Cecil Kilpin | December 2016 Newsletter - Cecil Kilpin | CA(SA)

Important Update on Corporate Governance

On 1 November 2016, the Institute of Directors in Southern Africa (IODSA) released the final King IV™ Report on Corporate Governance for South Africa 2016. The latest report brings South Africa up to date with international corporate governance codes and in line with the shift towards inclusive, sustainable capitalism and integrated reporting.

King IV™ completely replaces King III™ and is effective in respect of financial years commencing on or after 1 April 2017. This means that companies with a year-end of 31 March 2018 will be the first to report under the new code.

South Africans are becoming increasingly aware of the importance of ethical leadership in society. The report highlights the importance of ethical and effective leadership in organisations of all sizes, listed and unlisted. King IV™ is particularly significant for the public sector because, for the first time, it has been designed to be applied by most types of public sector entities, including municipalities and state-owned entities.

King IV™ has been simplified and made more user-friendly. The previous code contained 75 principles, the new code consolidates these into 17 principles. Governing bodies have more flexibility when implementing the recommended practices, but are required to be transparent when disclosing how they have achieved their goals.

King IV™ places the onus on the governing body (the board in companies) to take a much more hands-on approach in applying the code. Instead of the old ‘tick-box’ method, the governing body is required to pro-actively apply the principles of the code and explain the outcomes.
King IV™ is voluntary (unless prescribed by law or by a Stock Exchange listings requirement). Some of the principles have been legislated.

The report includes the code, as well as helpful, separate sector supplements for Small and Medium Enterprises, Non-Profit Organisations, State-Owned Entities, Municipalities and Retirement Funds. King IV™ is an essential tool for successful, responsible and effective corporate governance and all organisations and governing bodies should follow the principles and practices laid down in this document.

It is important that you become familiar with King IV™ and start planning how to apply it in your organisation.

Should you require any assistance or further information on this topic, please contact our offices.

National Minimum Wage Proposed

On 20th November 2016, Deputy President Cyril Ramaphosa, released the minimum wage report which proposes a National Minimum Wage (NMW) of R3 500 per month (R20 per hour).

The minimum wage report was presented to the National Economic Development and Labour Council (NEDLAC) by the panel appointed to advise on the level at which South Africa’s national minimum wage should be set.

Currently, minimum wages in South Africa are fixed by sector, or established through bargaining councils led by unions. This has allowed for greater flexibility when agreeing rates of pay, but has also resulted in disruptive strikes and time-consuming wage negotiations.

It is hoped that a NMW figure will help to resolve ongoing labour issues in the country. Unemployment and labour problems are currently under the microscope as they are an important factor being considered by credit rating agencies. Their decision on whether to downgrade South Africa’s credit rating will be announced in December.

Setting a national minimum wage is sensitive and debatable. Some say that it will have a negative effect on the economy and will lead to increased unemployment, especially in sectors like farming. Others feel that the current system for determining wages is adequate and should not be changed. By setting a national minimum wage, it is hoped that all workers will get a fairer deal overall.

The proposed R3 500 NMW is just a starting point for discussion. Based on research carried out by Wits University, the ‘optimal’ level for NMW is between R4 000 and R5 500. At this level, the net benefit to the economy would apparently outweigh the job losses which would result from the introduction of NMW.

For it to be written into law, the NMW must be agreed by leaders in labour, business, government and communities. There is already much heated debate around the proposed figure, and it is likely to be a long time before agreement on a final NMW figure is reached.

The suggested date for implementation of the national minimum wage is 1 July 2019.

Should you require more information, please contact our offices.

Integrated Reporting and Integrated Thinking

In the natural world, animals and plants must adapt to ensure their long-term success in a harsh and ever-changing environment. In many ways, the business world is a bit like a jungle – a harsh environment in which only the strong can adapt and survive.

Fundamental changes, such as globalisation, technological development and rapid population growth, have meant that organisations have had to modify their thinking and behaviour.

Traditional financial reporting has had to change, so that organisations and investors can achieve long-term success in this evolving and demanding environment. These days, reporting needs to provide broader information which is more interconnected and more forward-looking than traditional financial analysis.

What is integrated reporting?
In a nutshell, integrated reporting (<IR>) brings together key information about an organisation’s strategy, governance, performance and prospects, in a way that mirrors the commercial, social and environmental context in which it operates.

Integrated reporting provides a clear, concise statement of how sustainability is achieved, and how the organisation creates value. By embracing integrated reporting practices, all those involved with an organisation will develop a deeper understanding of the business, the business environment and how to create value.

Integrated reporting promotes a more holistic approach to the way investors and those within the organisation think, and takes into account a comprehensive range of factors which are important in long-term value creation. Thus, integrated reporting goes hand-in-hand with integrated thinking.

What is integrated thinking?
Integrated thinking is the ability to establish a link between the financial, social and environmental performance of an organisation. Effective integrated thinking requires commitment and transparency, as well as a good understanding of what makes the organisation sustainable. The long-term success of the organisation is dependent on the interrelationships between the organisation, the stakeholders and the operating environment.

The latest guidelines on Corporate Governance in South Africa place greater emphasis on integrated thinking and integrated reporting. It is important to come to grips with these concepts to be successful out there in today’s challenging business jungle.

The Importance of Keeping Your Website Up-to-Date

Launching a website involves a considerable amount of time and effort. Unfortunately, one of the most frequently overlooked components of a successful website strategy is ongoing maintenance.

Some reasons why it is important to continuously maintain your website:

Up-to-Date Design – the look and feel of your website is one of the most important aspects that affects sales. Your website needs to be responsive, so that it looks good and can be read on all desktop and all mobile devices.
Fresh Content – old, out of date or incorrect content creates a bad impression and puts customers off. It is essential to regularly update content, keeping it current and information to encourage visitors to come back. It is also important to constantly check your websites pages and links for errors.
Website Security – continuous review and updating of your website security is essential. A weakness in your website’s security could lead to your website being hacked with possible legal repercussions if your customer’s personal data is stolen.
Be Competitive – keep your website ahead of the competition with a dynamic website that makes use of social media. Monitoring performance and analytics are also important in ensuring that your website it is achieving the desired results.
Marketing – your website is an advertising medium for your business that has the potential of capturing the attention of many people. Regular changes to your website showing new products, or upcoming events will stimulate interest and interaction.
Search Engine Optimisation (SEO) – if your website is not updated to work on mobile devices, your website may no longer appear on search results. Updating your website will attract search engines to your site and will give valuable information to visitors.
Legal Requirements – laws constantly change and evolve and you need to make sure that your website is compliant with all relevant legislation (e.g. data protection and online selling laws).