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<ul><li>BMI-BRSCU </li></ul>Towards Making sense in the Age of the Unthinkable Dr. Llewellyn B. Lewis January 2010   <ul><...
<ul><li>BMI-BRSCU </li></ul>RESIDENTIAL INVESTMENT R66 238 MILLION CURRENT REALITY OF BUILDING & CONSTRUCTION: 2008 THE BU...
<ul><li>BMI-BRSCU </li></ul>TIPPING POINTS www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>TIPPING POINTS www.strategicforum.co.za   We have arrived firmly in an age in which the unthin...
<ul><li>BMI-BRSCU </li></ul>TIPPING POINTS www.strategicforum.co.za   It was  unthinkable  a few months ago that all of th...
<ul><li>BMI-BRSCU </li></ul>TIPPING POINTS www.strategicforum.co.za   If we had to react to 9/11 again, what would we do d...
<ul><li>BMI-BRSCU </li></ul>“ I have found a flaw. I don’t know how significant or permanent it is. But I have been very d...
<ul><li>BMI-BRSCU </li></ul>You probably don’t need to hear it from Greenspan to have a sense of the  confused navigation ...
<ul><li>BMI-BRSCU </li></ul>STRENGTHS and  WEAKNESSES OPPORTUNITIES and  THREATS Organisational Learning STRATEGIC LEADERS...
<ul><li>BMI-BRSCU </li></ul>STRENGTHS and  WEAKNESSES OPPORTUNITIES and  THREATS Organisational Learning STRATEGIC LEADERS...
<ul><li>BMI-BRSCU </li></ul>The Yale historian and political scientist John Lewis Gaddis once observed that the end of the...
<ul><li>BMI-BRSCU </li></ul>DOING Content Context Shortsight  Longsight  Foresight  Vision  Context Far Hindsight  Near Hi...
<ul><li>BMI-BRSCU </li></ul>DOING Content Context Shortsight  Longsight  Foresight  Vision  Context Far Hindsight  Near Hi...
<ul><li>BMI-BRSCU </li></ul>Information: Organizations are dependent on information to help identify and anticipate change...
<ul><li>BMI-BRSCU </li></ul>Flexibility: Organizations need to be able to adapt when external changes occur i.e. once the ...
<ul><li>BMI-BRSCU </li></ul>Intelligence: Is a blend of deduction, insight and inference. It’s this skill that marks the g...
<ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 1979 – 2008 www.strategicforum.co.za   What is the Paradigm...
<ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 01/1993 - 09/2009 www.strategicforum.co.za   . . .  all of ...
<ul><li>BMI-BRSCU </li></ul>The global financial crisis, hitting so soon after SA passed the National Credit Act into law,...
<ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 01/1993 -  09/2009 www.strategicforum.co.za   The decline i...
<ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 01/1993 – 09/2009 www.strategicforum.co.za   The decline in...
<ul><li>BMI-BRSCU </li></ul>While residential property developers were the first to experience the slowdown in the economy...
<ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 01/1993 – 09/2009 www.strategicforum.co.za   The decline in...
<ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 1979 – 2008 www.strategicforum.co.za   The decline in Total...
<ul><li>BMI-BRSCU </li></ul>Both New and Existing Houses compete for share of wallet. How long will it take to return to 2...
<ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 2008 VS 2007 www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: YTD 2009 VS 2008 www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>THE PROPERTY BUBBLE 2008
<ul><li>BMI-BRSCU </li></ul>In terms of  threats to economic confidence,  the current sub-prime crisis in some ways resemb...
<ul><li>BMI-BRSCU </li></ul>Paradigm  Re-invention Scope of change and transformation Critical mass of Investors (Whole co...
<ul><li>BMI-BRSCU </li></ul>Paradigm  Re-invention Scope of change and transformation Critical mass of Investors (Whole co...
<ul><li>BMI-BRSCU </li></ul>BPP AND BC: DWELLINGS > 80 M2: 1993-2009: M2 www.strategicforum.co.za   Downward trend in BC g...
<ul><li>BMI-BRSCU </li></ul>BPP AND BC: FLATS AND TOWNHOUSES: 1993-2009: M2 www.strategicforum.co.za   Trendline in BPP cr...
<ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL RESIDENTIAL: 1993-2009: M2 www.strategicforum.co.za   Trend in Residential B...
<ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL RESIDENTIAL: 1993-2009: M2 www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL NON RESIDENTIAL: 1993-2009: M2 www.strategicforum.co.za   Trend in Non Res B...
<ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL NON RESIDENTIAL: 1993-2009: M2 www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL BUILDING: 1993-2009: M2 www.strategicforum.co.za   Trend in Total BPP  < 1 3...
<ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL BUILDING: 1993-2009: M2 www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS The most marked feature of complex systems is a departure from the...
<ul><li>BMI-BRSCU </li></ul>Look around to get a clearer picture of the dangers and possibilities that suddenly become vis...
<ul><li>BMI-BRSCU </li></ul>Look Holistically instead of narrowly and focus on own resilience instead of everything that l...
<ul><li>BMI-BRSCU </li></ul>Resilience:   Allows us to keep learning, to change.  It’s a kind of battlefield courage,  the...
<ul><li>BMI-BRSCU </li></ul>Spreading power instead of hoarding it:   When you spread power instead of hoarding it, you di...
<ul><li>BMI-BRSCU </li></ul>This kind of  self-organisation,  the ability to pull off an  “all hands on deck”  reaction, e...
<ul><li>BMI-BRSCU </li></ul>Once  users step into active engagement,  the dynamics of the system shift forever: users stop...
<ul><li>BMI-BRSCU </li></ul>One morning in July 2007, the investor Bill Browder woke up in his vacation house in the south...
<ul><li>BMI-BRSCU </li></ul>In that summer of 2007 Browder’s habit of  living on his toes , of  looking for any sign that ...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS Errol Kruger saw the crash coming early.   Back in July 2005,  whe...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: ECONOMY Demand and Supply Equilibrium COINCIDE  WITH  ECONOMIC DO...
<ul><li>BMI-BRSCU </li></ul>Demand and Supply Equilibrium COINCIDE  WITH  ECONOMIC DOWNSWING 11 12 COMMODITIES CASH BONDS ...
<ul><li>BMI-BRSCU </li></ul>Demand and Supply Equilibrium COINCIDE  WITH  ECONOMIC DOWNSWING 11 12 COMMODITIES CASH BONDS ...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: ECONOMY WHEN TO HOLD 6 9 3 12 GROWTH MARKET Saturated Market Fund...
<ul><li>BMI-BRSCU </li></ul>The Fact that science explains so little demands constant radicalism, the sort of  creative im...
<ul><li>BMI-BRSCU </li></ul>This is all well documented in official reports on the state of the financial world at the tim...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS Demand and Supply Equilibrium COINCIDE  WITH  ECONOMIC DOWNSWING 1...
<ul><li>BMI-BRSCU </li></ul>WHEN TO HOLD 6 9 3 12 BOOM MARKET Saturated Market Funding Available Increasing Dividends  Inc...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS
<ul><li>BMI-BRSCU </li></ul>Severe Global Recession   <ul><li>Scenario: Long Freeze </li></ul><ul><li>Recession lasts more...
<ul><li>BMI-BRSCU </li></ul>Low  High POWER INTEREST (STAKE) UNAFECTED  STAKEHOLDERS Low  High  PLAYERS Demand creators Fu...
<ul><li>BMI-BRSCU </li></ul>Low  High POWER LEVEL OF INTEREST (STAKE) UNAFECTED  STAKEHOLDERS Low  High   PLAYERS Committe...
<ul><li>BMI-BRSCU </li></ul>INTEREST (STAKE) UNAFECTED  STAKEHOLDERS Low  High   BYSTANDERS  ACTORS Low  High POWER PLAYER...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS How can we create an environment that gives us the leverage to inf...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS Relationships and tools  that can be used to manipulate a crisis h...
<ul><li>BMI-BRSCU </li></ul>Building Industry Stakeholder Analysis Low  High POWER INTEREST (STAKE) UNAFECTED  STAKEHOLDER...
<ul><li>BMI-BRSCU </li></ul>Building Industry Stakeholder Analysis Low  High POWER INTEREST (STAKE) UNAFECTED  STAKEHOLDER...
<ul><li>BMI-BRSCU </li></ul>Productive capacity Alliances, Joint Ventures Cross functional Networking Enterprise Developme...
<ul><li>BMI-BRSCU </li></ul>Productive capacity Alliances, Joint Ventures Cross functional Networking Enterprise Developme...
<ul><li>BMI-BRSCU </li></ul>We have concluded that it is  not one single body  or institution or company that should devel...
<ul><li>BMI-BRSCU </li></ul>NATIONAL ISSUES GROWTH WEALTH EMPLOYMENT PROPERTY CLAYBRICK.ORG’S ROLE INVESTMENT ENVIRONMENT ...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: RESIDENTIAL UNDERSUPPLY Demand exceeds supply Prices increase Buy...
<ul><li>BMI-BRSCU </li></ul>6 9 3 12 BOOM MARKET Saturated Market Increasing Construction Funding Available Increasing Ren...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: RESIDENTIAL
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: RESIDENTIAL
<ul><li>BMI-BRSCU </li></ul>UNDERSUPPLY Demand exceeds supply Prices increase Buyer resistance develops Market tightens OV...
<ul><li>BMI-BRSCU </li></ul>6 9 3 12 BOOM MARKET Saturated Market Increasing Construction Funding Available Increasing Ren...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
<ul><li>BMI-BRSCU </li></ul>RESIDENTIAL INVESTMENT R62 576 MILLION CURRENT REALITY OF BUILDING & CONSTRUCTION: 2009* STRAT...
<ul><li>BMI-BRSCU </li></ul>RESIDENTIAL INVESTMENT R47 717 MILLION CURRENT REALITY OF BUILDING & CONSTRUCTION: 2009** STRA...
<ul><li>BMI-BRSCU </li></ul><ul><li>The Major  GAMEBREAKING POTENTIAL  lie in the following areas: </li></ul><ul><li>An ig...
<ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING <ul><li>The Major  GAMEBREAKING POTENTIAL  lie in the fo...
<ul><li>BMI-BRSCU </li></ul><ul><li>The Major  GAMEBREAKING POTENTIAL  lie in the following areas: </li></ul><ul><li>In or...
<ul><li>The  STRATEGIC FORUM  Scenarios FOR THE BUILDING INDUSTRY: 2008-2020 </li></ul><ul><li>BMI-BRSCU </li></ul>Investm...
<ul><li>BMI-BRSCU </li></ul>THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>Observe the recurring pattern in the cyclical leading indicator of the residential property ma...
<ul><li>BMI-BRSCU </li></ul>Decline   <ul><li>Property a POOR Investment </li></ul><ul><li>Industry has no leadership, no ...
<ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>Mortgage Advances  MAY  return to 2006 levels by 2020. . .  But . . .  Do we see signs  that t...
<ul><li>BMI-BRSCU </li></ul>It has been reported that SA Banks could be short as much as R600 Billion in liquid assets to ...
<ul><li>BMI-BRSCU </li></ul>Once a system  tumbles off a ledge  and goes catastrophically bad, it is very hard to return i...
<ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>Banks will no doubt survive (too big to fail?) .. . .  But . . .  Will  Homeownership  for the...
<ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul><ul><li>It is hoped that business leaders will also find their voices to speak out boldly. In ...
<ul><li>BMI-BRSCU </li></ul>TIPPING POINT LEADERSHIP www.strategicforum.co.za
<ul><li>BMI-BRSCU </li></ul>TIPPING POINT LEADERSHIP www.strategicforum.co.za   Ramphele said it was astounding that SA’s ...
<ul><li>BMI-BRSCU </li></ul>TIPPING POINT LEADERSHIP www.strategicforum.co.za   “ We need more civil society mobilisation....
<ul><li>BMI-BRSCU </li></ul>Having made sense of the future of the Building Industry System in  The Age of the Unthinkable...
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Making sense in the age of the unthinkable

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In this presentatation we apply the lessons from Joshua Cooper Ramo's bestselling "The Age of the Unthinkable" to make sense of the Building Industry. There are some remarkable conclusions that can be learnt from applying Ramo's insights to sensemaking in the Building Industry.

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  • Graph 3 The annual percentage movement  is rising sharply in real terms.  The cyclical lead time is between six and nine months.  
  • Transcript of "Making sense in the age of the unthinkable"

    1. 1. <ul><li>BMI-BRSCU </li></ul>Towards Making sense in the Age of the Unthinkable Dr. Llewellyn B. Lewis January 2010 <ul><li>THE STRATEGIC FORUM </li></ul><ul><li>A place of assembly </li></ul><ul><li>for strategic conversations </li></ul>THE STRATEGIC FORUM www.strategicforum.co.za BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc Reg. No. 2002/105109/23 • BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc • BMI • BMI • BMI
    2. 2. <ul><li>BMI-BRSCU </li></ul>RESIDENTIAL INVESTMENT R66 238 MILLION CURRENT REALITY OF BUILDING & CONSTRUCTION: 2008 THE BUILDING AND CONSTRUCTION INDUSTRY: 2008 www.strategicforum.co.za BUILDING & CONSTRUCTION INVESTMENT R297 754 MILLION BUILDING INVESTMENT R172 972 MILLION CONSTRUCTION INVESTMENT R124 782 MILLION CONTRACTOR (50,8%) R60 504 MIO SUBCONTRACTOR (49,2%) R58 598 MIO LABOUR (40%) R119 102 MIO DIRECT TO USER (40%) R59 356 MILLION MATERIAL (60%) R178 652 MIO INDIRECT VIA DISTRIBUTION (60%) R107 191 MILLION LARGE IND BUILDERS MERCHANT (10%) R17 865 MILLION LARGE CHAIN BLDRS MERCHANT (25%) R44 663 MILLION HYPERMARKET/SUPERMARKET (5%) R8 932 MILLION SPECIALIST SHOP (5%) R8 932 MILLION LOCAL HARDWARE STORE (15%) R26 798 MILLION RESIDENTIAL INVESTMENT R12 775 MILLION NON RESIDENTIAL INVESTMENT R66 321 MILLION UNRECORDED ADDITIONS AND ALT’S INVEST** R40 413 MILLION * Constant 2008 Prices ** Residential and Non Residential
    3. 3. <ul><li>BMI-BRSCU </li></ul>TIPPING POINTS www.strategicforum.co.za
    4. 4. <ul><li>BMI-BRSCU </li></ul>TIPPING POINTS www.strategicforum.co.za We have arrived firmly in an age in which the unthinkable has become, frankly, inevitable. We are now at the start of what may become the most dramatic change in the international order in several centuries, the biggest shift since European nations were first shuffled into sovereign order by the peace of Westphalia in 1648. (Joshua Cooper Ramo: The Age of the Unthinkable: 2009)
    5. 5. <ul><li>BMI-BRSCU </li></ul>TIPPING POINTS www.strategicforum.co.za It was unthinkable a few months ago that all of the major investment banks would be gone, mortgage companies nationalised and other financial companies merged in order to keep going. (William F Williams, Executive Vice President, The Bank of New York Mellon)
    6. 6. <ul><li>BMI-BRSCU </li></ul>TIPPING POINTS www.strategicforum.co.za If we had to react to 9/11 again, what would we do differently? 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)
    7. 7. <ul><li>BMI-BRSCU </li></ul>“ I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by the fact.” The Congressman questioning him asked, “In other words, you found that your view of the world, your ideology, was not right. It was not working?” Greenspan replied, “Absolutely. Precisely. You know that’s precisely the reason I was shocked. Because I have been going for forty years or more with very considerable evidence that it was working exceptionally well.” (Joshua Cooper Ramo: The Age of the Unthinkable: 2009: 6) TIPPING POINTS www.strategicforum.co.za Greenspan, in his fall 2008 congressional testimony: humbled, perplexed and worried.
    8. 8. <ul><li>BMI-BRSCU </li></ul>You probably don’t need to hear it from Greenspan to have a sense of the confused navigation of our leaders. How is it that the Secretary of the Treasury of the United States, a near-billionaire financier, can say that the worst of the crisis is over in May and then find himself in August furiously battling to save the global financial system? (Joshua Cooper Ramo: The Age of the Unthinkable: 2009: 6) We need to avoid models of the World built with the language of the past ! TIPPING POINTS www.strategicforum.co.za
    9. 9. <ul><li>BMI-BRSCU </li></ul>STRENGTHS and WEAKNESSES OPPORTUNITIES and THREATS Organisational Learning STRATEGIC LEADERSHIP As a way of Business Life ENVIRONMENTAL FORCES ORGANISATIONAL RESOURCES CAPABILITIES CURRENT REALITY STRATEGIC INTENT, VISION, MISSION DRIVING FORCE PERFORMANCE GUIDELINES INDUSTRY FORESIGHT UNDERSTANDING THE INDUSTRY SCENARIOS UNDERSTANDING THE ENVIRONMENT BUSINESS IDEA UNDERSTANDING THE INSTITUTION THE PARADIGM OR MENTAL MODEL Beliefs and assumptions held in common and taken for granted in an Organisation (After Johnson : 1988) STRATEGY AND PARADIGMS
    10. 10. <ul><li>BMI-BRSCU </li></ul>STRENGTHS and WEAKNESSES OPPORTUNITIES and THREATS Organisational Learning STRATEGIC LEADERSHIP As a way of Business Life ENVIRONMENTAL FORCES ORGANISATIONAL RESOURCES CAPABILITIES CURRENT REALITY STRATEGIC INTENT, VISION, MISSION DRIVING FORCE PERFORMANCE GUIDELINES INDUSTRY FORESIGHT UNDERSTANDING THE INDUSTRY SCENARIOS UNDERSTANDING THE ENVIRONMENT BUSINESS IDEA UNDERSTANDING THE INSTITUTION THE PARADIGM OR MENTAL MODEL Beliefs and assumptions held in common and taken for granted in an Organisation (After Johnson : 1988) STRATEGY AND PARADIGMS If you want to understand the World, commonly held ideas are absolutely blinding. Buddhist masters like to say that if you’re trying to reach enlightenment, you must develop, in this order, “right view, right intention, right action.” If you’re not seeing the world properly, you have no hope of any sort of breakthrough. (Ramo: 2009: 134) The only way to spot threats and opportunities is to break out of a narrow way of thinking.
    11. 11. <ul><li>BMI-BRSCU </li></ul>The Yale historian and political scientist John Lewis Gaddis once observed that the end of the Cold War “was of such importance that no approach to the study of international relations claiming both foresight and competence should have failed to see it coming. None actually did so though.” And it wasn’t just the Ph.D’s who missed the clues. All those Generals, all those spies, all those diplomats – they were just as blind. The collapse of the USSR is useful for us to study of how the wrong way of seeing can hide the real dynamics of the world, why the end of the USSR stunned the same minds who would later be stunned by 9/11 or the financial collapse of 2008 and who, I assure you, will be stunned again before long. Many of our best minds, blinded by optimism and confusion, are using out-of-date and unrealistic models of the world. (Ramo: 2009: 66,67) PARADIGM BLINDSPOTS
    12. 12. <ul><li>BMI-BRSCU </li></ul>DOING Content Context Shortsight Longsight Foresight Vision Context Far Hindsight Near Hindsight Blind spots Bright sparks PARADIGM BLINDSPOTS Data Facts, observations, data points Information Data with meaning Knowledge Information with insight Wisdom Knowledge with context (Source: Based on Dr. Kanes Rajah: 2005) Partial knowledge Incorrect knowledge False knowledge No knowledge BEING Process
    13. 13. <ul><li>BMI-BRSCU </li></ul>DOING Content Context Shortsight Longsight Foresight Vision Context Far Hindsight Near Hindsight Blind spots Bright sparks PARADIGM BLINDSPOTS Data Facts, observations, data points Information Data with meaning Knowledge Information with insight Wisdom Knowledge with context (Source: Based on Dr. Kanes Rajah: 2005) Partial knowledge Incorrect knowledge False knowledge No knowledge BEING Process . . . The environment is far more powerful than any individual. It is never stable and in its sudden changes from one state to another, more important than the desires of any of us.. . . Context is everything . . . (Ramo: 2009: 160). More than anything, what you want to know is when change is going to begin. In Chinese philosophy this sense is known as mastery of incipience, and the skill is often praised as the highest form of wisdom . (Ramo: 2009: 161). Much of ancient Chinese philosophy suggested that truth emerged not through debate but rather through study, reflection, meditation, and, at long last, insight delivered like lightning. (Ramo, 2009: 212).
    14. 14. <ul><li>BMI-BRSCU </li></ul>Information: Organizations are dependent on information to help identify and anticipate changes to the external environment. The emphasis here is on speed, organizations need to be less dependent on conventional analysis such as economic and market research data, and more dependent on early warning systems like environmental scanning. Environmental scanning helps to identify early signs of opportunities and threats which may exist in the external environment (Grant, 2008: 206). RESPONSIVENESS TO THE ENVIRONMENT www.strategicforum.co.za
    15. 15. <ul><li>BMI-BRSCU </li></ul>Flexibility: Organizations need to be able to adapt when external changes occur i.e. once the information has been analyzed and a decision has been made, then organizations need to be able to respond as quickly as possible in order to sustain or gain a competitive advantage over its rivals. (Grant, 2008: 206). RESPONSIVENESS TO THE ENVIRONMENT www.strategicforum.co.za
    16. 16. <ul><li>BMI-BRSCU </li></ul>Intelligence: Is a blend of deduction, insight and inference. It’s this skill that marks the greatest successes of the age, from men like Warren Buffet (who negotiates billion-dollar deals in an afternoon if they feel right) to Steve Jobs (who attacks improbable markets with radically different technology and design). Yet the old habit of piece-by-piece thinking remains in financial markets (“ah, those mortgages will never affect our insurance business”) as often as in foreign policy. But in a world where everything is connected, advance signs of change, of turbulence, are likely to appear only when we look in unexpected places. (Ramo: 2009: 153). RESPONSIVENESS TO THE ENVIRONMENT www.strategicforum.co.za
    17. 17. <ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 1979 – 2008 www.strategicforum.co.za What is the Paradigm? Are Mortgages DEBT . . . . .Or are they INVESTMENTS? Perhaps a Paradigm Shift is required?
    18. 18. <ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 01/1993 - 09/2009 www.strategicforum.co.za . . . all of this made banks respond in time-honoured fashion: by cracking down hard on those to whom they had been only too keen to lend in happier times. (Vince Cable: The Storm: 2009) ?
    19. 19. <ul><li>BMI-BRSCU </li></ul>The global financial crisis, hitting so soon after SA passed the National Credit Act into law, resulted in an almost invisible hand clamping down business activity as banks cut back drastically on issuing loans. Small businesses, as usual, are the hardest hit by any such changes in the business environment. It is safe to say that an entrepreneur would have found it far easier to get a business loan two years ago than today, when small business growth is needed more than ever. While South African banks were issuing credit too easily before the act came into effect, they certainly were nowhere near as reckless in their lending as were US banks, with their sub-prime mortgage loans which triggered the financial crisis. The act itself clamped down on issuing expensive credit to people who could not afford it. But then the financial crisis hit and South African banks stood accused of overdoing it — of clamping down to the point that it started throttling the economy. Meaningful new business activity is impossible without credit. (Business Day,9 July 2009) NEW MORTGAGE LOANS AND READVANCES: 01/1993 - 03/2009 www.strategicforum.co.za
    20. 20. <ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 01/1993 - 09/2009 www.strategicforum.co.za The decline in Mortgage Advances for New Construction was a bit slower initially and took a bit longer to take effect . . . .
    21. 21. <ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 01/1993 – 09/2009 www.strategicforum.co.za The decline in Mortgage Advances for Vacant Land was more catastrophic . . . . And can have UNINTENDED CONSEQUENCES
    22. 22. <ul><li>BMI-BRSCU </li></ul>While residential property developers were the first to experience the slowdown in the economy, they will be the first to benefit from the recovery. “ The recession is having a dramatic effect on the development sector and in many cases, the market has been brought to a standstill,” (Lewis Civin, MD Redcon Prop Development). The dilemma facing developers is it takes about two years to bring a project onto the market ready for occupation. At this stage, they should be getting stock ready now, in time for the turnaround. In reality, this is impossible and two years of preparation are being lost. Building merchants have not gone unscathed either. They have been forced to stop supplying materials as developers are unable to raise finance as a result of banking restrictions. Civin remains optimistic about the future and believes that as soon as the market eases, there will be opportunities in that first two critical years of recovery. “ There is still demand in the residential sector, particularly in the working-class market. However, the inability to raise bonds remains a stumbling block,” he says. (Homefront, Bus. Day, 3 July 2009) NEW MORTGAGE LOANS AND READVANCES: 01/1993 – 09/2009 www.strategicforum.co.za
    23. 23. <ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 01/1993 – 09/2009 www.strategicforum.co.za The decline in Mortgage Advances for Existing Buildings took the knock . . . . And how long will it take to recover?
    24. 24. <ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 1979 – 2008 www.strategicforum.co.za The decline in Total Mortgage Advances was a massive R140 Billion . . . . 3 Times the size of annual New Residential Building Construction! Did the Banks lose their appetite for long-term “Debt”?
    25. 25. <ul><li>BMI-BRSCU </li></ul>Both New and Existing Houses compete for share of wallet. How long will it take to return to 2007 levels? NEW MORTGAGE LOANS AND READVANCES: 1979 – 2008 www.strategicforum.co.za
    26. 26. <ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: 2008 VS 2007 www.strategicforum.co.za
    27. 27. <ul><li>BMI-BRSCU </li></ul>NEW MORTGAGE LOANS AND READVANCES: YTD 2009 VS 2008 www.strategicforum.co.za
    28. 28. <ul><li>BMI-BRSCU </li></ul>THE PROPERTY BUBBLE 2008
    29. 29. <ul><li>BMI-BRSCU </li></ul>In terms of threats to economic confidence, the current sub-prime crisis in some ways resembles the onset of the Great Depression (Shiller: 2008: 97) Fractional Reserve Banking involves multiple equilibria: People trust their Banks, and thus the banks come to be seen as trustworthy. But, conversely, if people lose trust in their banks, withdraw their funds, and cause the banks to fail, the lack of trust becomes a self fulfilling prophecy. (Shiller: 2008: 102) THE PROPERTY BUBBLE 2008
    30. 30. <ul><li>BMI-BRSCU </li></ul>Paradigm Re-invention Scope of change and transformation Critical mass of Investors (Whole community) Single Investor (Part of community) Paradigm Pioneer Early adopter Paradigm shift Late Adopter Bandwagon Flocking Herd behaviour Impact of Change and transformation All Countries (Whole World) Single Country (Part of World) <ul><li>THE LOCAL PROPERTY MARKET </li></ul>LIMITS TO GROWTH PARADIGMS CHALLENGED ALTERNATIVE INVESTMENTS <ul><li>REINVENTION </li></ul><ul><li>A Structural Change? </li></ul><ul><li>Self Organisation </li></ul><ul><li>Order for Free! </li></ul><ul><li>Property a preferred Investment! </li></ul>THE GLOBAL PROPERTY ENVIRONMENT <ul><li>DEMISE </li></ul><ul><li>THE PROPERTY BUBBLE? </li></ul>THE EDGE OF CHAOS CREATIVITY INNOVATION The current and known world The future, unknown THE PROPERTY BUBBLE 2008
    31. 31. <ul><li>BMI-BRSCU </li></ul>Paradigm Re-invention Scope of change and transformation Critical mass of Investors (Whole community) Single Investor (Part of community) Paradigm Pioneer Early adopter Paradigm shift Late Adopter Bandwagon Flocking Herd behaviour Impact of Change and transformation All Countries (Whole World) Single Country (Part of World) <ul><li>THE LOCAL PROPERTY MARKET </li></ul>LIMITS TO GROWTH PARADIGMS CHALLENGED ALTERNATIVE INVESTMENTS <ul><li>REINVENTION </li></ul><ul><li>A Structural Change? </li></ul><ul><li>Self Organisation </li></ul><ul><li>Order for Free! </li></ul><ul><li>Property a preferred Investment! </li></ul>THE GLOBAL PROPERTY ENVIRONMENT <ul><li>DEMISE </li></ul><ul><li>THE PROPERTY BUBBLE? </li></ul>THE EDGE OF CHAOS CREATIVITY INNOVATION The current and known world The future, unknown THE PROPERTY BUBBLE 2008 Individual Banks Public opinion Ministry Treasury IMF World Bank Contagion Many of the most serious threats we face today, from financial crises to terrorism, resemble nothing so much as epidemics : they start small, spread fast, and often breed at the intersection of things that look benign until combined (jet travel and fundamentalism, home mortgages and hedge funds ). Dealing with epidemics requires an unusually clear sighted way of thinking. Good epidemiologists are relentless about asking how and where such CONTAGIONS begin, what they involve, why they are spreading. Public health officials will tell you the only way to control an epidemic is with a carefully orchestrated approach that works along many lines at once. Deep security is a strategy that makes this possible. (Ramo: 2009: 109)
    32. 32. <ul><li>BMI-BRSCU </li></ul>BPP AND BC: DWELLINGS > 80 M2: 1993-2009: M2 www.strategicforum.co.za Downward trend in BC gradually turning below 300 000 m2 per month Precipitous decline in BPP trend to a level below 300 000 m2 pm AND below BC. (A dangerous situation)
    33. 33. <ul><li>BMI-BRSCU </li></ul>BPP AND BC: FLATS AND TOWNHOUSES: 1993-2009: M2 www.strategicforum.co.za Trendline in BPP crossed below trendline in BC BC Trendline heading towards 150 000 m2 per month
    34. 34. <ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL RESIDENTIAL: 1993-2009: M2 www.strategicforum.co.za Trend in Residential BPP still heading down . . . Following the precipitous decline of Mortgage Advances . . . BC trend line trending DOWN below 800000 m2 per month
    35. 35. <ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL RESIDENTIAL: 1993-2009: M2 www.strategicforum.co.za
    36. 36. <ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL NON RESIDENTIAL: 1993-2009: M2 www.strategicforum.co.za Trend in Non Res BPP HEADING DOWN below 500 000 m2 pm . . . Slower decline - Maybe because they don’t need Mortgages ? BC trendline LEVELLING at about 380 000 m2 per month
    37. 37. <ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL NON RESIDENTIAL: 1993-2009: M2 www.strategicforum.co.za
    38. 38. <ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL BUILDING: 1993-2009: M2 www.strategicforum.co.za Trend in Total BPP < 1 300 000 m2 pm and declining BC trendline trending down to < 1 200 000 m2 per month
    39. 39. <ul><li>BMI-BRSCU </li></ul>BPP AND BC: TOTAL BUILDING: 1993-2009: M2 www.strategicforum.co.za
    40. 40. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS The most marked feature of complex systems is a departure from the idea that our world can be reduced to simple models. The real dynamics of the world make prediction nearly impossible and demand a different way of thinking. They demolish poor Alan Greenspan’s hope that even forty years of experience is a reliable guide to the future (Ramo, 2009: 17). To see the world this way, as a ceaselessly complex and adaptive system, requires a revolution. It involves changing the role we imagine for ourselves, from architects of a system we can control and manage to gardeners in a living, shifting ecosystem. (Ramo:2009: 40)
    41. 41. <ul><li>BMI-BRSCU </li></ul>Look around to get a clearer picture of the dangers and possibilities that suddenly become visible, the unthinkable made thinkable. Deep Security: This is a way of seeing, thinking and acting that takes the best ideas from the playbook of revolutionary forces and combines them with demands and responsibilities that our established power places on us. Gobal Immune System: Always ready, capable of dealing with the unexpected, as dynamic as the world itself. (Ramo, 2009: 18). STRATEGY IN COMPLEX SYSTEMS
    42. 42. <ul><li>BMI-BRSCU </li></ul>Look Holistically instead of narrowly and focus on own resilience instead of everything that looks scary. Augment the instinct for direct action with the incredible power of an indirect approach. Resilience: Learning to think in deep security terms means largely abandoning our idea that we can deter the threats we face and, instead, pressing to make our societies more resilient so we can absorb whatever strikes us. Resilience will be the defining concept of twenty-first century security, as crucial for your fast changing job as it is for the nation. Resilience is a measure of how much disturbance a system can absorb before it breaks down so fundamentally that it can’t easily return to the way it once was. (Ramo, 2009: 172). STRATEGY IN COMPLEX SYSTEMS
    43. 43. <ul><li>BMI-BRSCU </li></ul>Resilience: Allows us to keep learning, to change. It’s a kind of battlefield courage, the ability to innovate under fire because we’ve prepared in the right way and because we’ve developed the strength to keep moving even when we’re slapped by the unexpected. In practice this means widening how we interact with the world – the better to learn new skills and make new connections – instead of narrowing to the fewest possible essential threats or policies. “ A management approach based on resilience would emphasise the need to keep options open. Flowing from this would be not the presumption of sufficient knowledge, but the recognition of our ignorance; not the assumption that future events are expected, but that they will be unexpected .” (Ramo, 2009: 172). STRATEGY IN COMPLEX SYSTEMS
    44. 44. <ul><li>BMI-BRSCU </li></ul>Spreading power instead of hoarding it: When you spread power instead of hoarding it, you discover benefits that you couldn’t have imagined in advance – and that sometimes runs contrary to what you expected. Military historians have studied the bewildering efficiency of armies that swarm like ants, highly decentralised groups that bend, adjust, and attack based on a far better sense of local conditions than any central commander could ever have. This form of warfare flew in the face of centuries of command and control warfare theory . . . Swarming: The classic immune-system response. It’s what happens when your blood clots after you slice your finger cutting cucumbers, and it’s what’s going on in your sinuses when you sneeze. (Ramo, 2009: 236). STRATEGY IN COMPLEX SYSTEMS
    45. 45. <ul><li>BMI-BRSCU </li></ul>This kind of self-organisation, the ability to pull off an “all hands on deck” reaction, exists in many of the most efficient and resilient systems in our world. This has been a marked feature of life in the information age, when e-mails, telephone calls, and text messages have diminished the effects of geography, put people in closer contact, and in the process, removed the need for much central command and control. Take, for example, what economists call “peer production” which is the previously unimagined economic twitch for sharing work that has built Wiki-pedia, file-sharing systems like BitTorrent . . ., or “open source systems” like Ubuntu and Linux. (Ramo, 2009: 240). STRATEGY IN COMPLEX SYSTEMS
    46. 46. <ul><li>BMI-BRSCU </li></ul>Once users step into active engagement, the dynamics of the system shift forever: users stop being consumers and become participants. This pushes the opportunity for innovation to the edges of a network, where users reside, instead of leaving it in the hands of some slow-moving, committee oriented, centralised manufacturing centre. (Ramo, 2009: 240). What Jean Monnet, one of the most masterful strategists of the last century, wrote in 1951 is true today: “World peace cannot be safe-guarded without the making of efforts proportionate to the dangers which threaten it.” The more peers we can bring online for the business of saving the world, the easier the effort will be, and in a sense, the stronger we will each be. (Ramo: 2009: 240) STRATEGY IN COMPLEX SYSTEMS
    47. 47. <ul><li>BMI-BRSCU </li></ul>One morning in July 2007, the investor Bill Browder woke up in his vacation house in the south of France. It was his habit to write a letter to investors in his $2 billion Hermitage fund once a month. Hermitage was a fund that invested in one of the most unstable markets in the world – Russia – and Browder’s ups and downs there had made him a legend in the world of investing. Browder’s investment model was to buy shares in the most corrupt, worst run Russian companies and then press them to change. Working in Russia over the years had accustomed Browder to the fact that markets could snap in ways that are largely unimaginable. (Ramo: 2009: 55) STRATEGY IN COMPLEX SYSTEMS
    48. 48. <ul><li>BMI-BRSCU </li></ul>In that summer of 2007 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. In New York an auction of debt from leveraged buy-out deals had failed to draw enough bidders and was shut down. 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. 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) STRATEGY IN COMPLEX SYSTEMS
    49. 49. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS 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. 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. “ 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.”
    50. 50. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: ECONOMY Demand and Supply Equilibrium COINCIDE WITH ECONOMIC DOWNSWING 11 12 COMMODITIES CASH BONDS PROPERTY EQUITIES PROPERTY EQUITIES BONDS COINCIDE WITH ECONOMIC UPSWING (Based on the Barings Liquidity Model : The Economist : 19 Nov. 1994) What did we see in July 2007?
    51. 51. <ul><li>BMI-BRSCU </li></ul>Demand and Supply Equilibrium COINCIDE WITH ECONOMIC DOWNSWING 11 12 COMMODITIES CASH BONDS PROPERTY EQUITIES PROPERTY EQUITIES BONDS COINCIDE WITH ECONOMIC UPSWING (Based on the Barings Liquidity Model : The Economist : 19 Nov. 1994) What did we see in July 2007? With borrowers starting to default on housing debts in the US, bond markets there and in Europe are trembling. More bad news about sub-prime mortgages could create global panic and our bond market would be affected. (Business Day, 6 July 2007) Which leaves us with the least sexy asset class of all — cash. But boy, isn’t it a comfy thought right now? It gives consistent returns, albeit small ones, and we can anticipate fairly accurately interest rates with Reserve Bank governor Tito Mboweni, controlling the reins. (Business Day, 6 July 2007) “ Why didn’t we all see the crisis coming? Seemingly the Banks did.” STRATEGY IN COMPLEX SYSTEMS: ECONOMY
    52. 52. <ul><li>BMI-BRSCU </li></ul>Demand and Supply Equilibrium COINCIDE WITH ECONOMIC DOWNSWING 11 12 COMMODITIES CASH BONDS PROPERTY EQUITIES PROPERTY EQUITIES BONDS COINCIDE WITH ECONOMIC UPSWING (Based on the Barings Liquidity Model : The Economist : 19 Nov. 1994) What did we see in July 2007? Why were we all taken so completely by surprise? (July 2007) STRATEGY IN COMPLEX SYSTEMS: ECONOMY
    53. 53. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: ECONOMY WHEN TO HOLD 6 9 3 12 GROWTH MARKET Saturated Market Funding Available Increasing Dividends Increasing Absorption Rent Concession Excess Funding Tightened Funding Reduced Funding RECESSION RECOVERY DECLINE (July 2007) EQUITIES PROPERTY COMMODITIES CASH BONDS PROPERTY “ . . . the failure of collective imagination of many bright people”. What the economists lacked was the imagination to see that it could all explode into a crisis. They preferred to believe that trends would continue . . . “ The signs were there. Did we ACT rapidly enough?” But it wasn’t just a failure of imagination. It was a failure of courage. It takes a brave soul to foresee the worst, and go out and warn people. . . .
    54. 54. <ul><li>BMI-BRSCU </li></ul>The Fact that science explains so little demands constant radicalism, the sort of creative imagining that has inspired great scientific leaps throughout history. (Ramo: 2009: 62) Queen Elizabeth put the greatest minds in the land on the spot recently. Touring the London School of Economics (LSE), she asked: “Why did nobody see the crisis coming?” The assembled professors were stumped. Not one of them could come up with an answer. After the Queen returned to Buckingham Palace, the professors put their heads together and penned a letter to Her Majesty explaining that it was “the failure of collective imagination of many bright people”. We are not told what the queen thought of this explanation. But it certainly did not satisfy her subjects, for whom her question hit a big nail smack on the head. Why were we all taken so completely by surprise? What did imagination have to do with it? Actually, the economists’ response was not that far off the mark. The reality is that many people knew and understood what was going on in the financial markets two or three years ago. They could see the upward spiral of asset prices, the miss-pricing of risk, the greed that was driving through bad deals, and the opacity of a system barely anyone could understand. STRATEGY IN COMPLEX SYSTEMS
    55. 55. <ul><li>BMI-BRSCU </li></ul>This is all well documented in official reports on the state of the financial world at the time. What the economists lacked was the imagination to see that it could all explode into a crisis. They preferred to believe that trends would continue, that somehow the world would muddle through, a very human failing but one that economists should be trained to resist. But it wasn’t just a failure of imagination. It was a failure of courage. It takes a brave soul to foresee the worst, and go out and warn people. The risk of making a fool of yourself is high, and reputation is everything in the world of economic forecasting. The inclusion of the phrase “collective imagination” in the professors’ letter is also revealing. It implies that they were all in it together, forming a consensus, reinforcing each others’ failure to use their imaginations. This is rather depressing because it narrows the scope for independence, for flashes of genius, for the great insights of free thinkers. What all this tells us is that psychology plays a key part in economics. It is not just a matter of analysing numbers but of training the mind to overcome the horror of what they might be telling you, and extract the true message, even if it deviates totally from the past and from economic theory. (David Lascelles, Senior Fellow of the Centre for the Study of Financial Innovation in London, and a former banking editor of the Financial Times) STRATEGY IN COMPLEX SYSTEMS
    56. 56. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS Demand and Supply Equilibrium COINCIDE WITH ECONOMIC DOWNSWING 11 12 COMMODITIES CASH BONDS PROPERTY EQUITIES PROPERTY EQUITIES BONDS COINCIDE WITH ECONOMIC UPSWING (Based on the Barings Liquidity Model : The Economist : 19 Nov. 1994) January 2010 What do we see in Jan 2010?
    57. 57. <ul><li>BMI-BRSCU </li></ul>WHEN TO HOLD 6 9 3 12 BOOM MARKET Saturated Market Funding Available Increasing Dividends Increasing Absorption Rent Concession Excess Funding Tightened Funding Reduced Funding RECESSION RECOVERY DECLINE CASH BONDS PROPERTY EQUITIES PROPERTY COMMODITIES STRATEGY IN COMPLEX SYSTEMS January 2010
    58. 58. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS
    59. 59. <ul><li>BMI-BRSCU </li></ul>Severe Global Recession <ul><li>Scenario: Long Freeze </li></ul><ul><li>Recession lasts more than 5 years, as in Japan in 1990’s </li></ul><ul><li>Ineffective regulatory, fiscal and monetary policy </li></ul><ul><li>All geographies stagnate </li></ul><ul><li>Defensive leverage ratios, with restrictive credit flows and trading in illiquid markets </li></ul><ul><li>Significant government involvement in allocation of credit </li></ul><ul><li>Very slow recovery of trade and capital flows </li></ul><ul><li>Globalisation goes into reverse </li></ul><ul><li>Attitudes become much more defensive and nationalistic </li></ul><ul><li>Scenario: Stalled Globalisation </li></ul><ul><li>Moderate recession of 1 to 2 years followed by slow economic growth </li></ul><ul><li>Regulatory regime holds system together but with significant drag on economy (eg. Higher cost of intermediation) </li></ul><ul><li>Overly safe leverage ratios </li></ul><ul><li>Significant government involvement in allocation of credit </li></ul><ul><li>Significantly higher cost of capitalthan before the crises </li></ul><ul><li>Globalisation stalls </li></ul><ul><li>Attitudes become more defensive and nationalistic </li></ul>Scenarios: Hard, Harder, Hardest, UNTHINKABLE Times <ul><li>Scenario: Regenerated global momentum </li></ul><ul><li>Moderate recession of 3 to 4 quarters , followed by strong economic growth </li></ul><ul><li>New effective regulatory regime </li></ul><ul><li>Safe leverage ratios reached, leading to rapid expansion of trading and lending volumes </li></ul><ul><li>Cost of capital recovers to historic levels </li></ul><ul><li>Trade and capital flows recover quickly </li></ul><ul><li>Globalisation stays on course, developed and emerging economies remain linked </li></ul><ul><li>Attitudes rebound, become positive </li></ul><ul><li>Scenario: Battered but Resilient </li></ul><ul><li>Prolonged recession of 18 months or more </li></ul><ul><li>New effective regulatory regime </li></ul><ul><li>Recovery generated by effective fiscal, monetary policies led by selected geographies (eg. China, Middle East, United States) </li></ul><ul><li>Safe leverage ratios reached, leading to slow resumption of trading and lending volume </li></ul><ul><li>Moderate recovery of trade and capital flows </li></ul><ul><li>Globalisation gradually gets back on course </li></ul><ul><li>Attitudes slowly rebound </li></ul>Global credit and Capital markets reopen and recover moderate Global Recession (Source: The three Keys to success in uncertain times: Business Flexibility, Awarenes and Resilience: www.gibsreview.co.za ) Global credit and Capital markets close down and remain volatile STRATEGY IN COMPLEX SYSTEMS
    60. 60. <ul><li>BMI-BRSCU </li></ul>Low High POWER INTEREST (STAKE) UNAFECTED STAKEHOLDERS Low High PLAYERS Demand creators Future oriented Proactive Innovative Entrepreneurial Risk Takers RESERVES Demand Responders Current orientation Reactive Responsive Service oriented Risk Managers ONLOOKERS Demand observers Past orientation Passive Risk Avoiders REFEREES Demand Facilitators Current orientation Reactive Responsive Mediating Gatekeepers Risk Averse BYSTANDERS ACTORS STRATEGY IN COMPLEX SYSTEMS Building Industry Stakeholder Analysis
    61. 61. <ul><li>BMI-BRSCU </li></ul>Low High POWER LEVEL OF INTEREST (STAKE) UNAFECTED STAKEHOLDERS Low High PLAYERS Committed In the Know RESERVES Involved Keep Informed CROWD Interested Minimal Effort REFEREES Concerned Keep Satisfied BYSTANDERS ACTORS STRATEGY IN COMPLEX SYSTEMS Building Industry Stakeholder Analysis
    62. 62. <ul><li>BMI-BRSCU </li></ul>INTEREST (STAKE) UNAFECTED STAKEHOLDERS Low High BYSTANDERS ACTORS Low High POWER PLAYERS Property Entrepreneurs, developers, Public Sector, FINANCIAL INSTITUTIONS (Mortgage Origination, Approval, Advances) RESERVES Architects, Specifiers, Manufacturers, Distributors, Contractors, FINANCIAL INSTITUTIONS Deposits, Repayments, Insurance) CROWD Labour, Unions, Consumer bodies, FINANCIAL INSTITUTIONS (Property Values, Property reports (HPI), Statistics) REFEREES Govt Prov-, Local-Authorities, CIDB, NHBRC, SABS, Agrement Board, MBA’S, SARB, State Tender Board, FINANCIAL INSTITUTIONS (Valuations, LTV ratios, Mortgage Rate, term, Affordability) STRATEGY IN COMPLEX SYSTEMS Building Industry Stakeholder Analysis Financial Institutions have INORDINATE Power and Interest. They play in all the quadrants of the Stakeholder Matrix and are SIMULTANEOUSLY PLAYERS, RESERVES, REFEREES and CROWD . They make the rules of the game and influence every facet of it.
    63. 63. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS How can we create an environment that gives us the leverage to influence the Banks? “ Are we making the same mistake again, not to see a crisis in the making?”
    64. 64. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS Relationships and tools that can be used to manipulate a crisis have to be prepared for years – sometimes decades – in advance. This reflects (Holling’s) belief that in a changing eco system the persistence of relationships matters more than anything else. That’s a reason that the re-acquiring of habits of international cooperation in everything from food aid to nuclear energy is so essential. It lets us begin to rebuild the webs of contacts, influence, and leverage to shape the environment around problems that we’ll never be able to attack directly. (Ramo: 2009: 214)
    65. 65. <ul><li>BMI-BRSCU </li></ul>Building Industry Stakeholder Analysis Low High POWER INTEREST (STAKE) UNAFECTED STAKEHOLDERS Low High PLAYERS Property Entrepreneurs, Property developers, Public Sector, Building Industry RESERVES Architects, Specifiers, Manufacturers, Distributors, Contractors, Financial Institutions, Building Industry CROWD Labour, Unions, Consumer bodies, Building Industry REFEREES Govt, Provincial, Local-Authorities CIDB, NHBRC, SABS, Agrement Board, MBA’S, SARB, State Tender Board, Building Industry BYSTANDERS ACTORS Think “outside the box”. Change the “rules of the game”. Become a PRO-ACTIVE PLAYER in each of the quadrants of the Stakeholder Matrix. STRATEGY IN COMPLEX SYSTEMS How can we create an environment that gives us the leverage to influence the Banks?
    66. 66. <ul><li>BMI-BRSCU </li></ul>Building Industry Stakeholder Analysis Low High POWER INTEREST (STAKE) UNAFECTED STAKEHOLDERS Low High PLAYERS Property Entrepreneurs, Property developers, Building Industry (Mortgage Origination, Approval, Advances) RESERVES Architects, Specifiers, Manufacturers, Distributors, Financial Institutions. Building Industry (Contractors, Deposits, Repayments, Insurance) CROWD Labour, Unions, Consumer bodies, Building Industry (Property Values, Property reports (HPI), Statistics) REFEREES Govt, Prov-, Local-Authorities CIDB, NHBRC, SABS, Agrement Board, MBA’S, SARB, State Tender Board, Building Industry (Valuations, LTV ratios, Mortgage Rate, term, Affordability, Quality) BYSTANDERS ACTORS STRATEGY IN COMPLEX SYSTEMS Develop an Igniting Vision and a Grand Strategy: Promote Building as the engine for growth, nation building and wealth creation through Property Ownership.
    67. 67. <ul><li>BMI-BRSCU </li></ul>Productive capacity Alliances, Joint Ventures Cross functional Networking Enterprise Development, BEE Skills Training and Development Leadership, Lobbying, Advocacy Modeling cooperative behaviour REINVENTION The Hot Spot Scenario: mapping emergence (Based on Gratton: 2007: 145) Building: The Engine for Growth and Wealth Creation. Property a preferred investment Management Training and Development BUSINESS Government Labour STRATEGY IN COMPLEX SYSTEMS
    68. 68. <ul><li>BMI-BRSCU </li></ul>Productive capacity Alliances, Joint Ventures Cross functional Networking Enterprise Development, BEE Skills Training and Development Leadership, Lobbying, Advocacy Modeling cooperative behaviour REINVENTION The Hot Spot Scenario: mapping emergence (Based on Gratton: 2007: 145) Building: The Engine for Growth and Wealth Creation. Property a preferred investment Management Training and Development BUSINESS Government Labour Who in the building and property industry is driving a vision of any description? Is there even a vision at all? Who will appropriate the role to champion the cause to promote nation-building through home-ownership, property as a preferred investment and building as an engine for growth and wealth-creation? And WHO WILL ADVOCATE THE HOPES AND DREAMS of millions of homeowners (and that of an industry that employs over one million people)? STRATEGY IN COMPLEX SYSTEMS The more peers we can bring online for the business of saving the world, the easier the effort will be, and in a sense, the stronger we will each be. (Ramo: 2009: 240)
    69. 69. <ul><li>BMI-BRSCU </li></ul>We have concluded that it is not one single body or institution or company that should develop and drive an igniting vision for the building industry. The industry COLLECTIVELY must take ACCOUNTABILITY to develop an igniting vision of Nation Building through Home Ownership, Property as a Preferred Investment and Building as an Engine for Growth and Wealth Creation. We envision that every major organisation in the Building Industry from Development to Manufacturing, to Distribution, to Contracting and Finance should adopt this overarching vision and customise it for their own vision (see example of Claybrick.org overleaf). Then the Building and Property Industry will indeed become a HOT SPOT industry driven by an igniting vision, a collaborative mind-set, cross boundary networking and the productive capability to make South Africa a Winning Nation. Then a repetition of the sub-prime crisis will not catch a cooperating industry unawares. STRATEGY IN COMPLEX SYSTEMS
    70. 70. <ul><li>BMI-BRSCU </li></ul>NATIONAL ISSUES GROWTH WEALTH EMPLOYMENT PROPERTY CLAYBRICK.ORG’S ROLE INVESTMENT ENVIRONMENT MARKETING LOGISTICS VISION Building is the engine for growth and wealth creation through Property Ownership and Clay brick is the preferred Partner for good as the green walling solution of choice. MANUFACTURING CLAYBRICK FOR GOOD MISSION Developing and growing competitive awareness, knowledge and support of burnt clay masonry and maintaining consistent standards in the environmentally friendly production of clay brick for good value and performance in building. INCREASED MARKET SHARE REINVENTION NARROW FOCUS ON CLAY STOCKBRICK BROAD FOCUS ON NATIONAL ISSUES <ul><li>VALUES </li></ul><ul><li>CB 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 ethical values and code of conduct of: </li></ul><ul><li>Respect </li></ul><ul><li>Responsibility </li></ul><ul><li>Honesty </li></ul><ul><li>Integrity </li></ul><ul><li>Accountability </li></ul><ul><li>Collaboration </li></ul>Overarching vision aligned with National Issues, adapted and customised by Claybrick.org for their own vision and values. STRATEGY IN COMPLEX SYSTEMS
    71. 71. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: RESIDENTIAL UNDERSUPPLY Demand exceeds supply Prices increase Buyer resistance develops Market tightens OVERSUPPLY Supply exceeds demand Competition increases Prices moderate Market loosens RECESSION Reduced Funding Less construction Tightened Funding Overbuilding Rent Concession Saturated Market DECLINE RECOVERY Increasing rents Stabilising rents Increasing Absorption BOOM MARKET Funding Available Increasing construction Excess funding Legend: AH - Affordable Housing DH<80 – Dwelling Houses < 80 m2 DH>80 – Dwelling Houses > 80 m2 F&TH – Flats & Townhouses A&A – Additions & Alterations AH F&TH DH>80 DH<80 AA Demand and Supply Equilibrium RES 11 12
    72. 72. <ul><li>BMI-BRSCU </li></ul>6 9 3 12 BOOM MARKET Saturated Market Increasing Construction Funding Available Increasing Rents Stablizing Rents Increasing Absorption Overbuilding Rent Concession Excess Funding Tightened Funding Less Construction Reduced Funding RECESSION RECOVERY DECLINE DH<80 DH>80 F&TH AH AA STRATEGY IN COMPLEX SYSTEMS: RESIDENTIAL RES
    73. 73. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: RESIDENTIAL
    74. 74. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: RESIDENTIAL
    75. 75. <ul><li>BMI-BRSCU </li></ul>UNDERSUPPLY Demand exceeds supply Prices increase Buyer resistance develops Market tightens OVERSUPPLY Supply exceeds demand Competition increases Prices moderate Market loosens Demand and Supply Equilibrium Offices Shops IWH PNR RECESSION Reduced Funding Less construction Tightened Funding Overbuilding Rent Concession Saturated Market DECLINE RECOVERY Increasing rents Stabilising rents Increasing Absorption What do we see in Jan 2010? STRATEGY IN COMPLEX SYSTEMS: NON RES NON RES 11 12 Funding Available Increasing construction Excess funding GROWTH MARKET
    76. 76. <ul><li>BMI-BRSCU </li></ul>6 9 3 12 BOOM MARKET Saturated Market Increasing Construction Funding Available Increasing Rents Stablizing Rents Increasing Absorption Overbuilding Rent Concession Excess Funding Tightened Funding Less Construction Reduced Funding RECESSION RECOVERY Offices Shops I&WH Public NR DECLINE STRATEGY IN COMPLEX SYSTEMS: NON RES
    77. 77. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
    78. 78. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
    79. 79. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
    80. 80. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
    81. 81. <ul><li>BMI-BRSCU </li></ul>RESIDENTIAL INVESTMENT R62 576 MILLION CURRENT REALITY OF BUILDING & CONSTRUCTION: 2009* STRATEGY IN COMPLEX SYSTEMS: BUILDING BUILDING & CONSTRUCTION INVESTMENT R302 722 MILLION BUILDING INVESTMENT R170 760 MILLION CONSTRUCTION INVESTMENT R131 947 MILL CONTRACTOR (50,8%) R61 921 MIO SUBCONTRACTOR (49,2%) R59 971 MIO LABOUR (40%) R121 892 MIO DIRECT TO USER (40%) R72 653 MILLION MATERIAL (60%) R181 634 MIO INDIRECT VIA DISTRIBUTION (60%) R108 980 MILLION LARGE IND BUILDERS MERCHANT (10%) R18 163 MILLION LARGE CHAIN BLDRS MERCHANT (25%) R45 408 MILLION HYPERMARKET/SUPERMARKET (5%) R9 081 MILLION SPECIALIST SHOP (5%) R9 081 MILLION LOCAL HARDWARE STORE (15%) R27 245 MILLION RESIDENTIAL INVESTMENT R12 775 MILLION NON RESIDENTIAL INVESTMENT R67 019 MILLION UNRECORDED ADDITIONS AND ALT’S INVEST** R41 181 MILLION * 2008 Prices ** Residential and Non Residential
    82. 82. <ul><li>BMI-BRSCU </li></ul>RESIDENTIAL INVESTMENT R47 717 MILLION CURRENT REALITY OF BUILDING & CONSTRUCTION: 2009** STRATEGY IN COMPLEX SYSTEMS: BUILDING BUILDING & CONSTRUCTION INVESTMENT R302 708 MILLION BUILDING INVESTMENT R150 228 MILLION CONSTRUCTION INVESTMENT R152 480 MILL CONTRACTOR (50,8%) R61 921 MIO SUBCONTRACTOR (49,2%) R59 971 MIO LABOUR (40%) R121 083 MIO DIRECT TO USER (40%) R72 649 MILLION MATERIAL (60%) R181 625 MIO INDIRECT VIA DISTRIBUTION (60%) R108 975 MILLION LARGE IND BUILDERS MERCHANT (10%) R18 163 MILLION LARGE CHAIN BLDRS MERCHANT (25%) R45 406 MILLION HYPERMARKET/SUPERMARKET (5%) R9 081 MILLION SPECIALIST SHOP (5%) R9 081 MILLION LOCAL HARDWARE STORE (15%) R27 243 MILLION RESIDENTIAL INVESTMENT R12 775 MILLION NON RESIDENTIAL INVESTMENT R61 330 MILLION UNRECORDED ADDITIONS AND ALT’S INVEST** R41 181 MILLION ** 2009 Prices ** Residential and Non Residential
    83. 83. <ul><li>BMI-BRSCU </li></ul><ul><li>The Major GAMEBREAKING POTENTIAL lie in the following areas: </li></ul><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; </li></ul><ul><li>Interest Rates falling further by 2-3 percentage points; </li></ul><ul><li>The Banks relaxing their stringent lending criteria and promoting Home Ownership as an Engine for Growth and Wealth Creation; </li></ul><ul><li>Return of Investor Confidence, Banks first and then Consumers; </li></ul><ul><li>Property a preferred Investment. (Source: BMI-BRSCU) </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
    84. 84. <ul><li>BMI-BRSCU </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING <ul><li>The Major GAMEBREAKING POTENTIAL lie in the following areas: </li></ul><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; </li></ul><ul><li>Interest Rates falling further by 2-3 percentage points; </li></ul><ul><li>The Banks relaxing their stringent lending criteria and promoting Home Ownership as an Engine for Growth and Wealth Creation; </li></ul><ul><li>Return of Investor Confidence, Banks first and then Consumers; </li></ul><ul><li>Property a preferred Investment. (Source: BMI-BRSCU) </li></ul>Retail Motor Industry chief executive Jeff Osborne is calling on South Africa’s banks to open the credit taps and on government to play its role by reducing the prime interest rate by a meaningful 2 percent. The umbrella body is the lead voice in the automotive industry, the largest manufacturing sector in the SA economy. With 7250 members , the RMI is also the major employer representative of the Motor Industry Bargaining Council. (Bus. Report, 26 November 2009) “ . . . They (the Banks) do hold the key to economic recovery and to the survival of small businesses. Although we are seeing the return of some stability in the market, there will be no real recovery until stable consumers can access credit.” (Bus. Report, 26 November 2009)
    85. 85. <ul><li>BMI-BRSCU </li></ul><ul><li>The Major GAMEBREAKING POTENTIAL lie in the following areas: </li></ul><ul><li>In order to achieve this 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) </li></ul>STRATEGY IN COMPLEX SYSTEMS: BUILDING
    86. 86. <ul><li>The STRATEGIC FORUM Scenarios FOR THE BUILDING INDUSTRY: 2008-2020 </li></ul><ul><li>BMI-BRSCU </li></ul>Investment Climate BOUYANT GROWTH > 5 % PA GDFI > 25 % OF GDP SUBSIDIES 3 - 5 % OF BUDGET AVERAGE GROWTH 2 - 5 % PA GDFI 20 - 25 % OF GDP SUBSIDIES 2 - 3 % OF BUDGET LOW GROWTH 0 - 2 % PA GDFI 15 - 20 % OF GDP SUBSIDIES 1 - 2 % OF BUDGET NEGATIVE GROWTH < 0 % PA GDFI < 15 % OF GDP SUBSIDIES < 1 % OF BUDGET NO CONFIDENCE LOW AVERAGE HIGH CONFIDENCE Risk Avoidance Risk Aversion Risk Tolerance Risk Taking PROPERTY A POOR INVESTMENT / AVERAGE / GOOD / A PREFERRED INVESTMENT Paradigm Regression Paradigm Paralysis Paradigm Shift Paradigm Reinvention HIGH ROAD COLUMBUS SCENARIO Property a PREFERRED Investment Home Ownership PREFERRED BUOYANT GROWTH Backlogs eliminated by 2015 UPPER MIDDLE ROAD APOLLO SCENARIO Property a GOOD Investment Home Ownership DESIRED AVERAGE GROWTH Erosion of Backlogs LOWER MIDDLE ROAD SOYUZ SCENARIO Property an AVERAGE Investment Home Ownership QUESTIONED LOW GROWTH Keeping pace with Population LOW ROAD CHALLENGER SCENARIO Property a POOR Investment Home Ownership AVOIDED NEGATIVE GROWTH Increasing BACKLOGS Investor Confidence MAKING SENSE OF THE FUTURE www.strategicforum.co.za Trends in the Building Industry are inextricably responsive to, and influenced by INVESTMENT CLIMATE, INVESTOR CONFIDENCE and PROPERTY DELIVERY. Property delivery
    87. 87. <ul><li>BMI-BRSCU </li></ul>THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
    88. 88. <ul><li>BMI-BRSCU </li></ul>THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
    89. 89. <ul><li>BMI-BRSCU </li></ul>THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
    90. 90. <ul><li>BMI-BRSCU </li></ul>THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
    91. 91. <ul><li>BMI-BRSCU </li></ul>Observe the recurring pattern in the cyclical leading indicator of the residential property market … THE STRATEGIC FORUM: EARLY SIGNS OF CHANGE www.strategicforum.co.za
    92. 92. <ul><li>BMI-BRSCU </li></ul>Decline <ul><li>Property a POOR Investment </li></ul><ul><li>Industry has no leadership, no vision, muddles along; </li></ul><ul><li>Competition fierce, no cooperation; </li></ul><ul><li>Industry operates in SILOS, adversarial and confrontational; </li></ul><ul><li>Confidence very low; </li></ul><ul><li>Private Sector Investment < 50%% of Total Investment in Building; </li></ul><ul><li>CPI > 12%; </li></ul><ul><li>Real Interest Rates > 10%; </li></ul><ul><li>Building Industry growth negative; </li></ul><ul><li>Construction Industry growth negative; </li></ul><ul><li>FTHB Subsidies < 1% of Budget; </li></ul><ul><li>Infrastructure spend inadequate; </li></ul><ul><li>GFCF < 15% of GDP; </li></ul><ul><li>Investment in Building and Construction < 25% of GFCF </li></ul><ul><li>Property a GOOD Investment </li></ul><ul><li>Industry has good leadership, some vision, well intended; </li></ul><ul><li>Confidence fairly low; </li></ul><ul><li>Private Sector Investment 60-75% of Total Inv in Bldng; </li></ul><ul><li>CPI > 6% < 10%; </li></ul><ul><li>Real Interest Rates > 5% < 7,5%; </li></ul><ul><li>Building Industry growth 3,5% - 6,5%; </li></ul><ul><li>Construction Industry growth 5% - 7,5%; </li></ul><ul><li>FTHB Subsidies < 2,5% of Budget; </li></ul><ul><li>Infrastructure spend R500 - R780 Billion by 2015; </li></ul><ul><li>GFCF 20% - 25% of GDP; </li></ul><ul><li>Investment in Building and Construction 25% - 50% of GFCF </li></ul>Scenarios: Property Preferred, Good, Average, Poor Investment <ul><li>Property PREFERRED Investment </li></ul><ul><li>Industry has strong leadership and an igniting vision; </li></ul><ul><li>High Confidence; </li></ul><ul><li>Private Sector Investment 75-80% of Total Investment in Building; </li></ul><ul><li>CPI in 3-6% range; </li></ul><ul><li>Credit readily available; </li></ul><ul><li>Real Interest Rates < 5%; </li></ul><ul><li>Building Industry growth > 6,5% pa; </li></ul><ul><li>Construction Industry growth > 7,5% pa; </li></ul><ul><li>FTHB Subsidies 2,5-5% of Budget (R350 Billion by 2020); </li></ul><ul><li>Infrastructure spend of R780 Billion pa by 2015; </li></ul><ul><li>GFCF > 25% of GDP; </li></ul><ul><li>Investment in Building and Construction > 50% of GFCF </li></ul><ul><li>Property an AVERAGE Investment </li></ul><ul><li>Industry has mediocre leadership, lacks vision; </li></ul><ul><li>Confidence low; </li></ul><ul><li>Private Sector Investment 50% - 60% of Total Investment in Building; </li></ul><ul><li>CPI 10% - 12%; </li></ul><ul><li>Real Interest Rates 7,5% - 10%; </li></ul><ul><li>Building Industry growth < 3,5%; </li></ul><ul><li>Construction Industry growth < 5%; </li></ul><ul><li>FTHB Subsidies 1% - 2,5% of Budget; </li></ul><ul><li>Infrastructure spend R300 – R500 Billion by 2015; </li></ul><ul><li>GFCF 15% - 20% of GDP; </li></ul><ul><li>Investment in Building & Construction 15% - 25% of GFCF </li></ul>Credit and Capital markets open Growth (Source: The three Keys to success in uncertain times: Business Flexibility, Awarenes and Resilience: www.gibsreview.co.za ) Credit and Capital markets closed MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    93. 93. <ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    94. 94. <ul><li>BMI-BRSCU </li></ul>Mortgage Advances MAY return to 2006 levels by 2020. . . But . . . Do we see signs that the Banks have LOST their appetite for Mortgage Loans? In July 2007 Browder’s Hermitage Fund recognised an auction of debt from leveraged buy-out deals that failed to draw enough bidders for what it was: a sign that the world had run out of the ability to absorb new debt. (Ramo: 2009: 55) MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    95. 95. <ul><li>BMI-BRSCU </li></ul>It has been reported that SA Banks could be short as much as R600 Billion in liquid assets to restore ratios to their required levels in terms of the December Basel 2 consultative documents. For SA Banks the liquidity proposals could result in weaker asset growth and a shift away from longer-dated, lower margin business such as mortgages. “ A push to increase retail savings relative to assets implies slower asset growth or a shift towards greater incentives for retail savings,” says an industry source. (FM, 12 February 2010: Risk and Rewards: 37) MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    96. 96. <ul><li>BMI-BRSCU </li></ul>Once a system tumbles off a ledge and goes catastrophically bad, it is very hard to return it to its earlier state; usually it is impossible. Scientists call this “hysteresis” which comes from the Greek word hysterien, which means “to be late” – as in, once a system cascades like this it is too late to do anything about it. What happened to the US investment banking business in the summer of 2008 was a cascade of this sort. None of those firms, packed with money though they were, had nearly enough resilience to bend under the force of the sudden – if self-inflicted – financial shock they received. The snapped ruler remained snapped forever. (Ramo: 2009: 172) MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    97. 97. <ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    98. 98. <ul><li>BMI-BRSCU </li></ul>Banks will no doubt survive (too big to fail?) .. . . But . . . Will Homeownership for the average citizen? Will Property as a preferred Investment? Will the Building Industry ? Will society ACCEPT THEIR FATE TO BE RENTERS WHILE THE RICH AND PRIVILEGED ARE THE LANDED GENTRY? Will NON DELIVERY lead to UNINTENDED CONSEQUENCES . . . TOO UNTHINKABLE TO CONTEMPLATE? MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    99. 99. <ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    100. 100. <ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    101. 101. <ul><li>BMI-BRSCU </li></ul>MAKING SENSE OF THE FUTURE www.strategicforum.co.za
    102. 102. <ul><li>BMI-BRSCU </li></ul><ul><li>It is hoped that business leaders will also find their voices to speak out boldly. In this regard, the recent comments by Dr Johann Rupert to the Anton Rupert memorial lecture, was enlightening. </li></ul><ul><ul><li>“ I’ve kept my word to Mamphela Ramphele, who said that whites should start speaking out a little bit without having the fear of being branded racists.” </li></ul></ul><ul><li>Quoting from his own experience he went on to say that even “Big Business with Government” meetings were orchestrated “powerpoint exchanges”. It was not frank dialogue. </li></ul><ul><ul><li>“ And whenever any of us wanted to speak out our fellow businessmen made sure that we were kept quiet. So even the business leaders were very reluctant to criticise, preferring the lobbying route.” ( Business Times, 26 October 2008). </li></ul></ul>TIPPING POINT LEADERSHIP www.strategicforum.co.za
    103. 103. <ul><li>BMI-BRSCU </li></ul>TIPPING POINT LEADERSHIP www.strategicforum.co.za
    104. 104. <ul><li>BMI-BRSCU </li></ul>TIPPING POINT LEADERSHIP www.strategicforum.co.za Ramphele said it was astounding that SA’s business sector had remained largely silent , even on failures that directly affected it. This included the system of 23 sectoral education and training authorities (Setas), funded by a levy of 1% of payroll for businesses with an annual turnover of more than R500 000, that was “clearly not working”. (Business Day, 3 December 2008) The Setas, the labour department’s near-destruction of SA’s working apprenticeship system and SA’s further education and training (FET) colleges were producing “unemployable” graduates. This was because there was not enough synergy between the college curricula and industry needs. “ The private sector is too scared to upset (the government) ... but its silence is creating the seeds of social instability. Our people can’t read, write, or be usefully engaged,” she said. (Business Day, 3 December 2008)
    105. 105. <ul><li>BMI-BRSCU </li></ul>TIPPING POINT LEADERSHIP www.strategicforum.co.za “ We need more civil society mobilisation. We can’t let people lie to us about what they are going to do with our taxes, and keep on voting for them.” What SA required was strong leadership of the enabling kind, instead of the traditional authoritarian kind, Ramphele said. The country’s leadership needed to create a milieu in which South Africans could commit to tackling the country’s dilemmas collaboratively. (Business Day, 3 December 2008) (Other) conundrums included how to develop a professional, performance-based, civil service; how to create an inclusive society while redressing lingering historical imbalances; and how to deal with the “huge” unintended consequences of some of the government’s “very good” policies. These policies included black economic empowerment (BEE), and the mass dismissal of white professionals from the civil service, particularly the country’s engineers. (Business Day, 3 December 2008)
    106. 106. <ul><li>BMI-BRSCU </li></ul>Having made sense of the future of the Building Industry System in The Age of the Unthinkable We Take a Stand and Declare the Possibility of an igniting Industry Vision of nation building through homeownership, property as a preferred investment and building as an engine for growth and wealth creation. Leaders make the impossible happen! THE STRATEGIC FORUM www.strategicforum.co.za BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc Reg. No. 2002/105109/23 • BMI Studium Ad Prosperandum Voluntas in Conveniendum BUILDING RESEARCH STRATEGY CONSULTING UNIT cc • BMI • BMI • BMI
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