Daniel Mminele’s exit as deputy governor of the Reserve Bank is a great loss in terms of institutional knowledge and leadership, says Intellidex head of capital markets research Peter Attard Montalto. Featured in Bloomberg

The drop in the purchasing manager’s index to 45.4 in May from 47.2 in April is consistent with a 5% decline in manufacturing output, says Intellidex analyst Peter Attard Montalto. Featured in Fin24

Intellidex introduced a new category in its 2019 Top Private Banks and Wealth Managers survey, with Sonia du Plessis from Brenthurst Wealth being named the Top Financial Advisor of the Year. Read more in Moneyweb

By: Heidi Dietzsch

Trust is the cornerstone of every good relationship and this is especially true for successful market research. It is a two-pronged approach – not only do market researchers need to instil trust within their clients, but also within the respondents who participate in the research.

Stephen R Covey, author of The 7 Habits of Highly Effective People, famously said: “Trust is the glue of life. It’s the most essential ingredient in effective communication. It’s the foundational principle that holds all relationships. When the trust account is high, communication is easy, instant and effective.”[1]

Clients will never approach a market research firm if it is not considered to be trustworthy. To be seen as trustworthy, the firm needs a solid reputation. A well-reputed company, in any industry, enjoys a distinct competitive advantage and helps to ensure client loyalty.

One misstep can destroy a carefully crafted reputation very quickly.[2] Facebook users’ confidence in the company plunged by 66% after revelations that data analysis firm Cambridge Analytica inappropriately acquired data on tens of millions of Facebook users.[3]

In this new era of post-truth, alternative facts and fake news, the responsibility on researchers to build trust is greater than ever. This trust needs to be evident in the methodology used, the data collected and in the reports delivered to clients.[4]

The market research process consists of many different steps and each needs to be executed correctly, exactly according to client requirements. For instance, if a client requests that data be collected via an online survey, researchers cannot conduct telephonic interviews simply because they might deem this easier to do. If clients have certain criteria for respondents – say, women between the ages of 30 and 50 who use private banks – these need to be followed to the letter.

There is no place for dishonesty in the data collection process. For example, using fake respondents is taboo, as is allowing respondents to take part in the same survey twice. Researchers who make themselves guilty of such misconduct are doing themselves no favours and will invariably get caught out.

The good name of the market research industry is dependent on data of the highest quality and researchers always need to apply the ethics of data integrity. Data need to be thoroughly cleaned before it is used. For instance, if it appears that a respondent selected the first response of every question or gave the same rating in all questions that use rating scales, these answers should be deleted from a data set. It means that a respondent was disengaged.

In addition, data need to be presented objectively and cannot be manipulated to suit a certain narrative. Cherry picking, for example discarding negative responses, is probably the cardinal sin in the world of research. Researchers know that clients usually desire favourable results, but without negative responses, clients will not know how to improve their products and services.[5]

Reports are the end result of a study and should be the pride of every researcher. These reports should be visually appealing, logical and easy to interpret, while simultaneously telling an interesting story. They should be devoid of any data, spelling and grammar errors. Most importantly, reports should be delivered on time.

Excellence in all three of the above criteria – methodology, data accuracy and the quality of the report – combine to convey a sense of professionalism that helps to build the trust of clients.

Trust is just as important among respondents. Without implicit trust, people will most probably not participate in your research. Once trust is lost, researchers are unlikely to gain it back and respondents will not partake in future research.

There are many ways in which researchers can breach the trust of respondents. For example, if they guarantee anonymity and then reveal the respondents’ identities; if personal information is provided to third parties; if data are used for something other than initially stated; or if incentives are promised to respondents but they never receive it.

Complying with all commitments made to respondents — as well as creating an initial feeling of amicability — will gain respondents’ trust and ensure that they have a pleasant experience while participating in the research. It will also improve your chances of getting them to participate in future research.

There are different techniques that can be used to build trust for telephonic and online research.

With telephonic interviews, the interviewer should speak in a calm, friendly-sounding voice, making the interview sound like a conversation rather than an interrogation. Interviewers also should have the knack of gauging the mood of respondents. Are they busy? Are they engaged with what you’re saying? Should you rather offer to call them back at a later stage? These are questions interviewers needs to be asking themselves.[6]

Online surveys tend to create a sense of anonymity and respondents might thus be more willing to participate. Still, researchers need to be cautious not to raise suspicions by bombarding respondents with intrusive personal questions right at the beginning of the survey. Asking them what their home address is, for instance, is a big no-no and will certainly not inspire anyone to continue with the questionnaire.

It is always a good idea to send prospective respondents an email prior to the fieldwork. This should assure respondents that all their information, as well as their responses, will be kept strictly confidential. It should also outline the purpose and benefits of the study.[7] People are usually much more willing to participate in research if they realise that it will contribute to a positive outcome, or even to a good cause.

Market researchers have a moral obligation to treat clients and respondents respectfully and not to engage in deceitful or damaging practices. If these parties are treated unjustly the industry will deteriorate. The public also depends on market research for information on products and services and when this information is skewed, a disservice is done to the public. Market research is a vital business solution – but it has repercussions. It is therefore imperative that researchers instil trust in all stakeholders.

[1] http://www.managetrainlearn.com/page/7-habits-of-effective-people-quotes

[2] https://medium.com/@Borderless/the-importance-and-psychology-of-reputation-in-human-lives-c72362393c91

[3] https://www.nbcnews.com/business/consumer/trust-facebook-has-dropped-51-percent-cambridge-analytica-scandal-n867011

[4] https://www.insites-consulting.com/the-state-of-market-research-keep-and-gain-relevance/

[5] http://portma.com/great-market-research-data-comes-great-responsibility

[6] https://www.voxco.com/blog/build-trust-survey-respondents/

[7] https://www.snapsurveys.com/blog/survey-respondents-provide-personal-information/

The big winners in the Intellidex Top Private Banks & Wealth Managers awards were announced last night. Congratulations to all of the winners! Check out the story in Business Day

Standard Bank/SBG Securities, SA’s top-rated research firm for the fourth consecutive year, has issued a strong call to the post-election government to rebuild the confidence of the private sector, especially the consumer.

This comes as institutional research and broking firms are being squeezed by low liquidity levels and trading volumes as fund managers pare back on their equity holdings, as well as margin compression on commissions as they reduce the number of research houses they use. Fund managers, generally, are “maxed out” on their offshore holdings, because they are restricted by prudential regulations from too great an exposure offshore, in the face of a suppressed economy stunting growth in all business sectors.

Click here for the full report published in the Financial Mail.

His master plans retain the developmental state approach, but he needs to get local government to foster the environment for a much bigger small business sector

This column was first published in Business Day

It is only in looking back that we can see the essence of an era. We can recognise and categorise the music of the eighties, nineties and even noughties, but it is hard to know the essential sounds of our current era, or even what it will be called (“teenies”, perhaps?). That’s because the zeitgeist of an era is not set by one person alone, but rather from the complex interaction of many actors and it is only when we have gained some distance and perspective that we can recognise it.

The same is true of economic policy. We know the essence of the Thabo Mbeki era: let the private sector grow the economy while using market-based incentives to drive transformation. The Jacob Zuma era has a policy flavour too, even though the reality was large-scale corruption and institutional destruction. Policy swung decidedly more state-centric, with the “developmental state” notion at the heart of an effort to direct the economy from the political centre.

So what will be the essence of economic policy under Cyril Ramaphosa?

Ramaphosa has, so far, been consistent in driving a recovery of the institutions of the criminal justice system.

The entrails of the Zuma era are still there. State-centric growth plans remain at the heart of government, despite the greatest failure of the period being the financial destruction of state-owned enterprises. It is a matter of some debate how much the developmental state policy enabled that.

As has been wisely pointed out by others, as soon as state-owned enterprises (SOEs) are given a mandate beyond efficient management according to business principles, the path is opened to justify bad decisions. So the plundering of Eskom was cloaked in terms of developmental objectives, the latter being much harder to measure and therefore harder to hold people to account. The developmental state may be solid policy under clean leadership, but it very easily provides a fig leaf for corruption under anything different.

Ramaphosa has, so far, been consistent in driving a recovery of the institutions of the criminal justice system. And in that arena at least, the talk has been followed up with some action, with the appointment of strong individuals. It will, at some point, translate into actual arrests.

It is tempting to think, then, that Ramaphosa is gearing up for a corruption-free version of the developmental state. Rhetoric from the ANC’s policy benches focuses on the state as a central driver of the economy. The private sector continues to be treated with suspicion, even while exhorting it to invest more in the economy.

Ramaphosa has so far not taken a clear line on just what the state should do. His state of the nation speech last week was a classic example. Some of it sounded decidedly pro-market, wanting “the state to effectively play its role as an enabler that provides basic services and critical infrastructure, a regulator that sets rules that create equitable opportunities for all players, and a redistributor that ensures that the most vulnerable in society are protected and given a chance to live up to their full potential.”

But then it went on to list several micro-level interventions in which the state would continue to be the lead actor through “master plans” in several economic sectors developed “with business and labour”. This sounds far more consistent with the developmental state approach, reminiscent of South Korea’s focus on creating industrial champions.

These are perhaps not mutually exclusive. It may be feasible to create a broad enabling environment in which companies are free to maximise profit by innovating and boosting competitiveness. Simultaneously, the government could lead several “master plans” to drive development in specific sectors using economic zones, digital hubs and the like.

The trouble is that it is the environment that has the biggest effect on small business, with its potential to become a major employer. Ramaphosa gave a nod to the importance of small business by promising incubation centres to support youth-driven start-ups, but master plans are much more about industrialisation and the formal sector. Incubators may help at the margin, but wider opportunity for small business would need a stable policy environment and slashing red tape (which Ramaphosa has also promised by improving SA’s performance in the World Bank’s Doing Business ranking).

The SA economy is structurally dominated by large companies and the formal sector. Mbeki’s policy direction focused largely on the formal sector, with BEE designed to transform it. As the historian Patrick Manning has noted, BEE drove black talent into institutions in search of rents rather than into entrepreneurship.

It is now clear that we need a far bigger small business sector, much of which might be informal. And that requires a pro-business policy unlike anything we saw under Mbeki or Zuma. Small business tends to be local, so it is the environments created by local government in towns and cities that can make the difference. A development strategy has to be integrated across all three levels of government.

Perhaps the essence of Ramaphosa’s  economic policy will be a dual line: master plans for driving industrialisation, while simultaneously driving an enabling environment for entrepreneurs. The latter, though, will require state leadership secure enough to put the government in the background. In this, Ramaphosa may struggle to overcome the insecurities of the rest of the governing party.

• Theobald is chairman of Intellidex.

Creditors and suppliers will be disappointed that Ramaphosa did not mention SAA and the SABC in the Sona as both embattled SOEs also require billions of rand in bailouts, says Intellidex head of capital markets, Peter Attard Montalto. Featured in IOL

Eskom’s bailout is disappointing as free money was offered with no additional pain politically or for the vested interests, says Intellidex analyst Peter Attard Montalto. Featured in My Broadband

There was a surprising lack of detail on Eskom which will disappoint both the energy industry and markets, says Peter Attard Montalto, head of capital markets research at Intellidex. Featured in Business Report

Market sentiment is not likely to improve much after Sona until actual implementation begins, says Peter Attard Montalto, head of capital markets research at Intellidex. Featured in Business Day

African Bank should capitalise on its access to clients from its former lending book, says Stuart Theobald, chairman of financial consultancy Intellidex. Featured in Reuters

Intellidex analyst Peter Attard Montalto believes various short- and long-term bailout plans will have gone to last week’s Cabinet lekgotla for processing and inclusion within the Sona speech. Featured in Business Report

The ANC’s political infighting has caused an extremely rapid loss of confidence in the economy which policymakers underestimate, says Peter Attard Montalto, Intellidex’s head of capital markets. Featured in Daily Maverick 

Investors look for some simple bedrocks of countries to invest in – like low, stable inflation emanating from a credible independent central bank, says intellidex head of capital markets Peter Attard Montalto. Featured in Business Tech

The markets seemed to think issues like the SA Reserve Bank and land would be parked – which is not going to be the case, says Intellidex head of capital markets Peter Attard Montalto. Featured in Fin24

Intellidex’s Peter Attard Montalto questions whether those around the president have the ability to deploy political capital to undertake policy formation and then implementation. Featured in Business Tech

There is no investment strike – investment is clearly happening. What is happening though is that the proportion of investment as a share of GDP is dropping over time, says Intellidex’s Peter Attard Montalto. Featured in Daily Maverick


We can now see that ‘implementation’ and leadership have not moved to new ground after the elections

This column was first published in Business Day

There are some things you know you must get right. Where there should be an instinctive, reflexive desire but also institutional memory. Holding newborn babies is one of them. Friends are popping them out everywhere and there is a deep almost evolutionary need to get it right when they are thrust upon you for the first time.

One could draw some similarities with this new administration. A risk aversion to not screw things up should mean there is attention to detail on policy and communication.

When you add in someone fundamentally opposed to your political leadership who is doing everything to undermine you being in charge of your party communications, one would have thought that systems and control would be in place.

The Reserve Bank policy issue is so fundamental that it gains an almost quasi-religious state. Investors look for some simple bedrocks of countries to invest in, like low, stable inflation emanating from a credible independent central bank. A reserve bank that is not printing money to fund government inefficiencies that crowd out the development of the private sector is another simple ask.

Statements from Tito Mboweni and Enoch Godongwana — necessary and strong as they were — were insufficient.

Investors treat central banking issues as a sign of maturity in an economy. Can you keep your hands off the kitty or are you looking for easy ways out to avoid doing challenging structural reforms?

SA failed on all these fronts in the past week. The idea of quantitative easing did not just randomly appear at the ANC national executive committee but from a desire for easy ways out that have been contemplated for some time in some corners of government.

Yet ultimately the “sin” was something far more worrying. At root I believe the issue is that there was no realisation that this was a real, live issue until too late. It was dismissed as a “normal” debate rather than a political attack with credibility fallout.

As such, statements from Tito Mboweni and Enoch Godongwana — necessary and strong as they were — were insufficient. When the final statement came from the president it was too late.

The error should have not happened in the first place, but if it did it should have been corrected within hours. An instinctive reflexive reaction should have meant that internal balancing was set aside to make the correction and stamp authority.

The revealed state of affairs now is that “implementation” (such a crucial word for so many more intricate and complex issues) and leadership have not moved forwards to somewhere new after the elections.

How is a massively complex issue like Eskom involving multiple stakeholders with conflicting requirements meant to be dealt with if a simple statement cannot be corrected in time?

This is why Ramaphoria has been killed off now quite so decisively. I have been shocked by how negative sentiment onshore and offshore has come so quickly in the past week.

The barrier to turn sentiment now been raised higher still, given that fundamental building blocks are in doubt. This is a dangerous situation to be in now that 2019 growth is set to only be 0.5% and we don’t now see positive per capita income growth till 2022.

While dedicated emerging-market investors are used to dealing with such issues, the most important segment right now is those investors who raise their hands for advice only when there is a major crisis. They sit holding tiny proportions of SA assets they can ignore (but which is for SA a huge quantum). They last panicked after Nenegate. Their attention has turned back to SA in the past week — nothing riles them more than a central bank independence issue. They do not care for the ins and out.

Emerging markets get themselves in these credibility holes from time to time — they can be gotten out of but require shock and awe on the policy front with perfectly executed implementation. This will have to be the focus of the state of the nation.

We are in an existential internal political battle where policy is weaponised by an unholy alliance of the left and rent-extraction forces. There is no point in pussyfooting around it — that is the reality. The fallout is not going to go away given that we will have repeats on National Health Insurance, land, prescribed assets and more.

Each is a “fallout issue” where even if the end point of implementation is never reached, the interim damage can be severe. This could be particularly the case with more left-wing elements in cabinet, as Anthony Butler outlined here on Friday.

The core lesson is that compromise and playing a long game cannot work when faced with short-term existential trigger points like this. You cannot compromise, you cannot balance forces. One thing you definitely cannot do is contemplate trying to park issues with discussions on the nature of inflation targeting and the balance between fiscal and monetary policy in this environment. That would be pouring kerosene on the flame.

If corrective steps are not taken, then the risk is we get stuck here. That is a scary thought.

• Attard Montalto is head of capital markets research at Intellidex.

Markets know Mboweni and Godongwana’s views on nationalising the South African reserve Bank, and so their interventions, whilst necessary, are not sufficient says Intellidex’s Peter Attard Montalto. In today’s Times Live