Tag Archive: Rob Wilkie


In the 2013 Budget speech, Finance  Minister, Pravin Gordhan, emphasised that one of Government’s most pressing development challenges is to expand work opportunities for young people: “There has been extensive debate on how this should be done and the answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.”

Learnerships help young people to obtain a formal qualification, while gaining relevant workplace experience. While there are many benefits to the prospective learners, there are also advantages to the employer implementing the learnership. Employers have the peace of mind that their employees are not away from the office for extended periods of time and while they are away, they are improving their relevant work based skills to be more productive and efficient at what they are employed to do.

In 2002, the Government introduced a Learnership Allowance Incentive, for employers to:

  • Encourage job creation by reducing the cost of hiring and training employees through learnerships
  • Promote skills development
  • Encourage human capacity development

However, there is a very specific legislation that guides the process and it poses certain challenges. Tax Talk spoke to Rob Cooper, tax expert and Director of Legislation Updates and Proposed legislation at Sage VIP, part of the Sage Group plc, about some of the recent changes made to the Learnership Allowance Incentive.

Cooper says: “To encourage employers to participate in learnerships, an allowance in the form of a deduction from the company’s taxable income has been available for many years. To qualify for the learnership allowance, employers must register the learnership with SETA. There is a R30 000 allowance at the start of the learnership, and a further R30 000 upon the successful completion. The value of the actual incentive has always been influenced by the when the learner is registered and the learner’s failure to complete. However, with new legislation introduced in January, the scenario will change.”

Cooper explains: “In the past, the allowance (deduction) was only allowed during the year in which the learnership agreement was officially registered with SETA.  For a variety of reasons, registration often takes a couple of months and this resulted in reduced value.”

“In future, employers will no longer have to register learnerships from the moment of the inception. A learnership will be deemed to have been registered for the duration of the agreement that falls within the employer’s year of assessment. However, it is necessary that the learnership is registered within 12 months after the year of assessment.”

“The second issue relates to failure to complete. In the past, the allowance was not granted if the learner previously failed to complete a prior registered learnership of similar nature to the new learnership.  Typically, the employer was not aware of prior learnerships (i.e. the information was not easily accessible or the quality of the information was not reliable, as it is dependent on feedback from other employers). Attempts to obtain this information also delayed the registration process.”

“In future, employers will no longer have to find out details of the individuals’ learnerships entered into with other employers.  Learnership allowances will only be refused if the learner failed the same type of learnership with the same employer (or associated institution).”

”Implementing a learnership programme within your company will definitely contribute to job creation, especially for young people. However, it is important to keep track of all the legislative changes.  Make sure that your company is operating within the parameters of the basic conditions of employment and its legal requirements. It is crucial to being a responsible citizen,” concludes Cooper.

For more information, employers are invited to attend the Sage VIP, Payroll and Tax Seminar. You can book your seat at:  www.vippayroll.co.za.

Rob Cooper is a tax expert and Director of Legislation Updates and Proposed legislation at Sage VIP, part of the Sage Group plc. 

Rob Cooper

Rob Cooper

“Changes proposed to South Africa’s Basic Conditions of Employment Act (BCEA), Labour Relations Act (LRA) and Employment Equity Amendment Bill (EEAB) will have a significant impact on how employers conduct their business in 2013,” says Cooper.

“In the draft Employment Equity Amendment Bill (EEAB), specific attention should be paid to the concept of equal pay for work of equal value, which can result in a new form of unfair discrimination.”

Cooper explains: “In cases where employment conditions, including remuneration, are applied differently to employees who do the same or similar work, then the employer must be able to show that the differences are based on fair criteria such as experience, skills, responsibility and qualifications. If the employer cannot do this, the differentiation would constitute unfair discrimination.”

“In practice it would mean that if a company employed factory workers on a permanent basis and at times of high demand took on additional workers from a labour broker and they worked side by side doing the same job, then both permanent and labour broker-supplied workers must be paid at the same rate,” says Cooper.

“Because the employer must pay the labour broker his fee on top of the wages for the workers, the result will be that brokered labour will cost more than permanent labour. This is logical and the premium that the employer must pay for flexibility.”

“Importantly, the intention is to align the Employment Equity Act with other general labour laws that need to be applied in cases where an individual supplied to a client by a labour broker is seen as an employee of that client.  One can only assume at this early stage that these employees, supplied by the labour broker, will have to be included in the client’s equity plan as well as in the labour broker’s equity plan.”

“The draft Employment Equity Act further changes the way in which companies implement affirmative action. According to Cooper, the groups of people who benefit from the affirmative action provisions will be limited to those who were South African citizens before democracy (April 1994) or to those who were prevented by the policies of apartheid from becoming citizens before 1994, and their descendants. This means that the employment of foreign nationals or those who became citizens after the democratic era (April 1994), will not assist employers to meet their affirmative action targets.”

Employment Services Bill

According to Cooper, the Employment Services Bill is another very important piece of legislation for employers to be aware of as it moves towards finalisation.

“The overall intention of this brand new piece of legislation is to empower the Department of Labour to provide a comprehensive range of employment services (free of charge) to members of the public in an attempt to achieve the Government’s objectives of: more jobs, decent work and sustainable livelihoods.  Any initiative that reduces unemployment is to be welcomed,” says Cooper.

The Government is aiming at making employment services open and accessible to all. This includes the following:

  1. Registering work vacancies and seekers, matching resulting opportunities, and facilitating the placement of seekers with employers or other work opportunities.
  2. Provision of advisory services for training, social security benefits, dealing with vulnerability, vocational and career counselling, assessment of work seekers to determine suitability, and improving work-related life skills.

UIF (Unemployment Insurance Fund) legislation

Changes to the UIF legislation have been pending for quite some time and will hopefully move through Parliament towards the end of this year.  Broadly, the proposed changes envisage increasing the value of the UIF benefit, as well as extending the grace period during which benefits can be claimed, from 6 to 18 months,” says Cooper.

He says there is also an intention to remove certain exclusions of which there are no details but hopes that this will include the exclusion of commission from the remuneration on which the contribution is calculated, which results in commission being excluded from the value of the contribution and the benefit.  Unemployed people, who were earning a low basic salary plus commission, are negatively affected by a benefit that is in line with only their basic salary.

Cooper is encouraging employers to attend Sage VIP’s Payroll and Tax Seminar in March and April 2013. “The seminar is regarded by many as a definitive guide to the changes in payroll and tax legislation and we endeavour to present it in a practical and interactive manner that does not focus on the legal aspects alone. The presentation will also aim at communicating future trends that will impact payroll and HR,” said Cooper.

By Rob Wilkie, CFO Sage South Africa

Rob Wilkie

Rob Wilkie

Whilst last year’s budget was all about infrastructure expansion investment, this year the emphasis is in keeping the budget deficit in check.

Mr Gordhan announced in his 2013 budget speech that tax collections would be R16.9 billion less than the estimate made in the 2012 budget. This was largely as a result of weaker economic growth, labour unrest and lower commodity prices. Economic growth for 2012 is expected to be sluggish at 2.7% with mining strikes and stoppages costing the economy approximately R15.3 billion.

As a consequence, the budget deficit increased to 5.2% of GDP. In other words, government spending exceeded tax revenue collected by R185 billion. In business terms, government made an operating loss in 2012.

In order to reduce the deficit (or rate of cash burn) Gordhan said that he would not increase taxes or impose drastic austerity measures, but would instead reduce the rate at which public spend was escalating. He said he would do this by utilising government’s contingency reserve (R23.5 billion); reprioritising expenditure to strategically important initiatives (R52 billion); and reducing financial mismanagement and corrupt expenditure (6% of GDP).  If successful, the growth in government spending would be reduced to 2.3% in real terms (7.8% including the effects of inflation) and the budget deficit brought back to 3.1% over 3 years. Additional borrowings of R497 billion would be required to fund the deficit, increasing government debt to R1,7 trillion or 40% of GDP. Gordhan said that he was comfortable with this level of debt and SA’s ability to meet its debt service commitments.

If government were a business the budget would read as follows:

  • Business SA has made a loss equivalent to 5.2% of its turnover.
  • It does not want to increase its prices as existing customers may stop buying and new customer acquisitions decline.
  • To return to profitability (or reduce its loss) Business SA therefore has to reduce its cost base or at least slow its cost growth.
  • It will do this by a combination of resource reallocation to its priority initiatives and reduction of inefficiencies and wasteful expenditure.
  • Until such time as it is able to return to profitability Business SA will utilise its cash resources and credit lines to fund its losses.

It is a balancing act.  Do you cut deep; stop the cash burn but risk sustainability and preparedness for the next cyclical upturn? Or do you rather focus on efficiency gains and investment priorities, live with losses and more debt, but enhance sustainability and competitive edge?

Government has chosen the later, both for socio economic and structural reasons, but also because it has the capacity to borrow in order to sustain deficits. I believe they have got the balance right in this budget. It is now up to government to show the political will and commitment necessary to implement it.

By Rob Wilkie, CFO Softline and Sage AAMEA

Rob Wilkie

The 3 weeks long strike in the transport sector has come to an end, but at an enormous cost to business.  The Road Freight Employers Association has estimated a cost of R1.2 billion per week.

With supplier deliveries late and transportation of their goods delayed, small businesses are fighting for their survival. A disruption to their trade means lower turnover, less cash generation and unpaid expenses.  Unfortunately job losses are a casualty.

My concern is that strikes will spread to other sectors. They are becoming part of a broader social movement taking the form of ill-disciplined and often violent protests.  The common underlying thread in all these demonstrations is poor service delivery, poor living conditions and growing inequality.

Without fast and effective government intervention to strike action, small businesses will have to be more agile and flexible than ever if they are to sustain themselves in this existing climate. Moreover, small businesses need to plan for a trade disruption so as not to be caught flat footed. A plan should consider the following:

  • What can you depend on from your banker during this time – borrowing capacity?
  • What monthly overhead expenses are unavoidable to stay in business?
  • What is your estimated monthly cash income?
  • Can you cancel or place orders on hold if supplies cannot be received?
  • Could you negotiate a payment plan with your major creditors?
  • What is the minimum inventory level necessary?
  • Do you have a communication plan to keep suppliers and customers fully informed?
  • Are you able to use sub-contractors if necessary?
  • Do you have access to replacement workers?

We live in very volatile times making planning difficult yet critical in survival of the fittest.

by Rob Wilkie, CFO Softline and Sage AAMEA

Rob Wilkie

Rob Wilkie

In about May 2010, President Zuma set up a National Planning Commission (NPC) under the leadership of Trevor Manual. The brief was to take an independent and critical view of the country (Task 1) and to draw up a vision and plan that would take South Africa to 2030 (Task 2). The primary objective of the plan was to eliminate poverty and reduce inequality; these being the two biggest problems facing the nation.

Task 1 was completed in June 2011 with the presentation of a diagnostic report describing the countries 9 most significant challenges. It’s not hard to guess what these were:

  1. A sub-standard quality of education for the majority of black learners. More than 25,000 schools dysfunctional;
  2. Too few South Africans are employed. Official unemployment at 26%;
  3. A public health system in distress. Total deaths in the country doubled in the past 10 years and life expectancy now 49 years.
  4. A divided society. Divisions in all societies still persisting 17 years after the abolishment of apartheid.
  5. Poor public service performance with leadership and skills deficits, corruption and bribery, political interference and erosion of accountability.
  6. Informal settlements that marginalise the poor. Massive divisions in settlement patterns being a legacy of apartheid.
  7. Inadequate infrastructure with generation of missing investment in roads, rail, ports, electricity, water sanitation and public transport.
  8. A growth path highly dependent on natural resource exploitation but unsustainable in a world seeking to protect the environment.
  9. Corruption undermining state legitimacy and accountability.

Task 2 is not yet complete and is by far the most difficult part of the plan.

In the 2012/2013 budget Speech, government gave much attention to two of the nine key issues identified, infrastructure and job creation. Infrastructure investment expansion was listed as a priority with approved and budgeted plans of R845 bn announced. There was also a particular focus on the unemployed and an additional R4.8 bn was allocated to an expanded public works programme and new Jobs Fund.

We know that government’s strength is in policy making and not in the execution and implementation thereof. We also know that even if government could build schools, it can’t make children go to school; government can pay social grants but cannot create the necessary jobs required. Government needs parents, teachers and the business community to do this. For the National development Plan to succeed it therefore needs all of us to be active citizens – government, business and communities.

The Premier of the People’s Republic of China, Wen Jiabao was asked how China could possibly deal with its poverty and environmental problems given their immense scale. He answered by saying that when you multiply a problem by 1,3 bn (people) it is insurmountable, but when you divide it by 1,3 bn, it is easily solved.

- A commentary by Rob Wilkie, CFO Softline and Sage AAMEA

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Sage Business Index polls over 10,000 businesses (across Europe, North America, South Africa and Asia) in order to measure the changing mood of business. In South Africa 1,000 businesses were surveyed and the responses show that both business outlook and economic confidence is still improving, albeit at a slower rate since last measured in September 2011.

This is consistent with the views we got from a few leading SA economists. According to them, our real income is growing. This means that we have dutifully been paying down our household debt (made easier with low interest rates). Our household debt to disposable income ratio has therefore fallen. In theory this means that we have more cash available to absorb price rises in food, petrol, tolls and electricity. In addition, banks are once again lending and households are taking on more credit. Not only are we absorbing price increases but we are also buying more with buoyancy recently reported in both retail and the consumer goods sector.

In short, there appears to be some cyclical buoyancy. The next 6 months will hopefully give us a clearer view of its sustainability.  Keep an eye out for price inflation – if it starts to rise faster than disposable income, consumer spending will decline. This is referred to as demand destroying inflation and what always follows is a drop in confidence.

…. and spare a thought for those who have not been in line for pay increases, or retirees reliant on an eroding interest income? Their real income has declined and price increases are already hurting. These households are already under a lot of pressure, a precursor perhaps for what is to come.

Rob Wilkie

Corruption has become endemic in both the private and public sectors. Perpetrators have little regard for the law and openly flaunt their gains. Each day we hear about tenderpreneurs, a term used to describe those who win tender contracts based on personal connections and corrupt relationships.

Where did this all start? Perhaps the big BEE transactions done by some of our blue chip companies set a precedent? Board room deals, financially unsustainable, benefitting a few elite and politically connected persons. Fronting and buying favouritism; this is corruption.

BEE deals were meant to compensate the previously disadvantaged but sadly have only widened the gap between rich and poor.

Small business can make a difference. If you’re contemplating BEE, do it for the right reasons. For if it is to work it must make a meaningful contribution to uplifting employees and the communities’ in which they live. Run an internship program, adopt a school, sponsor an entrepreneur, set up a community forum that holds local government accountable, lead a litter “clean-up” campaign. And even if you are not contemplating BEE, do this anyway. As Ghandi said “we must become the change we want to see in the world”.

- By Rob Wilkie, CFO Softline and Sage AAMEA

Redistribution of wealth does not drive economic growth. It is the creation of wealth that drives growth. To create wealth, we need to create jobs. High unemployment risks national stability and therefore requires significant spend in social grants. Grants are effective for the alleviation of poverty but are not effective for economic growth and job creation. The more government spends on social grants, the less money there is available for investment in economic growth; the less investment in economic growth, the more unemployment; the more unemployment the more social grant expenditure is required – this is the conundrum.

- Rob Wilkie, CFO Softline and Sage AAMEA

Do we really know the extent of government debt? South Africa’s debt to GDP ratio as listed by Eurostat is 34%. However if you include parastatal debt (the likes of Escom, Transnet, Denel etc) it is said to be more like 70%. Above 60% requires real caution so as not to fall into a debt trap. We are still in great shape when you consider Greece whose most recent round of debt restructuring was to bring its debt to GDP ratio down to 120%.

- Rob Wilkie, CFO Softline and Sage AAMEA

There is approximately R20 billion in debt following the much publicized Gauteng toll gate project. In his budget speech Pravin Ghordan announced a special appropriation of R5.8 billion against this debt, meaning that we should see the toll levy drop from 40c to 30c per kilometre. But does this really help us given his later announcement that the fuel levy would be increased by 20c. Feels like robbing Peter to pay Paul.

- Rob Wilkie, CFO Softline and Sage AAMEA

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