Week 43 to 26 October
Ben Pieters - the Business Support Specialist
Constantly challenging ourselves to deliver more to our clients.
Ben Pieters - the Business Support Specialist
Constantly challenging ourselves to deliver more to our clients.
Welcome to 'Navigating GRC' your guide through the intricate landscape of Governance, Risk, and Compliance.
Corporates and homeowners, stay ahead of the curve with expert insights, practical strategies, and industry best practices.
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Please note that we identify the author and the name of the publication the article appeared in, and directly extract aspects we believe would reflect the idea or thought expressed therein.
20 years of pension savings down the drain?
Kirsten Minnaar writes in BusinessTech that the two-pot pension system has revealed that more than 3,000 companies were exposed when workers, allowed to access part of their pension, discovered that no funds were available. Tribute to their workers’ pension funds, leaving employees without retirement savings or benefits.
These employers have failed to contribute to their workers’ pension funds, leaving employees without retirement savings or benefits.
Some of these employers have not contributed to their workers' pension funds for as long as 20 years.
“When you have almost everyone claiming at the same time it starts to expose those deficiencies in the system,” SABC Economics editor, Tsepho Mongwai, said.?
He explained that around R21 billion in withdrawals have been made currently, and that figure will likely go even higher, with SARS set to generate an estimated R5 billion.?
“The reality is you have companies, including to a large extent municipalities, that often experience cash flow challenges,” Mongwai said.
As a result, many of them haven’t been able to make the pension fund contributions they are required to.?
According to Pension Funds Adjudicator Muvhango Lukhaimane, said that "companies haven’t taken the necessary steps to prevent this problem." Many pension fund rules provide employers with relief if they find themselves in financial difficulties.
However, many simply do not bother to initiate the process and ask for the relief.??
Lukhaimane explained that the lack of monitoring from the side of pension funds is especially concerning. “The funds are not doing their enforcement work the way that they’re supposed to do it,” she said.
Non-payment of pension contributions is now considered a criminal offence, and those responsible may face jail time. Members should complain to their pension fund and, if the matter isn’t resolved, take the matter up with the Pension Funds Adjudicator.?
These employees, through no fault of theirs, are left destitute and will become dependent on the state.?
Taxpayers foot the bill for construction mafias
Bianke Neethling reported in Daily Investor that South African taxpayers bear the brunt of the damage caused by construction mafias in the country, as essential infrastructure projects are delayed or remain incomplete.
This is according to legal firm Cliffe Dekker Hofmeyr’s director of dispute resolution, Sentebale Makara, who said the construction mafia is a real threat to construction companies and vital infrastructure development across South Africa.?
They do so on the premise that there is a legislative requirement – set out in the Preferential Procurement Regulations – that 30% of public sector projects must be subcontracted to local participants.
The Mafia has evolved into not necessarily being bothered with actual work, but rather through extortion of demands for security contracts or even trying to elicit project protection fees.
In 2019 about R60 billion in losses were caused, with over 180 construction and infrastructure projects halted or disrupted at any given time during the assessment period.? The construction sector itself has been severely impacted, with a 44% decline in size over the past six years due to rising crime and corruption.
The construction mafia’s expansion into the mining industry is particularly concerning due to the sector’s vital role in South Africa’s economy.?
WBHO chairman Louwtjie Nel said there is an urgent need for South Africa to prioritise upholding the rule of law.? “The adverse effects of not doing so are becoming increasingly obvious,” Nel said.
“Crime and corruption function as significant deterrents to business and investor confidence, demanding swift and decisive action. We strongly urge the government to combat the growing tide of criminal extortion and corruption that is affecting South African society, particularly within the construction sector.”
Yet another facet of the economy where ordinary households bear the brunt.
The Transaction Did Not Flow
Harold Jacobs and Luyanda Lebepe of Weksmans report that the majority of judges of the Supreme Court of Appeal upheld an appeal against an order granted by the full bench of the Western Cape Division of the High Court (“the high court”).
The issue on appeal was whether an agreement for the purchase and sale of an immovable property could be revived after the lapse of a suspensive condition contained therein.
The central issue before the SCA was whether the second addendum, signed after the failure of the suspensive condition, effectively revived the original agreement or whether a new agreement was required.
The majority of judges held that while it was clear from the evidence that the parties intended to ‘revive’ the sale agreement, the respondents had laboured under the erroneous impression that they could simply extend the time for the fulfilment of the suspensive condition without appreciating that a new contract had to be concluded.
In this regard, the court relied on the unambiguous precedent that upon the failure of a suspensive condition, a contract lapses and is of no force or effect.
A suspensive condition cannot be waived or extended after the time for the fulfilment of the condition has passed; an agreement which has lapsed due to non-fulfilment of the condition cannot be ‘revived’; and finally, in such circumstances, the parties are required to enter into an entirely new agreement.
The finding of the SCA is clear and builds on well-established principles. We all have to take note of this principle.
Annual submissions to CIPC
This paper deals with your legal obligation to annually submit certain forms/declarations to CIPC. Several abbreviations are used in this circular and it's best to list these at the beginning for ease of reference.?
Definitions used in this Circular:
AD means the anniversary date of a company, i.e. the date on which it was registered in the books of CIPC;
AFS means the annual financial statements whether or not audited or independently reviewed;
AR means the annual return of the company; Act means the Companies Act 71 of 2008 as amended;
BO means beneficial ownership return;
CC means a close corporation;
Checklist means the compliance checklist to be submitted;
CIPC means the Companies and Intellectual Property Commission;
FATF means the Financial Action Task Force;
SARS means the SA Revenue Services.?
Annual submissions to CIPC?
CIPC launched a major new campaign in September 2023 to gather the details of the ultimate beneficial owner(s) of every single company or CC on its books. This was in response to the 2023 greylisting by FATF requiring stricter controls to combat money laundering and terrorist financing to be implemented.
CIPC has since streamlined their requirements by linking it to the AD of each legal entity and covering five specific outputs required of the directors. We deal with each of these below. We believe that working with and understanding these new CIPC regulations is crucial for businesses operating in South Africa.
These enhanced measures aim to strengthen transparency around company ownership, beneficial interests and the flow of funds into/out of corporates.
Similar enhancements were also introduced by SARS.
Annual Return?
Section 30 and Regulation 30 of the Act make provision for filing of the AFS whereas Section 33 makes provision for the filing of an AR together with FAS. The AR of a company involves both the payment of a fee and a return that must be filed within 30 days of the AD and should cover:
? an iXBRL filed in the case of an audit or independent review of the AFS of the company; or
? a FAS declaration - where no audit or independent review was undertaken - instead of the AFS which is completed online and filed with the AR.
The annual fee payable will be calculated and displayed online.
CIPC Compliance Checklist
The directors of the company are responsible for the completion, confirmation and filing of the Checklist. This was introduced per Notice 52 of 2019 and became mandatory in January 2020 for companies whose AFS were audited or independently reviewed.
The Checklist details the 24 sections thereof, is completed online and has to be filed within 30 days of the AD. A compliance year covers the preceding 12 months and terminates on the AD. The online form will automatically default to the most recent year to be submitted. It is an onerous document to be completed and we propose that the board delegates the responsibility to a director or senior official who is required to report back and table a copy of the return issued by CIPC, once filed.
The person who completed and submitted the return will receive emailed confirmation from CIPC once filed.
iXBRL submissions to CIPC?
The iXBRL instance compiled from the audited or independently reviewed AFS of the company has to be filed within 30 days of the AD. In those cases where:
? the client submits the iXBRL instance to CIPC themselves, we recommend that the Checklist be completed at the same time;
? we submit it to CIPC on behalf of the client, we require that the Checklist be submitted by the company directly to CIPC. We will confirm the submission to CIPC of the iXBRL instance.
As part of the iXBRL conversion we undertake, a schedule of additional details is required to also be submitted when requesting the compilation of the iXBRL instance.
This is typically issued as an annexure to the outline / quote we issue. Over time some details were found not to be required anymore, and the schedule titled “iXBRL – details of the mandatory and key information required” was recently simplified.
Beneficial Ownership confirmation?
Notice 26 / 2024 issued by CIPC requires that all companies and CCs must file a BO declaration and security register, or BO interest register (as applicable), within 30 days after the AD of the legal entity.
Non-affected entities are required to disclose beneficial ownership per Regulation 32B of the Companies Regulations and Affected companies, as defined in the Act, are expected to enter the information of the persons who hold a 5% or greater beneficial interest in the securities of the company per Regulation 32A of the Act.
An affected company is a:
? public company;
? state-owned company; or
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? private company that is a “regulated company” for take-over law purposes – namely where more than 10% of the shares in the company have been transferred amongst non-related persons within the preceding 24 months.
Subsidiaries of regulated companies are also affected companies.
In our experience, the same return could be used for non-affected and affected entities.
Please revert if you have any questions.
Deadline looms for massive prepaid meter update
William Brederode writes in News24 that In one month, millions of prepaid electricity meters in South Africa are vulnerable to going dark due to a date rollover issue. The possibility of wide-scale meter fraud means it's not clear how many paying customers could be affected.
A date rollover issue affecting the vending system of STS-prepaid meters means that there will be no new electricity token combinations that can be used to vend electricity beyond 24 November unless the meters are re-coded.?
The update, known as the token identifier (TID) rollover, is necessary as a result of the design of the vending system. It is not being caused by a failure or mistake.?
If a meter is not updated, it will not be able to load new electricity tokens beyond 24 November.
Crucially, meter owners are dependent on authorities to generate and provide them with update tokens, which are called key revision numbers.
The Standard Transfer Specification Association (STSA), the body that maintains the vending system, has been raising awareness about the issue for several years, directly contacting almost every authority in the world with an electricity supply area using STS technology to warn them of the TID rollover and urge them to prepare.
Eskom’s dashboard shows that there are still 2.8 million meters, or over 40% of the meters under Eskom control, operating on the operating standard that will stop working next month.
There is a significant chance that many of the 2.8 million meters that are not operating on the new standard have been bypassed or meter owners are committing a type of fraud known as ghost vending.
One potential benefit of the rollover is that ghost vending is set to come to an end after the rollover date.
Some fraudsters have got their hands on the encryption technology needed to generate new electricity tokens. This means they can generate and distribute electricity credits through non-official channels, denying authorities the revenue.? When the vending system moves on to a new standard, the stolen encryption technology won’t work anymore.
South Africa’s traffic fine change nightmare
Hanno Labuschagne writes in MyBroadBand that the rollout of the Administrative Adjudication of Road Traffic Offences (Aarto), which will bring sweeping changes to traffic fines and penalties in South Africa, has dragged on for more than two decades.
Legal action, administrative challenges, and resistance from certain municipalities concerned about the impact on their fine revenues have hampered Aarto’s implementation.
The first big difference it will make to how traffic fines function in South Africa is that it will separate violations between minor infringements and serious offences. It also introduces a demerit point system similar to those used in countries like the United Kingdom.
Continued violations could eventually lead to the full cancellation of a driver’s licence.
Aarto was originally passed into law in 1998 and has been used to deal with traffic infringements and offences in Johannesburg and Tshwane since 2008.
Everywhere else in South Africa, road traffic law violations are still dealt with in terms of the Criminal Procedure Act. All these violations are regarded as criminal offences and are prosecuted by the National Prosecuting Authority, most often in the country’s Magistrate Courts. Aarto decriminalises all but the most serious traffic law offences and converts them into infringements, which are dealt with administratively by default.
Civil society organisations, including the Organisation Undoing Tax Abuse (Outa), Fines SA, and the Automobile Association of South Africa, have raised serious concerns over this change. They have argued that the real purpose of the law is to expedite the collection of traffic fine revenues and impose an ominous administrative burden on those accused of violating traffic laws.
“When the offence is dealt with administratively, the motorist concerned does not have the right to be presumed innocent,” Fines SA said.
According to the National Automobile Dealers Association (Nada) chair Brandon Cohen, the implementation of Aarto and the Aarto Amendment Act has been pushed back to mid-2025.
The transport department has yet to appoint members to the Appeals Tribunal, which was supposed to be fully functional in the second phase of the rollout.
Outa argues it will be challenging to onboard all 245 of the country’s municipalities and seven major metros, as some are concerned about the RTIA’s 50% slice of traffic fine revenues.
Why the Gautrain doesn’t care if no one uses it
The Gautrain has a built-in Patronage Guarantee (PG) system that ensures it’s paid enough money to cover all its monthly expenses even if it doesn’t carry a single passenger.
The PG is a mechanism that compensates the Gautrain for low ridership levels. It is backed by the Gauteng Provincial Government (GPG) and, by extension, funded by the province’s taxpayers.
According to the Automobile Association (AA), the PG cost citizens R2.79 billion just in the 2023/24 financial year alone. Add this to the R13 billion bill racked up by the PG between 2013 and 2022, the AA estimates that Gauteng residents have collectively spent approximately R16 billion on keeping the commuter railway afloat.
This has come at the cost of service delivery and the expansion of other, more affordable public transport services to underserviced areas, said the AA.
“It is quite clear that Gautrain failed to deliver on its ridership projections from the outset and now the burden of funding falls on taxpayers – the majority of whom don’t even use the system because it’s too expensive to do so. They are, in effect, subsidising a system that caters to the elite who are already mobile,” it said.
The current Gautrain concession expires in 2026, after which the system will be handed over to the GPG which intends to expand it from the current 80km in length to a substantial 230km at a cost of R120 billion.
Earlier in 2024, the GMA said that the expansion would connect previously underserved communities to the country’s main economic hubs, which is likely to lead to elevated rider figures. To incentivise the use of the railway by individuals in these areas, the GMA also plans to introduce special reduced fares for select travellers, including?indigent families, pensioners, and scholars.
Yet another taxpayer-funded scheme that serves only the wealthy.
Posts for teachers in the spotlight
As the minister of finance’s Medium Term Budget Policy statement approaches this week, some provinces are hoping for funds to prevent or reverse cuts in teacher posts. But others are less optimistic.
The implementation of the national wage agreement concluded in March 2023 has left provinces battling to pay increased public sector wages, with some announcing cuts in posts, notably for teachers. The two-year?agreement?was for a 7.5% increase in 2023/4 and an inflation-linked increase in 2024/5. Inflation is currently running at 3.8% a year.
Education MEC David Maynier said “the National Treasury indicated that it would NOT provide all of the extra funding required for the increases, despite the national government agreeing to the wage increases.
As a result of the wage increase, the Gauteng Department of Education faces a R4.5 billion budget shortfall, but the provincial education department has chosen to cut school transportation and nutrition programmes?to save 3 400 teacher posts.
KZN is reported to be at risk of 10sing 11,000 teacher posts due to a R4 billion budget shortfall.
Mpumalanga will not be cutting teacher posts.
But in the Eastern Cape, the provincial department’s media liaison officer Malibongqe Mtima believes there is “no hope” that the medium-term budget will allocate additional funding for education.
But the 2023/24 national budget was determined before the wage agreement, and as a result, the funding needed for the higher wages was not factored into the equitable share.
“In the Western Cape, we decided to protect vital learner support programmes which overwhelmingly support children in poorer communities, such as school feeding, learner transport, and funding for our schools’ daily expenses,” Maynier said.
The Western Cape government has decided to push for no increase in public sector wages for the next three financial years.
In a?statement on 17 October, the provincial cabinet said it would “support a 0% wage increase for public servants and politicians for the next three financial years, given South Africa’s severely constrained financial environment”.
The statement said the demand by public sector unions for a 12% increase was “unaffordable”.
Big changes for marriage laws affecting surnames
Kirsten Minnaar writes in BusinessTech that in a recent landmark ruling, two husbands won the right to adopt their wives’ surnames. This groundbreaking judgment by the Bloemfontein High Court has sparked widespread debate.
The couples took the Department of Home Affairs to court seeking an order to declare section 26(1)(a)-(c) of the Births and Deaths Registration Act unconstitutional.?
They argued that
The Court agreed that the Births and Deaths Registration Act was discriminatory based on gender, and gave Parliament two years to amend the Act.?
Legal expert, Richard Chemarly, explained that husbands wanting to take their wives’ surnames can either “wait a bit, or they can just hope and try with their local Home Affairs department.”?
“The law has changed, but the provision changing the law has been suspended for two years to allow parliament and the presidency to remedy the issue,” Chemarly explained.
While the judiciary has the power to tell Parliament that a certain law is not compatible with the Constitution, it does not have the power to say how the law must be changed, specifically.?
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