Operating in a low-growth economy Defining the issue: Over the past three years, numerous problems have impacted what was already a constrained economic environment. The economy’s ability to grow has been affected by South Africa’s energy crisis, coupled with the global surge in fuel prices due to international factors such as the war in Ukraine. The increased frequency and severity of climate events being felt worldwide also affect South Africa. A case in point is the severe flooding in KwaZulu-Natal. Locally, the cost of living has been steadily increasing, driven primarily by international factors such as supply chain disruptions, a sharp increase in inflation and a rising interest rate cycle. Lower consumer confidence makes members and potential members reluctant to take on new financial commitments, challenging the new business environment. It also increases the risk of lapses, impacts costs, affects investment returns and potentially influences profitability negatively. Existing members may also choose to reduce their premiums or forego certain products when their budgets are under strain. PPS’s response: As we have always done, we take a long-term view of wealth creation and focus on delivering lifetime value for our members. Our investment strategy sensibly combines asset managers who have the ability to deliver long-term value for our members across different asset classes and geographies. This approach yields the best results in the medium to long term, mitigating the adverse effects of short-term conditions. Normal economic cycles and key events are considered when developing investment strategies to maximise or minimise their impact. To assist our members with the current consumer pressures, we use mitigants such as allowing them to use funds available in their PPS Profit-Share Accounts – subject to terms and conditions – to pay premiums. This has enabled members to keep their benefits in trying times. We continue to focus on lapse rates with retention initiatives implemented on an ongoing basis to mitigate controllable losses and manage costs, all while we continue to invest in efficiency initiatives and future growth. A key growth focus is on attracting and developing solutions for the younger graduate market and developing a breadth of products for the member base. 45 Material matters and risk management
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