Here are some Frequently Asked Questions: Consulting to give you some guidance and insight to our Consulting Department.
To uphold technical and quality standards and ensure effective risk management. To provide technical support services to directors and staff as well as external clients. Ensuring that support is provided in time and within expected time limits, through effective and efficient people and other resources management.
Whilst IFRS 15 is primarily a standard on revenue recognition, it contains specific requirements relating to contract costs. Companies may therefore need to change their accounting for those costs on adoption of IFRS 15 for annual reporting periods beginning on or after 1 January 2018. View PDF
The South African Companies Act has specific requirements on the approval of financial statements. View PDF
In this Issue
- Get the Most Out of Your Audit While Saving Cost
- Importing From Amazon: You Could Be Forced to Register as an Importer
- Directors Beware! You Could Be Held Personally Liable For Data Breaches
- Surviving a Business Crisis: Consider Your Turnaround Options
- Will the 21st Century Really Be Africa’s Time to Flourish?
- Your Tax Deadlines for October
The due date for non-provisional taxpayers who submit their income tax via eFiling or electronically at a SARS branch is 31 October.
Time is running out and SARS is cracking down on late lodgements and failure to submit returns.
The penalty amount that will be charged for late lodgement depends on your taxable income and, says SARS, “can range from R250 up to R16,000 a month for each month that the non-compliance continues.”
Treat this deadline seriously!
“We really need to have a third wave, and it needs to happen in sub-Saharan Africa” (Bill Gates)
Two factors often cited as to why “Africa’s time is coming” are:
- Demographics – the huge populations of India and China are cited as a key factor in their rapid growth. Currently Africa is the fastest growing continent and its population is set to double by 2050.
- Leapfrogging technology – for example, developing countries have set up banking in remote areas of East Africa by using cell phones powered by small solar panels. They have thus bypassed the whole process of setting up banking and electrical infrastructure.
Is it likely that these predictions will materialise and if so what impact will all this have on South Africa?
Demographics – the unseen flaw
It is accepted that large populations create a large potential market as has happened in Brazil for example. However to reap this benefit, populations need to start declining once development begins to take off. The reason for this is what is known as the “dependency ratio”.
In 1960, in developing countries in Asia, Africa and South America women had an average of six children. Since then the number has declined in Asia to 2.2 children and to 3 children in South America. However Africa has remained high at just under 5 children per woman.
Having fewer dependents allows parents to focus on their careers, grow their wealth and afford to spend more on things like education and health care on smaller families. As these smaller families rapidly join the middle class, this helps to provide the momentum for infrastructure development and rapid economic growth. As long as Africa has a high care dependency ratio, it will be extremely difficult to mirror China and India.
In South Africa our average number of births is 2.4 per woman which puts us in between Asia and South America. If we can get some basics right, like education, we could start to rapidly develop.
Mobile phones have been used for more than developing banking in Africa but smart phones are also used, for example, to help rural farmers. Satellites scan a farm and can tell the farmers which of their fruit trees have rot and need to be pulled out before the disease spreads to other trees. They can get advice on what crops to plant and how much fertiliser to use etc. Technology thus is enabling some African countries to progress at a rapid rate.
African countries still need infrastructure. There is no point in doubling your farming yield if you cannot get your product quickly and cost effectively to market. Without decent roads, ports, an effective legal system and no bottlenecks at border posts, Africa will struggle to fulfil its potential.
Many breakthroughs can be made with technology but without a decent foundation, leapfrogging will only have a limited impact.
We in South Africa have reasonable infrastructure but very high inequality and still need to focus on uplifting the poorer sections of the country and creating a more enabling environment to attract investment.
In a nutshell, South Africa is potentially well placed to move rapidly ahead. Things are unfortunately less certain for the bulk of our continent.
“Turnarounds seldom turn”
In the life cycle of any business, it will almost inevitably experience a crisis. This is always a very difficult time and it will be a test of judgment and experience how senior management respond. Usually, it will be some issue that is solvable and the business will continue to operate.
Sometimes however it is an existential threat and this will need careful thought and planning.
Stress drains your energy
Deciding whether to try and turn around a business or put it into liquidation is enormously stressful. Many careers and the family of staff and key stakeholders could suffer depending on the outcome.
It is unlikely there will be a second chance if the first decision made by management turns out to be incorrect.
What is the problem?
So the first thing to do is identify the core problem. There are many things to look at:
- Is your business in a mature to old stage?
- Are there disruptors like Uber in the industry?
- Is there still demand for the product or service your business provides?
- What sort of shape is your business in? Are systems and infrastructure creaking or worse?
Money, planning and analysis
Once the problem and a solution have been identified, don’t forget that turning around a business will take resources. Plan your cash flow carefully.
Business turnarounds are also high risk – remember they will often not work out. But careful planning and analysis will improve the odds of success – ask your accountants for their specialist help and advice at this crucial time.
Hacking into computers has become common place. In the United States it grew by 45% in 2017. Yahoo, one of America’s largest Internet search engines, was recently the victim of cyber crime and disgruntled shareholders are suing the directors for dereliction of their fiduciary duties.
Hacking is a reality in South Africa also, which raises the issue of your personal liability as a director in the event of your company being exposed to cyber crime.
What do the Companies Act and King IV expect of directors?
Directors need to have “taken reasonably diligent steps to become informed about the matter” – in other words directors would be expected to know cyber crime has become commonplace and to take steps to ensure the company takes all the necessary actions to prevent outsiders getting access to company information. King IV specifically charges directors to “identify and respond to incidents, including cyber attacks…”.
Your risk is that as a director you are personally liable for any costs, losses or damages resulting from a breach of your duties.
How to protect yourself from liability
If a company suffers loss from a hacking incident, then directors need to show they have addressed the issue to the best of their ability if they want to avoid attracting such liability.
Whilst many of us may feel lost when it comes to technology, it is clearly an issue that exposes a company to significant risk. Make sure you and your board of directors gain an understanding of how to protect your business. You need also to ensure that in need you can show documentation to a court to prove that you acted with diligence to counter the risk of being hacked.