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National Treasury and the South African Revenue Service (SARS) provided important feedback at the recent sitting of the Standing Committee on Finance as part of the parliamentary process regarding the much anticipated two-pot retirement system.
We are living in a time of economic uncertainty. Inflation is skyrocketing, Eskom is loadshedding, and food prices are the highest they’ve been in 14 years. These conditions are putting a lot of strain on business owners, and some tough decisions regarding the future may need to be made.
The proposed "two pot" retirement system would allow people to have the best of both worlds – early access to a portion of their retirement funds, should it be necessary, while still preserving a significant portion for when they retire. The changes are set to take effect on 1 March 2024, but without further draft legislation being published in February, there are concerns that industry players will not have time to implement changes to meet this deadline.
Rolling blackouts and the recently imposed 18.65% Eskom tariff hikes from April next month are likely to place additional stress on the South African consumer and businesses to the extent that further bankruptcies are inevitable. With the prospect of higher interest rates, low growth and still high inflation, many companies could face corporate failures particularly in the early part of 2023.
Given the current high cost of living and uncertain economic environment, being caught off guard by an unforeseen life event may place one in a far worse financial position if no insurance policies are in place to safeguard themselves and their assets.
The process of ‘business rescue’, as outlined in the Companies Act, has become heavily stigmatised in South Africa, leading to undue strain on corporates and an overall less healthy business environment. Companies, like people, can get 'sick' from time to time. When this occurs, a business is said to be suffering from 'financial distress', a condition caused by various factors.
As South Africa braces itself to reach the peak in the fight against the coronavirus pandemic, Government statistics have shown that the country could reach 400,000 infections by mid-July. While lockdown conditions may have been eased to level 3 for now, South Africa, and much of the world, is nowhere near the end of the pandemic, and the economic and health repercussions of COVID-19 are going to persist for months to come.
July is savings month in South Africa. This is a month where national savings awareness campaigns are run to look at fostering a culture of savings for South Africans. Historically, post the Global Financial Crisis of 2007-2008, the South African household savings ratio (the income saved by households during a certain period of time), has also mostly remained in negative territory.
High on the agenda of Finance Minister Tito Mboweni’s supplementary budget speech on Wednesday 24 June was the need to support the economy as it gradually reopens as well as to get businesses moving again. Notably, Mboweni announced amendments to the COVID-19 guaranteed loan scheme that was introduced at the beginning of lockdown, offering some relief to struggling businesses.
The COVID-19 lockdown has battered the already ailing South African economy. Despite the pending lift of the lockdown, companies will likely battle to stay afloat as the full impact of the pandemic plays out. Companies with insufficient liquidity face a high risk of collapse.