1 April: 4 major taxes are coming

While analysts praised former finance minister Malusi Gigaba for a budget speech that steered clear of any shocks or nasty surprises, there are still a number of big changes that will hit South African pockets come April.

VAT hike

Arguably the biggest of these is the increase in the effective VAT rate, which will rise from 14% to 15% adding approximately R22.9 billion to the fiscus.

Bruce Fleming, a financial planner with Old Mutual Private Wealth Management said that the increase was a tough political decision – but said it was important to remember that it is the first such adjustment since 1993 and was therefore overdue.

However, Fleming warned that all households will feel the pinch of the increase, and while zero-rated food items will take some of the increased burden off the poor, there has been no further developments as to whether more items will be added to the basket or even if additional items will be introduced at all.

Fuel levy

Commuters are expected to feel additional pain from 4 April with an increase in the fuel levy – although this increase could be slightly offset by a stronger rand and lower oil prices.

From this date the fuel levy will be increased by 52c per litre on 4 April, pushing up the general fuel levy to R3.62 per litre of petrol, after a hike of 30c per litre last year.

“This is quite significant as it will place an extra burden on all road users especially on those who mostly rely on public transport and will ultimately have an effect on inflation,” said Fleming.

Sin taxes

As expected there was another increase in sin taxes and South Africans will pay between 6% and 10% more for alcohol, while smokers will be paying 8.5% more to sustain their habit.

Fleming said that this is expected to bring in an additional R1.33 billion in revenue in the 2018/19 financial year.

However, the increase in South Africa’s sin taxes are also particularly notable this year, given the recent push towards further legislating both alcohol and smoking regulations.

This means that we could see both a ban on public smoking and an increased drinking age (from 18 to 21) by the next budget speech.

‘Not Wealth’ taxes

“Income tax for the higher earners will continue to squeeze them as there is no relief for inflation in the top four tax brackets,” said Fleming.

“While the bottom three personal income tax brackets as well as the primary, secondary and tertiary rebates will be partially adjusted for inflation through a 3.1% increase, the top four brackets will remain unchanged.”

Despite not seeing a direct increase in the higher wealth brackets, the budget was notable in the amount of ways it plans to indirectly tax wealthier South Africans.

This includes an increase in estate duty from 20% to 25% for estates worth R30 million or more, an explicit tax on smartphones, and an increase in the tax on vehicle prices.

Source: Supermarket & Retailer

The recession that never happened

The South African economy grew 3.1% during the fourth quarter compared with the previous quarter — putting growth for the year at 1.3%, beating Treasury’s and other forecasts.

Compared with a year earlier, gross domestic product (GDP) increased by 1.5% in the fourth quarter of 2017.
Treasury had expected growth of 1% for the year.

The largest positive contributor to fourth-quarter growth was the remarkable recovery in the agriculture, forestry and fisheries sector, which increased 37.5% and contributed 0.8 of a percentage point to GDP growth.

The trade, catering and accommodation industry grew 4.8% and contributed 0.6 of a percentage point.

The primary sector (which includes agriculture and mining) increased by 4.9%, the secondary sector (manufacturing, electricity and construction) grew by 3.1% and the tertiary sector (trade, transport, finance, government and personal services) grew by 2.7% compared with the third quarter.

This signals that the country’s economy is poised for a recovery.

It is a vast improvement on the dismal 0.3% GDP growth achieved in 2016 but still remains weak by the country’s historic standards.

In the third quarter, the economy grew by 2% quarter on quarter, demonstrating a resilience that suggested it was in better shape than most economists had previously thought.

Expenditure on real GDP increased by 3.1% in the fourth quarter of 2017, while final consumption expenditure by general government increased by 1.3%.

Treasury is forecasting growth to rise to 1.5% in 2018 on political and policy certainty, renewed confidence and rising private fixed investment.

Finance Minister Nhlanhla Nene said on Monday that it was likely that the growth forecasts would be revised upwards due to improved business and investor confidence.

Growth for 2016 was revised up to 0.6% from 0.3%.

Third-quarter GDP growth in 2017 was revised higher, from 2% to 2.3%.

The changes were based on better access to data sets, said Statistics SA deputy director-general Joe de Beer.

The revisions indicate that SA wasn’t actually plunged into a recession last year. A recession is based on two consecutive quarters of negative growth.

The performance in the fourth quarter of 2016 has been revised from a 0.3% contraction to growth of 0.4%.

By Sunita Menon for Business Day

Tiger Brands has asked consumers to remove any Enterprise ready-to-eat meat products from their fridges and place it in a plastic bag – away from other foods.

The reputational damage suffered by Tiger Brands following the outbreak of listeriosis that has claimed 180 lives in South Africa since last year is likely to hurt the diversified food giant’s balance sheet over the short to medium term only, analysts said yesterday.

Ron Kiplin, a portfolio manager at Cratos Wealth, said yesterday it would take Tiger Brands some time to turn operations around after Health Minister Aaron Motsoaledi identified its Enterprise Foods factory in Polokwane as the source of the food-borne disease.

“They (Tiger Brands) appear not to have had the right controls in place, and it is an indictment on operational management,” he said, adding that operational management at the factory had to be held accountable, although the buck stopped with top management.

“They need to hold a proper inquiry to be able to tell their customers they have the right controls in place, otherwise the reputational damage will continue for longer,” he said.

Kiplin said the company’s processed foods division was likely to take a knock, but it would not have a major impact on group profits, because Tiger Brands was highly diversified.

Recovery

Chris Moerdyk, a corporate marketing analyst, said although the immediate damage to the brand was enormous, it was likely that it would recover.

Moerdyk said wealthy people would start moving away from processed meats.

“The bulk of their market is people in the lower economic group,” Moerdyk said. “This group of people buy processed meat because it is cheaper. Polony is almost a staple food for many poor South Africans. They do not have alternatives.”

He said the damage to the brand would be limited to the medium term.

“Not long ago, Ford Kuga cars burnt and killed people. Ford is now back to sales of before that period. People thought that the Ford Kuga would not sell again, but people continue to buy the cars,” said Moerdyk.

Tiger Brands recalled its processed food products and halted production at its factories in Polokwane and Germiston after the report by Motsoaledi.

The move prompted Mozambique, Zambia, Malawi and Botswana to ban cold meat imports from South Africa.

Bomikazi Molapo, a spokesperson for the Department of Agriculture, Forestry and Fisheries (Daff), said the department would not be involved in the disposal of the processed meat products.

“The recall was instituted by the National Consumer Commission, and the suspension by the Department of Health. Therefore, the Daff will not be involved in the disposal of the products,” said Molapo.

By Dineo Faku for IOL

New Public Enterprises Minister Pravin Gordhan on Tuesday revealed that his immediate focus would be on revitalising state-owned entities (SOEs) and reversing the tide of state capture that has gripped key sectors of the economy.

The appointment of new boards at several public entities, including operational changes, was expected in the next three weeks, Gordhan told members of the Federation of Unions of South Africa (Fedusa) at a conference in Pretoria.

“It won’t be an easy task, nonetheless it is not impossible,” he said, adding that change was expected in state power utility Eskom following the appointment of a new board.

“There is a huge need to restructure the state entities to function in the public interest, not just to serve a few people,” said Gordhan.

The financial management of public enterprises such as Eskom, South African Airways and rail agency PRASA has been blamed for putting pressure on the fiscus, with billions of rands in guarantees extended to the entities to help them stay afloat.

“A good team at Eskom needs to assure South Africans that they would work to keep costs under control,” he said. “Given 3 to 6 months, we will begin to see some positive signs.”

‘Tough ride’

Gordhan, who was named public enterprises minister on February 26, stressed that rooting out corruption and transforming state-owned enterprises was going to be a “tough ride”.

Treasury has issued R350bn in government guarantees to Eskom, of which over R200bn has been utilised, as the troubled state power utility has battled to rein in bulging operating costs.

The poor state of Eskom’s financial affairs has seen its long-term corporate rating downgraded by Moody’s in November to Ba3, a third notch below non-investment grade.

The ratings agency placed Eskom on review for a further downgrade.

Late last month rival ratings agency S&P downgraded Eskom’s long-term debt to ‘CCC+’, the seventh rung of non-investment grade, with a negative outlook.

Gordhan said he anticipated that those involved in state capture would try to “sabotage” efforts of reversing the damage and transforming the state.

“The damage is not something that happened overnight […] we are on a good wave in South Africa and it is possible to re-capture the state and re-orientate these institutions,” he said.

By Sibongile Khumalo for News24

The Gauteng government has unveiled the first details for its new PWV15 highway.

Speaking on the tabling of the provincial budget on Tuesday (6 March), Gauteng finance MEC Barbara Creecy said that the develoment will form part of a significant investment into infrastructure in the Ekurhuleni municipality.

“The Gauteng department of transport will receive R6.4 billion in infrastructure money over the medium term.

“The most significant project to start in the design phase this year is the PWV 15, the first brand new Gauteng Highway to be built since the 1970s,” Creecy said.

R250 million of this is expected to be spent during the design phase of the highway in the current financial year, she said.

Aerotropolis

While details on the highway were relatively light in the budget itself, Creecy reportedly told journalists in a media briefing ahead of her address that the PWV 15 highway would run east-west, reports BusinessDay.

“This will help facilitate and enhance the Aerotropolis in Ekurhuleni and the first phase is going to be dealing with the roads around the OR Tambo international airport and the city of Johannesburg,” she said.

“The intention is to try and cut out the Gillooly’s interchange because any of you who travel in the early morning or late afternoon in that area would [know] that it is an area of very intensive congestion. This is particularly when all the trucks and freight vehicles move into that area.”

Gauteng had previously outlined its plans for a new highway and other infrastructure developments as part of its new Aerotropolis corridor.

The corridor promises to host an number of major ‘catalyst projects’ including new commercial, retail and logistics hubs, as well as a number of upgrades to the surrounding areas.

Source: Business Tech

Paper notebook goes high-tech

You’ve probably seen a few of these smart paper or smart pen things over the years — write in this special notebook and it gets saved to an app, that sort of thing. A new entrant to this niche space is the Everlast notebook, which obviates the necessity of restocking proprietary paper in that its pages can be wiped clean with a damp towel.

No, to answer your first question, it’s not a tiny whiteboard. The Kickstarter page is very clear on that:

The 36 pages (or 32 on the large-format version) are a “waterproof synthetic poly blend,” which when written on with a pen from the Pilot Frixion line can be wiped off over and over again, but only with a wet towel — normal rubbing won’t do it. It’s important to use the Frixions because they use an erasable ink that comes off the page completely (you can also just use the eraser for quick edits).

When you’ve written on the Everlast, you can then capture images of the pages quickly with the Rocketbook app. The Rocketbook, by the way, was the notebook the company funded earlier this year, which you erased by putting it in the microwave with a glass of water for a while and then vacuuming up the ink. Yes, really.

Your notes and sketches aren’t stuck in this random app, though: it’s just for scanning. When you snap pictures, it crops and processes the image and then sends it to the cloud services of your choice.

The clever bit is that you don’t even need to fiddle with the app to do that. You select the services each page should go to by marking them at the bottom. The symbols look more like Lucky Charms marshmallows, but you’ll get used to it. You can send stuff to Dropbox, Evernote, Google Drive, Box, Slack, or to an email address.

A couple minor caveats: the creators are honest about the fact that if you’re left handed and tend to drag your hand along what you’re writing, you’ll probably smudge it, since the Frixion ink takes several seconds to bond to the “paper.” And if you leave the ink on the page for more than 2 months, they say, it’ll leave a faint trace.

The Everlast isn’t going to change the world, and it isn’t for everybody, but this is a cool way to do the analog-digital thing these other notebooks do, for cheap ($34 for early birds) and without actually using any paper.

By Devin Coldewey for TechCrunch

Is this loadshedding, revisted?

Eskom has been dogged by allegations of corruption and mismanagement, and this is showing in its expected financial results over the short and medium term. In addition, two of Eskom’s suppliers of coal – namely, two Gupta mines – have stopped operations due to an inability to pay staff.

As the embattled parastatal’s bills mount, questions surround whether or not there will be enough coal to keep power on this winter.

Eskom’s problems far worse than expected

The Rapport reported that Eskom expects a loss of R8.1-billion in the short term, which is set to balloon to R26,5-billion in the medium term.

These projected losses are the highest a state-owned enterprise has ever experienced in South Africa.

The National Treasury described Eskom’s financial problems as the single biggest risk to the South African economy and public finances.

This echoed the views of finance minister Malusi Gigaba, who said in January that Eskom’s financial woes could collapse the economy.

“There would be no currency, and no economy for the country if Eskom went belly-up,” said Gigaba.

To address the mismanagement at Eskom, Gigaba said in his recent budget speech that the government has strengthened Eskom’s board and management with “highly-capable, ethical, and credible leadership”.

Further allegations of mismanagement
In related news, the Sunday Times reported that former Eskom executive Matshela Koko’s wife has received millions of rand from the power utility.

“Documents in the possession of state capture investigators suggest the money flowed to companies where Koko’s wife, Mosima, is a director,” said the Sunday Times.

The report stated that the money was “channelled through Eskom service provider Impulse International, where Mosima’s 27-year-old daughter, Koketso Choma, was a non-executive director”.

In March last year, the Sunday Times reported that Koko’s stepdaughter received contracts for her company worth R1 billion from Eskom.

The report stated that Choma was appointed as a director at Impulse International in April 2016, after which it received eight contracts from the division of Eskom which Koko headed up.

Third Gupta-owned mine fails to pay workers’ salaries

An employee at Shiva Uranium mine‚ a Gupta-owned company based in Klerksdorp‚ North-West‚ says they have been left in the lurch after the company failed to pay them their salaries last week.

“We have not been paid February salaries. We were told that we would be paid on the 28th. This is very frustrating as most of us live far from work and are struggling to get money for transport‚” said the employee‚ who asked not to be named.

She said the company told them on Friday that the payments were delayed because it does not have a bank. “They also told us that they have an international bank and the funds have to be converted from dollars into rands and that the process takes long.”

Koornfontein coal mine is the second Gupta-affiliated mine not to pay salaries to its workers.

They were also told that the delay was due to Eskom not paying the company.

The country’s commercial banks have cut ties with Gupta-owned companies – citing reputational risk – while the only bank which services the companies‚ Bank of Baroda‚ is to exit South Africa at the end of March.

“We know there is trouble brewing there. They are just not telling us the truth.”

She said most workers have since Friday taken leave because they either do not have money to take public transport or put fuel in their cars.

“I do not know what I would have done had it not been for my partner‚ who has helped out with the kids’ school fees and other household expenses‚” the woman said.

She said the company has denied that it is under business rescue as the workers have heard from media reports.

“We have asked them if they are under distress and they said no. They don’t want us to take action against them and have threatened us with our jobs‚” she said.

Shiva Uranium is the third Gupta-owned company to not pay its employees. Optimum and Koornfontein coal mines have also failed to pay workers their salaries this month.

Workers at Optimum downed tools on Wednesday last week‚ saying they wanted to know whether the mine would be sold following reports that the mine’s owners‚ the Gupta family‚ could no longer be found.

Koornfontein supplies coal to Komati power station‚ Optimum supplies coal to Hendrina power station and Brakfontein supplies coal to Majuba power station.

https://mybroadband.co.za
By NOMAHLUBI JORDAAN for https://www.timeslive.co.za

E-Tolls: Makhura admits system failure

In his State of the Province address on Monday, Gauteng Premier David Makhura acknowledged that the highly contested e-tolls system in Gauteng has been a failure. Makhura’s comments follow a number of years of resistance to the multibillion-rand e-tolls project by civil organisations and motorists.

“It’s loud and clear for all to see that e-tolls have not worked,” Gauteng Premier David Makhura said during his State of the Province address.

But it’s not the first time that Makhura has admitted that the e-tolls system was ill-conceived.

Delivering his 2017 State of the Province address, Makhura said: “We are mobilising resources for public transport infrastructure in ways that will ensure that we do not commit the same mistakes done with the e-tolls. We can’t build roads and only later inform citizens that they must pay. In fact, there will be no new e-tolls on our new roads.”

He added: “I must admit publicly, as I did last year, that all the efforts we have made through the advisory panel have not led to the resolution of concerns of Gauteng motorists regarding affordability. We have tried our best. The ultimate solution can only come from national level. We will continue to engage in order to represent the interests of our residents.”

On Monday, Makhura again admitted that e-tolls had failed and that the implementation of the system had increased the cost of living for many motorists and commuters in Gauteng.

Drawing from Ramaphosa’s envisaging of a “new dawn” in the country, Makhura said: “The new dawn must also bring a solution to the protracted and unresolved problem of e-tolls. Accordingly, I will engage President (Cyril) Ramaphosa in order to find a new and more equitable funding model to support the continued expansion of Gauteng’s road network and public transport system. Please send me!” he said.

The Organisation Outdoing tax Abuse (Outa) said it was in total agreement with Makhura in calling for a new and more equitable funding model to expand Gauteng’s road network.

“The compliance rate of e-tolls, based on the South African Roads Agency’s (Sanral’s) own version in their 2017 Annual Report, is 29%. If this figure is correct, it is clear that the system has failed. SANRAL could not in more than four years succeed to ensure a higher compliance rate. If compliance on this scheme doesn’t go up to at least 85% the scheme will never survive,” Outa’s Transport Portfolio Manager Rudie Heyneke said.

Heyneke said OUTA would not back down on the issue of the unaffordability of e-tolls, and would further engage the Minister of Transport, the Presidency, and the executive on the matter.

He said the organisation was busy preparing a submission for the Minister of Transport and the Presidency, and would in the near future engage with the executive to show the negative impact e-tolls have on the taxpayer and on the Sanral budget and proposed alternatives.

The writing has always been on the wall. Apart from firm resistance from Gauteng’s motorists, the highest compliance level ever achieved was 40% in June 2014, according to information released by Outa. This was achieved at R120-million and around R140-million short of target.

“The collection costs and litigation costs are too high when measured against the revenue generated by e-tolls,” Outa said in a statement.

Sanral had argued in court that it could achieve a payment rate of 93% which would generate the R260-million required to cover the cost of the project and the R22-billion borrowed for the freeway upgrade project.

But none of Sanral’s targets has been reached despite aggressive marketing and offers of discounts of up to 60% to all e-toll defaulters to encourage them to settle outstanding bills. According to Outa, by May 2016 less than 2% of outstanding bills were settled while e-toll bills increased to over R2-million a month. The cost of administering the e-tolls were capped at R1-billion a year.

When the e-tolls system was about to be rolled out, motorists and taxpayers objected vociferously, particularly over a lack of proper public consultations prior to the implementation of the system. This outcry as well as warnings from civil organisations like Outa were ignored.

Outa Chairman Wayne Duvenage told Daily Maverick the organisation was pleased with the premier’s acknowledgement. Duvenage said the issue was not only a provincial matter, but also a national one.

“E-tolls were a bad decision,” Duvenage said.

By Bheki C. Simelane for Daily Maverick

Cyril reshuffles cabinet

President Cyril Ramaphosa has fired 10 ministers from his cabinet, moved some to other portfolios and appointed David Mabuza as his deputy.

Ramaphosa announced the changes in a late-night address at the Union Buildings on Monday night.

It was bound to be a tough balancing act for President Ramaphosa, as he moved to strengthen his team in government, appease his supporters who backed him in the race for ANC president and give just enough to those seen as Jacob Zuma’s allies, who he may need as his party looks to retain control of government in next year’s national elections.

He also had to ensure the new cabinet is one which speaks to the ANC’s theme of unity, while ensuring those so-called “Gupta ministers” implicated in state capture are ousted.

Ramaphosa indicated he would retain existing ministries and departments until a review of the configuration, size and number of national government departments is completed.

The president has explained why he made the changes.

“These changes are intended to ensure that national government is better equipped to continue implementing the mandate of this administration and specifically the tasks identified in the State of the National Address.

“In making these changes, I’ve been very conscious of the need to balance continuity and stability for the need for renewal, economic recovery and accelerated growth in our country.”

Ramaphosa has moved Nomvula Mokonyane to the Department of Communications, Jeff Radebe to Energy, Naledi Pandor to Higher Education, Malusi Gigaba back to Home Affairs, Lindiwe Sisulu to International Relations.

Gwede Mantashe has been brought in as the minister of Mineral Resources, Bheki as minister of Police, Blade Nzimande is brought back as Transport minister and the minister in the Presidency responsible for Planning, Monitoring and Evaluation is Dr Nkosazana Dlamini Zuma.

The much-criticised Bathabile Dlamini remains in the corridors of power, moving to The Presidency, where she will work under Ramaphosa’s eye. Dlamini is moved to the portfolio of women, in a straight swap with Susan Shabangu, who will now head up the Social Development department.

Derek Hanekom, who was ousted by Jacob Zuma after he emerged as one of the former president’s fiercest critics, goes back to Tourism, while Zweli Mkhize goes to Cooperative Governance and Traditional Affairs.

DD’S RECORD

David “DD” Mabuza, also known as “The cat” – a reference to his numerous political lives – comes to the deputy presidency with a cupboard full of skeletons.

As a young activist in his home province of Mpumalanga, he was once accused of being an apartheid spy, a claim which has been revived by his mentor-turned-nemesis Mathews Phosa.

Mabuza was fired as Education MEC by Phosa in the 1990s for infamously inflating matric results in Mpumalanga.

As premier in that province he was engulfed in tender scandals and linked to a land claims scam.

His name has also been associated with a string of political assassinations in Mpumalanga, although he has never been criminally charged.

DD Mabuza’s greatest hurdle will be his own crisis of credibility as he assumes the position of deputy president.

So, who got the chop?

Fikile Mbalula

Faith Muthambi

Mosebenzi Zwane

Des van Rooyen

Lynne Brown

Bongani Bongo

Hlengiwe Mkhize

Nkosinathi Nhleko

David Mahlobo

Joe Maswanganyi

By Clement Manyathela for EWN 

One of the biggest changes in finance minister Malusi Gigaba’s recent budget speech was the proposed increase of the VAT rate to 15%.

While the rate is still subject to final parliamentary approval, it is expected to come into effect from 1 April 2018.

Despite the increase being the first in over two decades, the VAT Act currently contains a number of rules which cater for an increase in the VAT rate.

These rules cover, for example, what happens when contracts have been entered into before the VAT rate is increased, where no invoice has yet been issued or payment received.

They also explain why its important to actively track and issue receipts when these transactions are made, to ensure that the correct VAT rate is applied.

Di Hurworth, director of Value Added Tax at KPMG South Africa, broke down exactly how these rules will work when the VAT rate changes in April:

Should goods have been provided before 1 April, or services performed before 1 April, then the current VAT rate (14%), not the new VAT rate of 15%, will apply.

Should goods be provided on a periodic basis or services be performed over a period which falls before and after the effective date of 1 April, then an apportionment must be made on a fair and reasonable basis and the 14% VAT rate will apply to the portion before 1 April 2018, and the VAT rate of 15% will apply on the portion of the supply of goods or services from 1 April 2018.

Specific rules relate to the sale of fixed property.

Hurworth said that there were also special considerations where the time of supply (invoice or payment) falls within the period from the date the minister announces the increase in the VAT rate (21 February 2018) and ending on 1 April 2018.

“If the goods will be provided more than 21 days after 1 April, or the services will be performed after 1 April, the new VAT rate should be charged on the supply of goods or services – i.e. 15%,” she said.

“However, there are certain exceptions to this. This rule therefore prevents invoices being raised before 1 April where goods will be supplied more than 21 days after the effective date.”

Source: Supermarket & Retailer

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