 Reducing greenhouse gases is a commitment under the Paris Agreement, but the proposed carbon tax will not yield the desired results on its own. The delay in implementing the proposed legislation provides a great opportunity to come up with a better solution.
Author: Ettiene Retief, Chairperson of the National Tax and SARS Stakeholders Committees, South African Institute of Professional Accountants Late last year, the National Treasury published the results of a study on the likely effects of the proposed new tax designed to reduce South Africa’s emission of greenhouse gases—the so-called carbon tax. Perhaps unsurprisingly, the study concluded the proposed tax would reduce our emission of greenhouse gases (33 percent by 2035), without significant impact on economic growth or jobs. However, the Treasury report has been criticised and claimed as ‘fatally flawed’. The introduction of carbon tax is not surprising, considering the World Bank estimated that 15% of global emissions are subject to a tax or carbon pricing as at 2016. The intended implementation date of the carbon tax has been postponed till early 2018. Understandably, the implementation of a carbon tax is complex, and needs to cater for many market segments. The largest contributor to carbon emissions is the burning of fossil fuels. While it is intended that the carbon tax is not to affect the consumer of electricity until 2020, thereafter the costs will most likely be passed on to the consumer. Without a focus on alternative means to generate electricity, the consumer will have no choice than to either pay more, or use less. The ideal model is where carbon tax incentivises companies to change behaviour and consumption patterns, effectively becoming less reliant on fossil fuels. At the moment there is little alternative available, and the come at a cost. Why more time is good Firstly, any modelling exercise is by definition limited by the assumptions on which it rests and the data projections it uses. The problem is exacerbated by the highly-entrenched orthodoxies that characterise all thinking about climate change—objectivity, it often seems, has been a casualty. An equally compelling reason for spending a little more time and thought on formulating a strategy is the experience of other countries is mixed, at best. In Australia, for example, it appears as though confusion reigns despite emissions having been reduced. In 2014, a carbon tax was repealed in favour of an emission Reduction Fund, and the Environment and Energy Minister, Josh Frydenberg, announced on 5 December 2016 his department would undertake a review of the whole matter. Among the concerns, it seems are the impact on power generation that has affected employment not only in the energy sector, but in energy-intensive industries. Similarly, an academic study by two researchers at Statistics Norway shows that high carbon taxes in that country have actually yielded only “modest” reductions in gas emissions. The study notes: “This surprisingly small effect relates to the extensive tax exemptions and relatively inelastic demand in the sectors in which the tax is actually implemented. The tax does not work on the levied sources, and is exempted in sectors where it could have worked.” France has recently indicated that it is dropping plans to introduce a carbon tax for the moment, citing concerns about its ramifications and even constitutionality. Supporting measures I would argue that we should draw two main conclusions from all of this:
The aim of carbon tax is to reduce the amount of emissions created, and not mainly to expand the tax base.
The most significant impact could be made if we focus on shifting our reliance on burning fossil fuels to keep the lights on. South Africa has made commitments to reduce its greenhouse-gas emissions. The real question is how best to live up to those commitments. Hopefully the Budget Speech will indicate that we will use the delay in implementing our carbon tax wisely to come up with an integrated strategy—addressing the issues identified. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@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
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 Author: Bongani Coka, Chief Executive of the South African Institute of Professional Accountants (SAIPA)
With the Chinese economy slowing, commodity prices falling and the global economy stagnating, worldwide investment opportunities are scarce. But the last decade has seen a rising wave of optimism over Africa’s growth potential, and global investors are keen to uncover its riches. To realise its prosperity, Africa must first confront the obstacles that prevent investors from committing themselves. Accountants have a central role to play in confronting these obstacles and ensuring the development of Africa. The International Monetary Fund (IMF) suggests that although medium term growth prospects in Africa remains favourable, substantial improvement is required in the recalibration of fiscal policy (including the efficient use of national budgets), better domestic revenue mobilisation, and improving and prioritising the quality and efficiency of public investment. South Africa is in the green because our fiscal policy is sound. We just need to keep our budget in check to ensure government debt remains a low percentage of GDP. Our revenue is also being judiciously invested in infrastructure, with the top five government priorities being healthcare for all, better education, enhanced crime prevention, rural development, and job creation. In South Africa, public investment is lively, with the government spending a fair amount of its budget on social services and public infrastructure. However, we also face growth challenges. Corruption – real or perceived – is a threat to the continent’s development. Additionally, in South Africa, unemployment continues to be unacceptably high, not for lack of jobs but rather a skills shortage in specific sectors from which the field of accounting is not exempt. As for poverty and inequality, financial and human resources must be effectively deployed to address the following challenges, intimately linked to both conditions: optimising Africa’s natural resources, tackling illicit financial flows, increasing effectiveness of public expenditure, and attracting private funding. This is a daunting task if a country lacks the requisite skills to mobilise its resources. In spite of this, South Africa is well positioned to spearhead growth in Africa as envisioned by the IMF. Good resource management is one of the most effective ways to alleviate poverty. But it requires that those charged with the responsibility have the following core skills: good understanding of ethics and governance, good financial management, and transparency and accountability. A true accountant must have all these competencies. If even one is missing, they cannot prudently manage scarce resources, and poverty alleviation initiatives will suffer. In addition, as the people responsible for preparing information, auditing, consulting and advising, accountants are essential to the success of both the public and private sector in Africa. Weighty decisions are taken on their advice or the management information they prepare. It’s in the context of these opportunities and challenges that the accountant becomes a growth enabler. At the South African Institute of Professional Accountants (SAIPA), we try to counter these challenges by emphasising competency-based training, so that after students pass our professional evaluation exam, they are employable. They possess not just theoretical understanding but also the capability to solve real world problems as a practitioner, and so become go-to business advisers. Skills gaps exist in both the private sector and in government, particularly at the local government level. It is for this reason that SAIPA places a special focus on equipping the big metros to train students so they can do their articles in the public sector. For municipalities to be awarded a clean audit by the Auditor General’s office, they need highly skilled professional accountants who perform their duties without fear or favour. It’s encouraging that in the future, all municipal managers will have to earn a special qualification before being appointed to that position. Clean government starts with top-level leaders. Accountants are the champions of right record and should be beyond reproach. To continually earn this trust accountants must work tirelessly to maintain a faultless reputation and root out bad elements. Solutions such as the reversal of illicit financial flows, attraction of foreign direct investment, growth and development of the SME sector, and enhancement of the effectiveness of foreign aid, all depend on suitably qualified and regulated accountants. The main challenge facing the accountancy profession on the African continent and in South Africa is capacity building. Not only increasing the amount of available accountants, but elevating professionals to hold accountability, transparency, and good governance in highest regard. Strengthening the accounting profession and the public financial management capability are critical to this end. It takes strong, ongoing collaborative effort between all the stakeholders – academics, business, government, students and parents, accountants, and professional bodies that emphasise continuous professional growth, research and development, and compliance with best practice. Currently, more than 46% of African countries do not have a professional accounting organisation. Those that do are not yet functioning according to best practice. Ultimately, the role of the accountant is to provide indisputable financial structure and processes, unquestionable record of transaction, and incontestable strategic intelligence. When we can do this at scale, we will pave the way for investor confidence. Accountants therefore control the floodgates of prosperity in Africa, but it is by our integrity and effort that we earn the right to open them. PHOTO CAPTION: Bongani Coka, Chief Executive of the South African Institute of Professional Accountants (SAIPA) ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@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  The proposed sugar tax is being hotly contested by industries faced with major changes if the tax is implemented. Most recently, job losses have been indicated as consideration to not go ahead with the implementation of the tax. The flipside of the coin is however the growing health risks and its costs to the economy.
“The future workforce is under threat of serious illnesses due to the overconsumption of sugar,” warns Ettiene Retief, Chairperson of the National Tax and SARS Stakeholders Committee at The South African Institute of Professional Accountants (SAIPA). “Serious intervention is needed to ensure that the taxpayer of today is around to pay their taxes and boost the economy of tomorrow.” A recent study has presented interesting data with South Africa at the second highest ranking, ahead of the USA, with regards to the number of deaths attributed to sugar. Heart disease, cancer, and type 2 diabetes are all common diseases linked with the high consumption of sugar. A sugar tax should not only be regarded as another tax, nor that obesity is the only risk. Hindering economic growth Government’s plans for national growth is hindered by the costs related to high incidents of sugar related illnesses as taxpayers spend on healthcare instead of other areas, resulting in limited economic growth. This limited economic growth has far greater impact on a larger number of people than the reasons held against implementing a sugar tax in South Africa. There have been no reports of massive job or financial losses from countries where sugar tax have been implemented. On the contrary, the introduction of a one peso per litre tax on soda and other sugary drinks by the Mexican government saw in 2014 a drop of 10% in the purchase of soda and other similarly taxed drinks, balanced by an increase of 13% in purchases of bottled water. In many cases, the manufacturers of sugary drinks also have bottled water and sugar free drinks product options. Healthier choices Consumers will continue to purchase beverages, but may now make healthier and more informed decisions. It was recently reported by Cancer Research UK and the UK Health Forum that a 20 per cent tax on sugar drinks could reduce the obesity rate in the UK by 5 per cent by 2025. It is unlikely that job losses would be as significant as the claimed 60 000, which is published without any supporting evidence thereof. Doing nothing has an increased burden and cost with regards health care. Let’s not forget that the companies that make drinks with added sugar also make the sugar-free alternative. The beverage industry has known for many years that a sugar tax was likely to be introduced, and the various companies should have planned accordingly. Traditionally we have thought of sin taxes as not having any significant kind of impact on changing people’s behaviours and habits. Empirical evidence suggests that people won’t stop smoking because of a tax, but we have seen a significant reduction per capita consumption of 40% in the consumption of tobacco products over a ten-year period, attributed increased taxes and regulations. Consumer awareness We can’t simply apply a sugar tax to make the high-sugar products more expensive, we need to also focus on consumer awareness and the comparative pricing of alternatives, and the sugar taxes collected should be used to fund aggressive education campaigns on healthier alternatives. Marketing, advertising and packaging practices could also be regulated, with an introduction of warnings about the levels of sugar in certain foods and drinks, and the health risks, similar to the warnings on tobacco products. Selling of high-sugar drinks should be limited at schools. This would be enormously beneficial in South Africa where levels of education impact on understanding around how sugar can damage health and well-being. One thing is certain – we can’t simple ignore the problem! ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@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 group Facebook: South African Institute of Professional Accountants  Professional Accountants have a critical role to play in supporting African growth, says Shahied Daniels, CE of the South African Institute of Professional Accountants (SAIPA). Speaking at the 2015 Africa Congress of Accountants in Mauritius, Daniels argued that the continent needed to redesign its business, industrial and regulatory environments to deal with globalisation to include Africans from benefiting from their continent’s growth.
“African policy makers and business do not have the broad vision (or indeed the motivation) to lead the radical redesign of the business and industrial landscape across Africa,” Daniels says. “The accountancy profession, however, is uniquely placed to play this role.” Professional Accountants have an enormous role to play in enabling the continent’s businesses, which are typically the small medium enterprise sector of its economy “Professional Accountants can help their clients invest wisely and diversify their businesses, especially when it comes to expanding across borders,” he says. “Collaboration and the ability to identify the right alliance partners are vital in today’s highly competitive markets. Similarly, accessing capital at the right time in its growth cycle is critical, and professional advice on when and how to list on a stock exchange can make or break a company.” In particular, African economies need to move up the value chain by gaining the capability to beneficiate commodities before they are exported. This will be dependent on enhancing the capability and capacity of African businesses. “Professional Accountants have to step up to the challenge of helping the continent’s businesses build on their strengths. If this does not happen, we risk ceding many of the long-term benefits of Africa’s growth to companies from outside the continent,” Daniels continues. Professional Accountants (SA) have an important role to play as trusted business advisors. They will benefit from the support of its professional accountancy organisation, SAIPA, which play an active role in enforcing professional codes of conduct and providing continuous education. “A strong accounting profession is the foundation of African growth, and this depends on proactive professional accountancy organisations,” Daniels concludes. “SAIPA takes this responsibility very seriously.” ENDS MEDIA CONTACT: Cathlen Fourie, 012 644 2833, cathlen@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 How accounting professionals can help with the globalisation of South African SMEs With the SACCI business confidence index reaching its lowest level in 14 years in July, the South African Institute of Professional Accountants (SAIPA) recommends that South African businesses look beyond our borders for opportunities that could provide a sustainable boost to the local economy. But, those that hope for success would do well to do thorough research first and consult with accountancy professionals who are able to provide some much-needed expertise.
“With Sub-Saharan African economies outstripping the local and many global economies in terms of growth, the result is that many promising opportunities are opening up for doing business in Sub-Saharan Africa in a variety of sectors,” says Dr Thomas Höppli, Economic Research Analyst for SAIPA. “All we need to do is look beyond our backyard.” According to Höppli’s report entitled Doing Business in Sub-Saharan Africa, there are challenges to doing business in Sub-Saharan African countries, but the opportunities are also abundant and well worth investigating by companies wishing to grow on the continent. Cross-border trade According to Höppli’s report, many of the challenges to doing business – like bureaucratic red tape, corruption and infrastructure issues such as poor roads and unstable power supplies – are far more apparent to those physically establishing businesses in-country. “However, another way of tapping into the growth markets in Sub-Saharan Africa – instead of physically establishing a business in-country – is through trade. The high growth in many of these countries, spurred by export activities and related investment, suggests that demand for imported products as well as purchasing power is increasing rapidly and that they could thus be interesting export markets and foreign direct investment destinations.” “Exporting to begin with may be the wisest entry option for SMEs as setting up a branch in any other country may be beyond their reach,” Höppli adds. However, he takes care to emphasise the fact that trading across borders in Sub-Saharan Africa is not as easy as in other parts of the world. In the “Trading Across Borders” sub-index of the Ease of Doing Business Index, only five Sub-Saharan countries feature in the top 100 of the 189 economies analysed by the World Bank / IFC (2014). South Africa is ranked 106th. Also, as he cautions, without a physical presence in a market, marketing becomes even more important in order to make potential clients outside aware of the offerings of the SME. “To this end, social media may be very useful as well as other digital marketing opportunities, which tend to be comparatively cheaper,” says Höppli. “Also, collaboration with a marketing agency in the identified export markets may help to create demand.” For SMEs that wish to establish a physical presence in-country, Höppli says it’s vital to study the market thoroughly before venturing into it. “Businesses should take great care to identify the best markets, considering factors such as market potential, competitor activities and feasibility of doing business.” To this end, he recommends referring to the World Bank / IFC’s Doing Business reports, which rank almost 200 economies on their ease of doing business and highlight specific challenges in the individual countries. Of the 47 Sub-Saharan countries included in the 2014 index, just eight are ranked among the top 100, while the remaining 39 countries are ranked between 121 and 189. Talk to your accounting professional With these challenges in mind, Höppli says it’s wise for SMEs to consult with accountancy professionals who know their business and are able to help them navigate the challenges of internationalising. According to an article on the International Federation of Accountants (IFAC) website (ifac.org, 2013), perhaps the greatest challenge SMEs face is the lack of human capital, including managerial expertise and financial resources to take advantage of opportunities. “With a wealth of financial and business knowledge, accounting professionals such as SAIPA members are in an excellent position to help fill the resource gap,” he says. According to Höppli, accounting professionals with knowledge of and experience in working internationally are able to provide assistance in identifying the most attractive, fast-growing markets. “They can also help businesses access appropriate sources of funding and use their relationships with banks and other key financiers of international investment and trade to facilitate introductions between these funding sources and SME clients.” Höppli says they are also able to assist with value-adding advice in areas such as managing foreign exchange risks and forecasting currency needs. “We advise SMEs to increasingly become integrated into the global business community. But, in order for them to maximise the opportunities of doing business in other countries, they need good advice,” he concludes. “Accounting professionals are well placed to provide this assistance as they know the SME and its strengths and weaknesses.” ENDS _______________________________________________________________________________________________________ MEDIA CONTACT: Cathlen Fourie, 012 644 2833, cathlen@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 |
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