Interest on unliquidated debts
Interest often has a material effect on the amount owed by a debtor. This is also true in the case of unliquidated debts such as damages of which the amount is only ascertainable after an investigation.
In a claim for an unliquidated debt, a debtor was traditionally not held liable for interest in the absence of an agreement as to quantum or until such time as the amount had finally been assessed by a court or arbitrator. In 1997 the legislature stepped in by means of an amendment to the Prescribed Rate of Interest Act 55 of 1975 when it inserted section 2A into the Act. Section 2A provides for interest on unliquidated debts.
Such interest shall run from the date on which payment of the debt is claimed by service on the debtor of a demand or summons (or, in the case of arbitration proceedings, the date on which the creditor takes steps to commence the proceedings), whichever date is the earlier.
“Demand” means a written demand setting out the creditor’s claim in such a manner as to enable the debtor reasonably to assess the quantum thereof. Interest shall be calculated at the rate prescribed by the Minister of Justice by notice in the Government Gazette as at the time when such interest begins to run (that is, the date of service of a demand or summons or the date of commencement of arbitration proceedings, whichever date is the earlier). Currently the prescribed rate is 15,5% per annum. There are indications that this rate will shortly be amended by the Minister, however.
Interest on that part of a debt which consists of the present value of a loss which will occur in the future shall not commence to run until the date upon which the quantum of that part is determined by judgment, arbitration or agreement.
Notwithstanding the provisions of the Act – but subject to any other law or an agreement between the parties – a court of law, or an arbitrator, or an arbitration tribunal may make such order as appears just in respect of the payment of interest on an unliquidated debt, the rate at which interest shall accrue, and the date from which interest shall run.
Marius Potgieter, Cliffe Dekker Hofmeyr
South Africa slow to adopt online shopping, with logistics a problem
In South Africa, buying food and beverages as well as clothes online continues to lag behind global norms, an EY survey revealed in July 2014.
Though online activity is rising in South Africa, markedly through mobile platforms, complex logistics have seen few major retailers set up ecommerce functionality and the effect on the bottom line is yet to be seen.
EY retailer and consumer products sector leader Derek Engelbrecht said the cost of a single delivery could be substantial compared to the value of the order and substitution for unavailable items, particularly where a consumer had a strong affinity for a brand, was not handled properly.
In a retail market worth more than R500 billion, online transactions account for less than 1% in South Africa. Grocery retailers have shied away from pushing e-commerce hard as shoppers tend to make fewer impulse purchases online. Also, buying clothing continues to be an experience where consumers want to touch and see the products.
Looking at the very high mobile-phone penetration in South Africa, and being one of the highest globally, people are already doing a lot online in terms of browsing and price comparability. Roger Tejwani, an independent analyst, says online shopping over the next five to six years would “certainly” take off in South Africa.
Source: Financial Mail, 6–11 June 2014
Anton van Wyk to lead the world’s largest internal audit organisation
Anton van Wyk, a partner at PwC, was elected 2014–2015 global chairman of the Institute of Internal Auditors (IIA) at its annual meeting in London in July 2014. He is the first individual from the African continent to lead the world’s largest internal audit organisation. The election of Van Wyk to the IIA’s top volunteer post comes at a time when growing demands on the profession are prompting a deeper examination of its value to stakeholders. The IIA is the largest organisation representing the interests of the profession and provides ethical and professional guidance, continuing education, certifications and more to over 180 000 members worldwide.
Van Wyk said that as chairman he would focus on urging internal auditors worldwide to be mindful of potential gaps between internal audit services and stakeholder expectations. New technologies and global economic dynamics, he said, are creating new opportunities as well as emerging risks that threaten to expand these gaps.
Mastering the market
Planning to pursue a corporate career overseas? Or just to enjoy some management work experience before settling back in South Africa? Then get a business master’s.
It doesn’t have to be an MBA. Management, accounting or finance will do. International research shows that more companies are seeking out master’s graduates to help them flourish in an increasingly competitive business environment.
If you don’t have a master’s, then learn to speak well. The 2014 Corporate Recruiters Survey shows that the non-academic skill most prized by employers is the ability to communicate. “Employers seek recent graduates who are highly proficient in communication skills, specifically oral, followed by writing and listening skills and writing skills,” it says. “On average, employers rank communication skills twice as important as managerial skills.” The survey was compiled by the Graduate Management Admission Council, the international organisation that administers the GMAT entry exam for graduate business and management programmes.
Survey findings are based on corporate responses from 44 countries in Europe, North America and Asia-Pacific. Results show that 80% of companies interviewed this year plan to hire an MBA graduate, up from 50% five years ago. Master’s in management graduates are sought by 50% (18% in 2009), master’s in accounting by 45% (17%) and master’s in finance 44% (no comparative figure).
Companies say business school graduates come ready – trained in innovative thinking, leadership and strategic acumen. So it requires only a “short learning curve” to adapt that education to specific corporate context.
Not every industry is equally enamoured. The survey shows that while finance and accounting companies want more master’s graduates and 90% of healthcare and pharmaceutical employers want MBAs, the technology sector is mixed. There’s more demand for accounting, finance and MBAs are flat, and there’s a declining demand for management. Manufacturing wants more accounting and finance graduates.
Communication skills dominate the non-academic wish list of almost every business sector. The only exception is manufacturing, where employers’ priorities are, in order, integrity, drive, ability to inspire others, innovation and strategic vision.
Source: Financial Mail, 25–30 July 2014
SAICA APC urges the IASB to prioritise the disclosure initiative
The SAICA Accounting Practices Committee (APC) has encouraged the IASB to prioritise the disclosure initiative and has recommended that entities be required to disclose how they determine materiality in the context of the financial statements.
The SAICA APC comment letter on ED 341 Disclosure initiative: Proposed Amendments to IAS 1 Presentation of financial statements can be downloaded from the SAICA website.
Disclosure requirements for property, plant and equipment carried at a revalued amount
Following a submission by the SAICA APC, the IFRS Interpretations Committee has clarified that when an entity carries an item of property, plant and equipment at a revalued amount, disclosure about the items carrying amount based on the cost model should also be provided. Read more at the May 2014 IFRIC update.
Accounting for bearer plants changes
New amendments that require bearer plants such as grape vines, rubber trees and oil palms to be accounted for in terms of IAS 16 Property, plant and equipment have been published.
This will mean that bearer plants can be accounted for at either cost or revalued. Currently bearer plants are accounted for in terms of IAS 41 Agriculture and therefore have to be accounted for at fair value.
The produce growing on bearer plants, for example, grapes, tea leaves, oil palm fruit and latex, and living plants will continue to be accounted for in IAS 41.
Entities are required to apply the amendments for annual periods beginning on or after 1 January 2016. Earlier application is permitted.
Agriculture: Bearer plants – Amendments to IAS 16 and IAS 41 can be downloaded from eIFRS and the IASB press release. The project summary and feedback statement can be downloaded from the IASB website.
New dispute resolution rules
After much anticipation, SARS has finally issued new dispute resolution rules in terms of section 103 of the Tax Administration Act 28 of 2011 (which was promulgated in October 2012). The new rules, effective from 11 July 2014, govern the procedures for lodging an objection or appeal against an assessment or decision made by SARS and also sets out the conduct and hearing of an appeal before a tax board or tax court. It is important to note that the new rules will apply even if initial steps were already taken in terms of the old rules. Particular attention must be paid to the changes in the time periods relevant for submission of required forms and documentation in order to ensure that important deadlines are not missed. It is encouraging to note that with respect to the appeals process, SARS may now respond to a taxpayer’s grounds of appeal. This will provide more insight into SARS’s views on the matter and may assist the taxpayer or representative tax practitioner in the appeals process.
Robin Hood rankings
People in cultures that are relatively accepting of inequality in power or wealth are less likely to give to the needy, according to research by Karen Page Winterich, of Pennsylvania State University, and Yinlong Zang, of the University of Texas at San Antonio. Countries with high levels of giving, such as Australia, Canada, Ireland, New Zealand and the US, were found to be less accepting of inequality. Those with low levels of giving, such as Bulgaria, China, India, Russia, and Serbia, were more accepting of inequality. An acceptance of inequality may reduce people’s sense of responsibility for others, the researchers say.
Source: Harvard Business Review, July–August 2014
Employees who spent the last 15 minutes of each day of their training period writing and reflecting on what they had learned did 23% better in the final training test than other employees, according to a study by Giada Di Stefano of HEC Paris; Francesca Gino and Gary Pisano of Harvard Business School; and Bradley Staats of the University of North Carolina. “Learning by doing” is more effective when coupled with deliberate reflection, or “learning by thinking,” the study shows.
Harvard Business Review, July–August 2014
Michael Jackson’s estate grew by R7,4 billion after his death
It’s a half a decade since Michael Jackson’s death and the pop icon’s financial fortunes are positively blooming.
The self-proclaimed King of Pop was struggling to avoid bankruptcy when he died on 25 June 2009.
At the time, he was in rehearsals for a series of comeback shows he hoped would resurrect his wealth. But in the five years since, the Michael Jackson Estate – which runs his affairs on behalf of Jackson’s mother and three children – has earned R7,4 billion, according to a new book.
“Michael Jackson is making more money now, five years after his death, than he had been since the prime of his career,” Zack Greenburg, author of Michael Jackson, Inc, told AFP.
Source: The Star, 25 June 2014
Megacities of the future
According to a UN report, 13 urban areas are on track to join the list of megacities by 2030, meaning they will contain more than 10 million people. And Johannesburg happens to be on the list!
A sampling (plus projected populations):
14,8 million Bangalore
12,2 million Lima
12 million Bogotá
11,6 million Johannesburg
10,8 million Dar es Salaam
Source: Time Magazine, 28 July 2014
BOOK OF THE MONTH
The Contract with Yourself
By Dineshrie Pillay
“As long as you are in a legal contract with someone else, you are fulfilling their dreams, not your own.”
What if there was a contract that expressly stipulated how you should run your life – a contract that was designed by you, signed by you, and monitored by you? A contract that honours the wishes of the most important person in your life – YOU!
The Contract with Yourself explores what that ideal contract with yourself should look like with a view to achieving personal success and living an extraordinary life. You will assess and plan all areas of your life – from your spiritual life to your education; career; health and fitness; wealth building; societal involvement; and personal and family relationships. Success comes from doing the simple activities, consistently. This book is a reminder of those activities.