Finding treasure in the National Treasury

The National Treasury assures us that South Africa is not in a worst case scenario, despite the downgrade by two rating agencies, South Africa is still considered in the investment grade by Moody and Standard & Poor’s. This recognition is enough to create a staircase for. The critical issue at present is to evade further downgrades. With great focus on properly implementing existing policies, there are still many possibilities for the country’s economy to grow. With growth spurred by higher demand in China and a growing economy in the United States, South Africa could yet walk out of its economic downfall.

South African Finance minister Malusi Gigaba will meet International counterparts at the IMF and the World Bank meeting in Washington DC on 21 April 2017  with the aim to reassure, reaffirm and instill confidence in the South African economic stability. The South African Treasury is confident that the economy is resilient and robust enough to bounce back to investment grade, it has policies already being implemented to ensure a lift in the economy and a curb in the decline of the rand. The treasury is assuring citizens of its plans and efforts to boost the nation’s financial situation.

“Radical means it must be quick‚ there must be change and something must happen immediately and transform the economy to serve all our people.” Cyril Ramaphosa

Read more on restoring SA economy here

The Automotive Industry- South Africa’s premier employer

South Africa has one of highest unemployment rates in the world, sitting at a high of 26.5% at present. High levels of unemployment put pressure on the general efficiency of an economy, affecting even the employed. When there is diminutive money to spend, a cyclical economic problem forms. Businesses and employees are affected by a decline in the number of goods consumed.

Despite all these factors, South Africa is still considered one of the Top 10 most developed countries in Africa, it has an economy that is ranked the second largest in the African economies. This is mainly because South Africa has multiple industries contributing to its economy, the Automotive Industry being a giant amongst these.

The Automotive Industry contributes over R210bn in the South African annual GDP, placing over 660,000 jobs and R84.5bn in wages. It is largely based in the Eastern Cape, Gauteng, and Kwa-Zulu Natal.  Populaces in these provinces rely largely on this industry and its sub-industries, according to the AIEC’s report, it is estimated that each direct automotive job supports at least five other indirect jobs. The modern automotive industry in South Africa was launched in 1995 and has since continued to advance.

The financial responsibility for unemployed persons in South Africa falls largely on the government, with this realisation, the Government has put in place the Automotive Production and Development Program (APDP) which is designed to support and grow one of the country’s premier employers. The APDP hopes to achieve local production of 1.2 million vehicles annually by 2020 thus increasing employment opportunities.

The Automotive Supply Chain Competitiveness Initiative (ASCCI) was launched in 2013 as a measure to enhance localisation, production and supplier capabilities. Competition in this industry has significantly grown, more activity within an industry is always positive for the economy. However, global competition has also increased, thus creating difficult and challenging circumstances for the local Automotive Industry. Manufacturers are required to enhance quality, increase organisational efficiencies and drive innovative features into their products while keeping manufacturing costs minimal.

This prolific industry requires a wider source of investment, the Automotive Investment Scheme (AIS) has facilitated more public sector incentives purposed to develop and assist in the manufacturing of automotive components.

The Automotive Industry is a crucial financial contributor in the South African economy, it is responsible for a significant decrease in unemployment. Expectedly, the government has put immense drive and effort into the advancement and success of this industry, ensuring thrive and profitability. Undoubtedly the programs and initiatives put in place have contributed to the increasing growth of the local Automotive Industry.

Read more on the Automotive Industry SA

Three cars manufactured in SA READ

Staying financially afloat

South Africa’s junk status downgrade has had a number of dire consequences for both the country and the populaces, economists have warned that the downgrade to junk is likely to trigger a recession as its effects spread to the wider economy. The downgrade greatly complicates the prospects for South Africa being able to stage an economic recovery. Without growth recovery, employment growth and revenue collection will possibly decline.

The state of the economy affects every South African, directly or indirectly. Countries like Columbia, India and Uruguay who have experienced such a downgrade have had to spend an average of 7 years climbing out of downgrade and back into investment-grade. For the mere fact that it is unknown as to how long it will take South Africa to recover, individuals should consider ways to staying financially afloat.

“If you make hasty investment decisions now, without a clear understanding of what is to come, you could increase the risks in your investment portfolio. At this time we need to make careful, strategic and well-planned moves to weather the impending storm. It is important to remain calm and stay invested,” Phillip Kassel -Financial adviser

“Cutting down on indulgences such as eating out in restaurants or buying clothes on a store-card that has a high interest rate, or even packing your own lunchbox instead of buying takeaways, will go a long way towards enabling you to save a little extra each month. Even a small increase in the amount that you put away each month can make a huge difference over time, thanks to the power of compound interest” Phillip Kassel- Financial adviser

Read more on how SA can come back from junk status here

50 Drivers of change & The 7th annual public sectors conference

The global economic and business landscape is changing with unprecedented speed and uncertainty. Accounting professionals will be expected to look beyond the numbers and collaborate, think, behave more strategically and lead in decision making.

 

There is global consensus that public sector finance needs to adapt in the face of a changing economic landscape. With modernising economies, digital influence and evolving economic sectors, Africa’s public sector finance is confronted by 50 key drivers of change.

 

These 50 drivers of change undertaken in a global study by ACCA (Association of Chartered Certified Accounts) will have the biggest impact on public sector finance leading into 2026. Financial skills not yet practiced will come into demand under requirement and forever change the face of the public sector accountant.

 

THE KEY FOCUS

Unpacking the study at the recently held ACCA 7th Global Public Sector conference in Johannesburg, industry guests and members showcased practical examples of how these 50 drivers of change will influence public sector finance. Manj Kaler, Head of Public Sector ACCA, gave insight into the drivers and by which order they will begin to influence finance industry.

 

Overarching the drivers and theme of the conference is the increase in demand for integrated reporting in the public sector finance.Integrated reporting will require accountants to shift away from financial analysis to business accountancy, focusing on swift action and financial literacy beyond a spread sheet.

 

The public sector is as complex as it is diverse” – Report: 50 Drivers of change in the public sector

 

Unpacking the above influencers, through a panel discussion, Bukkie Adewuyi – Director, Sizwe Ntsabula Gobodo, Xolisa Dlanga – Senior Financial Analyst, Office of the Accountant General and Martin Turner – former president, ACCA – focused on the importance of transparency and accountability. Citizens now demand accountability more than ever, with a strong focus on aligning public sector finance to presidential term successes. More so in Africa, governments are starting to feel the strain from public backlash from corrupt accountancy and mismanaged public sector finances.

 

CITIZENS AND INTRINSIC VALUE

Presenter Patrick Kabuya, Senior Financial Management Specialist – World Bank Group, highlighted two main goals for the Group particularly in Africa, they are; to end extreme poverty, and to promote shared prosperity. The rise in active citizenship in Africa reiterates these goals, holding intrinsic value to transparent and accountable public servants.

 

Sound management of our public finances is a cornerstone of our development plans.” – Pravin Gordhan – Minister of Finance

 

Countrymen and investors want change. Unpacking this social uprising and other drivers of change, the recent study by ACCA draws on Professor Mervyn King’s King IV principles of integrated reporting ; independence from political influence, performance targeting and variable remuneration based on outcomes.

 

ACCA surveyed over 1,000 senior executives, ACCA members and members of other professional accountancy bodies working in public sector organisations and carried out 12 in-depth round table discussions across 11 countries, including South Africa (around 300 participants) to populate the report.

 

The report is structured in two sections, the first introduces the ranking of 50 drivers of change (split into eight domains of relevance) that are expected to impact the public sector in the next five years and beyond. The second section assesses the impact of the drivers on the future public sector landscape.

 

KEY FINDINGS

  • The overall top, critical, driver of change is: level of economic growth, followed by: quality and availability of the global talent pool.
  • The public sector finance function is also experiencing challenges of its own from changes in technology to greater commercial focus and big data.
  • Professional accountants in the sector will need strong set of skills to meet the challenges including strong technical skills, communication skills, professional judgement, vision and leadership skills. Hence it is most important to invest in nurturing and training students.
  • The ability to make linkages, explore perceived economic growth strategies in order to realise visions and plans of national governments.

Read more on economic policies and public finance http://bit.ly/2o9xnl7

Global uncertainty marks drop in business confidence

The South African economy has recorded its fair share in business confidence declines since the 2008 market global crash. Recently, in the 4th Quarter of 2016, the RMB/BER Business Confidence Index declined to 38 from 42 points. This would be equal to levels last seen in the 1970’s and 2010’s.

 

The latest Global Economic Conditions Survey from ACCA (the Association of Chartered Certified Accountants) and the IMA (the Institute of Management Accountants) point to a similar global business confidence drop in Q4. The findings of the survey highlight businesses and economic forecaster’s sentiment towards 2017 and a new age of uncertainty.

 

CONCERNS, FACTORS

Fall in Government investment; changes in political landscapes and economic isolation are all contributing factors to the decline. The survey of over 4,500 finance professionals and business leaders worldwide has found that while the economic outlook has improved slightly in the US and China over the last quarter, the Eurozone has hit its lowest confidence levels since 2012. In South Africa, business confidence levies are lower than last seen post-2008.

 

44% of respondents expressed concern over falling income due to low levels of government expenditure, with another 43% reporting worsening business confidence.

 

Across the Eurozone, the resignation of Italian Prime Minister Matteo Renzi in December 2016, combined with a series of upcoming national elections, has led to a downbeat mood while UK business confidence fell sharply ahead of Brexit negotiations.

 

 “Current political uncertainty is clearly having an impact on global business confidence. In the US the Trans-Pacific Partnership is unlikely to be ratified while likely restrictions on trade with key markets including China and Mexico are also major factors here. In Europe, uncertainty over the outcome of elections in the Netherlands, France and Germany – which could lead to major policy shifts for regional trade and the future direction of the Eurozone – all contribute to a gloomy outlook going into 2017.”findings Faye Chua, Head of Business Insights at ACCA

 

FUTURE UNCERTAINTY

Despite this and the slowdown in manufacturing worldwide, the global economy may be on course for growth in 2017, supported significantly by China’s growing response to its economic stimulus programme and the US maintaining a partial recovery.

 

In South Africa, there is an overall consensus that the Rands strength could beat 2015 levels. A stronger Rand equates to economic stabilisation, steady inflation, and stronger GDP figures. What South African economists are now looking towards is the level of uncertainty brought on by rapidly changing domestic and international economies, politics and trade figures. However, the State of the National Address  will give clearer guidance locally to the year ahead and market analysts can have more concrete views on how we emerge on international trade pacts.

 

To view the survey visit http://bit.ly/2jtIsxi

 

Fieldwork for the Q4 2016 GECS took place between 24th November and 13th December 2016 and attracted 4,551 responses from ACCA and IMA members around the world, including more than 350 CFOs.

 

References

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http://bit.ly/2n9Rxuv

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http://bit.ly/2n9RMWz

 

Reflecting on SDG’s in Relation to the WEF Resolutions

 

ACCA Blog WEF

World Economic Forum (WEF’s) theme for the year of “Mastering the 4th Industrial Revolution” presented some of the challenges that developing countries face, although opportunities of creating new markets, re-engineering on the existing business strategies seemed to be the focus. A shift in mind set and capacity building to support national plans stemmed up as an engine for building towards a positive socio – economic activity in the near future. The core of the conversations aligned directly and indirectly to the Paris agreement and the Sustainable Development Goals (SDG’s) of supporting responsible business practises, narrowing the gap between the developed and developing countries and “making the world a better place”.

Progress Review

As an emerging market, South Africa (SA) is currently not yielding the expected growth prospects. Progress has been uneven in whether it is in ensuring access to internet connection or in being innovative in the prevention of illnesses instead of treating diseases. Limitations to internet connectivity impede transfer of knowledge, business expansion and creation of small businesses – while the latter tends to decrease the rate of production and adversely having a ripple effect in the economic activity of the country. Entrepreneurship has been cited as the driver of change for the African economies. However, gender imparity, quality education, access to finance, data sharing, sound governance structures, bridging human capital and infrastructure gaps are the keys to unlocking the full realisation of a transformative, inclusive and sustainable economic growth path. SA has taken great strides in addressing gender equality and women empowerment in both corporate and public enterprises, but there is still some rhetoric that needs to be transformed into action. Authentic support thereof for entrepreneurship through industrialisation still needs to be re-invented.

With climate change revolutionising the way business is done, SA and Africa at large have an opportunity to turn the renewables market into a massive growth area. According to the World Bank “one investor characterized the renewable programme as the most successful public-private partnership in Africa in the last 20 years. Important lessons can be learned for both South Africa and other emerging markets contemplating investments in renewables and other critical infrastructure investments”. The role of regional infrastructure development is critical in building a continuing socio and economic development.

Like many of the developing countries SA has the world’s youngest population to train and develop in building agile and robust sustainable business and government strategies in the future.  With climate change threatening food security and exacerbating slow economic growth. The emergence of new technology, as in biotechnology can be further developed in building a resilient and sustainable agriculture. Each country has to consider the ethical issues that this new wave of technology also brings forth as it develops its policies and regulations.

Whilst the prime responsibility to deliver rests with the government, according to PwC 87% of SA businesses are aware and understand that company responsibility lies beyond profit and that its performance is interlinked to the triple bottom line. The accountancy profession has a critical role to play in supporting the building blocks of a

The Role of Fraud in the Economy

ACCA_Fraud

According to various reports, fraud is South Africa’s number one economic crime and considering that fraud accounts for 7% of company revenue worldwide, any further increases in this figure could prove detrimental to an organisation in these difficult economic times. In South Africa alone, it is estimated that fraud costs the economy in excess of R2 billion a year. There are a number of reasons why people fall victim to the pressures of fraud. In the economic state that we find ourselves in there is scarcity of jobs and this has resulted in people using unethical methods for financial gain. On the other hand, in an attempt to reduce costs, companies usually resort to measures like retrenching staff (which may affect the segregation of duties doctrine), reduced training, abandoning cheques and balances which may be in place, or cutting back on internal audits, amongst various other things. In such conditions, an organisation is susceptible to fraudulent behaviour from its employees both internally, as well as externally in transactions binding the firm. Ever since the 2008 downturn the relationship between the finance industry and consumers has changed. According to an ACCA report titled Culture vs regulation: what is needed to improve ethics in finance, “the crisis shattered the public’s trust in the banking system and as the examination of financial institutions continues the relationship between the bank and the public continues to deteriorate as ever more scandals are announced”. A number of policies have been drafted to aid this situation, but policies and regulations can only go so far. Regulations and policies alone will not be able to combat fraud in business. Regulation failed to prevent the 2008 crisis; risk was constantly discounted. In some instances it was considered non-existent. Technological developments and complex products can be created rapidly, which means that the regulator will always be playing “catch-up”. So maybe in highlighting the impacts of fraud on the economy and how these affect each of us directly there might be some improvements that emerge. Below are some of the impacts of fraud on the country:

  • Corrupt activity hinders development
  • Contributes to the depletion of the public purse and distorts markets
  • Hinders local and foreign direct investment.

Countless studies around the world show how corruption can interrupt investment, restrict trade, reduce economic growth and distort the facts and figures associated with government expenditure. But the most alarming studies are the ones directly linking corruption in certain countries to increasing levels of poverty and income inequality. The issue of ethics comes to play, and these are determined by the culture of an organisation. The ACCA report looks at the culture of tolerance in an organisation, for instance, is profit valued more than the means. Does an organisation promote a culture of high risk overlooking regulations and policies? It is important that business managers realise that these “insignificant” hints lay foundations to bad or good behaviour. Over-reliance on regulators has been found wanting in days of old when dealing with fraud and corruption, it is therefore important that business managers understand that the most power lies in the culture of the organisation and they have the most influence on this than external regulators.