Budget 2021: What It Means to You

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“Hope is being able to see that there is light despite all of the darkness.” (Archbishop Emeritus Desmond Tutu)

It was with a sense of trepidation that South Africans awaited the 2021 Budget Speech by Finance Minister Tito Mboweni.

Still confronted with all the challenges that existed before COVID-19 – massive debt, lacklustre growth, unemployment, the public service wage bill and rampant corruption – Treasury also faced the seemingly insurmountable challenge of funding the rollout of COVID-19 responses along with muted tax revenue collection impacted by lockdowns, record job losses and business closures.

Reminding South Africans of Archbishop Emeritus Desmond Tutu’s advice that hope is being able to see light despite all the darkness, the Minister presented what has been called a “positive”, “balanced” and “sustainable” framework to address these challenges, announcing some unexpected but welcome short-term tax relief.

The main story: funding COVID-19 responses without tax increases

The two main stories in the 2021 Budget proposals are the funding of the country’s COVID-19 response and the welcome absence of new and/or higher taxes.

Despite talk of a possible ‘vaccine tax’ and new and increased taxes to fund South Africa’s COVID-19 response – including a massive vaccine roll-out that will save lives and support the economic recovery – no new or increased taxes have been introduced to fund vaccines.

Instead, the majority of funding for new and urgent priorities is provided through reprioritisation and reallocation of existing baselines, budget allocations, emergency withdrawals and – if needed – the contingency reserve.

Government has set aside R19.3 billion to fund Covid-19 vaccines, with more than R10 billion allocated for the purchase and delivery of vaccines over the next two years. The contingency reserve has increased from R5 billion to R12 billion for the further purchase of vaccines and other emergencies.

Let’s look at what will change according to the proposals, and what it all means for us on a practical level…

Tax increase proposal withdrawn

In addition to the fact that the Budget review proposals included no new taxes nor any increase in personal and company taxes, government has also withdrawn the proposal announced in the October 2020 Medium Term Budget Policy Statement (MTBPS) to introduce tax measures to raise revenue by R40 billion over the next four years.

This is due to improvements in tax revenue collections in recent months, with tax revenue estimates R99.6 billion higher than projected in October, reducing the tax revenue shortfall to R213 billion.

This will provide welcome relief in the coming year as companies are still reeling from the economic devastation of COVID-19.

Lower corporate tax rate from 2022

It is proposed that the corporate income tax rate will be lowered to 27% for companies with years of assessment commencing on or after 1 April 2022. This is a move in the right direction as SA’s corporate income tax rate at 28% is among the highest in the world. According to Treasury, reducing the rate will have “a positive effect on wages and employment, while promoting additional investment”. The Minister also said that consideration will be given to “further rate decreases to make our tax system more attractive”.

However, this will be accompanied by “a broadening of the corporate income tax base by limiting interest deductions and assessed losses”.

Good news on personal income tax

Personal income tax brackets will be increased by 5%, an above-inflation increase, to provide R2.2 billion in tax relief for lower and middle-income households. This will eliminate “bracket creep”, effectively decreasing personal income tax rates.

It means that if you are earning above the new tax-free threshold of R87,300, you will have at least an extra R756 in your pocket after 1 March 2021.

Government is aiming to reduce the personal income tax rate over time by increasing the tax base through focusing on economic growth which will trigger job creation.

Higher “sin” and other indirect taxes

Unsurprisingly, the excise duties on alcohol and tobacco products were increased by 8% with immediate effect. It means a 750ml bottle of wine will cost an extra 26c while the price of a bottle of 750 ml spirits has increased by R5.50, and a packet of 20 cigarettes will be R1.39 more expensive. Excise duty on electronic nicotine and non-nicotine delivery systems are to be introduced later this year – following public consultations.
From 7 April, the fuel levies will also be increased by 27 cents per litre, comprising 15 cents per litre for the general fuel levy, 11 cents per litre for the Road Accident Fund levy and 1 cent per litre for the carbon fuel levy. This will have a negative effect on the cost of living for South Africans and businesses across all industries.


Other changes 

  • The June 2021 sunset clause for the so-called Section 12J tax breaks was not extended. The tax rebate could be claimed on investments through an approved venture-capital company and was meant to encourage investments in small businesses and riskier ventures that can help to create jobs and economic growth. Some analysts commented that the absence of this attraction offered to venture capital investment companies, will negatively impact job growth in the country.
  • The UIF contribution ceiling will be set at R17,711.58 per month from 1 March 2021.
  • An inflationary adjustment to medical tax credits – which will increase from R319 to R332 for the first two members, and from R215 to R224 for all subsequent members.
  • Financial sector levies – Bill to be tabled early 2021.
  • The carbon tax rate increased by 5.2%, from R127 to R134 per tonne of carbon dioxide equivalent, along with an increase of 1c to 8cents/l for petrol and 9cents/l for diesel from 7 April 2021, and 12.5cents/bag for bio-based plastic bags.

Taxpayers under greater scrutiny

An additional spending allocation to SARS of R3 billion over the medium term has been requested to fund tax collection efforts. As the Minister warned in his speech: “SARS has started to deepen its technology, data and machine learning capability. It is also expanding specialised audit and investigative skills in the tax and customs areas to renew its focus on the abuse of transfer pricing, tax base erosion and tax crime. In this coming fiscal year, SARS will establish a dedicated unit to improve compliance of individuals with wealth and complex financial arrangements. This first group of taxpayers have been identified and will receive communication during April 2021.”

This means that taxpayers with complex financial arrangements should engage a CA(SA) tax specialist to assist them in preparing and/or reviewing their tax returns prior to submission. Similarly, where SARS have selected a taxpayer for verification or audit, or where penalties and interest have already been imposed and levied, taxpayers will need expert assistance.

Have a look at the Tax Tables and Calculators below for more on how this will all impact on you and your business.

2021 Budget Summary & Tax Guide

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Five Mistakes to Avoid When Investing Offshore

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“An investment in knowledge pays the best interest” (Benjamin Franklin)

It can be tempting to look at South Africa and the bad news that seems to hit us like freight trains one after another, and immediately consider moving all your money offshore. There is however far more to consider than simply your gut feel, and predictions of woe as investing offshore comes with a lot of difficulties and more than a few unique problems.

Here we look at some of the most common errors people make, to steer you clear of losing your investments.

  1. A bank account is not an investment

    Perhaps the largest mistake that new offshore investors make is panicking. In their emotional state they open an offshore bank account and start moving money overseas, but this is a mistake.

    Bank accounts, particularly in Europe, often pay less than 1% interest and any money that is sitting in one is certainly not even keeping up with South African inflation. As with local investments offshore investors should be looking to craft a diverse portfolio that includes quality global equities to ensure they aren’t just throwing money away.

  2. Understand the market 

    Before leaping into an offshore investment, it’s important to have a clear picture of the currencies, returns, fees and taxes associated with the different options, and the respective risks that might need to be managed from the outset.

    In many jurisdictions fees can end up being a significant player in the profitability of the investment, to the point where they may result in an ongoing shrinkage of offshore assets. This is particularly true if an investment is held in the name of a company, trust or pension, where director or trustee fees will usually be charged on top of the advisory fees.

    On top of this, investors in many European countries often pay significantly more in fees for absolutely no added benefits, compared to local investors.

  3. Rental properties aren’t simple 

    Many people consider buying a rental property in a foreign country the ideal investment, especially if they are considering emigrating there at some stage. A number of countries also offer passports to investors provided they purchase property in those countries, which can also lead to this kind of investment.

    There are, however, a number of ways that a rental property can end up becoming a money sinkhole instead of offering the expected stable returns.

    International property investors should not simply buy into whichever development the internet or sales agents are suggesting. Do your homework and fully understand the laws, taxes and unique conditions around the country, city and suburb you hope to invest in. Even if the property you are about to buy seems like a good deal, if it is in an area where there is too much rental housing and you struggle to find a tenant, it will end up costing you a small fortune instead.

    Investors need to also make sure they do their research on the companies they are working with to ensure they are not uncertified or unscrupulous. Fortunately for investors there is the Association of International Property Professionals (AIPP), an international body that is committed to regulating the industry. If you partner with an AIPP member, you are assured that they have been vetted and approved.

    Arranging finance in a foreign country is possible, but again comes with a need for caution. What is the track record of the company offering the finance and just what are the terms they are offering in their contracts? Laws in other countries may not be the same when it comes to finance, and there may not be the same protections that are on offer in SA relating to allowable interest rates and what happens in the event of a default.

    Applicable laws need to be checked regarding tenancy too. Are there protections in place if your tenant does not pay the rent? What happens if someone refuses to move out or damages the property? The best solution is to team up with a reputable letting agent who knows the laws, and who has your best interests at heart to ensure you don’t fall foul of some trick of local law. Of course, using an agent results in additional costs, but in the scheme of things this is likely to be money well spent.

    In short, research and research again. This is not something to rush into because you saw a flashy Power-point presentation.

  4. Double Taxation

    With the laws around taxation of foreign income recently changing there is a lot of uncertainty, and numerous rumours have arisen as to just when tax is applicable, whether disclosure is necessary and just how much is due. The basic rule is that South African tax residents are subject to tax on their worldwide income regardless of where that income derives or whether it has already been subject to tax in the country where it was earned.

    It gets more complicated though, because the South African government has numerous Double Tax Agreements (DTA) with various countries, which seek to prevent double taxation. These are not always helpful however as they don’t always protect the investor from paying two sets of taxes.

    The DTA signed with the UK for example clearly outlines in Article 6(1) and 6(3) that where a South African receives rental income from letting immovable property in the UK, such income may be taxed by the UK. It does not however say that South Africa is then not allowed to also tax the income. Article 21 tries to provide protection from double taxation, but there are numerous limitations.

    This is then further complicated by the fact that there are some domestic laws which seek to help prevent double taxation in some circumstances, but these laws don’t always apply and come with onerous documentary requirements. Basically, consult an accountant to go through the particulars of your case to determine if any tax is owed and what to do about previously undisclosed income to avoid falling foul of the law.

  5. Waiting for the right time to invest

    Perhaps the simplest error to correct is the one where, having already decided to invest offshore, the investor decides to hold onto their money, waiting for the right time to jump into the foreign market.

    It may seem wise to wait for the Rand to strengthen or the global equity markets to offer up some value, but this is advised against. Commonly, when people are waiting to move funds, they place large sums of money in money market funds, sometimes for years, looking for the right time to jump in, all the while accruing local income taxes at the marginal rate. This more than undoes all the good that a small strengthening of the Rand could present.

    If you are going to do it, there is no better time than the present.

Companies: How to Manage Your Greater Tax Risk in 2021

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If you think compliance is expensive – try non-compliance.” (Paul McNulty, former US Deputy Attorney General)

The extent of corporate taxes – from income tax, employment taxes and value added tax (VAT) to dividend taxes, capital gains taxes, transaction taxes and other indirect taxes – along with the operational aspects such as data and reporting systems and related technicalities, guarantee complexity and time-consuming processes for companies, which in turn increases compliance costs.

This also compounds other tax risks such as under-estimation; underpayments; overpayments; not applying the correct tax savings and incentives; tax penalties – such as the 10% late payment penalty; the inability to meet tax obligations; and assessments and audits.

Compliance costs are another growing tax risk. Studies suggest that companies spend hundreds of hours and tens of thousands of Rands each year on internal tax compliance costs such as labour or time devoted to tax activities and incidental compliance expenses, and on external tax compliance costs like tax practitioners’ fees.

In addition, tax issues can place a company’s reputation and brand at risk. An example would be a company losing a tender on a large contract because it was unable to provide a tax clearance certificate, perhaps due to a technical or minor non-compliance issue. Companies also face the risk that a tax issue could attract negative attention from the media, civil society or competitors, as growing numbers of stakeholders ranging from customers to potential investors increasingly support only companies perceived to be contributing their fair share to the country and community in which it operates.


Why tax risk management will be even more critical in 2021

All these tax risks will be amplified in 2021 for a number of reasons, including increased tax liabilities; intensified taxpayer scrutiny; and the further entrenchment of SARS’ powers.

In the 2020 Medium-Term Budget Policy Statement, Finance Minister Tito Mboweni announced government-projected tax increases of R5 billion in 2021/22; R10 billion in 2022/23; R10 billion in 2023/24; and R15 billion in 2024/25. Companies need to factor these tax increases into their future planning and budgeting.

Taxpayers will also find themselves under greater scrutiny and likely to be subject to more punitive measures in 2021. Human errors and simple mistakes, which are not uncommon given the complex processes and strict deadlines involved, stand now to be harshly punished even if unintentional. The Tax Administration Laws Amendment Bill, 2020 (awaiting Presidential signature to become law) provides that for certain tax crimes you can be convicted if you acted either “wilfully or negligently”, where previously proof of wilfulness (intention) was required. This means that a court could find a taxpayer guilty of an offence without proof of wilfulness, so that even inadvertent errors could be penalised with a maximum penalty of up to two years’ imprisonment.

Along the same lines, companies can also expect an increase in the number of tax audits, as well as more detailed, expensive, and time-consuming investigations and audits. These are likely to focus on SMMEs, business owners, trusts and high net worth individuals.

Furthermore, SARS’ already extensive powers – including asset forfeiture powers – continue to be entrenched. Just two examples from recent court rulings illustrate: the Gauteng High Court confirmed a taxpayer’s obligation to be vigilant when filing a tax return and liability for appropriate penalties when falling short of this duty, while a North High Court judgement set an important precedent by re-affirming SARS’ right to liquidate a taxpayer to recover debt where an assessment is under appeal.


How to manage your tax risk 

  • Plan for tax compliance

    A well-defined tax strategy, aligned with your overall business strategy and the specific tax challenges facing your business, is important. As the business grows, a re-assessment of the corporate vehicle or tax structure may be required.

    Detailed planning is also required for the tax year ahead, providing ample time for processes required for proper record-keeping to ensure tax returns are complete and accurate, and that the numerous tax deadlines can be met.

    Planning should also incorporate identifying and implementing relevant tax relief and incentives and assistance. Just one example is turnover tax that provides administrative relief for micro businesses by replacing Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax for businesses with a qualifying annual turnover of R1 million or less.

  • Budget for tax compliance

    Proper budgeting is required to ensure all the various tax liabilities can be met before or on the stipulated deadlines, while also factoring in the effect of the annual tax increases announced in the latest Medium-Term Budget Policy.

    Companies also need to budget for compliance costs including the internal cost of labour or time devoted to tax activities, incidental expenses, and the resources, systems and continuous upskilling required to meet ever-changing tax obligations. The budget should also provide for external costs such as tax practitioners’ fees; external reviews of the tax function; and even tax risk insurance to cover the cost of immediate expert assistance and support from a team of tax professionals in the case of a SARS’ tax audit.

  • Call on expert professional services  

    Given the increase in compliance complexity and costs, the expertise of accounting officers and auditors is vital in determining the taxable income and the amount of tax to be paid.

    Advice from a tax professional can ensure an appropriate tax strategy is formulated to proactively manage your tax risk in the long-term, saving time and money and avoiding expensive tax mistakes, while keeping in line with the ever-changing tax obligations.

    Be sure to choose a specialist who is appropriately qualified and experienced, as well as a member of a professional controlling body that enforces strict standards, such as SAICA (South African Institute of Chartered Accountants).

Benefits of professional tax risk management

Failure to manage tax risk effectively will negatively impact on an organisation’s profitability. However, beyond managing tax liability, there are further benefits to managing a business’ tax risks.

One of these is more accurate records resulting from tax compliance obligations. This improves the availability of up-to-date information and insight into the financial position of the business and its profitability – enabling accurate, timeous financial management which is crucial to business success. In addition, tax compliance has become both a corporate governance and a reputational issue and can create both shareholder value and stakeholder trust. These benefits, along with tightly managed tax liabilities, will certainly assist companies as they build back after the economic upheaval of 2020.

The Way Forward: More Virtual Meetings?

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“Any sufficiently advanced technology is indistinguishable from magic” (Arthur C. Clarke, English science writer and inventor)

Virtual meeting platforms have their pros and cons, but the standout advantages seem to be their cost effectiveness, time saving capabilities and their ability to host large numbers of attendees at very small cost.

The options available to companies looking to use these platforms are vast. The South African Institute of Chartered Accountants (SAICA)’s recommended list of virtual meeting software and platforms for accounting professions and their clients include:

  • CrowdCast
  • Google Hangouts
  • GoToMeeting
  • Hopin
  • Microsoft Teams
  • Skype
  • Zoom.

Auditable voting tools

Furthermore, one of the useful tools of a platform like Zoom and Microsoft Teams, for example, is their polling system, which could be used in a meeting that requests voting or Q&As.

Virtual meetings pass the legal test and are admissible in court

Earlier this year, the Johannesburg Labour Court ruled that it is fully legal for employers to negotiate retrenchments with employees through Zoom.

The watershed ruling handed down by judge Graham Moshoana, in an urgent application brought by the Food and Allied Workers Union (FAWU) against South African Breweries (SAB), effectively gave credence to virtual meetings as legally recognised replacements for, or equivalent to, conventional face-to-face meetings in appropriate cases.

The resources used in face-to-face meetings can be put to better use

The average meeting requires money – from catering, human resources and fuel to even flights and accommodation. You can host a virtual meeting with literally thousands of attendees almost for free, with the only cost considerations being software, data and the availability of a laptop or computer.

This is ideal for businesses with a lot of employees. For example, if you are using Zoom for Webinars, it can allow up to 10,000 virtual attendees to sign up.

Virtual meetings afford a chance to save the conversation online

The meetings’ recordings are capable of remaining available for the attendees to refer back to and replay the content for clarity at their own discretion without extra charges. This can improve the quality of output.

The downsides 

On the downside, the quality of the conversation depends on external factors, typically beyond the administrator’s control. These could include data processing speed, audio visual quality, and the quality of network reception.

Consider virtual meetings more in your business and put your resources to better use – ask your accountant how to achieve this to maximum effect.

Leadership, Ethics and Governance: The Benefits for Your Business

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The European (and South African) authorities (refer to governance codes below) opted for a principles-based approach. However, governance cannot be truly effective without the integrity of purpose and actions which drive the ‘tone from the top’ leading to a strong moral compass founded on ethically-based values.

The governance imperative

Corporate Governance has been a topic of ongoing conversation and even legislation since the early 1990’s. However, in spite of a number of outstanding codes and reports (such as the Cadbury Report, the four King Codes and Reports, the Combined Code and many more around the world), together with the various legislative responses (such as Sarbanes Oxley in the USA), business failures continue.

Where were the directors of these failed businesses and what were they looking at and asking of management when considering their approval of the financial statements year after year?

Ethics and moral duties

Each director is a steward of the company and should demonstrate:

  • Conscience – intellectual honesty and independence of mind,
  • Inclusivity – legitimate interests and expectations of stakeholders,
  • Competence – knowledge and skills
  • Commitment – diligence, and
  • Courage – to take the appropriate risks and to act with integrity.

There is evidence that suggests that companies displaying consistent ethical values and behaviours based on solid and sustainable moral values driven throughout the organisation where all are aligned to the ‘tone from the top’ deliver better and more sustainable returns.

The ethical and moral imperative

Key questions:

  • Is it a reasonable presumption that all know and fully understand the meaning and impact of ethical behaviour, moral values and what drives them?
  • Do the directors live out their stated ethical and moral values – the tone from the top?
  • What are the views of management and the workforce of the leadership’s (director’s) ethical and moral values and the example set?
  • Is it reasonable to assume that management knows how to embed these values throughout the organisation?
  • How do directors measure the ethical and moral climate of their organisation?
  • Does the ethical and moral climate of the organisation align with those espoused by the directors?

What is understood by ethics and morals – is there a universal standard, a universal moral compass? 

In the Glossary of terms in the King IV report the term Ethics is defined as follows:

“Considering what is good and right for the self and the other, and can be expressed in terms of the golden rule, namely to treat others as you would like to be treated yourself. In the context of organisations, ethics refers to ethical values applied to decision-making, conduct, and the relationship between the organisation, its stakeholders and the broader society”.

However, what is understood by ethical values, behaviours and integrity? Can one assert that there is a set of Universal Principles? Consider the following:


Universal Principles

Noted anthropologist Donald E Brown found in his research that the moral codes of all cultures include recognition of responsibility, reciprocity, and ability to empathise. Other studies have confirmed his findings. The major world religions preach common values: commitment to something greater than self, responsibility, respect, and caring for others. Genuine behaviour norms in different cultures may distract us from what we have in common with all people – a universal moral compass.  

Stephen Covey suggests more evidence of universal principles: “From my experience in working with different people and cultures, I find that if certain conditions are present when people are challenged to develop a value system; they will identify essentially the same values. Each culture may express those values differently, but the underlying moral sense is always the same.”


What are these universal moral values?

The authors of Moral Intelligence (Doug Lennick and Fred Kiel, Ph. D) suggest the following from their research:

  • Integrity
  • Responsibility
  • Compassion
  • Forgiveness and reconciliation

While the first two seem self-explanatory, what about the last two?

Compassion shown to an employee in distress may lead not only to a swifter recovery and return to full operational ability but also to a substantial gain in loyalty from employees – and not just to the employee concerned.

Forgiveness and reconciliation: Is not business the enterprise of risk?  If employees and management are too fearful of making mistakes, how much business risk are they likely to take?

Finally, an organisation that demonstrates these ‘universal values’ from the top through management in alignment with actual behaviour will achieve, through its workforce, greater returns than might otherwise be the case.

So, these ‘soft’ practices have the potential of leading to hard bottom line results.

Ethics and moral values – are they worth it?

It has been suggested that companies with recognised good governance are valued at a premium over those with poor governance records. The same applies to companies with sound ethical records. Ethical companies attract and retain talent.

The Proposition

  • Enhanced governance through demonstrated ethical behaviour
    • What are your values and ethics?
    • Does your behaviour reflect them?
    • How do your board colleagues and your first line reports perceive your values, ethics, and integrity?
    • What is your staff’s perception?
    • How do you go about ensuring the values are embedded throughout the organisation to achieve alignment?
  • Starts at the top
  • Safety for those really tough and necessary conversations
  • Ethics led performance
  • Behavioural change and feedback
  • Strong business case
  • Is your top team up for the challenge?

SMME Owners: Your Training and Education Will Boost Your Business

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“An investment in knowledge pays the best interest,” (American politician and inventor, Benjamin Franklin)

Most SMMEs (Small, Medium and Micro Enterprises) in South Africa fold in the first two years of doing business. Reports suggest that the lack of education and training are some of the primary reasons for the low level of entrepreneurial activities and the high failure rate of SMMEs. To add salt to the wound, the overall quality of entrepreneurship in South Africa is recorded as lower than average.

Here are some of the visible results of the impact of, and lack of, education and training for SMME managers along with some corrective recommendations:

1. Quality of SA’s entrepreneurial activity below global average

South Africa’s entrepreneurial activity is rated at 5.1%, which is below the Global Economic Monitor (GEM) average of 6.4% and the average of 6.7% for efficiency-driven economies. (In 2019, South Africa ranked 49th out of 54 economies on GEM’s National Entrepreneurship Context Index, ahead of only Croatia, Guatemala, Paraguay, Puerto Rico and Iran. This index provides a single composite number that can express the average state and quality of the entrepreneurial ecosystem in a country and be compared to those of other economies.)

According to existing research on the subject, “This and other figures show a lower than average level of entrepreneurial activity in South Africa and present challenges to all role players (government, the private sector and educators) for getting programmes that encourage entrepreneurship off the ground, so that this gap can be decreased”.

2. Quality education linked to managerial confidence

In 2019, Ahmad Al-Tit, Associate Professor of Business Administration at Qassim University reported aspects such as the “business owner’s age, educational attainment, management skills, training, business size, and general business experience”, as elements impacting the success of a business.

“From these factors, the attainment of good quality education, general age, and business experience is believed to result in higher managerial confidence and quickens the procedure of obtaining adequate business finance,” he further stated.

3. Academic recommendation to solving the problem

Considering the importance of SMMEs to the economy, the responsibility to educate entrepreneurs is spread among several stakeholders.

Based on the findings of research published by the University of Fort Hare, the following recommendations are suggested to the stakeholders:

  • Government Agencies: “It is also suggested that government agencies work hand in hand with the banks to ease access to finance (training programmes) by SMMEs”.
  • Government: “It is recommended that the government explore other strategies to compliment entrepreneurship education that will help create independent entrepreneurs instead of educated beggars.”
  • SMME Owners and Managers: “SMME operators need to take advantage of entrepreneurship education programmes that are offered by institutions of higher learning and government agencies if they really want to improve the performance and survival chances of their businesses”.
  • Institutions of Higher Learning: “They need to play a critical role in providing entrepreneurship education, for they have the expertise and resources to do so”.
  • Banks: “It is recommended that banks provide financial resources to SMME operators who show potential for success”.

Consider additional education and training for SMMEs offered by the Institute of Directors South Africa (IoDSA) to improve your understanding of good governance requirements. These will improve your likelihood of success and the attractiveness of your business while reducing the potential of regulatory risk.

Ask your accountant to guide you through the entrepreneurial training and education programmes that could give your business a better chance of succeeding.

Simple Communication Tips to Boost Your Profitability

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“Communication is a skill that you can learn. It’s like riding a bicycle or typing. If you’re willing to work at it, you can rapidly improve the quality of every part of your life.” (American business speaker Brian Tracy)

Successful communication can be the difference between a profitable business and a failing one. Leaders who are unable to get across the needs of the company to their employees will very quickly close its doors. Likewise, people who are effectively able to communicate the things they need to be done will find their reward in a harmonious team and profitable enterprise.

This article is for those people who believe themselves to be among the latter. Those who have managed to traverse the minefield of communication and who find themselves surrounded by a largely effective team. In this position, it is possible you may still be making communication errors that are chipping away at your profitability and leading to a team that isn’t as effective as it possibly could be. They are common errors that anyone could make and everyone has seen at some point, but they definitely impact the bottom line. Here is how to cut them out and take your company to a brand-new level.


Avoid these communication errors

  1. Not answering the questionNo matter how well you explain things, being a leader sometimes requires you to answer follow-up questions from your team. While most of the time these questions are simple enough to answer, there may be occasions in which a manager may not be able to answer the question. Perhaps they don’t know the answer or simply didn’t take time to understand the question or misunderstood the question.

    When it comes to the effectiveness of your employee who is asking the question though, purposefully avoiding a response is as bad as mistakenly answering it incorrectly or ambiguously.

    For example, imagine your employee has sent you an email asking, “Did you say you wanted that report today, or next week?”

    A distracted communicator may see the first half of the message and rush to reply “Absolutely” or “Yes.” This ambiguous reply now wastes time and further confuses the employee. Does this mean the deadline has been pushed out or that it’s still due today? The employee may then be forced to follow up, or worse, assume an extension has been granted when it has not. Either situation wastes that employee’s time and can even lose a client.

    Avoid this simple error by ensuring you automatically read the full email and understand it before responding. Then make sure you make it clear which answer is to which question. Don’t assume the employee will be able to infer what is meant each step of the way.

  2. Too much informationThere is a very clear difference between providing your employee with the context and information they need to do their jobs and live up to expectations and giving them too much information. Giving an order with the right amount of information and the proper context will save time and make that employee better at their job.

    This error creeps in due to the manager’s assumption either that the employee needs more information than they do, or that extra information will help them to contextualize and make their own decisions. In the worst-case scenarios, it comes from the manager themselves not being sure what information the employee needs and simply giving them everything in the hope that this may cover it.

    The problem here is that having too much information can lead to time-wasting and analysis paralysis.

    For example, why share all the product information with your sales rep, when at the end of the day there are only three key points that separate your product from the competition and help to make the sale? Sending your sales reps a manual and expecting them to work out for themselves what aspects of your product will help them sell it to clients is as unhelpful as giving them no information at all. The time they waste reading the manual could rather be spent perfecting their sales techniques or working on their pitch documents.

    This also extends to bombarding your employees with opinions or reasoning that they may not need. Sometimes, in order to err on the side of caution, or to seem smarter than they need to be, managers can lean towards being verbose. As a manager you should avoid sending long paragraphs or speeches packed with thoughts, reasoning and explanations when a simple email explaining what needs to be done will remove wasted time and confusion.

    At the end of the day, conciseness is the key to good communication. Managers who impart all the necessary information and no more will find their teams perform more effectively and more profitably.

  3. Too little contextJust as bad as too much information is when managers share information assuming the context is known by everyone in the organisation. Context gives meaning to orders and conversation in general, and not including it puts the person at the receiving end of the communication at a disadvantage. Without the proper context, they may think they have been left out of the loop or have forgotten something important and may never bring it up, instead choosing to muddle through and therefore doing a worse job.

    To avoid all this, communication should give a quick background to the new information, a short description of the client and what they like and how they like it to be done and an explanation for why any deadlines have been set. Once people understand why they are doing something and how it should be done and by when, they are much more likely to deliver on the task itself in the way you want it to be done.

  4. Emotional communicationsThere are few places where emotional emails or other communications (WhatsApp or Teams messages and the like) are wanted, and the workplace is not one. Corporate culture places a lot of constraints on human behaviour and as such an emotional communication is definitely going to be not only career limiting, but also cause a lot of discomfort to all who are unlucky enough to be tagged in.

    The problem with emotional communications is that they cause so much discomfort that the issues they are discussing can often become more difficult to deal with. The delays in resolving these issues will lead to poor performance and an uncomfortable work environment.

    These kinds of constraints can also lead to the other kind of bad communication – passive-aggressive emails and communiques. In many cases these cause hurt feelings and divide teams without resolving issues because they claim not to be calling attention to any issue to begin with.

    This issue is fixed by encouraging an open and honest communication policy in your business. Allowing people to speak their minds respectfully and then genuinely listening allows people who have noticed problems to bring them to your attention and for those problems to be resolved. Do not let them linger in the shadow of hurt feelings.

Leaving a Legacy: Ensure Your Business Survival with a Succession Plan

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“A leader’s lasting value is measured by succession.” (John C. Maxwell)

Succession planning is preparing for the future of your business, ensuring the people and resources are available for its ongoing success beyond the lifetime of the current key players. It is especially critical in small businesses where the loss of a key person can bring the business to a sudden halt.

A formal succession plan details exactly what happens if the owner or a partner or another key individual in the business is no longer there, for both expected and unexpected reasons. These reasons range from the sudden or unexpected death or disablement to a planned and expected exit, for example, due to retirement.

Some of the options for succession include grooming the owners’ children and heirs to take over the reins; training loyal employees to take over key roles; bringing in high level expertise from outside the company; or selling the stake in the business to family, to the other partners, to a loyal employee or a group of employees, or to an outside buyer.


Why is succession planning so important?

Succession planning is crucial to ensure the viability of the company over the long term, and to unlock many benefits in the short term.

A good succession plan can secure a business owner’s legacy, and their retirement or their family’s well-being, instead of the business simply becoming one of the estimated 70% of inherited businesses that don’t survive.

It also ensures that what happens after the loss of a key person is planned and structured, rather than forced on the business by circumstance or by the courts.

A clear and fair succession plan can also:

  • Prevent confusion and uncertainty after a sudden and unexpected loss
  • Avoid family disharmony and conflict between heirs and employees
  • Allow for continuity and a smoother transition, reducing the impact on the business and its stakeholders
  • Ensure that successors, whether a promoted employee, a newly appointed manager, or a son or daughter or another family member, or a buyer, are qualified, skilled, and groomed to take over
  • Provide opportunities for employee career growth internally
  • Ensure you can get fair value if selling the business or a stake in it
  • Prevent the forced sale of assets to settle the estate.

How to plan

Succession planning involves a combination of financial planning, estate planning and wealth planning and therefore requires the expertise of qualified advisors including your accountant.

The details of a succession plan depend on a range of issues, such as the ownership structure of the business, whether succession involves handing over to the next generation or an employee or an outside buyer, and the unique financial and legal aspects of the business.

As just one example, many businesses are sold to family or staff who may not have cash up front, and this requires special planning, for example, staggered payments over time and a slower transition.

However, here are a few common characteristics of a successful succession plan:

  • All stakeholders are included in the planning and decision-making process
  • Suitable, practical and gives the best outcome from a family and business perspective
  • Documents and puts in place formal mechanisms and clear procedures for governance, conflict, and dispute resolution
  • Contains a short-term emergency plan for each key position
  • Details a full long-term succession plan for each key position
  • Considers the financial, estate duty and tax implications of the decisions
  • Takes into account legal compliance and commercial and practical considerations
  • Ensures continuity by providing essential liquidity through, for example, key man insurance, life insurance for the partners and contingency policies
  • Creates a viable and sustainable business operation now and for the future through modernised business systems, clearly documented and automated processes, fully trained people, and accurate up-to-date financial data – all of which will add immense value to the business now and in future.

If you consider for a moment what your death or retirement could do to the business’ success and to your family’s livelihood, you will realise how important it is to put in place a well-structured succession plan.

It will ensure that your time, effort and investment to grow a business in South Africa is not lost in a statistic, but rather that your legacy lives on, surviving beyond the current key players into the next generation.

 

Your Tax Deadlines for November 2020

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  • 6 November – Monthly PAYE submissions and payments
  • 16 November – D-date for taxpayers filing online
  • 25 November – VAT manual submissions and payments
  • 27 November – Excise Duty payments
  • 30 November – VAT electronic submissions and payments
  • 30 November – Company Provisional Tax Payments where applicable.