INSURANCE & ACTUARIAL NEWS

Innovative risk management can aid service delivery

11 JUL 2016 | SAVE | EMAIL | PRINT |  PDF    BY: PRIDE CHORUMA

How does the public sector balance its risk management framework with massive investment in infrastructural development required to reignite economic growth on the one side, and increasing damage from service delivery protests on the other?

Pride Chorum

Protests cause massive damage

The numbers speak for themselves. The recent student protests, for example, led to damage claims of nearly R100m in less than two months. Sasria also reported in its 2015 integrated report that claims in that financial year spiked by 54% due to labour and service delivery protests (which had increased 33% over 2013/14). More recently, Metrorail in Cape Town has been the target of protests and vandalism.

Violent and disruptive actions such as these have become more common and are clearly cause for concern. 

Local, district and provincial authorities as well as state-owned entities are therefore in far greater danger during these times, which calls for appropriate measures to manage their risks.Transferring risk through insurance might be one of the most effective ways to achieve this. 

These entities need to cover themselves against damage to existing infrastructure and ongoing projects, which may further hamper their ability to deliver their services to communities. This will also help them to align with sound risk management controls and good governance protocols, which apply to all organisations, to mitigate threats to their ability to operate effectively.

Extra cover

While an institution such as Sasria offers some protection against undue financial losses, proactive public sector managers are well advised to seek additional insurance solutions to cover themselves against exceptional losses that can go above Sasria limits. 

While general insurance cover may be sufficient for normal circumstances, public sector managers also require nimble, intelligent insurance solutions that offer additional cover for extraordinary events.

The same principle applies to natural disasters and changing weather patterns. Coastal regions, for example, are at a far greater risk from such events than they were 10 years ago and this should be factored into any risk management and mitigation strategy.

Insurance, therefore, is no longer a matter of one size fits all – it requires an appropriate solution designed to meet a specific need or threat.

COMPETITION LAW NEWS

MOU signing - first step to regional competition authority for SADC?

5 JUL 2016 | SAVE | EMAIL | PRINT |  PDF    BY: PIETER STEYN

The competition authorities of Botswana, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania and Zambia have signed a memorandum of understanding (MOU), an important step in the direction of more effective cross border enforcement of competition laws in SADC.

© Edhar Yuralaits – 123RF.com

It took effect once the 10 authorities signed it and it remains in force for three years. An authority may terminate its participation on three months' notice. SADC authorities that have not yet signed the MOU are from Angola, the Democratic Republic of Congo, Lesotho, Madagascar and Zimbabwe.

The MOU aims to strengthen relationships between SADC competition authorities by facilitating co-operation including through:

1. the exchange of information on significant developments in competition law and policies, and on investigations of mergers and complaints
2. participation in conferences, seminars, etc on competition law and policies
3. participating in joint studies and research of common interests
4. co-operating and co-ordinating with one another in the investigation of mergers and complaints
5. harmonising the rules and procedures for filing of mergers and applying for leniency or immunity

The MOU also makes provision for SADC competition authorities to develop an annual work plan of activities and establish a joint working committee. However, an authority is not obliged to participate in any such activities. A Joint Working Committee of authorities is also established. 

The MOU contains protections for third party information including confidential information submitted as part of a merger investigation or cartel leniency process. An authority is however obliged to use “best endeavours” to obtain a waiver from the relevant third party. A recipient authority is obliged to maintain confidentiality of information received from another authority.

Could this be the first step towards the establishment of a regional competition authority for SADC, similar to that of COMESA?

CORPORATE & COMMERCIAL LAW NEWS

New BEE Regulations addresses two key aspects

7 JUL 2016 | SAVE | EMAIL | PRINT |  PDF    

The final Broad-Based Black Economic Empowerment Regulations, in terms of the Broad-Based Black Economic Empowerment Act (BEE Act), were gazetted by the Minister of Trade and Industry in early June 2016. The Regulations came into effect the same day.

© Edhar Yuralaits – 123RF.com

According to Ashleigh Hale, partner and co-head of Bowman Gilfillan Africa Group’s Corporate Department, two key aspects addressed by the Regulations are the registration of major BEE transactions and annual BEE reporting requirements for listed companies and government entities.

Registration of a BEE Transaction

Hale explains that the B-BBEE Commission (Commission) must maintain a registry of ‘major’ BEE transactions, being those that fall above a certain threshold. The Minister is required to publish this threshold notice in the Government Gazette but this has not yet happened.

“Because the threshold for a major BEE transaction has not yet been determined, it is not currently possible to comply with this registration requirement, despite the BEE Regulations having taken effect.

“Further, it is not clear what a BEE transaction is for the purposes of the Regulations because a definition of a ‘-BBEE transaction’ has not been included in the Regulations. 

“According to the Regulations, a party that enters into a major BEE transaction is required to register the transaction with the Commission by completing and submitting a prescribed form. No underlying transaction documents are required to be submitted. 

“Once the form has been submitted, if the Commission is of the view that the transaction does not adhere to the BEE Act (for example, if it is of a view that the transaction amounts to fronting), it must advise the submitting party of its concerns in writing. The submitting party must take steps to remedy the issues identified ‘within a reasonable period’.

“If the submitting party fails to remedy the issues to the satisfaction of the Commission, the Commission may proceed to initiate an investigation. This investigation will presumably focus on the possible fronting practices.

“It is not clear how adherence to the BEE Act will be assessed by the Commission prior to any investigation being conducted, given that the information required to be submitted to the Commission is very limited, with no underlying transaction documents required. 

“In addition, while the Regulations specifically state that the registration requirement does not constitute a requirement to obtain approval from the Commission before the transaction can be implemented, it is recommended that the parties to a major BEE transaction take steps to seek appropriate advice prior to concluding the transaction, including through the advisory services of the Commission. 

“The Commission’s role in assessing the BEE transaction thus appears to amount to an indirect approval process.”

BEE reporting for listed companies

The Regulations also provide that JSE-listed companies and government entities must submit a compliance report to the Commission on an annual basis.

A company listed on the JSE must either submit its compliance report to the Commission within 90 days of the end of its financial year, or within 30 days of the approval of its audited financial statements and annual report, where the annual compliance report is included in its annual report. 

Government entities have to submit their reports within 30 days of the approval of their audited financial statements and annual reports. 

“Reporting companies have to detail the score obtained by the company for each of the BEE elements, whether they are an empowering supplier and whether they have achieved the priority element thresholds of ownership, skills development and enterprise and supplier development. 

“Once the Commission receives the compliance report, it must respond within 90 days describing the state of compliance with the BEE Act and highlighting areas of improvement. 

“If the Commission finds ‘non-compliance’ with the BEE Act, it will notify the company and the company will be required to correct its report and ensure compliance with its reporting duties under the BEE Act within 30 days. If a company fails to comply with its reporting duties, the Commission must reject any submitted compliance report and indicate the reasons for its decision. They will then be considered not to have complied with the requirements of the BEE Act.

“The Commission may allow a company that has submitted a report to appear before it in either an open or closed meeting, to respond to any questions the Commission may have in relation to its report,” concludes Hale.

TAXATION & REGULATION NEWS

BBBEE screws tighten on South African businesses

7 JUL 2016 | SAVE | EMAIL | PRINT |  PDF    

Many South African businesses will face a stiff challenge in meeting their accreditation targets as they prepare for their first audits under the stricter Revised Broad-Based Black Economic Empowerment (BBBEE) Codes that came into effect on 1 May 2015.

© pictrough 123RF.com

Growing pressure

Many companies are scrambling to address the stricter codes before they undergo their annual BBBEE audits for 2016, as they managed to squeeze an audit in last year under the old codes before the new ones took effect. Now, they face their first audits under the new codes. Many will see their ratings drop significantly unless they take drastic measures to improve their BBBEE credentials.

There’s also growing pressure, as large organisations start to tighten the screws on other entities they do business with. When procuring goods, most state-owned entities and large organisations are demanding that companies still achieve good overall ratings levels even under the revised codes.

In addition, when applying for licences and concessions, companies need to show they are aligned with BBBEE imperatives. This poses some serious challenges for companies which did not begin the process of transforming their businesses in line with the new codes when they were first announced in 2013. 

Compliance levels

Some businesses may see their BEE certification levels drop two to four levels under the stricter new codes when they conduct their 2016 audits, with many previously compliant companies even becoming non-compliant.

Compliance levels for each pillar of BBBEE are much higher under the revised codes. Organisations with a turnover of more than R50m a year must achieve a score of 40% in each of the following categories that have been deemed priority elements: ownership, skills development, and enterprise and supplier development. A company that fails to meet this threshold in just one of these elements will have its overall empowerment status drop by a level.

Empowering supplier

The revised codes also introduce the idea of an empowering supplier, defined as an entity that meets three of the following criteria if it is large entity (R35m-plus turnover) or one if it is a medium-sized company (R10m to R50m turnover):

• Buys at least 25% of cost of sales excluding labour cost and depreciation from local producers or local suppliers.

• 50% of jobs created are for black people.

• At least 25% transformation of raw material/beneficiation.

• Spends at least 12 days a year of productivity in assisting small black companies to increase their operation or financial capacity.

• At least 85% of labour costs should be paid to South African employees by service industry entities (only applicable to entities in the services industry).

Companies not deemed to be empowering suppliers will find it harder to do business with larger companies and state-owned enterprises because they will not count in their client’s preferential procurement calculations.

AGRICULTURE NEWS

Funky cappuccinos for farmers in need

8 JUL 2016 | SAVE | EMAIL | PRINT |  PDF    

Farmers are battling to produce crops and keep livestock alive which are essential for the country's food security, amidst the worst drought since 1982. In November 2015, Agri SA established the Drought Relief Fund to support farmers, farm workers and farming communities in need. Through the Funky Cappuccino Campaign, Wimpy restaurants in Pretoria East have pledged their support for this initiative.

Unsplash via pixabay

From mid-June till the end of September customers will be able to order a Funky Cappuccino at selected Wimpy restaurants. By adding R2 to their bill, they will receive a pink coloured cappuccino with a heart as its latte art. These proceeds will go towards Agri SA’s Drought Relief Fund. 

Agri SA is a non-profit organisation that is dedicated to helping to develop a stable, profitable agricultural environment within South Africa. This is no small task as the United Nations World Food Programme (WFP) stated that about 14 million people face hunger in Southern Africa because of the drought that has been worsened by the El Niño weather pattern. Agri SA offers drought relief across all nine South African provinces and evaluates elements such as field conditions, availability of water and feed in the area, as well as the possible retrenchment of workers and the impact that this has on their families by helping them to properly assess requests and grants.

“It's tricky to assess the long-term outlook,” says Luise Peters, marketing manager, at Wimpy. “But over the short and medium term, conditions are likely to remain very challenging. We will be promoting this initiative in the selected 23 stores to raise awareness for this cause and to encourage our visitors to support it."

AGRICULTURE NEWS

$24 billion investment boost for African agriculture

1 JUL 2016 | SAVE | EMAIL | PRINT |  PDF    

The African Development Bank (AfDB) has pledged 24 billion US dollars as an investment to ensure the implementation of the continent's agricultural transformation agenda, a statement has said.

USAID Africa Bureau Wikimedia Commons

The total investment for the Feed Africa, a strategy for agricultural transformation on the continent is estimated at between 315-400 billion dollars over the next 10 years, with annual returns of 85 billion dollars when fully funded.

Last week, the bank approved the strategy that will set Africa’s agricultural sector on a path of a competitive and inclusive agribusiness sector for the creation of wealth and improving lives of citizens, the statement added. The Feed Africa strategy makes a strong case for reversing the situation of a continent that spends 35.4 billion dollars on food imports annually despite being home to 65 percent of the world’s undeveloped arable land, it added.

According to the bank’s figures, some 70 percent of Africa’s population and about 80 percent of its poor who live in rural areas depend on agriculture and non-farm rural enterprises for their livelihoods.

The strategy will focus on scaling up agriculture as a business through value addition, led by the private sector and enabled by the public sector, and using innovative financing mechanism. It aims to end hunger and rural poverty in Africa in the next decade.

Source: naija247news.com

AGRI AFRICA

AGRIBUSINESS NEWS

Training programme to improve access to fertilisers and smallholder development

7 JUL 2016 | SAVE | EMAIL | PRINT |  PDF    

The Limpopo province's smallholder farmers are continuously confronted with the challenges of raising their productivity to boost food security due to limited access and low use of fertilisers - a neglected but critical input that can double yields within a single cropping season.

©VASILIS VERVERIDIS via 123RF

Fertilisers, in addition to inputs such as better seed and farming practices, can be a game changer in food security among South Africa's smallholder farmers who are battling falling harvests and unproductive soils. Research has established that for every kilogramme of nutrients smallholder farmers apply to their soils, they can realise up to 30kg in additional products.

The importance of developing agriculture SMEs

"There is a big push at the continental level to enhance agriculture productivity in Africa in line with the Maputo Declaration to increase agricultural productivity and food security and South Africa is part of that movement," African Fertilizer and Agribusiness Partnership (AFAP) vice-president, Prof. Richard Mkandawire, told participants at an entrepreneurship development support training programme held for smallholder farmers and agro-dealers in Limpopo Province and facilitated by Kynoch, a fertiliser manufacturer.

"To grow and support SMEs in Africa is the pathway if we are to reduce hunger and poverty. The future of South Africa is about growing those rural enterprises that will support smallholder farmers and employment creation."

Despite their high contribution to economic growth and job creation, SMEs are challenged by among other factors, funding and access to finance, according to the 2015/16 Global Entrepreneurship Monitor (GEM) Report. Lack of finance is a major reason for SMEs - which contribute 45 percent to South Africa's GDP- leaving a business in addition to the poor management skills which are a result of lack of adequate training and education. 

Building smallholder capacity, strengthening emerging agro-dealers

The training programme is part of the African Fertilizer Volunteers Program (AFVP) run jointly by the International Fertilizer Association (IFA) and AFAP to build the capacity of smallholder farmers on production inputs and their use. In addition, the training programme - an Africa-wide initiative - seeks to strengthen emerging agro-dealers in the Limpopo Province and develop strong private sector networks along the fertiliser value chain. To date, more than 100 agro-dealers have been trained in Limpopo Province under the AFVP.

Kynoch managing director, Eugene Muller, regional head - fertilisers and agri-inputs said: "Kynoch, part of the ETG Fertilizer, would like to contribute and play its part in assisting the African continent feed itself by ensuring that smallholder farmers are able to use fertilisers optimally in boosting their yields." By using more fertilisers correctly, South Africa's smallholder farmers can grow more and nutritious food, achieve household food security, create jobs, increase incomes and boost rural development, Prof. Mkandawire said. 

Trained to use fertilisers optimally

Smallholder farmers and agro-dealers were trained on basic knowledge about fertilisers, soils, plant nutrients, safe storage of fertilisers, environmental safety and business management skills. 

Agriculturalist and trainer at Kynoch, Schalk Grobbelaar said smallholder farmers in Limpopo are applying fertilisers randomly because they lack knowledge on their correct usage. "Fertiliser increase yields. We fertilise what crops will take away and we put back into the soil but farmers lack knowledge on the balancing fertilisers according to what crops need," said Grobbelaar.

High transaction costs throughout Africa are one of the several barriers to smallholder farmers accessing and using fertilisers, a situation AFAP is working to change through facilitating Private Public Partnerships (PPPs) models which including developing effective fertiliser markets and providing credit guarantee facilities for agro-dealers