36 47

There is no doubt that in

the last 10 years there has been a

phenomenal growth

internationally in the use of

e-learning (or online learning)

for training purposes, and this trend has

also started to take off in South Africa

more recently with the

improvement in technological

integration, network access

speeds, and general internet

accessibility.

In schools and universities, e-learning is being used mainly to support lectures or tutorials with notes,

readings, assignments, and forum debates. In some Universities, it is also being used to expand attendance at lectures by filming them and broadcasting them live or allowing later streaming access.

From our experience, the growth in e-learning in corporates has thus far been largely in training for compliance/legal purposes or to meet needs like induction, health and safety, and process and product knowledge – what can be referred to broadly as “skills training”. Management training on the other hand, still seems to be provided mainly face-to-face to small groups, on the basis that there is a need for interaction and discussion with an instructor or coach, as opposed to the person learning on their own online.

This is all changing however, with the realisation that ‘blended’ learning - that is, an appropriate mix between online and face-to-face training - not only has a number of obvious benefits, but can actually improve the learning experience, knowledge retention, and practical application in the work place. It can also save costs, by cutting down on the face-to-face instructor-led time, travel costs, and time away from work which is a cost which is not often calculated.

By having access to study materials beforehand, whether these are in the form of reading, videos, interactive e-learning courses, and assessments, the delegates can learn the theory online before they attend the workshop, leaving a lot more time for discussion and practical case studies in the workshop itself. The delegates can also be assessed on their knowledge gained during both the online

study and during the workshops , to see how much they understood and where the gaps still lie.

One of the other major benefits is that once the formal learning program is complete, the staff can continue to access the course content online, refreshing their memories and embedding the knowledge further.

Where they have particular management tasks to carry out, for example running a meeting, delegating, disciplining, planning, etc., they can easily look up this semi-familiar information for just-in-time performance support.

In this way e-learning also becomes the basis of a corporate “e-resource” or toolkit, which not only embeds the management principles they learnt, but also enhances their productivity day-to-day.

So, if you are still stuck thinking of e-learning and face-to-face training as mutually exclusive, think no further – they both work together, and the value that ‘e’ adds takes learning and performance to a new and more productive level. n

E-LEARNING steps up a NOTCH

By Frank SmitCEOBridgewater [email protected]

@frankbridge52

“‘Blended’ learning... an appropriate mix between online and face-to-face training”

36 EDUCATION & TRAININGBusinessBrief December/January 2014/2015

Invest in the global currency of success – quality education and training Education and training is an investment in yourself. A quality qualification that enjoys global recognition is the only capital you need to build a successful career in South Africa or abroad.

That’s why you have to insist on a NQF-registered qualification. The South African Qualifications Authority (SAQA) oversees the development of the National Qualifications Framework (NQF) – a set of principles and guidelines that assists in the creation of a qualifications system for South Africa.

In turn, the NQF ensures that you have access to reputable education and training establishments that provide you with qualifications that are recognised locally and internationally.

Finance your future with the currency that will always add value to your life – a NQF-registered

qualification.

“The SAQA stamp of approval gives me the assurance that my education enjoys international recognition and my future knows no boundaries.”

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[email protected]

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Invest in the global currency of success – quality education and trainingEducation and training is an investment in yourself. A quality qualification that enjoys global recognition is the only capital you need to build a successful career in South Africa or abroad.



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Working towards an MBA for further education and career advancement is a commitment that requires significant sacrifice. Relationships and family life

should not be one of these sacrifices. Many a pathway to a MBA has been strewn with broken relationships that fell victim to the stress. Classes, extracurricular activities and recruitment events keep MBA students away from home and, when they do get home, they have to study and do their coursework.

The average age of an MBA student in SA is about 34, a life stage when responsibilities at work are very demanding and there is invariably a young family at home. These factors can be a source of real stress when coupled with the rigorous demands of the course, creating a potential breeding ground for discontent. Recognising this pitfall, leading business schools of the 21st century are now designing MBA studies that centre around family relationships and aim to produce leaders who take family values into account. Schools like this respect their students’ aspirations to develop personally and professionally, transitioning from company executives to respected business leaders, but are very aware of the importance of nurturing family relationships and maintaining students’ quality of life over the protracted study period.

These forward thinking business schools have started working with the partners of their MBA students from the start to ensure they know exactly what lies ahead. Partners are frequently invited to let management know of any issues that cause conflict along the way, allowing for adjustments to the process to make it more family-sensitive. An approach that is also working very well is creating a “community” among the partners that allows them to support each other.

Many students with young families choose to pursue their MBAs on a part time basis, which enables sufficient flexibility to balance studies with other life commitments. Whether they need family time or are committed to an inflexible business schedule, a part-time MBA can allow students to study in their own time and at any location. This blend of workshops, flexible assessments, teamwork, online and offline self-study remains in step with the realities of most students’ lives as full-time businesspeople, professionals, partners and parents. n

Family friendly MBA?By Jon Foster-PedleyDean Henley Business [email protected]

@HenleyAfrica

The

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T: +27 11 608 1331I: www.davinci.ac.zaE: [email protected]

Contact Details

A TOTAL OF 384 CERTIFICATE 203 DIPLOMA 156 MSC

55 PHD students have graduated during the first 10 years

OF ENROLMENTS ARE STUDENTS FROM BEYOND SOUTH AFRICA’S BORDERS7%

STUD

ENTS 1543

497

undergraduates

postgraduates

A mature student population with

students older than 35 years of age

CUR

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software, intranets and more, and formulate their strategies to include knowledge management, but the actual knowledge transfer needs to happen with people.

Goman has also found that people tend to withhold information and only disclose on a “need to know” basis. In her research, Goman identified the following reasons as to why people withhold information:

• People believe that knowledge is power• People are insecure about the value of their

knowledge• People don’t trust each other• People are afraid of negative consequences• People work for other people who do not tell

them what they know

For key resources a competency framework or specific deliverables where knowledge sharing plays an important role should be developed. This ensures that should any member of the team move on, the knowledge remains within the organisation or team.

For knowledge sharing to become the norm it needs to become part of an organisation’s culture. Leaders need to become accountable for the sharing of knowledge, they need to drive the process and only then will employees start seeing the benefits and follow their lead. n

Gaining knowledge is empowering and creates vast opportunity for improvement and growth.

Unfortunately, not many people are willing to share their knowledge. Corporate South Africa is currently facing a skills shortage and it is vital that a culture of knowledge sharing is created within individual organisations to combat this.

The resources spent on having to formally educate teams on knowledge that should have been passed down from longer-term employees and leaders are substantial and unnecessary. The International Data Corporation developed a metric measure referred to as the ‘knowledge deficit’. It captures the costs and inefficiencies as a result of intellectual rework, substandard performance and inability to find knowledge resources. The knowledge deficit among fortune 500 companies is estimated conservatively at $12bn annually. Knowledge sharing gives employees and leaders valuable insights into their business, helps to foster a trust relationship and empowers others to learn. The advantages and richness of translating what we know to others and then what others share with us is invaluable.”

Research by Carol Kinsey Goman entitled ‘5 reasons why people don’t tell what they know’, states that knowledge management resides with people. Organisations invest millions in technology to support knowledge management with the likes of shared portals, collaborative

By Seugnet van den Berg Managing [email protected]

Many of us have attended a strategy session or listened to an impressive speaker and longed for a method to absorb all of the knowledge presented in an efficient manner.

38 EDUCATION & TRAININGBusinessBrief December/January 2014/2015

KNOWLEDGE transfer LACKING

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inci

Inst

itute

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defin

ing

Man

agem

ent E

duca

tion

T: +27 11 608 1331I: www.davinci.ac.zaE: [email protected]

Contact Details

A TOTAL OF 384 CERTIFICATE 203 DIPLOMA 156 MSC

55 PHD students have graduated during the first 10 years

OF ENROLMENTS ARE STUDENTS FROM BEYOND SOUTH AFRICA’S BORDERS7%

STUD

ENTS 1543

497

undergraduates

postgraduates

A mature student population with

students older than 35 years of age

CUR

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UDEN

TS20

40

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10

20

30

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58% MALE

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Blended learning points the WAY

In South Africa and the greater African continent, the demand for high-quality accredited education radically exceeds supply. The best residential universities can only service students living within their immediate areas, or those willing to relocate to attend on-campus programmes.

Delivering university courses online offers a viable solution to increase access to first-tier

education with Africa’s highest ranking universities.

Distance learning has been around for as long as technology has permitted it, and the global hype around online education is gaining strength. Over 6 million students worldwide are pursuing a degree online. Yet, the unfortunate reality is that for economies of scale and ease of administration, most correspondence and online course providers have sought to replace the role of people in the learning process with insufficient technological alternatives.

Until recently, traditional correspondence courses have been the most feasible option for working professionals to further their studies. In truth, these forms of learning are immensely challenging for most participants. Many experience an ongoing sense of isolation, struggle with the self discipline required to manage their own time, lack motivation and have restricted engagement with their teachers and fellow students. As a result, the statistics for traditional correspondence studies indicate that only a small percentage of learners who start correspondence courses actually end up completing them.

In contrast, participants of blended learning programmes see a near flawless completion rate. Blending learning is new to South Africa, and adopts the use of an interactive online education platform combined with elements of traditional learning.

The success of blended learning lies in the recognition that for most participants, significant learning

cannot occur without support from, and in collaboration with, other people. With advances in digital technologies, it’s now possible to replicate the best elements of the

face-to-face classroom we all grew up in, and

enhance the efforts of people in the learning experience – not replace them.

This design

fosters a vibrant community of

learners who have the opportunity to forge lifelong networks through collaborative project work, extensive debate and social interaction. n

By Rob PaddockChief Academic Officer [email protected]

the private health sector. The other aspect of the inquiry, which is curious is that it commences with an understanding that all South Africans are entitled to access healthcare pursuant to rights contained in the Bill of Rights. This has ramifications for members of the private healthcare sector in so far as constitutional rights are usually exercised as against the Government and not private persons and it is the Government’s obligation to ensure that rights are fulfilled within the means available to the Government to do so. But what is this inquiry intended to achieve? Well, if one accepts that there is a concern about how much healthcare costs in the private sector in South Africa, then one may be driven to the conclusion that the inquiry is to reveal how costs are determined in the hopes of influencing that determination and bringing the costs down. Seems to be rational and logical – not so?

However, the role of the Commission cannot be to determine how much healthcare should be or impose a formulation for the determination of applicable tariffs for healthcare services. In any event, how does one assess healthcare? Is one supposed to determine whether a healthcare system is efficient by the number of people it treats and who enjoy positive outcomes or is itits accessibility based on how much the services it offers cost. The inquiry may reveal much about the private healthcare sector but before we grab our pitchforks and light our torches and head up the hill to confront a monster, perhaps we should be reflecting on what healthcare is as a commodity and, like any other commodity, whether or not you are prepared to buy a high-end or low end-version of it and wish to retain that choice. n

Broadly, commentators and the man or woman in the street fall into two general categories: those who think healthcare

is too expensive in South Africa and those who believe that the quality of private healthcare is commensurate with its cost. Depending on your view, you either fall into one of these categories but sometimes that R1 800 consultation fee for a specialist makes one think about the costs of healthcare in South Africa.

The Commission’s inquiry is to take place on a level more esoteric than necessarily what the average consumer pays for healthcare daily. The Commission has proposed various “theories of harm” pertinent to the private healthcare sector in South Africa. These theories of harm are to be used to examine whether or not the private healthcare sector operates in an anti-competitive manner. The inquiry will also focus only on the private healthcare sector and not what occurs in the public healthcare sector. This is due to the provisions of the legislation governing the inquiry as well as the terms of reference applicable to the inquiry.

This is an interesting aspect of the inquiry in a South African context bearing in mind the significant impact that the public healthcare sector has on decisions by consumers as to where and how they wish to obtain healthcare

services and perceptions concerning the quality of healthcare in the public sector.

Such perceptions drive many consumers to purchase private healthcare in the belief or fear that services available in the public sector are inadequate or beneath acceptable levels and standards. Unfortunately, such motivations are underscored by frequent media reports concerning

a lack of equipment, expertise and infrastructure within the public

healthcare sector in South Africa. That having been said, the Panel governing

the enquiry is not adverse to receiving submissions concerning the role of the public sector and how it affects competition and access to healthcare in @Werksmans

By Neil KirbyDirector: Healthcare & Life Sciences Law [email protected]

The Competition Commission has

commenced with its market inquiry

into the private healthcare sector

in South Africa. The Commission is

proceeding in terms of a statement of issues published

on 1 August 2014. The statement is designed to

explain why the Commission is

interested in examining the

private healthcare sector from a

competition law perspective.

LEGAL40BusinessBrief December/January 2014/2015

An ARM & a LEG?

BLA

CK

MO

ON

136

14

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In 2011, nature photographer David Slater was in Indonesia with the aim of obtaining a winning shot of

a crested black macaque. It really was a case of “lights, camera and action” when one of the animals grabbed a camera and took a host of “selfies”, resulting in the winning shot Mr Slater was after.

The curious case of the “monkey selfie”As to be expected, most of the monkey photographer’s photographs were out of focus and not aimed at anything in particular, but a few fantastic shots were captured when the budding photographer/model gazed playfully into the lens. The incident has recently received much media attention, particularly in light of popular culture’s current infatuation with the “selfie”.

The legal issueWikimedia has added the rather intriguing image to its online collection of royalty-free images and has refused Mr Slater’s requests to remove the image and not use it without his consent. Wikimedia argues that the image is in the public domain as it was taken by a monkey, who is therefore the author of the copyright work but, being a monkey, cannot be said to own it (legal ownership is, after all, a human concept). Mr Slater argues that he made all the necessary arrangements that resulted in the image being taken, incurred significant costs to travel to Indonesia in the first place and should therefore be compensated for the use of this image. He claims that he owns the copyright.

Copyright is an automatically subsisting right. As soon as the work in question

is reduced to a material form, copyright exists, and it is not necessary to obtain a registration for the copyright. Generally, the author of a work, being the one who made it, is the owner of the copyright.

However, the question of authorship can often be more complex than merely considering who “made” the work.

The Copyright Act of 1978 designates the author of a photograph as being the person responsible for the composition of the photograph. This would mean, for example, that it is not necessarily the person who took the photograph by clicking a button, but rather the person who directed the content of the photograph (and therefore whose artistic vision it embodies), who is the “author”.

Although we might have sympathy for him, and empathise as he describes the difficulties faced by nature photographers who might labour for an entire year and come out of it all with just one winning image, there is an argument that the particular work that ensued was not a result of his artistic vision and efforts, but rather what one might call a “happy accident”. Mr Slater did not hand his camera to the monkey, sensing her talent as photographer/model, and did not foresee that a superb selfie would ensue.

Interestingly, in an extensive report of the US Copyright Office discussing federal copyright law, the US Copyright Office has indicated that it will not register works “produced by nature, animals or plants” and, as one of the examples of such works, it mentions “a photograph taken by a monkey”. As the report comes a few weeks after the media storm surrounding this matter, one might conclude that this reference has been made specifically with Mr Slater’s case in mind. n

Copyright in PHOTOGRAPHS?

By Nicole SmalbergerSenior AssociateAdams & [email protected]

@cr8tvedesignlaw

@DLACDH

LEGAL42BusinessBrief December/January 2014/2015

The Proposed Environmental Impact Assessment Regulations and

Environmental Impact Assessment Regulations Listing Notices 1 to 4 of 2014 were published under Government Notices in Government Gazette 37951 (Proposed Regulations) for public comment on 29 August 2014.

Investors have conveyed that South Africa has one of the most cumbersome and over regulated environmental law systems, with a clear need to streamline environmental applications. The Proposed Regulations’ objective is therefore laudable.

They were published in furtherance of an Agreement, the “One Environmental System for South Africa” (the Agreement), in which the Ministers of Environmental Affairs, Mineral Resources and Water Affairs agreed to streamline the environmental legislation.

In line with the Department of Environmental Affairs’ intention that the environmental authorisation process should be completed within one year, the Proposed Regulations include dramatically reduced timeframes for various application processes. Whilst these shortened timeframes could fast-track development, they have been

criticised by various environmental non-governmental organisations. Their concern is that the Proposed Regulations threaten to erode South Africa’s environmental management, as it may be difficult to fully assess potential environmental impacts in the required scientific investigations conducted as part of an application for environmental licences. This could have a knock-on effect on the quality of the mitigation measures proposed by specialists.

Despite the shortened timeframes, the Proposed Regulations do make allowance for extensions of time to be granted. If the scope of work must be expanded, based on an environmental impact assessment’s outcome and which could not be anticipated prior to their compilation, or if an applicant can demonstrate exceptional circumstances, the competent authority may extend the prescribed timeframe to an agreed period.

Amendments to the National Water Act (NWA) and specific Environmental Management Acts (SEMA)s have, however, not yet been promulgated to give effect to this intended streamlining. Any delays by the legislature in effecting these amendments could undermine the effectiveness of the Proposed Regulations. n

By Sandra GoreDirector: Environmental DepartmentCliffe Dekker [email protected]

By Gareth HowardCandidate AttorneyCliffe Dekker [email protected]

One ENVIRONMENTAL system required!

Further draft Regulations have been published under the National Environmental Management Act, 1998 (NEMA), aimed to streamline and expedite the applicable time frames for environmental licensing requirements.

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Do you want to benefit from Israeli technological advances?Members of the SAICC, through the Chamber’s Israeli affiliations, are in the unique position of being able to access some of the finest medical, agricultural and scientific technological innovations and advances coming straight out of Israel, the Silicon Valley of the Middle East, Europe and Asia.

Opportunities abound for offering their companies cutting-edge technology which places them far ahead of their competitors.

In the words of Bill Gates: ”Israel is a major player in the high tech world, which explains the considerable contribution of the country not only in the field of high tech start ups but also through the R&D centres for companies like Microsoft, Intel and Motorola. The level of technological integration in the country is evident. The use of fast speed internet, lap tops and cell phones is advanced here and puts Israel at cutting edge of world technology. There is a greater concentration of talented high tech manpower in Israel in comparison to other countries – almost to the extent of Silicon Valley,”

You can access all this - and more – by becoming a member of the SAICC

Do you want to network with top South African companies?Do you want to benefit from numerous marketing platforms to promote your company, including magazines,digital newsletters, a website and advertising campaign packages?


Do you want to attend regular tropical talks by local and international specialists; and/or regular executive breakfasts with keynote guest speakers, where you can mingle with key decision makers and influencers; and/or networking breakfasts/cocktails in order to generate new business; and/or regular seminars which incorporate topical presentations and panel discussions?

You can do all this - and more- by becoming a member of the SAICC








www.saicc.co.za

Israel technology...

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Public and private entities creating partnerships is gaining strength. Typically,

public-private partnership (PPP) arrangements are structured in one of four ways: the management of existing public facilities by a private entity for a predetermined time; a private entity receiving concessions in return for a substantial investment in an existing public service and entering into an operation contract for its provision and sale to the public; a private entity financing, constructing, operating and managing a utility for a long period before transferring it back to a public authority; and a private entity taking an equity stake in a state-owned utility through part-

ownership with other companies and/ or the state, or owning the utility outright.

The private sector helps to fill a vacuum in the provision of public services, the need for which has inexorably increased as a result of the current economic growth of certain African states. The public sector may need foreign investment from international operators providing the required capital to build and run public utilities at a reduced cost to the state.

Advantages for the state are that risks of delivery are transferred to the private partner and the state is able to fund more infrastructure projects.

The private partner benefits from full government support and approval, the certainty of long-term economic activity, an assured client base and an enhanced profile through its association with the state.

PPPs depends on the success of initial projects, the proper development of the regulatory environment and private sector investor confidence in the political stability of a country. n

POTENTIAL in PARTNERSHIPS

By Spencer NaickerSenior associate

[email protected]

@webberwentzel

BusinessBrief

LEGAL 43December/January 2014/2015

BusinessBrief

TAX44December/January 2014/2015

The MTBPS states that: “Government proposes a structural increase in revenues over the medium term. Policy

and administrative reforms will raise at least R12bn in 2015/16, R15bn in 2016/17 and R17bn in 2017/18. The details of proposed changes will be announced by the Minister of Finance in February when he tables the 2015 Budget in Parliament”.

It is not clear whether these increases were calculated in nominal or real terms, i.e. as nominal amounts for each of the next three years, or to be adjusted for inflation in the period to the relevant fiscal years.

According to research, the South African fiscal cliff is described as the point where civil service remuneration plus social grant expenditure equal government revenue.

If the amounts in the MTBPS are stated in nominal terms to be adjusted for inflation over the three fiscal years, the funding need increases considerably (assuming an inflation rate of 6% per annum): R12.4bn (rather than R12bn) in 2015/16; R16.4bn (rather than R15bn) in 2016/17; and R19.7bn (rather than R17bn) in 2017/18. The total funding need then amounts to R48.5bn, rather than R44bn as stated.

For purposes of the analysis, the amounts stated in the MTBPS are the actual amounts required in the next three fiscal years, for a total funding need of R44bn. A combination of tax increases and adjustments can deliver an increase of R44bn in tax revenue.

The three main sources of tax revenue are personal income tax, company tax and value-added tax (VAT). Increasing the government’s tax revenue should therefore focus on these three sources, although other tax revenue sources can also make a contribution. Tax increases are not favoured and a reduced expenditure to avert a fiscal cliff in South Africa’s fiscal position is preferred. There is an unwillingness on the part of government to make the necessary

expenditure cuts. Such spending cuts should include a reduction in the size of the Cabinet and the number of Deputy Ministers, as well as a reduction in employment numbers in the civil service.

As an alternative, the ability of the government to raise taxes was assessed. In the calculation of an increased tax burden, a 10% elasticity in the reduction of the tax base owing to the increased tax burden was assumed. In respect of personal income tax, two additional marginal tax brackets were introduced: 45% for taxable income above R1 million per annum and 50% for taxable income above R2mn per annum.

Based on the revised tax structure and a number of assumptions about other tax sources, tax revenue increases were assumed. These increases include the raising of the company tax rate to 30% and increasing VAT by one percentage point to 15%. However, in each instance a reduction of 10% in the tax base is assumed, which reduces the extra tax revenue collected. On this basis an additional R44bn in revenue in nominal terms can be raised.

The exception is customs duties. In this instance practically the whole amount collected is paid to Botswana, Lesotho, Namibia and Swaziland, South Africa’s partners in the Southern African Customs Union (SACU). This is one area where a revision is called for. Given South Africa’s own fiscal needs, it is clear that this subsidisation of South Africa’s SACU partners can no longer be afforded.

The analysis shows that the government can use the approach to raise an amount of R44bn. This will not be sufficient to avert a fiscal cliff. A fiscal cliff can only be averted if government restricts growth in civil service employment with the objective of reducing employment numbers over time and limits civil service remuneration adjustments to the rate of inflation. The trade union demand of an increase of 15% can simply not be afforded. n

Fiscal cliff LOOMS!

By Prof. Jannie RossouwHead, School of Economic

SciencesUniversity of the

[email protected]

In the 2014 Medium Term Budget Policy Statement (MTBPS)

the intention to increase the tax

burden in the next three fiscal years

was announced.

@WitsUniversity

Dividends Tax has been payable since 1 April 2012. Prior to this, resident companies that

declared dividends were subject to Secondary Tax on Companies (STC). Under the Dividends Tax regime when a company pays a dividend it is, subject to certain requirements, allowed to deduct unused STC credits from the dividend amount in calculating the amount subject to Dividends Tax. Some changes are in the pipeline though, but for those who need a better understanding, here are some points to note;

1) What is STC credit?If a company had an open “dividend cycle” at the inception of Dividends Tax the cycle was deemed to have ended on the day before such inception and that cycle is known as the “final dividend cycle”. This meant that at the end of the “final dividend cycle” a

company could have had a deemed dividend accruing from the penultimate “dividend cycle” together with other dividends which accrued to it in the “final dividend cycle” which had not been set off against dividends declared. This unutilised balance is referred to as an “STC credit”.

2) How is STC calculated?The period between two successive dividends declared by a company is referred to as a “dividend cycle”. STC is paid on the company’s “net amount” of dividends in a “dividend cycle” where the “net amount” was the amount of the dividend declared by the company less the amount of dividends that accrued to the company in that

“dividend cycle”.

Group company dividends on which no STC was paid could not be deducted in establishing a “net amount”. Where the amount of dividends accrued exceeded the dividend declared in a “dividend cycle” the excess could be carried forward to the company’s next “dividend cycle” and was deemed to be a dividend that accrued to the company in that next cycle.

3) What about Dividends Tax exemptions?Where a company’s shareholder is an individual this is fair and equitable but where the shareholder is a resident company it is exempt from Dividends Tax in any event. This means that where a dividend paying company utilises an STC credit and the dividend is paid wholly or partly to a resident company, the STC credit, or portion of it, would have effectively been lost. For this reason the recipient resident company is allowed, subject to certain conditions, to add the STC credit that was applicable to its dividend portion to its own STC credit balance.

4) What’s coming?On 1 April 2015 a company’s STC credit will be deemed to be nil. Companies are therefore reminded to calculate their STC credit balance and use it before this date. Companies should also consider whether companies in which they own shares should pay dividends and pass STC credits up the line. n

BusinessBrief

TAX 45December/January 2014/2015

By Mike DingleyNational Head of [email protected]

@Mazars_SA

Understanding STC credits

However, as African markets offer exciting growth and investment opportunities for

investors, there are also a number of common challenges faced by inbound multinationals with regards to Compliance and Reporting advancements.

Broadly these challenges are the reliance on manual tax compliance, the lack of precedent (and consistent application thereof), language barriers, local accounting requirements and an increase in tax

audits.

Whilst there is a shift to electronic tax compliance (for example in Kenya) there is still a strong reliance across Africa on manual filings, where taxpayers or their representatives have to physically complete and file returns. Added to this would be the physical payment process where cheques need to be drawn and handed in at a Revenue Authority office. This becomes particularly challenging when a multinational does not have a physical presence in country, a growing trend as businesses transform their finance functions and move resources to Centres of Excellence or low cost shared services centres.

The second category would be the lack of available court precedent to manage a complex dispute with cross border legislation.

Thirdly, language barriers are often difficult to overcome and in many instances financial statements and tax returns need to be filed in local languages. Coupled with this

is the fourth challenge, namely that many countries in Africa have different financial statement reporting requirements (such as OHADA and local GAAP).

Companies starting to operate in a new country need to open sales and marketing operations in country, while outsourcing non-core finance and tax functions to a reputable in country service provider, which can protect a company’s brand in country by ensuring compliance with the local laws and regulations.

A good mantra for companies that are transforming their finances to fit the new globalised economy is “standardise, digitise, globalise.” This process should include making all components of compliance and reporting global and efficient, not just the income tax returns. Almost two-thirds of companies’ surveyed by EY have established global processes for tax accounting, but many have omitted income tax compliance, value added tax returns, financial statements or some other important filings.

Fortunately, most finance executives are aware of the risks. The survey shows that 69% think that failing to globalise compliance and reporting will lead to incomplete or inaccurate data, 68% think it will add to the cost of compliance and reporting, 57% think it will result in missing deadlines and incurring penalties, and 50% think it will lead to an increased tax burden.

The practical challenges of operating across Africa are there, but can be overcome using local knowledge and lessons learned. n

Compliance & reporting IMPACTS

According to EY’s 2014 annual Africa Attractiveness survey, Executing Growth, Africa’s share of global foreign direct investment (FDI) projects reached the highest level in a decade.

By Warren TaylorGlobal Compliance & Reporting Leader for [email protected]

BusinessBrief

TAX46December/January 2014/2015

@warren_taylor40

“Standardise...Digitise... Globalise”

South Africa, like many countries around the world, has areas which suffer from urban decay. In 2003 the Urban Development Zone (UDZ) tax incentive was

introduced under section 13 of the Income Tax Act, 1962 to promote urban renewal in demarcated areas. The UDZ incentive provides for an allowance for the taxpayer which when claimed, reduces his taxable income. This deduction was initially only available until March 2014 but has now been extended to March 2020.

Any person who meets the requirements of section 13 is eligible to claim the UDZ incentive. Firstly, the person must have erected, extended, added to or improved a commercial or residential building. If only part of a building is erected, extended, added to or improved then the floor area must be at least 1 000m2 to qualify. The person may, subject to certain requirements having been met, also qualify if the building was purchased from a developer who has not previously claimed the UDZ deduction.

The building in question must be located in a demarcated UDZ area. The demarcated areas have been published in the Government Gazette and are available on the National Treasury website. Furthermore, the building must be used by the taxpayer solely for the purpose of trade. The deduction only commences once the building has been brought into use by the taxpayer and no longer applies when the trading activity ceases. The person claiming the UDZ incentive must own the building. A lessee would therefore not usually qualify for the deduction unless the lessee was responsible for the improvements or extension.

If the taxpayer meets the UDZ requirements an allowance is then determined in accordance with subsections (3) or (3A). For example, where a new building is erected, the incentive will be calculated at 20% of the cost. In addition 8% of the cost can be claimed in each of the 10 succeeding years of assessment. Therefore, if an investor purchases land in a UDZ area for R5mn and constructs a commercial building for R100mn in 2012 but commences trade in 2014, then the investor may claim 20% of the construction costs in 2014 (i.e. R100mn x 20% = R20mn). In addition, the investor can claim 8% (i.e. R8mn) for each of the next 10 years of assessment. The R10mn for the purchase price of the land will however, be disregarded when calculating the incentive. n

The urban INCENTIVE

By Graeme PalmerDirector in the Commercial Department Garlicke & Bousfield [email protected]

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