Week 45 ending 9 November
Ben Pieters - the Business Support Specialist
Constantly challenging ourselves to deliver more to our clients.
November 4, 2024
Constantly challenging ourselves to deliver more to our clients.
Welcome to 'Navigating GRC' your guide through the intricate landscape of Governance, Risk, and Compliance.
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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.
Combat corruption and crime
Helen Westman of Eversheds Sutherland writes in GoLegal that the surge in criminal activity and looting across South Africa has once again highlighted the serious risks posed by corruption and organised crime to legitimate businesses.
It’s more important than ever for South African companies to remain vigilant and ensure they’re not unwittingly drawn into corrupt activities or benefit from the proceeds of unlawful activities.
In 2024, South Africa ranked first in the crime index among African countries, underscoring the scale of this challenge for businesses.
Compliance with regulatory obligations is critical – not only to avoid legal repercussions but also to prevent your company from unknowingly supporting criminal activities:
South Africa has a robust framework to address corruption and organised crime:
Complying with regulatory obligations isn’t just about avoiding fines – it’s a smart financial strategy that protects your business. By investing in compliance, you’re protecting against potential fines, reputational harm, and costly disruptions.
Speedrunning Energy Infrastructure
Isobel Asher Hamilton reports in the Daily Upside that building and running generative AI tools takes an extraordinary amount of power — enough to upend the modern electricity market — so Big Tech companies have been flocking toward the energy industry looking for ways to shore up future capacity and stay in the genAI arms race.
Big Tech has been trying its hardest to cut out the middleman and strike deals to spin up energy projects, but the energy industry — and nuclear energy in particular — is not built for companies that like to move fast and break things.
Commissioner Mark Christie wrote in the decision: “Were we to approve this proposal at this time [...] we would be setting a precedent that would be used to justify identical or similar arrangements in future cases.”
Evan Caron, co-founder and CIO of climate-tech incubator Montauk Climate: “I think it shows that the regulators are thinking about how to balance significant additional load growth with the needs of the community and focusing on ratepayers, a balanced approach to growth, and making the big data centre operators pay for their fair share.”?
Meta had plans to build an AI data center powered by nuclear power in the US, but they were scuppered by both regulatory and environmental concerns, including the fact that a rare species of bee made its home next to the proposed project site.
We believe the FERC approach is correct. The risk to households would be a proliferation of small nuclear plants outside of the FERC control, owned and managed by Big Tech companies.
Sim card insanity in South Africa
Nkosinathi Ndlovu writes in TechCentral that South Africa’s mobile network operators produce an estimated 180 million Sim cards each year, around three times the country’s population.
This is due to high churn in the mass market, with prepaid consumers regularly switching between networks to take advantage of pricing and special offers. Many of these cards soon up as waste, discarded in the veld or landfill sites.
Sim cards contribute to e-waste in a variety of ways:
Telkom, MTN, Vodacom and Cell C have all reduced the size of their Sim cards to reduce the amount of waste.
Embedded Sims – more often known as eSims – are a digital form of a Sim card that might eventually solve the environmental problem associated with physical Sim cards.
However, the mass market relies heavily on feature phones and basic smartphones, which aren’t yet eSim compatible.
Both Vodacom and MTN said they have programmes where customers can dispose of their Sim waste in environmentally friendly ways, including having the waste picked up from the comfort of their own homes.
Is the high churn in the mass market to blame, or do we blame the mobile network operators for the toxic waste from landfill sites? It remains a risk with no solution in sight.
Starlink: why equity equivalence makes sense
Bruce Hunt of Transcend Capital writes in TechCentral that instead of focusing solely on direct ownership, Starlink could invest in initiatives that directly benefit black-owned businesses and communities.
South Africa’s pursuit of digital inclusion faces a significant hurdle: the high cost of broadband access, especially in underserved communities. Users include rural businesses, farmers and even Municipal and Government Departments.
Regulatory requirements mandating 30% black ownership for international communications companies pose a challenge, which is a shortsighted approach, leaving the very users of such services to bear the brunt.
Instead of focusing solely on direct ownership, Starlink could invest in initiatives that directly benefit black-owned businesses and communities. This approach aligns with the spirit of South Africa’s broad-based black economic empowerment (B-BBEE) policies, which aim to address historical inequalities.
Google established an AdWords training programme for small businesses and set up an R180-million advertising credits fund for small and black-owned businesses as part of their EEP initiatives.
A similar approach could be applied to Starlink, where underutilised bandwidth could be discounted for educational institutions and entrepreneurs from underrepresented communities.
It is easy to fall into the trap of implementing highly structured legal solutions. BEE has no direct benefit to the Government. It only benefits the middlemen.
Real transformation requires a commitment to sustainable, impactful structures that go beyond mere compliance, as is seen in bona fide private equity funds.
Prepaid meter crisis exposes a big R8.6 billion problem
Malcolm Libera reports in BusinessTech that according to the South African Local Government Association (Salga), about half of the prepaid electricity meters in certain metropolitan areas are suspected of being fraudulent or tampered with, a problem contributing to substantial financial losses for local governments.
The issue centres around the critical need for a software update to prepaid meters that use Standard Transfer Specification (STS) technology. This update is essential to prevent an impending system reset on November 24, 2024, a date when the Token Identifier (TID) will reset.
Data collected by Salga indicates that several municipalities are particularly affected by the non-vending meter problem. In eThekwini, for instance, 173,850 meters are classified as non-vending despite there being only 260,000 paying municipal prepaid customers.
It’s essential to note that a meter’s classification as non-vending does not automatically imply fraud; some meters may be faulty, or there may be data discrepancies within municipal records. However, those meters that have been intentionally bypassed or tampered with also fall under the non-vending category, exacerbating revenue losses.
The non-vending meter problem not only compromises municipal revenues but also threatens the broader infrastructure funding that local governments rely on. Once again ordinary households are facing the potential risk of being cut off on 24 November through no fault of theirs.
Employees to return to the office
Bianke Neethling reports in Daily Investor that most corporates in South Africa have compelled their employees to return to the office, resulting in a greater need for office space and a boon for commercial property.
South Africa’s listed property sector has been in the doldrums for the past seven years.? “A toxic cocktail of economic weakness leading to rising vacancies, the devastating impact of Covid-19 lockdowns and higher interest rates, and the added burden of load-shedding and various other costly utility challenges created a perfect storm,” Emira Property Fund CEO Geoff Jennett said.
He said that there are no signs of a real estate turnaround more evident than in the Western Cape, where offices that sat vacant just 18 months ago are now full.
Earlier this year, Discovery Bank’s SpendTrend24 report revealed that over three-quarters of South African office workers now commute to the office at least three days a week, and people are driving more than ever before.
“Rising REIT returns, reducing vacancies, and returning office appetite all point to a sector in recovery mode,” Jennett said.?
Households will spend more on travelling and possibly food as employees return to offices at the instruction of their employers.
Joburg fights back against Eskom threats
Bloomberg reports that Johannesburg, South Africa’s economic hub, criticized Eskom for threatening to disrupt power supply to the city for unpaid bills and said it would take legal action to stop it.?
The state-owned power utility informed the City of Johannesburg and City Power, the municipality’s distribution company, of its intentions on Thursday because of R4.9 billion in outstanding debt.?
The city stopped paying the power utility because of a dispute over billing charges, it said.
Eskom said it would make a final decision on whether to interrupt the power supply on Dec. 12, after hearing from affected parties.?
The city urges Eskom to retract its public notice and engage in genuine, good-faith negotiations to resolve these matters constructively,
Renewal of outages in Johannesburg after more than seven months without blackouts, thanks to Eskom improving the performance of its power stations, would further irk residents already frustrated with the city’s poor service delivery.
Flight safety warning in South Africa
Hanno Labuschagne writes in MyBroadBand that a dire shortage of air traffic controllers and failures to review key flight instrument procedures have raised concerns about South Africa’s aviation safety and operational issues, which are affecting airline operating costs and the economy.
Air traffic control in South Africa is the responsibility of the Air Traffic Navigation Service (ATNS), which falls under the Department of Transport.
Aviation expert Linden Birns explained that a global shortage of qualified air traffic controllers, radar controllers, and instrument flight procedure designers had emerged in recent years. This comes on the back of commercial air transport demand surging at a compounded annual growth rate of 4.5% over the last 20 years.
“This was made worse by the Covid-19 pandemic and the near total grounding of commercial flights,” Birns said. “It led to many experienced people being lost to the industry either by way of retrenchments, early retirement, death or other attrition.”
“The prospect of plying your skills and honing your expertise in some of the busiest air traffic zones is an attractive proposition for anyone wanting to develop their careers,” Birns said.
Countries like Australia and the United Arab Emirates have recruited many South African controllers with lucrative remuneration packages and benefits.
The shortage leads to several processes being introduced.
The lack of proper flight safety protocols directly threatens our this industry.
Let's pray that an accident and lives lost will not be needed to spur the Government into action.
Warning over deadly new fraud trend
Seth Thone writes in BusinessTech that the Association for Savings and Investment South Africa (ASISA) has flagged concerning trends that have emerged in recent years, which have helped exacerbate fraud and dishonesty cases in life insurers and investment companies.
These are murder for insurance payouts and deceased estate fraud. This comes as the association recorded 13,074 cases of fraud and dishonesty in 2023, a 46% increase from the 8,931 seen in the previous year.
The industry lost at least R175.9 million to fraud and dishonesty in 2023, which amounts to a 128% increase from the R77.2 million lost in 2022.
Convenor of the ASISA Forensic Standing Committee Jean van Niekerk said that the trends of murder for insurance payouts and deceased estate fraud are particularly concerning.
Van Niekerk said that committing insurance fraud to benefit financially from someone’s death is not only highly callous but also premeditated to the extreme.
He adds that while criminals often see insurance as a highly lucrative target, cases involving premeditated murder to benefit from an insurance payout are not that common. Out of the 4,130 insurance fraud cases reported for 2023, 14 cases related to the involvement of a beneficiary in the insured’s death.
Van Niekerk says life insurers and investment companies noticed a new trend whereby criminals target deceased estate benefits and investment accounts.
Murder for financial benefit is planned and callous. SAPS and Insurance companies are urged to come down strongly on this.
The Rules for Payroll Taxes
Wilna Scholtz of Kirch writes in Lexology that employers are responsible for educating employees about tax-related issues, including inter alia understanding their IRP5/IT3a certificates, their deductions, their benefits and all the implications thereof. A sound understanding of and adherence to payroll tax withholding requirements is necessary for maintaining compliance and positive labour relations.
On 5 March 2024, the Minister of Employment and Labour announced an increase in the annual earnings threshold from R241 110,59 to R254 371,67, with effect from 1 April 2024.
The earnings threshold is significant because it determines the application of certain provisions of employment legislation including:
Tax structuring of employee salaries (or salary sacrifice) is completely legal, as long as the primary purpose is bettering employees’ remuneration after tax.
Adopting a cost-to-company approach to salary structuring is a good way of ensuring that you legally structure employee packages. Employers need to tread warily around the labour and tax laws.
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