Nwanda internal news: April 2013

Tax & Legislation Update Seminar:

Nwanda Incorporated Annual Golf Day:

  • Nwanda Incorporated invites you to join the Annual Golf Day on the 6th of June 2013 at the Germiston Golf Club. Click here for more information.

Successful completion of articles:

  • We wish to congratulate Jared Geake on the successful completion of his Training Contract with SAICA.

Results:

  • We wish to congratulate Raeesah Shaik (Trainee Accountant) on obtaining her Honors In BCompt(Acc), she will continue with her studies towards CTA Level 2 in 2014 through Unisa.

Examinations:

  • We wish the best of luck to all our trainee accountants going on study leave in May/June 2013.  Study hard and make us proud.

Awesome Reward for the Month of April:

  • Congratulations to Rozelda Tiearney for receiving the Nwanda Awesome Reward for the month of April 2013.

Paul Bloch:

  • We wish to update and inform all our clients and staff on the status of Paul’s condition.  He is conscious and alert and was able to say a few words during this week which is major progress. Paul is remains paralysed but he is receiving physiotherapy on a daily basis and is showing signs of improvement evidenced by moving a hand or foot on request.  Paul is currently still in the Intensive Care Unit at Linksfield Hospital and his physician has confirmed that his recovery period will be lengthy.  Please note that no visitors are allowed at this time but he is well aware that we are all keeping him in our thoughts and prayers!

 New and resigned employees:

We are delighted to announce the appointment of the following staff :

  • Justin Li (Tax Compliance Manager)
  • Vicky du Plessis (Tax Compliance Officer)
  • Nikki Padarath (Trainee Accountant)
  • Kagiso Morare (Trainee Accountant)
  • Shaun Jones (Assistant Accountant)

Johan Haarhoff has resigned to join the private sector.  Good luck in your future endeavours Johan!

The silent death of the private sector

psdeath_BCommunists in South Africa must be popping the corks of their champagne as they witness the dream of a state-run economy coming true. Socialists must be wearing a wry smile as, despite their belief in a mixed economy, they do have reservations about the profit motive. Why all this celebration? Because the big picture suggests that, with some illustrious exceptions, the decline and fall of the private sector is happening before our eyes.

  • South Africa is no longer seen as the premier investment destination in Africa. The World Bank’s list of faster growing economies over the next five years has seven African countries in the top ten. They are embracing free enterprise while we continue to be dogged by policy uncertainty and increasing bureaucracy;
  • Graphs shown by economists at seminars indicate that the destruction of jobs in the private sector over the last five years offset by growing public sector employment and government grants. In January, the overall drop of 50 000 jobs countrywide hardly dented the stock marker or merited any press comment. In America, the Dow would have fallen 5% on the news and the president would have been furious.
  • The hikes in electricity tariffs – past and future – are completely undermining our competitiveness as a nation: meanwhile, the country’s flagship project – Medupi, which is also the largest project in the Southern Hemisphere has had no construction activity for over a month. Any hopes of the private sector having access to greater electricity supplies in the near future are currently being dashed;
  • New small business formation has stalled as a result of lack of support from the entrepreneurs and overregulation. At the same time, many small businesses are going bankrupt on account of an inconsistent payment culture in government and big business. For many in the union moving entrepreneurs have no right to exist as entrepreneurship does not count to decent work. As members of the tripartite alliance, they can adversely influence the ruling party’s attitude to small business;
  • Cadre deployment and corruption have shut down many opportunities for the real stars in the private sector to be awarded to state contracts. Equally, the cost of maintaining and building new infrastructure has gone through the roof, further undermining the cost-efficiency of the private sector;
  • Hard time in the global economy combined with the growing anarchy in the workforce (where even established unions are no longer listened to by employees) have seriously squeezed many out of our resource business which are a prime element of our economy. Even the largest companies in South Africa have limited cash reserves and borrowing facilities. If exhausted, the go bust;
  • Unrestricted imports are causing havoc in our textile and food industries, lowering production capacity and making the nation more reliant on the private sectors of other countries. Farmers are dreading land reform and selling up. I could go on, but I think I have given enough examples to show that something is rotten in the state of South Africa. We need to reserve the downward slide immediately.

The only way we are going to do this is by having an Economic Codesa with measurable outcomes. Please, Cyril, step up the plate. If you want to triple the size of the economy by 2030 and reduce underemployment by 6% – which is the objective of your and Trevor’s plan – you have to have a thriving private sector. But you know that already.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

21st Century Megatrends

megatrend_BNow that we are entering the fourteenth year of the current century, some of the megatrends shaping this century have become evident. As a 21st century fox, here is my top 10 list bearing in mind that these megatrends will apply for all global economic and political scenarios. In other words, they are universal rules of the game, not variables that may or may not come into play depending on which scenario you choose. I have also run them by my fellow fox, Chantell Ilbury.
1. Populations are ageing.

One of the problems making the budget deficit of the US so difficult to solve is the extraordinary number of elderly people who over the next 50 years will qualify for state-funded medical care and social security. Europe and Japan are in even more difficult situations given that population is declining in numbers in countries like Italy and now Japan. China faces a demographic cliff in about 20 years time because of the one-child policy introduced in 1978 and, at this stage, the nation has very little in the way of pensions and medical cover for the elderly.

Of course, India, Africa, South America and Indonesia still have relatively young, growing populations where the challenge is to raise general living standards. Nevertheless, depending on the degree of success in achieving the latter objective, they too will one day face the same ageing problem as increasing longevity goes hand in hand with rising income levels. The number of people over 100 years old living on this planet is set to explode and somehow will have to be catered for.

2. More economies will return to a steady state.

Japan has led the way. Having been a high growth economy for the 1970s and 1980s, it has been somewhere between zero and one percent annual growth since 1990. They have done everything to try and revive the economy and now have the highest national debt to GDP ratio in the world. Europe is about to follow suit, while America with its younger demographics will probably manage 2% per annum.

Growth, as a concept, has really only been around for 200 years. Prior to the industrial revolution and the massive increase in population in the 19th and 20th centuries, it was only the favoured few who expanded empires and trade. Now we once again face a relatively flat economic universe driven by static populations in the more advanced economies.

3. We have moved from the Age of Knowledge to the Age of Intelligence.

The Internet now means that access to knowledge and facts has increased exponentially over the last 20 years. The differentiator now is the way we use the existing knowledge to create new knowledge and connect the dots by dreaming up ideas that have not been dreamt up before. This is all about intelligence which comes back to teaching children cognitive skills. In a steady state economic universe, the penalty for not having an intelligent strategy as a business is no longer slower sales growth than your competitors. It is death. Innovation has become an even more important element of a company’s life cycle since to grow, somebody else has to shrink. Competition in being original has just undergone a quantum leap.

4. It is more about defending your wealth than growing your wealth.

Since 2000, food price inflation has averaged around 10% a year. Petrol prices have climbed too. In fact, the only thing that has checked the rise in the consumer price index is property (and mortgages). Meanwhile, interest rates are at all-time lows and returns from most asset classes since the beginning of the century have been subdued. It is the classic squeeze particularly in Britain and Europe. It is thus becoming more difficult to make money with money unless you are prepared to take a higher risk of losing it. In fact, preserving the real value of your savings is now a stretch.

In a steady-state universe, you have to be a value-driven investor intent on stocks offering a satisfactory dividend yield and modest price-earnings ratio. Put another way, you have to be a dog whisperer where you can tell the difference between the apparent dogs that offer the upside because they are priced cheaply on account of general market conditions and the real dogs that are cheap for a valid reason. All in all, the retirement age for the remainder of this century has risen to between 70 and 75. Even then, you will still need an intelligent financial adviser. Otherwise, it becomes a race between poverty and death.

5. Education is out of sync with the job market and changing nature of work.

Around the world, youth unemployment is a real issue and in some countries has hit record highs. One of the principal reasons is that schools are educating pupils for the job market of the middle of the last century, not the one that exists now. In those days, a decent academic qualification guaranteed you a job. Nowadays most kids have to be entrepreneurs and start their own businesses. When will schools wake up to this megatrend? I don’t know, but in the meantime society will have a significant propensity for social unrest among its young citizens. They are the first generation for whom life offers fewer opportunities than for their parents because of their inappropriate education.

6. We are witnessing a second and potentially more dangerous scramble for resources.

All the easy-to-find, easy-to-mine, easy-to-treat mineral and energy deposits have been found, mined and treated. We are now into the remoter deposits which require more infrastructure to get the product to the customer or more difficult deposits which require new methods of processing such as fracking. By the middle of this century this picture can only get worse which would signify that the next big technological wave after IT will be around improving resource utilization efficiencies as well as making substitutes such as solar energy better priced for the average consumer.

A growing scarcity of water and food is also developing which is why the Chinese are purchasing land in Africa and why nations on large rivers are beginning to be more aggressive about the way water is shared. Marine mining and offshore drilling are also being stepped up with nations quarrelling over ownership rights in places like the sea off China and Japan. Outright conflict cannot be ruled out.

7. Wars will continue to be fought as weapons become more sophisticated.

This century has already seen its fair share of wars; but it is unlikely to have a war of the magnitude of the two world wars of the last century for one good reason: the principle of mutually assured destruction. Nukes have raised the stakes so much with their power of devastation that every nation, including America, will think twice about using them. Nevertheless, conventional weapons are being turned into weapons of mass destruction by improvements in technology as can be seen by the appalling destruction wrought by a single, deranged gunman in incidents in Norway and America. Missiles are longer-range, drones more accurate and explosives more deadly. While mankind’s instinct to kill has in no way diminished, his ability to kill is forever improving. I doubt whether we will see a single month in this century where someone is not fighting a war somewhere in the world. Sad but true.

8. Like black swans, natural disasters will come out of the blue.

Tsunamis, hurricanes, superstorms, earthquakes, volcanic eruptions, droughts will continue to take their toll. Mother Nature is beyond our control and on account of a more populated world can unleash events of increasing consequence for human life. Moreover, so far this century nothing serious has yet been done by the super-emitters on global warming. It hardly rates a mention among political leaders whose tenure of office is far more determined by their country’s short-term economic performance than by long-term climate change. One hopes that the meticulous collection of further scientific data will put the theory beyond doubt. Consensus has never validated a hypothesis. Often it is one man like Einstein that advances science: but evidence is always the judge.

9. Dictatorial regimes will become rarer, but what replaces them is not necessarily democracy.

One of the biggest phenomena of this century has been the trumping of tyranny in all the countries affected by the Arab Spring. However, it is too early to predict that democracy in the full sense of the word (constitutional rights, regular elections, limited presidential terms) is about to flower in the void left by old regimes. What is certain is that the social media combined with the internet and YouTube have irreversibly changed the balance of power in favor of the people. They can publish their gripes.

10. The work/life balance is now even more elusive.

In the last century, young business executives did not work 24/7. They did not have mobile phones and could not get emails at home. They switched off at weekends and on holidays because nobody could reach them. Now work has intruded on every aspect of life. The strain is showing.

By Clem Sunter 2013-01-04

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.