A whale of a Flop
JPMorgan Chase & Co cancelled a question-and answer session on Twitter after it prompted a tirade of verbal abuse from thousands of people on the site.
They are the target of at least eight Justice Department investigations in the US and was mocked and taunted by Twitter users after asking followers to send questions to an executive using the hashtag #AskJPM.
The online forum which the bank cancelled, was intended in part to give college students an opportunity to communicate directly with a senior executive. At least 70% of the 80 000 tweets sent using the hashtag were negative. So the campaign was scrapped only hours after it started.
The bank has been the subject of criticism since its $13 billion settlement for mis-selling mortage-based securities and its $6 billion ‘London Whale’ trading losses. The latter was caused by a trader nicknamed London Whale because of his huge bets on the financial markets, reported Business Times.
Some of the abusive tweets were: ‘Quick! You’re in a room with no key, a chair, two paper clips, and a light bulb. How do you defraud investors.’ Another read: “Can I have my house back?” and “Is it true ‘JPM stands for ‘Just Pay More’?”
Someone also posted: “What’s your favourite type of whale?”
Court ruling could have effect on SA creditors
The Supreme Court of Appeal (SCA) handed down a judgment in favour of the Land and Agricultural Development Bank of South Africa, which found that a party or individual that defaults on payment does not only owe the interest on that capital, but also the interest that accrues on top of the owed interest.
The case against Ryton Estates was brought before the courts to determine whether or not the bank is liable to repay interest on overdue interest which it charged its clients. According to legal representative Theo Buchler, director at ENSafrica in litigation and dispute resolution, the judgment on this case is significant as it is now legally understood that borrowers are entitled to levy ‘moral interest’ on unpaid interest.
He says that it applies automatically, unless the parties agree to exclude it, or make a different arrangement such as automatic compounding of unpaid interest.
“This was a test case, meaning that its judgment would set a precedent for future cases involving interest rates. It is now settled law that a creditor may charge interest on due and unpaid interest, where the agreement is silent.
Modern commercial agreements often make provision for compounding of interest, but in the absence of agreement a creditor is entitled to charge simple interest on arrear interest. Currently the applicable rate is set by the Prescribed Rate of Interest Act, at 15.5%,” says Buchler.
Buchler explains that the case will have ramifications for creditors and their clients in South Africa, as should a client not repay the loan amount on a set due date, he will be liable to pay interest on top of the interest owed on the capital amount.
“Clients who sign loan agreements with creditors must be aware that in terms of the law, should they default on payment, they will now be liable not only for the interest on the capital amount owed, but also moral interest.”
The global rocketeers
Fifty years after its first space mission, India has launched its most ambitious rocket ever: the $72 million, 1 361 kg Mangalyaan, which aims to orbit Mars by September 2014. If that happens, India will become just the fourth nation to send a craft to the Red Planet, beating China, Brazil and several other space racers.
INDIA
During the Mangalyaan mission, India hopes to gather information about the surface of Mars and search for the presence of methane gas, which would signify that the planet could support life.
CHINA
In June 2013 China completed a 15-day manned space mission, its first step toward the space station it hopes to complete by 2020. China has also announced plans to land a probe on the moon by the end of 2013.
IRAN
Scientists have already launched a monkey into space. Now they plan to send a Persian cat and eventually a human. A space station may be in the works as well.
BRAZIL
After a series of mishaps in the 1990s and 2000s, Brazil is poised to make a huge dent in the world of commercial space launches with Cyclone-4, a joint project with Ukraine set to blast off in 2015. Brazil is also talking to Israel and Russia about joint satellite programmes.
(Source: TIME magazine, 18 November 2013).
Corporate Income Tax Rate
Currently, international shipping transport conducted by South African companies is subject to a corporate income tax rate of 28%, with limited incentives such as a depreciation allowance for capital investments. Internationally, the trend is towards reduced taxation for shipping companies through a tonnage tax or a total exemption for shipping activities.
In light of these trends, a new shipping tax regime is proposed by the draft Taxation Laws Amendment Bill 2013, to provide tax relief for qualifying South African shipping companies. In terms of the bill, the proposed amendments will come into operation on 1 January 2014 and will be effective for years of assessment beginning on or after that date.
Ireland’s road to recovery
Ireland’s Prime Minister, Enda Kenny, announced that Ireland could exit its EU and IMF bailout on 15 December 2013, becoming the first euro-zone country to do so. After four years of austerity, two recessions and $113.5 billion in bailout money, Ireland is still economically fragile but recovering. Here’s how the recovery breaks down:
GDP
Annual economic output, currently $55 billion, has been stagnant for years. At the peak of the financial crisis in 2009, the GDP hit a low of $53.4 billion.
WAGES
During the recession, the country’s wages fell to $925.69 a week at the beginning of 2010. They rebounded to almost $946 at the end of June 2013.
UNEMPLOYMENT
The unemployment rate peaked at about 15% at the beginning of 2012. It has since fallen to about 13%, slightly above the European average of about 12%.
INDUSTRY
The construction sector posted 4.2% growth after being left shattered in 2007. Housing prices have also begun to rise, growing 10% in Dublin.
Source: TIME magazine, 28 October 2013
The world’s most-trafficked wildlife
Illegal animal trading is already a multibillion-dollar business, but in the wake of a bust at an airport in Thailand where authorities seized 470 protected turtles, conservationists warn that it’s on the rise and putting more species in danger of extinction:
African Elephant: Poachers killed about 35 000 of them in 2012 to keep up with consumers’ and black-market demand for their tusks.
Black Rhinoceros: In China and Vietnam it is believed that rhino horn can cure all kinds of ailments, including hangovers … It can fetch up to $65 000 per kilogram on the black market.
Scarlet Macaw: This large, intelligent parrot species from Central and South America is one of the most sought-after animals in the illegal pet trade. It
Bengal Tiger: Demand for their parts and fur have claimed the lives of all but an estimated 3 200 wild tigers, including Bengal tigers in and around India.
Mountain Gorilla: Owing to detrimental human activity such as poaching, civil war, and habitat destruction, the mountain gorilla has become the most endangered type of gorilla. Fewer than 900 are left in a small geographic area in Central Africa.
Red flags for banks
Steep growth in unsecured lending by South African banks in recent years led to the sector being downgraded by international research organisation IHS last week, placing new question marks over a sector widely thought to be on the mend after the 2008 financial crisis.
Though IHS is not a ratings agency like Moody’s and Standard & Poor’s, which means the impact ofits downgrade is likely to be muted, investors will still take note of the red flag.
This is especially so because banking shares have gained ground this year, with Nedbank up 11.4% since January, FirstRand up 7.3%, Standard Bank up 4.6%, and Capitec up 10.9%.
Absa’s share price fell 11.7% in that time, while microlenders other than Capitec took a beating. African Bank’s price tumbled 42%, while Blue Financial Services lost 40.9%
The all share index rose 15.46% over that time. IHS’s five-point downgrade has now moved South Africa’s banking sector into the ‘medium-risk’ category from the “moderate risk” category, largely because of risk associated with the unsecured lending boom. This downgrade places South Africa in the same risk category as Nigeria.
The Reserve Bank estimates that unsecured loans make up 12% of all total loans which, although low, have not stopped analysts from worrying about the potential blowout in the unsecured lending space.
Matthew Warren, banking sector analyst at First Avenue Investment Management, said: “I don’t have any doubt that the growing problems in unsecured lending will contaminate the broader consumer-lending landscape to some extent.
“We are already seeing it in credit cards and car loans. I suspect housing will follow for middle-market consumers that have taken on too much unsecured debt.”
Whether the downgrade is warranted is debatable.
A Business Times analysis of the ‘credit-loss ratio’ of their loan book -a number that measures the impairments charge as a percentage of average advances, or the loss on every R1 given out as loan-shows South African banks still appear to be healthy, with the possible exception of Absa. Standard Bank, for example, incurred a loss of 1.08c for every rand owed by customers in 2012 – down marginally from the 0.87c loss of the year before. FirstRand, the parent company of First National Bank, improved its number to 0.99% – which means less than 1c of every rand was lost – from 1.08% the year before.
Nedbank’s credit loss ratio was 1.1% of total loans for 2012, while Absa’s credit loss ratio was the only one that escalated sharply, to 1.59%. IHS economist Alyssa Grzelak said consumers remained particularly vulnerable to any stress.
“The sector’s heavy exposure to households is particularly concerning in light of households’ high debt levels, which are near all-time highs at more than 75% of disposable income.”
This article was first published in Sunday Times: Business Times
An insurance shocker
The JSE-listed furniture retailer Lewis, may be set to lose more than R100 million a year in profit after severely overcharging its low-income consumers for credit life insurance.
Regulators are in the final stages of implementing measurements to curb exploitation of consumers through excessive insurance fees, which tend to be sold alongside retial credit agreements.
Two-thirds of Lewis’ roughly R1 billion in annual insurance revenue comes from these ‘insurance’ products, and Lewis CEO, Johan Enslin confirmed that the new rules could see the retailer lose 10-12% of annual earnings, or just over R100 million.
Source: Sunday Times 17 November 2013
Tender fraud
According to an article in Business Times a dubious advertising tender for R531 555 awarded by Africa’s largest pension fund, the Government Employees Pension Fund, to a small Johannesburg company called MojoMotherRussia increased 40-fold to R20 million through a series of ‘irregular’ behind-the scenes machinations.
This is one of the conclusions believed to be contained in a closely guarded forensic report by PwC, which raises questions over how the fund uses R1 trillion that sits in its coffers as the pension contributions of more than 1.2 million government employees.
The report by PwC recommended action against
a number of individuals, including the head of the fund, John Oliphant, who was suspended over the scandal.
Investigators evidently found multiple instances in which the fund contravened its own supply chain requirements.
History of the Chartered Accountancy profession in South Africa
The Chartered Accountancy profession in South Africa has been in existence for over 100 years.
It has played an important role in the development of this country and it has produced many outstanding business leaders.
This rich history is currently being recorded and will be published in book format in 2014. However, a profession is not only about the institutional activities. Indeed, it is more about the many people who make up the profession and give it a face.
Over the past 100 years many colourful people have graced the portals of the profession and many interesting stories have been told. We would like to capture some of these stories for inclusion in the book. We are therefore inviting you to send us any stories about members or events that you think would be of interest.
Please email your story to Estelle Webster (estellew@saica.co.za) and help us to make this a truly fascinating record of our history.
Book briefing
Deeper (R2 450) seeks to impart practice management strategies for the ever changing and challenging world practitioner’s face, and looks to guide firm owners through various strategic and day-to-day challenges to ensure that their firms survive and thrive in today’s dynamic environment.
Deeper is a two-part manual of 200+ pages, written as a coaching guide. The first part of the manual was written by Mark Lloydbottom, and covers client service strategies, ways to grow your service offerings, improving profitability and reducing firm capital.
It highlights what successful firms are doing, including looking at international accounting firm benchmarks. Each of the chapters have a corresponding chapter on a CD where additional personal insights are shared.
Part 2 comprises series of chapters written by 13 different leading experts in their various fields.
These experts share their specialised insights in chapters covering digital marketing, negotiating skills for accountants, profit improvement, increasing client loyalty, partner compensation and more.
This allows the reader to experience various viewpoints on certain topics, tapping into a wide range of expertise in one book.
The male and female side of a computer
Top reasons why computers are male
• They have a lot of data but are still clueless.
• A better model is always just around the corner.
• They look nice and shiny until you bring them home.
• It is always necessary to have a backup.
• They’ll do whatever you say if you push the right buttons.
• The best part of having either one is the games you can play.
• The lights are on but nobody’s home.
• Big power surges knock them out for the night.
Top reasons why computers are female
• Incorrectly worded commands are completely ignored, or worse, taken literally.
• They reveal all your secrets to anyone who wants to know.
• Upgrades react badly to things left behind by previous versions.
• Rules are absolute and there is no possibility of compromise.
• Nothing is ever “really” deleted… obsolete files will be brought up out of nowhere just
to annoy you.
