Spring has sprung again! It always adds a (no pun intended) spring to everyone’s step and the world outlook seems to be that much brighter. It is already time again to start planning for the annual Boney M invasion, the silly season and the end of year shut-downs – namely staffing, stock and cash-flow over this period. On another front, I was told that the Tygerberg Zoo has been sold and is shutting down at the end of the year. I was last there in 1997 and it was a vibrant bustling place – in complete contrast to the tragedy I witnessed last week-end when I went again – the whole place has a palpable air of neglect, many cages are empty and overgrown. Whilst I am not a fan of zoos, I believe they have a place and once Tygerberg Zoo closes, there are no more zoos left in the Western Cape. If you are interested/ would like to have a swansong there, there were still tigers, lions, zebra and others – enough to make it interesting for the kids (and their parents). Last chance to see for some.
In the tradition of not actually being full of doom and gloom, I am not taking any credit for the following excerpt (Cees Bruggemans – chief economist for FNB can have the kudos). The commentary, however, provides another succinct view of where the world is at the moment (and that things cannot improve rapidly any time soon).
Europe this year is being guided by Germanic-favoured fiscal austerity, deepening peripheral recession and ferocious political struggles to achieve structural reform so that growth can become supply-side boosted. The downside of all this enforced discipline is that a large part of Europe is increasingly suffering from reduced lifestyles or lost chances as unemployment, especially among youth, keeps rising. This is an enormous welfare loss to be absorbed. ECB President Draghi is on record saying that the EU welfare state is no more. The hardship and lost ideals accompanying such a wrenching change doesn’t come without political disagreement.
Elections this year in Greece and France, Ireland (referendum), Germany (at state level) and potentially Holland have led to (and likely will lead to) changing political mandates, in turn fundamentally shifting the way forward – witness particularly the reversals of Sarkozy policy in France since Hollande has taken power (albeit these policy changes are not sustainable).
And then there will still be key elections in Germany and Italy in 2013. The ECB interventions of earlier months, injecting EUR 1 trill of 3-year bank funding, may have temporarily stabilised markets, but there still lies at least another decade of hardship and deep choices ahead. These are bound to be subjected to harsh electoral and market vetting, potentially giving rise to the kind of abrupt disruptions as faces America later this year.
Therefore Europe, too, may not enjoy a smooth recuperation but may require new drastic support actions, presumably from the ECB if politicians are slow to react and the alternative is dissolution of the European Monetary Union and renewed fragmentation. Such European turbulence may at times reinforce US events or serially follow them. There you have it. Deeply challenging existential questions literally everywhere you care to look, with no clear indication where it may all wander.
It gives a range of possible outcomes for us. Our GDP growth could vary from +3.5% to -2%, the Rand could move in a 6-15:$ range, inflation might vary from 5% to 12%, and the prime interest rate in 2012-2013 could move between 9% and 15%. These are the kind of realities that will give some sleepless nights, others find enormously exciting, and may incite yet more others to hedge.
The point is made yet again that we are adrift in the sea of the world – with no very little influence on what happens, but merely reacting to events as they happen – in terms of global growth (European and American stagnation/ recession), oil, middle-eastern and Israeli tensions – cue the oil price, Chinese slowing/ regime change and economic restructuring, all the while attempting to shoot ourselves in the foot economically – see Marikana. Without having the facts of exactly what happened and when it happened, it is likely that the spectre of the Marikana massacre will cast a cloud over South Africa for many years to come.
There are, globally no easy solutions and we have a dearth of leadership on the local front, which has opened the door to unrealistic populists.
Please note that on the local front, the IRBA is proud to inform South Africans, that for the third consecutive year South Africa has maintained the number 1 position in the World Economic Forum Survey for the strength of its auditing and reporting standards regarding company financial performance. Whilst I am delighted for the feather in the cap of South Africa, what it means is that we have the most exacting audit standards in the world (and you don’t get that without audit fees having to cover the cost of compliance/ attaining and maintaining those standards). In my view, more time and money could be better spent addressing the many other ills in South Africa – poverty, education, sanitation, housing etc etc etc.
Ah, the ongoing national embarrassment that is the Companies and Intellectual Property Commission (CIPC) – their actions speak more eloquently than I ever could. We submitted an application where Director’s of a company changed. The Director’s ID number was, by way of example, 555 554. We received the director change notification back with the ID number 555 551 (an easy mistake to make), however, what it means is that the CIPC documents don’t agree to the source documents which can lead to problems with the bank/ SARS etc due to fraud concerns. And the only way to correct this is to redo EVERYTHING (and hope that they don’t beggar it up this time) – all of which has to be paid for.
As has been previously mentioned, SARS have added a truly vicious and malevolent beast to their arsenal known as an IT14SD. This is a reconciliation which requires reconciliation between the payroll numbers on the financial statements to the payroll reports (IRP5s and EMP501s) and a reconciliation of the VAT inputs and outputs (to cost of sales). This is an incredibly labour intensive reconciliation which easily takes 40 man hours. It is a VERY VERY expensive and time-consuming submission (and seeing as SARS developed this without informing the software providers, as of August 2012, there isn’t a software provider in South Africa that has set up their software to generate the inputs/ reports in the format required). I asked the question at the annual Southern Suburbs SAICA/ SARS meeting if we could not submit the document and rather invite SARS to audit. The considered reply was NO. It has to be submitted, irrespective of the time and cost (and of course God help you if a mistake is made). Of course, the fact that, for example, in a manufacturing environment, where (say) salaries are included in cost of sales, there is no way on God’s green earth that the financial statements will ever be able to reconcile to this, which leads to audits and more time wasted.
In addition, we are expecting SARS to change the format of the companies income tax return. This has not been widely publicized but it appears to be imminent, necessitating careful management to ensure that tax returns are not completed (to then have the format change, necessitating a rework). Incidentally, for another matter, where a client is under audit, we received a notification at 12h36 on 31 August 2012 advising that the audit would start on 31 August 2012. Apparently the letter was a system error…………..
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