Economic – TMMBS

Sars Escalation of South Africas Counterfeit Crisis

tmmbsonline — Fri, 26 Apr 2024 06:27:49 +0000

Sars Escalation of South Africa's Counterfeit Crisis

Sars Escalation of South Africas Counterfeit Crisis

Counterfeiting remains a pervasive issue across the globe, undermining economies, threatening consumer safety, and challenging the integrity of brands. In this complex landscape, the South African Revenue Service (SARS) has emerged as a key player in the fight against counterfeit policies. With a mission centered on safeguarding authenticity and upholding regulatory compliance, SARS has implemented a multifaceted approach to combat counterfeiting.

With illicit trading also being a major concern and risk, it not only threatens consumers but the revenue service as well. It steals from SARS. Furthermore, companies close down which means that people are losing their jobs and livelihoods which then leads to other forms of criminality. From a personal income tax as well as company income tax perspective, when companies close down it becomes a loss to SARS. Acts which constitute counterfeiting relate to the following:

Being in possession of infringing goods in the course of business;
Manufacturing or producing infringing goods for non-private or domestic use;
Selling, hiring or exchanging of infringing goods;
Exhibiting infringing goods for the purposes of trade;
Importing infringing goods into or through or exporting from South Africa; and
The act of dealing in counterfeit or suspected counterfeit products.

All these acts are criminal offences as they threaten the economy of the country.

Understanding the impact of counterfeiting

Counterfeiting poses multifaceted challenges that extend beyond mere financial losses. It erodes consumer trust, endangers public health through substandard products, facilitates illicit activities, and weakens the economy by depriving legitimate businesses of revenue. In South Africa, like in many other countries, counterfeiting spans various industries, including pharmaceuticals, electronics, fashion, and automotive parts, amongst others. When considering the associated loss of tax revenue, the true cost of counterfeiting could be much higher and the problem seems to be getting worse. Given the current economic climate in South Africa and in many of our neighboring countries, there is a steady increase in the demand for cheaper goods. This demand is often satisfied through the purchase and consumption of counterfeit goods, causing the counterfeiting marketing to grow at a steady and unprecedented rate.

SARS' Strategic Initiatives

SARS recognizes the gravity of the counterfeit issue and has adopted a proactive stance to address it effectively. The agency's initiatives encompass a combination of enforcement measures, collaboration with stakeholders, technological advancements, and public awareness campaigns.

Customs Enforcement: SARS leverages its customs infrastructure to intercept counterfeit goods at ports of entry. Through risk profiling, intelligence gathering, and collaboration with international counterparts, SARS identifies and seizes illicit shipments, thereby preventing these goods from entering the local market.
Collaboration with Regulatory Bodies: SARS collaborates closely with regulatory bodies such as the South African Bureau of Standards (SABS) and the Medicines Control Council (MCC) to ensure that imported goods comply with quality and safety standards. This partnership helps in detecting counterfeit products that pose risks to public health and safety.
Technology Integration: Embracing technological advancements, SARS employs sophisticated tools such as scanning devices, X-ray machines, and data analytics to enhance its detection capabilities. These technologies enable SARS to identify suspicious shipments more efficiently and conduct targeted inspections.
Capacity Building: Recognizing the need for specialized skills in combating counterfeiting, SARS invests in training programs for its personnel. These programs focus on counterfeit detection techniques, understanding emerging trends in illicit trade, and legal frameworks governing intellectual property rights.
Public Awareness: SARS collaborates with the media, industry associations, and consumer advocacy groups to raise awareness about the risks associated with counterfeit products. By educating the public, SARS empowers consumers to make informed choices and report suspicious activities.

Legal framework and international cooperation

Counterfeiting is a global issue with far-reaching consequences. It undermines international trade relations, impacts investor confidence and is even associated with the funding of criminal and terrorist organizations. Despite the challenges faced in combatting counterfeiting in Africa such as porous borders, non-specific legislation and limited resources, there is renewed commitment at national levels throughout Africa to combat the importation and sale of counterfeit goods, specifically to protect intellectual property rights, encourage foreign investment and curtail the loss in tax revenue.

SARS operates within a robust legal framework that empowers it to take decisive action against counterfeiters. The agency enforces laws such as the Counterfeit Goods Act, which prohibits the manufacture, sale, and distribution of counterfeit goods. Section 15 (1) entitles an owner of intellectual property to apply to the SARS Commissioner to seize and detain goods incorporating specific intellectual property rights during a particular period and calculate the infringement that might exist in terms thereof, or assist with the protection of that right for that period. Additionally, SARS participates in international forums and partnerships to strengthen cooperation in combating transnational counterfeit networks.

SARS' efforts have yielded significant successes in curbing counterfeit activities. Seizures of counterfeit goods, arrests of perpetrators, and successful prosecutions demonstrate the agency's commitment to upholding authenticity. However, challenges persist, including the evolving nature of counterfeiting techniques, the proliferation of online platforms for illicit trade, and the need for continuous adaptation to emerging threats. As SARS continues its mission against counterfeit policies, innovation and collaboration will remain crucial. Embracing emerging technologies such as blockchain for supply chain transparency, fostering public-private partnerships, and harmonizing efforts with global stakeholders will strengthen SARS' ability to combat counterfeiting effectively.

SARS' unwavering dedication to safeguarding authenticity and combating counterfeiting underscores the agency's pivotal role in protecting consumers, supporting legitimate businesses, and upholding the rule of law. Through a comprehensive approach encompassing enforcement, collaboration, technology, and awareness, SARS stands as a formidable force in the ongoing battle against counterfeit policies

Beware the Rise of Scandals: Employing Individuals with Fake Qualifications

tmmbsonline — Tue, 09 Apr 2024 05:01:57 +0000

Beware the Rise of Scandals: Employing Individuals with Fake Qualifications

Some job seekers and academics have developed a deadly disease called the “Fake Qualification Syndrome”. South African Qualifications Authority CEO, Ms Nadia Starr, believes that misrepresentation by a person of his or her qualification represents an act of fraud. The “key crisis” is that not enough people are scrutinizing qualifications presented to them. The council which sets and monitors standards for general and further education, Umalusi, has warned the public about the rise in fake qualifications either bought from fraudsters or received through unaccredited private institutions. Umalusi is seriously concerned about the mushrooming of bogus [learning institutions – particularly private] as well as the increase in the reported cases of fake certificates being sold to unsuspecting members of the public.

Such certificates received this way have no value because they do not appear in the certification databases of Umalusi and the National Learners` Records Database (NLRD) which is managed by the South African Qualifications Authority. The three main assessment bodies accredited by Umalusi to offer the National Senior Certificate are the DBE (Department of Basic Education), IEB (Independent Examinations Board), and SACAI (South African Comprehensive Assessment Institute).

In today's competitive job market, the pressure to hire qualified and skilled individuals can sometimes lead employers down a dangerous path. Recent years have seen a troubling rise in scandals involving the appointment of individuals with fake qualifications, posing significant risks to businesses, their reputation, and even legal repercussions. This article serves as a warning to employers, urging them to exercise due diligence and implement robust verification processes to avoid falling victim to such scandals. With the proliferation of online education and certification programs, it has become easier for individuals to obtain fraudulent qualifications. Diploma mills, websites offering fake degrees for a fee, and forged certificates are just some of the methods used by unscrupulous individuals to deceive employers. The consequences of hiring someone with fake qualifications can be severe. Not only does it undermine the integrity of the hiring process, but it can also lead to incompetence in crucial roles, financial losses due to poor performance, and damage to the organization's reputation.

Several high-profile cases have brought this issue to the forefront. One such example is the scandal involving a major technology company that hired a senior executive claiming to have an advanced degree from a prestigious university. It was later revealed that the degree was fake, leading to public embarrassment for the company and the dismissal of the executive. Similarly, in the healthcare sector, there have been instances where individuals with forged medical licenses or credentials were employed, putting patients' lives at risk and exposing healthcare providers to legal liabilities.

The Impact on Businesses

The repercussions of employing individuals with fake qualifications extend beyond immediate operational challenges. Businesses may face legal consequences for negligent hiring practices, damage to their brand reputation, loss of customer trust, and decreased employee morale. Moreover, in regulated industries such as finance or healthcare, regulatory bodies may impose hefty fines or revoke licenses for non-compliance with verification standards.

Best Practices for Employers

To mitigate the risk of hiring individuals with fake qualifications, employers should adopt the following best practices:

Thorough Background Checks

Conduct comprehensive background checks, including education verification, employment history, and professional credentials. Verify documents directly with issuing institutions rather than relying solely on copies provided by candidates.

Use of Third-Party Services

Engage reputable third-party verification services that specialize in authenticating educational and professional credentials. These services have access to databases and contacts with educational institutions to verify the legitimacy of qualifications.

Interview and Skills Assessment

Supplement credential verification with thorough interviews and skills assessments to gauge candidates' actual knowledge and capabilities. Look for inconsistencies or gaps in their qualifications during the interview process.

Educate Hiring Managers

Train hiring managers and human resources personnel on spotting red flags indicating fake qualifications. Encourage a culture of transparency and ethical hiring practices within the organization.

Regular Audits and Compliance

Conduct regular audits of employee credentials to ensure ongoing compliance with qualification requirements. Establish clear policies and procedures for handling discrepancies or suspected fraudulent activities.

The rise in scandals related to fake qualifications underscores the importance of diligence and vigilance in the hiring process. We advise all employers both in the public and private sectors to consider verifying their current and future employees’ qualifications through the verification agencies whose contact details are available on the website of Umalusi.

Employers must prioritize authenticity and integrity to safeguard their organizations from reputational damage, legal liabilities, and operational disruptions. By implementing robust verification measures and promoting ethical hiring practices, businesses can mitigate the risks associated with hiring individuals with fake qualifications and maintain a trustworthy and competent workforce. Finally, employment contracts and policies should explicitly state that falsifying qualifications is unacceptable, “and the consequences of such misconduct should be clearly stated.

Beware the Rise of Scandals: Employing Individuals with Fake Qualifications

The Impact Of Sanctions On The South African Financial System

tmmbsonline — Thu, 20 Jul 2023 14:57:22 +0000

The Impact Of Sanctions On The South African Financial System

Sanctions can have a significant impact on the South African financial system, affecting various sectors and aspects of the economy. The specific impact of sanctions on South Africa would depend on the nature, scope, and duration of the sanctions imposed, as well as the response of the South African government and financial institutions. Due to the war between Russia and Ukraine, the SARB is worried about Russia-linked sanctions as they have the potential of crippling the financial system thus affecting financial stability. Here are some of the potential impacts of sanctions on the South African financial system:

Trade and Investment: Sanctions can restrict or prohibit trade and investment between South Africa and the countries imposing sanctions. This can limit South Africa's access to international markets, disrupt supply chains, reduce foreign direct investment, and hinder economic growth. Reduced trade and investment flows can lead to a decline in export revenues, job losses, and lower economic output.
Financial Institutions: Sanctions may target specific financial institutions in South Africa, restricting their access to international financial markets and transactions. This can impede their ability to raise capital, conduct cross-border transactions, and maintain correspondent banking relationships. Financial institutions may also face increased compliance costs and reputational risks, as they navigate the complex regulatory environment associated with sanctions.
Currency and Exchange Rate: Sanctions can impact the value of the South African currency, the rand. Restrictions on trade and investment can lead to a decrease in foreign currency inflows, which may put downward pressure on the rand's exchange rate. A weaker currency can result in higher inflation, increased import costs, and reduced purchasing power for businesses and individuals.
Capital Flows: Sanctions can affect capital flows into and out of South Africa. In response to sanctions, investors may withdraw funds from South African markets, leading to capital flight. This can result in a decline in foreign reserves, a decrease in liquidity in the financial system, and potential instability in the banking sector. Restrictions on capital flows can also limit South Africa's ability to access international financing for infrastructure projects and economic development.
Sovereign Debt: Sanctions can make it more challenging for South Africa to borrow from international markets and refinance existing debt. The increased risk perception associated with sanctions can lead to higher borrowing costs and reduced investor appetite for South African sovereign bonds. This can result in a higher debt burden and potential fiscal challenges for the government.
Economic Growth and Development: The cumulative impact of sanctions on various sectors of the South African economy can hinder economic growth and development. Reduced trade, investment, and capital flows can hamper job creation, limit technological advancements, and impede the country's ability to address socio-economic challenges such as poverty, inequality, and unemployment.

The SARB is now watching for a direct impact from the war on the South African financial system, by way of an expression of anger by Western nations. Sanctions that have already been imposed on South African companies by the US includes being banned from benefiting from the reconstruction of Ukraine. The possibility of sanctions that could affect the banking system rather than just, say, construction companies, came up in the diplomatic fight about the supposed transfer of South African weapons to the Russian ship but, the US made it clear that cutting South Africa out of the African Growth and Opportunity Act (AGOA) would come first.

The general sanctions that are commonly imposed by countries or international bodies serve as a basis for understanding the potential measures that might be taken:

Diplomatic Sanctions: Diplomatic measures may include the expulsion or restriction of diplomats, the suspension of diplomatic relations, or limitations on official visits between countries. These sanctions aim to express disapproval and exert political pressure on the targeted country.
Economic Sanctions: Economic sanctions can take various forms and target different sectors of the economy. Some possible measures include:
- Trade Restrictions: Imposing trade barriers, such as import or export bans, tariffs, or quotas on specific goods or sectors. These restrictions can disrupt trade flows, impact supply chains, and reduce the export/import revenues of the targeted country.
- Financial Sanctions: These measures typically involve freezing the assets of targeted individuals, companies, or financial institutions, preventing them from accessing international financial systems. Financial sanctions can also include restrictions on financial transactions, such as limits on international money transfers or the use of certain currencies.
- Technology and Arms Embargoes: Restricting the export or import of specific technologies, military equipment, or dual-use goods. This aims to limit the targeted country's access to advanced technology and military capabilities.
- Investment Restrictions: Imposing limitations on foreign direct investment (FDI) or imposing divestment requirements. These measures can discourage foreign investors from engaging with the targeted country or existing investors from expanding their operations.
Travel Bans and Visa Restrictions: These sanctions can involve denying entry or imposing travel bans on individuals associated with the targeted country. They can affect government officials, business leaders, and individuals involved in specific sectors.

Should sanctions be imposed, though, the result could be a catastrophic financial crisis for South Africa, especially if it is banned from transactions in not only dollars but also in British pounds and euro. SA is highly dependent on investment inflows to fund its trade deficit, and that money comes mostly from the US, EU, and UK. It's important to note that the implementation of sanctions is a complex and politically driven process. The specific measures, if any, and their severity would depend on the geopolitical dynamics, the perceived threat or behavior, and the response of other countries and international organizations.

The insufficient and unreliable electricity supply is a significant drag on economic growth. It entrenches and contributes to the challenge of slow and inequitable domestic growth. As with sanctions, the SARB is required to prevent such trouble as it is legally obliged to take steps to avoid the materialization of such a risk.

The Domino Effect: Exploring the short-term and long-term impact of a decrease in the GDP

tmmbsonline — Wed, 15 Mar 2023 16:23:12 +0000

The Domino Effect: Exploring the short-term and Long-term impact of a decrease in the GDP

The term Gross Domestic Product (GDP) refers to the measuring of a country’s economic output. The term “output” means measuring the performance of a country’s economy. How the GDP is calculated is by taking the monetary worth of a country’s goods and services after a certain period of time, usually 1 year. The GDP represents economic production and growth which has a large impact on everyone within the economy. When the GDP growth is strong, firms hire more workers and can afford to pay higher salaries and wages, which leads to more spending by consumers on goods and services. Firms also have the confidence to invest more when economic growth is strong, and investment lays the foundation for economic growth in the future. When GDP growth is very low or the economy goes into a recession, the opposite applies (workers may be retrenched and or paid lower wages, and firms are reluctant to invest).

Africa’s most industrialized nation, South Africa, has been declared as a State of disaster as rolling blackouts imposed by Eskom transpire. Its GDP has declined by 1.3% after the energy crisis which has led to power cuts strangles the economy. Other factors include the finance and trade sectors which are also the biggest contributors to the economy’s decline. To combat the energy crisis, President Cyril Ramaphosa has appointed Kgosientsho Ramokgopa as electricity minister to tackle the crisis. The decline in South Africa’s GDP means it has been largely flat since the end of 2019, even as the country’s population has increased by 3.5%. The deadly riots that transpired in 2021 wrecked critical infrastructure in the country’s two most economically important provinces, Kwa-Zulu Natal and Gauteng. The country’s economic growth is not only affected by Eskom’s current challenges but by the Covid-19 pandemic, which amplified joblessness and poverty, in one of the world's most unequal countries. Economic growth slowed down for about 2 years. Expenditure on real GDP decreased by 1.3% in the fourth quarter of 2022.

The Domino Effect: Exploring the short-term and Long-term impact of a decrease in the GDP

With regards to expenditure on GDP,according to the StatsSA report, households spent 0.9% more on goods and services, which contributed 0.6% to the overall change in expenditure on GDP. Spending on the “other” category, restaurants and hotels, and furnishings, household equipment, and maintenance contributed positively to the increase, while spending on food, alcohol, and tobacco, transport, and recreation had a negative impact. The government’s final consumption expenditure decreased by 0.7%, while total gross fixed capital formation increased by 1.3%, mainly due to increases in transport and machinery equipment. The report also indicated that there was a R29 billion inventory build-up in three industries – mining and quarrying; manufacturing; and trade, catering, and accommodation. Net exports contributed negatively to GDP growth due to a decrease in exports of goods and services, mainly in base metals, mineral products, and paper.

How these sectors have been affected by the decline in the GDP are as follows:

Finance, real estate and business services: According to the latest Stats SA report, the finance, real estate, and business services industry fared poorly in the last part of the year, as it went down by 2.3%. This made the GDP growth go down by 0.6%. Within this industry, activities like banking, insurance, and other related services like pension funding and auxiliary activities, also did not have much business going on.
Trade, catering and accommodation industry: The trade, catering and accommodation industry decreased by 2.1% in the fourth quarter, contributing -0.3 of a percentage point to GDP growth, Stats SA said. Decreased economic activity was also reported for wholesale trade, catering and accommodation industries.
Mining and quarrying: The report also revealed that the mining and quarrying industry went down by 3.2%. This decrease resulted in a negative impact of 0.1% on the GDP growth. The report stated that this could have resulted from the production of diamonds, iron ore, and platinum group metals (PGMs) going down.
Agriculture, forestry and fishing: The agriculture, forestry and fishing industry decreased by 3.3% in the fourth quarter, contributing -0.1 of a percentage point to GDP growth. Decreased economic activities were reported for field crops and horticulture products.

Manufacturing: The manufacturing industry went down by 0.9%. Out of the 10 manufacturing divisions, five reported a decrease in growth rates during this period. The food and beverages division played the biggest role in the decrease. The basic iron and steel, non-ferrous metal products, metal products, and machinery division also had a significant contribution to the decline in this industry.

The 1.3% decline in South Africa’s GDP means that the value of all goods and services produced within the country’s boarder has affected its economy. When an economy’s GDP declines, it can have both short-term and long-term implications on the country and its citizens. The short-term implications of a decline in the GDP growth are often felt immediately. The implications are as follows:

This decline in the GDP slows down economic activity, which can lead to a decline in employment and income. Household spending has increased by 0.9%. Although more was spent on food, alcohol and tobacco, transport and recreation, South Africans received less for their money. This contributed negatively to the slow GDP growth. The result is a vicious cycle of reduced economic activity that can lead to recession.
One of the most important short-term effects of the decline in the GDP is unemployment. If companies are not making as much money, they may have to lay off workers or reduce their working hours. This leads to spending by people with lower incomes, which can further reduce economic activity.
Another short-term effect is a decline in government sector revenues. Again, if companies are do not make much money, they can pay less taxes. Also, when people loose their jobs, they may need government assistance in the form of unemployment benefits or other social security programs. This therefore strains state budgets and lead to a reduction in the public sector.

The long-term implications of a decline in GDP growth are often more difficult to predict and can be more serious than the short-term implications. The implications are as follows:

One of the most important long-term effects is the effect on economic growth. If economic activity is lower, it may be difficult for companies to invest in research and development or new technology which can limit future growth.
Another long-term effect is on the country’s standard of living. When economic activity weakens, people may not be able to afford basic needs such as food, housing and health care. This can lead to the deterioration in the quality of life of citizens and also affects their health.
A decline in international trade also has an effect in a country’s GDP growth. If a country’s economy is struggling, it becomes less attractive to foreign investors, which can lead to fewer exports and less foreign investment. Furthermore, if a country exports more than it imports, its economic value is also severely affected.

How Is (GDP) Calculated? there are three methods of calculating the figure: the production approach, the income approach, and the expenditure approach; and they should all in theory add up to the same number. The production approach is the sum total of market value of final goods and services produced in a country during 1 year. In comparison, the income approach simply adds the sum total of all incomes of all individuals living in a country during that same year. The most commonly used method however is the expenditure approach. With the expenditure approach, we calculate the sum of all consumption, investment, government spending, and net exports (exports minus imports).

An important question is,” will South Africa’s weak economy grow?” the country’s economic growth cannot be easily predicted because it is affected by multiple factors. The most important factor is with regards to politics.

Responding to South Africa’s budget, delivered by Finance Minister Enoch Godongwana last month, it seems like the failing electricity sector, with record levels of load-shedding, are likely to lead to lower growth this year and next than the government currently forecasts. In short, it can be said that the decrease in GDP can have significant short-term and long-term implications on the economy and the citizens of the country and the government and policy makers must act to address these issues and support economic growth to avoid a prolonged recession. A manner in which they can deal with this is to ensure that they work hard and diligently to being removed from the greylist, and deal with the energy crisis.

What greylisting entails and what it means for south africas economy

tmmbsonline — Thu, 02 Mar 2023 14:43:48 +0000

What greylisting entails and what it means for south africa’s economy

What greylisting entails and what it means for south africas economy

Financial crime is a serious concern for many countries around the world as it threatens the safety and soundness of financial systems world-wide. In the effort to combat money laundering, terrorism financing and other financial crimes, international organizations such as the Financial Action Task Force (FATF) and the European Union (EU) have established a set of standards that countries are expected to meet. Failure to meet these standards can result in a country being greylisted, which has significant implications for the economy. For a country to be declared greylisted, it is placed under valuation by the Financial Action Task Force (FATF).

Essentially, what greylisting means is that a country has been recognized as having compliance issues but has committed to address strategic inadequacies to counter money laundering and terrorist financing within a given timeframe. When a country has been put onto the grey list, the country is monitored by the FATF and strict regulations are imposed on them. When a country is greylisted, it means that its government has adopted an action plan or strategy to address its deficiencies identified during its mutual evaluation after an observation period, and to implement such an action plan within a defined time period, and with FATF monitoring such implementation. The implications of being placed onto the grey list is an indication that a country faces serious potential problems such as a subsequent shrinking economy, a downgrade of ratings, and a lack of trade opportunities.

What greylisting entails and what it means for south africas economy

What is greylisting ?

The Financial Action Task Force (FATF) is an inter-governmental body that supervises money laundering and terrorist financing around the globe. It also finances the proliferation of weapons of mass destruction. The purpose of the FATF is to prevent these illegal activities and the harm they cause to society from transpiring. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. A country may be greylisted for a variety of reasons:

Lack of Adequate Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Measures. Countries are expected to have effective AML/CTF measures in place to prevent money laundering, terrorism financing and other financial crimes. If a country is found to have insufficient measures, it may be greylisted.
Insufficient Cooperation with other countries. Countries are expected to cooperate with each other in combatting financial crimes. If a country is found to be uncooperative, it may be greylisted.
Presence of high-risk industries. Countries with high-risk industries for financial crimes, such as casinos, may be more likely to the greylisted.
Lack of political will. In some cases, a country may lack the political will to enact and enforce the necessary AML/CTF measures.

In 2021, the FATF conducted a mutual valuation which was concluded in October 2021. The valuation found holes in South Africa’s strategic systems to combat money laundering and terrorist financing. This was due to low levels of transparency and inadequate internal capabilities and systems, which led South Africa to be placed under review by the FATF and on the brink of being greylisted. South Africa found itself on a verge of being greylisted largely due to the collapse of commercial crime investigation and prosecution during the State capture period. South Africa is facing the consequences for its failure to implement effective prosecutions for crimes like money laundering and terrorist financing. Sadly, on February 24 2023, South Africa together with Nigeria were officially declared greylisted. The decisions were announced by the FATF. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed time frames. The average time spent under greylisting is 3 years, but the range is very wide, from a minimum of 1 year to a maximum of 7 years.

What greylisting entails and what it means for south africas economy

Furthermore, the length of time a country remains on the FATF grey list depends on the speed in which it resolves the shortcomings identified in its AML/CFT framework. South Africa has committed to resolve the remaining eight strategic actions by January 2025 on the condition that regular updates be provided, which creates an opportunity on set intervals to have South Africa’s greylisting reviewed by the FATF. However, the government hopes to address them sooner, possibly in 2024.

The initial mutual evaluation report had 67 recommended actions which South Africa had to action. In February 2023, at the time the greylisting decision was made, the FATF acknowledged the significant and positive progress made, and concluded that 15 actions remain open, linked to eight strategic actions.

The threat of greylisting was first announced in 2021, and as result, President Cyril Ramaphosa’s government has worked hard to address the concerns raised by the FATF in its mutual evaluation report, and has submitted an action plan to this end, while also participating in regular follow-up evaluations to assess progress. Some of the key actions coordinated by various stakeholders since 2021 include:

Passing several pieces of legislation aimed at improving the country’s financial crime laws, including the General Laws (Anti-Money Laundering and Counter Terrorist Financing) Amendment Bill in December 2022.
The mandate of the Financial Intelligence Centre Act (FICA) has already been widened to include more effective monitoring and detection capabilities.
The establishment of the Fusion Centre, which brings together bodies like the NPA, SIU, SARS, the Hawks, Crime Intelligence, State Security Agency and the FIC. Since its inception the work of the Fusion Centre has led to the preservation and recovery of approximately R1.75 billion in criminal assets.
In the Mid-Term Budget Policy Statement, Treasury made R14bn available to capacitate agencies that are critical in the fight against crime, including those that fight financial crimes.

The biggest concern is the impact that greylisting has on consumers, businesses and the country as a whole.

Being greylisted can have significant implications for the economy of a country. Some key implications include the following:

Damage to Reputaion. Being greylisted can also damage the reputation of a country. This is the main implication on a greylisted country. It makes it difficult for the country to attract tourists and foreign investors, and can also impact the country’s ability to negotiate favorable trade agreements. Furthermore, a country’s ineffectiveness in combatting financial crimes like corruption and money-laundering as well as terror financing is deemed to be below international standards.
Reduced Foreign Investment. Being greylisted may also lead to loss of confidence by foreign investors. This can result in a reduction of foreign investment in a country, which can have a negative impact on economic growth.
Increased Cost of Capital. If a country is greylisted, it may find that the cost of borrowing money increases. This can make it more expensive for the government and business to borrow money, which can make it more difficult for them to finance their operations.

With regards to the impact that greylisting has on the economy, President Cyril Ramaphosa stipulated that the strategic deficiencies identified by the FATF are not directly related to the financial sector which means that financial stability and costs of doing business with South Africa will not be seriously impacted by the greylisting. The President’s word gives South Africans some assurance however, the greylisting came at an unfortunate time because it represents bad news heaped onto the worsening energy crisis and other critical failings in areas such as transport and water which are essential to a functioning economy.

When looking at greylisting from a business and consumers point of view, transactions made by companies and individuals from South Africa will be seen as high-risk transactions, prompting difficult administrative and compliance obligations, and may reduce international trade with South Africa. South Africa’s biggest traders such as the UK will immediately impose a high risk category on the country, which will have a negative impact on investment flows. Investment flows are important, because it is through foreign direct investments that the country is able grow its economy and combat high levels of unemployment.

The money that South Africa has or is been using to pay for the risk premium imposed by the global Development Finance Institutions (DFIs), could have been used to address South Africa’s developmental needs such as health-care, education, infrastructure and job creation. However, it is not the end of the world for South Africa seeing that it’s on the grey list. The positive side of being greylisted is that, although the greylisting increases government’s foreign-funding costs and weigh on trade flows, it’s unlikely to “significantly” affect South Africa’s creditworthiness. It also grants the government a “wake-up” call in the need to increase its international cooperation on the law enforcement side and the use of financial intelligence. So all that useful information that financial institutions are providing by way of suspicious transaction reports and activity- that all needs to be made much better use of by law enforcement. If South Africa continues to make significant improvements in effectiveness and swiftly exits the grey list, it will have a limited impact on financial stability and costs of doing business with South Africa, particularly if South Africa moves speedily to get out of greylisting.

2023 Budget Speech

tmmbsonline — Mon, 27 Feb 2023 08:48:46 +0000

The fundamental changes and its implications: revenue and tax proposals

Finance minister Enoch Godogwana delivered the 2023 budget speech on 22 February 2023. He touched on multiple points, including the current state of the country’s economy and its growth estimates; Impact of load shedding on small growing businesses; the social wage as well as the new tax proposals. When delivering his speech, the finance minister was trying to strike a balance between spending priorities and the limited resources available to the National Treasury.

With the country facing its current challenges, i.e., unemployment, inflation, poverty, Eskom’s power cuts amongst other things, according to economic analysts and researchers, there has been a growth in the country’s economy. However, with the International Monetary Funds projects decreasing from an estimated 3.4% in 2022 to 2.9% in 2023 including the ongoing war in Ukraine, therefore causes global economic risks which have the potential of impeding the country’s economy.

When looking at the revenue and tax proposals stipulated within the budget speech, there has been a change welcomed by consumers and businesses alike. With SARS being under the leadership of Commissioner Edward Kieswetter, there also has been gross tax revenue projections which have been revised upwards by over R10 billion. This therefore serves as a testament that SARS has improved significantly in its tax collection efforts thus bearing fruit.The increase of the tax-to-GDP ratio from 25.4% to 25.7% is marginal but this does not mean that ultimately more revenue will be taken out of the hands of businesses and consumers in terms of the GDP.

2023 budget speech

What this means is that there were no major tax proposals for the year 2023.

The finance minister stipulated that the personal income tax bracket will be fully adjusted for inflation which will increase the tax-free threshold from R91.250 to R95.750.
With regards to the promoting investments in renewable energy, the general fuel levy together with the Road Accident Fuel levy will not be increased this year. This will take effect from 1 April 2023 for 2 years. This is viewed as a ‘tax relief’ intervention.
Medical tax credits will be increased by inflation, to R364 per month for the first 2 members, to R246 for additional members.
The retirement tax table will be adjusted upwards by 10%. What this means is that the tax-free amount that can be withdrawn at retirement increases to R550 000. This is good news for the country’s retirees who will enjoy moderate retirement fund lump sum withdrawal benefits with inflationary adjustment- this brings welcomed relief for the man on the street.
Transfer duty will be increased by 10%, allowing properties under R1.1 million to avoid any transfer duty payments.
For renewable energy, two tax incentives has been introduced to encourage both individuals and businesses to invest in renewable energy and help the power utility Eskom by increasing the generation of electricity. In the SONA, President Cyril Ramaposa stipulated that people will get a 25% rebate on the cost of installing rooftop solar panels at home. The rebate in this regard is capped at R15 000. This therefore can be used to reduce their tax liability in the year 2023-2024. As of 1 March 2023, businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewable energy. Businesses can deduct 50% of the costs in the first year, 30% in the second and 20% in the third for qualifying investments in wind, concentrated solar, hydropower below 30 megawatts, biomass and photovoltaic projects above 1 megawatt. There will be no thresholds on the size of projects that qualify. This incentive will therefore be available for two years to stimulate investment in a short term.
The government intends to publish a revised draft legislation on the two-pot retirement system. This system will be implemented from 1 March 2024 and any withdrawals from the accessible “saving pot” will be taxed as income in the year of withdrawal.
Finally, there will be an increase in excise duties on alcohol and tobacco of 4.0% which is in line with inflation.

2023 budget speech

Furthermore, the zero increases in corporate tax, personal income tax, VAT, fuel levy, and Road Accident Fund will go a long way to help ease cashflow pressure on businesses. Over the last 18 months, businesses have had to navigate challenging economic conditions including worsening loadshedding and increasing interest rates. Having the necessary support and assistance from the government to stimulate the economy is key to survival.

The causes and effects of global warming on agriculture and food supply

tmmbsonline — Tue, 14 Feb 2023 20:24:55 +0000

The causes and effects of global warming on agriculture and food supply

Agriculture is the largest sector that provides a nation with food and employment. It is thus the backbone of a stable nation, socially and politically. Agriculture is currently being affected by climate change and it is also a contributor to climate change. A question asked is how does agriculture affect climate change when climate change affects agriculture? Agricultural activities like breeding of livestock, deforestation, ploughing of fields and the use of pesticides and other agrochemicals contribute to climate change through their output of greenhouse gas emission and carbon footprint. Agriculture is facing droughts, flooding, sea level elevations, natural disasters and health hazards for employees.

As a result of these exponents, crop failure that leads or creates famines transpires thus leading food to rise. Agriculture and climate change are an interrelated process that exists mutually making it harder to reduce one without affecting the other. Climate change disrupts and affects the quality and supply of food. Climate change is very likely to affect food at a global, regional and local level. The severe weather also interrupts the delivery of food and resulting spikes in food prices. The increasing temperatures can contribute towards the spoilage and contamination of food. This therefore affects businesses in such a way that they loose large amounts of stock which then leads them to the price increase of what they can supply to generate a profit which then affects the food affordability of consumers.

In South Africa, vulnerability to climate change and variability is intrinsically linked with social and economic development. When looking at the farming sectors, farmers in the Western Cape will be confronted with high exposure to extreme events and climate change/variability; however, their adaptive capacity (particularly of commercial farmers) is high due to its greater wealth, infrastructure development and good access to resources. Furthermore, in Limpopo, KwaZulu-Natal and Eastern Cape it will only take moderate climate changes to disrupt the livelihoods and well-being of the rural inhabitants, who are largely subsistence farmers thus climate change will increase the burden of those who are already poor and vulnerable.

Alongside but linked to the climate crisis is a growing global food crisis. This is a systemic crisis built on a profit-driven, globalized and carbon-based food regime which contributes to greenhouse gas emissions, undermines the food needs of a billion hungry people, has contributed to widespread food inequality and has caught at least two billion people in a transition to diets that are based on cheap and fast food, resulting in obesity and a host of attendant diseases such as sugar diabetes and heart disease. These crises are set to get worse. The most valued crops in South Africa are maize, which is exported, and wheat, which is not enough to provide the country’s needs. Fresh fruit and wine bring in the most foreign earnings. All of these are under threat from increased temperatures and changing rainfall patterns. This as a result has become strenuous our economic well-being.

Stressors such as population growth may magnify the effects of climate change of food security. Climate change affects each and every country’s agriculture differently due to its geographical location. In South Africa, fossil fuels (coal, oil and gas) are by far the largest contributor to climate change. Climate change could reduce the availability of labor and productivity costing South Africa up to 11% of GDP per capita by the end of the century. However, with the right set of policies, changes in the job market related to rising temperatures might contribute to reducing the gender pay gap in rural communities.
Common constraints to successful small-scale and emerging commercial agriculture include lack of access to finance, challenges regarding land governance in the communal areas, access to water, the need for effective extension services, and poor infrastructure, such as roads, electricity and access to markets.

In conclusion, climate change is inevitable, and if emissions of greenhouse gases continue unabated, future changes will substantially exceed those that have occurred so far. The perceptions and behaviors, the processes and factors leading to decision-making, and the goals and convictions of individuals and communities appear fundamental to the adaptation of human systems because it is humans who will, in the end, make the right or wrong decisions influencing the future.

How the repo rate affects you

tmmbsonline — Wed, 01 Feb 2023 15:15:50 +0000

How the repo rate affects you

The repo rate is defined as the rate in which the central bank of a country being the South African Reserve Bank in our case, lends money to commercial banks like ABSA, FNB, Discovery Bank, just to name a few, in the event of any shortfall of funds. The term “shortfall” means that there is a short availability of funds. Furthermore, it is the amount by which the liability exceeds the required amount of cash that is available.

In essence, the repo rate is a tool used by monetary authorities to control inflation. A question that then comes to mind is how is the repo rate and inflation in sync? The South African Reserve Bank uses the repo rate to limit commercial banks from borrowing money from the central bank which ultimately reduces the money supply in the economy thus arresting inflation.

How the repo rate affects you

Though the repo rate seems to be somehow advantageous as it limits commercial banks from borrowing money thus allowing the government to control the money supply within the economy, it also affects the lives of ordinary people. How does the repo rate affect you? After a lengthy debate by the monetary policy committee of the Central Reserve Bank, a conclusion has been drawn that a 25 basis point increase should transpire.

The repo rate now sits at 7.25% whilst the prime lending rate sits at 10.75%. The Prime Lending Rate is that the cost at which banks are willing to lend money to consumers. The repo rate has a direct impact on the prime lending rate, which is the repo rate plus the amount which the bank adds to ensure sure they make a profit on their loans. The lower the repo rate, the lower the prime interest rate.

The inflation rate which is above 7% is the cause of the increase. As a result, this inevitably affects the consumer. What this means is that if for example, a consumer is paying a mortgage of R2 000 000 over a period of 20 years, he or she will be paying about R337 more. The repo rate is probably one of the most important considerations when it comes to applying for a bond. It affects not only the monthly repayments, but also how much interest will be paid over the entire period of the loan. A drop in the repo rate will mean a lower prime lending rate, and this will decrease the monthly bond payment.

For some consumers, the increase of the repo rate and prime lending rate might not seem like it’s a lot but it actually is considering the current economic status quo which has increased the cost of food, electricity and fuel prices.

Become a minimalist this December

tmmbsonline — Sun, 04 Dec 2022 23:54:28 +0000

Become a minimalist this December

In our most recent article we shared about different ways to protect your current and future income. In this weeks article we delve deeper on the subject matter and give practical tips on how to become a minimalist this festive season. When the calendar turns to January, the negative consequences of the unnecessary spending becomes apparent: higher-than-expected credit card payments, tighter finances than anticipated, increased stress, and regret over the amount of money spent.

Budgeting is one of the most important tools for navigating troubled financial waters, and there are several ways to navigate the holiday season and end the year on a financially sound footing, even if you have limited resources at your disposal.

Set a budget. Decide how much money you want to spend before the holiday shopping season begins. Consider all aspects of holiday shopping: gifts, travel, food, and decorations. Divide your budget into the following sections: How much money do you want to spend on gifts? How much will the trip cost? How many special events do you have planned, and how much will they cost? What changes and/or sacrifices do you need to make if the numbers don't line up?

Become a minimalist this December

If simply creating a budget was all that was required to keep us within our spending limits, we'd be set for life—not just the holidays. Regrettably, this is not always the case. Even when we have strict budgets, many of us overspend. One reason for this is that retail stores are incredibly good at convincing us to part with our money. Loyalty cards, retail credit incentives to return to the store, and constant sales are all tricks used by retailers to get us to part with our money. Keep an eye out for them, especially around the holidays.

Don't squander it. If you get a bonus, use it wisely. First, use it to repay any debts you may have; second, pay any past-due expenses. If you have any money left over, save at least half of it; the rest can be used to purchase necessary items that you could not afford during the year, such as appliances or clothing. Tracking your spending on a daily basis is an important part of good financial stewardship. This is true in general, but it is especially important during the holiday season. If you have carefully planned your budget (Tip #1), you must exercise caution in sticking to it.

Become a minimalist this December

You’ve probably heard the saying: ‘The best things in life are free.’ Many activities are either inexpensive or free. Get outside and enjoy the beautiful South African weather during the festive season and school holidays. Seek out activities by soliciting input and ideas from all members of the household. Quality time with loved ones doesn’t always need to be costly. Plan a picnic in your backyard, take walks in the neighbourhood, etc. If you must travel, bring your own snacks and meals and avoid expensive restaurants and take-out food.

It may be difficult to avoid overspending during the holiday season. It definitely takes more time and effort. But believe me, your January will thank you. Include everyone. All members of the household should be involved in the financial budgeting process and discussions about household expenditure. By doing so, you not only increase understanding of a household's financial situation, but you also educate your children from an early age, thereby fostering a culture of financial discipline.

Become a minimalist this December, Become a minimalist this December, Become a minimalist this December

Protecting your current and future income

tmmbsonline — Tue, 22 Nov 2022 10:43:50 +0000

Protecting your current and future income

Have you been to the mall recently? I am sure you’ve noticed that the Christmas trees are out again. The festive season is almost upon us, and while we plan and prepare to have several colours with our loved ones, it is also in good spirits to have the future in mind. As individuals, we may experience the loss of a loved one, relative, breadwinner, etc and as a business entity, we may find ourselves with one less partner or a key individual. Death is inevitable but and it is important that we plan and prepare accordingly. Therefore, it is important to put measures in place to protect your current and future income.

From a business point of view, it is always important to do some introspection regarding the future of the business. Be able to answer questions such as: what would happen to the business if so and so had to pass away, do you have a good understanding of your ownership model, would there be any conflicting priorities and future plans for the business between you, other business partners and the deceased’s family? These are critical points to consider and find solutions to.

Protecting your current and future income

Below are some measures you can put in place to protect your income as a business:

Key man insurance: key man insurance protects the business from financial consequences of a key individual passing away, becoming disabled or contracting a critical disease. The most important asset in any business is its people. The loss of a key person constitutes a risk for the business. Insurance can help businesses cope with the loss of a key person in their organisation, such as a manager or staff member. Loss of income due to specific knowledge, additional costs incurred to recruit and train a replacement, and loss of goodwill can put pressure on an organisation's finances.
Another option is taking out a buy and sell agreement: when a co-owner in a business dies, the affected owner's estate can be left severely exposed. The remaining owners might not have the resources to purchase the shares from the estate. The spouse may not want to participate in the business which means that he/she is left at the mercy of the existing owners. A buy-and-sell agreement is an agreement between two or more co-owners of a business. The purpose of the agreement is to provide the surviving co-owner with cash to purchase the interest of a deceased member of the family who owns shares in the business.

Protecting your current and future income

Individuals also have options available to them on how to protect their income:

Having an emergency fund: Savings are a good back up for short-term or relatively minor setbacks. You could keep these funds in an easily-accessible savings or cash account with the best interest rates. Saving is a way to insure yourself against setbacks, such as losing your income or unforeseen emergencies.
Income protection policy: Income Protection insurance is intended to replace a portion of your monthly earnings if you are unable to work for an extended period of time due to illness or injury. This may cover your day-to-day living expenses, allowing you to concentrate on your recovery.
Boost your current earnings: Increasing your regular earnings may improve your current financial situation and make it easier to save. You may be providing financial protection against income loss or unforeseen emergencies by doing so. It may even allow you to pursue your passion as a secondary source of income. Some people supplement their income by working part-time as a tutor or coach, while others create and sell arts and crafts at local markets or online. With so many options available, there's bound to be something that suits you.

As the saying goes, ‘uncertainty is the only certainty!’ As a result, it's always a good idea to contact a financial planner, who is well-positioned to help manage potential risks and build a business continuity plan to financially future-proof your business. It is now time to take stock. Is your last will and testament updated, do you have key-man insurance and a business succession plan in place. Does your risk plan have disability and accidental injury to protect your ability to earn an income?

Protecting your current and future income