The 1930's will forever be known as the Great Depression. This period we are in now will be known as the Great Recession. The World economy and Industries are in a period of RESET. The Building and Property market is no exception - perhaps it is even the forerunner for all industries. World wide the period 2000 - 2007 was characterised by the STORY that you cannot go wrong in investing in PROPERTY. Then the greed of investment bankers resulted in irrational exuberance and the subprime market presaged the bursting of the property bubble. Now the story has changed, and property ownership is being discredited. Rental is advocated as preferential to ownewrship. The Banks have lost their appetite for long-term lending and mortgage advances have dropped precipotously. The Building Industry has suffered the same fate. An Industry that doesn't have a story to tell will have one imposed on it - and it will be very difficult to reverse. There will be unintended consequences and leaders in the industry must promote building as an engine for growth and wealth creation and property as a preferred investment.

2. THE STRATEGIC FORUM www.strategicforum.co.za

3. “ Management and leadership are two different things, he says, and too many business people do not realise this. Management is the nitty-gritty, the day-to-day planning; leadership is inspiration and motivation: "They are two entirely different things and too many people try to mix them up. " THE STRATEGIC FORUM www.strategicforum.co.za PHENOMENON: Business coach Brad Sugars's ActionCOACH franchise has been rated as the top business- coaching franchise in the world, as well as one of the top 100 franchises overall.

4. Available on Amazon.com THE GREAT RESET www.strategicforum.co.za about Richard Florida author and thought-leader Richard Florida is author of the global best-seller The Rise of the Creative Class and Who's Your City? a national and international best seller and amazon.com book of the month. His new book, The Great Reset explains how new ways of living and working will drive post-crash prosperity. researcher Florida is Director of the Martin Prosperity Institute and Professor of Business and Creativity at the Rotman School of Management, University of Toronto. Previously, Florida has held professorships at George Mason University and Carnegie Mellon University and taught as a visiting professor at Harvard and MIT. Florida earned his Bachelor’s degree from Rutgers University and his Ph.D. from Columbia University. His research provides unique, data-driven insight into the social, economic and demographic factors that drive the 21st century world economy.

6. The real point of looking backward is to learn from the future and we have much to learn from the crises and recoveries of the past. THE GREAT RESET www.strategicforum.co.za

7. Economic development expert Richard Florida, examines these previous ECONOMIC EPOCHS, OR RESETS. He distills the DEEP FORCES that have altered physical and social landscapes and eventually reshaped economies and societies. LOOKING TOWARD THE FUTURE, he identifies the patterns that will drive the next Great Reset and TRANSFORM virtually every aspect of our lives – from how and where we live, to how we work, to how we invest in individuals and infrastructure, to how we shape our cities and regions. These forces, when combined, will spur a fresh era of growth and prosperity, define a new geography of progress and create surprising opportunities for all. THE GREAT RESET www.strategicforum.co.za

9. LESSON FROM THE FUTURE Standing in 2010 We see Michelangelo Towers completed and the Gautrain operational. 15 minutes from Sandton to the concourse at Jan Smuts Airport. TRENDS IN THE RESIDENTIAL PROPERTY MARKET (SF MAY 2003) THE GREAT RESET www.strategicforum.co.za

10. THE GREAT RESET www.strategicforum.co.za

11. THE GREAT RESET www.strategicforum.co.za We have weathered tough times before. They are a necessary part of economic cycles, giving us a chance to clearly see what is working and what’s not. Societies can be reborn in such crises, emerging fresh, strong, and refocused. Now is our opportunity to anticipate what that brighter future will look like and to take the steps that will get us there faster.

12. THE GREAT RESET www.strategicforum.co.za “ 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) “People who understand that, will prosper; those who don’t will be left behind.”

13. “ You can have the world's best product and if you have no sales and marketing strategy, it's nothing” "I'm proud of growing myself into a good citizen of the world but, business-wise, in 2007 I was named among the top 50 entrepreneurs in the US. "That's a pretty darn nice achievement for an Aussie kid." (Business Day, 22 November 2010) THE GREAT RESET www.strategicforum.co.za

16. STRATEGIC DRIFT AND REINVENTION www.strategicforum.co.za Every American President including George Bush promoted Home Ownership Housing was a major source of national wealth for decades, and home equity, however sadly diminished, is still the biggest single piece of wealth many Americans Have. (Fortune, 15 November 2010)

39. FOXY FUTURISTS www.mindofafox.com Clem Sunter was born in Suffolk, England on 8th August 1944 and was educated at Winchester College. He went to Oxford where he read Politics, Philosophy and Economics before joining Charter Consolidated as a management trainee in 1966. Since 1987, he has authored 14 books some of which have been bestsellers. His other main interest is seeking to mobilise the private sector in the war against HIV/AIDS. He was recently awarded an Honourary Doctorate by the University of Cape Town for his work in the field of scenario planning. He was also voted by leading South African CEOs as the speaker who has made the most significant contribution to, and impact on, best practice and business in South Africa. In 2006, he was invited to give a scenario presentation at the Central Party School in Beijing - a rare privilege for a foreigner. He also facilitated sessions on global warming in New Delhi and London.

40. FOXY FUTURISTS www.mindofafox.com 20% 30% 10% 40%

41. FOXY FUTURISTS www.strategicforum.co.za (Globalization/Low Economic Growth) This is a scenario of conventional global recession, probably initiated by a US economic downturn and the knock-on effect it has on the other economies. India and China are not spared as the interdependencies created by globalization and international trade turn against them. Asset prices (property and equities), the improvement of which has over recent years allowed consumers to borrow more to spend, suddenly reverse. The downward spiral is reinforced when commodity prices plummet except for gold, which does well in light of the uncertainties around paper currencies and paper assets. Eventually the bloodletting ends, green shoots start springing up in the burnt landscape and a recovery gets underway, which returns the world to the top right-hand quadrant. The length of the recession is relatively short, i.e. it is more like a 'V' than a 'U', but the depth of the 'V' is unknown. The crucial difference between Hard Times and Perfect Storm is that globalization remains intact in the former scenario, while it is seriously compromised by political and military events in the latter one. The rebound in the second case therefore takes much longer. Hard Times

42. FOXY FUTURISTS www.strategicforum.co.za Going clockwise from top left, we start with "Hard Times" continuing for the world economy for another three to five years . It's a "U" scenario across the globe. The reason this scenario has credibility is that the problem which created the "Hard Times" in the first place - the magnitude of debt owed by governments, businesses and consumers - has not gone away. All it has done is change in nature from a private sector problem concerning the solvency of the banks to a public sector problem concerning governments which are running up large budget deficits, and racking up an unacceptably high level of national debt. The latter problem is more difficult to solve. Whereas governments could justify bailing out the banks because taxpayers might lose their bank deposits, it is a much harder case to argue when governments start bailing each other out. Moreover, while a superfund may solve the liquidity problem of financially strapped governments in the short term, it does nothing to resolve the competitiveness of those nations in the long term. Indeed, it can even undermine any industrial renaissance by allowing the recipient nation to defer tough decisions. All in all this scenario presumes the mess takes a long time to clean up.

43. FOXY FUTURISTS www.strategicforum.co.za Sunter and Illbury attach a 30% probability to "Hard Times" and 40% to "Ultraviolet", the flag differentiating the two being the near-term performance of the Chinese economy. If China has a wobble because of labour problems or the property bubble bursting there (as it did in Japan in 1990), it's "Hard Times" or double-dip for all. Otherwise it's a "UV" world; and, with the Chinese authorities having the confidence to allow a limited float for the Yuan, this is looking increasingly likely.

50. FOXY FUTURISTS www.strategicforum.co.za (Fragmentation/Low Economic Growth) "Perfect Storm", is a seriously deep "U" triggered by a combination of political and economic events, including another major war, nuclear terrorism, widespread national defaults or an upsurge in protectionism. It portrays an unstable, hostile world where recession is replaced by depression. Perfect Storm

51. FOXY FUTURISTS www.strategicforum.co.za (Fragmentation/Low Economic Growth) Sunter and Illbury treat "Perfect Storm" as a wild-card scenario, giving it odds of 10%. The rising tension between North and South Korea, the standoff between the West and Iran over its nuclear programme and the continuing war in Afghanistan are all potential flags. Nevertheless, as they say to clients, please disagree with the flags and probabilities if you feel they are wrong. It is more sensible to have a structured debate around scenarios, flags and probabilities than to bet the whole shop on a single projection, however expertly it is crafted. Perfect Storm

52. FOXY FUTURISTS www.strategicforum.co.za 70% 30%

54. FOXY FUTURISTS www.strategicforum.co.za Let's apply this process to the possibilities for South Africa in light of the country's 2009 General Election (and against the backdrop of the global economy in recession). We have been in the 'Premier League' scenario since 1994 - the year of our first truly democratic election. For most of the time since then, we have resided in the middle of the league, which is where we should be. We are not a Manchester United (about to beat America, Japan, Germany and China). We are more like a West Ham or Manchester City. Nevertheless, according to some global surveys, we have lost considerable ground in the rankings, which puts us perilously close to the 'Relegation Zone'. Reasons given are that violent crime is driving talent out of the country; HIV/AIDS is shortening the lifespan of the average South African; our infrastructure is showing signs of disrepair; and some of our industries (such as our textile industry) are looking distinctly uncompetitive compared to Eastern players. Premier League

55. FOXY FUTURISTS www.strategicforum.co.za Given our current predicament, there are three alternative scenarios. The first one is that we get relegated to the 'Second Division', where the bulk of the Third World resides - poor but peaceful. Companies will still make money (as they do in plenty of Third World countries); and they will always have the option of extending their geographical footprint into other African countries, or even overseas. By contrast, for the Government the scenario is an unmitigated disaster because they can't change clubs! Certainly their tax revenue will be a whole lot less than they received when they were in charge of a Premier League nation; and they won't have the same access to international capital. Altogether it makes the perfectly honourable maxim of 'a better life for all' seriously harder to achieve. The flag for this scenario is that we disappear from the 'A' list according to an increasing number of internationally accredited surveys. Premier League

56. FOXY FUTURISTS www.strategicforum.co.za This scenario is for countries that are poor but peaceful. They remain 2 nd Division players either because they have no ambition to move up to the Premier League or they are quite bereft of mineral resources or Nature is harsh in terms of climate or soil. But they get by and, human spirit being what it is, people lead relatively contented lives. The 2 nd Division also contains ex-Premier-League nations that once were rich but whose income per head has declined for any number of reasons including bad leadership. They don't wield much influence in global affairs and seldom obtain anything prestigious like a seat on the UN Security Council. They may even possess some of the attributes of a 'winning nation' but somehow they simply cannot get their entire act together. 2 nd Division

57. FOXY FUTURISTS www.strategicforum.co.za The odds at the moment are 70% to a U-Turn in the 'Premier League' and 30% to being relegated to the 'Second Division'. This may sound optimistic to some; but we're probably out of the 'Relegation Zone' already, not because we've gone up but because the rest of the world has gone down. A positive flag is that in the 2009 World Competitiveness Yearbook, produced by the International Institute for Management Development, South Africa has risen to 48th out of 57 countries, compared to 53rd out of 55 last year. Reasons given include our resilience to the global financial crisis and our recovery from the rolling electricity blackouts experienced at the beginning of 2008. Indeed, our financial and insurance sectors have almost escaped the whole toxic debt tsunami unscathed; and we are relatively unencumbered by debt as a nation. Premier League or Second Division

58. FOXY FUTURISTS www.strategicforum.co.za In addition, despite the dramatic decline in our GDP, we shall probably experience a shallower 'V' than Europe and the US. All these sporting events on our calendar act as an excellent gap-filler. On top of that, Zimbabwe has every chance of resurrecting its economy in the near future, for which we will act as a gateway. On the other hand, we have to make tangible progress in the areas where we rank lowest in the 'Premier League' - unemployment, brain drain, available skills, life expectancy/health problems, pupil-teacher ratios in secondary schools and organised crime! In conclusion, we feel that South Africa is not a bad place to see out the global economic 'Hard Times', or even the 'Perfect Storm' if it looks like engulfing the world. Obviously quite a few young South Africans living overseas agree with us. They are returning home. Premier League or Second Division

59. FOXY FUTURISTS www.strategicforum.co.za This scenario is characterised by high levels of unemployment, gross inequality of income and appalling human rights abuse including routine torture. 'Government' is either a malevolent dictator living in a palace among the ruins of the country around him, where conflict is kept in check through intimidation; or it is a shifting alliance of warlords, each with a private army or militia. Here, conflict can range from a low-intensity to high intensity civil war depending on whether the informal coalitions are holding together or falling apart. Those with the means and skills in a Failed State are the first to emigrate, taking their capital with them. Thereafter, ordinary citizens become refugees, fleeing for their lives when the situation becomes really desperate. Failed State

60. FOXY FUTURISTS www.strategicforum.co.za The second scenario is 'Failed State' into which the principal flag for entry is widespread political or criminal violence. Examples of countries either in or on the border of 'Failed State' are Somalia, Pakistan and Iraq. Nothing trashes a national brand like violence. The world turns its back on you. The peaceful nature of the 2009 elections in South Africa means that the current odds on this scenario are negligible. It is more like a cautionary tale. This leaves the third scenario that South Africa returns to the middle of the Premier League - comfortably outside the 'Relegation Zone'. There are three flags associated with this scenario. The first one is inclusive leadership. The last thing that South Africa ought to be in the global 'Hard Times' scenario is a divided team. Inclusivity means on the one hand keeping the rich minority - who have the capital and a fair measure of skills - on side ; but also creating the opportunities for the marginalised poor to become part of the mainstream economy. In other words, it's a delicate balancing act, and it's reassuring that Jacob Zuma has made inclusivity central to his initial presidential theme. Failed State

61. FOXY FUTURISTS www.strategicforum.co.za The second flag is to show tangible results in rectifying the problems that have caused South Africa's recent slide in the Premier League. This has nothing to do with ideology on the Left or the Right, and everything to do with back-to-basics management. The best way for South Africa to raise this second flag is for all of us to recognise the pockets of excellence that exist in our midst and then benchmark other similar organisations against those pockets of excellence. For example, while there are many complaints against service delivery in the public sector, there is one world-class Government department - the South African Revenue Service. It is as good as any revenue collection service in the world. All other departments should be benchmarked against the excellence of delivery of SARS. In the health sector, a pocket of excellence is the Red Cross Children's Hospital in Cape Town. It shows that a properly managed state hospital can combine state-of-the-art equipment with medical care for children only obtainable at the best hospitals in Western capital cities. Failed State

62. FOXY FUTURISTS www.strategicforum.co.za The third flag is about the evolution of a dual-logic economy consisting of an outward-looking economy that earns enough foreign exchange to cover the country's export bill (which is real issue since the current account deficit is around 7% of GDP); and an inward-looking economy that creates enough new jobs to make a dent on our appalling unemployment rate of 23,5%. The success of the outward-looking economy revolves around choosing one's spaces carefully in light of how competitive the global economic game is. South Africa has three spaces where it can dominate: mineral and agricultural resources, but we need to add more value here before we export them (a pocket of excellence being our wine industry); tourism , which can benefit from our ability to host major sporting events; and playing the gateway role into a continent that is opening up for business. South Africa is the 'America' of Africa in that it produces 30% of the continent's GDP with a little less than 5% of the continent's population. Such a position confers huge competitive advantage in this particular trading space. Failed State

63. FOXY FUTURISTS www.strategicforum.co.za The success and inclusivity of the inward-looking economy will very much depend on the growth of small business in South Africa and overcoming the problem of a 'two worlds' economy. We have a First World formal sector and a Third World informal sector with virtually no linkage between the two. Yet a glance at the 'Premier League' reveals that the three countries that made it to the top fastest all began their ascent with an entrepreneurial burst of energy - Japan and Germany after the Second World War and China after 1978. They are now respectively the 2nd, 4th and 3rd largest economies in the world. Family-owned businesses were a critical element in the lift-off. Consequently a flag that will demonstrate progress in this area will be the transformation of the micro-lending industry. Why not invite Nobel Laureate Dr Muhammad Yunus, who founded the Grameen Bank in Bangladesh, to be a consultant on what we should do here? A second flag comprises more generous tax incentives to compensate for the risk of starting a small business, e.g. offering a complete tax holiday on profit up to a cumulative total of R1 million and exemption from capital gains tax for investors in businesses below a certain size. Failed State

64. DECLINE Credit and Capital markets CLOSED GROWTH Credit and Capital markets OPEN FOXY FUTURISTS www.strategicforum.co.za High Road Low Road Lower Middle Road Upper Middle Road 10% 40% 30% 20%

72. The High Road Scenario will not require a major miracle to be realised. But . . . Political will and Leadership is essential. THE ART OF QUANTUM PLANNING www.strategicforum.co.za

73. Stage 1 Hubris born Of success Stage 2 Undisciplined Pursuit of More Stage 3 Denial of Risk and Peril Stage 4 Grasping for Salvation Stage 5 Recovery and Renewal WELL FOUNDED HOPE STRATEGIC DRIFT AND REINVENTION www.strategicforum.co.za ? What will it take? (Source: Based on Collins: How the Mighty Fall: 2009)

74. STRATEGIC DRIFT AND REINVENTION www.strategicforum.co.za Can the Building Industry TRANSFORM and REINVENT itself – can it recover?

75. STRATEGIC DRIFT AND REINVENTION www.strategicforum.co.za It will FUNDAMENTALLY depend on the strategy of the FINANCIAL INSTITUTIONS.