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Get a share of solar

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FedGroup has recently launched its shared ownership system where investors receive a physical asset to generate income.

Independent financial services provider FedGroup has launched a shared ownership system as part of its effort to disrupt traditional approaches to wealth creation. Unlike traditional wealth creation approaches, where money is invested, this model involves the ownership of a physical asset to generate income.

The first project under this banner allows members of the public to own one or more solar panels that form part of a larger solar facility, located on the roofs of commercial and industrial buildings. The panels can be purchased on FedGroup’s online platform and are then installed on suitable sites, with the owners receiving a monthly rental income based on the power generated by the panels. FedGroup then collects and pays over the rental income to the panel owners.

The direct ownership network operates on the peer-to-peer model, where the landlords of sites, the providers and installers of the solar panels, and those wishing to own the panels are connected.

“FedGroup is always looking to implement the latest technology to drive down fees and maximise returns for our clients,” says Grant Field, CEO of FedGroup. “Therefore, introducing direct ownership for wealth creation to the South African market is a logical progression in terms of our product offering. Through the use of technology, we are able to actively track the performance of the panels, which translates into money generated for the owner.

“Our pilot project indicates that panel owners can expect to receive an internal rate of return on the purchase price in excess of 11% per annum, over the 20-year lifespan of the project. Because it is a green project, they can also apply for tax benefits, to further boost their returns. At the end of the 20-year term, owners can take physical ownership of the panel, or sell it back at a guaranteed residual value of R1 000.”

While the buyer owns the asset, FedGroup is tasked with the management, maintenance, insurance and optimisation of the panels.

“Because the rental income is calculated according to the performance of the panels, they would produce more on sunny days than on cloudy ones, but the sunny South African climate and our particularly high irradiance levels add to the profitability of this project,” says Field. “The returns are secured through a contract with the building owner to pay a monthly fee, determined by the amount of electricity generated. The money collected from the building owner every month is then distributed to the owners.”

Owners are able to track the performance of their panels online at any time. Because the panels are physically owned, FedGroup will soon be introducing a convenient secondary market to provide liquidity for anyone wishing to sell their solar asset.

The installation of solar panels also has several advantages for building owners, particularly in the case of older buildings, as many of them still bear the legacy of being energy inefficient, having been built at a time when electricity was cheap. Through this initiative, building owners now have an added incentive to retrofit their buildings with energy-efficient technology and turn the unused space on their roofs into profitable assets.

In addition to solar panels, FedGroup is also in the process of bringing other direct ownership opportunities to market.

“Each project is chosen on merit,” says Field. “We chose solar generation as our first project because we recognised the trend towards environmental sustainability in consumers’ purchasing behaviour. In addition, consumers understand solar power generation, making it a suitable product for the introduction of the concept of direct ownership.

“The beauty of the direct ownership model is that it can be applied to an almost limitless array of underlying assets, and we have a number of very exciting projects in the pipeline,” says Field. “While the asset being sold will differ, the model of direct ownership for wealth creation will remain consistent.”

Arts and Entertainment

VoD cuts the cord in SA

Some 20% of South Africans who sign up for a subscription video on demand (SVOD) service such as Netflix or Showmax do so with the intention of cancelling their pay television subscription.

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That’s according to GfK’s international ViewScape survey*, which this year covers Africa (South Africa, Kenya and Nigeria) for the first time.

The study—which surveyed 1,250 people representative of urban South African adults with Internet access—shows that 90% of the country’s online adults today use at least one online video service and that just over half are paying to view digital online content. The average user spends around 7 hours and two minutes a day consuming video content, with broadcast television accounting for just 42% of the time South Africans spend in front of a screen.

Consumers in South Africa spend nearly as much of their daily viewing time – 39% of the total – watching free digital video sources such as YouTube and Facebook as they do on linear television. People aged 18 to 24 years spend more than eight hours a day watching video content as they tend to spend more time with free digital video than people above their age.

Says Benjamin Ballensiefen, managing director for Sub Sahara Africa at GfK: “The media industry is experiencing a revolution as digital platforms transform viewers’ video consumption behaviour. The GfK ViewScape study is one of the first to not only examine broadcast television consumption in Kenya, Nigeria and South Africa, but also to quantify how linear and online forms of content distribution fit together in the dynamic world of video consumption.”

The study finds that just over a third of South African adults are using streaming video on demand (SVOD) services, with only 16% of SVOD users subscribing to multiple services. Around 23% use per-pay-view platforms such as DSTV Box Office, while about 10% download pirated content from the Internet. Around 82% still sometimes watch content on disc-based media.

“Linear and non-linear television both play significant roles in South Africa’s video landscape, though disruption from digital players poses a growing threat to the incumbents,” says Molemo Moahloli, general manager for media research & regional business development at GfK Sub Sahara Africa. “Among most demographics, usage of paid online content is incremental to consumption of linear television, but there are signs that younger consumers are beginning to substitute SVOD for pay-television subscriptions.”

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New data rules raise business trust challenges

When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.

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The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.

GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.

The fundamentals of trust

GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.

The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.

This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.

What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.

The risk of compliance

Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.

A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.

A three-step plan of action

So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:

Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.

Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.

Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.

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