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UP-TO-DATE: Keeping you informed of business today

Pick up a book
As Albert Einstein once said: “If you want your children to be intelligent, read them stories. If you want them to be more intelligent, read them more stories.”

Consider a few statistics. Ninety per cent of our children under the age of seven have no form of reading material in their home language; half of Grade 3 children scored less than 35% on standardised literacy assessments; only 8% of 14 000 primary schools in the country have functional libraries; and – shockingly – a mere 5% of South African parents read to their children.

So read, parents … read. And if you’re not yet a parent, why not go out of your way and find a few underprivileged children you can read stories to on a regular basis. It’ll brighten their day and their future.

Source: Business Day, 8 August 2014

SMSs are still the favourites
The short messaging service (SMS) is still one of the preferred channels for communication for marketers, says Cellfind, a subsidiary of JSE-listed Blue Label Telecoms, in a statement. This comes despite the rise of instant messaging services such as WhatsApp, BBM and Mxit. The growth of instant messaging was thought to be the death knell for SMSs.

However, chat services are not a substitute for them in mobile marketing and communication, says Cellfind MD Jacques Swanepoel.

Consulting firm Deloitte predicts in a report that looks at trends for 2014 that SMSs will generate more than US$100 billion this year globally. It says instant messaging services on mobile phones will carry an estimated 50 billion messages, compared with 21 billion SMSs.
“In South Africa, not everyone has a smart phone,” Swanepoel says. SMSs are therefore still relevant if marketers want to reach consumers who are using low-end phones.

Moreover, the instant messaging market is fragmented. Marketers will need to do more research to find out what customers use, he says.

Cellphone users receive payment reminders, banking notifications and promotions via SMS. They see instant messaging as a tool for talking to friends and business colleagues, says Swanepoel.

“SMS is less intrusive because the recipient feels able to respond in his or her own time, where instant messaging seems to demand an immediate response.”
About 450 million bulk SMSs are sent to customers every month.

Source: Financial Mail, 6 August 2014

The war continues
Millions of rand have been thrown at testing and implementing sophisticated technology to protect rhinos from poachers in South Africa.

Unfortunately, expensive technology appears to have had little effect on the number of rhinos poached. The number of people arrested has increased annually, but so has the number of animals killed.

Earlier this year, the Howard G Buffett Foundation in the US donated US$23,7 million (R255 million) to a three-year initiative to fight rhino poaching in the Kruger National Park. Technology will be used to create an “intensive protection zone” using detection and tracking equipment on the ground and in the air.

Other foreign funders include the Dutch and Swedish postcode lotteries, which donated US$21 million (R226 million) to fund the deployment of drones. South African National Parks (SANParks) has yet to use drones to fight rhino poaching in national reserves.
However, Tommy Fraser, a private game reserve owner, says the results of using technology to combat poaching are disappointing. Incidents are reacted to, rather than prevented. “We want to find poachers before they kill the rhino, we don’t want to find carcasses,” Fraser says. Poachers are often military trained specialists with their own sophisticated technology.

SANParks says it’s now focused on “surveillance, detection and early warning systems”. It oversees 22 000 rhinos, about 40% of the world’s remaining population.

SANParks says 558 rhino had been poached by 10 July this year, 358 of these in the Kruger National Park. In 2011, 448 rhino were poached. This number increased to 668 in 2012 and 1 004 last year. Rhino are poached for their horns to supply demand from China and Vietnam, where people grind the horns in the belief that they cure cancer and improve virility.

Source: Financial Mail, 6 August 2014

R1 billion jobs-for-Joburgers plan
The city of Johannesburg has launched a R1 billion scheme to create employment and to speed up service delivery and maintenance around the city’s 11 regions.

The scheme, Jozi@work, is expected to create some 12 500 permanent jobs through the creation of co-operatives and small businesses.

Neighbours and friends, small and micro entrepreneurs, in both higher-income and impoverished areas, can get together to pitch for city business through a simplified and streamlined process. They will work for the city’s utilities and agencies such as the Johannesburg Roads Agency, Pikitup, City Power and Johannesburg Water and do jobs such as separating and recycling waste, providing food for urban nutrition programmes, desludging chemical toilets, resurfacing and maintaining roads, and providing frontline support to water and power infrastructure agencies.

In launching the project, the city’s municipal manager, Trevor Fowler, said that in the first year it was expected 12 500 permanent jobs would be created, with the number tripling in the next phase.

Jozi@work would change the way the city did business, he said. “Our residents will no longer only be customers and recipients of city services – they will also be suppliers of these services. It will mean better value for money for residents and receiving faster and more attentive services,” he said.

A new supply chain process has been developed in consultation with the Treasury through which the city will source community-based enterprises and co-operatives through regional bidders.

Fowler said this would mean taking the traditional approach to small and micro enterprises to a whole new level. “We want to spread the net as widely as possible, reaching the large number of residents who are looking for opportunities to earn an income by doing an honest day’s work,” he said.

Capability support agents will be appointed to provide oversight and mentoring to ensure quality standards are adhered to. These agents will ensure that the providers will be able to buy the raw material they need, and to rent equipment. They will recover the costs from monthly contract payments from the city as targets are met.

Longer-term support for the new companies will also include capital financing, advisory services and training how to run their businesses which will, in time, be able to do business with other public sector institutions and the private sector.

The city also intends to start an apprenticeship programme for workers to improve their skills.

Source: The Star, 5 August 2014

World first
A community in the Free State will become the first in the world to be powered by fuel cells in a new scheme which could help remote areas of the continent access electricity for the first time.

South Africa suffers from power shortages and Eskom is struggling to keep up with rising electricity demand, while around 2 million poorer households live without any access to the grid.

“What we have here is a world first,” said Chris Griffith, chief executive of Anglo American Platinum, which is partnering with Canadian-listed Ballard Power Systems in piloting the project.

“Fuel cell mini-grid technology is a cost-competitive alternative to grid electrification in these remote areas and could accelerate access to electricity,” Amplats said. Amplats is investing around R215 million in the “mini-grid”, which will function independently from the national grid.

The pilot system can generate 15 kilowatts and a maximum of 60 kilowatts when extra batteries kick in. It will be used to power up 34 homes in the Naledi Trust rural community near Kroonstad in the Free State for a 12-month trial period.

Amplats and Ballard will cover the pilot scheme costs but hope to make the fuel cell system profitable by tapping into an estimated 600 000 South African households in areas beyond the reach of the grid and millions more throughout the continent.

Fuel cells use a chemical reaction and offer a cleaner alternative to lead-acid batteries. They are already used in industrial machinery and domestic refrigerators.

The fuel cells use methanol, hydrogen and platinum to produce electricity and a wider roll-out of the pilot could give some support to South Africa’s struggling platinum sector. If the fuel cell system is widely adopted, almost 200 kilograms of platinum will be used in production over the next 15 years.

Technical updates


New financial instruments standard completed
The new financial instruments impairment requirements will provide users with useful information about an entity’s expected credit losses on financial instruments. These new requirements have been unveiled as the International Accounting Standards Board (IASB) completes its new financial instruments standard, IFRS 9 Financial Instruments. IFRS 9, which incorporates the classification and measurement requirements, the impairment requirements and the general hedge accounting requirements, is effective for annual periods beginning on or after 1 January 2018. Entities are permitted to early adopt the standard.

Classification and Measurement
IFRS 9 applies one classification approach for all types of financial assets, including those that contain embedded derivative features. Two criteria are used to determine how financial assets should be classified and measured:
• The entity’s business model for managing the financial assets, and

• The contractual cash flow characteristics of the financial asset

Financial assets at amortised cost are held in a business model whose objective is to hold assets in order to collect contractual cash flows and those classified and measured at fair value through other comprehensive income are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. Any financial assets that are not held in one of the two business models are measured at fair value through profit or loss.

The new impairment model requires an entity to recognise expected credit losses at all times and to update the amount of expected credit losses recognised at each reporting date to reflect changes in the credit risk of financial instruments. It is forward-looking and eliminates the threshold for the recognition of expected credit losses so that it is no longer necessary for a trigger event to have occurred before credit losses are recognised. Consequently, more timely information is required to be provided about expected credit losses.

General hedge accounting
IFRS 9 also introduced a substantially reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities, enabling entities to better reflect these activities in their financial statements.

IFRS 9 Financial Instruments can be downloaded from eIFRS. The IASB press release and the Project Summary can be downloaded from the IASB website.


Premiums on income protection policies not deductible
From 1 March 2015, premiums paid in respect of income protection policies will not be deductible (that is, any contribution made by the employer will be taxable in the hands of the employee) and the related monthly income on payout will be tax-free. This amendment has been made to align the tax treatment of income protection policies with that of capital protection policies since they both have a similar objective, according to Legislators. Although there are five months left before this change becomes effective, it is important for employers to practically consider the impact of this change on their employees as well as changes to be made to related policies and the payroll system.

Employment Equity Act
The Employment Equity Amendment Act 47 of 2013 was signed into law with effect from 1 August 2014. The new Employment Equity Regulations 2014 have also been released and are effective from 1 August 2014.

One of the biggest changes in the Act is the amendment of section 6, which now states that where there is a difference between the terms and conditions of employment between employees of the same employer performing the same or substantially the same work or work of equal value based on any of the conditions listed in the Act, this would be seen as unfair discrimination. This section is addressing the concept of equal pay for work of equal value. The Act identifies various duties applicable to designated employers. Designated employers are defined as follows:
• An employer who employs 50 or more employees
• An employer who employs fewer than 50 people but has an annual turnover that is equal to or above the applicable annual turnover of a small business in terms of Schedule 4 of the EE Act
• A municipality as referred to in Chapter 7 of the Constitution
• An organ of state as defined in section 239 of the Constitution
• Any employer bound by an agreement concluded with the unions in terms of employment in terms of section 23 or 31 of the Labour Relations Act 66 of 1995
Designated employers should take note that Schedule 1 and Schedule 4 have been amended. The maximum fines for contravention of the Act and the annual turnover threshold applicable to designated employer have increased.

Designated employers have various duties in terms of the Act. The following are some of the duties which should be noted:
• An Employment Equity Plan must be prepared and needs to be retained for five years after the expiry of the plan
• An Employment Equity Report (Form EEA2) should be prepared and needs to be submitted on a yearly basis for all designated employers. The previous requirement where designated employers with fewer than 150 employees only submitted every second year has been removed
• A notice in the prescribed form, which is documented in Form EEA3, must be displayed at the workplace to inform employers of the provisions of the Act
• An Income Differential Statement in terms of section 27 of the Act using the EEA4 Form must be submitted.

Designated employers must refer to the Employment Equity Regulations 2014 to view the new forms and other changes to be implemented.
The deadline for the submission of the Employment Equity Report is 1 October 2014 for the manual forms or 15 January 2015 for the on-line submission.

The 10th Annual Woman of Substance Fundraising Banquet was held in Kyalami, Johannesburg, on 7 August 2014. The gala event was attended by some 450 distinguished guests from business and government. Among the high-profile attendees was former South African president Thabo Mbeki.

The coveted accolade, the Woman of Substance Award, was bestowed by African Women Chartered Accountants (AWCA) on Ms Phumzile Mlambo-Ngcuka, Executive Director of UN Women. Her daughter, Akona Ngcuka, accepted the award on her behalf.

This prestigious award is presented to an exceptional woman who has played a significant role in uplifting the role of black women in the accounting, audit and financial professions, or a woman who has consistently demonstrated substantial and innovative leadership in areas of governance and business aimed at realising gender parity.

Lesego Sennelo, president of AWCA, said: “Throughout her illustrious career, Ms Mlambo-Ngcuka has worked tirelessly to diminish gender stereotypes that continue to impede the development of women in South Africa. Mlambo-Ngcuka is continuing where she left off in South Africa to champion the cause of women development on an international stage. The judicious leadership she provides has made her the worthy candidate for the 2014 Woman of Substance Award.”

Ms Mlambo-Ngcuka’s career in leadership positions has been most notable including roles as Deputy Minister of Trade and Industry, Minister of Minerals and Energy, the first female Deputy President of South Africa, and the current Chancellorship at Tshwane University of Technology. She has served as Executive Director and Head of UN Women since 2013.

The gala evening serves as both a fundraising platform and prize-giving celebration. The AWCA’s bursary fund raised R1,75-million in 2013 towards the education of African women who aspire to become CAs(SA). To date, the scheme has provided financial assistance to 61 students, most of whom have qualified as CAs(SA).

According to Sennelo AWCA have exceeded the target of growing the number of black female CAs(SA) to 3 000 by 2015. As of June 2014 there are 3 703 black female CAs(SA).

The organisation also aims to create awareness about the profession among more than 100 000 black female school pupils by 2015. They are able to effect such change through partnerships with fellow member bodies such as the South African Institute of Chartered Accountants (SAICA) and the Association for the Advancement of Black Accountants of South Africa (ABASA).

Age creeps up
Finland, Germany and Japan are the only countries considered to be “super-aged” today. But by 2020 super-aged countries – where more than 20% of a population are 65 and above – will increase to 13. And by 2030, 34 countries will fall into this category.

This is according to a Moody’s report on the impact of ageing on GDP (www.moodys.com/agingworld). It says ageing will slow growth because it causes working-age populations to shrink and savings – and hence, investment rates – to decline. It expects ageing to knock 0,4% off global annual GDP until 2019 and a further 0,9% off by 2025. Ageing is not just a problem of the developed world, however. Emerging markets such as Russia, Thailand, Chile and China are already classified as ageing. South Africa is currently “not ageing”, but that will change by 2025.

Within 15 years all countries, except a few in Africa, will face a slower-growing or declining working-age population.

Source: Financial Mail, 14 August – 20 August 2014