Here’s what You Should Know About “YES” (our Youth Employment Service) and the Opportunity for SMEs

Empower+Youth+TodayOne of the most intractable problems facing South Africa is high unemployment, particularly (and this is a global problem) among the youth. Initiatives to deal with the issue have failed and our unemployment has risen from 21% in 2008 to over 27% at present. Clearly this is not sustainable.

Recently government, business and labour announced the YES (Youth Employment Service) program to tackle youth unemployment. YES will, over the next three years, provide one million young people with a one year’s internship in a business.

The YES initiative recognises that Small and Medium-sized Enterprises (SMEs) are a fundamental driver of employment and seeks their involvement. SMEs should look to get involved as the program is already funded and apart from helping to overcome unemployment, SMEs can reap benefits for their own businesses.

The rationale for YES

Most young people do not get a Matric pass and find it extremely hard to find a job. They thus cannot get the experience and skills to become an effective part of the community. In addition, most of the unemployed youth live in townships which are a substantial distance from businesses.

Currently youth unemployment stands at over 50%. 

How YES works

The program has a three-pronged approach:

  1. In the next three years over 100 companies will sign contracts with 1 million interns. The program will be for at least 1 year and interns will:
    • Gain work experience
    • Be given practical business training courses (training modules have been developed and will be given to interns)
    • Acquire the necessary skills to ensure they will be able to perform in business
    • A database of all the CVs of interns will be set up which will be available to companies seeking to employ staff.
  2. Business hubs will be set up in the townships where training and mentorships will take place. Satellite facilities of SARS, CIPC and B-BBEE accreditators will be available at these hubs. In addition, there will be internet provided along with facilities, including 3D printers, for light manufacturing.

A database will be built up linking township SMEs to the large corporates which will give priority to trading with these small businesses.

  1. It is unlikely that the 100 larger companies will be able to take on 1 million interns and they will sponsor those who they are unable to accommodate for internships with Black-owned SMEs in townships. This will build up business and employment in these areas.

This is particularly an opportunity for businesses who want to tap into the “Black” market. Why not set up a Black-owned SME in a township and train interns in your products/services and in your business? The interns get knowledge and experience and you can offer employment to the stronger candidates in your business whilst helping other candidates become marketable to other businesses. 

Incentives for business to get involved

The interns will earn R3,500 per month. Employers can get this refunded via the Employment Tax Incentive (ETI) which is paid by reducing your monthly PAYE.

There is also the potential to move either one or two places up in your B-BBEE score. A discussion paper is out for comment on amending B-BBEE legislation, the main proposals being –

  • In essence companies are set targets as to how many interns they should train and if they exceed their target and offer employment to a percentage of candidates, they move up one position in their scorecard. Companies doubling the number of their target interns and employing double their required quota will move up two positions in their scorecard.
  • In addition, companies can claim 50% of their YES skills spend in the Skills Development category.

Remember these are draft proposals and the final legislation could be tweaked.

There will be annual fees (R20,000 for SMEs) for companies who wish to register and participate in the YES program.

Overall, there are plenty of incentives for businesses who wish to participate in the YES program. With most of the large companies putting their support behind this initiative, it will probably be successful and contribute to solving one of the country’s most pressing problems.

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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A Tank of Petrol – Where Does Your Money Go?

image_content_8886634_20170929101219Are you aware that less than 40% of the petrol price is made up of actual petrol cost? Most of it goes to pay tax (Fuel Levy), the Road Accident Fund and the various players in storing, wholesaling and retailing petrol.

As of April the makeup of the cost of petrol (as reported by the Automobile Association) is as shown in the table below.

Notes to the table:

  1. The difference between the two sets of prices is the cost of transport (34 cents per litre) to get fuel from the coast to inland.
  2. The Fuel Levy is a general tax and is part of Government taxes. It will contribute R77.5 billion to taxes in 2018/2019.
  3. The RAF is to compensate those injured in road accidents. RAF will raise R41.2 billion in 2018/2019.
  4. Storage, margin and distribution is mainly the fee paid to wholesalers and service stations.

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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How Big is Your Carbon Footprint and How Can You Reduce It?

GettyImages-485873480-1024x726“We’re running the most dangerous experiment in history right now, which is to see how much carbon dioxide the atmosphere… can handle before there is an environmental catastrophe” (Elon Musk)

Climate change is now a part of our life. It is worth getting to know how big our carbon footprint is and how we can reduce it. Of course businesses will also need to start thinking about the new carbon tax planned for 1 January 2019.

Defining “carbon footprint”

It’s the amount of Greenhouse Gases (GHGs) emitted – the main culprits are carbon dioxide, methane, nitrous oxide and fluorinated gases.

The most common ways we emit Greenhouse Gases is by transport, the food we eat, the energy we consume and our shopping spend. If you want to measure your GHGs have a look at The Nature Conservancy’s Carbon Footprint Calculator here.

What should you do to reduce your footprint?

Transportation is now the biggest emitter of GHGs, so it’s a good place to start.

An overseas flight puts 2.6 tons of GHGs into the atmosphere. Do you really need to make that overseas trip when a lot of business can be done on electronic media?

Motor cars come next – if the average person did not use their car for a year it would also save 2.6 tons of GHGs. Consider the following:

  • When buying a car consider buying an electric or hybrid vehicle. Generally, the less emissions, the lower your operating costs.
  • Minimise the use of your car – use carpools, share a taxi or Uber, or where possible ride a bicycle or walk.
  • Service your car regularly and check tyre pressure often.
  • To optimise your fuel usage, drive more efficiently by braking less and reducing the amount of air-conditioning you use.

In terms of your home, look at going off grid and converting to renewable energy. If this is too expensive you can:

  • Regulate the hours your geyser operates,
  • Reduce your meat and dairy consumption,
  • Buy a laptop as they use 80% less power than desktops,
  • Recycle bottles, packaging etc.

There are many ways to save here, so look at your home and circumstances and analyse how you can cut GHGs.

We have already touched on shopping but reducing what you buy to cut down on waste is a good start. Look at the type of packaging on your purchases – is there wastage by the supplier and how environmentally friendly is it? If we do this correctly we can:

  • Save money
  • Lead a healthier lifestyle, and
  • Reduce CHGs.

Climate change is with us, so let’s approach it in a realistic and responsible way. Let’s also measure how we contribute to CHGs and how we can try to reduce our impact on the environment.

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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Bitcoin is Taxable!

gold and silver bitcoin lies on a white calculatorSARS has released a media statement on Bitcoin in which it states that people dealing in Bitcoins or other cryptocurrencies are subject to normal Income Tax law in terms of gross income, tax deductions or Capital Gains Tax. SARS are treating Bitcoin not as a currency but as an intangible asset.

If you are in doubt about your circumstances speak with your accountant, and in need you can get a ruling from SARS.

Taxpayers who fail to declare dealings in cryptocurrencies will be subject to interest and penalties.

Currently, you are not required to register for VAT if you are a vendor in Bitcoin (or any other internet currency).

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: The Steinhoff Debacle Highlights Your Exposure to Personal Liability

IC-OG-ProgramManagementTeamThe “new” Companies Act of 2008 promised to place greater accountability and liability burdens on directors. This was in response to directors being given greater powers in the Act.

Importantly, the Act does not distinguish between non-executive and executive directors.   

What is required of you as a director?

A director is to act in good faith and in the best interests of the company. More specifically “with the degree of care, skill and diligence that may reasonably be expected of a person- (i) carrying out the same functions in relation to the company as those carried out by that director; and (ii) having the general knowledge, skill and experience of that director.”

In other words if you are a financial specialist then you will have the knowledge and experience to assess the inner financial workings of the company. Boards of directors are expected to appoint directors to ensure they have the skills to cover all important aspects of the business.

Directors are liable for any costs, losses or damages resulting from a breach of their duties.

Steinhoff and non-executive directors

The collapse of Steinhoff revolves around accounting irregularities which have been ongoing for several years. What is of interest in the Steinhoff case is there were six non-executive directors who are Chartered Accountants.

To date no non-executive director (Steinhoff or otherwise) has been held liable under these provisions. This is probably likely to change as unhappy overseas investors are gearing up to sue the directors of Steinhoff for their losses suffered.

These losses run into billions of dollars, so this will be a high profile case. It also has the potential to set a precedent which will encourage other aggrieved stakeholders to hold directors accountable for their actions.

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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How to Grow Your Small Business Rapidly with Digitalisation

coin“Digitalisation – the use of digital technologies to change a business model and provide new revenue and value-producing opportunities” (Gartner Glossary)

Surveys show that small to medium-sized businesses (SMEs) are not fully aware of the potential that technology and digitalisation offers them.

Achieving critical mass – a recent case study

A local SME had shown steady growth but still could not afford to take the next step to achieving critical mass – for example, it needed to appoint support staff to handle the additional workload as it found it difficult to anticipate and react to the rapid changes in its industry. However, it didn’t have the cash flow to bring in new staff.

It decided to embrace technology. This began with online accounting which it can pay off monthly and is relatively inexpensive.

The second change was to use a database to be able to quickly analyse trends with its customers, so it could have a better understanding of their activities, plus proactively propose deals to them.

This worked well, but what really surprised them was that the database enabled them to store all of their records online.  This meant ease of access for staff and allowed management to quickly ensure that all customers were correctly updated. This time saving was so significant that the business did not have to recruit new staff and was able to significantly grow its administration capacity.

The business is now growing rapidly without the usual cost increases and working capital problems.

More importantly it has given the organisation the confidence to proceed further down the road of digitalisation and continue to progress towards achieving the critical mass which will make the organisation rapidly expand its wealth.

Lessons learnt  

  1. Put digitalisation at the core of your strategy with senior management embracing it. Often, a digital champion is appointed but this is not ideal as this champion can operate in a silo and disappear down it.
  2. If our doctor tells us we need to take medication for, say high blood pressure, we take it to avoid having a heart attack at some future date. Technology is a similar challenge and if we don’t embrace it, rivals will. And they will soon overtake us.
  3. Integrating digital technology into your systems and processes can enable you to leapfrog to a higher level. Remember the majority of global giants such as Amazon and Apple leveraged technology to grow.

Improving speed to market, agility, better customer understanding and cost control can be achieved by clear focus and effective leadership.

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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South Africa’s Importance to the World

jnbwebTrends in Africa have diverged in recent years – one school of thought holds there is optimism that Africa could replace Asia as a high-growth area. It has high population growth (population will double to 2.4 billion in the next thirty years), is rapidly urbanising and has been growing its economies at 5% per annum. The optimists say let’s harness these factors and economic growth will grow even faster, bringing in a substantial middle class who will demand more democracy and better governance.

It is worth noting that investment is flowing into high-growth economies like Kenya and Rwanda and large multinationals see a bright future in these countries.

Pessimists on the other hand say that Africa is becoming a failed continent where strongmen still flourish (Sudan and the Congo), where corruption is endemic and millions of refugees flee to Europe every year.

Where we fit in   

Twenty years ago we were the Rainbow Nation. Our peaceful transition to the 1994 election and the leadership of Nelson Mandela galvanised the world. Places like Northern Ireland, the Middle East and parts of South America used the South African model to try and bring peace to their areas. When Mandela retired after one term, he set a precedent for the continent – democracy and governance challenged the Strongman Bogey.

Recent events have tarnished this. Corruption and lack of accountability flourished. Cynics said “I told you so – another failed state”.

Yet the transition to the Ramaphosa Presidency was peaceful and corruption is now being met head on. To the cynics, one can say democracy is digging deep roots.

It should also be noted that in Angola, President Dos Santos has been replaced after four decades in power and of course Robert Mugabe resigned as President of Zimbabwe in November last year.

Our sophisticated economy – a model for Africa

South Africa has the most modern economy in Africa with world class financial institutions and the best infrastructure in Africa.

For the first time in many years, our economic outlook is brightening and the country is set to resume its leadership role in Africa.

An economically growing South Africa can provide a model for the rest of Africa to follow – it will result in high economic growth underpinned by democracy and governance.

This would bring the African refugee crisis to a manageable situation and a rapidly expanding continent would bring economic growth to Europe, the Middle East and Asia. Africa has the potential to be a mainstream global economy.

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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Minimum Wage Starts Soon: Make Sure You Are Ready

WH_minimumwagegavelThe new minimum wage provisions, originally due to start on 1 May but now reportedly facing delay due to the high number of submissions received from the public, will affect us all significantly.

Assuming that the National Minimum Wage Bill’s provisions are enacted in substantially their current format, from implementation just under half of the current labour force will see their wages increasing. This will add approximately R70 billion per annum into the economy.

How will this affect you?

It will be compulsory for all employers to pay workers R20 per hour or R3,500 for a normal working month (that’s for 40 working hours a week – at 45 hours a week it comes to R3,900).

Businesses that cannot afford to pay the minimum wage may apply for an exemption but this cannot be for more than twelve months. There is scope in the legislation to “make regulations” as to how the exemption process will work. Possibly, government is waiting to see how the process unfolds and may then introduce specific exemptions.

Why have a minimum wage?

South Africa has two large structural problems – unemployment and inequality of incomes. The minimum wage is intended to strike a balance between those two in which inequality will decrease but unemployment will presumably be unaffected.

There is however no hard evidence as to whether a minimum wage will improve social justice and grow the economy in a developing economy. South American countries have in the last decade instituted minimum wages with mixed results. Brazil, for example, initially saw an upswing to its economy but within a few years slipped into a deep recession.

One size fits all 

In South Africa, there is one minimum wage and it is possible that some sectors will react differently. Clothing workers for instance currently earn half of the new minimum wage and have already suffered substantial job losses in the past twenty years. Although concessions have been made for farm workers and domestic workers (they will earn 90% and 75% of the R20 per hour respectively), a more nuanced approach could have reduced potential job losses. Some economists predict that unemployment will rise from 9.2 million currently to more than 10 million workers out of jobs.

Overall, it is possible this will help the economy at a macro-level. Those in favour of a minimum wage cite the grant system which gives a basic income to more than 11 million people. It was one of the contributors to the boom of 2003 to 2008. Critics contend this is a different funding model – grants were funded by government whilst the minimum wage will be paid by employers.

It seems that it will soon be a reality though, so we all need to be ready for it and let’s hope it has a positive impact on the economy. There will be substantial benefits for the country if it is accompanied by a productivity surge.

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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VAT Increase and Accounting Systems

As you are aware, the National Treasury announced an increase in Value Added Tax (VAT) from 14% to 15% effective 1 April 2018.

We urge you to ensure that your accounting systems are set up to process transactions at the new VAT rate of 15% from 1 April 2018.  This is to avoid any penalties or interest due to an under declaration or an over claim on your VAT201 return.

Also note that vendors under Category B (March/April), Category E (annual return) and most farmers registered under Category D VAT reporting periods, will have transactions subject to the VAT rate of 14% and 15% which must be correctly reflected on the VAT201 return.

SG_VAT_AccSystems

Feel free to contact us should you have any questions or require assistance.

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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Make Sure You Have a Shareholders’ Agreement

50b7c20d4567e47cae6f107f423e8b5eA well-known attorney recently said he is constantly surprised by the number of shareholder disputes that could be quickly resolved if there was a shareholder agreement.

The importance of shareholder agreements

Human nature is fickle and a few years after starting a company on a handshake, things can quickly unravel. That’s why shareholders should apply their minds upfront to defining the key characteristics in their relationship with fellow shareholders.

For example, if a shareholder wants to sell out after a dispute and wants a friend to acquire his shareholding, this can create many obstacles:

  • What if the other shareholders want to acquire the equity?
  • Who sets the price of the shares?
  • What happens to the current shareholder’s loan account?
  • The remaining shareholders may want a different shareholder.

The chances are, in this example, that the shareholders will have to turn to the courts to resolve the situation.

A shareholder agreement should contain…

The major points a shareholder agreement should contain are:

Firstly, the roles and responsibilities of the shareholders, such as do they actively participate in the business or appoint directors.

Secondly, if one of the shareholders does want to exit or if an offer is made for the company, there should be clear processes as to how to execute this:

  • How the shares are valued (normally by independent accountants).
  • Whether existing shareholders get first option to buy the shares and how to allocate the shareholding if more than one shareholder wants to buy the equity.
  • The time frames for all this to happen.

Thirdly, how to resolve shareholder disputes. Usually some arbitration and dispute resolution mechanisms are built in.

Fourthly, what mix of shareholder money and debt to use in the business?

There are obviously many aspects to the agreement, and the nature of the business and the relationships of the shareholders (e.g. do they know each other well?) will determine what else should be included in the agreement.

Don’t forget the Memorandum of Incorporation (MOI) and the Companies Act

In terms of the “new” Companies Act, the shareholders’ agreement cannot conflict with the Act or the MOI. If any clauses in the shareholders’ agreement are not consistent with the Act or the MOI, they are null and void.

For example, if the shareholders want to restrict directors in incurring company debt, the Companies Act requires that this be stipulated in the MOI. This could thus lead to an expensive error as failure to insert this clause in the MOI will effectively mean that directors can borrow at their own discretion.

Take good advice when drawing up your agreement.

Bottom line: Protect yourself and draw up a shareholders’ agreement – one day you will need it. When that day comes you will be very relieved to have taken the time in agreeing fundamental principles with your fellow shareholders.

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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