Cecil Kilpin | December 2024 Newsletter - Cecil Kilpin | CA(SA)

29th Conference of the Parties (COP29).

The 29th Conference of the Parties (COP29) to the UN Framework Convention on Climate Change (UNFCCC) recently concluded in Baku, Azerbaijan, and it has been a pivotal event in the global climate agenda. Here are the key outcomes and implications of COP29:

COP29 saw significant developments in climate finance, with rich nations pledging to contribute at least $300 billion annually to the global fight against climate change. This funding is aimed at supporting developing nations, which had sought over $1 trillion in assistance. The agreement, although seen as a base to build on, was criticized by some developing countries as insufficient to address the complexities of the climate crisis.

One of the major achievements of COP29 was the agreement on the rules for a UN-backed global carbon market. This market will facilitate the trading of carbon credits, incentivizing countries to reduce emissions and invest in climate-friendly projects. Additionally, the conference extended a program centered on gender and climate change and agreed on support for the least developed countries to carry out national adaptation plans.

Despite these advancements, COP29 outcomes fell short in addressing the impacts of climate change on health. Experts noted that the agreements made did not fully address the ambition and focus needed to maximize the benefits of action on climate health.

The outcomes of COP29 also lay the groundwork for COP30 in Belém, Brazil, where critical issues such as scaling mitigation efforts and improving adaptation mechanisms will be further advanced. Achieving transformative change will require stronger commitments, enhanced transparency and coordinated global efforts to align financial flows with climate goals.

The conference highlighted the crucial role of non-Party stakeholders (NPS) such as businesses, subnational governments, investors, and civil society in driving global climate action. The High-Level Champions and the Marrakech Partnership showcased collective momentum from diverse sectors and discussed issues crucial to driving global ambition and action.

Small and medium-sized enterprises (SMEs) were also a focal point at COP29. SMEs, which make up about 90% of all businesses and around 70% of jobs worldwide, are particularly vulnerable to the impacts of severe weather and climate-related disasters. COP29 emphasized the need for capacity building, technical support, and increased access to finance for SMEs to help them transition to a net-zero future. Initiatives like the SME Climate Hub were highlighted, which aim to empower SMEs to take ambitious climate action by providing resources, networks, and tools to build their capacity in the green transition. This support is crucial for SMEs to continue providing jobs and prosperity while contributing to global emission reduction efforts.

In summary, COP29 made significant strides in climate finance and carbon market regulations, but fell short in addressing health impacts. The outcomes set the stage for further advancements at COP30, emphasizing the need for stronger commitments and coordinated global efforts to tackle the climate crisis effectively.

Africa: A Continent of Growth and Opportunity.

Africa, a vast continent covering 30.2 million square kilometres, is home to approximately 1.5 billion people, representing about 18.6% of the world’s population. With its diverse climates ranging from hot deserts to tropical rainforests and frozen glaciers, Africa is a land of immense natural beauty and resources. The continent is rich in oil, gold, platinum, and diamonds, many of which remain untapped due to infrastructure and financing challenges.

Despite its historical struggles with war, disease, corruption, and regime changes, Africa is on a promising path toward becoming a preferred investment destination and a potential pole of global growth. The continent’s young population, with 70% of sub-Saharan Africa under the age of 30, presents a significant opportunity for economic development. Empowering this new generation is crucial for realizing Africa’s full potential.

In recent years, Africa has seen increasing political stability, improved health and education systems, and rapidly expanding infrastructure. These advancements have contributed to the continent’s economic growth, with many African economies ranking among the fastest-growing in the world. A growing middle-class consumer market is emerging, further driving economic development.

Africa comprises 54 independent countries, including the Indian Ocean islands of Madagascar, Mauritius, the Comoros, and Seychelles. The majority of African countries are members of the World Trade Organization (WTO), and cross-border trade and investment are promoted through approximately 30 regional trade agreements.

However, investors face challenges due to the continent’s diverse markets and regulations, a confusing assortment of taxes, and a shortage of accurate and up-to-date information about market conditions. Corruption, lack of policy, and the need for greater transparency are gradually being addressed by African governments, leading to a state of transition in many tax and banking systems.

As Africa continues to develop, it is essential for its leaders to focus on those who are being left behind. By rising to this challenge, Africa can become more prosperous, stable, and equitable, fulfilling its potential as a global growth leader and a hub of innovation and creativity.

If you are considering expanding your business into Africa do hesitate to contact our offices for professional advice in this regard.

How to Obtain a Tax Directive from SARS.

Obtaining a tax directive from the South African Revenue Service (SARS) is a crucial step for employers, fund administrators, and insurers to ensure the correct deduction of employees’ tax from lump sum payments. This process is essential for managing tax liabilities on retirement funds, severance packages, and other lump sum benefits.

Understanding Tax Directives

A tax directive is an instruction from SARS to an employer or fund administrator on how to deduct tax from a lump sum payment. This ensures that the correct amount of tax is withheld, preventing underpayment or overpayment of taxes. Tax directives are commonly required for retirement fund withdrawals, retrenchment packages, and other lump sum benefits.

Steps to Obtain a Tax Directive

Register on eFiling: Employers, fund administrators, and insurers must be registered on the SARS eFiling platform. If you are not already registered, visit the SARS website and follow the registration process
Complete the Application Form: Once registered, log in to your eFiling account and navigate to the tax directive section. Complete the relevant application form (IRP3(a), IRP3(b), or IRP3(c)) based on the type of lump sum payment. Ensure all required information is accurately provided
Submit Supporting Documents: Depending on the type of directive, you may need to submit supporting documents. These could include proof of retirement, retrenchment, or other relevant documentation. Upload these documents through the eFiling platform
Submit the Application: After completing the form and uploading the necessary documents, submit the application through eFiling. SARS will process the application and issue the tax directive, which will be available for download from your eFiling account

Important Considerations

Accuracy: Ensure all information provided is accurate to avoid delays or rejections
Timeliness: Submit the application well in advance of the payment date to ensure timely processing
Compliance: Adhere to SARS guidelines and requirements to ensure compliance and avoid penalties

By following these steps, employers, fund administrators, and insurers can efficiently obtain tax directives from SARS, ensuring proper tax compliance and accurate tax deductions for lump sum payments. Should you require assistance in this regard please do not hesitate to contact our offices for professional advice.

IMF Concludes Annual Consultation with South Africa: Positive Outlook Amid Challenges.

The International Monetary Fund (IMF) recently concluded its 2024 Article IV annual consultation with South Africa, highlighting a cautiously optimistic economic outlook. The IMF team, which visited from November 11-25, engaged with various stakeholders to discuss policies aimed at ensuring macroeconomic stability and fostering sustainable growth. The IMF’s preliminary findings indicate a recovering domestic demand bolstered by post-election confidence, improved power generation, and declining interest rates. However, the IMF cautioned that risks remain, including potential geoeconomic fragmentation and slowdowns in key trading partners.

The IMF emphasized the importance of ambitious structural reforms, particularly in the electricity and logistics sectors, to unlock South Africa’s growth potential. Recommendations included the development of a competitive wholesale electricity market, establishment of an independent transmission system operator, and regulatory frameworks for transmission and distribution. Additionally, the IMF urged accelerated reforms to attract private-sector participation in freight rail and ports, alongside business-environment, governance, and labor-market reforms.

The National Treasury (NT) welcomed the IMF’s constructive engagement and noted that the IMF’s concerns align with the government’s priorities. The NT’s economic outlook projects growth of 1.1% in 2024 and 1.7% in 2025, supported by improved energy supply and a balanced fiscal strategy. The government aims to achieve primary surpluses and stabilize debt at 75.5% of GDP by 2025/26.

Operation Vulindlela, a key reform initiative, has already implemented significant actions to reduce power cuts, improve logistics, and lower data costs. The next phase will focus on reversing local government decline, tackling spatial inequality, and advancing digital government. Notably, the Electricity Regulation Amendment Bill and the National Transmission Company of South Africa are pivotal in establishing a competitive energy market.

The NT remains committed to implementing reforms that promote sustainable and inclusive growth, improve the fiscal position, and enhance state capacity and effectiveness. The IMF’s final report is expected to be considered by the Executive Board in January 2025.