NEWSLETTER DECEMBER 2016

SERVICES WE OFFER:

· Auditing

· Tax planning

· Due diligence

· Special investigations

· Accounting

· Registration of trusts and companies

· Management and financial advisory services

· Planning and installation of information systems

1

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IMPORTANT UPDATE ON CORPORATE GOVERNANCE

On 1 November 2016, the Institute of

Directors in Southern Africa (IODSA)

released the final King IV™ Report on

Corporate Governance for South

Africa 2016. The latest report brings

South Africa up to date with

international corporate governance

codes and in line with the shift towards

inclusive, sustainable capitalism and

integrated reporting.

King IV™ completely replaces King III™ and is effective in respect of financial years

commencing on or after 1 April 2017. This means that companies with a year-end of 31 March

2018 will be the first to report under the new Code.

South Africans are becoming increasingly aware of the importance of ethical leadership in

society. The report highlights the importance of ethical and effective leadership in

organisations of all sizes, listed and unlisted. King IV™ is particularly significant for the public

sector, because for the first time it has been designed to be applied by most types of public

sector entities, including municipalities and state-owned entities.

King IV™ has been simplified and made more user-friendly. The previous code contained 75

principles, the new code consolidates these into 17 principles. Governing bodies have more

flexibility when implementing the recommended practices, but are required to be transparent

when disclosing how they have achieved their goals.

King IV™ places the onus on the governing body (the board in companies) to take a much

more hands-on approach in applying the code. Instead of the old ‘tick-box’ method, the

governing body is required to pro-actively apply the principles of the code and explain the

outcomes.

King IV™ is voluntary (unless prescribed by law or by a Stock Exchange listings requirement).

Some of the principles have, however, been legislated.

The report includes the code, as well as helpful, separate sector supplements for Small and

Medium Enterprises, Non-Profit Organisations, State-Owned Entities, Municipalities and

Retirement Funds. King IV™ is an essential tool for successful, responsible and effective

corporate governance and all organisations and governing bodies should follow the principles

and practices laid down in this document.

2

THE IMPORTANCE OF KEEPING YOUR WEBSITE UP-TO-

DATE

Launching a website involves a considerable amount

of time and effort. Unfortunately, one of the most

frequently overlooked components of a successful

website strategy is ongoing maintenance.

Some reasons why it is important to continuously

maintain your website:

• Up-to-Date Design - the look and feel of your website is one of the most important

aspects that affects sales. Your website needs to be responsive, so that it looks good

and can be read on all desktop and all mobile devices.

• Fresh Content - old, out of date or incorrect content creates a bad impression and puts

customers off. It is essential to regularly update content, keeping it current and

informative to encourage visitors to come back. It is also important to constantly check

your website’s pages and links for errors.

• Website Security - continuous review and updating of your website security is essential.

A weakness in your website’s security could lead to your website being hacked with

possible legal repercussions if your customers’ personal data are stolen.

• Be Competitive - keep your website ahead of the competition with a dynamic website

that makes use of social media. Monitoring performance and analytics are also

important in ensuring that your website is achieving the desired results.

• Marketing - your website is an advertising medium for your business that has the

potential of capturing the attention of many people. Regular changes to your website

showing new products, or upcoming events will stimulate interest and interaction.

• Search Engine Optimisation (SEO) - if your website is not updated to work on mobile

devices, your website may no longer appear on search results. Updating your website

will attract search engines to your site and will give valuable information to visitors.

• Legal Requirements - laws constantly change and evolve and you need to make sure

that your website is compliant with all relevant legislation (e.g. data protection and

online selling laws).

By regularly maintaining and monitoring your website, you will be able to maximise its

effectiveness and create a good impression of your business.

3

INTEGRATED REPORTING AND INTEGRATED THINKING

In the natural world, animals and plants must adapt to ensure

their long-term success in a harsh and ever-changing

environment. In many ways, the business world is a bit like a

jungle - a harsh environment in which only the strong can

adapt and survive.

Fundamental changes, such as globalisation, technological

development and rapid population growth, have meant that

organisations have had to modify their thinking and behaviour.

Traditional financial reporting has had to change, so that

organisations and investors can achieve long-term success in this evolving and demanding

environment. These days, reporting needs to provide a broader scope of information which is

more interconnected and more forward-looking than traditional financial analysis.

What is integrated reporting?

In a nutshell, integrated reporting (<IR>) brings together key information about an

organisation’s strategy, governance, performance and prospects, in a way that mirrors the

commercial, social and environmental context in which it operates.

Integrated reporting provides a clear, concise statement of how sustainability is achieved, and

how the organisation creates value. By embracing integrated reporting practices, all those

involved with an organisation will develop a deeper understanding of the business, the

business environment and how to create value.

Integrated reporting promotes a more holistic approach to the way investors and those within

the organisation think, and takes into account a comprehensive range of factors which are

important in long-term value creation. Thus, integrated reporting goes hand-in-hand with

integrated thinking.

What is integrated thinking?

Integrated thinking is the ability to establish a link between the financial, social and

environmental performance of an organisation. Effective integrated thinking requires

commitment and transparency, as well as a good understanding of what makes the

organisation sustainable. The long-term success of the organisation is dependent on the

interrelationships between the organisation, the stakeholders and the operating environment.

The latest guidelines on Corporate Governance in South Africa place greater emphasis on

integrated thinking and integrated reporting. It is important to come to grips with these

concepts to be successful out there in today’s challenging business jungle.

4

NATIONAL MINIMUM WAGE PROPOSED

On 20th November 2016, Deputy President Cyril Ramaphosa, released the minimum wage

report which proposes a National Minimum Wage (NMW) of R3 500 per month (R20 per hour).

The minimum wage report was presented to the

National Economic Development and Labour

Council (NEDLAC) by the panel appointed to advise

on the level at which South Africa’s national

minimum wage should be set.

Currently, minimum wages in South Africa are fixed

by sector, or established through bargaining

councils led by unions. This has allowed for greater

flexibility when agreeing on rates of pay, but has also

resulted in disruptive strikes and time-consuming

wage negotiations.

It is hoped that a NMW figure will help to resolve ongoing labour issues in the country.

Unemployment and labour problems are currently under the microscope as they are an

important factor being considered by credit rating agencies. Their decision on whether to

downgrade South Africa’s credit rating will be announced in December.

Setting a national minimum wage is a sensitive and debatable topic. Some say that it will have

a negative effect on the economy and will lead to increased unemployment, especially in

sectors like farming. Others feel that the current system for determining wages is adequate

and should not be changed. By setting a national minimum wage, it is hoped that all workers

will get a fairer deal overall.

The proposed R3 500 NMW is just a starting point for discussion. Based on research carried out

by Wits University, the ‘optimal’ level for NMW is between R4 000 and R5 500. At this level, the

net benefit to the economy would apparently outweigh the job losses which would result from

the introduction of NMW.

For it to be written into law, the NMW must be agreed upon by leaders in labour, business,

government and communities. There is already much heated debate around the proposed

figure, and it is likely to be a while before agreement on a final NMW figure is reached.

The suggested date for implementation of the national minimum wage is 1 July 2019.