Cut your electricity bills!

Logista_Nov2019_03Electricity has become a bane in our lives – not only does it increase in price by double digits each year, but we also face the ongoing possibility (perhaps probability) of load shedding.

But we can be proactive as there are many ways to cut costs and with some research and a good plan you can cut electricity costs by 40%, by taking steps such as:

  • There are several things you can do with your geyser. Turning the thermostat down can save 150kwh (kilowatt hour) per month, putting in a timer can save even more (although it does cost up to R1,250), whilst putting on an energy blanket also saves money.

    A heat pump can reduce 60% of the geyser’s energy consumption but they are expensive (up to R16,000) and noisy.

    Solar geysers are slightly more expensive than heat pumps, are quiet and operate well (assuming your area has plenty of sunlight).

    Remember that a geyser makes up 40% of your monthly electricity bill

  • Switch off unnecessary lights as these costs add up. Get into the habit of turning off lights you aren’t using.
  • LED lights are big savers – it’s common sense that moving from 40 watt to 3 watt bulbs will drive power costs down – up to 2000 kwh per month. Prices for LED bulbs have also dropped rapidly, and you can purchase them for R20. Don’t forget downlights and outside lights when considering LED as these latter two use 40 to 45 watt bulbs
  • Washing in cold water also yields savings as do new fridges which can save up to 150 kwh per month but cost from R7,000 upwards.
  • Use of gas for cooking also saves as a 9-kilogram gas cylinder only costs R200 for up to 6 months.
  • Finally, there is solar which is expensive (costs vary depending on requirements and scale). If your local authority allows you to sell back your excess solar power to them, then solar becomes an attractive investment.

    Solar power is getting cheaper and more sophisticated and offers you the     possibility of reducing or eliminating your exposure to load shedding.

There are many ways to save on electricity – why not start 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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5 reasons to never overlook your business plan

Logista_Nov2019_04“How can I be so stupid?” (John Cleese recalling when he pitched the BBC to start the Monty Python’s Flying Circus show without a business plan)

When setting out on a new venture or adding a new section to your business, it pays to have a strategy as to what you want to achieve and how you want to go about accomplishing your vision.

Be thorough when doing this and do a comprehensive business plan.

Why a business plan is important

  1. Starting a business or changing your operation invariably requires funding from either a bank, investors or both. Unless they can see a clear-cut plan of action, an in-depth knowledge of the marketplace and what you plan to achieve, it is unlikely you will be able to get any money for your business.
  1. Doing a business plan is a substantial commitment as it involves research plus giving every section of the proposed venture deep thought. Your efforts will be rewarded as your new venture will be a much smoother process if you have done a business plan. By considering all the risks and pitfalls in your plan, you will avoid making some costly and potentially ruinous mistakes. In the long term your business will be more profitable and sustainable.
  1. A good business plan will enable you to focus on the important areas of the company, something you will be grateful for as many issues will arise as the business unfolds and having good knowledge of the sector you are in will more easily allow you to realise which of these issues is important and requires your attention.
  1. Having a good roadmap of the business will also let you effectively measure the progress you are making – measurements of how a company is performing are important and a business plan will give you a baseline to rate how you are doing.
  1. A good business plan will greatly increase the chances of your new venture being successful. On an ongoing basis, you can update this plan to continually assess how the company is performing.

In next month’s issue we’ll share some thoughts on how to go about preparing your business plan…

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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Your websites of the month: Buying or selling anything? How to use facebook marketplace

Logista_Nov2019-20By all accounts Facebook Marketplace is giving Gumtree, OLX and other online classifieds a real run for their money in both the personal and business markets. It is now used every month by 800 million people in 70 different countries.

Have a look at Facebook’s “How Marketplace Works” guide here for a step-by-step guide on buying and selling anything, sorting by distance or new listings, notifications, following, safety and trust issues and so on.

For more ideas, and for 5 ways to use Facebook Marketplace for your business, read “Facebook Marketplace: The Marketer’s Guide” 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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Tax Clearance Certificate being terminated

Logista_Sep-03The issuing of the printed Tax Clearance Certificate (TCC) will be terminated after 25 October 2019, as we are fully implementing a more secure and electronic Tax Compliance Status (TCS) system.

Since the implementation of the TCS system in 2015, we advised taxpayers that our goal was to terminate the use of the printed TCC, and would stop issuing TCCs at a future date.

We have now reached a point where the ability to print a TCC will be terminated, and the TCS PIN will have to be used by taxpayers to share their tax compliance status electronically with third parties. In addition to terminating the ability to obtain and/or print a TCC, all active TCCs that are currently in circulation will be cancelled. You will therefore no longer be able to verify or print it.

You are encouraged to familiarise yourself with the electronic TCS system and the use of the TCS PIN, so as to be prepared when we entirely terminate the TCC concept.

The secure and convenient electronic TCS PIN provides you with a way to authorise any third party (an organisation or government department) to view your tax compliance status online via eFiling by providing them with the PIN. It will present them with your overall tax compliance status as at the date and time they view it, instead of your tax compliance status as it was at the date when the TCS PIN was issued to you. To protect the confidentiality of taxpayer information, no other information will be accessible to a third party through this process.

It is important to remember that your tax compliance status is not static, but changes according to your continued compliance with tax obligations.

For more information on how to use the TCS PIN, please refer to the “Guide to the Tax Compliance Status Functionality on eFiling”.

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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Your shareholder agreement versus your Memorandum of Incorporation – There is only one winner

Logista_Sep-03Shareholder agreements usually form the backbone of shareholder relationships as they govern, for example, how shareholders sell their shares, how shareholder disputes are settled and the type of authority required for certain transactions.

The Companies Act makes it clear that:

  • If there is any conflict between the MOI (Memorandum of Incorporation – the statutory document which per the Companies Act “sets out the rights, duties and responsibilities of shareholders, directors and others within and in relation to a company”) and the shareholders’ agreement, the MOI will prevail.
  • Similarly, if there are any differences between the Companies Act and the shareholders’ agreement, then the Companies Act will take precedence.

The case that tested a shareholder agreement v the MOI

A company issued a new MOI in 2012. This MOI conflicted with the shareholders’ agreement and some shareholders approached the Court to have an order granted that the shareholders’ agreement governs the relationship amongst shareholders and thus supersedes the MOI. The shareholders’ agreement contained a non-variation clause which stated that no changes to the agreement could be made unless all shareholders agreed in writing.

The Court refused to grant the order and said that the issuing of the new MOI was done lawfully and in line with the requirements of the Companies Act. The shareholders’ agreement so materially conflicted with the MOI that it was now effectively null and void.

As a shareholders’ agreement is fundamental to the workings of shareholders, it is important to carefully consider how the MOI will relate to the shareholders’ agreement. Thus, any potential conflicts should be ironed out when drafting either a new MOI and/or a shareholders’ agreement.

Take your accountant’s advice when doing this to avoid extra cost, aggravation and time taken to resolve any differences which may surface when you need to enforce your shareholders’ agreement.

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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Be ready for SARS employee audits

Logista_Sep-01

“Forewarned is forearmed” (Wise old saying)

SARS is having trouble meeting its revenue targets and this is clearly putting enormous pressure on the South African economy. Further economic deterioration in the economy will probably result in a downgrade to junk status by Moodys. This will mean that all three of the major ratings agencies will have consigned our economy to junk status which means further currency weakness and probably a recession.

Most of the tax paid in South Africa is paid by individuals and it is logical that SARS will focus on maximizing its revenue with this segment of taxpayers. Thus, one can expect more auditing by SARS of employees’ tax returns.

Implications for employees

Any SARS queries will be initially directed at employees who will have to justify what they have claimed. Most employees will go back to their employer and say, for example, ‘there is this query on my car allowance and how should I respond?’

It would make sense for employers to ask all employees to run SARS’ questions through the employer so that SARS receive a consistent answer (employees may have their own tax adviser to help the employee respond to the query, but the adviser may not understand how the employer’s tax administration works).

Implications for employers

If SARS are not satisfied with the responses to their queries, they may start to look at how the employer administers its employee tax obligations.

SARS places a substantial onus on employers to collect tax and to pay it over to the Revenue authorities. This involves a knowledge of taxes like:

  • Remuneration and benefits paid to:
    • expatriate employees
    • local employees
    • executives and directors
  • Retirement benefits for employees, executives and directors
  • Payments to labour brokers and independent contractors
  • Share incentive schemes
  • Cash book payments
  • Gifts, prizes, awards and gift vouchers
  • Loans to employees
  • Company cars
  • Travel allowances and reimbursements
  • The Employment Tax Incentive (ETI).

These taxes are all different and require an understanding of tax legislation and the administrative systems required to process and collect the taxes.

In making their enquiries of the employer, SARS will most likely look to get an understanding of the employer’s systems and if dissatisfied with the response may audit the employer.

An audit can take up to one year to complete and apart from the stress of the audit there will be penalties, interest plus tax due where SARS finds the tax has been incorrectly calculated. SARS can also go back several years when they find errors, and this can become a costly exercise. At the moment, SARS appears to be homing in for the most part on the ETI, labour brokers, company cars and travel allowances – perhaps therefore pay particular attention to these taxes.

So, it is a prudent idea to frequently test how robust your systems are and how well you understand the tax laws. SARS often tweaks the law and issues interpretation notes on how businesses should levy and pay over tax.

Having an independent viewpoint can be invaluable when testing your systems – make use of your accountant to help you as apart from being at arm’s length he or she has the skill and experience to assist in this important exercise.

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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Communicate with candour – the “Oracle of Omaha” speaks

Logista_Sep-02“The CEO who misleads others in public may eventually mislead himself in private” (Warren Buffett)

Companies that are sustainable in the long term are honest with themselves and with all the businesses’ stakeholders.

The starting point is candour

If you are open and honest in your dealings with people you will gain their trust and once you have this people will follow you. The word “candid” comes from the Latin candeo which means to illuminate – the candid person is not afraid to shine a light on and confront the problems facing the business.

Make this a key aspect of your leadership

Train yourself to show candour in all your dealings. Doing this will mean you will deliver a consistent and increasingly trustworthy message to the company’s stakeholders. You will also find that your staff will follow this example which in turn will result in a tightly focused business. In the long term this will make the company more sustainable and profitable.

It works! The Candour Analytics Survey

In the United States one consultancy has attracted a lot of attention by drawing up and publishing such a survey. It has developed a model that measures the various communications issued by the company along with financial numbers and looks at a company from several angles:

  • Capital Stewardship;
  • Strategy;
  • Accountability;
  • Vision;
  • Leadership;
  • Stakeholder Relationships; and
  • Candour.

This model looks at the clarity of the communication and gives negative marks to what it considers “FOG” (Fact deficient, obfuscating, generalities). What is interesting about the Candour Analytics Survey is that the higher corporations score in this survey, the more they outperform the market – the top 25% Candour-ranked companies outperformed the S&P Index nearly threefold in 2017-2018 (29.7% versus the 11% return of the S&P Index).

As the consultancy says, candour is a proxy for trustworthiness.

Does it have credibility?

One of the biggest fans of this survey is Warren Buffett who has now made candour one of his key principles and as he stated in a communication to his shareholders: “…We will be candid in our reporting to you, emphasizing the pluses and minuses important in appraising business value. Our guideline is to tell you the business facts that we would want to know if our positions were reversed. We owe you no less.”

There is strong empirical evidence that the survey is meaningful and the endorsements it has obtained show it is well worth making Candour one of your key principles.

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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Spying on employees is becoming a big industry

Logista_Sep-04In a recent UK survey 72% of employees felt that their employers were eavesdropping on them.

Gathering information on employees is now a multibillion dollar industry and is continuing to grow as more sophisticated technology is launched.

Why are employers doing this?

A good example of how keeping tabs on employees can be beneficial is the destruction of the World Trade Centre on 11 September 2001, where many firemen died needlessly searching for people who were not in the buildings. Technology is available that pinpoints who is in an area and how long it will take to get everyone to safety.

It is also possible to determine when people enter sensitive areas or try to access confidential information.

An employer also needs to know if its staff are passing on business secrets or running down the company to friends, fellow employees and the public – damage to a firm’s business reputation is one of the biggest existential risks faced by a company.

Employer versus employee

It is a balancing act as employees have a right to privacy and a right to their personal information being protected whilst as noted above the employer, in order to trade successfully, needs to be aware of potential harmful employee actions.

Maintaining trust

The most important issue is to maintain trust between employer and employee. Once this is undermined the harm to both parties can be lasting and severe.

Management need to be open with their staff if they intend to monitor them. Tell the staff what you plan to track (emails, social media, telephone conversations etc) and that any employee can request the information you have gathered and how you will use it, and destroy it once it is no longer needed. Update staff contracts and conditions of employment with these measures.

An open process with staff will help to clear up uncertainties they have and will keep the trust between you and your employees. It will also enable your business to protect itself against reputational damage from employees leaking negative information about your business.

Protection of Personal Information Act (POPIA)

POPIA awaits the announcement of a commencement date before the one year grace period starts running and among other things will allow staff to compel employers to give their staff access to all the information that the business holds on them.

Technological advances have made it feasible to intercept and analyse your employees’ communications. In view of the arrival of POPIA and more importantly the relationships you have with your staff, think about this carefully, particularly as there will be harsh penalties for any material POPIA lapses.

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 big mac index says the rand is way undervalued

Logista_Aug-03f“Our results indicate that the Big Mac Index is surprisingly accurate in tracking exchange rates over the long-term, which is consistent with previous PPP research findings” (ScienceDirect)

For decades the Economist has been publishing its Big Mac Index to give an estimation of how under- or over-valued a currency is. This is done by comparing the price of a MacDonalds Big Mac Burger in a country to the price of the burger in the USA.

Although this began as a lighthearted attempt to establish currency values, it has gained traction and credibility.

Purchasing Power Parity (PPP)

It is a tenet of economic theory that over time currencies will equate to the cost of goods and services in other countries. Thus, if a basket of goods and services costs, say,  $20 in the USA and costs R100 in South Africa, then the Rand to US dollar rate should equal R5 to 1 US$.

The Big Mac Index

The cost of a Big Mac is $5.74 in the U.S. whilst the cost in South Africa is R31 which translates into the PPP rate of US$1 = R5.40. As the actual rate at the time the index was measured was R14.18 to the dollar, so the Rand is 61.9% undervalued (14.18-5.5/14.18).

How do we compare worldwide?

The Economist looks at approximately 60 countries in compiling its index and we rank as the third most undervalued currency, ahead only of Malaysia and Russia.

Whilst some will dismiss the Big Mac index, it does underline that South Africa faces many headwinds with a potential downgrade to full junk status (Moodys is expected to announce its decision on South Africa’s debt in October after the Medium Term Budget), a stalled economy and uncertainty as to how to re-ignite economic growth. As economic growth is dependent on investment another key issue is how to make South Africa an attractive place to invest.

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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