NEWSLETTER DECEMBER 2016
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
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IMPORTANT UPDATE ON CORPORATE GOVERNANCE
On 1 November 2016, the Institute of
Directors in Southern Africa (IODSA)
released the final King IV™ Report on
Corporate Governance for South
Africa 2016. The latest report brings
South Africa up to date with
international corporate governance
codes and in line with the shift towards
inclusive, sustainable capitalism and
integrated reporting.
King IV™ completely replaces King III™ and is effective in respect of financial years
commencing on or after 1 April 2017. This means that companies with a year-end of 31 March
2018 will be the first to report under the new Code.
South Africans are becoming increasingly aware of the importance of ethical leadership in
society. The report highlights the importance of ethical and effective leadership in
organisations of all sizes, listed and unlisted. King IV™ is particularly significant for the public
sector, because for the first time it has been designed to be applied by most types of public
sector entities, including municipalities and state-owned entities.
King IV™ has been simplified and made more user-friendly. The previous code contained 75
principles, the new code consolidates these into 17 principles. Governing bodies have more
flexibility when implementing the recommended practices, but are required to be transparent
when disclosing how they have achieved their goals.
King IV™ places the onus on the governing body (the board in companies) to take a much
more hands-on approach in applying the code. Instead of the old ‘tick-box’ method, the
governing body is required to pro-actively apply the principles of the code and explain the
outcomes.
King IV™ is voluntary (unless prescribed by law or by a Stock Exchange listings requirement).
Some of the principles have, however, been legislated.
The report includes the code, as well as helpful, separate sector supplements for Small and
Medium Enterprises, Non-Profit Organisations, State-Owned Entities, Municipalities and
Retirement Funds. King IV™ is an essential tool for successful, responsible and effective
corporate governance and all organisations and governing bodies should follow the principles
and practices laid down in this document.
2
THE IMPORTANCE OF KEEPING YOUR WEBSITE UP-TO-
DATE
Launching a website involves a considerable amount
of time and effort. Unfortunately, one of the most
frequently overlooked components of a successful
website strategy is ongoing maintenance.
Some reasons why it is important to continuously
maintain your website:
• Up-to-Date Design - the look and feel of your website is one of the most important
aspects that affects sales. Your website needs to be responsive, so that it looks good
and can be read on all desktop and all mobile devices.
• Fresh Content - old, out of date or incorrect content creates a bad impression and puts
customers off. It is essential to regularly update content, keeping it current and
informative to encourage visitors to come back. It is also important to constantly check
your website’s pages and links for errors.
• Website Security - continuous review and updating of your website security is essential.
A weakness in your website’s security could lead to your website being hacked with
possible legal repercussions if your customers’ personal data are stolen.
• Be Competitive - keep your website ahead of the competition with a dynamic website
that makes use of social media. Monitoring performance and analytics are also
important in ensuring that your website is achieving the desired results.
• Marketing - your website is an advertising medium for your business that has the
potential of capturing the attention of many people. Regular changes to your website
showing new products, or upcoming events will stimulate interest and interaction.
• Search Engine Optimisation (SEO) - if your website is not updated to work on mobile
devices, your website may no longer appear on search results. Updating your website
will attract search engines to your site and will give valuable information to visitors.
• Legal Requirements - laws constantly change and evolve and you need to make sure
that your website is compliant with all relevant legislation (e.g. data protection and
online selling laws).
By regularly maintaining and monitoring your website, you will be able to maximise its
effectiveness and create a good impression of your business.
3
INTEGRATED REPORTING AND INTEGRATED THINKING
In the natural world, animals and plants must adapt to ensure
their long-term success in a harsh and ever-changing
environment. In many ways, the business world is a bit like a
jungle - a harsh environment in which only the strong can
adapt and survive.
Fundamental changes, such as globalisation, technological
development and rapid population growth, have meant that
organisations have had to modify their thinking and behaviour.
Traditional financial reporting has had to change, so that
organisations and investors can achieve long-term success in this evolving and demanding
environment. These days, reporting needs to provide a broader scope of information which is
more interconnected and more forward-looking than traditional financial analysis.
What is integrated reporting?
In a nutshell, integrated reporting (<IR>) brings together key information about an
organisation’s strategy, governance, performance and prospects, in a way that mirrors the
commercial, social and environmental context in which it operates.
Integrated reporting provides a clear, concise statement of how sustainability is achieved, and
how the organisation creates value. By embracing integrated reporting practices, all those
involved with an organisation will develop a deeper understanding of the business, the
business environment and how to create value.
Integrated reporting promotes a more holistic approach to the way investors and those within
the organisation think, and takes into account a comprehensive range of factors which are
important in long-term value creation. Thus, integrated reporting goes hand-in-hand with
integrated thinking.
What is integrated thinking?
Integrated thinking is the ability to establish a link between the financial, social and
environmental performance of an organisation. Effective integrated thinking requires
commitment and transparency, as well as a good understanding of what makes the
organisation sustainable. The long-term success of the organisation is dependent on the
interrelationships between the organisation, the stakeholders and the operating environment.
The latest guidelines on Corporate Governance in South Africa place greater emphasis on
integrated thinking and integrated reporting. It is important to come to grips with these
concepts to be successful out there in today’s challenging business jungle.
4
NATIONAL MINIMUM WAGE PROPOSED
On 20th November 2016, Deputy President Cyril Ramaphosa, released the minimum wage
report which proposes a National Minimum Wage (NMW) of R3 500 per month (R20 per hour).
The minimum wage report was presented to the
National Economic Development and Labour
Council (NEDLAC) by the panel appointed to advise
on the level at which South Africa’s national
minimum wage should be set.
Currently, minimum wages in South Africa are fixed
by sector, or established through bargaining
councils led by unions. This has allowed for greater
flexibility when agreeing on rates of pay, but has also
resulted in disruptive strikes and time-consuming
wage negotiations.
It is hoped that a NMW figure will help to resolve ongoing labour issues in the country.
Unemployment and labour problems are currently under the microscope as they are an
important factor being considered by credit rating agencies. Their decision on whether to
downgrade South Africa’s credit rating will be announced in December.
Setting a national minimum wage is a sensitive and debatable topic. Some say that it will have
a negative effect on the economy and will lead to increased unemployment, especially in
sectors like farming. Others feel that the current system for determining wages is adequate
and should not be changed. By setting a national minimum wage, it is hoped that all workers
will get a fairer deal overall.
The proposed R3 500 NMW is just a starting point for discussion. Based on research carried out
by Wits University, the ‘optimal’ level for NMW is between R4 000 and R5 500. At this level, the
net benefit to the economy would apparently outweigh the job losses which would result from
the introduction of NMW.
For it to be written into law, the NMW must be agreed upon by leaders in labour, business,
government and communities. There is already much heated debate around the proposed
figure, and it is likely to be a while before agreement on a final NMW figure is reached.
The suggested date for implementation of the national minimum wage is 1 July 2019.
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