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Tumeka Matshoba-ramuedzisi, a business executive and co-owner of Ramuedzisi Chartered Accountants and Auditors, breaks down some of the biggest headlines dominating the financial sector and how they impact your life.

The financial world around us

1 Vat Last April, the government increased the VAT from 14% to 15%, affecting the price of almost every product we buy. The unfortunate reality of this increase is that the poor suffer the most. However, to alleviate some of the pressure for lower-income households, there is a list of basic foods, such as brown bread, rice and milk, that are exempt from this tax. But how does the government collect revenue from VAT anyway? Imagine you get to Pick n Pay, and you see there’s a new price for the same product you’ve always bought. What are you going to do? You’re going to pay for it either way. Pick n Pay will then collect that VAT on the government’s behalf and pay it over, making it simple for them to reap the benefits immediately. 2 struggling Broke Businesses financially Business are in also this tough economic climate, since the biggest client in any country is the government. So when the government has little or no money to spend, which is the case now, less funds are allocated to goods and services for communities. But now who is servicing them? Us. When the government can’t spend money procuring goods and services, which local businesses provide, the businesses are left with less income than before. This ultimately sets off a chain of events: your company’s income can no longer cover its expenses, so the prices must increase. This leads to customers cutting down on services that they deem unnecessary or expensive, which then impacts business revenue and leads to job loss.

3 Many rating S&P Brics agencies agencies believe Global rating that like and Moody’s, leading Fitch Ratings are driven aren’t by independent, politics and are influenced by Western countries to downgrade our country’s status according to whether they approve of what we’re doing. This is done to put a stronghold on the country and influence political decision making. Basically, what the sceptics are saying is, “Don’t be alarmed when they downgrade our credit rating, it’s just their way of saying they’re unhappy with whatever direction the country is headed in.” Last year, S&P Global downgraded us from BB (stable investments) (you won’t outlook to receive junk for status your any returns on your investments). Unfortunately, there’s a lot of weight behind a decision like this, as it sends a message to the rest of the world that our economy is not growing and is not worth investing in. The problem: if you don’t have people investing in the economy, how will it grow? If there’s no growth [in the economy], then there is an increase in job loss. To counteract this, the BRICS countries (Brazil, Russia, India, China and South Africa) are looking at the viability of creating their own credit rating agency in order to break away from the dominance of Western rating agencies. 4 There belief books by then chartered Misuse of you that have was funds can if your been always accountants, trust business’ signed their this finances. chartered associated Now, accountants with because misconduct being of by like KMPG, respected Steinhoff companies and VBS Mutual Bank, a shadow of doubt has been cast over this profession. What’s even more alarming is the perception that there is a lack of convincing reaction from the South African Institute of Chartered Accountants (SAICA) – it seems that no real consequences have been faced by any party involved. This raises the question in many peoples minds: can people be municipalities owned are accountants. there acting Consider trusted? handled is in entities in an no accountancy unethical consequence If the whose it by and appears number chartered finances manner, state- really that for of what departments by If the the does public public’s this mean that is tax questioning for are money? those run the accountants, ethics of how those will chartered we have comfort is not being that misappropriated. our tax money This is why it’s important that SAICA is seen to be taking the necessary action against those who behave unethically, so as to ensure that the public can rest assured that one bad apple doesn’t spoil the whole bunch.

“If you don’t have people investing in the economy, how will it grow? If there’s no growth, then there is an increase in job loss.”