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NEWSLETTER APRIL 2017
SERVICES WE OFFER:
· Auditing
· Tax planning
· Due diligence
· Special investigations
· Accounting
· Registration of trusts and companies
· Management and financial advisory services
· Planning and installation of information systems
1
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Update on the Twin Peaks Bill
The Competition Commission recently referred three South African banks and
several foreign-owned banks to the Competition Tribunal because of their alleged
involvement in price-fixing. These banks are accused by the Competition
Commission of manipulating the price of the Rand when selling and buying Dollars.
Price-fixing was conducted by creating fictitious orders to buy and sell South African
Rand (ZAR), thereby changing the supply of currency. There was also alleged
collusion between banks to co-ordinate the timing for selling currency, as well as the
manipulation of prices by periodically suspending the sale of ZAR.
Not only does this scandal put good corporate citizenship in the spotlight, but it also
highlights the need for more effective regulation in the Financial Sector. It is hoped
that the long-awaited Financial Sector Regulation Bill (also known as the Twin Peaks
Bill) will introduce a new era of market conduct regulation for retail banks, thereby
enabling the forthcoming market conduct regulator to impose stricter standards on
banks in the same way it does with insurers.
The Twin Peaks Bill is currently before the National Council of Provinces (NCOP) in
Parliament, and has already been passed by the National Assembly. It is expected
to come into effect towards the middle of this year.
The Twin Peaks model of financial sector regulation recommends the creation of a
prudential regulator, the Prudential Authority, to be housed in the South African
Reserve Bank (SARB), while the FSB will be transformed into a dedicated market
conduct regulator, the Financial Sector Conduct Authority.
The implementation of the Twin Peaks model in South Africa has two fundamental
objectives:
• to strengthen South Africa’s approach to consumer protection and market
conduct in financial services; and
• to create a more resilient and stable financial system.
South Africa’s financial sector regulatory reform process is already well-underway
and the Twin Peaks system will make the financial sector safer. It is hoped that the
new regulations will bring about better outcomes for consumers, the financial sector
and the wider economy, by ensuring that customers are treated fairly and that their
funds are better protected.
2
Tax on Sugary Beverages
The global obesity epidemic is a major concern for
governments. The World Health Organisation (WHO)
recently reported that a price increase of 20% or
more will lower sugar consumption from soft drinks,
thereby helping to reduce the occurrence of obesity,
diabetes and tooth decay.
Increasingly, fiscal measures are being introduced
throughout the world to promote health, prevent
disease and to raise tax revenue. So far, South Africa
is the only country in Africa to introduce a “sugar
tax”.
Since publishing its initial proposals for the tax on sugary beverages in July 2016,
Treasury has introduced the following changes:
• The introduction of a threshold of 4g/100ml below which the sugar content is
not taxed. This is equivalent to almost a teaspoon of sugar per 100ml, which
will not be taxed (the tax will therefore only be applied to the additional sugar
above 4g/100ml)
• The rate has been slightly reduced from 2.29c/g to 2.1 c/g
Putting this into context, this means that for a 330 ml can of Coca Cola, which
contains just over eight teaspoons of sugar, the first 3 teaspoons will be tax-free (4g
times 3.3, which is approximately three teaspoons), and the tax rate of 2.1c/g will be
applied to the remaining five teaspoons. Thus, on a 330 ml can of coke, the tax will
be 45.7 cents. If the proposed sugar tax is implemented, the price of one litre of
coke will increase by R1.39.
In line with international practice, 100% pure fruit juice and milk will be exempt from
sugar tax. There is ongoing debate over the negative health benefits of 100% fruit
juice, and therefore sugar tax on 100% fruit juice will be considered in the future.
Former Finance Minister, Pravin Gordhan, announced in his Budget Speech that the
sugary tax has been revised to include intrinsic and added sugars. The draft 2017
Rates and Monetary Amounts and Amendment of Revenue Laws Bill contains the
draft legislation to implement the tax. It is open for public comment, to be submitted
by 31 March 2017.
The proposed tax will likely be implemented in 2017, once the legislation has been
finalised.
3
Invest South Africa One Stop Shop Gets Off the Ground
One of the initiatives to help
strengthen the relationship
between government and the
private sector is Invest SA. This is
an initiative which aims to reduce
the regulatory burden for local
and foreign investors.
The Invest South Africa One Stop Shop (Invest SA OSS) has recently been launched.
Based at the Department of Trade and Industry (DTI) offices in Pretoria, this new DTI-
led initiative is aimed at boosting much needed international investment in South
Africa.
The programme will enable investors to use a centralised, single centre to obtain all
required services and information. Invest SA OSS has been established to make it
easier for investors to do business in South Africa by significantly shortening and
simplifying administrative procedures and guidelines for the issuing of business
approvals, permits and licences.
The DTI not only promotes trade and inward investment, but also recognises the
importance of building trade and investment relations. By establishing collaborative
agreements with existing trading partners and with fast-growing emerging markets,
the DTI encourages exports, thus promoting much-needed global growth for the
development of the South African economy.
These are just some of the ways in which the DTI promotes investment in South Africa:
• export marketing incentives
• assisting foreign investors with business permit applications
• provision of reliable information to investors
• assisting investors to locate suitable premises; and
• assisting investors to access project and operational finance.
Numerous investment incentives and industrial financing interventions aimed at
encouraging commercial activity are in place to promote further expansion of
international trade with South Africa. To read more about these DTI incentives, go to
www.dti.gov.za
Should you require further information, advice or assistance on this topic, feel free to
contact our offices.
4
Insuring Your Business
The South African commercial sector is traditionally
underinsured and this gets worse during tough
economic times. Underinsurance can be very
damaging, especially in the case of a serious
incident where business is interrupted, or where
major repairs or even the rebuilding of a property is
required.
Making sure that your business is adequately insured is essential to protect your
business assets and finances.
Some important components of business insurance cover to consider include:
Liability insurance - all businesses, including home-based businesses, need liability
cover which offers protection in cases where you, your employees or your products
or services cause, or are alleged to have caused, injury or damage to a third party.
Property insurance - if you own your building or even just the office equipment, your
policy should protect against perils such as fire and floods as well as other risks such
as theft and vandalism. It is important to make sure that the building and its contents
are insured for their replacement value.
Commercial vehicle insurance - you can insure your business vehicles against
damage, theft, hijacking and collisions. Vehicles should be insured at market
replacement value.
Business interruption/loss of revenue insurance - insurance protection of your
revenue if your business is unable to operate.
Network business interruption insurance - covers the loss of income and operating
expenses when your company's business operations are interrupted or suspended
due to a network security failure.
Cybercrime insurance - insurance protection for the threat of intentional security
attacks against a company by an outsider attempting to extort money, securities or
other valuables. There is an increasing demand for cybercrime insurance in South
Africa.
It is important to understand the risks associated with your specific business and to
find a risk management solution which meets your specific insurance requirements.
The cheapest premium offered is not always the best option, so you should compare
the cover, exclusions, excess and all the terms and conditions before deciding on an
insurance provider.