ASA March 2018

MARCH 2018
NICK
WILKINSON
MAKING IT BIG
IN AFRICA
MAINTAINING BUSINESS
INTEGRITY IN A POST-
TRUTH WORLD
THE ETHICALITY OF
CAs(SA) SERVING
ON BOARDS
2018 TOP 5
WATCHLIST
FOR ACCOUNTANTS
March 2018 accountancysa.org.za 1
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2 accountancysa.co.za March 2018

IN THIS ISSUE
CONTENTS UPFRONT
6 UPDATES
Environmental, local, economic and political
news updates
MARCH 2018
FEATURES
THIS MONTH’S FOCUS: 14 The 2018 Watchlist for Accountants
2017 was a year of major changes in
South Africa
ETHICS
16 ORGANISING FOR THE AGE OF URGENCY
To compete at the speed of digital, you need
to unleash your strategy, your structure, and
your people
24 PROFILE
& TRUST
Attitude is everything
26 INTERNATIONAL PROFILE
Discovering the deep-rooted culture
of Beijing
ADVICE
46 VIEWPOINT
52 THOUGHT LEADERSHIP: Unlocking an agile

accounting house
SPECIAL REPORT
55 BUDGET 2018
RECOMMEND
64 SAICA LEAP PROGRAMME
66 CPD: ISA 720 – A bird’s eye view of ‘other

information’
68 CPD: Transfer pricing compliance - An ethical

dilemma?
30 MAINTAINING BUSINESS INTEGRITY IN
A POST-TRUTH WORLD
INDULGE
32 ETHICAL DILEMMAS
72 INDULGE: Travel
34 ETHICAL FAILURES AND THE DANGER
OF OVER-REGULATION 76 INDULGE: Motoring
36 THE ETHICALITY OF CAs(SA) SERVING 78 INDULGE: Lifestyle

ON BOARDS
40 THE PROFIT IN BUSINESS ETHICS ITEGRITAX SUPPLEMENT
83 ETHICS: Tax morality
MARCH 2018 | SUPPLEMENT
ON THE COVER
Nick Wilkinson’s career reads like a ‘how to make it ETHICS
big in Africa’ story. The multi-award-winning olive oil
85
ETHICS
maker first spent 20 years working for international

IN TAX DISPUTE
RESOLUTION
86
‘I AM NOT GUILTY UNTIL
corporate agricultural businesses, turning near bankrupt

I GET CAUGHT’
88
WHAT IS RIGHT TO DO
agribusinesses into profitable operations. PAGE 10

AS A COMMISSIONER
OF OATHS
90
IS TAX MORALITY
A THING?
92
ARE WE TREATING
TAX EVASION AS A
‘NON-CRIME’?

EDITORIAL
IS YOUR BEHAVIOUR ETHICAL?
This month we have a focus on ethics and it seems that one can’t really
discuss ethical leadership without looking at ethical behaviour. What is
ethical behaviour? It’s knowing and doing what’s right. And as a CA(SA) you
should have ethics entrenched into your daily behaviour – it is after all the
cornerstone of the chartered accountancy profession. EDITOR
Gerinda Engelbrecht
And like Mike Brown says in his interview on page 40 that ethical behaviour ART DIRECTOR
Ashley van der Merwe
is an individual value with each person having his or her personal moral
ASSISTANT EDITOR
compass and consciousness regarding the subject. However, that does not Lynn Grala
mean it’s a complex issue. He defines it as follows: ethical behaviour is doing PUBLICATIONS ADMINISTRATOR
what you know is the right thing, taking account of all stakeholders that are Palesa Khobane
likely to be influenced by your decision. So, it isn’t something you can refer COPY EDITOR
to in a rulebook or textbook to see what you’re allowed to do. Deep down, Sarie Moolman
irrespective of various community’s customs or behaviours, human beings ILLUSTRATOR
Liézel Els
intuitively know what is the right thing to do.
SOCIAL MEDIA
Then historian Lord Actonstated: ‘Power corrupts and absolute power James Sibia
corrupts absolutely.’ And unfortunately we as South Africans have seen how WEBSITE ADM INITRATORS
André van der Merwe and Marcelle
power can corrupt leaders that we are supposed to look up to. And everyone Blignaut
can do their bit by being a leader others can look up to.
If you do a bit of introspection – ask yourself how ethical are your leadership PUBLISHER
behaviours. Are you someone others can trust? Do you respect others? Willi Coates
Would you consider showing a smaller profit if it would make a difference ADDRESS
17 Fricker Road,
in the lives of your employees? It is a challenge to balance the needs and Illovo, Sandton, 2196
interests of various stakeholders and that is probably where your character is TEL
tested the most … If you’re under pressure to deliver results – do you hold Local 08610 SAICA (72422)
International +27 11 621 6660
on to your morals?
FAX
In an article on page 32, ‘Ethical dilemmas: what does millennial leaders do’, +27 11 622 3321
the author writes that the greatest predictor of unethical behaviour is the EMAIL
journal@saica.co.za
emphasis on self-gain. It is exacerbated in an economically driven business
world with unrealistic performance expectations and in companies where
the boss is perceived to be a bully. Unethical acts are often committed from
ADVERTISING SALES MANAGER
a resentment and disillusionment perspective. Matt Knight
Cell +27 71 785 7205
One of the keys to having an ethically run company is to have morally Email mattk@saica.co.za
upstanding leaders. Research has shown time after time that employees are
ADVERTISING SALES
more likely to act ethically when they have ethical leaders who guides them Michelle Baker
and sets an example. Cell +27 73 137 1231
Email michelle.baker@mediamarx.co.za
In an article (‘Are you an ethical leader’) by Michelle McQuaid, published
on the Huffington Post website she mentions her interview with Professor
David Mayer from the University of Michigan. He says that many executives SUBSCIPTIONS
embrace the practices of ethical leadership because of the kind of leaders Email subscriptions@saica.co.za
they hope to be and the legacies they want to leave. He also said that ethical ANNUAL SUBSCIPTIONS
RSA R560
leaders are moral people and moral managers – they don’t just act ethically Students/LSM R350
on their own but try to create the right type of environment to influence Southern Africa R560
others’ behaviours by creating an ethical culture, talking about ethics
and rally following that up with policies and practices that encourage the
employees in the organisation to do the right thing.
As a CA(SA) business leader, you have the opportunity to influence
behaviours and develop ethical employees – just imagine the change it can
bring in corporate South Africa if ethical behaviour can be entrenched in
everyone’s behaviour.
GERINDA ENGELBRECHT
EDITOR
4 accountancysa.org.za March 2018

UPFRONT | UPDATES
SA-BORN
BILLIONAIRE BUYS
LOS ANGELES TIMES
As someone who grew up in the apartheid era, Patrick Born in Port Elizabeth in the 1950s to Chinese immigrant
Soon-Shiong’s motivation behind buying the Los Angeles parents, he studied medicine at the University of the
Times newspaper (for R6 billion) is said to stem from Witwatersrand before later emigrating to the US via
a deeply personal one. He understands that high-quality Canada. According to Forbes, he has a net worth
journalism plays a crucial role in a free society. The Los of R94 billion, making him ‘America’s richest doctor’.
Angeles Times is one of the largest and most widely read
publications in the US. Source: News24
#SONA2018:
INSPIRING FOR SA’S 5,9M
NUMBER OF
ENTREPRENEURS
UNEMPLOYED SOUTH AFRICANS
BASED ON
THE OFFICIAL DEFINITION OF
Small and medium businesses in South Africa are likely to take inspiration from the UNEMPLOYMENT
upbeat tone of President Cyril Ramaphosa’s first State of the Nation Address and its
positive outlook on how smaller businesses can play a major role in spurring economic
growth and addressing the challenge of unemployment.
‘Entrepreneurship doesn’t happen in a vacuum – it is the result of collaboration between
big business, government, business builders, universities and other stakeholders to build
the skills, infrastructure and support systems entrepreneurs need to succeed,’ says Pieter
Bensch, Executive Vice President, Africa and Middle East at Sage.
UNEMPLOYMENT R1,5Bn
LINKED TO LOW IN SALES
LOSS
INVESTMENT
Besides a dire need to improve skills development, a lack of fixed investment from the
REVENUE
OF THE BEVERAGES INDUSTRY
private sector is a huge factor that is keeping unemployment levels high. Already with the IF NO CHANGE TO THE SUGAR CONTENT
IS MADE AFTER THE SUGAR LEVY TAKES
‘Cyril Ramaphosa effect’ and an improving political landscape, business confidence
EFFECT IN APRIL
is slowly picking up bringing more positive signs of fixed-investment activity.
Source: Business Live

UPFRONT | UPDATES
TALLEST TIMBER
SKYSCRAPER
A 70-storey tower in Tokyo that will be named W350 is anticipated
to become the world’s tallest wooden building. It will be made from
90% wooden materials and should be finished by 2041. The cost will
be some 600 billion yen (R65,7 billion). A steel vibration-control
framework will underpin the design − an important feature in a city
where earthquakes are frequent.
Source: CNN; Image: archdaily.com
MONACO’S $2,3 BILLION PROJECT

Despite being the second smallest country in the world, Monaco is
one of the richest with approximately a third of its residents accounted
to be millionaires. Consequently, Monaco’s 38 000 residents are today
squeezed into less than 2,02 square kilometres. The problem occurs when
40 000 people cross the borders from France and Italy to work each day.
To solve the problem, an extension of the natural contour of Monaco’s
coastline a further 15 acres into the Mediterranean has begun.
Source: CNN
AFRICA’S
‘LIFESTYLE CHECKS’
RICHEST
FOR SA’S OFFICIALS WOMAN
According to the US-based Forbes
Ismail Momoniat, a deputy director-general at the Treasury, believes magazine Isabel dos Santos is Africa’s
that in order to combat corruption, ‘state employees with high levels richest woman with estimates that her
of responsibility’ should have to undergo annual ‘lifestyle audits’. ‘After personal fortune could be as much as
Zuma’s rule where the department had become powerless to investigate $3,3 billion. She is the oldest daughter of
allegations of corruption, he says ‘we need to have people who will ask Angola’s former president, Jose Eduardo
questions, and without fear or favour.’ dos Santos, who stepped down in 2017.
Source: Bloomberg Her father made her head of Sonangol,
Angola’s state oil firm, in June 2016, but
Angola’s new president removed her from
that role in November 2017.
SA AT THE PITS
OF MINING INVESTMENT
South Africa shockingly ranked 84th out of 104 jurisdictions in the latest
$140 000 000
2016 survey of the attractiveness of countries for mining investment.
According to Business Day, ‘the first step must be to scrap the Mining THE AMOUNT TOP MINER DE BEERS
Charter − the subject of a judicial review on February 19 − and work RAISED ITS 2017 MARKETING BUDGET
to free the industry from onerous rules that are holding investment, TO. IT’S THE HIGHEST IN ALMOST
job creation, and economic growth back. Unless this happens, SA will A DECADE AS DIAMOND JEWELLERY
continue to struggle to attract investment, which means SA will fail to PURCHASES HAVE DROPPED
harness the mining industry’s potential to help boost economic growth.’ SUBSTANTIALLY

UPFRONT | UPDATES
HUGE The total value of the poultry industry is R46 billion,

and losses as a result of the highly pathogenic avian
LOSSES DUE influenza has resulted in losses amounted to R954

million.
The area most affected by the outbreak has been the
TO BIRD FLU Western Cape, with almost 71% of the bird population
being culled or recorded as dead. The outbreak has also
resulted in 1 300 people losing their jobs. The South
OUTBREAK
African Poultry Association (SAPA) recommended that
compensation guidelines be reviewed, a comprehensive
disease control programme developed, and emergency
response improved.
Source: News24
SINGAPORE THE
FACES AGEING PRODUCTIVITY
PROBLEM PUZZLE
To prepare for Singapore’s rapidly ageing Sage’s live tracker shows that productivity losses caused by
population, Finance Minister Heng Swee unnecessary admin are costing South African businesses R231 every
Keat has announced a range of tax second of the day − adding up to a cost of more than R585 million for
increases in the latest budget to prepare 2018 to date. Businesses are still suffering from a significant burden of
for fiscal pressures. For the first time the paperwork, which could be reduced with digital tools.
population percentage that is 65 years and What businesses would like to hear: Government could make it
older is set to match those younger than15 simpler and faster for small businesses to register as suppliers by
years. Singapore’s fertility rate remains half making more effective use of digital platforms. It could also take steps
the global average at 1,2 births per woman to streamline processes such as issuing tax clearance certificates
in 2015, according to World Bank data. and look at a minor increase in the threshold before small businesses
need to register for VAT.
THE TRUTH
ABOUT FREE
RADICALS
R1,4Bn
ANTICIPATED REVENUE GAIN FOR GOVERNMENT
Although free radicals have been linked to serious health conditions
such as heart disease and cancer, they aren’t necessarily absolutely
‘bad’. Being by-products of a basic metabolic process called oxidation,
they do play their own important part of the body’s defence.
However, the problem is that too many free radicals caused by smoking
FROM THE and excessive sun exposure and so forth can become detrimental to your
health.
SUGAR TAX LEVY After eliminating smoking and tanning, eat a wide variety of fruits and
vegetables to enrich your diet. Studies suggests that eating at least five
servings of fruits and vegetables a day will reap the most health benefits.
Source: News24

UPFRONT | UPDATES
‘DAY ZERO’
CRISIS AND
COCA-COLA
The City of Cape Town’s dreaded Day Zero has been pushed to July
9 instead of the scheduled date of June 4, the Democratic Alliance
has announced, despite the city not meeting water conservation
targets. DA leader Mmusi Maimane said in a statement on 21
February thatthe ‘reduced consumption that continues to be
sustained by Capetonians’ was the main reason behind the decision
to move Day Zero back.
Maimane commended the efforts of Capetonians to reduce their
water consumption but pointed out that the City of Cape Tow
is still using more water than it should to beat Day Zero.
He also thanked private water sources in the Groenland wine area
for making more water available for public use.
In the meantime, the Water Crisis Coalition is demanding answers
about the Coca-Cola’s daily water usage amidst a crippling drought.
The soft drink giant is accused of failing to comply with the city’s
water restrictions.
Source: Mail and Guardian
THE BENEFITS COLDEST

OF TECHNOLOGY WINTER
Many small businesses demonstrate a deep understanding of the
OLYMICS IN
benefits of technology adoption – 44% are actively employing cloud
tools and services. Those businesses that do use cloud tools and
services reported significant operational advantages: 70% use them
20 YEARS
to save time – with many saving over 10 hours per week, with 52% In the opening week of the PyeongChang
claiming that it has helped them save money. Winter Olympics (South Korea), the
temperature plunged to -25oC. Despite
being neither cheap nor a straight-forward
trip, over 20 000 passengers a day are
ZIM RECEIVES said to travel by train to the Games. The

$3,7 billion ‘bullet train’ reduces what
would be a three-hour trip from the capital
$1,5 Bn FROM to the mountains to just over an hour.
AFREXIMBANK
After being starved of forein direct investment for over two decades,
Zimbabwe has turned to the Afreximbank to avert a major crisis and
boost its investor confidence. According to the Reserve Bank of
Zimbabwe (RBZ), the African Export-Import Bank (Afreximbank) has
promised a financial package to guarantee foreign investment into
the Zimbabwean economy.

MAKING
IT BIG IN
AFRICA
Nick Wilkinson’s career reads like a ‘how to make it big in Africa’ story.
The multi-award-winning olive oil maker first spent 20 years working for
international corporate agricultural businesses, turning near bankrupt
agribusinesses into profitable operations. In one venture he created
opportunities for 150 000 small-scale cotton farmers in Zambia,
supporting 1,5 million livelihoods. This chartered accountant chose general
management, and economies throughout Africa are the better for it
Photos Liézel Els

COVER STORY | MAKING IT BIG IN AFRICA
Too much of the good life and a middle manufacturing facility and was looking to
age spread first attracted Nick Wilkinson offload it – right place right time!
to the virtues of olive oil. ‘As a pilot, I I should have run with it.
need to pass a full medical each year,’ ‘But the financing contract stipulated
says Nick. being “all in” with no other business
‘In 1997 my blood pressure wasn’t ideal, interests. My business partner was
and my doctor recommended that I reluctant to take that route.’
switch to a Mediterranean-style diet.
The family was living in Malawi. There
are big Greek communities in central
STEPPING STONE
Africa and we started socialising with INTO AFRICA
them and holidaying in Greece and
Turkey. Their food and laid-back culture Then, fortuitously, Nick was headhunted
interested me.’ and appointed financial controller of
a subsidiary of British Petroleum (BP)
Who would have thought that Nick’s
in Malawi. ‘I had been offered a job in
recreational (but in-depth) study on
Australia by then Coopers and Lybrand.
olives and olive farming, which started
My wife, Brenda, said, “No ways!”
years ago, would translate into a career
as an olive oil maker? On the other ‘I accepted the Malawi offer as a
hand, it’s not so surprising: Nick acts stepping stone into Africa, and possibly
on opportunities. later the greater world, on condition
that my prospective employers give me
As a young man he decided to qualify
two months to sell my business. I sold
as a chartered accountant (CA(SA)).
it to the first buyer at my price within a
‘I wondered what on earth I was doing; month – perhaps the price was too low.
it was hellish boring, and I wasn’t
‘BP had sole rights for fuel importation
enjoying it. But I’m glad I stuck with it.
into Malawi. With stringent exchange
Being a CA(SA) gives you a foundation
control regulations, we were always
for business. I got exposure to plenty of
sitting on cash. I met this development
different businesses, while being paid a
bank guy on the golf course who was
salary. The qualification opens doors to
inundated with requests for short-term
many opportunities.’
loans. One thing led to another and we
After a brief spell with the Johannesburg established a grey market, brokering
Stock Exchange (JSE), Nick bought an short-term funding increasing our
aircraft refurbishment business in 1987. effective deposit rate and increased
‘I still love flying,’ he explains. ‘My first the profits for BP.
business proved very lucrative, but it
‘A few months later, my boss was
wasn’t mentally stimulating. I sold the
retiring. When I asked for the top job,
business within two years.’
my proposition was turned down.
The next business proposition arrived I was told I needed an engineering
though a chance encounter on the golf background.’
course with a former audit client, who
Nick describes as ‘this grumpy old guy’.
‘He owned a pre-stressed concrete lintel A MINOR HICCUP
‘Not a problem, as I was approached
by Lonrho (they participated in the grey
market) and was “parachuted” into
I WONDERED WHAT ON a lumbering agri-business, initially in
EARTH I WAS DOING; IT Malawi.
WAS HELLISH BORING, AND ‘My brief was simply to return these
“tired” companies to profitability and
I WASN’T ENJOYING IT. BUT they included tea and coffee estates
I’M GLAD I STUCK WITH IT. and mixed farming operations (dairy,
BEING A CA(SA) GIVES pigs, tobacco and mixed cropping); the
whole shooting match. These farming
YOU A FOUNDATION FOR businesses were going nowhere. It
BUSINESS. THE QUALIFICATION was a challenge!’ And one which Nick
OPENS DOORS TO MANY successfully rose to meet.
OPPORTUNITIES ‘I learnt very quickly – you cannot
control what you cannot measure,

COVER STORY | MAKING IT BIG IN AFRICA
if you fail to plan you plan to fail, It was a good call.

attention to detail, stick to the plan and
continually monitor performance I LEARNT VERY QUICKLY Rio Largo Olive Oil has consistently won
top awards since that first Double Gold,
– it works!’ – YOU CANNOT CONTROL including Gold in Japan for the 2016
Then, with leg pulling from friends WHAT YOU CANNOT harvest and Best in Class in New York.
in South Africa, Nick was appointed
managing director of two sorghum
MEASURE, IF YOU FAIL TO ‘It’s an amazing honour for a South
breweries in Malawi. Within eight PLAN YOU PLAN TO FAIL, African oil to get this level of recognition
from among 800 other oils from around
months he turned them into profitable ATTENTION TO DETAIL, the world,’ says Nick. He credits his
concerns and they were sold to SA
Breweries. STICK TO THE PLAN AND wife, Brenda, for her sterling marketing
efforts.
His next posting was to Lonrho Cotton CONTINUALLY MONITOR
Africa, a small-scale farming and cotton PERFORMANCE – IT WORKS!’ COMMUNITY MINDED
ginning operations in Mozambique,
Uganda and Zambia.
Rio Largo is 100% owned by Nick
Nick soon developed a reputation as a require a cold chain, so there were no and Brenda. ‘Although we haven’t got
trouble shooter. The nature of his work worries about refrigeration. Quite simply, B-BBEE status, we have taken the
meant regular moves for the young you can own the supply chain from field opportunity, through our business,
family. ‘In Malawi we lived in three to fork.’ to uplift people in the community.
houses. In Zambia; let’s see: one …
It was harvest time when Nick took ‘If you’re generous in life, life will be
two … three … four houses.’
over as the new owner on what was generous with you.’
The cotton businesses were successfully a neglected estate in 2010. The oil mill
sold, and Nick was recruited by the was upgraded with a custom-designed “We have mentored Zikhona Tefu of
Common Wealth Development Company processing plant produced by Italian o’Live handmade soap, who produces
to again ‘fix’ the biggest single grain- Georgio Mori, ‘an absolute specialist in natural beauty products including soap,
producing estate in sub-Saharan Africa. production design and one of the best oil as a result of trying to find a product
It included double cropping maize, soya tasters in the world’. which didn’t irritate her child’s eczema.
beans and wheat with a wheat flour mill Brenda introduced her to the investment
Georgio Mori still visits regularly and agency Westgro and supported her
on an estate of 80 000 hectares, with
imparts a lifetime of learning and marketing at trade exhibitions overseas.
15 000 hectares producing grains and
understanding in the art of producing
sugarcane production on 3 000 hectares. We also assist in marketing Sarah
world class olive oil, fulfilling Nick’s
‘The business was technically insolvent, desire to fully understand this life- Taylor’s Bee Balmy natural balms as she
but with a great team of displaced benefiting tree and its fruit. only uses Rio Largo as her base oil in her
Zimbabwean farmers we turned products and we support the Save the
In his first season Nick entered the SA Rhino campaign with a specific product
it around and sold it off in parts to
Olive Association annual competition line.
international investors – got to be the
with a blend of Italian cultivars, Frantoio,
most rewarding challenge of all.’ Nick mentors farm labourers teaching
Coratina and Leccino, which depicted the
attributes learnt from his Italian mentor. them computer skills to the extent that
they are now able to run the processing
BEST QUALITY OLIVE OIL ‘It came as a big surprise to me and plant unattended.
I think the industry that the award
Meanwhile the Wilkinson’s two bestowed on this oil had never been In a speech this year as chairperson of
daughters registered at Stellenbosch issued before. Winning Double Gold SA Olive at the SA Olive awards, Nick
University, and the family returned to signifies an oil of superior quality!’ said: ‘Slowly but surely international
South Africa. ‘We wanted to be near our markets are beginning to recognise the
children,’ says Nick, who decided the This is where Nick, the master strategist quality of South African olive oil. The
timing was right for Brenda and himself and CA(SA), comes into play. premium market wants fresh olive oil all
to buy a farm near the children. ‘I have a direct line to this Italian wizard year round.
‘The process of investigation took who can see our work in progress on a ‘The Southern Hemisphere produces
several years. In terms of the National screen his side. Mori has addressed the less than 3% of world olive oil
Development Plan, olives were high different variables to improve the balance production. We can deliver when the
on the agenda, being a labour-intensive of the nose (or fruitiness), bitterness and European olive oils are already six to
business which is hand harvested. pungency. This Italian family knows how seven months old – opportunity knocks
to increase the polyphenols content in sometimes very softly, we need to
’In the Western Cape the fruit harvest olive oil. take advantage of this. So, despite the
is from November to April, with labour
‘There is no way I could have competed current economic upheaval we’re in a
employed for six months. If there is
on volume against a Spanish olive farm good space right now …’
a bigger olive industry, this extends
labour’s employability to nine months. much bigger than my farm. I decided In terms of success, as Nick says, there
to forget about chasing retail space and is no substitute for hard work.
‘There were a couple of reasons I chose compete on quality; produce olive oil
olive farming: olives aren’t edible straight that is above average quality and above-
off the tree, require processing and don’t average yield.’

IN TERMS OF
SUCCESS, THERE
IS NO SUBSTITUTE
FOR HARD WORK
View a personal interview with Nick

by clicking the video link icon

FEATURE | 2018 WATCHLIST FOR ACCOUNTANTS
5
THE 2018
TOP
WATCHLIST
FOR ACCOUNTANTS
2017 WAS A YEAR

OF MAJOR CHANGES
IN SOUTH AFRICA
WITH ALLEGATIONS
OF STATE CAPTUREAND
KING IV board as a whole. I look forward to
CABINET RESHUFFLES, reading the reports that companies
OUR DOWNGRADE When we consider the turmoil our will now be issuing.
country has been through and the
TO JUNK STATUS BY extreme levels of mistrust, the King NEW STANDARDS
THREE CREDIT RATING IV Code of Corporate Governance APPLICABLE
AGENCIES AND ENDING could not have come at a better time.
A different way of looking at, and The meme that was doing the rounds
THE YEAR WITH reporting, good corporate governance for New Year this year was. ’Everyone
OUR PRESIDENT NO at a time when it feels as if corruption else: Happy New Year, Accountants:
is everywhere, King IV became effective
LONGER BEING THE 1 April 2017 and is applicable to entities
IFRS 15 and 9 have just become
effective!’
HEAD OF THE LEADING listed on the JSE from 1 October 2017
This is a big year for accountants
on an ‘apply and explain basis’, with the
POLITICAL PARTY. IT focus on the four outcomes identified worldwide, as these are two very big
ALL MADE FOR LOTS by the code: standards applicable for years beginning
1 January 2018. They will impact every
OF UNCERTAINTY AND • Ethical culture company in one way or another, and yet
PLENTY OF MOVEMENT • Good performance many companies are still not prepared!
If your company applies International
IN THE RAND, THE • Effective control, and
Financial Reporting Standards (IFRS),
ECONOMY AND THE • Legitimacy then a thorough assessment must be
LEVEL OF TRUST IN THE Directors are no longer able to use done as to how the new revenue and
financial instruments standards will
the tickbox approach in checking their
COUNTRY application of the code corporate impact you. This information is critical to
governance and they cannot simply ensure you understand the impacts not
leave it to the last minute. It must only to the coming years, but also of the
Words be a constant consideration to be various transition options available.
Justine Combrink attended to and reported on by the

FEATURE | 2018 WATCHLIST FOR ACCOUNTANTS
IFRS 17 On that note, the Listing Requirements

have been amended again, with a
The new Insurance Standard that lot more focus on the role of audit
has been in the making for 13 years committees and their responsibilities,
was finally issued in May 2017. The right down to responsibilities in
THE FINANCIAL REPORTING standard is effective for entities with electing the external auditors. The JSE
STANDARDS COUNCIL HAS financial years beginning on or after 1 Listings Requirements also now focus
January 2021. There are many changes more on holding entities responsible
BEEN VERY BUSY TRYING for transformation requiring formal
that insurance entities will need to
TO EASE THE BURDEN ON undergo to be able to apply this, but responding regarding gender and race
SOUTH AFRICAN GROUPS IN the standard was written with plenty diversity at board level. The JSE issues
its report in February each year of their
PREPARING THEIR ANNUAL of consultation and outreaches. The
proactive monitoring findings for the
insurance companies have been very
FINANCIAL STATEMENTS involved from the very start, so we are previous year, which includes focus
BY ISSUING THE REDUCED not expecting too many amendments or areas for the next year. Please take time
DISCLOSURE FRAMEWORK interpretations at this time ... although to read through this and understand
… who knows? what could come your way.
JOHANNESBURG STOCK THE FINANCIAL REPORTING

For revenue, if you have contracts EXCHANGE STANDARDS COUNCIL
that span more than a year and you
currently use the milestone method to The JSE’s proactive monitoring is still The Financial Reporting Standards
account for it, you’re going to have huge going strong. To summarise the 2017 Council has been very busy trying
recognition changes. The requirements report, it is a case of ’Too much, too little to ease the burden on South African
for identifying whether the entity is an or not enough’. groups in preparing their annual financial
agent or principal have changed too. statements by issuing the Reduced
• Too much: Companies are not Disclosure Framework. This framework
For debtors accounting the impairment assessing the relevance of
recognition has changed dramatically. allows for reduced disclosure within
disclosures and particularly still a group situation where the additional
We therefore expect some interesting including way too much irrelevant
adjustments in the 2018 reports. That IFRS disclosures do not add value as
or not applicable information in their the information is already produced
is before we even start looking at the accounting policies in particular.
disclosure requirements. at a group level. There seems to be
• Too little: The effect of statements a lot of support for this framework,
and interpretations issued and but the Financial Reporting Standards
IFRS 16 not yet effective is not adequately Committee is yet to publish anything
detailed in their annual financial effective, as it all has to go through
IFRS 16 becomes effective from 1
statements. Parliament, and we all know how busy
January 2019. While we expected many
they have been. While South Africa is
to adopt this together with IFRS 15 and • Not enough: Not enough attention
still applying the Financial Reporting
IFRS 9 so they would only have one year and focus is given to the important
Guides as issued by SAICA’s Accounting
of major changes, most entities have entity specific items. The JSE has
Practices Committee. The Financial
not elected to do so, opting instead to been very focused on entities
Reporting Standards Council is our
adopt it from its effective date. The New detailing the expected impact of
official standard setter … maybe this
Leases Standard is expected to impact the new standards and for those
year we will see some movement
almost all entities that lease assets who will only be applying IFRS 15
in the sphere.
from others. It requires all leases that and IFRS 9 to their annual financial
are not insignificant, extending more statements in 2019. You can be As usual there is a lot to watch. May
than one year, to now be recognised sure to be questioned through the 2018 be a much better year for all!
as a lease asset in the form of a ’Right proactive monitoring process if you
of Use asset’ in the Statement of do not present enough detail in this AUTHOR l Justine Combrink CA(SA) is
Financial Position, together with a lease year’s financial statements. Partner and Head of Financial Reporting
liability. The measurement of each is at Mazars
Audit committees are now required
quite different from the current leases to work through the annual proactive
standard. An entity will need to assess monitoring reports issued by the JSE
every one of their leases, which is likely and take appropriate action where
to be a huge assessment, so make sure necessary to ensure application. The
you have the right tools for the job. JSE is likely to be challenging audit
committees a lot more.

FEATURE | ORGANISING FOR THE AGE OF URGENCY
ORGANISING
FOR THE AGE
OF URGENCY
TO COMPETE AT THE
SPEED OF DIGITAL,
YOU NEED TO UNLEASH
YOUR STRATEGY, YOUR
STRUCTURE, AND YOUR
PEOPLE
Congratulations! Your organisation is of a decade, according to research by
performing at or near the top of its our colleagues in McKinsey’s Strategy
game, or it has been in the recent Practice. The challenges in maintaining
past. Perhaps even better, you have a dominance are not new; even sectors
strategy to improve in the near future. that digitisation has not consigned to
Now for the bad news: the good news oblivion have seen flagships such as
won’t last. Delta Airlines, General Motors, and
It can’t − at least without the right Owens Corning move from the top
kind of organisation. Across industries, into Chapter 11 and then back into
Words Aaron De Smet and barely half of the top performers sustain leadership positions again.
Chris Gagnon their leadership position over the course

DIAGRAM 1 ORGANISING FOR URGENCY
AS DIGITISATION, ADVANCED
ANALYTICS, AND ARTIFICIAL
INTELLIGENCE (AI) SWEEP
ACROSS INDUSTRIES AND
GEOGRAPHIES, THEY AREN’T
IDENTITY
JUST RESHAPING THE • Adopt a recipe
COMPETITIVE LANDSCAPE; to run the place.
• Cultivate purpose,
THEY’RE REDEFINING values, and social
connection
THE ORGANISATIONAL
IMPERATIVE: ADAPT OR DIE
AGILITY
• Worship speed
• Shift to emergent
But of course, technology is changing strategy
everything. As digitisation, advanced
analytics, and artificial intelligence
(AI) sweep across industries and
geographies, they aren’t just reshaping
the competitive landscape; they’re AGILITY CAPABILITY
redefining the organisational imperative: • Unleash decision making • Personalise talent programs
• Reimagine your structure • Rethink your leadership model
adapt or die. The average large firm
reorganises every two to three years,
and the average reorganisation takes
more than 18 months to implement.
Wait and see is not an option; it’s a
death sentence.
formula for success, we’ve seen stops and tune-ups. One could almost
As a result, companies are beginning versions of these elements at so many analogise to a race car − almost,
to experiment with increasingly companies that we think they provide because race cars typically run on a
radical approaches. We’re struck by a at least the organisational outline to win fixed track toward a clear finish line.
commonality among those who get it (diagram 1). Along the way, we’ll try to Your organisation’s race, by comparison,
right: they create adaptive, fast-moving dispel some common misconceptions is toward an unknowable destination.
organisations that can respond quickly (too risky! too inefficient! too time And that race doesn’t end.
and flexibly to new opportunities and consuming to set up!) of what such an
challenges as they arise. In doing so,
they’re moving intelligent decision-
organisation really means. We know you WORSHIP SPEED
don’t want your company to undergo
making to the front lines. That’s in sharp yet another reorg − and another one
contrast to the standard, ‘safer’ modus At the highest-performing companies,
a few years after that. Consider this a speed is the objective function, the
operandi of capturing data, sending it road map out.
up a hierarchal chain, centrally analysing operating model, and the cultural bias.
it, and sending guidance back. Several And more: speed is an imperative. Walk
of these forward-thinking organisations THE URGENCY IMPERATIVE the halls of leading organisations, and
now starkly describe their decision- you’ll repeatedly hear catchphrases
making as being pushed to the ‘edges’ A good road map can come with such as ‘energy’, ‘metabolic rate’,
− to and beyond employees, past the callouts and suggestions, and here’s ‘bias for action’, and ‘clock speed’.
organisation’s four walls, and out to our first: floor it. When you compete in Jeff Bezos, in his April 2017 letter
consumers and partners. The process a marketplace that moves so quickly, to Amazon shareholders, highlights
functions more like a network and less the default outcome is to fall behind. making not just ‘high-quality’ decisions
like a chain of command. If your organisation is to have any but ‘high-velocity’ decisions. They go
hope of keeping up, it will need to be hand in hand. ‘Most decisions,’ writes
In this article, we’ll share these reconceived as fast, quick to turn, and Bezos, ‘should probably be made with
emerging elements of the organisation even quicker to emerge from rapid pit somewhere around 70 per cent of the
of the future. While there is no set
>
with a number of ‘clay layers’ of middle AGILITY

management, where officers feel
compelled to add value by refining, The principles behind organisational
augmenting, synthesising, piling agility have been around for decades.
on, micromanaging, and adjusting In its current, most mainstream form,
TACKING AND READJUSTING information that passes their way − and agility is a DevOps description of how
QUICKLY ARE ESSENTIAL, where personal incentives and cognitive IT teams form to address problems,
EVEN IF THE DESTINATION biases inadvertently give rise to hockey- sprint toward solutions, and then
stick forecasts, sandbagging, and poor
IS UNCERTAIN. IN FACT, decision-making.
reconstitute to work on new challenges.
These approaches have made ‘Agile’
BECAUSE THE DESTINATION practical and concrete, and they’ve
Our colleagues in McKinsey’s Strategy
IS UNCERTAIN YOU NEED Practice have just written a book, given rise to broader applications
AN ‘EMERGENT STRATEGY’, Strategy beyond the hockey stick,2 yielding transformative impact across
an entire enterprise. Much like Agile
WHICH ENTAILS A about how to tame this ‘social side’
software development helps meet the
of strategy. By understanding the real
RELENTLESS QUEST AND odds (long) of breaking out from the challenge of producing an application
NOT A DEFINED END POINT pack, by making a consistent series that is already obsolete when finally
of big moves, and by treating these launched, enterprise agility helps
steps as a journey that doesn’t end, solve the problem of an organisation’s
information you wish you had. they show that companies can make strategies, resources, structures, and
If you wait for 90 per cent, in most strategic breakthroughs.3 capabilities being obsolete by the time
cases you’re probably being slow.’ they’re finally operational.
Such an approach requires an
Choosing not to fail fast comes at organisational platform that allows for Organising for urgency calls for
a price. ‘If you’re good at course an emergent mix of multiple strategies organising differently (diagram 2).
correcting,’ Bezos continues, ‘being to be formulated and carried out in real The urgency imperative places a
wrong may be less costly than you time. If the old world was a master premium on agility: it enables the
think, whereas being slow is going composer like Mozart, planning every shift to emergent strategy, while
to be expensive for sure.‘¹ detail for every instrument, the new unleashing your people so they can
world is improvisational jazz. But even reshape your business in real time. It’s
SHIFT TO EMERGENT older cats can jam. One global chemical also a powerful means of minimising
STRATEGY manufacturer, for example, had confusion and complexity in our world
originally been conceived, decades ago, of rapid-fire digital communications
Tacking and readjusting quickly are to commercialise a singular scientific where everyone can talk with everyone
essential, even if the destination breakthrough. When challenged, else − and will, gumming up the works
is uncertain. In fact, because the decades later, to dig deeper into if you don’t have a sensible set of
destination is uncertain you need an how the company had realised high operating norms in place. Agility is also
‘emergent strategy’, which entails a returns after its founding period had the ideal way to integrate the power
relentless quest and not a defined passed, leadership discovered that the of machine-made decisions, which are
end point. The pursuit itself should be business’s biggest money-makers were going to become increasingly important
a firm’s North Star − a questioning of consistently the result of incremental, to your fundamental decision system.
‘how do we add value’ that’s unceasing close-to-the-customer applications.
but also unsolved, open to exactly how Many of those value-creating UNLEASH
innovations had sprung from learning
that manifests in terms of specific DECISION-MAKING
opportunities and actions. by doing, improvising, and improving
− and getting by on a shoestring.
Too often, decisions about how to In a competitive environment that’s
In fact, upon further analysis, the
create value are made from on high changing so rapidly and so profoundly,
company realised that it had been
and tend to be ‘one and done’. They’re can any single individual keep up? Not
starving incremental (but high-impact)
implemented by means of top-down in isolation, and certainly not from
innovation for the new New Thing,
planning, frontline execution, frontline the top down. But the right kind of
with poor returns on investment too
reporting back up the ladder, top-down organisation − one that taps into a
often the result. Grasping that insight,
analysis of gaps, top-down replanning network of individuals, recognises the
leadership decided to flip its resource
and pushing down mandates to fill outperformance and resilience that
allocation almost completely. That
those gaps, frontline re-execution, a diverse workforce will provide, and
fundamental shift, hitching its star to
and repeating it all again − a process deploys technology aggressively and
emergent strategy, has since generated
much too slow and mechanistic to purposefully − can.
outperforming value for more than a
keep up with real-world change. That’s half dozen years. To understand how, tap into your own
particularly the case in organisations decision system − the human brain
>
DIAGRAM 2 ORGANISING FOR URGENCY CALLS FOR ORGANISING DIFFERENTLY
URGENCY FROM TO
Making a decision when you Making a decision when you

WORSHIP SPEED
have 90% of the information have 70% of the information
Realising your objective is a

Setting your objective
SHIFT TO EMERGENT STRATEGY relentless, purposeful pursuit
as a predicted outcome
of value creation
AGILITY FROM TO
Imposing decisions from Encouraging real-time decisions

UNLEASH DECISION-MAKING
the top down at the edges of your organisation
Maintaining a hierarchal chain of Creating a flatter organisation

RE-IMAGINE YOUR STRUCTURE command, with decision-making and decoupling title or rank from
authority coupled to control day-to-day control
CAPABILITY FROM TO
PERONALISE TALENT Offering generalised training Customising training for the individual,
PROGRAMMES for the ‘average’ employee in part by using advanced analytics
Recognising that leadership can come

RETHINK YOUR LEADERSHIP Elevating charismatic leader
from anyone, regardless of title, and
MODEL who get results by force
is earned, not appointed
IDENTITY FROM TO
Sampling strategy à la carte from Sticking to a strategic prix fixe

ADOPT A RECIPE TO RUN THE
a wide array of approached and to select one approach that best
PLACE
methodologies matches how you create value
CULTIVATE PURPOSE, VALUES, Conceiving of your organisation Aligning the individuals in your
AND SOCIAL CONNECTION as a collection of rolls and processes enterprise around common principles

− and consider how people decide. CEO is essential for this organisational planning (S&OP), new-product launches,
While neuroscientists can identify ‘platform definition’, which is why some and portfolio management. These types
specific parts of the brain that are more leading executives describe themselves of determinations are necessarily cross-
active under certain circumstances, as ‘gardeners’, ‘city planners’, or functional and often highly iterative. The
it’s never the case that one discrete ‘architects’, rather than ‘operators’ or challenge is to bring together multiple
neuron, alone, is determinative. Rather, even ‘strategists’. parties who often have different
intelligence is an emergent property of The second category of decision- priorities, so they can provide the
the whole system, and every person’s making is ‘big-bet decisions’. These right input at the right time, without
‘decision system’ is a network of infrequent and high-risk decisions bureaucratic watering down.
multiple, small, iterative processes have the potential to shape the future The final category is made up of
honed naturally over time. of your company. Examples include determinations that are pushed out
That’s not to say all decisions are major acquisitions and game-changing to the edges of your organisation.
created equal; they are anything capital investments − both high stakes These are the ‘delegated decisions’
but, and a failure to categorise often and inherently risky. Organisations and ‘ad hoc decisions’. Delegated
contributes to inefficient or ineffective that do well in this decision category decisions are high frequency and low
decision-making. In our experience, focus not only on debiasing but also on risk (in other words, even if long-
the best way to understand decisions designating a single executive sponsor, term impact is high, bad decisions
is to conceive of them as part of a atomising decision components into can be undone or corrected long
four-category taxonomy. The highest identifiable and more easily solvable before significant consequences
level of decision-making, we’d submit, parts, standardising a decision- arise). They can be handled effectively
comprises the decisions about how making approach, and moving as fast by an individual or a small natural
to decide. Call this meta–decision- as possible. Time, after all, is of the working team, with limited input from
making ‘greenhouse design’. It essence. other parts of the organisation. Such
involves choosing the foundational Less conspicuous but still high stakes decisions also increasingly can be
elements − the structures, governance are determinations in a third category: delegated to algorithms (think instant
arrangements, and processes − that ‘cross-cutting decisions’. These often recommendations on YouTube or route
define how your organisation operates look like big decisions but are a series planning at UPS). Ad hoc decisions
and reflect its core value proposition. of smaller, interconnected choices are less frequent but still low stakes;
This platform, in turn, supports looser, made by different groups and individuals they arise unexpectedly, but frontline
more dynamic elements that can be as part of a collaborative, end-to-end employee judgement should be
adapted quickly in the face of new decision process. Such decisions supported by more senior managers
challenges and opportunities. The include pricing, sales and operations through an ethos that Jeff Bezos calls

‘disagree and commit’ and Zappos’s Zappos, whose passionate customer-

Tony Hsieh encourages as ‘safe enough service agents have cultivated a
to try’. passionately loyal customer base − are
analytics powerhouses, but they rely
RE-IMAGINE YOUR on inspired individuals to outpace the
STRUCTURE
competition. These organisation have CENTRAL TO TALENT
also figured out that flatter makes it DEVELOPMENT IS A
much easier to operate in agile ways,
The more interconnected your to speed information along, and to COMPANY’S LEADERSHIP
organisation, and the more that integrate disparate sources of it in ways MODEL. LEADERSHIP CAN
decision-making can be diffused,
the easier it will be to sustain high
that boost the odds of making decisions COME FROM ANYONE,
that serve the interests of the company
performance in a world of uncertainty, as a whole, not just of isolated, self-
NOT JUST FROM THOSE
speed, and disruption. Accelerating, interested cells. IN POSITIONS OF FORMAL
unpredictable, and shifting currents
of information are precisely not what
AUTHORITY
a tall command chain is designed to CAPABILITY
confront, especially in a turbulent
external environment. Those dynamics In order to operate with urgency and
can render your firm’s advantages in pursue the agility that makes high Examples include a fast-food restaurant
numbers, tools, and training irrelevant. performance possible, you’re likely chain that, after extensive testing, was
That’s a key reason why even the most going to have to fill some serious able to identify and teach behaviours
hierarchical chain of command − the capability gaps along the way. What’s that would inspire colleagues; rigorous
US military − moved to decentralise more, many of the critical skills your research and statistical analyses used
decision authority to help beat back Al people need − as individuals, team by Alphabet to inform (but not replace)
Qaeda’s Iraqi-based forces.4 members, and leaders − are changing its engineers’ human judgement
rapidly as a result of workplace about people decisions; and, in the
Of course, hierarchies will continue automation and AI. case of one insurer, identifying which
to exist, and it’s right that certain
As less complex work becomes employees would benefit most from
functions (think risk management,
increasingly automated, workers will which types of learning opportunities.
legal, treasury) should be centralised.
In a world growing more complex by need to be able not just to perform
the moment, there are compelling in concert with machines but also to RETHINK YOUR LEADERSHIP
reasons for strata of specialisations adapt to uncertainty. And the more that MODEL
and sub-specialisations − the very sort information-rich tools are used (and
of dedicated expertise that should the more effective they become), the
Central to talent development is
be teamed for what we’ve described harder it will be to achieve the proper
a company’s leadership model.
earlier as cross-cutting decisions. balance between person and machine
Leadership can come from anyone,
‘Flattening’, without more, is not a − a challenge that amplifies, in turn,
not just from those in positions of
comprehensive fix. the importance of continuous learning,
formal authority. Think about your own
employee development, and consistent
What does work is to free your firm: sometimes an employee can be
leadership.
initiatives and decisions from the a leader and sometimes a follower,
constraining hands of unnecessary because while no one employee
hierarchy. While some level of
PERSONALISE TALENT knows everything, many are likely at
prioritisation and resource allocation PROGRAMMES the leading edge of something. What’s
must be coordinated centrally, many more, leaders in agile organisations lead
actions and decisions are best taken When direction comes primarily from less by control than by influence. In
where the work is done at the front ‘the boss’, your company will need one workshop we frequently conduct,
line, close to the customer. To pull that more bosses to keep on course. That’s we ask executives how they would
off, eliminate superfluous management one reason so many organisations solve a given issue. Most are direct −
levels, decouple decisions from control, are too tall and bureaucratic. But if they identify the problem and then fix
and let go. capabilities bubble up from within, and it. A smaller group will drill down to
learning is personalised for individuals the problem’s root cause and fix that
That calls for getting serious about instead.
and not the masses, employees can
letting your sensors, machine and
act more urgently and, usually, more Only a very few take a more holistic
human, work their shared mojo as
effectively. approach; they consider how to create
information providers and decision
makers. The human element is not a Fortunately, organisations are gaining the conditions in which an ecosystem
feel-good add-on. Winning organisations new tools − especially in people can be largely self-managing, where
− from the 2017 World Series Champion analytics − that will enable them to individuals and tools can learn, and
Houston Astros, who value player manage and develop their people with problems can be avoided before they
‘heart’ and talent-evaluator intuition, to greater precision than ever before. manifest.
>
This, we believe, is what the urgency By contrast, the healthiest firms − organisation’s sense of mission and
and uncertainty of the competitive those most capable of sustaining strengthen your employees’ social
future will demand. The traditional performance and renewing over time connection.
model of a charismatic leader who − have a much simpler approach: they There’s an old quip that ‘everybody talks
gets results by force of will has long don’t sample à la carte. Our research about the weather, but nobody does
proved expensive and is fast becoming shows that four distinct recipes are anything about it’. With reorganisations,
outdated. Leaders should strive, particularly effective and having the it’s too often the reverse: everybody
instead, to empower the organisation discipline to stick with any one of does a reorg, but nobody likes to talk
as a whole, to be felt but not seen, to them is critical. In fact, organisational about it. That’s because reorganisations
be inspiring but not indispensable − and discipline is one of the foundations of are hard to get right, distract everybody
not to insist that everyone else should both corporate health and operational from senior leadership on down, and
be just like them. Such leadership performance. have real consequences for meeting
rests on the ability to adapt and on Nor are ‘health’ and ‘operational results’ investor expectations. And even if
congruence with the essence of your binary choices. To keep from losing you’re game for continual top-down
organisation. their way, organisations must prioritise revisions, mantras such as ‘The only
both at all times. That adds up to a constant around here is change!’ run
IDENTITY virtuous cycle that accelerates and the risk of bewildering employees.
enhances performance, even for fairly Ironically, shifting to urgency can
All of which leads into a fundamental mundane initiatives such as squeezing stave off the ceaseless reorganisation
challenge for urgency: if you build this a bit more margin from better pricing or cycling. In the face of today’s massive
kind of ‘control light’ organisation, and lowering costs through more effective disruptions, an ethos of urgency serves
it’s moving that fast − how do you procurement. It also helps ground the to smooth gyrations between ‘hurry up’
keep your bullet train from running company and the people who comprise and ‘settle in’. Of course, urgency alone
off the rails? Our research shows that it, even in times of momentous change. can also be a recipe for dysfunction.
speed needs to be channelled into
But combine urgency with agility,
stable processes, tasks, and roles if CULTIVATE PURPOSE, capability, and identity, and you’ve got
you’re going to stay healthy as you
move quickly. Realistically, lots of those VALUES, AND SOCIAL an organisation that can play fast and
long. The future will be both.
sources of stability are going to get CONNECTION
upended by workplace automation,
as we’ve noted before. As well, If you conceive of your organisation AUTHORS l Aaron De Smet is a senior
operating with the urgency and agility as more than just a collection of roles partner in McKinsey’s Houston office
we’re describing, and overhauling and processes, you’ll be far more and Chris Gagnon is a senior partner in
organisational capabilities constantly prepared for the uncertainty ahead. the New Jersey office
to keep and exceed competitive pace, Aligning around common principles
can seem unsettling. And resource is a large part of what an organisation
reallocation plainly changes people’s of the future is all about: participants
lives. It’s hard, therefore, to keep your making decisions under defined rules
organisation pulling together when of engagement, collaborating to create
there’s so much ambiguity, so much value, and earning the credibility to NOTES
shifting around, and too little sense of lead rather than having ‘leadership’ be
why. imposed from on high. 1 Jeffrey P Bezos, 2016 Letter to Shareholders, 12
April 2017.
Employees reach higher when their
ADOPT A RECIPE TO RUN energies are channelled toward a higher
2 Chris Bradley, Martin Hirt and Sven Smit,
Strategy beyond the hockey stick: people,
THE PLACE purpose. Because different people probabilities, and big moves to beat the odds,
find inspiration from different sources, Wiley, 2018.
While there’s no pat answer to this it takes range to strike a chord that 3 For more, see ‘Strategy to beat the odds’,
uncertainty, following a clear recipe will resonate with almost everyone. forthcoming on McKinsey.com.
is an effective way to start. By its Smart organisations hit every note 4 General Stanley Mc Chrystal, Tantum Collins,
very definition, a recipe is a defined − and mean it. That calls for walking David Silverman, and Chris Fussell, Team of
the talk in, among other areas, race teams: new rules of engagement for a complex
set of conditions and constraints. In world, New York: Portfolio, 2015.
siloed firms, one sees a wide array of and gender diversity, social impact,
processes and practices, executed in and diversity of political expression.
dramatically different fashion across Some employees are most inspired
THIS ARTICLE WAS ORIGINALLY
the organisation (and sometimes by personal development (and, it must
PUBLISHED BY MCKINSEY & COMPANY,
within the same silo). It makes for an be said, monetary compensation);
others find passion in objectives geared WWW.MCKINSEY.COM. COPYRIGHT (C)
incongruous hash, with ingredients
from management books over the last more toward their working team, the JANUARY 2018 ALL RIGHTS RESERVED.
20 years − a pinch of this and a dash of company as a whole, its customers, REPRINTED BY PERMISSION.
that. and even society at large. Cultivating
purpose requires you to sharpen your

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INFORM | PROFILE
ERYTHING
ATTITUDE IS
EVERYTHING
Chartered acountant Solomon
Mphakathi hasn’t wasted a single
is recognising and acknowledging
the achievement of municipalities
moment in turning the Joburg Theatre who have consistently achieved clean
into what is acknowledged as a success audits,’ says Julius Mojapelo, senior
story of Joburg City’s corporatisation executive for the public sector division
policy. The complex’s largest venue, the at SAICA. ‘We want to encourage
Nelson Mandela Theatre, regularly sees municipalities and municipal entities
close to capacity audiences. to continue receiving clean audits. By
The Joburg Theatre promotes itself highlighting municipalities who have
as a ‘theatre for a world-class African achieved clean audits, we are showing
city’. Growing audience numbers is other municipalities that clean audits
not as simple as assessing customer are possible.’
satisfaction surveys, although ‘Attitude is everything,’ suggests
evaluating audience feedback on theatre Mphakathi, as the starting point for
productions is important. achieving clean audits. As a CA(SA),
Giving theatre-goers what they want Mphakathi emphasises that while the
and developing storytelling through right skills and training are important,
theatre takes serious skill. how a leader guides their team
and articulates financial strategy so
‘Attracting patrons is a juggling act employees see where they fit in the
between commercial viability on the bigger picture is just as crucial.
one hand, and telling new African
stories on the other,’ says Mphakathi. ‘I regularly meet with employees,’
‘Sure, we have a customer-centric focus says the soft-spoken, focused CFO.
in keeping existing audiences happy, ‘It’s important to identify areas of
but another strategy is developing new weakness and to have quick turnaround
audiences.’ times in resolving those issues.’
SOLOMON MPHAKATHI, Under Mphakathi’s leadership, the Mphakathi used his first six months
CHIEF FINANCIAL Joburg Theatre has succeeded in in office as a case study and identified
procurement as the main weakness
OFFICER (CFO) OF THE achieving a 55:45% ratio between
in the system. He introduced an
government subsidy and income from
JOBURG THEATRE, own operations in the last financial year integrated financial system at minimal
investment.
STEPPED INTO HIS NEW from a ratio of 58:42 when he started at
the theatre. Under his watch, the Joburg Theatre
ROLE THREE YEARS has progressed from 30 audit findings
AGO AND THANKS TO CLEAN AUDITS three years ago to six audit findings a
year later and another year after that,
HIS LEADERSHIP, THEY to three audit findings. An audit finding
The Joburg Theatre recently received
HAVE SHOWN CLEAN an Excellence in Municipal Finance usually identifies a problem related
AUDITS SINCE. HE Management Award from the to non-compliance with standards,
policies and procedures, governmental
South African Institute of Chartered
SHARES HIS TIPS FOR Accountants (SAICA) for obtaining regulations, or operating efficiencies.
SUCCESS clean audits in three consecutive years. On a more sombre note, there has
‘Through the Excellence in Municipal been a regression in the number of
Finance Management Awards, SAICA municipalities and municipal entities in

INFORM | PROFILE
Gauteng getting clean audits over the reporting if they are to retain their we took decisive action to develop and
previous year. clean audit status of the previous year,’ measure our communication in the
One municipality in Gauteng received a recommends Mojapelo. social media space.’
clean audit in 2015/16; down from five ‘Working in the public sector is really
municipalities who achieved clean audits ROBUST DISCUSSIONS interesting and challenging,’ says the
the previous year. WELCOMED CA(SA). ‘It is hugely satisfying that our
Nine municipal entities in Gauteng work at the Joburg Theatre touches the
received clean audits in 2015/16 The Joburg Theatre is setting a good lives of ordinary South Africans.’ He
(including the Joburg Theatre), down example of clean audits in the public urges more CAs(SA) to invest their skills
from 11 municipal entities who sector as well as being commercially in the public sector to help improve
received clean audits in 2014/15. viable. Operating in a competitive service delivery in the country.
Municipal entities are independent environment where patrons could Mphakathi is passionate about lifelong
organisations that perform municipal be cutting back on luxuries such as learning, a requirement of the CA(SA)
services on behalf of a municipality and attending the theatre presents its own profession. ‘The world in which we
the municipality controls the majority set of challenges. live is very dynamic. New accounting
shareholding. Mphakathi encourages robust standards are issued every year, so
There is a solution to remedying this discussions amongst board members. lifelong learning is not just necessary, it
decline in the number of clean audits. ‘The board is vigilant in ensuring that the is critical.’
‘Municipalities and municipal entities theatre goes from strength to strength.
need to pay sufficient attention to supply When we recently identified a shortfall
chain management and performance in the area of social media strategy,

INFORM | INTERNATIONAL PROFILE
ULTURE
DISCOVERING
THE DEEP-ROOTED CULTURE
OF BEIJING
‘Beijing is a megalopolis!’ says Magnus
Sprenger. It’s the biggest city he’s ever
lived in and having experienced various
cities right from Berlin to Brazil, we
can’t deny his statement holds some
weight.
profession for 18 years with 11
years being international. Tell us
more about the countries you
have worked in? From day one in
my career I knew that I wanted to
work internationally. During school
Describe yourself as a person. and university, I had already spent
I consider myself a global citizen, time abroad, namely in Australia,
fostering relations between countries New Zealand and the US. Hence, I
and cultures with an overall aim to bring joined one of the big six accounting
people together. firms at the time in Germany’s largest
city – Berlin. After one year my boss
What do you enjoy most about conducted the annual review with me
Beijing? While clearly China has not and while I confirmed that I probably
reached the level of development had the most international client
many Western countries have, among portfolio of the office, I also informed
developing countries it stands out him that working internationally to me
WHEN MAGNUS in many ways: size, level of urban meant more than communicating with
planning, quality of infrastructure and overseas teams by phone and e-mail.
SPRENGER WAS GIVEN public safety, for example. I previously He acknowledged that but told me
THE OPPORTUNITY TO also lived in Brazil in similar-sized cities that he had no immediate fix. Within
but there the lack of urban planning and
MOVE TO CHINA, HE infrastructure was clearly visible and
six months he nominated me for an
international programme in Washington
SIMPLY COULD NOT public safety was almost nonexistent. DC. This was the foundation for my
RESIST THE IDEA OF These factors make life in Beijing very
comfortable. But what I love most is
international career. Here I got exposed
to global firm leadership who within a
LIVING IN THE WORLD’S the deep-rooted culture. I live five metro year invited me to work with them at
LARGEST COUNTRY stops from the Forbidden City – what our global headquarters in New York.
more can I say? From there I moved into the US firm’s
BY POPULATION – National Office which was gearing up
What is your current role at EY?
AND SOON TO BE THE I call myself the ‘German Ambassador’, for IFRS adoption – which never came.
LARGEST ECONOMY which means that I look after our From there I went back to Germany for
three years where I continued as part of
German clients all over China – greater
IN THE WORLD. China by corporate definition, which our technical function but also did client
SINCE LANDING IN includes Hong Kong, Macao and facing work in accounting advisory and
Taiwan in addition to Mainland China. was admitted to partnership. When the
BEIJING LAST YEAR An accountant by training, I direct all opportunity presented itself, I moved to
OCTOBER, HE HAS non-accounting-related topics to my Brazil for three years to help with the
initial adoption of IFRS and from there
NOT REGRETTED HIS colleagues to provide my clients with a
one-stop-shop. to Singapore to support the mandatory
DECISION, ALTHOUGH How has your CA(SA) qualification
firm rotation triggered by the EU.
HE ADMITS IT’S THE benefited your career? Immensely What is the most interesting lesson
you have learned in Beijing? An
BUSIEST HE’S EVER – my CA(SA) is recognised in
Australian boss once taught me not
the Commonwealth and former
BEEN! Commonwealth countries at the same to assume. The countries I lived in
level as their local qualifications. previously had legal systems that were
similar to what I knew from home. I
You’ve have been working in the
also knew that the legislative process

INFORM | INTERNATIONAL PROFILE
is unpredictable and time consuming.

I assumed the same would be true
in China. I learnt that here laws can
change quite rapidly when a good
case is being made and the proposed
legislation has advantageous outcomes
for the country. That is very positive and
came as a surprise to me.
What have been some of the
challenges you have encountered?
First and foremost, language is an
issue. While I believe Chinese students
have to learn as much English as
German students, they get little
opportunity to practise and therefore
are not comfortable using it. In addition
to my native German I speak English,
French, Spanish and Portuguese. My
first foreign language was Latin, which
has helped me a great deal. Chinese is
completely different. I have started to
take lessons, but even with a concerted
effort I will only be able to learn basic
Chinese during a five-year period − and into the trains so the doors can close. In as B are those in desirable professions
that does not include the ability to read Singapore entering and leaving the MRT where there are insufficient domestic
or write. is a lot more civilised and is supported resources at the moment. But even
by five comic figures called Get on those classified as B will have to think
What do people do in Beijing to relax Glenda, Move in Martin, Hush Hush about their long-term prospects once
and enjoy their free time? Beijing Hanna, Bag down Benny and Stand up the C-classified workers are sent home.
is the capital and has many tourist Stacy. While they seem to designed for A is awarded only to outstanding
attractions. The country is huge. One children, I believe they are really meant personalities in business and other
can travel in it for years without having for adults, to teach them manners and fields who have for example won
to visit the same place twice. politeness. They have not yet been internationally recognised prizes such
What is the quality of living like introduced in Beijing and in the morning as the Nobel Price. Incomes vary widely
in Beijing? The quality of life is high. it is an amazing sight to watch people according to classification.
Before I moved many friends and embarking and disembarking from the What is the cost of living like in
colleagues warned me of the high subway. It looks like opening a bottle Beijing? To my surprise, rent is higher
level of air pollution. But since I arrived, of champagne. When the doors open, than in Singapore and reaches levels
things have improved markedly. The a wave of people − not all wanting I previously encountered only in
government has put environmental to leave the train – pop out and wash Manhattan. Food, electricity and water
protection at the top of its agenda against an identical wave of people are surprisingly inexpensive. Electricity
and passed legislation prohibiting trying to move in. One needs strong has to be purchased with a pre-paid
the burning of coal – a major source legs and even stronger arms not to be card. The same is true for gas. Water,
of particulate matter – north of the washed away. on the other hand, is metered and gets
Yangtse River. As a consequence, coal What does a South African earn in invoiced at regular intervals according to
power plants have been replaced with Beijing? How does the income tax consumption. Transportation by public
gas-burning power stations emitting system work? The average income in transport is also very cheap and taxis
no particulate matter. The result is that Beijing in 2017 was R560 000, while are equally cheap. Regarding cars, it
the air quality in Beijing this winter has the median was only R185 000. Income depends whether they are imported or
improved significantly. taxes can amount up to 45%, which is produced domestically.
What do you miss most about significantly higher than in Singapore Based on these two factors, can a
South Africa? Wildlife, wildlife, where I previously lived and where the South African come to Beijing to save
wildlife. Photography is my hobby highest tax rate was 22%. money or is it difficult because of
and South Africa’s game reserves are Beijing classifies foreigners into grades the cost of living? Overall, the cost of
incomparable. A, B and C. C is for jobs which can be housing cannot be balanced against the
Is there a short, interesting story done by locals. Foreigners with this cheaper cost of food and utilities. So, in
you’d like to share? Many people will classification should expect their work the end, the cost of living in Beijing is
have heard about the metro in Tokyo permits not to be renewed in the not quite a bit higher than in South Africa.
where platform staff push passengers too distant future. Foreigners classified

SAICA LAUNCHES NEW
WEBPAGE:
EMERGING TECHNOLOGY
The purpose of this webpage is to create a
central repository for information relating to
emerging technologies in all spheres of the
accounting profession to enable members to
keep abreast with the latest developments.
This webpage includes the following:

• Articles included in the SAICA S&L
newsletters, Accountancy SA magazine
and SMP newsletters;
• Links to recordings of seminars and
events presented by SAICA;
• SAICA Comment letter on the IAASB
request for input: Exploring the Growing
use of technology in the audit with a focus
on data analytics; and
• A link to information issued by the IAASB,
including agenda packs, board minutes,
issued documents and videos on data
analytics.
To access this page click here
This page is a work in progress so WATCH

THIS SPACE.

FOCUS | ETHICS AND TRUST
TRUST
ETHICS
&
Integrity and values should be at the core of every business and each
employee. Why? Because the right values will steer your personal life, your
business, employees and management in the right direction. It will promote
a spirit of trust and influence others to do likewise. Ethical choices are like
seeds that one plants that can potentially yield fruit that a whole nation can
eventually feed from. Quite contrarily, one unethical decision not only ruins
your reputation, but your family, company – and as we’ve witnessed- may
ripple right to the economy. In this feature we discuss more about ethical
behaviour
Illustration Liézel Els

MAINTAINING BUSINESS
INTEGRITY IN A
POST-TRUTH WORLD
The best place to start building sustainable businesses is fixing the systemic issues
that have brought our professions into disrepute and future-proofing them against
further potential damage. Let’s ensure integrity is the cornerstone of our businesses
Words FR (Rhys) Robinsonn Illustration Liézel Els
Locally and internationally, the headlines disrepute is to pursue systemic integrity In the financial world, we also help
of late have been disheartening, from in our professions and organisations. So build structures where integrity can
politics to environmental news and how do we do that? flourish through focusing on objectivity,
even within the financial and accounting impartiality and independence. I
professions. Many firms have come INTEGRITY STARTS WITH believe we should also pursue greater
under fire – whether for failing to uphold YOU AND ME transparency. As openness increases,
professional standards or even being there are fewer ‘dark places’ where
implicated in accounting or auditing confusion and dishonesty can grow.
scandals. Some of the responsibility First, it’s important to understand
they’re shouldering may be fair; some that business integrity is a collective NEXT, LOOK AT THE DATA
endeavour. Each of us has a role to play
might not. But in this age of ‘alternative LEVEL
facts’ and social media, protecting – no matter what our job description or
our integrity is more important than level of power. Integrity takes hard work
ever before, both as individuals and sometimes. It means doing the right Any decent data scientist or accountant
collectively in businesses. thing, even when it’s not easy, and we understands the importance of clean
each need to be committed to making data in drawing useful conclusions.
Integrity can be defined in various ways. that choice, every day.
The Cambridge English Dictionary says Dirty data muddies the water and
it’s ‘the quality of being honest and At an organisational level, ensuring makes room for unnecessary mistakes
having strong moral principles that you integrity means everyone is willing as well as deliberate obfuscation. As
refuse to change’. Another idea that to keep each other in check – and to the saying goes, ‘Numbers don’t lie.’
I like is that integrity is simply being be kept in check. Too often, we place But if the numbers aren’t accurate and
the same on the outside as you are responsibility solely on leaders. While clear, sometimes they might as well.
on the inside – no matter who or what they do shoulder great responsibility,
When you simplify the figures by
you’re dealing with. In that sense, if employees and shareholders need
cutting out the clutter and working only
you believe in honesty in your core, to realise they are also responsible
with relevant, clean data, you can use
you will refuse to behave dishonestly, for maintaining and protecting the
your numbers to flag potential problems
even if it means a bigger profit or better business’s integrity. We all need to
and deal with them efficiently. If,
opportunity. help one another to weed out our blind
however, you have inaccurate data and
spots.
I think the answer to preventing any you’re not clear on your key metrics,

IDEA IN
BRIEF
you run the risk of missing those red DON’T FORGET THE WHEN IT COMES TO
flags, opening yourself to potential data
manipulation.
OBVIOUS BUSINESS INTEGRITY,
AS IN MOST THINGS,
BRIDGE DATA AND PEOPLE When it comes to business integrity, ACTIONS SPEAK
WITH SMART SYSTEMS as in most things, actions speak louder
LOUDER THAN WORDS.
than words. So, for those of us who
want to prioritise business integrity, it’s SO, FOR THOSE WHO
Even the most competent people
will make mistakes, so to protect an
important we don’t just say all the right WANT TO PRIORITISE
things, but follow through and do them. BUSINESS INTEGRITY,
organisation from human error, it’s wise This is no easy feat. It means meeting
to invest in experts and systems that our commitments, treating everyone IT’S IMPORTANT WE
provide a measure of automation and with respect – no matter their ‘rank’ DON’T JUST SAY ALL
independence where possible. – and putting in the time and effort THE RIGHT THINGS,
This is actually easy to do in a to build and maintain trust with our
employees, partners and shareholders.
BUT FOLLOW THROUGH
number of functions, including
finance, operations and HR. For AND DO THEM. THIS
To me, success without integrity is
example, automating various HR not true success. It also leaves us IS NO EASY FEAT. IT
admin processes can protect against vulnerable when things go wrong. To MEANS MEETING
preferential treatment or the perception
thereof. Similarly, automating key
state what every good leader already OUR COMMITMENTS,
knows, integrity remains the true mark
aspects of an organisation’s financial of leadership, so let’s bring the focus
TREATING EVERYONE
reporting can help to weed out common on it back into our organisations and WITH RESPECT – NO
issues like Excel formula corruption,
version control on documents and
professions. MATTER THEIR ‘RANK’
ultimately the misstatement of – AND PUTTING IN THE
numbers. AUTHOR l FR (Rhys) Robinson, PhD is TIME AND EFFORT TO
Executive Director, Infinitus Reporting BUILD AND MAINTAIN
Solutions (Pty) Ltd TRUST

ETHICAL
DILEMMAS
With millennials starting to occupy
the top organisational positions,
it is important to consider and
understand the impact this may
have on the manifestation of
unethical behaviour in organisations
Words Renate Scherrer Illustration Liézel Els
IDEA IN
BRIEF In the next decade, millennials (those
born between 1980 and 2000) will
will millennial leaders do in the face of
these ethical dilemmas?
increasingly climb the corporate Leaders ultimately set the ethical
ladder or head their own successful tone of the organisation through their
businesses. This may be seen as own actions. Unethical behaviour
contradictory to the popular stereotype
THE GREATEST PREDICTOR that millennials are career-hoppers.
is driven by poor ethical decisions
and is counter to the legitimate
OF UNETHICAL BEHAVIOUR However, a recent survey (Deloitte interests of the organisation and all
IS THE EMPHASIS ON Global’s sixth annual Millennial Survey) its stakeholders. Decisions (or in this
showed that there is a growing need,
SELF-GAIN. THIS IS especially in developing countries, for
case then poor ethical decisions) are
EXACERBATED IN AN impacted by factors such as personal
stability and job security. values, attitudes, life experiences, and
ECONOMICALLY DRIVEN Add to this the perspectives from intentions. The greatest predictor of
BUSINESS WORLD another recent study about millennials unethical behaviour is the emphasis
WITH UNREALISTIC in South Africa: almost 50% of the on self-gain. This is exacerbated in
participants indicated that mentoring an economically driven business
PERFORMANCE others is the most attractive aspect world with unrealistic performance
EXPECTATIONS AND IN of leadership and nearly 60% seeked expectations and in companies where
COMPANIES WHERE THE traditional management-track corporate the boss is perceived as a bully.
careers (Universum South Africa). Unethical acts are then often committed
BOSS IS PERCEIVED AS With more than a third of South from a resentment and disillusionment
A BULLY. UNETHICAL Africa’s citizens being millennials, perspective. Unethical behaviour
ACTS ARE THEN OFTEN business-as-usual will very soon be also increases when employees feel
COMMITTED FROM A led and influenced by a generation that that their actions will not harm a
brings new perspectives and changing potential victim and that they will not
RESENTMENT AND priorities to leadership roles. In an be condemned by their peers for their
DISILLUSIONMENT often volatile and challenging work actions. Putting the millennial lens
PERSPECTIVE environment, leaders are continuously on these factors yields an interesting
faced with ethical dilemmas. What perspective:

work ethic, but perhaps it is just a new helping others; if their flexible approach
set of values-based guidelines, rather to work life translates into a flexible
than specific rules and regulations. implementation of business rules; if
they question the way things are done
ETHICS IS IN THE EYE OF because they need their work to be
meaningful − then that understanding
THE BEHOLDER? can be incorporated into leadership
development initiatives.
One can perhaps argue that, as
leaders, millennials will increasingly The need for trust and transparency
craft company cultures where the from their environment are millennial
greater good is more important than strengths that should be capitalised
individual needs. Their higher sense on when it comes to positioning and
of social consciousness may impact developing these future leaders as
their discernment of what constitutes custodians of ethical behaviour. Some
ethical vs unethical behaviour. This suggested actions are:
was highlighted in an analysis of the • Ethical dilemmas should be
generational differences in responses discussed and debated and the link
to the National Business Ethics of unethical behaviour to the harm
Survey in 2015 in which millennials it causes clearly highlighted.
presented as having the highest risk of
• Codes of conduct with defined
all the generations for non-compliance
behavioural norms should be co-
due to turning a blind eye to certain
created and enforced.
questionable behaviours. It seems that
they simply do not put the same value • Values should be given life through
on different forms of unethical behaviour the strategic use of symbols or
and will ignore misconduct if it saves slogans to activate underlying
jobs, therefore deciding that the end moral standards.
justifies the means. • Ethical behaviour should be
rewarded.
THE SLIPPERY SLOPE OF
• Millennials have an increased sense UNETHICAL DECISIONS ALLOW THEM TO SHINE
of social responsibility and believe
that business should do more to Put together, those small ‘ends- There is a saying, ‘Power reveals
alleviate society’s challenges. They justified’ unethical acts can lead to who you really are …’. In the case of
want to be involved in good causes bigger negative outcomes. In fact, millennials, it may in fact reveal them
at the local level at work. many executives who end up facing to be the more caring and responsible
• With a ‘work hard, play hard’ the consequences of their poor ethical generation who will ultimately deal
attitude, they demand flexibility in decisions will say that it started small with ethical dilemmas with a human
the workplace and require work to − bending only a few ethical guidelines touch. Hopefully they will be the
be meaningful. and not setting out to hurt anyone. Then generation of leaders who take a stand
along the way rationalisation helps to against toxic, profit-only, power-hungry
• Work/life integration is high on their recast unethical acts as justifiable and organisational cultures. Perhaps, in the
priority list. it becomes more acceptable. When face of ethical predicaments, they will
• Millennials typically have a high new employees join the organisation, succeed in rationalising less, being
expectation of the presence of they are socialised regarding the way more transparent and consistent, and
positive traits such as trust and business is conducted and together ultimately acting in ways that enable
transparency in their environment. with rationalisation, this then leads to ethical behaviour and have a lasting
the acceptance and perpetuation of positive impact on the interests of all
unethical behaviour. organisational stakeholders.
DIFFERENT APPROACH TO
WORK MANAGING THE RISK
AUTHOR l Renate Scherrer PhD is a
With millennials’ emphasis on flexibility
If business understands the drivers of registered clinical psychologist with the
in terms of working and a more relaxed
unethical behaviour for millennials, it Health Professions Council of South
intersection of ‘work’ and ‘life’, their
may help to prepare for and manage Africa and the managing director of JvR
leadership style and demands may seem,
the potential future risk thereof. If their Consulting Psychologists, part of the
at least on the surface, more relaxed and
unethical behaviour is not necessarily JvR Africa Group
less rule-oriented. Previous generations
fuelled by the emphasis on self-gain,
may interpret this as a lower level of
but rather stem from the intention of
March 2018 accountancysa.org.za

accountancy.co.za 33
ETHICAL FAILURES
AND THE DANGER OF
OVER-REGULATION
Rules and more rules … Organisations should be encouraged to curb unethical

behaviour by establishing a conviction-based approach that promotes ethical
standards and behaviour rather than ascribing to mindless compliance to rules
Words Professor Deon Rossouw and Professor Leon van Vuuren Illustration Liézel Els
It is easy to react to recent corporate FEAR And so the rest of the organisation’s
ethical failures by calling for intensified employees learn by observing what
regulation to prevent ethical There is no question that rules and happens to their colleagues.
transgressions. Such reactions are regulations are important to ensure The big stick approach to preventing
to be expected when stakeholders’ order and prevent chaos in societies and unethical behaviour may certainly
indignation at the seemingly organisations. A major outcome of over- curb unethical behaviour through
shameless unethical behaviour in all regulation is the proliferation of rules, fear. And certainly, punishment
sectors of the economy reach breaking however. Organisations often attempt to for transgressions is an inevitable
point. prevent unethical behaviour by creating and necessary consequence of
Lawmakers are called upon to amend more and more rules via policies. This wrongdoing. Organisations that follow
laws and regulations to close loopholes may even be based on the belief that this overwhelmingly compliance-
and impose harsher sanctions on most apples are ‘bad’. Such actions and based approach by and large rely on
transgressors. Organisations are beliefs are usually accompanied by an reactive ethics interventions such as
advised to create more and stricter intensification of attempts to identify enforcement of codes and policies,
policies or to amend current policies transgressors and to thereafter deal with encouraging and rewarding whistle-
accordingly. them in no uncertain terms, in other blowers, and heavy-handed discipline.
words the big stick approach.
But can the knee-jerk responses that But can such a fear-based organisational
may follow really make a difference? It cannot be denied that employees culture ensure ethical behaviour on a
Will such responses not lead to even refrain from breaking the rules through sustainable basis? Or may it merely fuel
more devious ways of beating the fear of punishment for wrongdoing. the adage that ‘what is not forbidden is
system? Does intensified regulation Observing what happens to others allowed’? Will the mocking and defiant
contribute to enhanced ethical that do wrong is after all an important ‘as long as you don’t get caught’ belief
behaviour? It must be extremely form of social learning. This form of of those with a propensity for deviant
tempting for law- and policymakers to shaping behaviour is called vicarious behaviour not result in such behaviour
react to ethical failures by using fear learning. A typical example of how becoming even more devious and
and punishment as a default point of people learn vicariously in the workplace ubiquitous?
departure. is organisations’ efforts to create safe
It is surely cynical of organisation’s to
work environments. Employees are
In this article, we analyse the role of continually focus on what ‘they don’t
indoctrinated on a daily basis to adhere
fear as a means of curbing unethical want’. The temptation of over-regulation,
to safety regulations. Individuals and
behaviour as opposed to a convictions- the proliferation of rules and ‘catching
teams who break these rules are
based approach that promotes ethical those who do wrong’ may prevent
punished or denied certain privileges.
standards and behaviour. unethical behaviour and maintain a highly

Ethi s
Ethics IDEA IN
BRIEF
THERE IS NO QUESTION
THAT RULES AND
REGULATIONS ARE
IMPORTANT TO ENSURE
ORDER AND PREVENT
CHAOS IN SOCIETIES
AND ORGANISATIONS. A
MAJOR OUTCOME OF
OVER-REGULATION IS
THE PROLIFERATION
OF RULES, HOWEVER
regulated status quo. Employees know Employees who demonstrate exemplary ethical values and standards that they
exactly what they are not permitted to ethical behaviour are identified as wish to entrench in their organisations.
do. They even do the right thing because such by their peers and recognised by The focus thus is on the ethical
‘someone may be watching’. They are leadership. This does not necessarily standards that the organisation wishes
thus extrinsically motivated into doing require reward in monetary form, but to achieve, and no longer on what ‘they
the right thing. In a perverted sense employees receiving recognition for don’t want’, in other words undesirable
this may provide them with a sense of being good organisational citizens behaviour.
security by virtue of the predictability of that live the espoused values of the Principle 2 of the King IV Code on
their environment. But can one’s sense organisation. ‘Catching those who do Corporate Governance (2016) reads:
of doing the right thing, and thus being right’ is a way of reinforcing the ethical ‘The governing body should govern the
ethical, thrive in such autocratic and values of the organisation. Employees ethics of the organisation in a way that
fear-laden contexts? Is there not a more do the right thing ‘even when no-one supports the establishment of an ethical
positive and constructive approach of is watching’. They are thus intrinsically culture.’ This reflects encouragement to
getting people to do the right thing than motivated. organisations to establish conviction-
by using fear to accomplish this? An organisation consists of many based cultures rather than ascribe
individuals though. In conviction-based to mindless compliance to rules.
CONVICTIONS ethical cultures a shared meaning of Conviction-based ethical cultures require
what is good, right and just exists leadership courage, trust and patience,
An alternative to a fear-based culture among employees. There is a collective though. Strong barrels that hold good
is a conviction-based culture. The latter aspiration to create an organisational apples may thus take several years to be
type of culture is characterised by culture that sustainably results in a solid coopered. Yet, such an approach is built
organisational values that are clearly reputation marked by stakeholder trust. on a solid basis of values and trust rather
articulated and translated into tangible, than on a precarious basis of fear and
Establishing conviction-based cultures
desirable behaviours that reflect these punishment.
do not necessarily have to be triggered
values. Adherence to policies occur
by scandals and large-scale ethical
because people subscribe to the ethical
failures. Nor are they built on the naïve
values of the organisation, and not out of AUTHORS l Professor Deon Rossouw,
belief that all apples are unconditionally
fear for punishment. CA(SA) is CEO of The Ethics Institute
good. Rules and policies exist where
The focus on the prevention of unethical necessary and are respected rather than and Professor Leon van Vuuren is
behaviour is shifted to leadership feared or blindly adhered to. Executive Director: Business and
promoting ethical behaviour through Professional Ethics at The Ethics Institute
Conviction-based cultures come about
talking the ethics talk and walking the
when leaders focus on the positive
ethics walk, thus leading by example.

THE ETHICALITY OF
CAs(SA)
SERVING ON BOARDS
The ethical conduct of CAs(SA) has a direct or indirect impact on the organisations
that they lead and is strengthened and governed by the SAICA Code of Professional
Conduct (CPC), which strives to ingrain high moral fibre in all SAICA’s members. This
article considers the ethicality of CAs(SA) serving on the board of directors of the
Top 40 JSE-listed companies
Words Izel van Loggerenberg, Alicia van der Walt, Khosi Hlongwane (UJ Academic Trainees 2017), Professor Ben Marx CA(SA)
Illustration Liézel Els
Good governance and ethical sector organisations that have fallen prey
leadership are critical for successful to corrupt activities raise the question
economies and business growth. This whether professions are successful in
is supported by Kallinowsky, who as their attempts to eliminate corruption
far back as 2007 subscribed to this: and act ethically in everyday business
IT IS EVIDENT THAT THE CA(SA) ‘It is universally acknowledged that situations.
DESIGNATION COMMANDS eliminating corruption is a prerequisite
Chartered accountants in South
A HIGH LEVEL OF TRUST AND for societal and economic development.
Africa (CAs(SA)) play a critical role in
RESPECT IN ORGANISATIONS Good governance and transparency are
business and governance structures
building blocks of modern democratic
IN SOUTH AFRICA. THE societies. The question is no longer
and the CA(SA) qualification is held
ETHICAL CONDUCT OF CAs in high esteem. This is reflected in
whether corruption hinders sustainable
the words of the CEO of SAICA, Dr
WOULD CONSEQUENTLY development, but much more how
Terence Nombembe: ‘We surveyed all
societal actors can collaborate to
HAVE AN IMPACT ON THE eliminate corruption in all its forms,
the companies listed on the JSE; there
ORGANISATIONS THAT THEY including bribery and extortion.’1 The
were 4 035 directorships in all, of which
1 025 (23,8%) are held by Chartered
LEAD allegations of state capture and private

IDEA IN
BRIEF
THE ALLEGATIONS
OF STATE CAPTURE
AND PRIVATE SECTOR
ORGANISATIONS THAT
HAVE FALLEN PREY TO
CORRUPT ACTIVITIES
RAISE THE QUESTION
WHETHER PROFESSIONS
ARE SUCCESSFUL IN
THEIR ATTEMPTS TO
ELIMINATE CORRUPTION
Accountants South Africa CAs(SA). That’s (CPC), which strives to ingrain high moral AND ACT ETHICALLY IN
almost a quarter of the total and CA(SA) fibre in all SAICA’s members. EVERYDAY BUSINESS
is the most predominant business SITUATIONS.
qualification represented. When we look
at CFOs or financial directors, CAs(SA) THE CONCEPT OF ETHICS CHARTERED
constitute 74,3% and 21% of CEOs or
AND ITS COMPONENTS ACCOUNTANTS
managing directors are CAs(SA).’2
IN SOUTH AFRICA
Thus it is evident that the CA(SA)
Ethics defined. For centuries
(CAs(SA)) PLAY A
designation commands a high level of
trust and respect in organisations in philosophers have attempted to CRITICAL ROLE IN
South Africa. The ethical conduct of CAs formulate a definition of ethics. Some BUSINESS AND
would consequently have a direct or of the definitions are as follows: GOVERNANCE
indirect impact on the organisations that
they lead. The ethical conduct of CAs(SA)
• ‘Moral virtue is a disposition STRUCTURES AND THE
to behave in the right manner
is further strengthened and governed by and as a mean between extremes
CA(SA) QUALIFICATION
the SAICA Code of Professional Conduct of deficiency and excess, which IS HELD IN HIGH
> ESTEEM.

are vices’ (Aristotle, 340 BC). to adhere to King IV requirements to

attain good corporate governance, and,
• ‘There are two questions that we
accordingly, ethical behaviour.
must ask ourselves whenever we
decide to act: Can I rationally will Business ethics is important, as
that everyone act as I propose to stakeholders do not want to be THE RESEARCH FINDINGS
act? If the answer is no, then we associated with unethical organisations. DEMONSTRATE THAT THE
must not perform the action’ and Whenever an organisation does
Does my action respect the goals not adhere to high business ethics
CA(SA) PROFESSION IS ONE
of human beings rather than merely standards, its reputation is damaged, THAT EXHIBITS HIGH MORAL
using them for my own purposes? which in return reflects as lost sales.9 VALUES. HOWEVER, THE
Again, if the answer is no, then we The conclusion can be drawn that a
must not perform the action’ (Kant, weak business ethics environment may
FACT THAT THERE ARE SOME
1797). lead to sustainability problems. Marx and CAs WHO ARE INVOLVED IN
• ‘Human well-being (eudaimonia) is
Els substantiate these conclusions by IRREGULAR ACTIVITIES IS
the highest aim of moral thought
emphasising the necessity of business ALARMING. THIS IS SOMETHING
ethics, as it ensures the long-term
and conduct, and the virtues (aretê:
survival of modern organisations.10 THAT EACH INDIVIDUAL CA AS
‘excellence’) are the requisite skills WELL AS SAICA SHOULD WORK
and dispositions needed to attain it’ Professional ethics defined. An
(Plato, 387 BC). organisation is made up of individuals, VIGOROUSLY TO ELIMINATE
and in order to establish an ethical
From the above it is evident that ethics
culture and adhere to business ethics,
has been a topical concept in society for
the individuals of such organisations
many centuries. guidance for the professional individual
should have a strong moral sense of
Business ethics defined. The concept right and wrong.11 Every profession has in order that he/she does not misuse the
of business ethics has evolved from its own set of rules that members need information advantage.15
ethics and business over the years to adhere to in order to operate within Given the prominence of CAs(SA) in
and is a topic that is widely defined. their profession. This set of rules is business, it is reasonable to argue
Investopedia describes business ethics referred to as professional ethics.12 that ethics and business ethics are an
as the study of the practices and policies integral part of their everyday life and
The accountancy profession in
of an organisation that govern potentially work responsibility.
South Africa is distinguished by its
controversial issues such as insider
responsibility to act in all stakeholders’
trading, corporate governance, fraud
best interests. As such, all CAs(SA)
and bribery and as such relates to an
organisational framework in order to
are required to comply with the SAICA OBJECTIVE AND
CPC. The SAICA CPC consists of three
ultimately gain public approval.3 Another
parts. Part A of the CPC is the general METHODOLOGY
definition of business ethics is standards
application of the Code, which outlines
of conduct that govern an organisation
the fundamental principles of integrity, The objective of the article is to assess
and result in the stakeholders’ interests
objectivity, professional competence the ethicality of CAs(SA) serving on
being respected.4
and due care, confidentiality and the boards of directors of the Top 40
In an attempt to guide organisations professional behaviour. Part B of the JSE-listed companies. This was done by
with a code of best practices, the first Code is applicable to CAs(SA) serving means of a qualitative research method.
King Report on Corporate Governance in public practice, and Part C to CAs(SA)
was issued in 1994. This report in business. Parts B and C of the CPC The study comprised analysing recent
was internationally recognised as a address specific ethical issues that the corporate scandals (up to 23 November
comprehensive publication that adopted relevant CA(SA) might be faced with.13 2017) to ascertain whether CAs(SA)
an inclusive approach to corporate were on the board of directors and/or
There are several reasons why took part in unethical conduct. This was
governance.5 Since 1994 there has
professional ethics are important. done through a Google keyword search
been three revised reports, and the
This was very well defined as far back of the Top 40 JSE-listed companies
King Report on Corporate Governance
as 1991 by Davis, who sums up the paired with unethical terms.
remains the compass for business ethics
different reasons in one statement: ‘The
in South Africa.6 By inspecting integrated reports, the
code is to protect each professional
King IV states that the responsibility for from certain pressures (for example, researchers obtained the names of
overseeing ethics in an organisation lies the pressure to cut corners to save all the board members and verified
with the governing body, which includes money). A code protects members of a their SAICA membership on the
the board of directors.7 Good corporate profession from certain consequences SAICA website. Thereafter a Google
leadership results in an embedded of competition. A code is a solution to a search was performed on their
ethical culture, which starts with the coordination problem’.14 This still holds names, followed by carefully selected
board members setting an appropriate true today, and accordingly professional phrases that are most commonly used
example.8 It can be deduced from this ethics should serve as a moral guide and when unethical behaviour occurs in
that the board of directors will need provide the necessary and appropriate organisations, for example bribery, tax

the reported findings are low numbers.

The issue that also arises is where the
governance processes were that should
have ensured that company directors and
officials are persons of the highest moral
compass.
It must also be acknowledged that, from
an audit point of view, the difficulty is that
there is not always an audit trail to follow
when it comes to unethical behaviour, as
such activity usually takes place outside
normal business discussions. As such,
these conspiracies are by nature secret
and difficult to detect.
One of the major developments is the
inclusion of a section named ‘Non-
Compliance with Laws and Regulations’
(NOCLAR) in the SAICA CPC. The
NOCLAR section is a framework that has
been established to assist auditors and
other CAs(SA) in business on how they
should act in the public’s best interest
and what actions they should take when
they are aware of potentially illegal acts
evasion, collusion, fraud, price fixing, population. It should also be noted that committed by their clients or employers.
fronting, and related party fraud. the study was done before the reporting NOCLAR will provide a clear guideline
of irregular conduct in December 2017 for auditors and other professional
in Steinhoff, many of whose directors accountants to disclose potential non-
are CAs(SA). compliance without being constrained by
POSSIBLE LIMITATIONS OF
the ethical duty of confidentiality. It also
THE STUDY places renewed emphasis on the role of
FINDINGS AND senior-level accountants in businesses
The Top 40 JSE-listed companies as CONCLUSION to promote a culture of compliance with
at 23 November 2017 were selected laws and regulations, and to prevent non-
because this group comprises the compliance within their organisations.17
The research data revealed the
largest companies based on market The research findings demonstrate
following.
capitalisation and the JSE is also South that the CA(SA) profession is one that
Africa’s best-known and most closely It is alarming to observe that, as the exhibits high moral values. However, the
watched local exchange index.16 This findings indicate, CAs(SA) were involved fact that there are some CAs who are
study is thus limited to the Top 40 JSE- in or were associated with such reported involved in irregular activities is alarming.
listed companies’ board of directors and unethical and irregular activities, even if This is something that each individual CA
may not be representative of the whole as well as SAICA should work vigorously
to eliminate.
Table 1 Percentage of CAs(SA) in unethical and irregular activities AUTHORS l Izel van Loggerenberg,
Alicia van der Walt, Khosi Hlongwane (UJ
CAs(SA) in the Top 40 JSE-listed companies 32% Academic Trainees 2017), Professor Ben
Marx CA(SA) is HOD of Department of
CAs(SA) involved in bribery 3%
Accountancy at UJ (supervisor)
CAs(SA) involved in tax evasion 2%
CAs(SA) involved in collusion 1%
CAs(SA) involved in fraud 4%
CAs(SA) involved in price fixing 1%
CAs(SA) involved in fronting 1%
CAs(SA) involved in related party fraud 1% NOTES
CAs(SA) under investigation 5% CLICK HERE FOR THE FULL LIST OF NOTES
CAs(SA) convicted 0%

THE PROFIT
IN BUSINESS ETHICS
‘What is called standard practice in the private sector is corruption in the public
sector’ is an argument that one commonly hears from apologists of state
corruption. But it’s wrong, says Mike Brown CA(SA)
Words Eammon Ryan Illustration Liézel Els
Public sector and private sector cancer will spread throughout our
corruption differ in who suffers the society,’ says Brown.
consequences, but they are also
‘When those given the responsibility
fundamentally linked. ‘Society is the
of policing our society are themselves
sum of all its parts,’ says Mike Brown,
corrupt, it means the private sector
Chief Executive of Nedbank Group.
loses critical checks on its behaviour.’
’After all, the same people make up both
sectors, being the people from which Then there’s the scale of the problem:
we draw our customers and hire our ‘If you look at the extent of corruption
staff. It would be wrong for the private that’s been exposed by investigative
sector to believe it is fundamentally journalists drawing on documents like
different to the broader society in which the GuptaLeaks, it has now become
it operates. Corruption in every instance apparent that the corruption of the state
is to be denounced, but corruption at a is significantly larger than anyone had
state level is of a different gravity in that imagined. Something of that magnitude
the state has a regulatory and policing will reach all facets of our society, so
MIKE
role to play in an economy. It must the private sector cannot imagine that
set the rules and regulations by which it is immune from the challenges of the
business must conduct itself, and it public sector,’ explains Brown.
BROWN must police those rules and regulations

through the legal framework when
anyone falls short.
OBEYING RULES ISN’T
ENOUGH
‘When the state itself is seen as
CHIEF EXECUTIVE OF complicit − as we have seen in South Brown believes that while there are
NEDBANK GROUP Africa with state capture, and where up exceptions, corporate ethics in South
until December 2017 the prosecuting Africa is at best ‘average’, ‘and if any of
authorities seemed inactive – the us takes a serious look at what’s been

i
View a personal interview with Mike by clicking the video link icon
going on in our society, business ethics Public Service and Administration bound to come to the notice of a social
have probably also been declining over Minister Faith Muthambi reported in media savvy public. ‘These things are
the past few years’. TimesLive (8 February 2018) do little to today out in the open,’ says Brown, ‘and
instill trust: ‘We wish to repeat for the that’s good for society.’
The recent history of South Africa
record‚ again‚ that the minister has not
has demonstrated that business That we are now on the fourth iteration
deviated from the law and regulations
and investor confidence − and as a of the King Report on Corporate
provided for in the ministerial
consequence economic growth and Governance reflects this ongoing
handbook.’
job creation − freezes in the face of rise in transparency. How they adopt
corruption. ‘Society needs trust before The law is a minimum standard for good King, says Brown, accords with each
it will have the confidence to invest and conduct – ethical, honest conduct in company’s different level of maturity
create jobs, so corruption really goes both the private and public sectors is around ethics and sustainability
to the core of damaging the economic a much higher standard than the law thinking. Brown suggests King IV will
progress of our society. Therefore, alone, says Brown. require boards of directors to think a lot
business should not blindly focus on more about their purpose statement.
compliance with rules of governance HOW TIMES HAVE ‘This essentially prompts a company to
as its major tool to fight corruption. It’s CHANGED reflect not just on what are its products
too easy for business to hide behind or services and customers, staff and
behaviour which is fully compliant with shareholders, but on what is its role in
the law but is unethical. The gauge that One reason businesses need to society: what is the company doing to
business measures itself by should adopt a truly ethical approach as enable the achievement of society’s
be to look beyond the rules, as an opposed to a tick-box one is that the objectives? If companies are not seen
absolute minimum standard, and rather bar of transparency has been raised to be acting in the interests of the
ask themselves how society thinks extraordinarily in recent decades. This societies in which they operate, over
business should be conducting itself,’ is due to the multitude of social media time they will lose their social license
says Brown. platforms in the digital age. to operate.’
For instance, statements such as the It may well be that certain types of
following issued on behalf of former behaviour slipped under the radar 30 or
40 years ago, whereas today they are
>
More of a red flag is where potential of various community’s customs or

whistleblowers feel unwilling to behaviours, human beings intuitively
report malfeasance due to perceived know what is the right thing to do,’ he
intimidation. ‘In such an instance the explains.
culture of the organisation is clearly
PEOPLE AND COMPANIES inappropriate, and that culture is a
Some will argue that ethics doesn’t
EMPLOY HUMANS AND WILL matter so long as an economy is
reflection of the behaviours of its
growing and creating jobs. In 2016
INEVITABLY MAKE MISTAKES. leadership. If an organisation cannot
(the latest published) South Africa was
be transparent enough to run an
DESPITE ALL THE SCREENING appropriate whistleblower line in our
ranked by Transparency International
THAT IS DONE, THEY WILL ALSO modern society, clearly it has a culture
in its Corruption Index ahead of all its
BRICS partners – India, China and Brazil
INEVITABLY EMPLOY A SMALL whereby that organisation is unlikely to
all rank joint 79 strangely, while Russia
PERCENTAGE OF PEOPLE WHOSE be sustainable over time.’
ranks 131, compared to South Africa’s
ETHICS ARE NOT ALIGNED TO King IV will drive greater thinking ranking of 64 out of 176. Most of these
around integrated strategies that countries are growing faster than our
THOSE OF THE COMPANY. THE look at all a business’ stakeholders, local economy.
CHALLENGE, HOWEVER, IS TO whether shareholders, customers, staff,
‘There are many reasons why countries
MAKE SURE YOU HAVE THE regulators or communities in which it
grow at differing rates at points in time
GOVERNANCE SYSTEMS IN operates. ‘When boards focus on more
and many reasons why countries fail
integrated thought processes, over time
PLACE TO DEAL WITH THEM, such a company will inevitably be more
to achieve their potential growth rates.
HOLD PEOPLE ACCOUNTABLE Corruption is certainly one of them, but
sustainable and a better company.’
it is hard to measure precisely what
AND LEARN This is because there is ‘a very the impact of higher or lower levels of
definite correlation between a focus corruption contributes to preventing a
on sustainability and positive long- country reaching its potential growth
term performance of an enterprise’, rates is.
says Brown. What may disguise this
‘Certainly, I strongly believe that
correlation is the factor that too many
King IV is driving much greater focus on unless a society has at its foundations
companies and analysts have a greater
a number of other areas, including: ethical behaviour and zero tolerance to
focus on short-term performance.
corruption, you will have a breakdown
• Board responsibility for the culture ‘The job of a board and the CEO is to
of trust among certain segments of
and ethics of a business, and think much more long term than that,
society. This leads to lower confidence
effectively to try maximise the present
• The ethics of pay rather than just and lower economic growth than you
value of all of the future earnings of an
the level and fairness of pay would otherwise have had and this, in
organisation, and in so doing to think
turn, creates a lack of social cohesion.
about the balance between all the
stakeholder groups they’re responsible ‘While economic activity can actually be
IT’S ABOUT CULTURE for. If you can balance the interests of stimulated by elements of corruption,
AND LEADERSHIP all these stakeholder groups, that is the in the long term this is unsustainable,’
way to sustainably generate value over concludes Brown.
time.’
‘You have to get the culture of an People and companies employ humans
organisation right,’ he says. ‘It’s critical. THE HIDDEN COST OF and will inevitably make mistakes.
Managing the values of an organisation Despite all the screening that is done,
UNETHICAL BEHAVIOUR they will also inevitably employ a small
is a key role of the chief executive.’
Sometimes poor governance seems percentage of people whose ethics are
to go hand in hand with a charismatic ‘Ethical behaviour’ is an individual not aligned to those of the company.
leader, when too much trust is placed value, with each person having his The challenge, however, is to make sure
in a single individual rather than in or her personal moral compass and you have the governance systems in
a company’s governance systems. consciousness regarding the subject. place to deal with them, hold people
While charisma can be a red flag in the However, that does not mean it is a accountable and learn. The private
presence of poor governance, it is not complex issue. Brown defines it as sector may not be perfect, but the vast
in itself a cause of corruption. Brown follows: ‘Ethical behaviour is doing majority of our businesses have strong
notes that there are as many instances what you know is the right thing, taking ethical intent and where they fail they
of a charismatic, ethical leader account of all stakeholders that are will corruption quickly and genuinely try
performing incredible feats building likely to be influenced by your decision. to learn and improve.
businesses over time, as there are So, it isn’t something you can refer to a
charismatic, unethical leaders who have rulebook or textbook to see what you’re
done a dismal job of it. allowed to do. Deep down, irrespective

WISE Understanding the National Budget Speech
isn’t easy. So we’ve made it easy for you.
UP ON How does this year’s Budget affect you?
TAX
The budget proposals involve strengthening
the public finances by raising taxes, reducing
and reprioritising government spend.
Where is the money going to?

REVENUE Announcements Learning and Culture Social Development
R351.1 bn R259.4 bn
Value-Added Estate Duty rate increases
Tax rate from 20% to 25% on Economic Development Other
increases from dutiable amount of estates of
R R200.1 bn R194.2 bn
14% to 15% more than R30 million
on 1 April 2018 CONSOLIDATED
Peace and Security Health
SPENDING
R200.8 bn R205.4 bn
Limited relief for the effect 2017/18
of inflation in adjusting
Community Development General Public Services
Personal Income Tax
Donations Tax R196.3 bn R64.0 bn
rates resulting in additional
rate increases
tax of R6.8 billion
from 20% to
25% on
donations
of more than
Who won’t pay income tax?
R30 million
The amount an idividual can earn before being required to pay
personal income tax.
Increased TAX TAX YEAR TAX YEAR
Minister of Excise THRESHOLDS 2017/18 2018/19
Finance to approve Duties on
six special tobacco and Below age 65 R75 750 R78 150
economic alcohol Age 65 to 74 R117 300 R121 000
zones for
tax relief Age 75 and over R131 150 R135 300
Increased Environmental The new tax thresholds are due to increase in the tax rebates for
taxes on plastic bags, individual taxpayers.
General Fuel Levy
incandescent light bulbs and
increases by 22 cents per litre
vehicle emissions tax, and TAX TAX YEAR TAX YEAR
and Road Accident Fund
health promotion levy on REBATES 2017/18 2018/19
levy increases by 30 cents
sugary beverages are effective
per litre on 4 April 2018 Primary (aged below 65) R13 635 R14 067
from 1 April 2018
Secondary (aged 65 and over) R7 479 R7 713
Tertiary (aged 75 and over) R2 493 R2 574
How do we pay tax?

Where is the money coming from? Value-added tax
The money that government spends comes from taxes and levies. The VAT rate will increase from 14% to 15% from 1 April 2018. This
Government proposes raising additional tax revenue mainly from increase will raise an additional R22.9 billion in revenue. Raising VAT is
Value-Added Tax (VAT) and other taxes. estimated to have the least harmful effect on growth over the period
ahead.
TAX REVENUE 2018/19 R billion %
Increases in fuel levies effective on 4 April 2018
PERSONAL INCOME TAX 505.8 37.6 The General Fuel Levy will increase by 22 cents per litre and the Road
CORPORATE INCOME TAX 231.2 17.2 Total Accident Fund Levy will increase by 30 cents. This will push up:
R1345 bn • the General Fuel Levy to R3.37 per litre of petrol and to R3.22 per
VAT 348.1 25.9
100% litre of diesel
CUSTOMS AND EXCISE DUTIES 97.4 7.2
• the Road Accident Fund Levy to R1.93 per litre for both petrol and
GENERAL FUEL LEVY 77.5 5.8 diesel.
OTHER 84.8 6.3

2018
HIGHLIGHTS
Increased sin taxes on alcohol and tobacco

INCREASES BY
TURNOVER TAX FOR MICRO BUSINESS
Malt beer 15c per 340ml can Financial years ending on any date between 1 March 2018 and
Unfortified wine 23c per 750ml bottle 28 February 2019
Fortified wine 28c per 750ml bottle 0 – 335 000 0% of taxable turnover
Sparkling wine 73c per 750ml bottle 335 001 – 500 000 1% of taxable turnover above 335 000
Ciders and alcoholic fruit beverages 15c per 340ml can 500 001 – 750 000 1 650 + 2% of taxable turnover above 500 000
Spirits R4.80 per 750ml bottle 750 001 and above 6 650 + 3% of taxable turnover above 750 000
Cigarettes R1.22 per packet of 20
Cigarette tobacco R1.37 per 50g Estate Duty and Donations Tax
Pipe tobacco 39c per 25g
• From 1 March 2018, the dutiable value of an estate exceeding
Cigars R6.45 per 23g
R30 million will be taxed at a rate of 25% instead of the
current rate of 20%.
Income tax at what rate? • The amount of donations exceeding R30 million will be taxed at a
rate of 25% instead of the current rate of 20%.
TAXABLE INCOME
Tax payable for the 2018/19 tax year
OF INDIVIDUALS (R)
0 to 195 850
195 851 to 305 850
18% of taxable income
35 253 + 26% of taxable income above 195 850
Providing social support to the poor
305 851 to 423 300 63 853 + 31% of taxable income above 305 850
423 301 to 555 600 100 263 + 36% of taxable income above 423 300 18.1 million South Africans will be receiving
555 601 to 708 310 147 891 + 39% of taxable income above 555 600 social grants by 2020/21. In the 2018 Budget,
708 311 to 1 500 000 207 448 + 41% of taxable income above 708 310 government has increased social grants at a
1 500 001 and above 532 041 + 45% of taxable income above 1 500 000 higher rate than before in order to compensate
the poor for the increase in VAT.
TRUSTS
Trusts other than special trusts Rate of tax 45%
2017/18 2018/19
State Old Age Grant R1600 R1695
INCOME TAX: COMPANIES
State Old Age Grant, over 75 R1620 R1715
Financial years ending on any date between 1 April 2018 and 31 March
2019 War Veterans Grant R1620 R1715
Companies 28% of taxable income Disability Grant R1600 R1695

Foster Care Grant R920 R960
Care Dependency Grant R1600 R1695
INCOME TAX: SMALL BUSINESS CORPORATIONS
Child Support Grant R380 R405
Financial years ending on any date between 1 April 2018 and 31 March
2019
Taxable Income (R) Rate of Tax (R)
0 – 78 150 0% of taxable income
78 151 – 365 000 7% of taxable income above 78 150
365 001 – 550 000 20 080 + 21% of taxable income above 365 000
550 001 and above 58 930 + 28% of taxable income above 550 000

ADVICE | VIEWPOINTS
OF GOLDFISH,
GENETICS AND
INTEGRITY
‘May you live in interesting times.’ This purported
Chinese curse rings true with every new media report
raising fundamental questions around the integrity our
country’s political leadership
Leadership Advisor
BRETT TROMP CA(SA)
CFO of Discovery Health The frequency of enquiries into the conduct of many of our country’s
leadership figures unfortunately overrides public perception of most
other − albeit excellent − work done by dedicated public servants who
want a better South Africa for all. And with every decision made, our
leaders fuel much-needed growth or devastating recession.
Integrity. Trustworthiness. Ethics. These are three cornerstones of a
sustainable, safer society where business thrives and political stability
stands rock-solid.
I venture that integrity is the most important attribute I − we − should
have. It is the basis for a mentality of service to others, above self.
It arms a track record to stands up to scrutiny – which every leader
inevitably faces. It translates into, What I say I do, is what I truly do. In
business, integrity means a product or service entirely fulfils what it
promises to clients who put their faith − and funds − into it.
Ever had a goldfish? Its development is governed by its environment −
toxicity and abnormal hormone levels in its water limit its growth. Ever
consider your DNA? Epigenetic studies prove environmental factors
such as nutrients, toxins and exercise determine the way in which many
YOU ONLY HAVE

genes function, activating or silencing them.
Clearly, environment is key to how we think, behave and grow. The
ONE CHANCE TO environment’s leaders create are akin to a climate that feeds or kills
integrity, trustworthiness and ethics.
WALK YOUR TALK Experiments by renowned behavioural economist Professor Dan Ariely
show that given the opportunity to choose honesty or dishonesty in an
enticing context, subjects are guided less by their own principals and
When it comes to integrity and ethics, more by whether they could be caught or judged as dishonest.
something priceless is at stake – your
reputation. Remember, you only get one It’s a truth we know well in South Africa: if our environment accepts
chance at conveying your integrity to others. a lack of integrity as normal, some people justify and perpetuate this
Once deceit is uncovered society offers little ‘norm’.
forgiveness. Is that worth the short-term
gains that deceit may deliver? Be the person Integrity means doing the right thing when no-one is watching. Integrity
who sets a better example and adds to the means honouring your employment contract, delivering on projects
creation of an environment where integrity, and hours you’re paid for − particularly when your salary is paid by tax-
like a goldfish or genetic expression, can payers.
reach its greatest potential. I challenge us all
to be people who set the bar high and walk It means respect for others. And, it means constructing an environment
the integrity talk, all the way. that allows for growth, and rewards truth and fairness − no matter how
hard they may be to uphold.

ADVICE | VIEWPOINTS
‘BANKING’
YOUR 2018!
South Africans are in for a ‘bank’-ride this year with at least
four new banks hitting the high streets, shopping malls or
just smartphones
Business Advisor
The banking and financial services industry will probably get more attention STANFORD PAYNE
this year than any year since the Cape Town doors of Lombaard Bank opened
in 1793. And as a stakeholder this can and will impact your life and business
CA(SA)
ICF-Accredited Executive
more than you realise. and Business Coach
Allow me to pose two questions to you:
• How do I want these changes to affect me and my business?
• What can I learn from this disruption to grow my business and self?
South Africa’s innovative new banking products hopefully will outshine the
South African (once-golden-child) Steinhoff headlines of 2017 and bring
redemption and opportunity to South Africa’s investment market and the
people that deserve it.
26 years ago, Discovery entered the insurance industry worldwide, long
before the trendy ‘disruptive innovation’ had been coined and changed the
way people deemed insurance. They offered their clients and members the
opportunity to own and manage their own risks at a huge success.
One can only imagine how Discovery Bank again will encourage and empower
its current and new client base to create healthier financial wealth through
saving and spending.
Bank Zero with its AppOnly bank meaning limited costs and smartphone YOUR BANKING
friendly approach is going to appeal to an already digitally addicted millennial
market with great results. CHALLENGE
With the new offerings that 2018 are presenting, I’ll be bank (window)
shopping for sure. If you embrace your needs, change your
assumptions, revamp your limiting beliefs
• Too many of you are so busy that you never really have an opportunity to and (re)commit to your life and business
sit back, plan and action. With the tough financial realities of today it is dreams, how will you be embracing
important to know that your well-earned resources and assets are utilised 2018?
for your highest return of investment (time, money, life, family, hobbies,
etc) and are cost effective at the same time. Let 2018 be a year in which banking
• Knowing that banks are being disrupted by individuals that come from disruptive innovation brings you closer
to your dreams and you ask for more
other industries − probably succeeding at it even − what can or do you
changes.
want to do but have been too scared to do or have been told you won’t
make it?
Close the year by saying: ’Thank
Your world is changing, and you can make the most with the changes coming you, Adrian Gore, Michael Jordaan,
your way. Patrice Motsepe and Mark Barnes for
empowering me and my business with
Let’s BANK on that! your innovations.’

ADVICE | VIEWPOINTS
WORKING WITH
YOUR
SUPPLIERS
The pressure is mounting when it comes to the
preferential procurement element on the B-BBEE
B-BBEE Specialist scorecard
ANTON DE WET CA(SA)
Managing Director of Managing
Director of NetValue™ Equity Partners
Large enterprises realise that Preferential Procurement is the one element on
the scorecard over which they have limited control. After all, you can’t force
your suppliers to become B-BBEE compliant.
Yet, if a company were to score poorly on this element, many of the other
B-BBEE initiatives undertaken during the measurement year may have been
in vain from a point scoring perspective. This is because the preferential
procurement element constitutes around 25% of the total available B-BBEE
points. This poses a significant risk of overall non-compliance as preferential
procurement is also one of the priority elements that result in a one-level
discounting if the 40% subminimum criteria are not met. In practical terms
this means a company could have spent a lot of money on the other scorecard
elements (ownership, management control, skills development, enterprise
development, supplier development and socio-economic development) just
to find that a poor score on preferential procurement results in an overall non-
compliant status.
Qualifying small enterprises are also finding the revised codes very difficult
to deal with. Not only is the scorecard proving to be extremely expensive to
YOUR B-BBEE implement but the planning and execution is administratively burdensome.
In the meantime, they are being pressured by their clients to prove they are
STRATEGY compliant.
So, what is the solution? Working with your suppliers.
Timing is vital when planning a B-BBEE Large enterprises should move away from simply putting pressure on their
strategy. There is no use in undergoing smaller suppliers and expecting them to do the almost impossible. This can
a verification if there is no certainty that,
only lead to further frustration, breakdown in supplier relations and even
based on your latest financial year, the
company will achieve a compliant status. potential supply chain problems. It can also lead to the sad situation where
The verification process is costly and time desperate smaller suppliers revert to fronting practices to stay in business.
consuming. When considering the 51% Companies should rather work with their suppliers and build a strategy
black ownership route, it is important to around helping them to comply. For example, in the case of qualifying small
note that such a transaction can even be enterprise suppliers (those with an annual turnover between R10 million and
implemented after your latest financial R50 million), corporates could assist such suppliers in implementing 51%
year-end and will still benefit your clients if black ownership for them to qualify for the automatic Level 2 status. They
the transaction is finalised and your sworn
could partner with one of the many B-BBEE equity strategists out there and
affidavit issued before your client’s next
verification. Do you know when your most really help their suppliers embrace the transformation agenda. This would be
important clients’ certificates expire? in the best interests of all involved as the corporate will achieve its preferential
procurement targets in a sustainable manner while smaller and mid-sized
suppliers will stay in business.

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ADVICE | VIEWPOINTS
DEEMED
DISPOSAL:
AT DEATH
Section 9HA of the Income Tax Act is a deemed disposal
rule for deceased persons is effective from 1 March 2016
and is applicable in respect of a person who dies on or
after that date
TAX Specialist
MUNEER HASSAN CA(SA)
Tax Consultant, Senior Lecturer in Section 9HA of the Income Tax Act and the rewritten section 25 relocate
Taxation at UJ and Lecturer on the some of the capital gains tax implications in the Eighth Schedule to the
Gauteng Board Course main body of the Act. Section 9HA deals with the deceased person, while
section 25 deals with the deceased estate and heirs or legatees, including a
surviving spouse.
In terms of section 9HA, a person is deemed to have disposed of all assets
at market value at date of death, except:
• Assets left to the surviving resident spouse
• Long-term (SA policies) of the deceased, or
• Deceased interest in retirement funds (SA and non-SA funds)
When a person disposes an allowance asset, this triggers a possible
recoupment or scrapping loss and capital gains tax under the Eighth
Schedule. Prior to 1 March 2016, an allowance asset was deemed to be
disposed of at market value under paragraph 40(1) on the date of death, but
this disposal applied only for purposes of the Eighth Schedule. Under this
rule, only the capital gain or loss was therefore taken into account. From
1 March 2016, the deemed disposal takes place under section 9HA. This
triggers a possible recoupment or scrapping loss, and capital gains tax under
the Eighth Schedule.
The Eighth Schedule applies to both capital assets and trading stock but
prevents double deductions and taxation. Trading stock is accounted for
SPECIAL ADVICE under the main body of the Income Tax Act, and it therefore holds no further
capital gains tax implications at the date of sale. Prior to 1 March 2016 the
market value of trading stock held and not disposed of on the date of death
When a person, donates an asset during which exceeded its closing stock value was dealt with as a capital gain/loss.
his/her lifetime, subject to the exemptions, Trading stock was regarded as held by the deceased on the date of death
this triggers donations tax at 20% plus
for the purposes of section 22(1), whereas for capital gains tax purposes
capital gains tax as a donation is a disposal
for the purposes of the Eighth Schedule.
it was disposed. From 1 March 2016, section 9HA deems trading stock to
Should a person hold onto the asset until be disposed of at market value on the date of death. The deemed disposal
the date of death, at the date of death, is included under gross income and holds no further capital gains tax
subject to the deductions and abatement, implications.
estate duty is levied at 20% plus capital
The inter-spouse roll-over relief under paragraph 67 of the Eighth Schedule
gains tax as a person is deemed to have
disposed of all his/her assets at the date continues under section 9HA for the deceased person and under section
of death. Therefore, both events result in 25 for the surviving spouse, but now includes trading stock.
potentially 20% donations tax or estate
duty plus capital gains tax.

ADVICE | THOUGHT LEADERSHIP
UNLOCKING
AN AGILE ACCOUNTING HOUSE
With technology hurtling headlong into all aspects of life, from our homes, cars and
workplaces, to banks, schools and hospitals, it’s no surprise that business looks to
the IT world for inspiration on how to adapt and thrive. An example of this is Agile,
a method of developing software that is spilling over into all aspects of business,
including the finance department
Words Nickolette Assy
Agile, and being an agile organisation, is improving. As important as the work

coming to the attention of the business that is done is the work that is not
world as a plausible way to navigate done: simplicity and speedy time to
the disruption all businesses face market is paramount.
today. This disruption is thanks to the
LONG-TERM PLANNING NEEDS transition to a digital economy and from
It is clear that the old way of working
TO FACTOR IN THAT THINGS the unpredictable nature of the world at
and a top-down, regimented approach
will not cut it anymore. Take annual
MIGHT CHANGE DRAMATICALLY, large. reviews, for instance. In the past
AND THAT PEOPLE AND Agile software development, as they used to make sense to plot the
COMPANIES NEED TO BE opposed to the Waterfall method future based on past experience and
inherited from the hardware world, benchmarks. Today, though, we know
PREPARED TO WEATHER AND uses collaboration between self- that seismic shifts that are impossible
MAXIMISE THESE SHIFTS. TO DO organising, cross-functional teams to to plan for are in fact a reality. Look at
THIS, THE ABILITY TO CHANGE set requirements and figure out how Trump, Brexit, the Cape Town drought
to achieve them. And, according to and the astonishing rise of crypto
NEEDS TO BE BUILT INTO ANY the Agile manifesto, the key to this currencies in the last year. Not only
PLAN way of working is embracing changing were these events unexpected, their
requirements at any stage, delivering impact has yet to play out, and can’t be
work frequently and continuously guessed at. Expect the unexpected is

ADVICE | THOUGHT LEADERSHIP
the only thing that anyone can say with continuous improvement; favouring So, considering the arguments above, is
any certainty. iterative, time-based activities over slam ZBB not only doable but also a practical
As a side note, I believe that in South dunk delivery. Change and improvement way to empower your new, agile, future-
Africa we do have an advantage is considered a journey, not a proofed finance culture? It ties the
over the Northern Hemisphere. destination. Documentation and system budget directly to corporate strategic
We’re used to absorbing a level of adoption is key to getting IP out of plans and allows for rethinking of the
uncertainty as part of our day-to-day people’s heads (like complex standalone way things have always been done.
lives, and this has made us resilient spreadsheets), as well as standardising Empowerment, transparency and
and entrepreneurial, hustling to find and automating processes. ownership in and of themselves,
the advantage and opportunity, even Once you have created a strategy, whether you adopt ZBB or not, will
in tough circumstances. Possibly to a you need to translate it into a delivery lead to better budgeting and budget
fault South Africans tend to adapt rather model, and this is effectively the budget management. As the actual numbers
than complain, protest or debate. For or forecast at a financial level. But how become available for comparison with
instance, look at electricity and water do you pull all these strands together the budgets, the same transparency
shortages: the delivery of both should though, to allow BPM to unlock your drives the empowered user at the coal
be inalienable, and the failure to do agile culture? You don’t get there face to be more invested in delivering
so speaks volumes about our leaders. with spreadsheets, that is for sure. against that budget. Compare this to a
So yes, we are all unhappy about the Fortunately, as so often is the case, manager that is handed a budget that
state of affairs, but we make plans to the very technology that has opened they have had little or no involvement
adapt to the new reality, and we do Pandora’s Box has also enabled a new in, and yet are still expected to deliver
it immediately rather than waiting to generation of business tools that will against.
realise our complaints have borne no facilitate this agile shift. So, a hat trick of agile, business process
fruit. Budgeting and forecasting can generally management and zero-based budgeting
Nevertheless, it sounds like we are be viewed as the ground zero of a can transform your financial processes
all going to have to be nimble going financial cycle, so let’s start there. from drudgery and frustration, into
forward. Long-term planning needs A web-based interface rather than a a user-friendly, creative process that
to factor in that things might change spreadsheet can make financial data drives innovation in your organisation.
dramatically, and that people and input and review accessible to anyone Ultimately, if your budgeting and
companies need to be prepared to in your organisation. Now, non-financial forecasting process is more effective
weather and maximise these shifts. To managers can easily give you the figures and responsive, this will impact your
do this, the ability to change needs to be you need, in a standardised format that bottom line positively.
built into any plan. can be rolled-up into a single version
Sounds like we are going to have to be of the truth. You bypass the ineffective,
time-consuming, and soul-destroying AUTHOR l Kevin Phillips CA(SA) is CEO
pretty agile, right? And especially the of IDU GroupAssociates, Coaching and
finance department as it ensures the spreadsheet go-round, shaving weeks
and months off the budget cycle in the Mentoring
right amount of money is invested in
the right places, that innovation is both process. And, importantly, by providing
enabled, and culled, as necessary. That increased visibility and transparency,
the business continues to optimise in especially of business strategy, you
ways that build up to significant change. foster buy-in to, and ownership of, the
And that, above all, the bottom line is budget.
stewarded into the future. This way of working also opens the door
So far, so good. But how do you go to considering zero-based budgeting
about making finance more agile? (ZBB). This bottom-up budget approach,
where instead of adjusting the previous
Well, I’d argue that tapping into business year’s numbers you start from a
process management (BPM) principles greenfield site and build your budget
might be the key that unlocks an agile around what your strategic objectives
finance department. While BPM has are, has traditionally been dismissed as
its origins in the 1990s, much of its a pipe dream. Nice in theory, especially
philosophy resonates with the Agile as it has been proven to save money,
movement. Practices such as having a but too difficult and time consuming to
well-defined strategy and understanding implement in real life … Really? If we
how core processes underpin it; accept that the world is rapidly changing
consulting the coal face about better across the board how relevant is trend
ways of doing things; of breaking down analysis for the past five years as a basis
silos and getting different teams into for projecting the future? Or even the
the same room together to collaborate relevance of basing this year’s budget
and feedback to the business; driving on last year’s numbers?
a culture of ownership, buy-in and

Do you see the number 4 in front of you? You’re looking
at more than just a number. According to Numerology,
you’re looking at stability and trust. Stability is something
that will always have a positive impact on your business’
numbers. You can count on a CA(SA) to help you make
insightful business decisions, thereby providing as much
consistency and stability as possible.
Because business is more than just numbers.
Partner with a responsible business leader.

Partner with a CA(SA) today.
leaders in business

SPECIAL REPORT | BUDGET 2018
BUDGET
2018
BUDGET 2018: STAYING AFLOAT IN AN OCEAN OF DEBT 54
WHERE TO WITH THE NHI AND MEDICAL CREDITS? 59
CRYPTOCURRENCIES: TAX LAWS TO BE AMENDED 60
EDUCATING OUR CHILDREN GOVERNMENT WEIGHS IN 61
SAICA BUDGET SUMMARY CLICK HERE

BUDGET
2018
STAYING AFLOAT
IN AN OCEAN
OF DEBT
'There are no joys without mountains having been climbed. There are no
joys without the nightmares that precede them and spring them into light'
Ben Okri, A Way of Being Free, 1997

The words of Ben Okri quoted by then Minister of Finance protecting the vulnerable and investing in enablers of inclusive
Trevor Manual in presenting Budget Speech 2006 eerily growth. It moderates spending and raises the revenues
felt like déjà vu when listening to Budget Speech 2018. The required to contain the growth in national debt, whilst trying
public discourse has been quite positive across the country to minimize negative effects on growth.’
as political leadership change in South Africa unfolded in the Much of the above resonate clearly from the SAICA Budget
last week. Even in Parliament, the adversarial environment Summary click here and it was refreshing to see that the
and scenes of violence were temporarily gone and discussion Davis Tax Committee recommendations have at least now
uncannily civil. been judiciously considered.
The Budget Review 2018 can be described as continuing For the public the hope was always to be found in
the previous year’s theme of moderation; a lot less was Government taking seriously the lack of accountability in state
presented than was feared, especially given the talk of spending, especially for fruitless and wasteful expenditure.
‘radical economic transformation’, though this equates more Tax morality was a big theme in this year’s budget and we
to the President’s explanation of the term on 27 June 2017. have seen some dramatic proposals including given more
The Minister of Finance himself was clear: this is a tough powers to the Auditor-General to collect wasted money from
but hopeful budget, aligning his message to that of the public officials, denying SOEs tax deductions for such costs,
President’s State of the Nation Address of hope to the nation and implementing a host of checks and balances as to how
which is dearly needed. SARS operates. Taxpayers were not left out: tax practitioners
However, as the euphoria dies down and we all get back to will now face possible deregistration for non-compliance with
evaluating and doing what must be done to right Ship SA, the requirements, which may invariably include their own tax
questions start arising over whether the incoming political compliance.
leadership not only have the capacity to fix enormous The President and the Minister are rightfully preaching hope,
structural problems and align the very opposing economic however the words of Ben Okri quoted above resonate even
dialogue, but whether they have received a poisoned chalice. more loudly now than ever before since 1994, and there are
Similar to 1994, when the incoming leadership had to face mountains and nightmares to conquer before we get to the
many challenges but too little resources, a dwindling economy joy. So, if all seems is seemingly on track, are there major
and an over indebted state. As we ponder over these concerns? The answer is yes, as the two main structural
challenges, concerns also start rising that too much may be problems in our Budget remain without much insights being
expected by the public, especially with a general election in given how they will be addressed namely, state debt and staff
just over 12 months. However, as the Minister says, this is a costs.
budget of hope; finding solutions and not being discouraged
by the challenges but looking forward to the joy when we
conquer them.
We can summarise the Minister’s speech in his own words: STATE DEBT AND CONSUMER
‘It required us to make difficult but necessary trade-offs,
important to ensure that this budget is a platform for renewal, DEBT – BOILING THE FROG
inclusive growth and job creation. It directs spending to
our most pressing national priorities: educating our youth, SLOWLY
We need to look at this holistically for both state and
consumers as the debt of the latter has a direct impact on the
state’s ability to collect taxes and moneys due. Furthermore,
over-indebtedness by the state has severe consequences
and as we have seen in the Irish Republic and Greece, will be
THE PRESIDENT AND THE MINISTER ARE enforced with severe adjustments to spending policy.
RIGHTFULLY PREACHING HOPE, HOWEVER THE
WORDS OF BEN OKRI QUOTED ABOVE RESONATE NATIONAL STATE DEBT
EVEN MORE LOUDLY NOW THAN EVER BEFORE
Similar to the early and mid-2000s, concern of state debt
SINCE 1994, AND THERE ARE MOUNTAINS AND was high on the agenda and much had been done in the
NIGHTMARES TO CONQUER BEFORE WE GET TO preceding years to rein it in. The then Minister of Finance
THE JOY. SO, IF ALL SEEMS IS SEEMINGLY ON noted that debt in 1994 cost South Africa 24c for each rand
TRACK, ARE THERE MAJOR CONCERNS? THE and predicted that if the same fiscal policy was followed, by
2009 this would be down to 10c for each rand.
ANSWER IS YES, AS THE TWO MAIN STRUCTURAL
In 2001 a columnist in Personal Finance was so impressed
PROBLEMS IN OUR BUDGET REMAIN WITHOUT with the government’s ability to control its finances that he
MUCH INSIGHTS BEING GIVEN HOW THEY WILL had this to say:
BE ADDRESSED NAMELY, STATE DEBT AND STAFF ‘The most important issue is that the ANC government,
COSTS for it is the ANC’s Budget, not only Manuel’s, has stuck

to a rigid regime of fiscal discipline. In other words, it has

not borrowed and spent its way to popularity with any
particular interest group.
‘The principles of running a country are not much different
to running your home, namely, to use an old cliché, you
have to cut your coat according to your cloth. If you
borrow too much money, you will ultimately land up in
trouble and you will have to make major sacrifices to get
yourself back on the straight and narrow. Likewise with
any government and its citizens.’
Though these fiscal principles sound as true today as they did

then, the changes in the global economy in 2008 as well as
the change in political leadership and fiscal prioritisation would
unfortunately mean that this road less travelled would be no Debt is driven by government funding its operational
more. It was also not just the state. In 2015 the World Bank expenditure and its spending plans don’t seem to include
reported that South Africans are the most indebted people reducing any time soon, reaching nearly R2 trillion by 2021.
in the world, with 86% of people having debt compared to This has been exponential growth over especially the last 10
the global average only 40%. As a country and state we have years.
taken the easy road and as a nation and state developed
a bad habit of financing our wants and needs with other
people’s money.
The Minister of Finance has acknowledged this concern and
echoes the same sentiment in Budget 2018:
‘Debt service costs were also projected to rise, crowding
out social spending.
‘We dare not borrow irresponsibly, leaving it to future
generations to repay. Our fiscal interventions also demand
greater efficiency in the use of funds across the public
sector. Government recognises the need to shift spending
away from consumption towards higher investment.’
These are wise words indeed and all should heed the
warning. The question is whether we will be willing to climb
the mountain or will continue to kick the can down the road
The cost of this debt has also become astronomical and the
as we have done, especially in the last five years. We need to
Minister acknowledges that it is crowding out other spending
understand why this debt nightmare is going to haunt us so
areas.
we can bring hope to us all in conquering it. But we must not
underestimate the enormity of the task that lies ahead.
Public debt is estimated to now increase from the current
53,3% to 56,2% of GDP and decline after 2023. It is unclear
how this will be achieved and we will refrain from reaching
the MTBPS 2017 estimate of over 60%. Real GDP growth
is not estimated to reach anywhere near 3% in the medium
term. The preceding five years grew by more than 10% so
that if nothing else changes, why would the next five not do
so as well? In 2017/2018 we borrowed R217 billion, R50 billion
more than budgeted in 2017. Long gone are our plans for
public debt levels below 50% and decreasing by 2019 as was
estimated five years ago − and these amounts do not even
include SOE guarantees realising.
By 2021, debt service costs are estimated to be R214 billion,

which will be more than or nearly equal to what we intend
to spend in 2020 on health (R206 billion), social protection

(R207 billion), policing and defence What makes this even more problematic STAFF COSTS
(R221 billion) with even basic education for them, is that unlike the national debt
(R273 billion) not that far ahead. This all book collected by SARS, the municipal Public sector wages have grown by
assuming we don’t receive a local debt debt book and unrecoverable debt is 10,3% in the last five years and given
downgrade before then. escalating daily, including debts from the wages demands for 2019, do not
In addition to this, the state is also National Government. seem to dissipate. This makes debt
exposed to SOE debts through costs and wages the fastest growing
guarantees, and as we saw in 2017, this CONSUMER DEBT expenses in the budget. Public sector
is becoming a lot more akin to debt wages of national and provincial
than guarantees. In 2017/2018 these There is not much better news when government will be R630 billion by
stood at R466 billion, and if only 10% or it comes to consumers and taxpayers. 2020.
20% of this realised, the state would be Over and above the R101 billion owed To put this in context: if we continue
in serious financial difficulty. to municipalities, the National Credit with the same GDP growth that we
Regulator shocked parliament last currently have and maintain about
LOCAL GOVERNMENT DEBT year with the news that consumers a 27% tax/GDP ratio, staff costs at
owe formal lenders R1,6 trillion. Forty current rates will equal 100% of net
Local government has suffered from per cent of credit active persons have revenue within the next 24 years (that
the same lack of debt control with impaired records, but when taken as is, 2042).
more than R100 billion in debt and debt a percentage of persons in the formal
employment sector, that figure balloons What is concerning is that Government
instruments. seems to be budgeting CPI +1% for
to over 60%.
staff cost increases, although they have
not been able to achieve this in the last
decade.
Figure 2: Growth in long term municipal borrowing
IN CONCLUSION
It is clear that without drastic and radical
intervention in our insatiable want for
debt, the South African state and its
consumers will soon find themselves
facing the same nightmare as the
Greeks in 2015. The lack of control over
staff costs adds to the spiralling debt
problem and we seem to be no closer
to having a social contract with public
sector organised labour.
The concerning thing about the Budget
Review 2018 and its predecessors in
the last few years has not been the
level of debt and staff costs, but the
deafening silence as to how to control
and manage these.
Figure 3: Debt instruments issued by municipalities
Hope is a dangerous thing if use
improperly but powerful if used
correctly. The Minister may and should
bring us hope as a country in steering
the country financially on the right
path − something this government
has achieved before. However, we
should not be deluded: keeping to
the fiscal right path was not easy and
without sacrifice, as many dreams were
delayed, especially those of the poor.
Merely staying afloat in an ocean of
debt is just not good enough − we need
to start swimming to shore and quickly.
What the Minister and President made
clear is that this time round, it will take
a more concerted effort from everyone.

WHERE TO
WITH THE NHI
AND MEDICAL CREDITS?
The way forward with the National Health Insurance
plan is starting to gain some momentum after the
2018/19 Budget speech in terms of a number of
transitional arrangements although not as much as
was originally anticipated in the run-up to the Budget
Words Christel van Wyk
In its White Paper on the National credits, which have been the topic of beneficiaries. For each additional
Health Insurance plan (NHI), the much controversy. The medical tax beneficiary, the increase will be from
Department of Health described it credits are a form of rebate and has R204 to R209. It is important to note
as ‘a health financing system that is provided some tax relief for defraying that these increases are by design
designed to pool funds to provide expensive medical costs. It was always below inflation, the purpose being
universal access to quality, affordable known that this would be an interim that Government has earmarked
personal health services for all South measure until such time that the NHI the additional revenue that will flow
Africans based on their health needs, is fully operational, but there have even from the below inflationary rebate
irrespective of their socio-economic been talks of a complete scrapping of to contribute towards funding of the
status’. this rebate in the months leading up to NHI. The expected impact is additional
The intention behind the NHI is to the Budget. Alas, there were no such revenue of R700 million in 2018/19,
provide free access to personal health drastic measures, which is somewhat R640 million in 2019/20 and R586
care service at the point of service for of a relief for the moment. million in 2020/21, and these benefits
all South Africans and legal residents. It was noted in the Budget, in relation are therefore projected over a three-
The primary long-term objective is to to these medical tax credits, that year period. While this proposal is in
provide access to health care based some individuals are excessively line with the proposals made in the
on individual need instead of financial benefiting from the medical schemes NHI White Paper released in June
ability, and to cover unplanned health contribution rebate, specifically where 2017, it seems that this will not have
events for everyone. multiple taxpayers contribute toward a significant impact on the NHI cost,
the medical scheme or expenses of given that the 2025 estimated cost
The idea is that the NHI Fund will is in the region of R256 billion. In the
operate as a single publicly financed another person. The example used is
where adult children jointly contribute 2017/18 Budget, the then Minister of
and administered fund and envisages Finance, Pravin Gordhan, set aside
all South Africans making compulsory to their elderly mother’s medical
scheme and where each contributor R5,2 billion for the NHI fund, which
contributions to the fund based on although much more than this year,
their ability to pay. The NHI Fund would currently enjoys a full rebate, although
the joint cost is for a single beneficiary. is still not significant considering the
therefore promote cross-subsidisation overall funding need.
on a bigger scale than is currently The Budget proposes that in such
the case with individual medical aid cases the medical tax credit should The NHI is therefore still very much
schemes. also be apportioned between the a ‘work in progress’ and significantly
various contributors. more work needs to be done before it
In the meantime, while the plans goes live.
for implementing the NHI are being The monthly medical scheme fees
streamlined, taxpayers have for the tax credit will, from 1 March 2018,
past few years been given some be slightly increased from R303 to AUTHOR l Christel van Wyk is SAICA
benefit in the form of medical tax R310 per month for the first two Project Director: Tax

CRYPTOCURRENCIES
TAX LAWS TO BE AMENDED
Words Pieter van der Zwan
Public awareness of cryptocurrencies has increased cryptocurrency losses seems high on the agenda as a
significantly over the past couple of months, perhaps concern, given the spectacular price implosion of Bitcoin
because of substantial increases (and sometimes implosion) since December 2017. In addition, the proposals would
in the values of cryptocurrencies such as Bitcoin. More ostensibly also have to address transaction and mining
fundamentally, it could reflect the fact that consumers and fees, given that the former also forms part of the latter for
businesses see potential for such digital currencies and the cryptocurrencies and that ‘new coins’ are issued as part
technology to be useful in their daily lives and operations. payment.
Some payment mechanisms used by South African retailers Transactions involving cryptocurrencies are also problematic
already enable their customers to pay using cryptocurrencies. from a VAT perspective. Unless a cryptocurrency is classified
Despite many sceptics, cryptocurrencies could have a far- as and treated similarly to money for VAT purposes, the risk
reaching impact on the way in which businesses operate exists that the supplier of the cryptocurrency (customer) may
if there is widespread adoption. This would in turn affect be liable to charge VAT on the cryptocurrency supplied. If this
the way that taxes are imposed and collected. The National happens, the system through which VAT is currently collected
Treasury acknowledged this fact with the announcement by SARS from suppliers could become one where, in some
in the Budget Review 2018 that income tax and VAT instances, SARS would have to collect VAT on a transaction
legislation will be amended to address issues arising from from the customer rather than the supplier. Administrative
cryptocurrency transactions. Annexure C of the Budget difficulties that the supply of cryptocurrencies can cause was
Review hints at some of the issues that will be addressed. identified as an area that requires attention.
From an income tax perspective, both the receipt of Although not explicitly addressed in the budget, transactions
cryptocurrencies and transfer thereof as method of undertaken by exchanging cryptocurrencies, often on
payment pose uncertainties. As with any other form of unregulated platforms, are likely to present numerous
payment received, the recipient should account for, and be administrative challenges to SARS. Foremost of these would
taxed on, cryptocurrencies received as consideration in a be detection of the transactions which invariably may result in
transaction. Given the current volatility of the prices of most another compelled disclosure regime for banks and taxpayers
cryptocurrencies, the value of the units of cryptocurrency should the relevant cryptocurrency not have a data trail.
received today may be significantly more, or less, tomorrow. The announcements in the Budget Review 2018 show that
The issue as to how such receipts with such volatile values despite the obstacles it may face, SARS is intent on collecting
should be taxed is raised in the Budget Review. On the other tax on these transactions and stem possible tax evasion
hand, payers who use cryptocurrencies to make payments through the use of these technologies.
could realise gains (or losses) on the cryptocurrencies
exchanged. If exchanged for goods or services, they will
become liable for tax without obtaining cash from the AUTHOR l Pieter van der Zwan CA(SA) is a member of the
transaction to pay such tax. Revenue services in other SAICA National Tax Committee and an associate professor
countries face similar challenges though ring-fencing at North-West University

CATING
EDUCATING
OUR CHILDREN
GOVERNMENT WEIGHS IN
The way forward with the National Health Insurance plan is starting to gain some
momentum after the 2018/19 Budget speech in terms of a number of transitional
arrangements although not as much as was originally anticipated in the run-up to
the Budget
Words Aakifah Louw
Minister of Finance Malusi Gigaba’s maiden Budget Speech The Budget Speech states that fee-free higher education and
delivered on 21 February 2018 was a balanced one. On the training to students from poor and working class families
one hand, tax proposals were introduced to the tune of R36 will be phased in. The students who will benefit from this
billion. On the other hand, Cabinet approved expenditure are students in their first year in 2018 at either universities or
reductions to the tune of R85 billion. Both sides of the scale TVET colleges and with a family income of below R350 000.
are seen as an effort to reduce the R48,2 billion revenue These students will have their 2018 academic year funded
gap, as well as to provide for reallocation of budget spend to in full. This funding will be rolled out in subsequent years
cater for new expenditure. of study until they complete their studies. From the 2018
One such new expenditure stream is in respect of fee-free academic year, students funded by the National Student
higher education. Since the announcement of fee-free Financial Aid Scheme (NSFAS) will have their loans converted
higher education, questions have abounded on how exactly to bursaries.
the government would implement this. All was revealed in The move of granting fee-free education may be seen by
the Budget Speech. some as a political move on the part of the ruling party, but
The Minister announced: ‘The largest reallocation of no one can deny that education is an important cornerstone
resources towards government’s priorities was on higher to addressing the imbalances of our past. In remembering
education and training, mounting to additional funding of an iconic statesman, reference is made to the views share
R57 billion over the medium term. As a result, this is the by the late Former President Nelson Mandela. Said he about
fastest-growing spending category, with an annual average education in his autobiography Long Walk to Freedom:
growth of 13,7 per cent.’ ‘Education is the great engine of personal development.
Former President Jacob Zuma commissioned the Heher It is through education that the daughter of a peasant
Commission of Inquiry into Higher Education and Training can become a doctor, that the son of a mineworker
to consider the feasibility of providing fee-free higher can become the head of the mine, that a child of
education. The Former President released the report on farmworkers can become the president of a great nation.
13 November 2017 and indicated that he would make a It is what we make out of what we have, not what we
pronouncement on the report once he and certain ministers are given, that separates one person from another.’
had concluded their review of the report. On 16 December
2017, the Former President announced that Government
would subsidise free higher education for poor and working
class students. Once the horse had bolted, the government AUTHOR l Aakifah Louw is a member of the SAICA
could only follow it by implementing initiatives to live up to Tax Administration Committee and Massmart Group
the promise. Tax Manager: Controversy

“The future belongs to

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beauty of their dreams”
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when looking to the future, SKILLS are AT THE HEART OF A HEALTHY ECONOMY.
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RECOMMEND | VIEWPOINTS
SAICA LEAP
PROGRAMME
With applications opening for SAICA and GIBS’ LEAP
programme, we asked one of the participants of the 2017
programme to share his experience
Why I did the programme

Having been recently promoted to the position of Senior Executive: Public
Sector, it became important for me to upskill myself to be able to lead
effectively and deliver results.
My biggest take-out from the programme
JULIUS MOJAPELO CA(SA) My biggest take-out from the programme has to be the realisation that
SAICA Senior Executive leadership begins with understanding yourself rather than the people you
lead. As part of the programme we conducted assessments of our leadership
styles and personality profiles. This allowed us to understand ourselves better
and identify our strengths and weaknesses and how they influence how we
interact with others.
The programme also had very insightful content around personal branding,
presentation skills and best practices in marketing and strategy formulation.
The programme further expanded on our business acumen by including topics
related to digital trends and innovation, behavioural economics and scenario
planning.
The Action Learning Project and Business Simulation gave us an opportunity
to implement what we have learned as the programme progresses.
I WOULD RECOMMEND
What I liked most about the structure of the programme
THIS PROGRAMME
The block approach followed by the programme is conducive to a working
TO EVERY ACCOUNTING professional and allowed for time to digest and internalise the content learned
PROFESSIONAL WHO WISHES between the blocks. The programme also included several off-site activities
TO EXPAND THEIR BUSINESS that broke the monotony of having to sit in a classroom for extended period
of time, with visits to historical sites such as the Lilies Leaf Farm to learn
AND LEADERSHIP ACUMEN more about the early days of the South African democracy and how this
BEYOND ACCOUNTING AND history has shaped the country we find ourselves in today.
AUDITING AND OBTAIN A Why I would encourage a fellow CA(SA) to do the programme
DEEPER UNDERSTANDING OF I would recommend this programme to every accounting professional who
wishes to expand their business and leadership acumen beyond accounting
THEMSELVES AS BUSINESS and auditing and obtain a deeper understanding of themselves as a business
LEADERS leaders.

Want to
lead more
actively?
Take the SAICA LEAP
SAICA LEAP (Leadership excellence
accelerated programme) is what
you need for business acumen and
leadership skills to lead a business
or build a new one.
This programme will assist you to grow your career and help make better
business decisions for yourself and for your organisation - whether as an
employee or as a new business owner.
You'll benefit by getting the tools to: Programme information

Lead more effectively
COURSE FEE
• Create sustainable and profitable business ventures
• Future-proof yourself against disruptive changes that R65 000 for SAICA members and associates.
digitalisation poses to finance businesses globally The cost includes tuition, instruction material,
• Analyse market trends, threats, opportunities and risks lunches and refreshments and VAT is exempt.
• Help build your Personal Development Plan
SAICA members and associates will receive preferential
Who should attend? access to seats on the programme. Please note that seats are
Chartered accountants and other financial professionals who limited for non-SAICA members.
have less than 15 years' work experience.
Those with the potential to be promoted to senior positions DATES
in the short to medium term, or who plan to start their own Block 1: 30 May - 3 June 2018
businesses in the short term. Block 2: 29 August - 2 September 2018
Block 3: 18 - 21 October 2018
CPD POINTS Lim

ite
120 CPD Hours ava d sea t
ilab s
le.
Book now at www.gibs.co.za/saica

RECOMMEND | ISA 720
30 MIN
A BIRD’S EYE VIEW

OF ‘OTHER
INFORMATION’
The International Standard on Auditing (ISA) 720 (Revised), The Auditor’s
Responsibilities Relating to Other Information, is effective for audits of financial
statements for periods ending on or after 15 December 2016. What does this mean
for an auditor, you may ask?
Words Ian Mtegha CA(SA)
While keeping the possible impact on ISA 720 (Revised) defines an annual
the auditor’s report at the back of your report as ‘a document, or combination of
mind, ISA 720 (Revised) requires an documents, prepared typically on an annual
auditor to read the other information. basis by management or those charged
It also states that one of the auditor’s with governance in accordance with
AN ANNUAL REPORT CONTAINS objectives is to consider whether there law, regulation or custom, the purpose
is a material inconsistency between of which is to provide owners (or similar
OR ACCOMPANIES THE the other information and the financial stakeholders) with information on the
FINANCIAL STATEMENTS statements. Therefore, although not entity’s operations and the entity’s financial
AND THE AUDITOR’S REPORT required to audit it, the auditor must results and financial position as set out in
read the other information for a bird’s the financial statements. An annual report
THEREON AND USUALLY eye view that will help when doing a contains or accompanies the financial
INCLUDES INFORMATION comparison to the audit and ensuring statements and the auditor’s report
ABOUT THE ENTITY’S that it is consistent with what is in the thereon and usually includes information
DEVELOPMENTS, ITS FUTURE financial statements. about the entity’s developments, its future
outlook and risks and uncertainties, a
OUTLOOK AND RISKS AND A question then arises as to what other
statement by the entity’s governing body
information is. A clear definition of this is
UNCERTAINTIES, A STATEMENT especially relevant in the South African and reports covering governance matters.’
BY THE ENTITY’S GOVERNING context as nuances exist as a result So, what are the considerations specific to
South Africa?
BODY AND REPORTS of corporate reporting practices and
COVERING GOVERNANCE legislation. The IRBA Staff Audit Practice Alert1
states that for a South African company
MATTERS.’ SO, WHAT ARE THE ISA 720 (Revised) defines other
whose financial statements are audited,
information as ‘financial or non-financial
CONSIDERATIONS SPECIFIC TO information (other than financial the annual report, for purposes of ISA
SOUTH AFRICA? statements and the auditor’s report 720 (Revised), includes:
thereon) included in an entity’s annual • Annual financial statements
report’. But what is an annual report, • The integrated report (if prepared,
then? and regardless of whether the

RECOMMEND | ISA 720
annual financial statements and applicable) and the Company Secretary’s It then stands to reason that if a
the auditor’s report thereon are Certificate (when applicable) form part report is a company’s annual report,
contained therein), and of the annual financial statements for purposes of ISA 720 (Revised), all
• Any other documents that are prescribed by the Companies Act information contained therein, other
described within the company’s that must be audited or reviewed. than the financial statements and the
annual financial statements or its The South African Auditing Practice auditor’s report thereon, constitute other
integrated report as forming part Statement 3, Illustrative Reports information. As such, the auditor would
of the company’s annual financial (Revised November 2015), concludes have to read the other information in
statements or its integrated report that the information in these reports the annual report in order to comply
is not in the form of an assertion and with ISA 720 (Revised). In addition,
In determining other information, the subject matters are not identifiable the auditor would have to consider
the auditor also has to consider law, and capable of consistent evaluation or the impact of the other information
regulation and custom. This is clear measurement against identified criteria. on the auditor’s report and amend
from the definition of an annual report. Consequently, the opinion expressed his or her report as appropriate in the
In South Africa, the King IV Report on the financial statements does not circumstances.
on Corporate Governance, the JSE extend to the information contained in
Limited Listings Requirements and the these reports as the auditor has no basis
Companies Act (2008) require a listed for concluding that the information is AUTHOR l Ian Mtegha CA(SA) is a
entity to present various reports and properly stated. However, the auditor Professional Manager: Standards
information to stakeholders. All these has responsibilities, in accordance with Independent Regulatory Board for
reports and information may accompany ISA 720 (Revised), which require the Auditors (IRBA)
the audited financial statements, or auditor to read the other information
certain information may be presented (the reports mentioned above) and in
in a separate document, for example doing so consider whether there is a
a separate integrated report that does
not accompany the audited financial
material inconsistency between the NOTE
other information and the financial
statements. 1 IRBA Staff Audit Practice Alert: Determining
statements and between the other Other Information as Defined in ISA 720 (Revised)
Further, the Directors’ Report, the information and the auditor’s knowledge in the South African Context.
Audit Committee’s Report (when obtained in the audit.

RECOMMEND | TRANSFER PRICING COMPLIANCE
30 MIN
TRANSFER PRICING COMPLIANCE

AN ETHICAL
DILEMMA?
Transfer pricing has been named as one of the main mechanisms used by
multinational groups for base erosion and profit shifting (BEPS). While transfer pricing
legislation across the world has recently been tightened, including in South Africa,
compliance with this legislation is still dependent on the level of taxpayer compliance
Words Christian Wiesener and Karen Miller
THE OECD BASE EROSION the OECD and used in most countries notices providing for the mandatory
around the world to test compliance preparation and/or filing of transfer
AND PROFIT SHIFTING with transfer pricing rules. The arm’s pricing documentation, for some
INITIATIVE length principle effectively prescribes taxpayers for years of assessment
that transactions between related parties commencing on or after 1 January 2016,
With the Organisation for Economic Co- must be carried out on the same basis there was no legal requirement for South
operation and Development (OECD)’s as if they were entered into between African taxpayers to prepare transfer
BEPS initiative, the focus on transfer independent parties. pricing documentation.
pricing compliance has increased
Since 2012, the burden of proof that a Even now, so far there are no
significantly for both revenue authorities,
cross-border related party transaction administrative penalties for taxpayers
as well as taxpayers. Many countries,
was, in fact, carried on at arm’s length who do not comply with mandatory
including South Africa, have introduced
has been with the taxpayer. transfer pricing documentation
rules which place the burden to transact
The way to discharge this onus is by requirements.
in line with transfer pricing rules, and the
obligation to demonstrate this, on the having transfer pricing compliance
taxpayer. documentation supporting the THE ISSUE OF PREPARING
relevant transactions and ensuring
Historically, South Africa has not
implementation thereof. This means
AND/OR IMPLEMENTING
experienced aggressive transfer
that the documentation should correctly TRANSFER PRICING
pricing enforcement by the South
African Revenue Service (SARS). Thus,
reflect the facts relating to functions DOCUMENTATION
performed, risks borne, and assets
compliance was largely dependent on
employed by the parties to the relevant Practicalities. The preparation of transfer
the taxpayer’s level of compliance with
intra-group transactions (the controlled pricing documentation is often expensive
transfer pricing rules.
transactions). and time consuming. The need to
The documentation should also update documentation on an annual
SOUTH AFRICAN TRANSFER reflect that the prices and/or margins basis creates a compliance burden. In
PRICING REGULATIONS achieved by the comparable companies, addition, taxpayers often do not have the
determined in terms of the underlying necessary skilled in-house resources,
The South African Transfer Pricing law transfer pricing study performed, are thus transfer pricing documentation
requires taxpayers to transact at ‘arm’s correctly implemented from a South projects are mostly performed in
length’. The arm’s length principle is African perspective. collaboration with professional advisors
the global standard recommended by or outsourced completely.
However, until the issuance of public

Also, in a multinational group for transfer pricing at a company must a taxpayer prepares transfer pricing
environment, it is likely that transfer decide whether or not to prepare documentation in order to be able to
pricing documentation is prepared at transfer pricing documentation, or to support its pricing and to successfully
head office level or within the relevant review/adapt a template provided and to respond to any queries.
global tax/transfer pricing function, and implement this. Although there are currently no
local tax departments are provided This decision will often follow administrative penalties and, probably
with transfer pricing documentation considerations relating to certain for most South African corporate
or specific prepopulated templates, aspects such as budgets, resources taxpayers, there would be no statutory
for use in the respective country. (internal and external), support from the obligation to prepare contemporaneous
Of course the risk here is that this group, the company’s/group’s tax risk transfer pricing documentation, the
transfer pricing documentation may not policy, the company’s transfer pricing question should be if it is not the right
comply with local standards, conflict policy which sets out instructions thing to do. As mentioned, transfer
with local transfer pricing law and/or regarding the pricing to be applied, pricing documentation is the best way
practice, or simply not reflect the actual the general level of tax compliance, to support that cross-border related
circumstances faced by the organisation the potential exposure in case of a party transactions were entered into at
in South Africa. In practice, to avoid such transfer pricing audit, the company’s arm’s length and in line with transfer
issues, a local review and adaptation, engagement, and its experience with pricing rules.
if required, of the templates provided SARS.
would be performed. Is there not an expectation that in
Ethical considerations. The term today’s time when tax risk management,
In addition, of course, the correct ‘ethics’ relates to moral principles that tax compliance and good corporate
implementation of the transfer pricing govern a person’s behaviour or the governance are at the top of company
documentation is required − that conducting of an activity, according to board members’ minds when thinking of
is, ensuring that the facts set out in the Oxford Dictionary. In addition to tax, a company has an ethical obligation
the documentation reflect the reality the aspects that are generally to be to prepare and maintain transfer pricing
during the period covered by the considered regarding the preparation of documentation?
documentation and that comparable transfer pricing documentation, set out
prices or profit margins determined It would appear that, following several
above, the ethical point of view needs to international media reports and human
and set out in the transfer pricing be considered.
documentation are achieved. rights groups’ campaigns over the last
The (still) applicable SARS Practice five or so years relating to incorrect or
However, particularly if the preparation Note 7 on transfer pricing effectively misuse of transfer pricing for purposes
of documentation is not mandatory, the recommends, at paragraph 10.2.4, that of profit shifting to low tax jurisdictions
person charged with the responsibility

by large multinational groups, there TAX MORALITY pricing rules.

is an expectation that companies In the African context, transfer pricing
engaged in cross-border related party Internationally many large multinational has been the focus of several non-
transactions demonstrate ethical groups have been faced with scrutiny governmental organisations (NGOs)
behaviour, which would include broad from various revenue authorities with which have swooped on multinational
level transfer pricing compliance – that respect to perceived aggressive transfer groups operating on the continent
is, the preparation of transfer pricing pricing practices. These multinational with accusations of creating economic
documentation to ensure that transfer groups have settled the enquiries hardship and social deprivation. In
prices are implemented correctly. making significant additional payments many cases such claims are not
to the revenue authority. This suggests only irresponsible, but incorrect. This
TRANSFER PRICING SELF- that either incorrect pricing policies creates a significant reputational risk
were uncovered or the legislation simply for multinational groups operating in
ADJUSTMENT did not go far enough to ensure that Africa, placing increased concerns that
the multinational group paid what the multinational groups should be paying a
Another area which may pose an revenue authority viewed as fair and larger portion of tax than is legally due
ethical dilemma to a person in charge reasonable. to mitigate this risk. Is this appropriate
of transfer pricing at a multinational
Are we thus seeing a move towards though, and what is the impact for other
company relates to transfer pricing self-
morality testing to determine whether jurisdictions? The multinational group
adjustments.
a multinational group is paying its fair only has one profit pie and allocating
As mentioned before, current South share of tax in a jurisdiction and a move an imbalanced amount to a country
African transfer pricing legislation places away to what is legally required? in which it is not legally required to,
the onus to transact at arm’s length on takes that portion from elsewhere.
the taxpayer. Thus, where the taxpayer Google, Facebook and Amazon were Thus transfer pricing and tax managers
identifies a mismatch between the all criticised for the level of corporation are faced with this ethical dilemma of
pricing regarding a cross-border related tax they paid in the UK even though mitigating such reputational risk.
party transaction, the taxpayer would the multinational groups were not
breaking any laws. As a result the UK The BEPS programme outlined above
technically need to adjust its income
considered the implementation of the seeks to address some of these
to reflect an arm’s length price for this
fair tax mark. The fair tax mark uses a concerns and therefore it is hoped that
transaction. For example, the provision
set of metrics to assess companies on as countries tighten their legislation in
of specialised services by the South
their tax and transparency. But how do line with these guidelines, the morality
African company to a related party tax
you define what is the correct amount versus legal question falls away reducing
resident in Mauritius is charged for at
of tax if you are deviating from what the ethical dilemma facing multinational
R11 million for the year, R10 million for
is legally required? In the UK it seems groups in this regard.
the cost of services, and R1 million
relates to the profit mark-up charged. that the ‘economic substance’ of
However, the taxpayer then realises, for what a company does in a jurisdiction CONCLUSION
instance by reviewing its transfer pricing is reflected in the tax it pays. Is this
documentation, that it should have therefore not a subtle move to formulary Tax and morality/ethics has been a hot
charged a profit mark-up of R2 million apportionment and a move away from topic overseas and in South Africa.
rather. the arm’s length principle? Will we see Particularly transfer pricing, which is
fair tax mark assessments as part of the often said to be ‘not an exact science’,
The ethical dilemma the taxpayer faces ethical training for tax practitioners going
here is whether to make a transfer may create various ethical dilemmas for
forward? taxpayers, tax practitioners and revenue
pricing (self) adjustment to reflect
income in line with the arm’s length Starbucks was considered the poster authorities.
price, that is, R2 million profit mark- child of this change, being accused It is therefore important to consider all
up in the example, or to leave as is of using artificial structures to limit potential ethical aspects of a transfer
(R1 million) avoiding the additional tax its UK tax payments it settled with pricing matter particularly if professional
payable in South Africa, the potential Her Majesty’s Revenue and Customs standards,for example those of SAICA,
administrative burden and further (HMRC) to pay a whopping £20 million. place an even higher expectation on
investigation of transfer pricing practices The company maintained it had paid the ethical professional behaviour.
by SARS, unless SARS identifies the amount of tax it was legally obliged to
need for a transfer pricing adjustment. pay, but it appears determining what is
the correct amount of profit was much
In practice, ignoring or delaying a more complex than this. AUTHOR l Christian Wiesener is the
transfer pricing self-adjustment usually chairman of the SAICA Transfer Pricing
results in significant additional costs/ As such multinational groups are facing Sub-Committee and Karen Miller is a
penalties. Nevertheless, the ethical the ethical dilemma as to whether member of the SAICA Transfer Pricing
aspect remains. they are paying what is morally fair Sub-Committee
and reasonable as opposed to what
is required under the relevant transfer
TAX COMPLIANCE VERSUS

Numerology shows that the number 6 represents balance. In business, it is
crucial to have a strong balance of ethics, experience, insights and leadership.
A CA(SA) brings these qualities, and more, to your business. That’s what
makes a CA(SA) a responsible business leader. So, partner with a business
asset to turn opportunities into results, and make a measurable impact on your
business. Because business is more than just numbers.
Partner with a responsible business leader.

Partner with a CA(SA) today.
leaders in business

INDULGE | TRAVEL
A ROYAL
CONNECTION
When you think of London, what is one Queen’s Gallery, you get not just a little
of the first things that pop into your bit excited.
IN A WORLD WHERE head? Probably the Royal Family … The Rubens at the Palace Hotel is part
and then Buckingham Palace. If you’ve
EXPECTATIONS ARE NOT ever been to London, you’ll know that
of the Red Carnation Group, which has
a presence in South Africa as well. They
OFTEN MET, YOU CAN the palace is surrounded by lush parks own the Twelve Apostles Hotel and
PREPARE YOURSELF TO BE where you can spend hours ‘escaping’ Spa, the Oyster Box, and Bushmans
from the city and enjoy how the British
PLEASANTLY SURPRISED AT can soak up the sun.
Kloof Wilderness Reserve and Wellness
Retreat – so you can expect impeccable
THIS LONDON HOTEL And when you see that the hotel where service and attention to detail at this
you are going to spend a few wonderful fine four-star establishment.
nights are not only in Buckingham And the comfort and splendour are
Palace Street but right opposite the fitting for its location in the Royal
entrance to the Royal Mews and the setting. The hotel is a short walk away

INDULGE | TRAVEL
dished are paired with a great selection

of wines to complement them.
And to work off the wonderful Indian
food Mohan will serve you, there are
loads of opportunities to keep fit and
looking good. Guests enjoy full access
to the H2 Victoria gym facility and even
join some of their classes. Otherwise
you can go for a jog in nearby St
James Park. There’s even have a sports
buddies programme, which means
you’re never left without a tennis
partner, golf companion or cycling
buddy.
The hotel is a natural fit for business
travellers. They offer competitive
business rates for repeat stays in
London and are happy to negotiate the
best solution for your business needs.
Whether you need space for a small
from many of London’s parks, museums and snacks for our journey back home. focus group or for a meeting, seminar
and theatres, making it the perfect base The concierge will also have a taxi ready or large event, they can tailor our
for exploring this amazing city. and waiting for you before you even numerous function suites to match your
have to ask for one. It’s as if the staff request with style and efficiency, with
You can enjoy a luxurious overnight stay, fully equipped business services you
pre-theatre fine dining in the English aspire to make you say ‘wow’ at every
opportunity. can rely on.
Grill, Royal Afternoon Tea in the Palace
Lounge, or cocktails in the Cavalry Bar. Even your taste buds will enjoy your The elegant function rooms can
With afternoon tea, guest are seated in stay at The Rubens. At their recently accommodate up to 160 people in total
front of windows overlooking the Royal launched Indian restaurant, the Curry comfort and the dedicated team will
Mews – so who knows – you might just Room, an inspired three-course menu make sure your event or meeting runs
be lucky and get a glimpse of royalty is offered. The menu celebrates with meticulous attention to detail.
while having your tea. authentic flavours made with the finest
But it’s the small touches that impress ingredients and exclusively imported
For more information visit
− like being served something hot spices from India.
www.rubenshotel.com
after your arrival, or the homemade Mohan and his team will take you
biscuits offered with turndown service. on a gourmet journey and you can
We even received a travel kit upon our expect service and tales to keep you
departure with lotions, toothbrushes entertained all night long. The food

INDULGE | TRAVEL
A
DELICIOUS
RITUAL The experience is just as rich and
wonderful as the history. To visit the Ritz
of sitting down for an afternoon treat of
tea, sandwiches, scones and cake – and
for afternoon tea has to be the London it became fashionable in the early 19th
equivalent of Breakfast at Tiffany’s − a century to fill the long gap between
world-famous brand that captures the lunch and dinner (in a time when dinner
AFTERNOON TEA IN LONDON essence of each city’s history and was served as late as 20:00). Today
IS SOMETHING YOU HAVE culture. afternoon tea is a treat rather than a
‘Afternoon tea’ and ‘high tea’ are stop-gap. And while the working lives of
TO NOT JUST ENJOY WHEN used interchangeably, because many many do not allow the time to sit down
VISITING THE CITY, BUT people mistakenly believe that there to enjoy scones and cakes in the late
REALLY EXPERIENCE … AND TO is no difference. But both traditions afternoon, so for many, the ritual is now
saved for holidays and special treats.
are steeped in British history and the
HAVE IT AT THE RITZ … WELL, differences, subtle as they may be, are Many Brits still make the time to sit and
THAT IS AN INSTITUTION a direct result of their origins. enjoy the propriety and civility of this
the quaintest of English dining customs.
IN ITSELF If you ever wondered – according to
The Spruce (www.thespruce.com), And there is no more renowned place in
afternoon tea is a British food tradition London to find a true afternoon tea that

INDULGE | TRAVEL
from the resident pianist, Ian Gomes.

Attention to detail is so evident here –
with a handbag stand under each table
and even the chinaware s exclusively
designed for the Palm Court – with gold
and pale green and rose.
Everything about enjoying tea
here is done to perfection. From
the combinations of fillings on the
sandwiches to the warm scones served
with strawberry preserve and clotted
cream. The Ritz scones are baked
shortly before they are served to ensure
they are fresh. The cakes and treats are
as pretty as pictures – and extremely
creamy and rich. The head pastry chef
and his staff produce a fresh fleet of
these cakes every day – from exquisite
mille feuilles to creamy chocolate
eclairs. And the trained staff will keep
your plates and cups full until it’s time
the Ritz. It is so high in demand that it’s people more at their ease in his hotels
for you to leave.
recommended to make your booking at than the blandishment of tactful
least 12 weeks in advance. lighting. His widow recounts how the The experience is something you’ll
Ritz was absorbed in lighting problems never forget and whenever you plan
From the moment you make (and get)
for weeks and for hours and hours at a trip to London, you’ll set aside two
a booking you will understand why this
a time she would sit while he and an hours to enjoy this unforgettable
brand is synonymous with exceptional
electrician tried the effects of various experience again.
levels of service and care. Every detail
is attended to and when the day arrives coloured shades on her complexion. And as one of the guests said: ‘Tea
to enter the Palm Court for a wonderful A delicate apricot pink was found at the Ritz is not only sandwiches
experience. Everyone is dressed in to be the most becoming colour. and cakes, but an occasion. Thanks
formal attire – jeans and sportswear And even if you’re not a tea lover, goodness there are still places like this
are not permitted, and gentlemen are there’s an assortment of 18 types for pure enjoyment, even in the modern
required to wear a jacket and tie – and of tea to choose from, so there’s world.’
they look more beautiful as well. This something for everyone. Service really
is thanks to the flattering light falling do happen here with a smile and from
mild and clear from the Palm Court’s the moment the delicious crust-less For more information or for bookings
frosted glass ceiling and pink-capped finger sandwiches arrive on beautiful visit https://www.theritzlondon.com/
chandeliers. It is said that César Ritz china you’ll be exported to another time dine-with-us/afternoon-tea/
always maintained that nothing put and place while enjoying renditions

INDULGE | MOTORING
VOLVO
S90 The all-new S90 will definitely stand out
from a crowd especially from the rear,
with its now almost Volvo signature-
style rear cluster lights. On the S90
they look like brackets on either side of
Step inside and you are welcomed by
a simple and elegant interior that has
a real sense of luxury. This is thanks to
the use of high-quality leather, plastics
and the light real wood inlays. The
the car, echoing the similarity of the XC traditional squared centre hub of the
90-style lights. Up front, the elongated steering reminds you that this is from
VOLVO HAS ALWAYS BEEN headlights that are split halfway with a the Swedish marquee stable. The big
KNOWN TO BE CONSERVATIVE LED light with a horizontal ending that change to previous Volvos is the huge
looks like the letter ‘T’ on its side. investment in technology: gone are the
AND SUBTLE IN THE WAY knobs and buttons and in their place
The rather elongated body on the
THEIR CARS JUST SEEM TO S90 looks longer than many of its is a large, almost tablet-like screen
BLEND INTO THE CROWD OF competitors, which I think was in the centre dropdown console. This
touchscreen infotainment system
OTHER MOTOR VEHICLES. a strategy on Volvo’s side, as its
controls almost everything in the car
competitors are trying to make their
WELL, THAT WAS UNTIL cars look smaller. Volvo is making their from climate to sound and the heated
seats. The use of the Volvo interface
NOW ... cars appear larger than they are. The
does take some getting used to, as it
coupé-style rear window adds to a
larger interior space and gives the car a is deliberately different from any of its
rather executive finish. competitor’s style. Once you are trained

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ENGINE
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POWER
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TORQUE
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on this, it becomes almost second system can catch you off guard if you the front wheel drive system is not as
nature, though. have a load at the back and decide to smooth as the Audi, but all in all the
The space upfront and in the back is take off with your foot planted. The car feels good and the large centre
ample, and so too are the legroom and motor kicks off, but the tyres battle to display reminds one of a Tesla rather
the carnivorous boot. The one drawback get traction causing the car’s traction to that any of its competitors. This is
is that the boot lid feels light and almost control to kick in just as the tyres interesting, considering that Volvo have
tiny compared to the rest of the car, manage to catch the tarmac. This just announced that they will be going
which has a rather solid feel. results in a rather jerky take-off. That all electric in the not too distant future.
said, this car is not meant to be a traffic- So, if you’re looking for a medium-sized
The big plus on the Volvo is that almost light racer. It’s rather meant to cruise sedan and want to stand out, the Volvo
all the creature comforts and more are around in absolute comfort, and that it is one to consider.
standard. Items like heated seats, blind- does achieve well in its stride. Volvo is
spot indicators, and electric seats are ll also known for its safety and that has
standard − to name a few. not been spared in this vehicle. AUTHOR l Torque Talk is a member of
On the road, the Volvo feels soft and SAGMJ
Overall the S90 has definitely matured
comfortable to the point that you realise to become a worthy competitor to
this car can easily be one that you are cars like the BMW 5 series, Mercedes
chauffeured around in. The steering E-Class and Audi A6. It is possibly one
wheel is light but does lack a bit of of the most comfortable and the best
responsiveness. The front-wheel-drive standard-equipped of the lot. However,

INDULGE: LIFESTYLE
ELEVATE YOUR TIME

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coverage. The best news of all is that your Apple Watch 3 will
share the same phone number as your iPhone, doing away
with one of the biggest grievances of previous LTE-enabled
smartwatches: juggling multiple numbers.
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INDULGE: LIFESTYLE
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REAL FOOD FOR

THOUGHT
What we eat really can impact our brain power.
So, tweaking your diets won’t immediately
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can improve our mental clarity, enhance your
ability to focus and retain information, and help
to minimise ‘brain fog’.
PIZZA FOR DESSERT? According to www.nola.com, if you incorporate

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MARCH 2018 | SUPPLEMENT
ETHICS
85
ETHICS
IN TAX DISPUTE
RESOLUTION
86
‘I AM NOT GUILTY UNTIL
I GET CAUGHT’
88
WHAT IS RIGHT TO DO
AS A COMMISSIONER
OF OATHS
90
IS TAX MORALITY A
THING?
92
ARE WE TREATING TAX
EVASION AS A ‘NON-
CRIME’?

EDITOR’S
NOTE
PIETER FABER, SENIOR EXECUTIVE: TAX
Integritax has an illustrious history within The success of ASA can be attributed
SAICA, having been launch in 1994 as to its professional editorial, design and
THE MARCH 2018 ISSUE OF a newsletter to inform members and publishing team who have shown that
ASA NOT ONLY HAS A GENERAL the public on a technical level and to they can transform SAICA products
serve as a platform to showcase the and services to meet the needs of
ETHICS FLAVOUR BUT ALSO profession as thought leaders. To ensure our members in a modern world. The
COINCIDED WITH THE 2018 that this rich tradition continues within a integration of Integritax into ASA was
BUDGET REVIEW. IT WAS changing world and align with SAICA’s therefore a logical conclusion and will be
strategic intent of being recognised as a well served by this editorial team. The
THEREFORE QUITE COINCIDENTAL thought leader, it has become necessary March 2018 issue was an opportune
THAT ONE OF THE MAJOR to update the content and format of time to implement this migration.
THEMES OF THE BUDGET REVIEW the publication to appeal to our broader The March 2018 issue of ASA not only
2018 WAS TAX MORALITY. THIS membership. In this regard the SAICA has a general ethics flavour but also
National Tax Committee has taken a
CONCEPT IS EXPLORED IN THIS leading role to help SAICA implement
coincided with the 2018 Budget Review.
It was therefore quite coincidental that
MONTH’S ISSUE, FOCUSING NOT our vision. The next step was invariably one of the major themes of the Budget
ONLY ON THE CHALLENGES IT finding an appropriate platform that will Review 2018 was tax morality. This
achieve this.
POSES, BUT ALSO ON THE SELF- concept is explored in this month’s
ASA is the profession’s premier and issue, focusing not only on the
REFLECTION REQUIRED BY THE award-winning publication with a challenges it poses, but also on the self-
PROFESSION. MEMBERS CAN monthly distribution of more than reflection required by the profession.
ALSO READ A SUMMARY OF 40 000 copies. ASA was transferred Members can also read a summary
THE 2018 BUDGET REVIEW AND to a new, modern and user-friendly of the 2018 Budget Review and some
e-publication platform from its February broader analysis and insights on it.
SOME BROADER ANALYSIS AND 2018 issue, making it one of a few. We look forward to working with the
INSIGHTS ON IT. This platform makes the publication ASA editorial team in creating and
accessible on various devices, with enhancing the value of the profession
automatic scaling to screen size, and providing products that reflect
indexing, and an intuitive touchscreen the professional standards of our
interface. membership.
84 INTEGRITAX March 2018

ETHICS
ETHICS AUTHOR | CHRISTEL VAN WYK IS SAICA PROJECT DIRECTOR:

IN TAX DISPUTE RESOLUTION Tax and Legislation
ONE MAY ASK

WHETHER ETHICS
EVER PLAYS A ROLE
IN TAX DISPUTES.
IT IS ONLY UPON A
CLOSER EXAMINATION
OF THE PROCEDURAL
REQUIREMENTS THAT
ITS ROLE BECOMES EVIDENT
• Seek a fair, equitable and legal resolution of the dispute

In a mediation process, some of the key
contributions a mediator makes are not • romote, protect and give effect to the integrity, fairness
P
so much the outcome of the dispute but and efficacy of the ADR process
the values and ethics that the mediator • Act independently and impartially
contributes. Bear in mind that the mediator
exerts influence in getting the parties • onduct himself or herself with honesty, integrity
C
themselves to reach an agreement. In a and with courtesy to all parties
South African tax context, the alternative • Act in good faith, and
dispute resolution (ADR) process, which
• ecline an appointment or obtain technical assistance when
D
has key characteristics of mediation,
a case is outside the field of competence of the facilitator
the facilitator can exert considerable
influence by virtue of contributing values Considering the highly complex tax system, it seems overly burdensome for
and ethics to the process. The underlying the facilitator, by implication, to personally have the expertise in a particular tax
ethical issues may be complex but must field. It is also difficult to see how a person of good standing with, for example,
nevertheless be considered, as they play a a mediation qualification would ever be able to accept an appointment to a tax
pivotal role in a dispute process. dispute. Complex tax matters would presumably not be within his or her personal
area of competence, hence requiring that person on ethical grounds to decline the
Addressing ethical issues in an ADR
appointment. Considering the example used, where the facilitator therefore does
process with SARS is no easy feat. How a
not have the specific field of competence, certainly then the facilitator should be
facilitator addresses ethical concerns may
able to source the expertise, just as a judge of the Tax Court would invariably rely
influence the quality of both procedural and
heavily on specifically sourced expertise. The nature of sourced expertise runs
substantive justice. For example, where the
hand in hand with the nature and complexity of the matter.
facilitator dismisses a request by a taxpayer
to involve an expert in mining tax, where Interesting enough the rules also do not directly place the same ethical
the dispute involves a complex mining requirements, such as conducting themselves with honesty integrity and courtesy,
tax issue, this may impair the substantive on the parties to the dispute. The question is then how the facilitator should
outcome of the dispute and defeat the achieve an ethical balance and substantively fair outcome where the parties are not
object of this process. This also raises the subject to the same fundamental ethical prescripts.
question what the facilitator’s responsibility In practice the negotiation process in an ADR can be utterly frustrating and easily
is to ensure substantive justice in an ADR deadlocked as parties often fight for position instead of principle. This may be
process. difficult for the facilitator to influence as a result of the absence of these minimum
The dispute rules prescribe that a senior ethical standards for the parties.
SARS official must establish a list of The introduction of the same or similar ethical standard for the SARS officials
facilitators of ADR proceedings and that he and taxpayers in an ADR process would certainly benefit the outcome of ADR
or she must meet certain minimum ethical proceedings and be a firm step towards making the process more accessible, fair
requirements. This includes being a person and efficient.
of good standing of a tax, legal, arbitration,
mediation or accounting profession and
must have appropriate experience in such
fields. In addition to this, the facilitator
must also:
March
MARCH 2018
2018 accountancysa.org.za
INTEGRITAX 85
‘I AM NOT GUILTY UNTIL I GET CAUGHT’
HOW MANY PROFESSIONALLY QUALIFIED PEOPLE OUT THERE ARE OF THE SAME VIEW?
15 MIN
In the tax world, one is often confronted with the question as to whether
a specific transaction amounts to tax avoidance. It is common cause that
THIS WAS THE ANSWER OF A tax avoidance is the elimination or reduction of a tax liability by way of legal
FELLOW LAW STUDENT DURING methods provided for in a particular tax act and tax evasion is the employment
MY FIRST YEAR OF STUDY AND of illegal methods to achieve the same goal. For many governments and
NGOs − and increasingly society in general − the real issue is not so much
I HAVE NEVER BEEN ABLE TO whether the law is being complied with in a transaction that could amount to
FORGET THAT REPLY, SHOCKED AT tax avoidance but whether it is ethical/moral in the first instance to use the
THE TIME THAT A PERSON WITH Act to avoid tax. Google, Apple and Amazon were all quick to point out that
THE INTENTION OF BECOMING A they achieved low effective tax rates within the perimeters of the law, but this
argument was not received well at all.
LAWYER CAN HOLD SUCH A VIEW
This is where reputational risk becomes critical.
Owing to the current tax landscape, one of increased transparency and
exchange of information between tax authorities worldwide, companies cannot
afford to be caught off-guard. Even more so in South Africa, with reference to
The above begs the question – how many
the King IV Report in which the governing body is assigned responsibility for
professionally qualified people out there
a tax policy that is compliant with all applicable laws but that is also congruent
are of the same view? As a member of a
with responsible corporate citizenship and that takes account of reputational
regulatory body, one subscribes to a code
repercussions.
of conduct which would demand ethical
decision-making. Even though some people Currently, companies in the UK with either a turnover exceeding £200 million
have proven that ethical decision-making is or a balance sheet above £200 million have to publish their tax strategies
demanded, it is not always carried out. on the Internet to be accessible by the public free of charge. Requirements

ETHICS
AUTHOR | JANIEN JONKER IS THE GROUP SENIOR TAX

ADVISOR AT BARLOWORLD AND A COMMITTEE MEMBER
OF THE SAICA TRANSFER PRICING COMMITTEE
afterthought – a decision has already the M1, would you be comfortable with
been made with the purpose of the tax that?
team being to make it work. Companies Ethical dilemmas have always been
have started to address this concern by present; they are not something new.
adopting a tax code of conduct whereby What has changed is that unethical
the roles and responsibilities of its tax choices in the tax world are subject to
team members are set out, together increased public scrutiny and society
with for instance the requirement of is taking a much closer interest in
a commercial rationale. For example tax compliance. There is growing
the Vodafone Global Policy Standard,2 dissatisfaction with companies that
has attached thereto its Tax Code of stretch tax laws and regulations beyond
Conduct and it specifically highlights: their intended purpose to reduce their
‘The commercial needs of the Group tax liabilities. In this environment,
are paramount and all tax planning companies are almost expected to have
will be undertaken in this context. tax strategies and codes of conduct that
All transactions must therefore have they are willing to abide by and to share
a business purpose or commercial publically.
rationale.’
Unethical actions in respect of tax
compliance can be gray and can range
from sending SARS far more supporting
information than what was requested
(lever-arch file on lever-arch file) with
the sole intention of ensuring that SARS
officials have so much unnecessary
NOTES
information to read through that the
chances of them identifying the real 1 https://www.gov.uk/guidance/large-
issue at hand is slim, to carefully and businesses-publish-your-tax-strategy.
minimally worded explanations that are
not untrue but also not complete. 2 https://www.vodafone.com/content/dam/
vodafone-images/sustainability/downloads/
Recently in tax court case 14055 the policy-and-code-of-conduct.pdf.
court had to consider the additional
assessment issued by SARS together
with the levy of an understatement
include details on the company’s tax penalty. The appellant’s accountant,
risk management process, the attitude when completing the annual tax return,
adopted in respect of tax planning reflected an amount of R2 576 145 as
and more specifically, any reasons ‘other expenses’ with a description of
why external advice might be required ‘motor vehicle expenses etc’. SARS
and an outline of the company’s tax- established that included in this ‘other
planning motives. If the company has expenses amount was an amount
a tax code of conduct, it should be of R2 million reflected in the annual
included. In addition, the HMRC requires financial statements as ‘corporate social
confirmation whether the company’s expenditure’. There was nothing wrong
internal governance has rigid levels of with this description – the amount did
acceptable tax risk and if so, how it is include some motor vehicle expenses.
influenced by stakeholders, together However, one does wonder whether
with detail on the working relationship reference was only made to the motor
between the HMRC and the company.1 vehicle expenses with the sole purpose
of avoiding highlighting any potential
The same request has been put forward risk in respect of the so-called corporate
by the public in respect of the country- social expenditure which made up the
by-country reports multinationals have bulk of the other expenses.
to submit, in other words these should
also be made publicly available. If you were to wake up the following
morning and your name and advice
From a commercial perspective, provided were to be on the front page
the problem is that tax is often an of Business Day or on a billboard next to
March 2018 INTEGRITAX 87

WHAT IS RIGHT TO DO
AS A COMMISSIONER OF OATHS
15 MIN
POTTER STEWART SAID THAT

‘ETHICS IS KNOWING THE
DIFFERENCE BETWEEN WHAT YOU
HAVE A RIGHT TO DO AND WHAT IS
RIGHT TO DO’
The South African Revenue Service

(SARS) webpage prescribes the
necessary supporting documents
required to register taxpayers or amend
taxpayers’ information. In many cases the
requirement includes a certified copy by
a commissioner of oaths of the relevant
supporting document.
All chartered accountants (CAs(SA)) and
associate general accountants (AGAs(SA))
are empowered to act as a commissioner
of oaths, in accordance with regulations
published in 2002. All CAs(SA) and
AGAs(SA) therefore by designation have
a right to do so, but the question remains
what is right to do when they certify
documents.
The public entrust integrity with a
commissioner of oaths to ensure that
the certifications of documents are
authenticated and scrutinised as a true
copy of the original. A commissioner
of oaths’ public duty further extends to
shield people against placing reliance on
a statement or declaration that is false,
incorrect or not within the knowledge of document. The commissioner of oaths therefore does not attest the true
the person making the statement when origin or source of the original document. The SAICA Guide on the Duties of
commissioning an affidavit. the Commissioner of Oaths further confirms that CAs(SA)/AGAs(SA) should
A CA(SA)/AGA(SA) that exercises his/her not certify documents in respect of which they have a personal interest (that is,
commissioner of oaths designation must whether it pertain to themselves or close family).
observe the original document and the The Rules for Electronic Communication promulgated under section 255(1) of
copy presented and satisfy him/herself the Tax Administration Act 2011 states in Rule 9(4) that where a copy, printout
that the content of the documents is the or extract of electronic communication is used, such copy, printout or extract
same. This is a fundamental requirement. must be certified to be correct. The SARS Electronic Communication Guide in
If the content is not the same, the turn provides that an electronic communication printout or extract dealt with
commissioner of oaths cannot certify the in accordance with the rule represents a rebuttable presumption of the facts
copy as a true copy of the original and contained therein, which is admissible in court proceedings.
would clearly not be performing his or her Given the age of digitisation, the question about certifying a true copy also
duty. extends to how a commissioner of oaths certifies a printout of an electronic
The act of certifying a copy of the original transmitted document as a true copy, especially considering that an electronic
as a true copy does not, however, transmitted document may also have hyperlinks, meta tags, drop-down lists,
impact on the legitimacy of the original etc.
88
88 INTEGRITAX
accountancysa.org.za March 2018
ETHICS
MADELEIN GROBLER IS SAICA PROJECT MANAGER:

Tax and Legislation
Prior to certifying an electronically transmitted document, a diligent and ensure that when assessing the original electronic
commissioner of oaths should accordingly first acquaint himself transmitted document, such document is indeed authentic
or herself of what constitutes an ‘original’ document. Section prior to certifying a true copy thereof. This is in light of the
14(1) of the Electronic Communications and Transactions Act ethical duty on him/her. It should be stressed again that the
2002 determines that a data message retains its original form act of certifying a copy of the original as a true copy does
where the integrity of the information from the time when address the authenticity of the original document real.
it was first generated in its final form can be displayed or The duty of a commissioner of oaths is therefore verifying
produced to a third person. Section 14(2) further notes that that the copy handed to him/her looks exactly like the original
the integrity must be assessed by considering whether the document handed to him/her. Where the commissioner
information has remained completed and unaltered (except for of oaths has reason to be suspicious of the information
the addition of any endorsement and any change which arises presented it would seem unethical to certify. While the liability
in the normal course of communication, storage and display), of a commissioner of oaths is limited based on a specific fact
taking into account the purpose for which the information was set, he/she must nevertheless be mindful of the inherent
generated and having regard to all relevant circumstances. ethical requirements.
It is therefore clear that there is a possibility that electronic Before stamping and certifying the next true copy of the
documents can be altered, and which cannot be detected on original given the right to do so, a commissioner of oaths
the face of it. A commissioner of oaths should therefore be should therefore carefully consider what is right to do.
MARCH 2018
March 2018 accountancysa.org.za
INTEGRITAX 89
IS TAX MORALITY A THING?
CHANGING WITHIN SHIFTING SOCIETAL NORMS
30 MIN
in the statements of Lord Tomlin in the case of IRC v Duke

of Westminster [1936] AC 1: ‘Every man is entitled, if he
THE DEFINITION OF MORALITY IS, ’PRINCIPLES can, to order his affairs so that the tax attaching under
CONCERNING THE DISTINCTION BETWEEN RIGHT the appropriate Acts is less than it otherwise would be. If
AND WRONG’ he succeeds in ordering them so as to secure this result,
then, however unappreciative the Commissioners of Inland
Revenue or his fellow-taxpayers may be of his ingenuity, he
cannot be compelled to pay an increased tax.’
Morality and ethics as concepts have kept philosophers and This often-cited statement, incepted in South African
stoics preoccupied for centuries. The distinction between jurisprudence, defines what taxpayers fiscal obligations are
them is helpful in understanding them and their evolution. In towards the state. Essentially, by meeting the letter of the
layman’s terms, whether traced to its Greek or Latin roots, law, you are acting legally – that is, as an upright and ethical
ethics seems to refer to the character traits of a person and person regardless whether your actions undermine such law,
his or her conduct as either being good or bad and that others its purpose or society, irrespective of the immorality of your
benefit from such virtue, though not directed at them. For actions. This approach has globally resulted in adversarial
example, others benefit from me applying the ethical value taxpayer−tax authority relationships. Under the letter of the
of not stealing, although I don’t refrain for their benefit but law, the former pays the least and the latter collects the most
because of my virtue. Similarly, morality seems to refer to taxes.
good or bad or right or wrong. The concept, however, seems
Things are changing. Revenue authorities attempting to retain
rather to focus on what is customary to a particular society
tax morality but create tax ethical standards – for example,
and what is in the greater good of such society, irrespective of
general anti-avoidance rules making certain tax conduct
whether it is in the interest of my own ‘good life’. The direct
unlawful. Though tax evasion has always constituted unlawful
beneficiaries of morality are therefore others, even at the cost
conduct, impermissible tax avoidance is a new creature to
of the self.
address abuse and misuse of tax laws through contrived
So how to apply this in what is sometimes perceived as the transactions whereby a taxpayer suffers no economic
murky world of tax, and why ‘murky’? Well, because the loss, but transactions are within the letter of the law.3
creation of taxes does not have a moral or ethical beginning There are accordingly limits to tax planning through factual
in any sense of the imagination, having been introduced in manipulations of facts, although determining these limits
ancient Egypt as the tithe (monetary payment) and corvée is a multi-billion-dollar business.
(forced labour) for peasants unable to pay.1 Taxes were
The global financial crisis hit of 2007 was the worst since the
therefore not initially levied on any ethical basis or for any
1933 Great Depression. What was different was not only that
societal good but for the benefit of a few. Many have argued
governments increased in size, but societal morals changed.
that even today’s taxes are modern day slave-labour toward
In the late 19th century, governments of developed countries
governments, resulting in many a rebellion2 over the last few
on average cost 10% of GDP, growing to 9% by 1913 and by
centuries.
1996 had exceed 35%, with some countries exceeding 60%.4
Whatever your viewpoint of its creation, the dawn of the South Africa was no exception, with tax to GDP swelling from
Roman Empire saw the advent of democracy, that is, the under 18% in the 1970s to just under 28% currently.
people governed through representatives for the benefit
The world also become globally moral, for example anti-
of the people. Therefore funding Government to govern in
nuclear, anti-waste, save-the-planet, meaning sacrifices for
principle meant that such funding had a moral underpinning
some, both voluntary and enforced. These two ingredients
and paying your dues are traits of an ethical person. Therefore
led to changes in defining tax morality, especially society
a changing world and societal norm have transmuted tax from
exposure to the underbelly of the tax world. Take for instance
being immoral to at least having the underpinnings of morality.
the HSBC bank leaks and the Panama Papers.
How to define ‘tax morality’ to determine whether it is really a
In a UK parliamentary hearing in 2013, Margaret Hodge5 told
thing or just populist propaganda?
Google’s vice president for Europe, Matt Brittin: ‘We’re not
Well, if morality by its very nature constitutes the right and accusing you of being illegal, we’re accusing you of being
wrong for society as a whole in relation to societal norms, immoral.’
then tax morality at least extends to those who have to
The same year the OECD launched the BEPS project to
pay, collect and spend tax, for the greater societal good
close the gaps in international tax law and holy cows such
incorporated into a complex social contract.
as fiscal sovereignty flew out the window in the search for
a moral global tax regime. Quickly the rules-based tax ethic
TAXPAYER MORALITY requirements that were enforced through literal legislative
interpretations were replaced with a new principle based one,
It is difficult to argue that taxpayer morality is an ancient following the ‘Spirit of the Law’ or following the intention of
creation as opposed to an ethical one and rather that tax the legislature. Following the letter of the law was not good
morality may be a recent creation. This statement is illustrated enough anymore.

ETHICS
AUTHOR | PIETER FABER IS SENIOR EXECUTIVE:

Tax and Legislation, Standards at SAICA
draconian powers exceed even

most police and military services.
Collaboration and voluntary compliance
are buzz words in revenue authority’s
overall strategy.
TAX MORAL GOVERNMENT

The last component to this three-
way social contract is the morality
of government spending for the
benefit of society. Age-old institutions
including oversized governments,
wasteful expenditure and corruption are
challenged, starting with public criticism
of fiscal administration and societal
resistance such as the American
Revolution and the French Revolution,
Tax advisors would also not escape this deluge of new found tax morality and their which were fuelled by oppressive,
role has been the subject of much scrutiny with proposals raging from regulation, infective tax spending systems.
fines, exclusion from the market and even proposals to rid the world of tax Society is discovering its moral
information confidentially in all forms (that is, tax information and revenue authority obligation of living with less, sharing
information), the cornerstone in many views to the problem. more, leading to less governance
However, what governments soon realised was that defining global tax morality required and therefore expecting leaner
was a lot easier said than done, especially where voters needed more jobs and governments and efficient funding
benefits. Once it has been decided what a taxpayer had to morally contribute structures. The days of consumption-
fiscally, slicing up the global pie based on someone else’s morals was maybe going based economies funded by excessive
to be a step too far. debt is outdated and needs reviewing.
Budget deficits and state debt to fund
And so it began. African countries accused developed countries of exploiting operational costs are unacceptable
their tax base and tax haven countries were accused of allowing taxpayers not to wastages. Morality dictates that
pay their fair share, even though fair share countries provided ‘off the book’ tax governments learn to live within their
subsidies. Some countries such as the US have even gone so far as accusing such mandate and resources.
taxpayers of being unpatriotic for not repatriating profits earned elsewhere from
foreign economies. So, is tax morality a thing? The answer
is invariably yes, a big thing. It is here
Global taxpayers face the unenviable task of redetermining their fiscal moral to stay. It challenges adherence to
obligation for each government. The sum of the parts may now be larger than the the social contract, requires relooking
whole. However, one thing was certain, the tax morality genie was out of the lamp taxpayer and tax advisor conduct
and is not going back. This is not where tax morality ends, however. and challenges revenue services and
government to redesign outdated rules-
TAX MORALITY FOR REVENUE based fiscal systems to principle and
moral-based systems.
The immediate consequence of the global fiscal budget crunch was stricter
taxpayer enforcement, access to more information, and removing fair discretion.
However, governments were ill equipped to deal with the exception and broad NOTES
brush approaches upset the morally driven public. This challenge is centuries old 1 https://en.wikipedia.org/wiki/Tax#History.
with the tax collector seen as the strong arm of government whether in biblical
times, medieval Robin Hood or today. 2 David F Burg, A world history of tax
rebellions, 2004, pp vi–viii.
The last 50 years is defined as the age of human rights. Tax morality falls within
its scope. Taxpayer Bills of Rights is the new benchmark and the Tax Ombud, or 3 SARS discussion document on tax
similar, its gatekeeper. The revenue services’ conduct is increasingly scrutinised avoidance and section 103, November 2005.
with previously acceptable conduct being challenged in the balance between
extracting more taxes with taxpayers rights to fair administration. It is all about 4 http://www.econlib.org/library/Enc/
balance. GovernmentGrowth.html.
Society is pressurising individuals to contribute to the greater good even at
individuals’ expense, is intolerant of quasi-Gestapo revenue authorities whose 5 Chair of the Public Accounts Committee.

ETHICS
ARE WE
TREATING TAX
EVASION AS A
‘NON-CRIME’?
WITH SHIFTING MODERN STANDARDS, ARE
WE AS ACCOUNTING OR TAX PROFESSIONALS
TURNING A BLIND EYE TO TAX EVASION, OR EVEN
INCORPORATING IT INTO OUR NORMS? IF SO, AT
WHAT POTENTIAL PERSONAL AND SOCIETAL COST?
SHIFTING ETHICAL STANDARDS really do harm and are perhaps expected in polite society. For
example, saying ‘fine, thank you’ when asked how one is, is
Within society, the lines of ethical behaviour have been generally considered the correct approach, even if inaccurate.
shifting. Society has become comfortable with so-called Parking and speeding tickets are typically not considered to be
‘white lies’, which are typically viewed as lies that do not something to be ashamed of. Digital downloads are another

ETHICS
AUTHOR | PATRICIA WILLIAMS

Partner at Bowmans
area where many people are comfortable with breaching the while knowing that these contain incorrect statements as
not consider it acceptable to shoplift a music CD or DVD, but regards tax.
many people are downloading music, TV programmes, or
movies not purchased by them.
REPORTABLE IRREGULARITIES
Are we doing the same thing with tax evasion? Is cheating on
one’s taxes being viewed as a ‘victimless’ crime or a ‘non- In relation to reportable irregularities, it is important to note
crime’? that the suspicion of tax evasion would ordinarily comprise
a reportable irregularity. Reportable irregularities must be
TAX EVASION VS TAX AVOIDANCE reported to IRBA both before and after discussing the item
with management and giving them an opportunity to remedy,
Tax evasion is the illegal non-payment or underpayment and ordinarily the reportable irregularity would also need to be
of taxes. It is a crime, and there is potential jail time for all disclosed in the annual financial statements. It is not lawful
involved, including anyone who assists someone else to to fail to report because the issue ‘has been fixed’. It is also
evade their taxes. not lawful to simply increase the tax-related provisions and
then conclude that the financial statements are not materially
In contrast, tax avoidance is the legitimate minimisation of misstated. Apart from the ‘improper conduct’ consequences
tax liabilities, in compliance with tax legislation. Arguably, of failure to report, there is also a potential criminal conviction
directors or other fiduciaries have a legal obligation to with a ten year jail term for failure to report a reportable
stakeholders to minimise tax liabilities, within the bounds of irregularity.
the law. Case law has upheld the so-called ‘choice principle in
terms of which a taxpayer is entitled to choose the alternative
transaction method that reduces tax liabilities. ASSISTED TAX EVASION
Alarmingly, however, both SARS and taxpayers appear to be Assisting a person to evade tax includes causing or allowing
blurring these two very different concepts. On SARS’ side, to be made any false statement or entry in a return or other
the Commissioner has in various public appearances referred document (such as financial statements). If convicted, the
to attacking tax avoidance and tax evasion with the full weight potential jail term is five years per offence (in terms of the Tax
of the law in the same breath, implying that tax avoiders and Administration Act).
tax evaders should be treated similarly. On the taxpayers’
side, it appears that people are feeling more comfortable to
evade their tax responsibilities, and professionals such as IMPACT OF TAX EVASION
chartered accountants are not necessarily complying with
their ethical and legal responsibilities in this respect. The impact of tax evasion is obviously broad and complex.
However, simplistically one can look at the recent South
African experience. There have been severe tax deficits
COMMON EXAMPLES OF TAX EVASION over the last few years as a result of which tax increases
were promulgated, including increasing the top tax rate for
Within social conversations recently, I have heard people individuals to 45% in 2017.
talking about having items imported through a contact that
gets them through quickly and without duties and VAT on
importation. I have also heard about various businesses CONCLUSION
where the price is 14% less if you pay cash and do not require
a tax invoice. It may be challenging to do the right thing, particularly
where one feels that one may lose business in the process.
Within the context of tax due diligences or similar
However, it is well known that middle- to higher-income
assignments, I have come across various tax sensitive year-
earning individuals bear the brunt of taxes in South Africa.
end journals that have been passed. For example:
If then, you facilitate tax evasion by someone else, you are
• Debit Cost of Sales, Credit Salaries – Description risking increasing your own tax rate. Also, as highlighted
‘Balance salaries to amounts disclosed on IRP5s’ briefly above, you may well be risking jail time. Is this really
• Debit Cost of Sales, Credit Loan account – Description the choice that you want to make?
‘Write off debit loan accounts’ In the words of Martin Luther King Jr: ‘The time is always
Other common issues are the inclusion of personal expenses right to do the right thing.’
within the business accounts and payment of salaries to
family members who are not actually employees, particularly
within owner-managed entities, and company-owned cars
where employees’ tax is not declared and paid to SARS.
It is critical to note that, in many instances, the financial
statements are audited and the auditor neither qualifies the
audit report nor reports a reportable irregularity. In other
instances, the chartered accountant prepares or signs off on
financial statements that will be submitted with the tax return

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agribusinesses into profitable operations. PAGE 10

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Source: Business Live

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Source: CNN; Image: archdaily.com

MONACO’S $2,3 BILLION PROJECT

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HUGE The total value of the poultry industry is R46 billion,

LOSSES DUE influenza has resulted in losses amounted to R954

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ZIM RECEIVES said to travel by train to the Games. The

$1,5 Bn FROM to the mountains to just over an hour.

March 2018 accountancysa.org.za 9

Photos Liézel Els

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if you fail to plan you plan to fail, It was a good call.

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View a personal interview with Nick

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2017 WAS A YEAR

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IFRS 17 On that note, the Listing Requirements

JOHANNESBURG STOCK THE FINANCIAL REPORTING

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DIAGRAM 1 ORGANISING FOR URGENCY

with a number of ‘clay layers’ of middle AGILITY

DIAGRAM 2 ORGANISING FOR URGENCY CALLS FOR ORGANISING DIFFERENTLY

Making a decision when you Making a decision when you

Realising your objective is a

Imposing decisions from Encouraging real-time decisions

Maintaining a hierarchal chain of Creating a flatter organisation

Recognising that leadership can come

Sampling strategy à la carte from Sticking to a strategic prix fixe

March 2018 accountancysa.org.za 19

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‘disagree and commit’ and Zappos’s Zappos, whose passionate customer-

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24 accountancysa.org.za March 2018

March 2018 accountancysa.org.za 25

26 accountancysa.org.za March 2018

is unpredictable and time consuming.

March 2018 accountancysa.org.za 27

This webpage includes the following:

To access this page click here

This page is a work in progress so WATCH

28 accountancysa.org.za March 2018

Illustration Liézel Els