Making sense and animal spirits march 2011 sv

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John Maynard Keynes was the first to mention Animal Spirits in the 1930's. Now Akerlof and Shiller have published a seminal work with this title. They argue that the macro economy can be described as behaving in four quadrants. The horizontal axis describes the MOTIVES, from non economic to economic. The vertical axis describes the responses, from irrational to rational. Conventional economic theory supposes that the behaviour of the economy is confined to the ecomic motives and rational responses (top right hand quadrant). However, they argue that in fact much of the economy can only be ascribed to non economic motives and irrational respones (the other 3 quadrants). These animal spirits drive everything and are based on five forces: Confidence; fairness; corruption and bad faith; the illusion of money and STORIES. The world we create depends on the prevailing stories. And the power of language is underestimated. It is a PRIMORDIAL force greater than FIRE - and it has the power to create or to destroy.

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Making sense and animal spirits march 2011 sv

  1. 1. BMI-BRSCU<br />THE STRATEGIC FORUM<br />www.strategicforum.co.za<br />THE STRATEGIC FORUM<br /> A place of assembly <br />for strategic conversations<br />Towards<br />Making sense of the Building Industry: <br />Animal spirits and how human psychology drives the economy and<br />why it matters for the building industry.<br />Dr. Llewellyn B. Lewis<br />May 2011<br />
  2. 2. BMI-BRSCU<br />ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />George A. Akerlof is the Daniel E. Koshland Sr. Distinguished Professor of Economics at the University of California, Berkeley. He was awarded the 2001 Nobel Prize in Economics.<br />Robert Shiller is the best-selling Author of Irrational Exuberance and The Subprime Solution (both Princeton). He is the Arthur M. Okun Professor of Economics at Yale University.<br />
  3. 3. ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />We are facing the same problem today that we faced in the later years of the Great Depression – business today is inhibited by uncertainty about the future, about the tolerance of an angry public, about a disaffected labour force, and about what further government actions may be coming.<br />Animal Spirits are the forces that drives all of this, and to understand animal spirits we have to use methodologies outside of traditional economics, leading us to other social sciences.<br />Five psychological factors are of particular importance;<br />Confidence;<br />Fairness;<br />Corruption and bad faith;<br />Money illusion; and<br />Stories. (Akerlof and Shiller: 2009: ix)<br />Animal Spirits drive almost everything. Animal Spirits are more than just confidence as measured by confidence indicators.<br />Declining Animal Spirits are the principal reason for the recent severe economic crisis.<br />And despite the recent positive economic indicators, we see no clear indication that these spirits are yet revived. (Akerlof and Shiller: 2009: vii)<br /><ul><li> BMI-BRSCU</li></li></ul><li> BMI-BRSCU<br />ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />How the Macro Economy behaves<br />Conventional Economic Theory<br />Economic theory incorporating “Animal Spirits”. <br />RESPONS <br />Irrational Rational<br />Economic theory incorporating “Animal Spirits”. <br />Economic theory incorporating “Animal Spirits”. <br />Non EconomicEconomic<br />MOTIVES<br />
  4. 4. ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />How the Macro Economy behaves<br /><ul><li>The current model fills only the top right hand box; it answers the question: How does the economy behave if people only have economic motives and if they respond to them rationally?
  5. 5. But that leads immediately to three more questions, corresponding to the three blank boxes: How does the economy behave with non-economic motives and rational responses? With economic motives and irrational responses? With non-economic motives and irrational responses?
  6. 6. Akerlof & Shiller believe that the answers to the most important questions regarding how the macro economy behaves and what we ought to do when it misbehaves lie largely (though not exclusively) within those three blank boxes)
  7. 7. Their description of the economy fits the qualitative as well as the quantitative facts, better than a macro-economics that leaves out irrational behaviour and non-economic motives.
  8. 8. Thus, they occasionally use statistics but for the most part, rely on history and on stories. (Akerlof & Shiller: 2009: 168)</li></li></ul><li> BMI-BRSCU<br />THE ROLE OF BUILDING, CONSTRUCTION AND PROPERTY IN THE ECONOMY: 2010<br />www.strategicforum.co.za<br />PROPERTY OWNERSHIP<br />ENGINE FOR GROWTH <br />AND WEALTH CREATION<br />R3,8 TRILLION RES PROPERTY<br />R1,3 TRILLION NON RES PROPERTY<br />LISTED PROPERTY SECTOR <br />MARKET CAPITALISATION<br />> R100 BILLION<br />“Public Investments or joint Private-Public Investments that yielded even moderate real returns (say 5% - 6%) would increase activity, cut unemployment, generate more tax returns and mean lower long-term debt.” (Joe Stiglitz: Freefall: 2010)<br />EMPLOYMENT<br />IN BUILDING & CONSTRUCTION<br />> 1 000 000 PEOPLE<br />PRIMARY AND SECONDARY PROPERTY MARKET<br />R195 BILLION PA MORTGAGE ADVANCES PA<br />R1000 BIO MORTGAGES O/S<br />ANNUAL HOUSING<br />NEED <br />(POP. GROWTH ONLY)<br />250 000<br />INTEGRATED HOUSING<br />URBAN HOUSING<br />BACKLOG > 1,5 MILLION<br />UNITS IN 2010<br />FTHB SUBSIDIES<br />(1,9% OF BUDGET = R13,8 BILLION)<br />(500 000 HOUSING UNITS)<br />INVESTMENT IN AFFORDABLE HOUSING<br />(R1,4 TRILLION 2010-2020)<br />BUILDING INV.<br />R108,5* BILLION<br />(20,8% OF GFCF)<br />RESIDENTIAL AND <br />NON RES BPP AND <br />BUILDINGS COMPLETED (BC)<br />GOVERNMENT BUDGET<br />R7399BILLION<br />(30% OF GDP)<br />GFCF<br />R521,6 BILLION<br />(22% OF GDP)<br />GDP<br />R2663 BILLION<br />GOVERNMENT <br />INFRASTRUCTURE SPEND <br />(R846 BILLION 2010-2020)<br />TRANSFER DUTY<br />R8- R9 BILLION PA<br />CONSTR. INV.<br />R174,9 BILLION<br />(33,5% OF GDFI)<br />* When the UNRECORDED Home Improvement and Affordable Housing is taken into account Building Investment = 30,5% of GFCF<br />
  9. 9. BMI-BRSCU<br />CURRENT REALITY: BUILDING & CONSTR: 2010<br />BUILDING & CONSTRUCTION INVESTMENT<br />R334 221 MILLION<br />BUILDING INVESTMENT<br />R159 277 MILLION<br />CONSTRUCTION INVESTMENT<br />R174 944 MILL<br />CONTRACTOR (50,8%)<br />R67 914 MIO<br />RESIDENTIAL INVESTMENT<br />R12 775 MILLION<br />LABOUR (40%)<br />R133 688 MIO<br />SUBCONTRACTOR (49,2%)<br />R65 775 MIO<br />NON RESIDENTIAL INVESTMENT<br />R64 488 MILLION<br />DIRECT TO USER (40%)<br />R80 213 MILLION<br />MATERIAL (60%)<br />R200 533 MIO<br />UNRECORDED<br />ADDITIONS AND ALT’S INVEST**<br />R35 106 MILLION<br />INDIRECT VIA DISTRIBUTION <br />(60%)<br />R120 320 MILLION<br />LARGE IND BUILDERS MERCHANT <br />(10%)<br />R20 053 MILLION<br />LARGE CHAIN BLDRS MERCHANT<br />(25%)<br />R50 133 MILLION<br />SPECIALIST SHOP<br />(5%)<br />R10 027 MILLION<br />HYPERMARKET/SUPERMARKET<br />(5%)<br />R10 027 MILLION<br />LOCAL HARDWARE STORE<br />(15%)<br />R30 080 MILLION<br /> * 2010 Prices<br />** Residential and Non Residential<br />CURRENT REALITY OF BUILDING & CONSTRUCTION: 2010*<br />RESIDENTIAL INVESTMENT<br />R59 682 MILLION<br />
  10. 10. BMI-BRSCU<br />THE AGE OF THE UNTHINKABLE<br />www.strategicforum.co.za<br />If we had to think about the nature of our global financial markets all over again, how would we change what we did and did not do?(Ramo: 2009: 205)<br />
  11. 11. BMI-BRSCU<br />DEVELOPING PRESCIENCE<br />www.strategicforum.co.za<br />In the summer of 2007 William Browder’s habit of living on his toes, of looking for any sign that the landscape around him was about to avalanche away, drew his attention to a news item in the papers.<br />In New York an auction of debt from leveraged buy-out deals had failed to draw enough bidders and was shut down.<br />To most of the investing world this looked simply like a small hiccup in an otherwise well functioning financial system. But Browder recognised it for what it was: a sign that the world had run out of the ability to absorb new debt. It was the end of a Ponzi-like scheme and he knew, the start of an avalanche that might reach a historic, tragic scale.<br />Almost immediately he began stockpiling cash, reducing his exposure to stocks as much as he could, and moving his investor’s money into any safe haven he could find. (Ramo: 2009: 56,57) <br />
  12. 12. BMI-BRSCU<br />DEVELOPING PRESCIENCE<br />South Africa's quietly efficient registrar of banks, Errol Kruger, who has announced he will be retiring after eight years in the job, admits that he allows himself a wry smile when local bank executives congratulate themselves on avoiding the worst of the fallout from the global recession. <br />Despite projecting themselves as models of restraint and responsibility, the truth is that if they'd had their way they would have indulged in the same shenanigans that got their international counterparts into such trouble.<br />SA would have been in it up to the eyeballs. (Moneyweb, 23 April 2011) <br />Errol Kruger saw the crash coming early.Back in July 2005, when our Banks were enjoying big profits, Kruger called up the CEO’s of the five major Institutions – ABSA, Nedbank, Standard Bank, FirstRand and Investec – and cautioned he will be “pulling the handbrake” on expansions and acquisitions. <br />To him, the economy was showing early signs of overheating . . . And he warned that SA’s financial institutions were at stage 7 of the banking cycle and not stage 4 as they thought.<br />“I didn’t want to be a pessimist, But I told them I could see a crisis coming, and they should expect a tougher stance, and increased activities from my office that are appropriate to stage 7 – activities which they might think are extremely bureaucratic.” <br />
  13. 13. BMI-BRSCU<br />TOTAL MORTGAGE LOANS & RE-ADVANCES: 1979-2009<br />The deleveraging by the Banks and the loss of consumer spending power could only mean lost growth: <br />mortgage repossessions, business failures, and personal bankruptcies . . . <br />
  14. 14. BMI-BRSCU<br />THE PROPERTY MARKET AND COMPLEXITY<br />The crisis in the financial markets that I had anticipated arrived in force on August 9, 2007. <br />It came from an area we hadn’t expected – housing – and the damage it caused was much deeper and much longer lasting than any of us could have imagined. (Paulson: 2010: 61)<br />Encouraging high rates of homeownership had long been a cornerstone of US domestic policy – for Democrats and Republicans alike. <br />Homeownership it is commonly believed helps family’s build wealth, stabilizes neighbourhoods, creates jobs, and promotes growth. (Paulson: 2010: 64)<br />All bubbles involve speculation, excessive borrowing and risk taking, negligence, a lack of transparency, and outright fraud, but few bubbles ever burst as spectacularly as this one would(Paulson: 2010: 65)<br />
  15. 15. BMI-BRSCU <br />THE PROPERTY MARKET AND COMPLEXITY<br />Not imposed by any one guru or institution or government.<br />The result of the individual choices of millions of people world-wide.<br />Emergent Global Property market<br />Local Interaction, local knowledge<br />(Source: Based on Roger Lewin. Complexity. Life at the edge of chaos: 1999)<br />
  16. 16. BMI-BRSCU <br />THE PROPERTY MARKET AND COMPLEXITY<br />Not imposed by any one guru or institution or government.<br />The result of the individual choices of millions of people world-wide.<br />Emergent Global Property market<br />Characteristics of WISE CROWDS:<br />Diversity of opinion (each person has some private information, even if it is just an eccentric interpretation of the known facts);<br />Independence (people’s opinions are not determined by the opinions of those around them);<br />Decentralisation (people are able to specialise and draw on local knowledge);<br />Aggregation (some mechanism exists for turning private judgements into a collective decision).(James Surowiecki: 2004)<br />Local Interaction, local knowledge<br />(Source: Based on Roger Lewin. Complexity. Life at the edge of chaos: 1999)<br />
  17. 17. BMI-BRSCU <br />THE PROPERTY MARKET AND COMPLEXITY<br /> The current and known world The future, unknown <br />IMF<br />World <br />Bank<br />THE<br />EDGE OF CHAOS<br />CREATIVITY<br />INNOVATION<br />All Countries<br />(Whole World)<br /><ul><li> REINVENTION
  18. 18. A Structural Change?
  19. 19. Self Organisation
  20. 20. Order for Free!
  21. 21. Property a preferred Investment!</li></ul>Ministry<br />Treasury<br />Single<br />Country<br />(Part of World)<br />THE GLOBAL PROPERTY ENVIRONMENT<br />Scope of change and transformation<br />LIMITS TO GROWTH<br />PARADIGMS CHALLENGED<br />ALTERNATIVE INVESTMENTS<br />Banks<br />Public<br />opinion<br />Critical mass of Investors<br />(Whole community)<br /><ul><li>DEMISE
  22. 22. THE PROPERTY BUBBLE?</li></ul>Individual<br />Single Investor (Part of community)<br /><ul><li>THE LOCAL PROPERTY MARKET</li></ul>Contagious<br />Stories<br />Paradigm Pioneer<br />Paradigm shift<br />Bandwagon Flocking Herd behaviour<br />Paradigm <br />Re-invention<br />Early <br />adopter<br />Late<br />Adopter<br />Impact of Change and transformation<br />
  23. 23. BMI-BRSCU <br />THE PROPERTY MARKET AND COMPLEXITY<br /><ul><li> It appears that the limits to growth have been reached and the Industry is once again on the cusp of change and standing on the burning platform.
  24. 24. It is a time of discomfort with a real danger of strategic drift. It means gradual demise for the industry or quantum change back to its potential growth rate.
  25. 25. It is the time to challenge old mindsets, assumptions and established industry recipes and to expose paradigm blind spots. Only then can reinvention and the required growth be achieved.</li></li></ul><li> BMI-BRSCU<br />THE SUB PRIME CRISIS<br />www.strategicforum.co.za<br />The Sub-Prime crisis is the name for what is a historic turning point in our economy and culture. It is at its core, the result of a speculative bubble in the housing market that began to burst in the United States in 2006 and has now caused ruptures across many other countries in the form of financial failure and a global credit crunch. (Shiller, Robert J. 2008 : 1)<br />
  26. 26. BMI-BRSCU<br />THE SUB PRIME CRISIS<br />www.strategicforum.co.za<br />According to John Maynard Keynes a Government stimulus package (like Infrastructure spending) results in a multiplier process as each round spends the MPC (Marginal Propensity to Consume). The effect can be calculted and =1/(1-MPC), the so-called Keynesian multiplier. If the MPC is, say 0,5, the Keynesian multiplier is 2. If the MPC is 0,8. the Keynesian multiplier is 5.<br />But the multiplier theory also explains that a drop in expenditure could have greatly multiplied effects. If people (or Banks) overreacted in fear of, for example, a stock market crash (or a financial melt-down following the sub-prime crisis), then this would act just like a negative government stimulus. For each round of deleveraging by the Banks, there would be another round by Businesses, Individuals etc, resulting in a much larger decline in economic activity than would be attributable to the initial shock (see Akerlof and Shiller: Animal Spirits: How human psychology drives the economy, and why it matters for global capatalism 2009: 15).<br />
  27. 27. BMI-BRSCU<br />THE SUB PRIME CRISIS<br />www.strategicforum.co.za<br />‘Subprime securitization’ was the latest greatest snake-oil story in a tradition of centuries and eventually blew up, imploding a global financial house of cards, triggering the biggest change in credit culture in a lifetime.<br />Locally, we thankfully weren’t directly in the line of fire, but our banks certainly drew similar conclusions and made similar changes, further encouraged by the National Credit Act of 2007 and the enhanced Basel 111 capital requirements.<br />These changes have hit our property market and the building industry like a ten-ton truck going into a brick wall, throwing up hurdles for demand while contributing to a backing up of supply, with asset prices adjusting downwards, creating a severe case of indigestion probably taking at least five or more years to digest (with two already in the bag). (Dr CeesBruggemans, Chief Economist FNB, ).<br />
  28. 28. BMI-BRSCU<br />NEW MORTGAGE LOANS & RE-ADVANCES: TOTAL<br />www.strategicforum.co.za<br />
  29. 29. BMI-BRSCU<br />MORTGAGE INTEREST RATE LOWEST IN 3 DECADES<br />www.strategicforum.co.za<br />
  30. 30. BMI-BRSCU<br />NOMINAL HOUSE PRICE GROWTH <br />www.strategicforum.co.za<br />
  31. 31. BMI-BRSCU<br />RESIDENTIAL LAND VALUES GROWTH <br />www.strategicforum.co.za<br />
  32. 32. BMI-BRSCU<br />AFFORDABILITY OF HOUSING<br />www.strategicforum.co.za<br />Affordability gradually improving . . . <br />HHDI = Household Disposable Income<br />
  33. 33. BMI-BRSCU<br />PRICE DIFFERENCE OF NEW AND EXISTING HOUSES WIDENING<br />www.strategicforum.co.za<br />A massive 34% differential !<br />
  34. 34. STAKEHOLDER ANALYSIS<br />www.strategicforum.co.za<br />Building Industry Stakeholder Analysis<br />BYSTANDERS ACTORS<br />PLAYERS<br />Demand creators<br />Future oriented<br />Proactive<br />Innovative<br />Entrepreneurial<br />Risk Takers<br />RESERVES<br />Demand Responders<br />Current orientation<br />Reactive<br />Responsive<br />Service oriented<br />Risk Managers<br />INTEREST (STAKE)<br />UNAFECTED STAKEHOLDERS<br />Low High <br />ONLOOKERS<br />Demand observers<br />Past orientation<br />Passive<br />Risk Avoiders<br />REFEREES<br />Demand Facilitators<br />Current orientation<br />Reactive<br />Responsive<br />Mediating<br />Gatekeepers<br />Risk Averse<br />Low High<br />POWER<br />
  35. 35. STAKEHOLDER ANALYSIS<br />www.strategicforum.co.za<br />Building Industry Stakeholder Analysis<br />BYSTANDERS ACTORS<br />PLAYERS<br />Committed<br />In the Know<br />RESERVES<br />Involved<br />Keep Informed<br />LEVEL OF INTEREST (STAKE)<br />UNAFECTED STAKEHOLDERS<br />Low High<br />CROWD<br />Interested<br />Minimal Effort<br />REFEREES<br />Concerned<br />Keep Satisfied<br />Low High<br />POWER<br />
  36. 36. STAKEHOLDER ANALYSIS<br />www.strategicforum.co.za<br /> BMI-BRSCU<br />Financial Institutions have INORDINATE Power and Interest.<br />They play in all the quadrants of the Stakeholder Matrix and are SIMULTANEOUSLY PLAYERS, RESERVES, REFEREES and CROWD.<br />They make the rules of the game and influence every facet of it.<br />Building Industry Stakeholder Analysis<br />BYSTANDERS ACTORS<br />RESERVES<br />Architects, Specifiers,<br />Manufacturers, Distributors,<br />Contractors,<br />FINANCIAL INSTITUTIONS<br />Deposits, Repayments, Insurance) <br />PLAYERS<br />Property Entrepreneurs, developers, Public Sector,<br />FINANCIAL INSTITUTIONS<br />(Mortgage Origination, Approval, Advances, Repossessions, Auctions)<br />Lanice Steward, MD of Anne Porter Knight Frank, says it is time that the regular bank reviews gave a more balanced picture of South African residential property.<br />"These bank surveys are widely consulted and referred to and are highly influential. Where, it seems to me, they fall down is that they tend to reflect only the price moves on homes for which their bank has issued mortgage bonds.”(Business Day, 8 Feb 2011) <br />INTEREST (STAKE)<br />UNAFECTED STAKEHOLDERS<br />Low High<br />CROWD<br />Labour, <br />Unions,<br />Consumer bodies,<br />FINANCIAL INSTITUTIONS<br />(Property Values, Property reports (HPI), Statistics)<br />REFEREES<br />Govt Prov-, Local-Authorities, CIDB, NHBRC, SABS, Agrement Board, MBA’S, SARB, State Tender Board,<br />FINANCIAL INSTITUTIONS (Valuations, LTV ratios, Mortgage Rate, term, Affordability)<br />Low High<br />POWER<br />
  37. 37. STAKEHOLDER ANALYSIS<br />www.strategicforum.co.za<br />Building Industry Stakeholder Analysis<br />BYSTANDERS ACTORS<br />RESERVES<br />Architects, Specifiers,<br />Manufacturers, Distributors,<br />Contractors,<br />FINANCIAL INSTITUTIONS<br />Deposits, Repayments, Insurance) <br />PLAYERS<br />Property Entrepreneurs, developers, Public Sector,<br />FINANCIAL INSTITUTIONS<br />(Mortgage Origination, Approval, Advances, Repossessions, Auctions)<br />INTEREST (STAKE)<br />UNAFECTED STAKEHOLDERS<br />Low High<br />CROWD<br />Labour, <br />Unions,<br />Consumer bodies,<br />FINANCIAL INSTITUTIONS<br />(Property Values, Property reports (HPI), Statistics)<br />REFEREES<br />Govt Prov-, Local-Authorities, CIDB, NHBRC, SABS, Agrement Board, MBA’S, SARB, State Tender Board,<br />FINANCIAL INSTITUTIONS (Valuations, LTV ratios, Mortgage Rate, term, Affordability)<br />COMPETING WITH THEIR CUSTOMERS – AND THE BUILDING INDUSTRY?<br />Low High<br />POWER<br /><ul><li> BMI-BRSCU</li></li></ul><li> BMI-BRSCU<br />STAKEHOLDER ANALYSIS<br />www.strategicforum.co.za<br />We understand that homes are expensive these days. That’s why FNB offers you Bank repossessed properties at hugely discounted prices. All prices are negotiable. FNB Homeloans also offers loans up to 100% and there are no transfer duties payable.<br />The properties are predominantly situated in what could be described as Middleclass areas. These areas are predominantly areas with an average property price of R300 000 – R650 000. <br />
  38. 38. BMI-BRSCU<br />STAKEHOLDER ANALYSIS<br />www.strategicforum.co.za<br />ABSA strategy in Repossession market powered by www.MyRoof.co.za<br />
  39. 39. BMI-BRSCU<br />STAKEHOLDER ANALYSIS<br />www.strategicforum.co.za<br />Standard Bank strategy in Repossession market.<br />
  40. 40. BMI-BRSCU<br />STAKEHOLDER ANALYSIS<br />www.strategicforum.co.za<br />NEDBANK strategy in Repossession market.<br />
  41. 41. BMI-BRSCU<br />STRATEGIC RESPONSE<br />www.strategicforum.co.za<br />There can be no return to high levels of employment and growth without finding a way of harnessing finance’s creative energies to allocate resources and risk so effectively that it spurs and speeds economic growth.<br />We must never forget that credit, and the need for securitisation too, is at the heart of a modern financial system. (Gordon Brown: 2010: 109)<br />How can we create the conditions that gives us the leverage to influence our environment?<br />There is a compelling need for wide collaboration to address common problems. <br />
  42. 42. BMI-BRSCU<br />TREND IN RESIDENTIAL ACTIVITY: BPP AND BC: 1993-2011 (FEB)<br />www.strategicforum.co.za<br />The response of Residential BPP to the NCA was immediate and severe and followed later by BC . . . <br />
  43. 43. BMI-BRSCU<br />TREND IN NON RES ACTIVITY: BPP AND BC: 1993-2011 (FEB)<br />www.strategicforum.co.za<br />
  44. 44. BMI-BRSCU<br />TREND IN TOTAL ACTIVITY: BPP AND BC: 1993-2011 (FEB)<br />www.strategicforum.co.za<br />
  45. 45. BMI-BRSCU<br />CUM YTD % CHANGE: RESIDENTIAL: JAN 1994-FEB 2011<br />www.strategicforum.co.za<br />Res BC turned at about -21% in early 2011 and will grow STEADILY . . . <br />Res BPP has turned at about -35% in early 2010 and is growing quite strongly . . . <br />
  46. 46. BMI-BRSCU<br />CUM YTD % CHANGE: NON RESIDENTIAL: JAN 1994-FEB 2011<br />www.strategicforum.co.za<br />Non Res BC follows BPP down but may turn sooner than expected . . <br />Non Res BPP TURNED SUDDENLY BECAUSE OF IMPACT OF TWO LARGE SHOPPING CENTRES. . . <br />
  47. 47. BMI-BRSCU<br />CUM YTD % CHANGE: TOTAL: JAN 1994-FEB 2011<br />www.strategicforum.co.za<br />Total BC turned at about – 21% and move to positive growth by third quarter 2011 . . . <br />Total BPP has turned at - 30% and will breach zero by first quarter 2011 . . <br />
  48. 48. BMI-BRSCU<br />NET BUILDING ACTIVITY IN THE PIPELINE: 1993-2011 (FEB)<br />www.strategicforum.co.za<br />Residential BC Trend-break occurred in early 2006.<br />Early sign of Change?<br />Recovery is STRONGLY on the way. But the road back could be long …<br />
  49. 49. BMI-BRSCU<br />NET BUILDING ACTIVITY IN THE PIPELINE: 1993-2011 (FEB)<br />www.strategicforum.co.za<br />Non Residential BC Trend-break occurred been 2007 and 2008.<br />Recovery has STRENGTHENED…<br />
  50. 50. BMI-BRSCU<br />NET BUILDING ACTIVITY IN THE PIPELINE: 1993-2011 (FEB)<br />www.strategicforum.co.za<br />Total BC Trend-break occurred in mid 2006.<br />Recovery is GRADUAL…<br />
  51. 51. BMI-BRSCU<br />% DIFFERENCE IN CUM Y/Y BPP : ACTUAL 2010 VS 2009: DEC<br />www.strategicforum.co.za<br />
  52. 52. BMI-BRSCU<br />% DIFFERENCE IN CUM Y/Y BPP : ACTUAL 2011 VS 2010: FEB<br />www.strategicforum.co.za<br />
  53. 53. BMI-BRSCU<br />% DIFFERENCE IN CUM Y/Y BC : ACTUAL 2010 VS 2009: DEC<br />www.strategicforum.co.za<br />
  54. 54. BMI-BRSCU<br />% DIFFERENCE IN CUM Y/Y BC : ACTUAL 2011 VS 2010: FEB<br />www.strategicforum.co.za<br />
  55. 55. BMI-BRSCU<br />BUILDING COST OF NEW HOUSES DECLINING<br />www.strategicforum.co.za<br />
  56. 56. BMI-BRSCU<br />BUILDING MATERIAL COSTS INREASING<br />www.strategicforum.co.za<br />
  57. 57. BMI-BRSCU<br />BUILDING MATERIAL COSTS INREASING<br />www.strategicforum.co.za<br />
  58. 58. BMI-BRSCU<br />GFCF RESIDENTIAL BUILDING: Q1 1993 – Q4 2010: R MIO<br />www.strategicforum.co.za<br />
  59. 59. BMI-BRSCU<br />GFCF NON RESIDENTIAL BUILDING: Q1 1993 – Q4 2010: R MIO<br />www.strategicforum.co.za<br />
  60. 60. BMI-BRSCU<br />GFCF TOTAL BUILDING: Q1 1993 – Q4 2010: R MIO<br />www.strategicforum.co.za<br />
  61. 61. BMI-BRSCU<br />GFCF CONSTRUCTION: Q1 1993 – Q4 2010: R MIO<br />www.strategicforum.co.za<br />
  62. 62. BMI-BRSCU<br />THE GREAT RESET<br />www.strategicforum.co.za<br />Available on Amazon.com<br />“This economic crisis doesn’t represent the cycle, it represents a reset. It’s an emotional, raw, social, economic reset.” (General Electric CEO Jeffrey Immelt)<br />“People who understand that, will prosper; those who don’t will be left behind.”<br />
  63. 63. BMI-BRSCU<br />THE GREAT RESET IN AMERICA<br />www.strategicforum.co.za<br /><ul><li>The bubble was so big in the 1920s, that after it popped during the Great Depression, it would take 22 years for non-residential construction investment to regain its precrash peak and 24 years for real spending on residential construction to recover to its pre-crisis highs.</li></li></ul><li> BMI-BRSCU<br />THE GREAT RESET IN THE UK<br />“We tend to think of the sweep of destiny as stretching across many months and years – as if each minute leads inevitably to the next, before culminating in one of those decisive moments we call history. <br />But sometimes the defining moments of history appear suddenly and without warning.”(Gordon Brown: 3: 2010)<br />“The World has never been faced with such a complex global economic challenge – such fast financial reversals, such great banking threats, and such pronounced economic instabilities – as it faced in 2008.” (Gordon Brown: 3: 2010)<br />
  64. 64. BMI-BRSCU<br />THE GREAT RESET IN THE UK<br />In July 2008 Treasury Secretary Hank Paulson was having to negotiate with Congress for support for Fannie Mae and Freddie Mac (which together owned or guaranteed $5 Trillion worth of homeloans). <br />In Britain’s housing market the Council of Mortgage Lenders announced on July 18 that lending had declined by 32% from June 2007. <br />These figures made my blood run cold. I knew what they meant: people and business stuck without credit and possibly a bad recession(Gordon Brown: 35: 2010)<br />In South Africa the decline from 2007-2008 was 33% followed by a decline of 29% in 2009!<br />
  65. 65. BMI-BRSCU<br />THE GREAT RESET IN THE UK<br />. . . The years 1929-32 are known forever as the Great Depression and the years 2008-9 will be known as the Great Recession. (Gordon Brown: 129: 2010) <br />The removal of credit was happening very suddenly, and I realised I had not been thinking out of the box enough. <br />I had expected to push and nudge the system back to order, but it was not happening.(Gordon Brown: 35: 2010)<br />The information I had been looking at in the past weeks (October 2008) was as stark as it was serious:<br />we were facing a situation that risked becoming worse than 1929.<br />No one trusted anyone in the banking system, and people were predicting not a recession but a depression.<br />People were panicking, asking which would be the next bank to collapse. The financial system was looking over an abyss.(Gordon Brown: 59: 2010)<br />
  66. 66. BMI-BRSCU<br />THE GREAT RESET FOR SOUTH AFRICA<br />www.strategicforum.co.za<br />Jean-Marie Talbot, the president of Master Builders South Africa (MBSA), which represents more than 4000 contractors, predicts further job losses in the industry next year because of the unusually difficult trading conditions.<br />He said the building industry was facing a multi-faceted problem caused by several factors, with the credit crunch, municipal infrastructural blockages that reduced the number of developments taking place and a lack of skills in various municipalities all playing a crucial role.<br />MBSA believes the situation is so serious it has decided to convene an urgent building industry crisis summit early next year to address the crisis.<br />“Without pre-empting the outcome… it is clear that the government – as a major supplier of work and with its stated capital expenditure budgets – will have to be engaged as a matter of urgency.<br />“The departments of human settlements, public works, finance and labour are key partners in the process. We are constantly reminded about extensive capital budgets, but now we need action,” he said.<br />?<br />
  67. 67. BMI-BRSCU<br />THE GREAT RESET FOR SOUTH AFRICA<br />www.strategicforum.co.za<br /><ul><li>The recovery will be gradual
  68. 68. The Building Industry can Change fundamentally
  69. 69. New consumption patterns will be less centred around houses and cars
  70. 70. Home ownership under threat
  71. 71. Rental preferred to ownership
  72. 72. Housing Units will be smaller
  73. 73. But could favour rental and new forms of living, eg Townhouses and High Rise Flats, walkable neighbourhoods
  74. 74. More job mobility requiring flexibility
  75. 75. Transition to the Knowledge Economy – could affect Industrial and Warehousing developments
  76. 76. People working at home and desk sharing – affecting Office development
  77. 77. Infrastructure Investment crucial in new forms of public transport,
  78. 78. Traffic congestion and gridlock forcing new working and living models
  79. 79. A radically altered and much denser economic landscape organized around megaregions
  80. 80. New types of inner cities with people walking to work
  81. 81. Spatial fix involves Integrated, Sustainable developments where people live work and play </li></li></ul><li><ul><li>The STRATEGIC FORUM ScenariosFOR THE BUILDING INDUSTRY: 2010-2020</li></ul> BMI-BRSCU<br />THE STRATEGIC FORUM SCENARIOS<br />www.strategicforum.co.za<br />HIGH ROAD <br />COLUMBUS SCENARIO<br />Property a PREFERRED Investment<br />Home Ownership PREFERRED<br />BUOYANT GROWTH<br />Backlogs eliminated by 2015<br />UPPER MIDDLE ROAD <br />APOLLO SCENARIO<br />Property a GOOD Investment<br />Home Ownership DESIRED<br />AVERAGE GROWTH<br /> Erosion of Backlogs<br />LOWER MIDDLE ROAD<br /> SOYUZ SCENARIO<br />Property an AVERAGE Investment<br />Home Ownership QUESTIONED<br />LOW GROWTH<br />Keeping pace with Population<br />LOW ROAD <br />CHALLENGER SCENARIO<br />Property a POOR Investment<br />Home Ownership AVOIDED<br />NEGATIVE GROWTH<br />Increasing BACKLOGS<br />Trends in the Building Industry are inextricably <br />responsive to, and influenced by INVESTMENT CLIMATE, INVESTOR CONFIDENCE and PROPERTY DELIVERY.<br />BOUYANT GROWTH<br />> 5 % PA<br />GDFI > 25 % <br />OF GDP<br />SUBSIDIES<br />3 - 5 % OF BUDGET<br />AVERAGE GROWTH <br />2 - 5 % PA<br />GDFI 20 - 25 %<br />OF GDP<br />SUBSIDIES<br />2 - 3 % OF BUDGET<br />LOW GROWTH<br />0 - 2 % PA<br />GDFI 15 - 20 %<br />OF GDP<br />SUBSIDIES<br />1 - 2 % OF BUDGET<br />NEGATIVE GROWTH<br />< 0 % PA<br />GDFI < 15 %<br />OF GDP<br />SUBSIDIES<br />< 1 % OF BUDGET<br />Investor Confidence<br />NO CONFIDENCE LOW AVERAGE HIGH CONFIDENCE<br />Risk Avoidance Risk Aversion Risk Tolerance Risk Taking<br />Property delivery<br />Investment Climate<br />PROPERTY A POOR INVESTMENT / AVERAGE / GOOD / A PREFERRED INVESTMENT<br />Paradigm Regression Paradigm Paralysis Paradigm Shift Paradigm Reinvention<br />
  82. 82. ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />The MFA CLIBI has moved sideways for four quarters, still reflecting widespread pessimism in the South African building industry … this is the first time that it has moved sideways for more than two quarters, an unprecedented occurrence … a recovery-in-waiting?<br />?<br />
  83. 83. ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />If this is what we mean by confidence, then we see immediately why, if it varies over time, it should play a major role in the business cycle. Why?<br />In good times, people trust. They make decisions spontaneously. They know instinctively that they will be successful. They suspend their suspicions.<br />Asset values will be high and perhaps also increasing. As long as people remain trusting, their impulsiveness will not be evident.<br />But then, when the confidence disappears, the tide goes out. The nakedness of their decisions stand revealed.<br />When people are confident, they go out and buy; when they are unconfident they withdraw, and they sell.<br />Economic history is full of such cycles of confidence followed by withdrawal (Akerlof and Shiller: 2009: 12,13)<br />A confident prediction is one that projects the future to be rosy; an unconfident prediction projects the future as bleak.<br />But if we look up confidence in the dictionary, we see that it is more than a prediction. The dictionary says that it means “trust” or “full belief”.<br />The word comes from the Latin “fido”, meaning “I trust”.<br />The confidence crisis that we are in at the moment is also called a “credit crisis”.The word “credit” derives from the Latin “credo”, meaning“I believe”.(Akerlof and Shiller: 2009: 12)<br /><ul><li> BMI-BRSCU</li></li></ul><li>ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />The real problem is the conventional wisdom that underlies so much of current economic theory. So many members of the macro economics and finance profession have gone so far in the direction of rational expectations and efficient markets, that they fail to consider the most important dynamics underlying economic crises. Failing to incorporate animal spirits into the model, can blind us to the real sources of trouble.(Akerlof & Shiller : 2009 : 167)<br />What has happened in the current financial crisis, corresponds to what causes most of our economic ups and downs: over-confidence followed by under-confidence. The story in this case was that the price of housing had never declined (that is only a story, and it is actually untrue) and therefore, that it would just continue to go up and up. There was nothing to lose. This is the story of our time; it is the story of the business cycle that began in 2001. (Akerlof & Shiller, 2009 : 170)<br />The theory of animal spirits provides an answer to a conundrum:<br />1. Why did most of us utterly fail to foresee the current economic crisis?<br />2. How can we understand this crisis, when it seems to have come out of the blue with no cause?<br />3. Why have the measures to forestall it falling short, while the economic authorities publically express surprise at their ineffectiveness?<br />We need to answer these questions if we are to feel any confidence in economic policy in the (future). (Akerlof and Shiller: 2009: 167)<br /><ul><li> BMI-BRSCU</li></li></ul><li>ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />For some reason in the late 1990s and early 2000s, the idea that homes and apartments were spectacular investments, gained a stronghold on the public imagination in the United States and many other countries as well. <br />Not only did prices escalate, but there was palpable excitement about real estate investments; one could see the animal spirits in action everywhere. <br />It was the biggest home price boom in U.S. history. It extended over nearly a decade, beginning in the late 1990s. <br />Prices nearly doubled before the bust began in 2006. While it lasted, this spectacular boom mirrored in other countries as well, helped drive the entire world economy and its stock markets. <br />In its wake, it has left the biggest real estate crisis since the 1930s. The so-called sub-prime crisis, as well as a global financial crisis, the full dimensions of which still have to be grasped. (Akerlof and Shiller: 2009: 149)<br /><ul><li> BMI-BRSCU</li></li></ul><li> BMI-BRSCU<br />ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />JOHANNESBURG - The Consumer Protection Act which comes into effect on April 1 2011, has raised several concerns, among them the lack of protection for landlords who feel the new legislation will offer them little recourse in the way of defaulting tenants. <br />The Act provides ample protection to investors and homeowners in their dealings with unscrupulous estate agents. However, some landlords feel the legislation leaves them in the lurch.<br />Who will build Rental housing?<br />Abandon all hope in property. (?)<br />That is a rather brutal summary of the outlook for residential, commercial and industrial property described by First National's property guru John Loos and veteran property analyst Erwin Rode (pictured) at a symposium in Johannesburg. (David Carte writing on Moneyweb, 30 March 2011)<br />
  84. 84. BMI-BRSCU<br />ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />Adding to Consumer uncertainty and HOPELESSNESS?<br />
  85. 85. BMI-BRSCU<br />ANIMAL SPIRITS AND CONFIDENCE<br />www.strategicforum.co.za<br />Do overseas Investors have a different, longer-term view of prospects for Property inSA??<br />
  86. 86. BMI-BRSCU<br />THE STRATEGIC FORUM SCENARIOS<br />www.strategicforum.co.za<br />Conditions for High Road Scenario<br />Investor Confidence:<br /><ul><li>High confidence;
  87. 87. Risk taking propensity
  88. 88. GDP growth > 6% pa;
  89. 89. CPI in 3-6% range;
  90. 90. Real Interest Rates < 5%;</li></ul>Investment Climate: <br /><ul><li> Property a preferred investment;
  91. 91. FTHB Subsidies increased to 2,5-5% of Budget;
  92. 92. The non residential market grows in tandem with residential;
  93. 93. Home improvement and non residential refurbishment markets grow at > 10% pa;
  94. 94. Private Sector Investment as a percentage of Total Investment in Building 50-60%;</li></ul>Property Delivery:<br /><ul><li> Building growth 2010-2020 at > 6,5% pa;
  95. 95. The R1,5 Trillion Affordable Housing programme successfully implemented;
  96. 96. Backlogs eliminated by 2020;
  97. 97. Construction growth 2108-2020 at > 7,5% pa;
  98. 98. The R846 Billion Government Infrastructure programme is successfully implemented</li></ul>“ This is the ideal time to borrow and invest heavily in public infrastructure that has been badly neglected over the past 30 years . . . Not only to roads and bridges but also to airports and air traffic control systems, urban transit, high-speed rail, schools and university facilities, national laboratories, national parks, smart electric grids, broadband networks, green generating plants and health information networks.<br />This forward looking approach is best defined not as deficit spending fuelling consumption but as an investment for the future with fiscal consolidation achieved in a way that supports jobs and growth” (Gordon Brown: 148: 2010)<br />
  99. 99. BMI-BRSCU<br />THE STRATEGIC FORUM SCENARIOS<br />www.strategicforum.co.za<br />“Over the next three years government will spend R846 billion on public infrastructure.<br />On transport, we will maintain and expand our road network.<br />We will ensure that our rail network is reliable, competitive and better integrated with our sea ports.” (President Jacob Zuma: State of the Nation Address: 2010)<br />Conditions for High Road Scenario<br />Investor Confidence:<br /><ul><li>High confidence;
  100. 100. Risk taking propensity
  101. 101. GDP growth > 6% pa;
  102. 102. CPI in 3-6% range;
  103. 103. Real Interest Rates < 5%;</li></ul>Investment Climate: <br /><ul><li> Property a preferred investment;
  104. 104. FTHB Subsidies increased to 2,5-5% of Budget;
  105. 105. The non residential market grows in tandem with residential;
  106. 106. Home improvement and non residential refurbishment markets grow at > 10% pa;
  107. 107. Private Sector Investment as a percentage of Total Investment in Building 50-60%;</li></ul>Property Delivery:<br /><ul><li> Building growth 2010-2020 at > 6,5% pa;
  108. 108. The R1,5 Trillion Affordable Housing programme successfully implemented;
  109. 109. Backlogs eliminated by 2020;
  110. 110. Construction growth 2108-2020 at > 7,5% pa;
  111. 111. The R846 Billion Government Infrastructure programme is successfully implemented</li></ul>“Economic Development Minister Ebrahim Patel put the total annual expenditure on infrastructure over the next four years at R250bn a year, translating into R1-trillion for the period — an 18% increase on the state’s previous infrastructure spending estimate of about R846bn for the three years to 2013.” (Business Day: 16 February 2011)<br />
  112. 112. BMI-BRSCU<br />LOOKING TO THE FUTURE<br />WELL FOUNDED HOPE<br />Stage 5<br />Recovery and Renewal<br />What can we do to restore growth when one part of the Industry wants to save (and not spend) and the other wants to stop spending (and save)?<br />?<br />Stage 3<br />Denial of Risk and Peril<br />Stage 4<br />Grasping for Salvation<br />Stage 2<br />Undisciplined Pursuit of More<br />What will it take?<br />Stage 1<br />Hubris born<br />Of success<br />(Source: Based on Collins: How the Mighty Fall: 2009)<br />
  113. 113. BMI-BRSCU<br />LOOKING TO THE FUTURE<br />www.strategicforum.co.za<br />Can the Building Industry TRANSFORM and REINVENTitself – can it recover?<br />
  114. 114. BMI-BRSCU<br />LOOKING TO THE FUTURE<br />www.strategicforum.co.za<br />It will FUNDAMENTALLY depend on the strategy of the FINANCIAL INSTITUTIONS.<br />
  115. 115. BMI-BRSCU<br />LOOKING TO THE FUTURE<br />www.strategicforum.co.za<br />It could take a decade to get back to the 2006 level!<br />R305 Billion decline in only 3 years!<br />
  116. 116. BMI-BRSCU<br />TOTAL INVESTMENT IN BUILDING BY SECTOR: 2000-2020<br />www.strategicforum.co.za<br />
  117. 117. BMI-BRSCU<br />TOTAL INVESTMENT IN BUILDING BY SECTOR: 2002-2020<br />www.strategicforum.co.za<br />The difference between “high road” and “lower middle road” could be R350 Billion and 700 000 jobs over the 10 years to 2020. <br />
  118. 118. BMI-BRSCU<br />THE STRATEGIC FORUM SCENARIOS<br />www.mindofafox.com <br />Credit and<br />Capital markets<br />OPEN<br />10%<br />40%<br />High Road<br />Lower Middle<br />Road<br />DECLINE<br />GROWTH<br />Low Road<br />Upper Middle <br />Road<br />30%<br />20%<br />Credit and<br />Capital markets<br />CLOSED<br />
  119. 119. BMI-BRSCU<br />SHORT-TERM OUTLOOK BY SECTOR & SEGMENT: 2010-2015: R MIO<br />www.strategicforum.co.za<br />
  120. 120. BMI-BRSCU<br />THE STRATEGIC FORUM SCENARIOS<br />www.strategicforum.co.za<br />The Major GAMEBREAKING POTENTIAL lie in the following areas:<br /><ul><li>An igniting vision of nation-building through home-ownership, property as a preferred investment and building as an engine for growth and wealth-creation;
  121. 121. Interest Rates falling further by 1-2 percentage points;
  122. 122. The Banks relaxing their stringent lending criteria and promoting Home Ownership as an Engine for Growth and Wealth Creation;
  123. 123. Return of Investor Confidence, Banks first and then Consumers;
  124. 124. Reinvented Investment Climate.(Source: BMI-BRSCU) </li></li></ul><li> BMI-BRSCU<br />THE STRATEGIC FORUM SCENARIOS<br />www.strategicforum.co.za<br />“We are pleased with the performance of our financial sector.<br />It has proven to be remarkably resilient in the face of the recent financial crisis and the global economic meltdown.” (President Jacob Zuma: SONA: Feb 2011)<br />The Major GAMEBREAKING POTENTIAL lie in the following areas:<br /><ul><li>An igniting vision of nation-building through home-ownership, property as a preferred investment and building as an engine for growth and wealth-creation;
  125. 125. Interest Rates falling further by 1-2 percentage points;
  126. 126. The Banks relaxing their stringent lending criteria and promoting Home Ownership as an Engine for Growth and Wealth Creation;
  127. 127. Return of Investor Confidence, Banks first and then Consumers;
  128. 128. Reinvented Investment Climate.(Source: BMI-BRSCU) </li></ul>“The raft of reforms from Basel that other banks are now grudgingly having to implement have been practised (reluctantly) by our banks for years.<br />"Our banking system is ahead of the game," says Banking Registrar, Errol Kruger.<br />Indeed, it is ranked sixth out of 133 for "financial soundness", way above banks in the US which are ranked 108, or the UK at 126.(Moneyweb, 23 April 2011)<br />
  129. 129. BMI-BRSCU<br />THE STRATEGIC FORUM SCENARIOS<br />www.strategicforum.co.za<br />In order to achieve the VISION FOR THE BUILDING INDUSTRY SYSTEM a collaborative culture is required based on trust and cross boundary networking and dynamic Public, Private Sector Partnerships that can deliver on Infrastructure, Housing, Health, Education, Safety and Security et al and make South Africa a Winning Nation and a World model of Nation Building and Reconciliation.(Source: BMI-BRSCU) <br />
  130. 130. BMI-BRSCU<br />HOTSPOT SCENARIO FOR THE BUILDING INDUSTRY<br />www.strategicforum.co.za<br />Building: The Engine for Growth and Wealth Creation.<br />Modeling cooperative behaviour<br />REINVENTION<br />Skills Training and Development<br />PRIVATE <br />SECTOR<br />The Private Sector accounts for 77% of Building activity and the Public Sector 23%.<br />In Construction the Public Sector accounts for 56% of activity and the Private Sector 44%. (BMI-BRSCU estimates: 2011) <br />Public Sector <br />Labour<br />Leadership,<br />Lobbying,<br />Advocacy<br />Enterprise Development,<br />BEE<br />Research has indicated that we can create jobs in six priority areas. These are infrastructure<br />development, agriculture, mining and beneficiation, manufacturing, the green economy and tourism.<br />We cannot create these jobs alone. We have to work with business, labour and the community<br />constituencies. (Pres Jacob Zuma: SONA: 2011)<br />Management Training and Development<br />Cross functional Networking<br />Productive capacity<br />Alliances,<br />Joint Ventures<br />The GOLDEN Triangle <br />The Hot Spot Scenario: mapping emergence<br />(Based on Gratton: 2007: 145)<br />
  131. 131. BMI-BRSCU<br />THE ROLE OF PUBLIC AND PRIVATE SECTOR IN BUILDING INDUSTRY: 2010<br />www.strategicforum.co.za<br />
  132. 132. BMI-BRSCU<br />THE ROLE OF PUBLIC AND PRIVATE SECTOR IN BLDNG & CONSTR: 2010<br />www.strategicforum.co.za<br />
  133. 133. BMI-BRSCU<br />HOTSPOT SCENARIO FOR THE BUILDING INDUSTRY<br />www.strategicforum.co.za<br />ENVIRONMENT<br />EMPLOYMENT<br />NATIONAL ISSUES<br />INVESTMENT<br />PROPERTY<br />GROWTH<br />WEALTH<br />Overarching vision aligned with National Issues, adapted and customised by the organisation for their own vision and values. <br />TOMORROW’S<br />ECONOMY<br />ORGANISATION’S ROLE<br />MARKETING<br />LOGISTICS<br />MANUFACTURING<br />BUILDING INDUSTRY <br />AN ENGINE OF GROWTH<br />ENVIRONMENTAL<br />SUSTAINABILITY<br />MISSION<br />Developing and growing competitive awareness, knowledge and support of END USERS and maintaining consistent standards in the environmentally friendly production of PRODUCTS for good value and performance in building.<br />VISION<br />Building is the engine for growth and wealth creation through Property Ownership and THE ORGANISATION is the preferred Partner for good as the green BUILDING solution of choice.<br />YESTERDAY’S ECONOMY<br />BROAD FOCUS ON CONTRIBUTION TO NATIONAL ISSUES<br />BORROW<br />BUY <br />BURN<br />SOCIAL<br />SUSTAINABILITY<br />REINVENTION<br />Doing well while doing good.<br />VALUES<br />The Organisation has an igniting vision, a culture, or mind set of co-operation, collaboration and cross-boundary networking; and a production capability to facilitate delivery of fit for purpose products and solutions and based on the unashamedly ethicalvalues and code of conduct of:<br /><ul><li>Respect
  134. 134. Responsibility
  135. 135. Honesty
  136. 136. Integrity
  137. 137. Accountability
  138. 138. Collaboration</li></ul>NARROW FOCUS ON COMPANY<br />ECONOMIC<br />SUSTAINABILITY<br />
  139. 139. HOTSPOT SCENARIO FOR THE BUILDING INDUSTRY<br />www.strategicforum.co.za<br />“. . . the Board is there to understand the big picture, to understand the relationship of the business with the society, particularly with the environmental issues, particularly with the political issues, but to think in 30 year terms, not to think in three-year terms.” (Bobby Godsell in Gleason: 2011: 149)<br />“I see myself as a person with vision in our industry about building things and innovating things and that is not a CEO function necessarily” (Adrian Gore in Gleason: 2011; 164)<br />
  140. 140. HOTSPOT SCENARIO FOR THE BUILDING INDUSTRY<br />www.strategicforum.co.za<br />“A mission statement in a corporate sense is a definition of purpose: it circumscribes and defines what you do. In a personal sense a mission statement, as opposed to goals, is not what you want to have, it’s not even what you want to do, it’s who you want to be, and that takes some thinking.” (Mark Lamberti in Gleason: 2011: 149)<br />
  141. 141. BMI-BRSCU<br />THE STRATEGIC FORUM<br />www.strategicforum.co.za<br />THE STRATEGIC FORUM<br /> A place of assembly <br />for strategic conversations<br />Towards<br />Building: The Engine for Growth and Wealth Creation<br />Dr. Llewellyn B. Lewis<br />May 2011<br />

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