Six Important Business Lessons From The Coronavirus Pandemic

The coronavirus pandemic arrived like a thunderbolt and the unique situations it created found many companies unprepared and disorganised. Around the world, organisations began closing as it was found their emergency planning was not up to scratch and basic functions of the company could not exist in the new world.  

Now that we are half a year into the outbreak some companies are still playing catch up and many will never manage. For those who have survived and even thrived, there are plenty of lessons to take away from COVID-19 that will hopefully change the way we do business and future proof our endeavours for the inevitable coming emergencies. 

We discuss six of the most important business lessons we can all benefit from… 

“Given the nature of the crisis, all hands should be on deck, all available tools should be used” (Christine Lagarde, President of the European Central Bank) 

1.Working from home is possible 

Ever since the creation of the internet employees have been pushing for more opportunities to work from home and the vast majority of companies have been resisting it, worried that productivity would plummet or that team culture would suffer. With their hands forced many will now admit that working from home is not only possible but also saves the company money. 

Some of the largest businesses in the world are leaning into the trend. Twitter and Square have both notified employees that they may work from home permanently if they choose, while Google and Facebook have extended work-from-home options through to the end of the year.  

South African Business and Automation Analyst Grant Buchanan explains, “We are going to see a shift towards shorter and more flexible leases as firms realise they actually require significantly less floor space than before. There will be an emphasis on collaboration spaces and desk sharing and this is going to have an impact on the demand for commercial office space.” 

2.Understand your whole supply chain 

What the pandemic has made abundantly clear is that businesses do not operate in a vacuum. Your suppliers, in turn, have other suppliers and a disruption to one link in the chain can result in your whole business suffering. It has therefore never been more important to understand just who your suppliers are, how their businesses operate and just what sorts of emergencies may impact them down the line. 

Knowing what to expect is half the battle won, as you cannot plan for emergencies you were not expecting. It’s easy to control the issues and items within your own company only to be let down by the actions of others. 

Buchanan says it’s important to understand which suppliers you are dependent on for your most critical goods and services. Do you understand how many supply options you have, and do you have plans in place for if they fail to deliver? How capable are your service providers of delivering when they are ill, trade wars kick in, or their key suppliers hit snags? What sort of emergency procedures do they have in place to ensure you will not be negatively affected? 

3.Communication and crisis planning is essential 

During the scramble of early lockdown a number of companies realised there were flaws in their communication and crisis management systems.  

While email works perfectly well in an environment where in-house emergencies can be dealt with on a quick walk across the office, employees at home required other solutions.  

Does your company have a way to communicate with all employees quickly and efficiently without relying on email? There are many stories of IT managers breaking curfew to try to fire up servers that had frozen, resulting in significant delays.  

The same goes for crisis management. How do you secure your premises and assets? How do you notify your staff? What systems are in place to protect them in the event of a catastrophic incident? And how do you minimise the damage from a future pandemic or related drama? 

Leaders need to put plans in place, introduce new technology and train their staff in these new processes before they become necessary.  

4.Use the available technology 

It’s easy to get caught up using systems that have always been in place. In smaller businesses particularly it’s common to use manual systems for accounting, payroll and other functions, and companies that did this were badly exposed by the virus.  

Many smaller, local retailers and restaurants were caught off-guard by the pandemic. Where they should have been at the ready to serve online customers, and provide delivery or curbside pickup to keep afloat, they instead took many months of lost income to get there.  

Technological uptake has been phenomenal over the past few months. The need to meet up has seen collaboration apps booming with Zoom experiencing a 1,125% spike, Webex 560%, and Microsoft Teams 108%.  

The trick is to take that collaboration app approach across the board, look closely at what solutions are already out there and find innovative ways to use that technology to make your business work away from your desk before the next event strikes. 

5.Build relationships with your accountants, bankers and lawyers  

Some people only see their accountant, lawyers or bankers during a crisis or tax season but these relationships have recently played an integral part in the survival of many companies.  

The COVID-19 business rescue loans were implemented via the banking system, and banks, which are overloaded with applications, are giving first preference to their current customers. Those companies that have a good working relationship with their bankers appear to have more luck with these applications and get them processed faster due the banker’s familiarity with their accounts.  

Similarly company accountants and lawyers have been working overtime helping their clients interpret the regulations for obtaining disaster loans and TERS funding, as well as guiding them on seldom-used aspects of business such as suspending rent payments, delaying vendor invoices, and chasing non-paying customers.  

“Understanding our clients’ businesses has been integral over the last few months,” says Robin Gerhold of Gerhold & van Wyk Attorneys in Sandton. “Knowing the details of how they operate has allowed us to tailor solutions and secure aid much more easily, efficiently and ultimately, cheaply, than if we were coming in cold without that information”. 

6.Broad-based skills are important 

The tendency when hiring is to focus on getting in highly-trained niche experts for each position. The pandemic has, however, shown us that the organisations which were able to rethink their business model and pivot quickly had a much better chance of adapting to market conditions and surviving, and these organisations were also full of employees with broad skills, emotional agility and a wide range of competencies.  

It is a well-known fact that companies should constantly be innovating, and the pandemic has shown us just why. Being able to shift quickly relies on an employee base of innovative and creative thinkers who are empowered by company culture to take risks and develop new ideas.  

According to one of the world’s leading management thinkers and award-winning Harvard Medical School psychologist Susan David, organisations today, “operate within unprecedented complexity resulting from many forces including technology, globalisation, and strong competition. At present, organisations are also feeling the added impact of the COVID-19 crisis. All these pressures require companies to offer swift responses.” 

However, she says, “organisations themselves can never be truly agile unless the people who work within them are agile.” 

David advises hiring and rewarding out-of-the-box thinkers and supporting those who are risk-takers.  

It’s impossible to ignore the difficulties of doing business in 2020. The lessons learnt this year have been hard won, but by putting them into practice, and reaching out for help when we lack the expertise, we can ensure the next set of challenges won’t be our last. 

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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Tips and Ideas to Retain Your Best Staff and Skills During COVID-19

In the highly competitive local economy, disrupted by the arrival of the COVID-19 pandemic, firms more than ever cannot afford to lose their best staff and skills. 

This piece provides critical insight from leading business thinkers including practical advice that you can implement to ensure you retain your best performing staff and skills so as to avoid the significant cost of having to hire new people. 

We also bring you a vital understanding of how employees’ needs and requirements have radically changed due to the national lockdown and COVID-19. 

The piece also provides advice from experts for keeping your employees motivated and keen to stay at your company. 

Small businesses across South Africa face the challenge of keeping their best staff and skills during the COVID-19 pandemic to ensure that they can survive these hard times and can thrive when the economy picks up again. 

For small and medium enterprises (SMEs), keeping top talent is vital to ensuring that these companies deliver effective products as well as services to their clients. 

This comment comes from a “thought paper” published in June this year about talent management and penned by six University of Pretoria master’s students. 

The right talent is a differentiator 

The right talent was a key differentiator for companies to gain a competitive advantage and attain future success, they wrote. 

They defined the right talent as “giftedness, individual strength, meta-competency, high potential and high-performance workers”. 

“Employees are a crucial and valuable element of any organisation. They are the life force that drives innovation, profitability and sustainability,” they added. 

Nishan Pillay, Gordon Institute of Business Science’s (Gibs) executive director for open programmes, said during an interview that it was vital for small businesses to keep their high-performing staff. 

A quote to bear in mind 

The master’s students’ paper included a quote that is worth bearing in mind when considering strategies to keep top people. 

It comes from the former chairman of the Citicorp, Walter Wriston, who said: “Human capital will go where it is wanted, and it will stay where it is well treated.” 

“In a time of… disruption, evolving technology, stiff competition, and increased demand for limited talent, no organisation wants to lose their top talent that they have invested so much in to acquire and develop,” the master’s students wrote. 

Costly to replace staff that exit 

Adding to the picture is that it is expensive and time-consuming to replace staff. 

Alex Nieuwoudt, manager of recruitment firm Michael Page’s finance and legal team in Johannesburg, said during an interview that it could cost between R150 000 and R350 000 to fill a middle to senior role. 

“Hiring people, getting them to know your culture and systems, is hugely expensive. Recruitment costs aren’t just about the agency costs of bringing someone in, it’s about the training, development and the cultural assimilation,” Gibs’ Pillay said. 

Changing candidate questions 

It is also worth noting that candidates that Michael Page interviewed before COVID-19 focused their questions on the job in question. 

But now the critical issue for these candidates was how the company doing the hiring was coping with COVID-19, Nieuwoudt added. 

It was essential to answer these questions accurately, as a new hire would find the truth once he or she joined the company and could leave if what they discover wasn’t to their liking. Thus the company would have to incur all the hiring costs again, he said. 

Given this, it is essential that when small businesses advertise for a post that they have their answers ready for this burning topic. 

Four strategies to keep staff 

There are many strategies that companies can use to keep staff. 

Nieuwoudt suggested four strategies that SMEs can consider for keeping staff. These four strategies are:  

  1.  Allowing staff flexible working conditions, 
  2. Empowering employees, 
  3. Providing virtual wellness, which is where the company gives their employees the means to operate successfully remotely while maintaining staff motivation, 
  4. Promoting staff and acknowledging their achievements. 

Virtual wellness is also determined by a company’s reputation, including its corporate social responsibility schemes. This measure impacts on employee mood and decisions about whether to join and then stay with the company, Nieuwoudt said. 

The desire for flexible employment 

Michael Page ran a poll recently, and 84% of the respondents wanted their companies to give them a permanent option to have flexible conditions of employment, Nieuwoudt said. 

“This gives you an understanding of how the mind-set of employees has changed in South Africa,” he added. 

“Flexible working conditions are now at the forefront of hiring conversations. It is very critical to keep that in mind,” Nieuwoudt said. 

Digital working is vital 

Geoff Jacobs, president of the Cape Chamber of Commerce & Industry, advised that for companies to keep their staff, it was vital for them to move to the digital way of working, especially given the COVID-19 social distancing requirements. 

Jacobs also suggested in response to questions that to allow for easier retention of staff, SMEs should review all expenses, especially rent. 

A third retention tactic that he suggested was that small companies remodel the roles of their staff, so they take on extra duties or get the employees to help the company offer new services and products given the opportunities because of COVID-19. 

If a company had to retrench staff, it was critical that the business part with its staff on the best possible terms so that when the economy grows again, these former employees would be keen to re-join the business. 

Recruit from your pool of alumni 

Karel Stanz, a University of Pretoria professor, said during an interview that hiring a company’s former employees or alumni was one of the most cost-effective ways of recruiting staff. 

He is a professor in industrial psychology at the Department of Human Resource Management at the university. 

Jacobs also advised that as part of the staff retention strategy, small companies should ensure frequent interaction across digital platforms. 

“Build online communities that aid in social interactions for employees preferring flexible work arrangements. These online communities allow employees to interact with colleagues, superiors, and clients. It also allows the organisation to monitor the employees’ engagement levels and needs,” the University of Pretoria master’s students wrote. 

These students in their paper also listed the following measures to ensure a company keeps its top staff: 

  • Have a conducive company culture, 
  • Provide staff with meaningful work, 
  • Offer employees career advancement 
  • Provide staff with a sense of belonging. 

They also referred to respect, recognition and rewards as necessary means to keep staff. 

Opportunity to gain scarce skills 

In a surprising turn of events, Stanz said that the COVID-19 pandemic had provided specific companies with a chance to gain scarce skills. 

He said that a former student of his was working in a human resources role for a timber company in Nelspruit. 

Before the lockdown, it was difficult for this company to find people with technical skills such as artisans. 

But ArcelorMittal South Africa retrenched many people, including artisans, and this has provided the timber company with access to these skills. 

Digital skills important 

Dr Jabulile Msimango-Galawe, Wits Business School programme director for business and executive coaching, said in response to questions that during and after lockdown, some businesses would continue to work online. 

“People in the digital space with the required skills will need to get businesses trading again, and marketing online will be in demand,” Msimango-Galawe said. These skills would include analytical and digital capabilities, she added. 

Attitude is key 

“From what we’ve seen in the past few months, it’s not so much skills that you need to keep, but the attitude of your staff that supports the values of the business,” Jacobs added. 

Individuals with multiple skills would be in demand and the era of having one critical skill was over, Msimango-Galawe said. 

Michael Page’s Nieuwoudt said that essential skills right now included candidates that helped companies achieve their employment equity targets. 

Gibs’ Pillay identified types of people and critical areas of skill where small businesses needed to keep staff, and these included staff with high levels of creativity as well as those with strong people skills. 

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 Incentives to Invest in Small Business: The Clock is Ticking

National Treasury is reviewing all of its business tax incentives to determine to what extent they are contributing to policy objectives. One such incentive under review is the “Section 12J” incentive, which allows an investor a deduction of the full amount invested in a Section 12J VCC (Venture Capital Company), provided certain requirements are met, from its taxable income.  

The VCC regime was introduced in 2009 with the objective of boosting economic growth and job creation by assisting small businesses that cannot obtain financing from financial institutions to access equity finance. 

The regime is subject to a 12 year sunset clause that ends on 30 June 2021 – if your small business needs venture capital funding, the clock is ticking!    

“Creating an environment in which SMMEs can thrive is inextricably linked to creating conditions in which all businesses can thrive.” (National Treasury, 2019 Economic Strategy document) 

The VCC (Venture Capital Companies) incentive allows a holder of shares to claim a 100% tax deduction of the cost of the shares issued by an approved VCC, provided certain requirements are met. The deduction is subject to recoupment if the VCC shares are held for less than five years. 

VCCs have been investing in small and medium-sized businesses (SMEs) that include education, agriculture, renewable energy, hospitality and tourism, and student accommodation. Many of them are especially hard-hit by the strict lockdown regulations imposed on businesses.  

Funding has always been a major stumbling block for start-ups, and small businesses wanting to expand. They will find it far more difficult post-COVID-19 to get access to funding.  Without the tax incentive it is possible that investments may flow offshore – investors will take their money where the rewards match the risks.  

According to SARS, there were 180 registered and approved VCCs which had raised R8.3 billion at 28 February 2019.  

The VCC industry body, 12J Association of South Africa, conducted its own survey on the impact investments have made to date. It released the results in June this year.   

Responses were received from 12J managers that collectively manage 106 VCCs and R9.3bn in assets under management to date. 

The R9.3bn industry assets under management has been raised from over 5,500 investors, equating to an average investment amount of R1.7m per investor. 

The survey report shows that the Section 12J capital raised has been invested into more than 360 small, medium and micro-sized entities which in turn support 10,500 jobs (50% of them permanent) across dozens of industries.  

According to the survey the incentive has been cost-effective at an average cost per job of approximately R126,000 for each current job created. This is in contrast to current job creation focused incentives in South Africa, which allow for a required cost per job of up to R450,000. 

Getting the investors  

When the VCC tax incentive was introduced these companies were to be the “marketing vehicles” to attract retail investors with the tax incentive as a major advantage.  

There was an initial investment limit of R750,000 per tax year and a lifetime limit of R2.25m. This limit was removed around 2011 in order to make the incentive more attractive. 

However, due to several amendments to the Act, aimed at combatting perceived abuse, the incentive only really gained traction after 2015. 

In July last year new caps were introduced. Investments by a natural person and trusts were capped at R2.5m and for companies investments were capped at R5m in a tax year.  

Small businesses – the clock is ticking! 

The regime is subject to a 12 year sunset clause that ends on 30 June 2021. 

Many of the industries qualifying for VCC investments were hard hit by the impact of the COVID-19 pandemic. Survey participants expect COVID-19 to have a negative impact on the ability of SMEs to obtain equity capital over the next year and even the next two years. This is likely to manifest itself in a far higher unemployment rate and corresponding lower growth in the South African economy. 

More than 75% of the participants in the industry survey said investors would not have invested their capital in SMEs, had it not been for the attractiveness of the Section 12J tax incentive.  

The 12J Association of South Africa suggests that the tax incentive should be extended until at least 2027.  

SMMEs will now need more support than ever before, and if your small business is struggling to find funding, ask your accountant now for advice on applying to a VCC. Unless the June 2021 sunset clause on tax incentives for section 12J funding is extended, support from investors will soon dwindle – the clock is ticking!  

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 Chaos Sparks Business Innovation

The greatest innovation is created in times of chaos, when opportunity abounds. Many successful business stories began during times of recession, depression, chaos and crisis, such as Uber, Airbnb, WhatsApp, Slack, Pinterest, Square, Disney, Sony and iPod.  

In the midst of the unprecedented chaos created by COVID-19 on a global scale, we have witnessed great and inspiring innovation, as local and global businesses innovate ways to stay relevant in industries completely disrupted, if not shut down, by the pandemic and the lockdown 

Find out how you can innovate in your business and industry with a simple three-step system that can transform a time of chaos into a catapult for creation and innovation.. 

All great changes are preceded by chaos. The disruption we see in the world is the prelude to emergence.” (Deepak Chopra) 

The greatest innovation is created in times of chaos. Many successful business stories began during times of recession, depression, chaos and crisis. Not paralysed by uncertainty or frightened into inaction, these business leaders and companies used chaos as a catapult for creation and innovation.  

This was the message from actuary and innovator Dean Furman at SAICA’s recent complimentary virtual leadership series Leadership in a time of crisis.  

Chaos creates opportunity 

In a crisis situation such as COVID-19, people and companies’ needs have changed significantly. Priorities have shifted and the way people and businesses operate on a daily basis has changed, creating endless opportunities for individuals and companies to cater to new needs with new services and solutions, or existing solutions offered in different ways,” says Furman. “And that is precisely why there is always so much opportunity where there is chaos and crisis.”  

In the midst of chaos, there is also opportunity” (Sun Tzu)  

Business innovation in time of chaos 

Just some examples of innovations born in times of chaos or depression include Uber and Airbnb, WhatsApp, Slack, Pinterest and Square.  

“While Uber and Airbnb, for example, did not necessarily plan on being founded during the Great Recession of 2007/2008, the timing worked in their favour. With so many people looking for extra revenue, it suddenly made sense to turn your car into a taxi, or to rent out your spare room – ideas that may have seemed crazy just a few months or years before.” Other examples of companies or products born in times of chaos include Disney, Sony and iPod.  

In the last few months, in the midst of the unprecedented chaos created by COVID-19 on a global scale, we have also witnessed great innovation 

 COVID-19-driven innovation 

Harvard Business School Working Knowledge provides some recent examples of innovation driven by the pandemicgrocery stores installing plexiglass shields at checkouts, restaurants and groceries expanding to takeout and deliveries; video conferences replacing face-to-face meetings and professional consultations; and employee monitoring software ensuring productivity among teams working from home.  

The need to mitigate contagion risk has also driven new products and processes, such as robots that deliver medicines and meals and collect bed sheets and rubbish in hospitalselectronic pre-booking to control customer flow for on-premises businesses; a drone program to drop parcels and spray disinfectant developed by e-commerce giant JD; and Smart helmets can identify anyone with fever within a five-meter radius. 

Even in industries where digital and automation technologies were uncommon, the crisis led to drastic innovationsTeachers from pre-schools to universities digitised content and delivered it online or via phones. Retailers adopted Amazon’s Just Walk Out technology to eliminate the need for checkout. Galleries, cinemas, concert hallsindependent musicians and artists found ways to create, perform and connect with their audiences through online platforms. 

And out of Africa… 

“There is always something new out of Africa” (Pliny the Elder) 

Innovations by African businesses and individuals also abound. Earlier this year, the World Health Organisation (WHO) in the African Region hosted the first in a series of virtual sessions for innovators across the region to showcase home-grown creative solutions aimed at addressing critical gaps in the response to COVID-19. Eight innovators from Ghana, South Africa, Nigeria, Guinea and Kenya presented their pioneering solutions, all of which have already been implemented in their respective countries, with significant potential to be scaled up further across the region. The innovations ranged from interactive public transport contact tracing apps and dynamic data analytics systems to rapid diagnostic testing kits, mobile testing booths and low-cost critical care beds. 

Locally, a Vodacom and Discovery partnership has made free COVID-19 Online Doctor Consultations available to all South Africans. To meet the demand for alcohol-based sanitiser, South African Breweries (SAB) adapted its operations; Sasol developed a new unique blend of alcohol-based chemicals to be used in manufacturing of hand sanitisers; and L’Oréal South Africa began producing hand sanitisers under its natural beauty brand Garnier. 

Further local innovations range from virtual wine tastings and game drives, and restaurants that deliver all the ingredients so customers can make their favourite cuisine at home, to local craft markets gone virtual and digital yogadance and art lessons.  

 How to innovate – a three-step system 

It is inspiring to read how businesses are innovating ways to stay relevant in industries completely disrupted, if not shut down, by the pandemic and lockdown 

But how do you innovate in your business and industry? Furman provides a three-step system to innovation – 

  1. Focus on your clients – meet their changed needs, make their lives better and listen to them. 
  2. Challenge the way you do things – develop new products or services, and offer existing services in new ways 
  3. Explore the world around you for new possibilities – including the many new enabling technologies that can digitally update old ways of doing things and even extend your client-base globally. 

As countless companies have proven before, the chaos of a crisis such as COVID-19 can be a catapult for creation and innovation. 

“Just like a catapult, the more you get pulled back, the further and faster you can go forward,” says Furman. “When chaos happens, spend time thinking how it can be used as an opportunity for growth and innovation. This is your time to move forward.”

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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POPIA (The Protection of Personal Information Act) is Now Law and the Clock is Ticking

After many false starts over the years (the pandemic causing one last delay this year), the enforcement provisions of POPIA (the Protection of Personal Information Act) have finally become law. 

The clock is ticking on the year’s grace period allowed for compliance and every business should be aware of the substantial implications of POPIA compliance, and of the equally substantial penalties and risks associated with non-compliance.  

Read on for a brief overview of how “personal information” is defined, of the eight principles underlying the Act, and of the various practical issues you should know of and prepare for.  

Globally, governments are responding to the vast amounts of information flooding into the public domain due to the growth in companies like Amazon, Facebook and Twitter. As much of this information is personal, POPIA seeks to regulate how this personal information is processed and stored.  

South Africa, like many countries, has a constitutional mandate to protect the right to privacy and POPIA is aimed at balancing this right with the necessity of processing personal information – employee salaries is an example. 

With the Act now in effect, you have a twelve-month grace period to comply with POPIA. By 1 July 2021, all entities that process personal information need to be in compliance with the Act.  

This has substantial implications for business and will be costly and time consuming to implement.  

A brief overview 

  • Firstly, what is personal information?  POPIA defines this as including: 
  • a person’s name (including a juristic person such as a company), 
  • contact details,  
  • religion, 
  • sexual orientation, 
  • personal views, 
  • private correspondence,  
  • health records, 
  • employment records,  
  • financial records, 
  • biometrics (DNA, fingerprints) 
  • There are eight self-explanatory principles which govern the Act: 
  1. Accountability  
  2. Processing limitation  
  3. Purpose 
  4. Further processing limitation  
  5. Information quality  
  6. Openness  
  7. Security 
  8. Right of access  
  • Further restrictions apply for the use of “special personal information” like political affiliation or sexual orientation.
  • A regulatory body known as the Information Regulator has been established with the following powers and duties:- 
  • Search and seizure powers 
  • May impose administrative fines  
  • May sue on behalf of the subject 
  • Can decide if the law is being complied with 
  • Receives and acts on complaints 
  • May issue notices 

It is a criminal offence to make false statements to, or to not comply with notices from, the Regulator.

  • The appointment of an Information Officer. In terms of POPIA this is deemed to be the head of the organisation, such as the CEO or sole proprietor. The person may delegate this to another person. The Information Officer is to register with the Regulator.The role of this position is to encourage and ensure compliance with the Act, to handle queries from outside the organisation on matters relating to POPIA, to liaise with the Regulator and deal with whatever has been prescribed. 
  • POPIA makes provision for cross-border uses of personal information 
  • In terms of direct marketing, there is a clause requiring opt-in. This is contrary to current laws where the norm is to require opt-out. This means permission must be sought from people whose information will be used, prior to direct marketing taking place.  The only exception is in respect of existing customers/clients. 

This transition period is going to be onerous on businesses. They need to determine what information falls into the Act, how it is used, protected, stored, who has access to it.  Businesses will also need to get the relevant consents from staff and other stakeholders. What privacy statements do you need to make, what protocols do you need to put in place over your information and website?

As there are onerous penalties (a fine of up to R10 million or ten years imprisonment) and these requirements concern the safety of your staff’s (amongst other) information, so it is well worth investing time and taking advice to start getting the right procedures in place now. 

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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What Happens if your Driver’s Licence Expires During the Pandemic and You Have an Accident?

If the thought of spending hours or days in a queue to renew your expired driver’s licence fills you with dread, you are not alone. Even before lockdown the testing centres were running behind in renewing licences and testing licence applicants, and the lockdown has naturally caused backlogs to soar. Centre closures as result of infection scares will continue to compound the problem. 

And of course not having a valid licence puts you at risk of having any insurance claims rejected – a prospect to be avoided at all costs. We share details of the recent and very welcome extension in “deemed validity” of driver’s licences, with some advice on contacting your insurer or broker to confirm cover. 

Driving licence test centres were closed during the lockdown and even prior to that centres were running behind in renewing driver’s licences and testing first time driver’s licence applicants. 

The Minister of Transport recognised these difficulties and gave motorists until August 31 to renew their licencesThat has now been extended to January 31 2021 and your licence is deemed to be valid if it expired during the period from March 26 to August 31. 

Check your insurance   

Insurance policies require you to have a valid driver’s licence and if this is not the case, the insurer is entitled to refuse any claim made. Even if your policy doesn’t specifically require a valid driver’s licence, there could still be difficulties in making a claim without a valid licence. 

It is worth contacting your insurance broker or company and getting written clarification of cover if your licence has expired or will expire this year.  

Car hire  

On a related topic, car hire companies will not allow car hire without a valid driver’s licence – check upfront that your “deemed valid” licence will be acceptedAnd as and when international travel becomes available to us again, remember that your destination country may still regard your expired licence as invalid 

Motor vehicle licence discs  

All motor vehicle licence discs, temporary permits, and roadworthy certificates that expired during the period from March 26 to May 31 are deemed valid until August 31 2020. 

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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Protecting your Company’s Reputation When Staff Work from Home 

The number of staff working from home has surged with the lockdown, and many office-based employers now plan to keep most or all of their employees working remotely for the long term. There are of course many advantages to allowing those staff members who can work effectively from their own home offices to do so, but be aware also of the business risks that this “new normal” exposes your company to. 

One of these is the increased risk of reputational harm to your business, particularly whilst the pandemic and its economic fallout continue to threaten staff morale and uncertainty is the watchword of the day. We analyse those risks and suggest some positive steps you can take to address them. 

“It takes a lifetime to build a good reputation, but you can lose it in a minute” (Will Rogers)  

Whilst many employees enjoy working from home, this is a time of uncertainty for them. They read of people being retrenched or furloughed and wonder if they are next. The isolation of working from home can fuel this uncertainty. 

Yet it is these employees who daily interact with customers and other stakeholders. If staff have negative feelings about the company, this can be quickly picked up by customers. Social media can spread this quickly and suddenly management have to start undertaking damage control. Recently, an English business decided to not pay staff until the government’s wage subsidy kicked inFollowing an outcry, management swiftly reversed this and paid the staff. 

Contrast this with Quickbooks who kept their cleaning staff on full pay despite empty offices. L’Oreal have made a point of paying small suppliers quicker than usual.  

Don’t think short term  

The decisions you make send out signals to your staff and they are much more likely to view you favourably if you are showing fairness to your stakeholders.  

Think also of your investors – they tend to support businesses where carefully considered long-term decisions are made by management. Don’t forget having a holistic outlook and making the environmentalsocial and governance (ESG) criteria part of your strategies. 

Communicate effectively  

In a recent case, staff supported management putting them on furlough after they were persuaded by management that this was the best long-term strategy to preserve jobs in the business. 

Staff are more motivated if they know they have commitment and active support from their bosses. 

IBM have started a program of supporting employees who need to take out time to educate their children or look after family members. They have also encouraged their staff to raise any individual difficulties they have with their managers. Introducing this type of flexibility makes managers’ jobs harder to do and IBM have created separate online chat channels for managers to network with their peers and find solutions to employees’ problems.  

Other companies with diversity in the workplace have openly supported Black Lives Matter and have made sure that when there are pay cuts or retrenchments, there is no discrimination against minorities. 

The world has changed and become more uncertain and more flexible. You need to plan carefully and act to ensure you stay on top of the situation and keep the support of your staff. 

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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Employees Working from Home: What Tax Deductions Can You Claim?   

Working from home is part of our “new normal” and home offices are predicted to remain a permanent feature of many employment relationships in the future. 

Both employees and their employers should be familiar with the tax angles, in particular the opportunity to claim tax deductions. When and how do you qualify for deductions? What expenses can you deduct? We discuss the various ins and outs with a simple practical example to illustrate. 

If you own your own home, read our tail ender note on the possible impact of claiming for a home office on your Capital Gains Tax liability when you sell your house. 

“We like to give people the freedom to work where they want, safe in the knowledge that they have the drive and expertise to perform excellently, whether they at their desk or in their kitchen. Yours truly has never worked out of an office, and never will” (Richard Branson) 

Thousands of employees have had to work from home since the lockdown began at the end of March. This story has been one of the success stories of Covid19, as companies have reportedly found that productivity has increased, travel costs are right down and the work is still being done.  

Employees stand to reap a range of financial and health benefits from working at home and both they and their employers should know that they may also be able to claim certain home office expenses as tax deductions. Normally only independent contractors and commission-earners would claim these expenses, but SARS has confirmed the relief is available to full-time employees as well – but only in the specific circumstances set out in the Income Tax Act. 

How you can claim tax deductions for a home office  

The Income Tax Act sets out basic requirements that must be met if this tax relief is to apply: 

  • You must practice a “trade” – which can be employment so by being employed this criterion is fulfilled. 
  • The home office must be specifically equipped for you to do your job – usually, this would mean a computer, broadband, printer, desk and chair etc. 
  • The home office is be regularly and exclusively used by you to do your job – once you have finished a day’s work, for example, the area cannot be used as a family room.  
  • More than 50% of your work needs to be performed in the home office – in other words you must work from home for at least six months of the tax year. 

Tax deductions allowed 

If the above criteria have been met, theyou may deduct:  

  1. Rental or bond interest on your home and home repairs, 
  2. Municipal rates, electricity and water, 
  3. Wear and tear on office equipment (SARS has differing depreciation rates on computer equipment and office furniture). 

You will also incur numerous costs in running your home office such as cell phone, bandwidth, equipment repairs, stationery and cleaning. As these are not specified in the Income Tax Act, it is better that you be reimbursed by your employer for these expenses. 

In terms of points 1 and 2, as a taxpayer you need to make an apportionment of those costs when claiming them in the income tax return. Typically, this is done on a floor space i.e. square metre basis of the home office in relation to the total area of the home – see the example below. 

As noted above, one of the criteria is that you can only claim a home office allowance if more than 50% of your work (at least six months of the tax year) is done in your home officeThis is not a problem during lockdown (as the home office is being used 100% of the time) but should you want to continue claiming for a home office after the lockdown, then you will need to spend more than 50% of your working hours in your home office. 

This is all best illustrated with an example: 

Example: Home Office 
Notes  Calculation of deductions claimed    Rand   
  Elizabeth needs to work from home and purchases…       
  A desk and chair    10 000   
  Desktop computer and printer    12 000   
  = Total equipment and furniture    22 000   
  Elizabeth’s monthly rates, water, refuse and electricity cost    4 000   
  Elizabeth’s monthly rental of her home    20 000   
1  Her monthly data and cell phone cost    1 200   
1  Stationery     120   
  Her Annual tax return       
2  Wear and tear computer equipment  3 year write off  4 000   
2  Furniture  10 year write off  1 000   
  =Total wear and tear deduction C22    5 000   
3  Water, rates, refuse and electricity    6 000   
3  Rental claim    30 000   
  =Total deductions claimed    41 000   
1  Company reimburses Elizabeth for these costs as they are not allowable per the Income Tax Act       
2  Annual depreciation computer = 12 000/3 = 4 000       
2  Annual depreciation furniture = 10 000/10 = 1 000       
3  Size of Elizabeth’s house  200 square metres   
  Size of her home office  25 square metres   
  Claim is (25/200)   12,5%   of allowable costs  
  Annual municipal charge  48 000  4 000 monthly  
  Claim is 48 000 x 12.5%    6 000 
  Rental claim = annual rental x 12.5%  30 000   240 000 x 12.5% 

se tax deductions effectively compensate you for your costs of equipping a home officeBoth employers and employees benefit. 

As an employee make sure you get a letter from your employer to confirm that you are working from home, retain invoices and statements of these expenses, and keep a running spreadsheet of days worked at home for the tax year. 

As an employer speak to your accountant when setting this upSARS’ requirements are stringent and you don’t want your staff to be denied the deduction.  

Beware the CGT impact! 

Claiming for a home office as above may well have an adverse impact on the amount of Capital Gains Tax you have to pay when you eventually sell your home. This can become a complicated issue and calculation so it is essential to get professional advice on this aspect! 

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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Fraudsters are Everywhere: Cybercrime up 667% since Lockdown  

It didn’t take the online fraudsters long to realise that the coronavirus lockdown has opened up a whole new avenue of opportunity for them.  

Malware, phishing and ransomware attacks are surging, and schemes offering some form of financial relief are particularly evident. All forms of online communication including emails, SMSes and Social Media posts should be treated with caution. 

We share tips on how to protect yourself and your business in these dangerous times, with news on some of the more common scams going around and a link to the latest examples identified by SARS. 

There has been a surge in internet scams over the past three months – from malware, phishing and ransomware to obtaining your log-in details. 

Take extra precautions such as dual authorisations for payment, carefully validate new beneficiaries and get your IT staff or consultants to regularly check that no malware is loaded onto your IT platforms. 

Recently, SMSes were being sent out from the “Public Investment Corporation (PIC)”, promising money from a “Business Personal Relief Fund”. If you replied, you got an approval letter and money was promised once you paid a “handling fee”. If you Google the PIC, there is no mention of Covid-19 relief money.  

SARS have reported scams whereby taxpayers get messages from “SARS” about their income tax return or about an audit on the taxpayer or asking for missing documents and you are asked to disclose confidential information in your reply to “SARS”. See some examples of the latest scams on the SARS “Scams and Phishing Attacks” page. 

There are other scams involving Transnet. 

Treat emails, SMSes, and Social Media with caution, particularly if you get offered some form of relief. 

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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Who will Emerge as Winners and Losers in the Post Covid-19 Marketplace? 

As we wend our weary way through the pandemic and the lockdown’s economic fallout, let’s not lose sight of the fact that eventually we will inevitably return to some form of “normal”. As the wry Internet joke has it “This too will pass. It may pass like a kidney stone, but it will pass.” 

We can all of us – businesses, investors, individuals planning our futures – profit from understanding how there will be both winners and losers emerging from this period of fundamental disruption. We analyse the evolving trends that are driving and will continue to drive this process, with examples of those sectors expected to end up as big winners, and of those predicted to be big losers. 

Many trends that emerged in the lockdown period will almost certainly continue post Covid-19Technology, for example, has received a huge boost with products like Zoom now household names. 

One thing we shouldn’t forget is that periods of anxiety and boredom provide a perfect platform for creativity to flourish. Hopefully, many of you have taken the extra time that lockdown gave you to flesh out the idea that you have had for many years. 

The winners are…   

The big trend of the global lockdown has been the move to working from home which  has worked out well and is set to continue  

There will be many spinoffs from this: 

  • Home improvements will benefit as people spending a lot more time at home  will become aware of items that can enhance their houses. Furniture companies will get more business. Redecorating businesses will also see an uptick in their sales as will TV and sound systems suppliers. 
  • The businesses where staff work at home will be able to scale back on the size of their offices (there will still be a demand for offices, but it will be reduced). As rent is usually one of the high cost items that most businesses have, this downsizing will contribute to cost reductionAnother cost saving will be in reduced travel costs as staff will continue to take advantage of virtual meetings and save travel time – companies will see less airfares and petrol costs along with reduced accommodation and meal costs. 
  • With the reality of climate change and the petrol industry slowly dying, there will be renewed focus on solar and wind energyThis swing to renewable energy will bring in a new surge in investment – something badly needed in the difficult economic times ahead. 
  • Smaller towns stand to gain from this as people working from home realise they can relocate to a simpler, healthier lifestyle (a recent survey in New York showed that 50% of those surveyed would like to move out of big cities). Already parts of the Karoo are marketing the attractiveness of living in quieter and cleaner areas and are upgrading technology so that people can work there.   
  • Distributors and online shopping should continue to be amongst the winners as consumers see how convenient and efficient ordering online is.    
  • Health products and pharmaceuticals should also be successful post Covid-19 as people have grasped how important staying healthy is. 

And the losers 

  • The property sector has already taken some body blows – the retail sector and shopping malls will need to think creatively as consumers take to online shopping and spending will remain weak for a while. Whilst an obvious solution might be to convert shopping malls into residential units, the potential trend of people moving out of the large cities could negate this. 

Office blocks will also be under pressure as demand for office space will likely continue to fall. Again, creative thinking may be needed, perhaps along the lines of office “hot seating” i.e. allowing different people to book a desk for say a day or a few days a week, or conversion to residential or small industrial units. 

Industrial properties may experience some success as distribution centres for online sales grow and companies bring crucial parts of their supply chain back from overseas production. 

  • The coal, oil and gas industry will continue to decline. Before Covid-19, many financial institutions were refusing to finance projects in these fields and they expect renewables and electric cars to become more prominent. 
  • Tourism and the travel industry will take time to recover as consumer spend will remain muted due to ongoing job losses. This will have knockon effects on restaurants, hotels and bed and breakfast facilities which additionally have been struggling with lockdown restrictions. 

It will take a while for the world and South Africa to recover from Covid-19 with forecasts that the first world will not get back economically to where it was in 2019, until at least 2022. In South Africa it will take even longer. 

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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