved through the simplest of things – brilliant service.

5. Brand relevance will extend through the supply chain.

In the past consumers were prepared to take brands at face value. In recent times consumers have made decisions beyond the brand, to the suppliers and contexts that affect it. This trend will deepen. Consumers will want to know who makes Nike footwear and under what conditions. They will be concerned with the brands of the clothing suppliers to Edgars and Mr Price stores, as well as the labour issues surrounding the creation of these clothes. As social issues increasingly affect South Africa, the relevance of brands will become increasingly important for consumers.

6. The brand black market will rise alongside brands

As brands create value, so too this value will be realised by racketeers wanting to make a quick buck. Counterfeit brand products will proliferate, but as they do an industry will emerge alongside it focused on protecting brands. These will range from high-technology tracking devices to marking technologies that verify the authenticity of products.

The best advice we could give marketers in 2003 is to under-promise, over-deliver and connect with customers whenever you can, wherever you can. While brand strength will discourage consumer switching, consumers will abandon products and services that don’t live up to their core promises. A case in point is the cellular market that has seen significant churn following a new brand entry off the back of complacent service levels and aggressive pricing.

Connecting with consumers will be a key thrust for 2003. Marketers should not limit their activities to the point of sale, but should realise that consumers experience brands everywhere and the promise of that experience must be reinforced through every interaction, through every channel and at every point the consumer meets the brand. As channels both converge and proliferate,safeguarding the integrity of the brand experience will become crucial.

Mandy de Waal and Janice Spark are the founders of Idea Engineers, a strategic marketing company that develops brands and businesses. They can be contacted on tel. +27 11 803-8111 or e-mail Mandy on mandyd@mweb.co.za

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The year of the dividend

By Arthur Goldstuck

At a time when most corporate results are a tale of desolation, one would think
that those companies that continue to deliver solid results would be lionized,
or at least held out as the true champions of the business world.

The problem, however, is how to decide what constitutes success in this era of accounting gimmickry, where ebitda (earnings before interest, tax, depreciation and
amortisation) has become a substitute for profit, and “off balance-sheet” has
become a euphemism for “lying through our teeth”.

It can be argued that the only real measure is what a company gives back to its
shareholders. No, not the speculative returns that result from runs on the
market and enable shareholders to cash in. Those are really gambling returns, as
they only become real when the shares are sold. The obvious, traditional but
out-of-fashion method of giving something back to shareholders is in the simple
mechanism of dividends.

The dividend yield of a stock tells something precise about shareholder returns.
The wonder measure of the dot.com era, the price-earnings ratio, tells only of
the so-called irrational exuberance of the investor market that is willing to
drive a share price up to many multiples of the profits that a company is able
to achieve.

So who are the companies paying dividends, and who are the companies with
anything like a decent dividend yield? In South Africa, the hi-tech players in
these categories can be counted on one hand. No wonder: during the dot.com era,
much was made of the idea that all profits (when they were made) should be
ploughed into acquisitions in order to ensure growth. Investors in hi-tech
stocks bought this nonsense based on the promise that share prices would shoot
through the roof and stay there, never mind all the extra shares that were
issued to pay for the acquisitions and the drain on companies that now had to
integrate their acquisition and pay off the departing directors.

But shareholders and directors alike are beginning to appreciate what dividends
say about the business.

In 2002 major US companies like FedEx introduced quarterly dividends for the
first time. According to Fortune, dividend payouts by S&P 500 stocks rose half a
percentage point for the first nine months of 2002. That, apparently, is the
first time dividends have risen more than earnings coming out of a recession.

In South Africa, both IT giants like Altech and minnows like Moneweb declared
dividends in 2002. In between, the likes of ERP.com, Infowave, Enterprise
Outsourcing Holdings and Paracon climbed aboard the dividend train. Some have
questioned the benefits, with Moneyweb’s 1c a share dividend coming under close
scrutiny and Paracon’s 2.5c representing a similar dividend yield in relation to
its share price. But the reality is, the dividend tells us two things about a
company: it really is profitable, something you can’t always tell from the
balance sheet, and it really is giving something back to the long-term
shareholder.

On the other hand, Money magazine in the USA likes to refer to this as the
dividend myth, arguing that dividends can never be more attractive than a
company’s prospects:

“Think of the dividend as part of a company’s diversification of capital. Is the
company really making money? If so, what is it doing with it? How much is going
to investors in dividends or stock buybacks? How much is going to capital
spending?

A company that doesn’t pay dividends may be using the money to grow, a move that
may ultimately pay off more than a cash payment. A perfect example: Microsoft.”

That’s fine for the people who bought Microsoft in 1995, but what about those
who bought in 2000? It will be years before they see the share price back above
$120 (it was languishing below $60 towards the end of 2002), and in the meantime
dividends would be a great way not only of telling them that this company is
still solid, but that there is some return on investment.

As Fortune points out, “investors – deeply suspicious of management, the
earnings guidance it provides, and even reported profits – are demanding cash in
hand and discounting promises of future earnings”. In other words, the dividend
myth is itself a myth in the eyes of the investor.

Proof, in South Africa, came with the boardroom coup at Comparex, when Alan Gray
led a revolt by institutional shareholders over their frustration at directors’
insistence on hoarding the company’s cash rather than distributing it to
shareholders.

Want further proof? In the first 11 months of 2002 US investors poured $3.8
billion into equity-income funds, which focus on yield-bearing shares – up from
$2.6 billion for all of 2001 and an outflow of $16.7 billion in 2000.

This article is excerpted from Arthur Goldstuck’s review of 2002 for the
December/January annual edition of Intelligence: Total Business. Contact him on
mailto:arthurg@internet.org.za

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A radioactive sister in law

By Rudy Nadler-Nir

I got an uneasy feeling when I saw Microsoft’s new payoff line for its Microsoft .NET campaign. It said “One Degree of Separation.”

The line refers, presumably, to what is known as “Six Degrees of Separation”. I assume that the Redmondites are talking about the fact that their product is directly linked, bonded and otherwise grafted into the virtual skin of the user. Shudder.

“Six Degrees of Separation”, a concept denoting an actual social network, was conceived by the psychologist Stanley Milgram, who set out to trace the way social networks behave.

For his “The Small World Problem” study, Milgram chose reasonably remote locations in the American states of Nebraska and Kansas and asked residents there to send a parcel to a stock broker in an obscure Massachusetts town named Sharon. Each parcel contained a log of delivery and a set of rules for the participants.

If they did not know the addressee directly, participants were asked to choose a person whom they thought would be able to see the parcel safely and quickly to its target.

Milgram found that the surprisingly small average number of “hops” (intermediaries) between the sources in Nebraska and Kansas and the target in Sharon, Massachusetts was 5.5 – thus, “Six Degrees of
Separation”. (For more on Milgram and his work, visit http://www.stanleymilgram.com/)

“Six degrees of separation” stipulates that each person on earth could be linked to any other person through six “hops” or intermediaries. The smaller the “Degree of Separation”, the closer you are to your subject.

When Microsoft claims One Degree of Separation, it means that only one intermediary will be required to facilitate communication. My sister-in-law is one degree of separation away from me – with her husband (my brother) serving as the single intermediary.

The world’s largest software company pays billions of advertising bucks to tell me it is situated as close to me as my sister-in-law?!

Microsoft is not in the schmoozing business and, judging by recent news headlines, Microsoft is not in the mood for schmoozing, either.

It has just announced that it will close down sales and support for Microsoft Windows NT and, while they were at it, also unplug Windows 98 and stop supporting Sun Java. One degree of separation from these guys is as comfortable as having a radioactive sister-in-law.

Part of a new Internet development known as “Web Services”, .Net is intended to offer centralised data management and processing, together with hosts of services. It is possible that users will be asked to pay for such services.

Microsoft .Net’s public platform, named .NetMyServices, is a personal data repository, locked behind security servers and offered to users wrapped in services such as auctions and transactions.

Sounds familiar? It’s a reincarnation of the “locked portal” – entry by registration, usage in an enclosed environment. All of this smells heavily of digital deja vu.

Had it been any other player, we’d have laughed “One Degree of Separation” off the park. Remember news24? Remember M-Web locking out non-subscribers? Not this time.

Please don’t tell me I’m Microsoft bashing. Would you like Microsoft (or anyone, for that matter – be it the South African government, the Sheriff of Mpumalanga, Brad Pitt or the Dalai Lama) to be the gatekeeper to your personal data?

Considering security holes like the ones we saw on Microsoft’s MSN and Hotmail, how safe can .NetMyServices be?

Conspiracies aside (I don’t believe Microsoft will ever do conspiracies – they aren’t platform-dependent), I’m naturally jittery. It’s a normal reaction to future aspirations of the world’s largest, most successful IT company.

I fear the day when Windows 95, 98 and NT are gone, and Windows XP’s version for the year 2005 turns out to be only operable through Password (another Microsoft service) and available to us at a cost.

I can see myself scrambling to find a R5 coin to pay to unlock my PowerPoint presentation, reboot my PC or print a spreadsheet – one degree of separation and 150 degrees of irritation.

Rudy Nadler-Nir is an independent e-strategist and Brain-for-Rent. Check Rudy’s personal Website, at: http://eclectic.co.za or e-mail him at: mailto:rudyn@eclectic.co.za

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Right of reply: Dear King Content

Reply to “Death of the Content King” article published on 28 June 2002.

Dear King Content Rudy Nadler-Nir

Your article, WOZA and the death of the content king (The Big Change, 28 June) refers.

It is probably a truism that when you hanker after the past you miss key features about the present. That corner cafe where we used to get our groceries is a nostalgic memory to those of us old enough to remember, but the supermarket is an infinitely superior way of getting consumables to consumers.

You argue content is no longer king on the internet, but without having any facts on this at all I would guess that there is definitely considerably more content on the web now than there was when content site after content site started hitting the wall in the dotbomb collapse last year.

If you have any doubt about what I’m saying, go to news.google.com and check out the feast of news content, up to the minute, and from all corners of the globe.

There is probably also greater range, from specialist sites providing high-value information, to general sites providing a vast range of material. Google, I read, delivers 150 million requests a day. This is for content, so presumably content continues to have high value.

There is more content than ever, a greater range and it has never been as easy to access.

You will know, though, that the internet has changed the nature of content. People love to generate their own stuff, be it in e-mails, newsgroups, chat rooms or on blogs.

You seem to be concerned that white branding or labelling is taking place whereby some parties concentrate on the wholesale part of the distribution chain, others on retail. I can only think that this is a good thing and is one of many reasons why internet access is much cheaper in South Africa now than it used to be.

But I think your warm, fuzzy analysis about content has left you missing the central features of the present South African market. It has split in two, with incumbents at the high end offering access at the R120 to R135 level and a set of newer and smaller players charging R50 to R65 a month.

Most of the latter have no ambitions of providing a content operation to their user base. They probably have noticed, as you have, that content costs can be horrific. But it also suggests that they see no value in community.

I would continue to argue that the value of a user base is greater than the sum of its individual parts. Community, players like AOL have found, can also be a terrific, cost-effective marketing tool. Community forms around content.

Now, if you can somehow provide access and develop content and community with your user base, this I would say is a good business model for the overtraded and hyper-competitive SA internet access market.

Key here is that you can plan on annuity revenue to fund your content operations. You don’t seem to like this approach, but then I guess you’ve never run a content company online.

I would add that your romance about content as it used to be also leaves you to miss another interesting feature of the present market. The gurus with a capital G continue to tell us the market is overtraded yet almost every other day another ISP or VISP opens.

There is also no shortage of activity in the related telecommunication sector as about R20 billion in investment starts eyeing the second network operator.

The subscription-free model pioneered by Absa is coming back. Experience around the world with deregulating markets tells us this. The ISP market will change to call-sharing with telcos.

The most successful ISPs in this market will offer content as a way of keeping their users online longer. This may not look a lot like some of the stuff called content, the stuff which appears in newspapers, but to the user it will be content.

But the key prediction I’d make here is that with their top-heavy capital and cost structures, the present market leaders are not going to be competitive in this new space. They will watch while others move in and offer the new services at prices they can’t hope to match.

This is already happening. It is the key feature of the present market, but one which I’m afraid you will miss completely unless you understand that the nature of content and its pricing has changed forever.

Much of the above is not easy to see. The market is confused and confusing. Absa is charging some of its users R65 a month for its service which others still get for free.

Some suppliers think internet access should cost R120 or more, others say the sustainable price is half this. Yesterday there were no subscriptions, tomorrow they will also be gone.

But then, I guess its safe to say that you no longer get all your groceries from your corner store anymore, either.

Kevin Davie is the publisher of WOZA. He can be contacted on info@woza.co.za

————————-

Rudy Nadler-Nir responds:

Mr. Davie wastes too much time on my romantic tendencies – I said in my article that Content King – as a factor that can generate revenue – is dead. Google makes money by selling search facilities, not from news, sport or whatever. The fact the Google keeps news up to date is irrelevant – nobody will pay for this.

As to the issue of the split in the ISP market – Mr Davie obviously reads only his own content – or content that has to do with his corner-kiosk. I have described the split months ago in my article “The compelling sum” (The Big Change, February 2002) and reached the same conclusion – users will pay for connectivity (and at R59 per month, Woza offers an attractive deal) but not a cent for content.

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The ECT Act: Your Guide to the Law, Part 1

By Lance Michalson

This guide is a summary of the Electronic Communications and Transactions Act 2002 as published in Bill form and does not necessarily express the views of Michalsons Attorneys or Government.

Introduction

The Electronic Communications and Transactions Act (“the Act”) is the result of Government’s e-commerce debate process initiated during 1999 with the Discussion Paper on electronic commerce and followed by the Green Paper published in November 2000.

The Act seeks to address the following policy imperatives:

* Bridging the digital divide by developing a National e-Strategy for South Africa;
* Ensuring legal recognition and functional equivalence between electronic and
* paper-based transactions;
* Promoting public confidence and trust in electronic transactions; and
* Providing supervision of certain service providers

Key issues sought to be addressed in the Act include:

*
Maximising benefits – creating a national e-strategy around the promotion of universal access to electronic transactions, especially for members from previously disadvantaged communities, SMMEs and differently abled people;
*
Legal certainty – providing for the legal recognition of electronic transactions, documents and signatures and facilitating record retention, electronic evidence and automated transactions;
*
E-government – encouraging electronic communications between Government and citizens;
*
Security – the registration of cryptography service providers, the accreditation of electronic signature technologies by authentication service providers and the protection of critical databases;
*
Protection of individuals – the protection of the consumer by stipulating minimum information to be provided to consumers and the protection of personal information and critical data;
*
Illegal activities and enforcement – the creation of new “cyber offences” and cyber-inspectors to administer certain provisions of the Act;
*
Effective management of internet-related issues – the establishment of a proper management regime with regard to domain names in the Republic of South Africa and the limitation of liability of Internet Service Providers.

What you should keep in mind:

* It is not prescriptive: although the Act does contain certain provisions which vendors should comply with when dealing with consumers, it leaves it up to you to decide how you should conduct your electronic communications and transactions. You can decide on the types of technologies and provide for your own contractual relationships. The Act does not interfere with your business dealings and relationships.
* The scope is broader than you may think: although the title of the Act creates the impression that it is mainly aimed at “buying goods over the internet”. The Act impacts far beyond what we traditionally associate with “e-business”. It deals with any type of electronic document or communication, whether that document or communication is used in a commercial transaction or not.
* Identify what is relevant to you – although the Act comprises 14 chapters and 95 sections, only a small portion of the Act may impact on your business. For example, chapter III will affect everyone while chapter XI will only affect Internet Service Providers and intermediaries.

Lance Michalson of Michalsons IT Law Attorneys was a member of the team responsible for drafting the Electronic Communications and Transactions Act on the instructions of the Department of Communications. He can be contacted on mailto:lance@michalson.com or by phone on 021 438 6323

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Legal insight: Business transfer and employees

By Jan Truter

One of the most significant amendments to the Labour Relations Act that became effective on 1 August 2002, relates to the transfer of business as a going concern. In many respects the law is clarified. But here are some sticky questions.

Automatic substitution

The amendments include an automatic substitution of new employer for the old employer. Consequently the rights and obligations of the employee and new employer remain the same as they were between the employee and the old employer. The employee’s service remains uninterrupted.

Terms and conditions of employment may be changed, provided that they are on the whole not less favourable than before the transfer. Resignation due to terms and conditions of employment being changed could amount to constructive dismissal. The issue of transfer of pension, provident, retirement or similar funds is clarified and seemingly facilitated by the amendment.

Retrenchment prior to sale

What to do if somebody is interested in buying your business, but only if you retrench some of your staff? One of the more controversial amendments is that a dismissal as a result of a transfer or related to a transfer may be regarded as automatically unfair. Although it is unlikely that the intention of the Act is to prevent one from dismissing employees if there are sound reasons for termination based on operational requirements. This notwithstanding, it would be wiser to leave any such considerations until after the sale or transfer.

A further provision is that the old employer must take reasonable steps to ensure that the new employer can meet the obligations in respect of leave pay, severance pay and other monies payable to the employees. Not doing so can result in liability for a period of 12 months after the transfer.

In the case of insolvency or scheme of arrangement, the new employer (liquidator) would be automatically substituted for the old employer, but rights and obligations would not be transferred.

On the whole, the entire issue of the transfer of a business as a going concern, is much clearer than before the introduction of the amendments.

Jan Truter has been practicing as an attorney from 1985 and specialising in labour law since 1990. His articles can be read online at Labourwise, on http://www.labourwise.co.za/

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E-government won't fix flawed processes

By Arthur Goldstuck

Investing in technology is not a solution to poor customer service if nothing is done about the service itself.

When a large organisation makes a massive investment in new technology, you expect their business processes to improve. And when that investment is aimed at improving customer service, naturally, you expect their customer service to improve.

The truth, as we all discover quite quickly, is that technology cannot improve customer service. Only improved customer service can improve customer service. That may sound logical, but logic flies out of the window when you give someone a big enough IT budget.

Much was made of a recent announcement by the government that it was planning to embrace an e-government strategy. The Department of Public Service and Administration said it had adopted a concept document for a system that would provide a single gateway to all state information and services.

According to the department’s director general, Robinson Ramaite, both the Internet and existing trading kiosks would be used as portals for payments for services and as a way to disseminate information from the government. The system would evolve as a blueprint across Africa to streamline government services and efficiency, but would require a project implementation team with technical specialists. Among other, a toll-free call centre would be set up, with information available in all 11 languages.

Sounds wonderful, doesn’t it? Well, so does an all-you-can-eat diet. The problem is, to diet, you need to eat less. And to streamline processes, you need to streamline processes, not add more processes.

The problem with the government proposal is that the existing processes don’t work. The treatment of the public at most government outlets in urban areas is shameful. The queues that form at Home Affairs, Labour Department and Welfare Department offices are a blight on the government’s commitment to services delivery. The treatment of the most desperate members of society at some of these offices is nothing less than a national disgrace.

And now the government wants to transfer this mess onto the Internet and into call centres?

Here’s a piece of advice for free: if you want to use technology to streamline a process, you first make sure the process works. In the government’s case, it is obvious the processes don’t work. As much as it intends to invest in the new technology, it needs to invest in a change management strategy that will streamline not only the processes, but also the attitudes of the people responsible for administering the processes. They must understand that their role is to serve the public; that they are the gateway, not the gatekeepers to government.

The Internet, call centres and other technologies cannot change the way things are done on the ground, unless things are first changed on the ground.

Arthur Goldstuck is editor of The Big Change and managing director of World Wide Worx, the leading independent technology and telecommunications research house. He can be contacted on mailto:arthurg@internet.org.za.

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The ECT Act: Your Guide to the Law, Part 2

By Lance Michalson

This guide is a summary of the Electronic Communications and Transactions Act 2002 as published in Bill form and does not necessarily express the views of Michalsons Attorneys or Government.

Synopsis of the Act

Chapter I: Interpretation, Objects and Application

This part of the Act defines critical words and phrases and sets out the main objects of the Act.

Chapter II: Maximising Benefits and Electronic Policy

The objective is to maximize the benefits the Internet offers by promoting universal and affordable access by all to its possible applications, with a view to bridging the digital divide. The Act requires the development of a national e-Strategy plan by the Minister, in consultation with members of Cabinet. The national e-Strategy plan must include detailed plans and programmes to address the development of a national e-transactions strategy, the promotion of universal access and e-readiness, SMME development, empowerment of previously disadvantaged persons and communities, human resource development, contain definable objects and timeframes.

Chapter III: Facilitating Electronic Transactions

This Chapter deals with the removal of legal barriers to electronic transacting. Chapter 1 provides for the legal recognition to data messages and records. Provision is made for the legal recognition of electronic signatures and “advanced electronic signatures” – a secure form of electronic signing. Electronic data will, subject to certain conditions, be permitted to be retained for statutory record retention purposes; regarded as “writing” a true copy of an “original” record, and provision is made for securing proper evidentiary weight of electronic evidence.

Chapter 2 deals with the rights and obligations that follow from the communication of data messages, namely contract formation, the time and place of sending and receiving data messages, as well as the time and place where a contract is deemed to have been formed by means of data messages. The Act also provides for the validity of sending notices and other expressions of intent through data messages.

Chapter IV: E-government

This Chapter facilitates electronic filing. It lists the requirements for the production of electronic documents and the integrity of information. Provision is made for a Department or Ministry to accept and transmit documents in the form of electronic data messages, to issue permits or licences in the form of a data message or make or receive payment in electronic form.

Chapter V: Cryptography Providers

The Internet presents security challenges which, without an effective regulatory framework, would pose a threat to the security of consumers and the State. This Chapter requires the suppliers of cryptography materials to register in the prescribed manner their names and addresses, the names of their products and a brief description thereof maintained by the Department of Communications. This will allow investigative authorities such as the SAPS, to identify which organisation provide the encryption technologies, intercepted by them in terms of our monitoring and interception laws. This will enable the investigative authorities to approach these service providers to assist with deciphering the encrypted messages.

Chapter VI: Authentication Service Providers

Identification and authentication of the parties in cyberspace remains a challenge and poses threats to consumers and businesses. The Bill seeks to provide for the establishment of an Accreditation Authority within the Department, allowing voluntary accreditation of electronic signature technologies in accordance with minimum standards. Once accredited, these “advanced” electronic signatures will allow a party to rely on their authenticity.

(next: Part 3 – Chapters VII to XIII)

Lance Michalson of Michalsons IT Law Attorneys was a member of the team responsible for drafting the Electronic Communications and Transactions Act on the instructions of the Department of Communications. He can be contacted on mailto:lance@michalson.com or by phone on 021 438 6323

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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