On 24th June, Finance Minister Tito Mboweni presented the supplementary budget in response to emergency measures taken to combat the COVID-19 pandemic.
 
According to Ettiene Retief, Chairman of the National Tax and SARS Committee at the South African Institute of Professional Accountants (SAIPA), the presented figures may not fully consider the knock on effects of the disrupted economy.
 
“While I have every confidence in SARS’ ability to collect available revenues, I’m not sure the Minister’s downward adjustments account for the coming reality,” he says.
 
Projections
Mboweni said that, in 2020, a global economic contraction of 5.2 percent is expected while the South African economy is expected to shrink by 7.2 percent. Unemployment had already risen to 30.1 percent in the first three months of the year and inflation is projected at 3 percent.
 
He also noted that the country is reliant on exports and this has been impacted by the collapse in global demand and restrictions on economic activity.
 
The projected total consolidated budget spending, including debt service costs, will exceed R2 trillion. Gross tax revenue for 2020/2021 is revised down from R1.43 trillion to R1.12 trillion, for a loss of R300 billion. Tax relief measures and adjustments result in a consolidated budget deficit of R761.7 billion (15.7 percent of GDP) up from the R370.5 billion (6.8 percent of GDP) stated in February.
 
Gross national debt will be R4 trillion (81.8 percent of GDP) instead of R3.56 trillion (65.6 percent of GDP) projected in February.
 
Real impact
According to Retief, even the adjusted tax revenue of R1.12 trillion may not be achievable. “Although companies are reopening, for many this will be a gradual process over the next 12 months which will hamper them from recovering the losses they suffered during lockdown,” he says.
 
He notes that other businesses will be forced to close, many employees will be retrenched from surviving ones, and remaining workers may be forced to take pay cuts of up to 30 or 40 percent. “We will have to wait another three months for the latest unemployment figures, so we can assume that current unemployment is much higher,” he says.
 
At the same time, consumer and business buying behaviours will change. Individuals may eat out less or holiday less, due to the risk of contracting the virus, resulting in lost revenue for local businesses. They may also defer purchases, like home improvements, because of lower pay. Likewise, companies will have less funds for business development.
 
Knock-on effect
“This has a snowball effect that affects vendors across the supply chain and further slows economic activity,” says Retief. He believes it is almost impossible to model the full extent of the fallout because each sector and industry will have a different recovery rate, which will be staggered across sectors and industries.
 
“All of these factors and the resulting slump will have a far-reaching and unforeseeable effect on tax collections,” says Retief. The government therefore needs to amplify its efforts to restart the economy if it wishes to achieve its target.
 
ENDS

MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African Institute of Professional Accountants Company
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We all face ethical dilemmas during our lives, but for the professional the stakes are particularly high.
By Shahied Daniels, CEO: South African Institute of Professional Accountants (SAIPA)
 
We all make choices every day, from the trivial (“What coat shall I wear?”) to the significant (“Should I take advantage of this loophole in the accounting system?”). Many choices have no right or wrong answer, or there is clearly a right one. But then there’s the ethical dilemma which, strictly speaking, is a dilemma in which either each alternative is “right”, or each will compromise an ethical principle.
 
It is not called “the horns of a dilemma” for nothing—making the right choice can be excruciatingly difficult.
 
Ethical dilemmas are relatively rare in personal life but, in professional life, they crop up more frequently. Professionals must balance the ethics of their profession, serving the interests of the public and serving the interests of the client.
 
One can distinguish several different types of common ethical dilemma. One is when ethics derived from one’s culture or beliefs conflict with legislation—this is likely when laws are unjust, or in multicultural societies where the law is based on one set of cultural or religious precepts. This can lead to a conflict between personal morals, laws or regulations, and professional ethics codes.
 
During the Level 5 lockdown, many individuals and organisations faced an acute ethical dilemma because of the prohibition on supply cooked food to the needy. Similarly, nurses often had to choose between allowing a COVID-19 patient to receive visits from family members and the need to keep the infected individual isolated.
 
Another common type of ethical dilemma relates to industry practices. A Professional Accountant might work in, say, the oil and gas industry and become habituated to the accepted codes of behaviour and regulation in that industry, and then shift industries only to find that some of these are not accepted in the new environment, or are indeed contrary to industry-specific regulations.
 
The same might occur even when moving between companies within the same industry.
 
A topical ethical dilemma could concern the CFO of a government department being asked to bypass payment or tender procedures to facilitate the swift rollout of an urgently needed social relief programme.
 
An important factor that complicates ethical dilemmas is that the added complication that one has to engage with the ethics of other stakeholders. For Professional Accountants in particular, a significant and common dilemma relates to assessing the integrity and materiality of the information supplied to them by clients.
 
Making the choice
So, when trying to navigate the correct choice between two conflicting ethical courses, how should one proceed? There are some useful rules of thumb, the first of which is the legal test. Is a law going to be broken? If so, the choice is between a law, which can be enforced, and a moral code, which cannot. If the option you choose is legal, then there are other tests to apply. Does it carry the stench of corruption? Would you be happy to see your choice being communicated on a billboard or the front page of a news site? And, finally, what would another person who values and cares for you think about your choice—your parent or spouse, for example?
 
Those who are bound by professional codes of conduct, such as Professional Accountants (SA) also have the benefit of an official code of ethics to help guide them. It can also be extremely useful to speak to fellow professionals or a fellow member of your professional association.
 
When confronting an ethical dilemma, one could argue that the principle embodied in the Business Judgment Rule could be helpful. The Rule is used to protect directors from liability or censure if a decision they take later proves to have been faulty. Fundamentally, the Rule provides directors with a “safe harbour” if they can show that they took all reasonable steps to inform themselves and properly applied their minds to all the factors before making their decision—in other words, that they acted competently as directors and in good faith for the benefit of the organisation based on the information before them.
 
Professionals confronting a tricky ethical question could well make use of the same principle. In the end, because an ethical dilemma is ultimately about choosing between two “right” choices, the best one can do is make the decision as rationally as possible, taking everything into account and taking all reasonable steps to ensure the most appropriate outcome in the circumstances. In addition, professionals would be well-advised also to keep a record of the decision-making process they followed so that it their choice is later questioned, they can demonstrate the process they followed in arriving at it.

ENDS

MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African Institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

On 10 June 2020, the South African Institute of Professional Accountants (SAIPA) successfully concluded its first virtual AGM on the Zoom conference platform. The meeting encountered no technical difficulties and digital interaction between the Board and its Members was seamless.
 
“I am very happy with the smooth execution and satisfactory outcome of the event, as well as how we were able to more efficiently progress through our agenda using technology,” said Kantha Naicker, SAIPA Chairman of the Board.
 
Voting on various matters, facilitated by the auditor, was conducted by way of the platform’s polling system.
 
Slowed but not halted
 
Although attention was devoted to the SAIPA’s response to the COVID-19 crisis, the emphasis was on our roadmap towards digital and service transformation to ensure that we are aligned to the requirements of the Fourth Industrial Revolution. Particular attention was devoted to the steps that need to be taken to ensure that the profession, the Institute and our members are future-ready and well equipped to serve the interests of our country and the communities in which we operate.
 
During their presentations, both Kantha Naicker, the SAIPA Chairman and Shahied Daniels, the Chief Executive of SAIPA, drew attention to the fact that SAIPA had, despite being encumbered by the consequences of the pandemic, explored the most optimal and innovative ways of continuing to perform its responsibilities.  By virtue of its new home-grown digital cloud-based platform and its willingness to embrace technological advances, SAIPA maintained operational continuity and was able to further enhance its service delivery.
 
“Because we own the intellectual property related to this system, so we are able to rapidly enhance its functionality and the services we deliver, not having to be concerned with proprietary restrictions,” said Daniels.
 
Future-driven
 
After the opening presentation by the Chairman, Daniels provided members with a summary of the Institute’s outlook and strategic direction during the year ahead.  He emphasized the primary responsibility of minimizing the COVID-19 risks to which the staff and management, the board and our members are exposed.  Furthermore, he stressed the need to continuously keep members appraised of the latest developments and of opportunities they could leverage to add value for themselves and by so doing enhance the Professional Accountant (SA) designation.
 
Daniels drew attention to the fact that globally the accounting profession was in a transformational phase, which was primarily due to rapid advances in technology that are compelling the profession to chart a new future.   “Professional Accountants (SA) must move their current skillset towards what is needed to provide a business advisory service to clients; a service that is value creating and value adding”, he said.
 
Bearing in mind the developments in the profession, SAIPA will need to adopt a strategy that provides for restructuring the Institute in such a manner that it is future-ready and remains future-fit.  SAIPA accepts that the ultimate goal must be to empower our members to become increasingly credible and trusted business advisors that are able to meaningfully contribute to inclusive socio-economic prosperity.
 
Service-based strategy
 
Daniels pointed to SAIPA employing a GREG (Governance, Risk, Ethics, Compliance) framework to guide it on the road ahead.  Consequently, the Institute embarked on implementing the results of a major governance review that was focused on compliance, board and operational committee structures, policies and procedures, and problems that were encountered in previous years. “Our challenge for the year ahead is to ensure we consistently implement and enforce appropriate processes, procedures and practices,” he said.
 
Having streamlined its personnel requirements, the Institute is now committed to building a culture of trust and performance excellence, whilst simultaneously instilling a service philosophy that inspires its staff to deliver superior service to members.
 
With respect to CPDs, the aim is to upskill and reskill members by way of an enhanced competency framework. “We are developing visionary thought leadership that will secure our position as the Professional Accounting Organisation of choice,” said Daniels. Consequently, SAIPA had established a Centre of Future Excellence (CoFE), which is led by Professor Rashied Small, the SAIPA Executive for Thought Leadership.
 
The intention is to sharpen the further focus on rebuilding public trust and maximizing the ethical conduct of members. This initiative will inter alia involve the recertification of all members, the signing an ethical pledge by all members, the establishment of a comprehensive practice review system. This will be augmented by a major ethics and professional conduct campaign to reinforce the attention paid to public interest and trust.
 
An ongoing initiative will be to actively engage members by virtue of various initiatives, such as the monthly open agenda forum, which will be hosted by the Chief Executive and afford members the opportunity of sharing their wishes, concerns and queries in a face-to-face interaction, albeit two-dimensional.   “Our intention is to promote a culture of transparency and to provide an open line of communication to our members,” Daniels said.
 
AGM close
The AGM concluded with the swearing of new Board members, whereupon the Chairman closed what had been an uneventful and very successful meeting, reiterating her unwavering commitment to serving the Institute for the final year of her tenure as Chairman.  
 
ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African Institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

For Professional Accountants, the way you engage with clients is an ethical issue too.
By Shahied Daniels, CEO, South African Institute of Professional Accountants

When one thinks about ethics, one’s mind immediately conjures up some big moral dilemma and how you, as a professional, should act. That’s obviously part of it, but true ethics should be embedded in the way a Professional Accountant (SA) conducts his or her business in the ordinary course of events—in that sense, everything a Professional Accountant (SA) or any other professional does in his or her business life should be done ethically.

This is particularly evident in the way a Professional Accountant (SA) engages with clients.

Clearly, any business relationship needs to be conducted with the utmost professionalism, but it must also be admitted that there is considerable scope for dispute. This is particularly true when the professional is providing vital services or dealing with sensitive information, as an accountant does. In areas like this, the boundary between professional and ethical conduct is necessarily blurred: the one cannot exist without the other.

To ensure that they engage with clients both professionally and ethically, Professional Accountant (SA) need to follow these three guiding principles:

• Begin with a well-drafted letter of engagement. A letter of engagement is essentially the contract that sets out what services the Professional Accountant (SA) is going to provide, and all other material facts relating to the nature and scope of the services. If there is any dispute, or a Professional Accountant (SA) comes before SAIPA’s disciplinary committee, this is one of the first things to be considered because everything flows from what was agreed.

Most professionals will use a template to save time, but each engagement is unique—make sure the template is adjusted to reflect the true nature of the engagement.

It is important to watch out for scope creep or amendments. It is quite common for clients to expand the work they want done, or to request additional services (such as doing personal tax). Make sure that these amendments or additions are noted either in an addendum to the original letter of engagement or, if appropriate, a new one.

A good letter of engagement will make it clear what a Professional Accountant (SA) has undertaken to provide and thus will make it easier for him or her to deliver what was promised, and thus be both professional and ethical.

• Only undertake what you are competent to provide. Acting professionally and ethically does not just mean being clear about the scope of the engagement; the ethical Professional Accountant (SA) must be certain that he or she has the necessary skills to deliver a good result for the client. For example, a Professional Accountant (SA) might be doing tax for a client and is then asked to help with estate planning—but has not done any for years. In other words, his or her skills are neither honed nor up to date. The ethical approach would be either to partner with a colleague who does have the skills and experience, or to take steps to obtain the necessary skills. At the most fundamental level, it would be highly unethical to deliver substandard services knowingly.
• Maintain confidentiality… except when the law is being broken. Clients have a reasonable expectation that the professionals they deal with will never divulge any information about their affairs to a third party

There is one exception. In terms of their ethical code, Professional Accountants (SA) cannot engage with clients in a way that contravenes the letter or the spirit of the law. Across the profession, the same standard has been agreed to offer guidance in this regard. Known as NOCLAR (non-compliance with laws and regulations), the standard is extremely broad and is codified by the International Ethics Standards Board for Accountants (IESBA) into a standard called Responding to Non-Compliance with Laws and Regulations. The NOCLAR standard provides guidance on how to disclose NOCLAR to public authorities without breaching client confidentiality and provides an alternative to simply resigning.

It is advisable that clients understand this issue and spelling it out in the letter of engagement would be wise.
As always, ethics and true professionalism turn out to be two sides of the same coin.

ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African Institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants