The golden continent and the ethics of luxury
It is a struggle to reconcile the dichotomy of deep social concerns for our African continent, rife with poverty, and the light-hearted revelry and opulence associated with the luxury sector. This is particularly true as the global financial crisis has not yet loosened its grip, currency volatility remains erratic and unemployment figures remain high - these are uncertain and difficult times.
3 Sep 2012 10:06
Clearly, marketing luxury goods at such a time could well be considered insensitive to those suffering hardship. But instead of fixating on the perceived ills of luxury consumption, it is precisely the time to be bold and to market products with a margin in order to stimulate economic activity, build confidence and initiate growth. Recessions severely hamper government spending. High net worth (HNW) individuals are an important alternative source of spending and inducing them to spend can make a significant contribution, not just to the luxury industry, but towards building the necessary confidence to trigger the next economic cycle. There are scant insights into the spending patterns of elusive HNW individuals but a few studies over the last couple of years have shown some trends. The Forbes Wealthpulse survey looked at how recession dynamics affect affluent individuals with investible assets over US$1million. It showed this group tends to have a much more positive outlook and continues to spend at pre recession levels. Even in difficult economic times, 42% of HNWs do not consider luxury to be 'distasteful' but have refined it in less extravagant terms and spend less on external signs of opulence like watches or fine jewelry and more on top quality wine and gourmet dinners. By contrast, the 2011 Richemont Interim Results, for the 6 months ending in September 2011, show over this recessionary period substantial growth across the Richemont stable. Jewelry Maisons grew by 34% and Specialist Watch Maisons by 30%, across geographies and product lines. Whilst their results mark an indication that global luxury continues to flourish, luxury brands and consumers in the South African market tend to tell a more conservative tale.
Outside of consumption patterns, in South Africa there is a tendency to downplay the employment opportunities generated by the luxury sector. The most obvious sectors to generate employment through luxury goods and services are the mining industry, through which a myriad of jewelry businesses are generated, and tourism where high-end hospitality and exclusive safaris show South Africa at its best. But aside from these two monoliths there are in fact many other areas of growth. The multi-billion Rand boat building industry employs over 3000 permanent employees that has seen South Africa recognized for its high-end catamarans worldwide. BMW is a leader in the manufacturing of luxury cars and has recently announced further investment of R2 billion into 'BMW World Plant Rosslyn', its South African facility. They anticipate that the upgraded plant will be capable of producing up to 60 000 units per annum.
Small and medium enterprises, well recognized in academic and policy literature for their economic and social importance, are perhaps where our craft-centric culture and the luxury industry could interest a government seeking job creation. There are many exemplary domestic luxury brands generating employment as well as being ambassadors for Brand SA. Avoova, for example, creates functional art and collectible items from the best fragments of ostrich eggshell that are carefully laid down as a fine veneered finish used as a decoration for objet d'art from bowls and bars to billionaires yachts. In doing so they support 40 artisans in the Karoo. For leather goods, Cape Cobra Leathercraft, who employs ninety people from the local community, and Via La Moda are both fine examples of companies who support their employees. Via La Moda employ 50 people in their workshop and have an apprentice scheme where young people can learn and refine their craft over three years.
A new generation of designers has been born that has taken our raw materials and transformed them into world-class lines that are in global demand. Hanneli Rupert, daughter of Johann Rupert, has recently launched Okapi. The energetic, talented young designer, is a firm supporter of the potential job creation through luxury on our golden continent and as such she has committed to supporting local manufacturing and where necessary purchasing machinery to do so. She uses local suppliers in the creation of her new exotic handbag range with signature horns and has sourced rare leathers and materials from across Africa.
One often overlooks the impact of high-end consumption and disregards the more obvious arenas such as the gourmet sector, championed by master-chefs like Margot Janse, Reuben Riffel and Giorgio Nava, that employs and trains staff for numerous restaurants. Beyond fine foods, consumers are presented with an ever greater number of fine wines and spirits from farms and niche distilleries, that are reaching a new price echelon, whilst creating employment in the winelands and broader drinks sector.
Global luxury forecasts for 2012 seem optimistic, particularly for those businesses focused on growth markets. The 2011 Global Wealth Report by Credit Suisse comments that in many respects, South Africa is the model for many other African economies. Household wealth has grown vigorously over the last decade, quadrupling in value from US$8,400 in 2000 to US$34,300 in mid 2011. Global Wealth overall is showing an upturn led by increased wealth in South Africa, China, India, Brazil, Australia, Chile and Indonesia. That is not to say that the volume of HNW individuals is homogenous, indeed it varies radically between these rapid emerging markets - China boasts 1,017,000 US Dollar millionaires (and 5,000 with a wealth of over US$50 million) and South Africa sports a comparatively meager 71,000 US Dollar millionaires. Fortunately we too have a few exemplary billionaires who have travelled to space, built luxury empires, not to mention the obvious financial and mining empires.
Wherever wealth is generated, the luxury industry follows closely behind generating aspiration and desire, which spurs on greater wealth generation and ultimately, the knock on effect results in greater employment. Or at least that's the pro-lux theory put forward in the battle of 'The evil vs The good of luxury consumption'. But the shock of the new marketplace, fraught with recession and purchase sensitivity, has encouraged the luxury industry to be more introspective and demure. The move from conspicuous consumption to more conscious consumerism is well established in South Africa and tends to follow the international triple-bottom line model: people, planet and profit. Local South African luxury brands must create a niche for themselves in an already hyper-competitive market and a few have been fast to adopt market-acceptable strategies that reflect the new luxury paradigm. African collectibles for sophisticated international and domestic buyers are growing; Ardmore Ceramic Art not only produces exquisite hand-painted, hand-sculpted ceramic art but also contributes a percentage of profits to enable upliftment and socio-economical support of the artists and their surrounding community in Kwazulu Natal. Luxury safari operators have become more innovative. Hayward's, who have hosted Nelson Mandela and Oprah Winfrey, develop 50 to 200 people mobile safaris for those seeking absolute privacy and unique moments. They have adapted their strategy to include socially responsible and locally relevant experiences to ensure that people looking for a unparalleled experience of South Africa are not simply going on safari in the traditional sense but are also considerate of their footprint and are part of a positive change in the local community they visit. Luxury eco-tourism in South Africa is globally revered and companies like the Mantis Collection and &Beyond are spearheading a sustainable, considerate view of engaging with nature at the top level.
South African fashion is achieving international acclaim - from Gavin Rajah to Malcolm Kluk, home grown labels have not only a solid local following but are being welcomed to the world run way from Paris Couture to New York Fashion Week. The work by Precious Moloi Motsepe, wife of billionaire Patrice Motsepe, in creating Africa Fashion International has seen the emergence and strengthening of many African couturiers and labels. But more needs to be done in the fashion sector to generate employment and support local design. Major clothing retailers remain price sensitive and, in order to enjoy some of the highest margins globally, opt for low-cost manufacturing in Central and Eastern Europe and the East. This is also the case in the mining sector - South Africa boasts a wealth of diamonds and gold but the bulk of manufacturing and finishing happens internationally. Johannesburg based African Romance has invested in local diamond finishing and the training of diamond polishers to retain value in South Africa. With the mining industry constituting one third of GDP, an estimated 50% of the world's gold reserves in SA and a huge 10 million carats annually of diamonds mined annually (with 90% of the diamonds being exported), it stands to reason that we should look at methods to retain value locally. The Southern Africa Luxury Association, through the SALA Artisan Accelerator, has recently worked with Keith White to develop an initiative to build up the expertise of black jewelry designers, taking them through an apprenticeship to become master jewelers. Keith has worked with leading players in London like Graff and Aspreys on an average of 10 carats and has turned his attention to fostering a new generation of talented jewelers in South Africa. And he's not the only one. De Beers Shining Lights Awards is another noteworthy program supporting the industry that has recognized his talents and those of other jewelers using our natural resources for world-class finished products.
Businesses which take a more thoughtful view of luxury and succeed in carving out a unique niche for themselves, with consideration for people, planet and profit, will be firmly entrenched on the road to success by adhering to a new definition of local luxury that exemplifies 'Proudly South African'.