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UP-TO-DATE: Africa Fraud Barometer

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Africa Fraud Barometer

KPMG has released the findings of the second Africa Fraud Barometer. This initiative was launched in 2012 and is an early stage effort to measure fraud on the African continent and expose the risk of fraud to companies in their day-to-day operations. According to the tool, reported cases of fraud decreased from 520 in the second half of 2011 to 503 cases in the first half of 2012. In the same period, the value of fraud decreased from US$3.3 billion to US$2 billion. Nigeria, Kenya, Zimbabwe and South Africa make up 74% of all fraud cases reported in Africa. While fewer cases are reported in South Africa, the overall value of these cases is far greater than in Nigeria.

The Africa Fraud Barometer has been developed to provide a bigger picture of fraud prevalence on the African continent. “This is only the second barometer we are publishing, but we have noticed a decline both in terms of reported fraud cases and their monetary value. We see this as a positive trend,” says Petrus Marais, KPMG’s Global Leader of Forensics, who developed the barometer. “There is an increasing interest in Africa as an investment destination, but the continent struggles with a rather negative image. We are providing an analysis of fraud profiles in individual African countries to foreign investors since a generic approach to assessing fraud risks on the continent is not possible. The overriding point is that investors need to assess the prevailing environment in each country.”

SAICA News

SAICA has established a Products and Services web page that will put all our member offerings under one ‘roof’. From this page, members will be able to access the various products and services that we offer under specific categories, as well as be exposed to new offerings that were previously hidden in other pages of which you may not have been aware. From now onwards, members looking for products and services (other than technical services, which are available in the Technical pages) can easily access these by directly visiting this link: www.saica.co.za/ProductsandServices

Investment Entities

The International Accounting Standards Board (IASB) has issued an amendment that exempts investment entities from the consolidation requirements in IFRS 10 – Consolidated Financial Statements. Under the amendment, an investment entity is permitted to measure its investments in subsidiaries at fair value through profit or loss in accordance with IFRS 9 – Financial Instruments. A parent of an investment entity must consolidate all entities in which it has a controlling interest, which includes those controlled through an investment entity, unless the parent itself is an investment entity.

The type of entities is likely to apply to include private equity organisations, venture capital organisations, pension funds, sovereign wealth funds and other investment funds. The amendments also introduce new disclosure requirements related to investment entities in IFRS 12 – Disclosure of Interests in Other Entities and IAS 27 – Separate Financial Statements. While IFRS 10, IFRS 12 and IAS 27 are effective from 1 January 2013, this amendment is effective for annual periods beginning on or after 1 January 2014. Early application is permitted.

Changing the future

In 2008 SAICA estimated South Africa’s shortage of accounting specialists at 22 000, of whom
5 300 should be CAs(SA). To date that gap has not been bridged, as CAs(SA) are sought after globally, despite declining employment rates in many economies.

The chartered accountancy brand is directly linked to high standards and a stringent qualification process. Given the robustness of our preparation, this premier South African qualification is recognised around the world. The qualification process is reviewed and revised periodically to maintain standards and ensure that the qualification remains relevant and competitive.

South Africa must invest in these essential skills and make the required learning accessible to our learners and trainees. SAICA has recognised that we need to be supportive, innovative and creative in how we engage and support our aspiring CAs(SA) and future leaders. We have accordingly explored education delivery models with the flexibility to meet the individual needs of learners and to enable them to gain the skills appropriate to sustainable employment.

This has led to the development of a new examination, which will be known as the Assessment of Professional Competence (APC) and be written for the first time in November 2014. The APC replaces the two separate discipline examinations (Auditing and Financial Management).
The APC will take the form of a single integrated case study based on a real-life scenario and will be inter-disciplinary in nature. Such a case study will form part of the learning process and the main objective will be to assess a candidate’s professional competence. As such it will focus less on ‘what you know’ and more on ‘why’ and ‘what to do with information’. Candidates will be expected to differentiate between relevant and irrelevant information, and be able to synthesise and assimilate that information. The assessment will also focus on pervasive skills and in particular the ability to communicate effectively. There will be less focus on technical competence, as this is tested in the first professional qualifying exam.

A case study will be released to candidates five days before the assessment, but they will only receive the actual question(s) when the assessment starts. This emulates real-life scenarios in a business, where certain facts are known before a meeting takes place or a proposal is made.

This approach will effectively assess the skills and competencies a CA(SA) has learned within the workplace via on-the-job training. This will also ensure that the CAs(SA) accredited by SAICA continue to be sought after for their skills, insight and robust training.

For more information please refer to www.saica.co.za or contact helenb@saica.co.za

Introducing SAICA Committees

• Ad-hoc Committee on Corporate Law (ACCL)
• Assurance Guidance
• Committee (AGC)
• Audit and Risk Committee (A&RC)
• Banking Project Group Committee (BPGC)
• Continuing Professional Development Committee (CPD)
• Enterprise and Socio-Economic Development Committee
• Ethics Committee
• Finance Committee
• Medical Scheme Project Group
• Members in Business Committee

More information on these committees can be obtained from the SAICA website.

Gadget of the month – LG Optimus 3D Max

LG’s latest achievement in the glasses-free 3D space – the Optimus 3D Max – is a second-generation 3D smartphone that boasts an enhanced chipset and more enticing 3D entertainment features in a slimmer and lighter body.

The Optimus 3D Max includes a new 3D Converter which allows for a greater variety of 3D content as it converts 2D content from Google Earth, Google Maps and other mapping apps into 3D. The device also has a unique 3D video editor that allows the editing of 3D video on the phone in real time. It also features a 3D ‘hot key’ mounted on the side of the phone that enables users to easily toggle between 2D and 3D. The Optimus 3D Max includes 3D-style cubicle icons in addition to its customisable icons, which can be amended by applying the user’s own photos through the Icon Customizer feature.

Additional features, which will be available through an upcoming maintenance release (MR), include a HD Converter to offer high resolution content to be viewed on a TV connected through MHL (Mobile High-Definition Link), and Range Finder, which calculates the distance between the camera and a subject as well as the dimensions of an object through triangulation.

As for its new form-factor, the Optimus 3D Max is 2mm slimmer and 20g lighter than its predecessor, measuring only 9.6 mm thin and weighing 148g. The 5MP camera on the rear captures both photos and video in 3D using its dual lenses. The recorded material can be viewed directly on the smartphone in glasses-free 3D or on a 3D capable computer monitor or TV.

SARS in business rescue

The Western Cape High Court had to consider a request by SARS (Nov ’12) that it should be treated as a preferent creditor in business rescue proceedings. If SARS’s view was correct it would mean that, at the meeting of creditors, SARS, as a ‘preferent’ unsecured creditor under section 145(4)(a) of the Companies Act, would have had a voting interest equal to the value of its claim against the company. The remainder of the concurrent creditors, which, in this particular case, represented 87% of the value of all creditors present at the meeting, would then have been disenfranchised concurrent creditors in terms of section 145(4)(b). Implications would have been that the SARS vote would have carried the day and the business rescue plan would have been rejected, contrary to the wishes of the lion’s share of the company’s creditors.

It was the view of the court (Judge Fourie) that the SARS construction of the provisions of section 145(4) of the Act, was not only contrary to the ordinary grammatical meaning of the words used in the said section, but also lead to an illogical result that failed to balance the rights and interests of all relevant stakeholders, as envisaged in section 7(k) of the Companies Act.

Governance: COMPANIES ACT

This is the first court ruling under the new Companies Act that requires companies to provide the public and media with copies of their share registers. Judge Potterill accused companies of being opportunistic in arguing that the new Act makes no provision for this.

In this case the North Gauteng High Court, Pretoria, ruled against the respondents (On-Point Engineers (Pty) Ltd, SL Engineering (Pty) Ltd and Gwama Properties) in favour of Media 24 and Adriaan Jurgens Basson (Assistant Editor at City Press newspaper). City Press applied in writing to access the register of members in terms of Section 26 of the Companies Act, 71 of 2008 and Regulation 24 of the Companies Regulations. The applicants are members of the media that wanted access to the respondents’ registers of members in order to establish the shareholding of each of the respondents, so to further establish who benefitted from state tenders.

The arguments from the respondents stated that City Press had requested access to the register of members. The respondents then argued that a register of members is not a securities register. ‘Members’ in the Companies Act, 2008, only refers to Non-profit Companies and therefore the respondents urged the judge to dismiss the application. Judge Potterill stated that in terms of section 26, the applicants have the right to inspect or copy the securities register and directors register upon payment of the prescribed fee. The inspection of the registers is also in line with the Constitution’s right of access to information, as entrenched in section 32 of the Constitution.

The judge also stated that section 26(2) regulates the requests for access to inspect or copy the register of members or register of securities and directors, where section 26(6) regulates the inspection of the register of members and register of directors during business hours at the business for reasonable periods upon the payment of a certain amount. It would be an offence in terms of section 26(9) of the Companies Act, 2008, not to provide the information requested, based on the requirements included in section 26.

Getting Corporate Ethics Right

Research by the Ethics Institute of South Africa (EthicsSA) strongly suggests that three factors underlie the inability of many organisations to manage their ethics effectively.

“It’s clear that many companies find it difficult to manage their ethics, and research over the years has made it clear that problems in three dimensions are almost always the root cause of these difficulties,” says Professor Deon Rossouw, CEO, Ethics Institute of SA.

The need for a visible and audible commitment by a company’s leaders is to the ethical values and standards of the company.

“Without strong and obvious executive support, a company’s ethical standards are destined to remain simply windowdressing,” Professor Rossouw says. “That means that the leadership has to be heard frequently talking about the importance of ethics, and has to be seen to be behaving ethically. Colleagues quickly spot any gap between what a leader says and what he or she does.”
How well a company communicates its ethical standards – Rossouw warns that companies should not assume that everybody understands what are their ethical standards, or subsequent implications. This point holds true for both employees and other stakeholders across the supply chain. In fact, it is frequently the company’s suppliers whose unethical actions cause it embarrassment.

The speed and decisiveness with which a company reacts to reports of unethical conduct – Although these reports are typically made anonymously via the various mechanisms the company has in place, it is the way that allegations are handled that sets the ethical tone of the company.

Rossouw points out that South African companies must manage their ethics in order to comply with Principle 1.3 of the King Code of Governance for South Africa 2009 (King III).

This principle states that: “The board should ensure that the company’s ethics are managed effectively”. Rossouw argues that the social and ethics committee mandated by the new Companies Act (71 of 2008) is the appropriate vehicle through which companies should put this principle into action.

POLL OF THE MONTH

We asked …

Will Cyril Ramaphosa’s return to politics help boost business confidence in South Africa?

No, he is just an individual – 28%
He will appeal to the business community – 61%
Many business leaders and economists are happy he is back – 11%
Maybe in SA but globally it won’t – 0%

FINANCIAL SERVICES SECTOR A KEY ENABLER IN AFRICAN INVESTMENT

We asked …

Business, politicians and economists support the medium-term budget, what did you think?

That was a good budget and it will work 11%
Government doesn’t have necessary resources/skills to make it work 11%
There is too much talking and no action 38%
It will work if tenders are given to rightful bidders 16%
The budget is good, but our government not 24%

THIS MONTH’S MUST READS …

Navigating your career
by Kerry Dawkins and Graeme Codrington

The world of work has never been as difficult or as complicated as it is right now – and yet there has never been as many opportunities. If you know what you’re looking for, and are sure of how to position yourself in a competitive job market, there are ways for you to find your dream job. It all starts with a radical mindset shift: treat your career as a journey to be navigated and then follow the author’s five steps for lifelong job satisfaction. This is not a quick-fix solution; it will require hard work and focus.

Become your own stockbroker
by Jacques Magliolo

Nowadays, the stock market is no longer limited to rich global traders. Anyone can trade equities without the help of a broker. Despite this opportunity to build staggering wealth, potential investors seem to continue to stumble in the dark. Too many take the easy route of trading on advice from friends or so-called experts. These traders inevitably leave the market before they are able to create a definitive path to becoming their own stockbroker. This book shows you how to avoid such pitfalls.

Everyone’s Guide to the South African Economy
by André Roux

Recession, inflation, interest rates, income tax, exchange rates … one is bombarded with these terms every day. How do they impact on ordinary people?
In this book all these issues – and more – are addressed. It clearly explains and evaluates a wide range of economic occurrences – from the budget and the exchange rate to the role of the South African Reserve Bank and the balance of payments. This is essential reading for every South African consumer and taxpayer.

SA BUSINESSES ARE COMMITTED

The Carbon Disclosure Project (CDP) 2012 Report of the JSE 100 is a shining light when read in the context of investor confidence in South Africa being so under pressure. Released by the National Business Initiative (NBI), the report shows that the 78% response rate of South African companies to the CDP is the second highest internationally by geographic region, which reaffirms local business as a global leader in participating in corporate citizenship indices.

The CDP surveyed more than 5 000 companies worldwide on behalf of 655 institutional investors (CDP signatories), representing $78 trillion in assets. The CDP requires companies to disclose information relating to their management of strategy, risks and opportunity, data management and performance, with reference to climate change. Each company is given a score for transparency of disclosure (0-100) and performance (a band A-E), which enables NBI to gauge how seriously SA companies consider climate change, how they express this in public communication and the effectiveness of their action.

It shows there has been ‘a material reduction’ in the reported greenhouse gas emissions of South Africa’s top companies. Total reported direct (scope 1) emissions for 2012 decreased from 137 million tons of carbon dioxide equivalent (tCO2e) in 2011 to 132 million tCO2e in 2012, while indirect (scope 2) emissions reduced from 98.4 million tCO2e in 2011 to 86.6 million tCO2e in 2012.

PAPERLESS REVENUE RETURNS

Handling tax returns for individuals just got a lot easier with the release of the Individual Tax Module by CQS Technology Holdings, a leader in financial reporting and audit software. Used in conjunction with its popular TaxWare solution, the Individual Tax Module facilitates the completion and submission of individual tax returns to the South African Revenue Service (SARS) It represents a further step in the CQS vision for more efficient and productive paperless accounting offices.

According to CQS Technology Holdings director, Ross Hampton, the module is a much-anticipated extension of the TaxWare solution: “Having examined the market we realised that there was a need for a more efficient solution to process individual tax returns, one that could also integrate with the practice as a whole. With thousands of accountants and tax practitioners using a range of CQS solutions to guide the preparation of financial statements and tax returns for corporations and trusts, the Individual Tax Module is a logical next step. That’s because many of these practitioners also handle the tax affairs of individuals. With the Individual Tax Module, a familiar interface and proven method of working is extended into the accounting practice.”