Robots and the Rise of AI: Will New Technology Lead to Greater Unemployment?

shutterstock_530775229“The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.” (Warren Bennis, American scholar and author)

We often read how the advent of new technologies, such as Artificial Intelligence (AI), will result in higher job losses. And of course the last thing we need in South Africa is increased unemployment.

A lesson from history: The ATM story

ATMs turned 50 in June and at the time of their invention, it was predicted that substantial job losses would follow.

In fact employment levels rose as banks used the savings from fewer tellers to invest in more branches to sell other bank products such as mortgages and insurance. This resulted in more jobs created at better pay as ATMs reduced repetitive work for more skilled employees.

The logical deduction from this is that, historically, the productivity gained from technology should actually lead to more economic growth with people having higher incomes.

But – that isn’t always what is happening

Globally, productivity has been low since 2004 and incomes have not grown significantly except for the top 1% of earners. This seems counter-intuitive as we are in the middle of a technological revolution – let’s look at why that is.

The global labour pool

The technological revolution of the 1980s gave a big push to globalisation which integrated economies around the world. Jeans were designed in New York, cut in Vietnam, assembled in China and rolled out globally.

This integration introduced nine hundred million new workers from emerging markets to world labour markets. This led to a surplus of labour and depressed wages globally.

The paradox of current productivity

Today with wages low because of excess global labour, there is little incentive to push for productivity initiatives. In essence, this leaves an uncomfortable status quo with the middle class feeling stuck, the poor making modest gains whilst the highest earners at the top get even richer.

Research has also shown that there is a lag effect between new technology and productivity gains. The introduction of electricity helps explain this. By the 1890s electricity was being mass produced for consumers but it took until the1920s before it was used for widespread industrial production. The reason cited for this is that to use electricity, factories had to be completely redesigned and it took thirty years to figure out how best to do this.

These two factors (excess global labour and the lag effect) explain why, despite technological advances, we are currently experiencing low productivity.

Where does this leave South Africa?

Talk of mass layoffs due to technological improvements in the short term is probably exaggerated. History suggests, however, that in all probability in the next generation, new technology will be harnessed and will result in job losses.

In the meantime, there are opportunities to integrate with the global market via unskilled labour. In time these employees enhance their knowledge and begin to move up the skills ladder. It happened in Asia – why can’t it happen here?

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Protect Your Clients’ Personal Information from Hackers!

shutterstock_540300280We have been speaking of hacking and ransomware for a while and it just grows and continues to make news.

In a recent case in England, a small to medium-sized entity (SME) was fined GBP 60,000 (over R1m) for failing to take “basic steps” to prevent hackers from gaining access to clients’ personal information, including their banking details.

It is important for South Africa, despite the Protection of Personal Information Act (POPI) not yet being effective, as personal information is protected by our constitutional right to privacy. In any case negligence in protecting this information, if it leads to loss, could expose you to a substantial damages claim.

A UK case illustrates the danger

A video hire company with more than 26,000 customers had a coding error on its login page. This enabled a hacker to gain access to the names, addresses and bank account details of its customer data base.

Authorities found that the company had failed to take “basic steps” to protect customer information. These “basic steps” were:

  • Adequate testing on their website would have revealed the coding error,
  • Customer passwords were simple and prone to attack, and
  • Their decryption key was not secure. These keys more effectively hide security algorithms as hackers are aware of most algorithms.

What is “personal information”?

“Personal information” has several definitions in South African law, but POPI, even though it is yet to commence, suggests that it will cover information such as:

  • A person’s name (including where applicable a juristic person e.g. a company),
  • Contact details,
  • Religion,
  • Sexual orientation,
  • Personal views,
  • Private correspondence,
  • Health records,
  • Employment records,
  •  Financial records,
  • Biometrics (DNA, fingerprints) etc.

Check your systems now!

POPI has been promulgated but is waiting for the government to gazette a date for it to be fully effective (after which a one year grace period will commence). The administrative fines for transgressions will then be up to R10m. That is in addition to your existing risk of being sued for millions in damages.

It pays to ensure now that personal information under your control is adequately protected to prevent any chance of being sued for negligence. This will also help you get ready for POPI.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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The Special Voluntary Disclosure Programme:
Time is Running Out, and Automatic International Exchange of Tax Information is Kicking In

shutterstock_524062759There has been widespread reporting that globally, revenue authorities are clamping down on tax havens. As from next month, tax authorities from over 50 countries (set to grow to over 100 by September 2018) will be automatically reporting to their counterpart tax offices on, amongst other things, bank accounts and investments held by their nationals.  This is in terms of the OECD’s automatic exchange of tax information policy.

With such information exchanged, SARS will undoubtedly be in an even better position to request relevant material, issue assessments and potentially prosecute tax offenders. In addition, Exchange Control will also be informed and could commence proceedings against individuals and entities that have unauthorised forex holdings.

Those wishing to take advantage of the Special Voluntary Disclosure Programme (SVDP) have until the end of August 2017 to submit their applications for amnesty relief, which includes immunity from prosecution and reduced penalties.

If you are accessing the SVDP, do so quickly as the application process may be time consuming.

Speak to your accountant now if you are in any doubt.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Time is Running Out, and Automatic International Exchange of Tax Information is Kicking In

In The News Again: Mandatory Audit Firm Rotation

shutterstock_557969968Recently the head of the IRBA and the Finance Minister announced that this would commence on 1 April 2023.

There has been a backlash to this by prominent bodies such as the King Committee, the Institute of Directors and the Chief Financial Officers Forum (Finance Directors of JSE listed companies). The opposition centres around the cost of the move to MAFR, estimated at R10 billion in the first ten years and whether the intended purpose of MAFR will in fact be achieved. A number of countries who previously introduced mandatory rotation have in the meantime scrapped this for the same reasons.

MAFR, say those opposed to it, will effectively dilute shareholder rights and will lead to less investment in South Africa, as it will deter companies from listing on the JSE.

These bodies have appealed to Treasury to reconsider the matter. These are strong words and we will update you as this unfolds.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Blockchain Technology: New Potential in Financial Services

A5Bitcoin is currently the best known user of a blockchain platform, but expect many more varied uses to emerge.

For example Calastone, which provides a platform for mutual funds (e.g. unit trusts) to trade in 34 countries, recently successfully replicated its transactions for a full day using blockchain technology.

Will this be good for us? 

This potentially paves the way to transform the industry, resulting in enhanced and faster access to global and local securities at a significantly lower cost.

The financial services industry has been in a race to be the first to use blockchain technology.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Must You Pay Tax on Bitcoin Transactions?

A4Bitcoin has become increasingly used in South Africa and there are some good platforms for its use. Although it has proved volatile (it fell 30% in value recently), its long term value has risen over the past decade.

So is Bitcoin subject to taxation?  Yes it is. South Africa is following global trends and SARS has confirmed that the normal rules of taxation will apply and it will be subject to income tax or capital gains depending on the type of transaction.

Speak to your accountant if you need advice.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Directors and Shareholders: There’s Hope If You Forget Companies Act Compliance Requirements

A3The “new” Companies Act is pitted with clauses requiring that special resolutions be passed. There are also instances where as directors you are required to take certain actions such as recusing yourself if there is a conflict of interest.

It is important to note that transactions can be set aside if the necessary steps are not taken. Should this happen, a costly and time-consuming exercise would follow.

Can “unanimous consent” rectify non-compliance?

Both our “old” Companies Act and English company law allowed the concept of “unanimous consent” to override statutory non-compliance with certain requirements, such as the requirement for a special resolution to be passed authorising the sale of all (or the greater part) of a company’s assets. Simply put, if all of the shareholders were aware of the implications of a transaction and consented to the transaction, then the “unanimous consent” principle may be available to hold up the transaction despite the required statutory steps not having been taken.

In South Africa following the introduction of the “new” Companies Act in 2011, there was uncertainty whether “unanimous consent” would be accepted here until the Supreme Court of Appeal (SCA) recently pronounced on the subject.

What the SCA said

A company sold the major part of its assets and the directors had a conflict of interest in the sale. Part of the case revolved around setting aside the transaction as no special resolution was passed for the sale of the assets and the directors had not disclosed their interests. The company was owned by a single shareholder – a trust effectively controlled by one person.

The SCA said that the reason for requiring that a special resolution be passed was to “ensure that the interests and views of all shareholders are taken into account”. When reviewing the circumstances of this case the SCA found that the person who controlled the sole shareholder was party to the transaction and thus no special resolution was needed as the shareholder was clearly aware of and had effectively approved the transaction.

It used a similar line of reasoning in resolving the conflict of interest question.

The court specifically accepted the principle of unanimous consent, stating “that principle, long recognised in English company law, from which our courts have received much guidance, was accepted as part of our law relating to companies, under both the 1926 and the 1973 Companies Acts. I can see nothing in the current Act to suggest that the principle no longer finds application”.

The implications are that if a business is owner-managed or the board of directors are a tightly knit group then – even if in error you don’t tie up all the Company law requirements – the “unanimous consent” principle might be available to you.

Be sure however to seek professional advice – every situation will be different.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Vet Your Suppliers! Good Stakeholder Relationships Will Boost Your Profits

A2Suppliers play a strategic role in your business because if they fail to deliver on time or with the required quality, they can cause delays in your organisation. These delays will inevitably have a knock-on effect to your customers.
How to ensure you get high quality suppliers

Best practice dictates that vetting procedures are in place that cover, at least:

  • A review of the supplier’s financials to establish that the business has the financial means to remain sustainable and to deliver to its customers.
  • The supplier has sound processes in place and the organisation is well managed.
  • How long has the entity been in business? The longer the better.
  • Get testimonials from the supplier’s current customers.
  • Check for fraud and/or conflicts of interest. This involves establishing that none of your staff have undisclosed relationships with the supplier, that the supplier has no criminal record or any suspicious activities.
  • See how the supplier responds to queries. You could call as “customer” of the supplier and see how they react to a problem.
  • Check their social media platforms to ensure they are consistent with their marketplace persona.
  • Culturally are they a good fit for your business? Do they have the same values as your organisation?
  • Have in place ongoing processes to detect if there are any changes in the supplier’s organisation which could trigger further investigation.

Getting the most out of suppliers

In the new King IV Report there is a section on optimising stakeholder relationships by an “inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time”.

This involves understanding what they want and ensuring there is a mutual relationship of trust which will last a long time and from which both parties will get the outcomes they want.

An honest, transparent relationship with your suppliers will bring good long term profit to your business.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Tax Season Opened On 1 July: Here’s What You Need to Know, and Do

A1“Giving money and power to government is like giving whiskey and car keys to teenage boys” (P.J. O’Rourke)

Once again tax season has opened for individuals, and whilst we can chuckle at jokes about the pain of paying taxes, they remain of course an integral part of life.

By now you should have already gathered all your supporting documentation. This is an important task as not getting your tax 100% correct can lead to queries and audits from SARS, which is clearly something to avoid.  Whilst you won’t have to submit this with your tax return, you need to keep it available, for five years, in case SARS asks for it. Once an audit is open or if you must prove the item you need to retain documents for longer.

However, if you are going to do your return at a SARS branch, then bring all your documentation and your I.D. with you.

Documentation you will need is

  • Your IRP5. If you changed jobs during the year, you will have at least one other IRP 5. If you get any retirement funding, the relevant institution will send you an IRP 3 (a).
  • IRP 3 (b) for any investment income received.
  • Medical certificates from your medical aid plus any medical expenses incurred not covered by medical aid.
  • A logbook if you receive a car allowance.
  • Any retirement funding certificates received.
  • Any other documentation that will affect your return e.g. if you had a capital gain or loss during the tax year.

Check that the tax certificates you receive are correct and if you find an error, go back to whoever sent you the documentation and get them to issue a corrected certificate. SARS populate your tax return with information received from third parties (IRP5, IRP 3 etc) and the only way to change the populated data on your tax return is to get the tax certificates re-issued. This can be a very cumbersome process.

 Do you have to submit a tax return?

If you earn R350,000 or less –

  • From a single employer,
  • You have no other tax deductions, such as a car allowance or retirement funding,
  • You earn less than R23,800 in interest from South Africa (if you are less than 65 years old) or R34,500 in interest (if you are 65 or over),
  • You are a non-resident with only exempt dividend income.

Then you are one of the lucky people who don’t need to complete a tax return.  There are a couple of exceptions here, so if in doubt speak to your accountant. If you submit a return where you were not required to, this may, due to the SARS systems, lead to an automatic imposition of penalties and this may in turn lead to unnecessary disputes with SARS.

Of  course if you are due a refund, then you should submit a tax return anyway.

Submission deadlines

Important dates to file your tax returns for the 2016/2017 tax year are as per the table below.

A1grid

Be honest when compiling your return. Check that everything is correct and accurate. Finally, be alert to the scammers out there who always seem to target SARS related transactions.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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