SAIFM’s 4th Regulatory Summit

SAIFM’s Regulatory Summit has solidified its standing as the premier platform for productive debate on financial regulation while playing a key role in providing first-hand information and promoting understanding on financial regulation…

The emergence of crowdfunding in South African financial markets

South Africa is leading in Africa in terms of both the mushrooming of crowdfunding platforms and possibly volumes of funds being raised. Crowdfunding is not entirely a new phenomenon in South Africa. For many years communities used it in the form of stokvels, whereby members contribute small equal amounts to a pool fund every month from which a member is allocated cash in turns…

Global economic and political risks

There has been a lot of speculation regarding the future of trade agreements involving the USA. President Trump mentioned during his election campaign that tariffs of between 5% and 45% could be levied by his administration on imports from countries such as China and Mexico. A full-scale trade war with the USA’s trade partners levying similar tariffs on American imports, could likely lead to a global recession…

Financial technology – an introduction

Financial technology (fintech) is not new. From ATMs to internet banking financial institutions have used technology to deliver products and services to customers for decades. However what is new is the rapid pace of innovation and the entry into financial services of both new technologies and non-financial players with substantial potential benefits to consumers…

Hedge funds 101

Hedge funds have been perceived as elitist investments or only for high net worth individuals. This is a pity, as hedge funds can offer investors excellent returns with generally lower risk. They are essentially funds which aim to generate returns that are independent of the direction of the underlying market…

Reprieve for banks – but is margin implementation imminent?

With variation margin for uncleared derivatives which came into effect on 1 March 2017 in other parts of the world, margin requirements for uncleared swaps in South Africa has been top of mind for derivatives traders and end-users…

How to dodge a downturn

In times of weak economic growth, companies need to be that much smarter to survive and thrive. To understand what is needed to navigate and negotiate changing times and tough conditions, we studied the behaviour and performance of more than 1,200 South African-listed companies over a period of 15 years. Through this in-depth work, we identified two primary business attributes that actively help to recession-proof a business…

Purpose of a loan and related interest expenditure

Interest is only deductible if incurred in the production of income and for purposes of carrying on a trade. This requires that the loan in respect of which the interest is paid and the trade/income should be closely connected. A recent case heard in the tax court illustrates that the original purpose of a loan for a specific purpose plays an important role in this regard, even in the case of a loan with flexible payment terms…

Don’t be fooled by the bounce back

In the face of tremendous geopolitical uncertainty, markets in 2016 were characterised by a rebound in previously out-of-favour currencies, sectors and stocks, while the winners of the previous decade lagged.   This ‘bounce back’ can largely be attributed to an uptick in commodity prices which provided a boost for resource stocks and developing markets, but are these returns sustainable?

Why are people buying negative yielding bonds?

Why are buyers willing to buy negative interest rate bonds – those which are issued with a negative yield, meaning that the total interest and principle payments received from the issuer are less than the price of the bond at the time it was issued – i.e. the holder is guaranteed to lose money…

Reinstatement triumphs acceleration clauses in credit agreements subject to the National Credit Act

Credit providers need to understand that simple reliance on acceleration clauses will not be sufficient to assist them to enforce its rights under a credit agreement – especially against consumers who regularly fail to make payments by the stipulated dates…

2017 – still money to be made in property, but not for the traditional thinker

While 2016 was a year many would sooner erase from their memory. 2017 may hold still more disappointment, unless investors adopt a less traditional approach and are prepared to find the right partners…

Well educated people can lag behind in wealth accumulation

Successful wealth accumulators on the other hand are price sensitive to most things but interestingly less price sensitive when it comes to buying services that will help them control their family’s consumption behaviour. They will also happily spend good money on legal and financial advice which they know will help them…

The King is dead, long live the King

From a structural and format perspective, King IV is significantly different to King III. The substantive principles, however, are broadly in line with its predecessor. Much has been made of King IV’s switch to an “apply and explain” philosophy as opposed to King III’s “apply or explain”…

What the dickens is money?

Money in the South African context can be defined as any tangible or intangible thing that functions as a means of exchange or debt settlement, a measure of value, a unit of account or as a store of value…

How serious is SA’s credit downgrade?

The recent credit rating downgrades to “sub-investment” grade by Standard & Poor’s and Fitch, a level often touted as “junk”, raises the question as to what these terms mean for an investor. “Junk”, however, is not the word used by the credit agencies, but merely a label developed among regulated investors who are not permitted to invest beyond “investment grade” securities or countries. And yet the word carries tremendous weight and emotional currency, most of which is an inaccurate reflection of what investment grade or sub-investment grade actually means…

Bad debts: Effect on exchange gains or losses

The tax treatment of unrealised exchange gains or losses pose certain challenging questions when a foreign denominated debt becomes irrecoverable. SARS issued a draft interpretation note that provides their views on, amongst others, the tax effect of such gains or losses when a debt goes bad or is reduced. While the effect of unrealised exchange differences appear to be neutral from a lender perspective, this is not necessarily the case for a borrower whose debts are reduced…

King IV extends application to retirement funds and introduces sector supplements for easier application

Although King IV is not binding on South African retirement funds it is undeniably “applicable” in the sense that it can be readily applied in a practical manner to the management, oversight and governance of retirement funds…

A need for financial services providers to reinforce monitoring mechanisms over representatives

A recent finding of the Appeal Board is a wake-up call to FSPs who do not have robust monitoring mechanisms, it is also a reminder that the old and well-established vicarious liability and ostensible authority doctrines still subsist and extend to the financial services sector…

Fund fees a key factor in investment performance

The Morningstar study finds that investors in South Africa could make better use of unit trusts if they considered the relative costs of funds within respective categories, with funds with lower total expense ratios having a higher chance of succeeding against their category peers, both in terms of survival and outperformance…

Heirs, immigrants, expatriates and investors take note: Period for administrative relief outside of the exchange control special voluntary disclosure programme extended

Period of administrative relief outside of exchange control special voluntary disclosure programme is extended to 31 August 2017…

Capital gains tax: Cancellation of disposals

Capital gains tax is imposed on any amount that a taxpayer becomes entitled to as a result of a disposal of an asset, whether this amount has been received in cash or not. It was confirmed in New Adventure Shelf 122 v C:SARS that a taxpayer does not have grounds to request that the assessment where such capital gains tax was levied if the proceeds become irrecoverable…

Further ruling issued by SARS in respect of venture capital companies

The South African Revenue Service issued an important ruling on 3 February 2017 providing direction in respect of the interpretation of the rules contained in s12J pertaining to venture capital companies as well as illustrating the practical implementation of some of the technical aspects of the rules to particular structures…

The Financial Sector Regulation Bill, 2015 and the regulation of financial conglomerates

The Financial Sector Regulation Bill seeks to supervise “eligible financial institutions” more closely that are part of “financial conglomerates”. Thus, the purposes of the Bill include establishing a system of financial regulation by creating the Prudential Authority (as defined in the Bill); and the supervision of financial conglomerates in relation to eligible financial institutions that are part of financial conglomerates…

SARS expands and refines its attack on low- or no-interest loans: section 7C and the “in duplum” rule

One of the major developments arising from the 2016 tax laws amendment cycle was the introduction of an anti-avoidance measure, section 7C of the Income Tax Act, which attacks tax-free transfers to trusts using low- or no-interest loans…

New limits for Credit Life Insurance premiums

Up until now, credit life insurance has been largely unregulated by the National Credit Act, No 34 of 2005 (NCA) and this has resulted in many credit providers charging customers high insurance premiums. This is all due to change with a new set of Regulations to be welcomed by consumers of retail credit…

6 tips for buying investment property

It sounds idyllic: get someone else to buy your property for you. But before you make that decision, you need to be sure that you can really afford to buy the property. Here are six things that you ought to think about before purchasing a house for investment purposes…

Tax free savings accounts – when are they appropriate?

Much has been written about Tax Free Savings and Investment Accounts (TFSA) and there was considerable excitement when these vehicles were first launched. While they do offer novel benefits, as with any other investment vehicle, they are designed for a specific purpose and should not be viewed as a one-size-fits-all solution…

Tax on profit-sharing loan arrangements

The Income Tax Act contains rules that re-characterise interest on certain loans to be treated as dividends for tax purposes. The effect of these provisions is that the interest is not deductible by the borrower, while the yield may be subject to dividends tax and qualify for the dividend exemptions from normal tax in the hands of the lender. Binding Private Ruling 263 deals with a profit-sharing loan arrangement and provides a good example of payments that the re-characterisation rules apply to…

Investors in for nasty surprise if they try make changes to loan facilities

Many investors and small business owners are being caught unawares when trying to access additional capital through their home loans. Not only is the age of the access bond over, but they may trigger changes which result in new, unattractive rates from their bank…

The largest companies in the JSE

Bayhill Capital has released an infographic depicting how the companies listed on the JSE have been affected by the growth of industry and technology over the past four decades focusing on the years 1976, 1989, 1996, 2006 and 2016. The largest company in the JSE in each decade together with the industry of the number one listed company are highlighted…