CRYPTOCURRENCY NEEDS LOOKING AT
CRYPTOCURRENCY has gained significant traction in the past few years and has become a risky, but potentially lucrative, investment or trading option.
South Africa has been a bit slow on the uptake in regulating the use of cryptocurrencies and, for the most part, their use has been unregulated.
The SA Reserve Bank issued a statement on April 6 that cryptocurrency is not considered to be “legal tender”, i.e. real currency, in South Africa. Taxpayers are merely required to declare their gains and losses with respect to their transactions involving cryptocurrency as part of their income. The SA Revenue Service looks at the intention of the taxpayer when determining whether the income is capital or revenue in nature.
The National Treasury published the draft Taxation Laws Amendment Bill (the Bill) for public comment on July 16. The Bill is Treasury’s first attempt to regulate the use of cryptocurrency in South Africa and proposes changes to both the Income Tax Act and the VAT Act. The amendments, if promulgated in their current form, will significantly deter the use of cryptocurrency in South Africa for both trading and investment purposes.
One proposed change is the inclusion of cryptocurrency in the definition of “financial instrument” in the Income Tax Act.
Other financial instruments include loans, debts and shares. A simple change to the definition of financial instruments has a ripple effect throughout the Income Tax Act. Section 22 provides for the determination of the value of undisposed trading stock to be included in taxable income. Financial instruments are specifically excluded by section 22(1)(a) of the Income Tax Act which means that those who trade in cryptocurrency may not benefit from valuing their undisposed cryptocurrency using the valuation method contemplated in section 22.
The above amendment may also stifle investment in fintech companies in South Africa as section 11D of the Income Tax Act, which provides an allowance for companies that invest in research and development in South Africa, specifically excludes the creation or development of financial instruments. This would include companies who mine or develop cryptocurrencies.
A further proposal is the addition of “the acquisition or disposal of any cryptocurrency” to section 20A of the Income Tax Act, which deals with the ring-fencing of assessed losses of certain trades. Although taxpayers who trade in cryptocurrency may set-off their assessed losses from income derived from that trade, they may not set-off their assessed losses against income derived from other trades.
South Africa has great potential as an emerging market to attract investments in the fintech sector. The use of cryptocurrencies is on the rise and it may be that Treasury, and the Reserve Bank, are forced to address the insurgence sooner than expected.
Wade Ogilvie is a partner in the Corporate and Natural Resources Law Team. Arnold Mbeje is an Articled Clerk with the team. AT A GLITTERING ceremony held in the Gingindlovu Sport Ground on Kwazulu-natal’s North Coast on Saturday, the South African Farmers Development Association (Safda) celebrated its meteorological burst into being three years ago.
The Three-year Anniversary Imbizo, attended by no fewer than 10 000 people, among them the high-standing in business and politics, was essentially to celebrate the revolutionary rise of an organisation formed solely to smash historical barriers and chart a new course for black sugar-cane farmers.
Even executive chairperson Siyabonga Madlala, one of three founding brains and guts of Safda, seems astounded that what was born as a rebellion of the voiceless and disenfranchised in 2015 has grown into a giant aspiring to own the entire value chain of the sugar industry – ie growing, harvesting, transport, milling and marketing.
“We want to bring the black farmer to a space they would not be in otherwise, we are ushering them to the real money. We want to be there in the primary production, we have to own the agro-logistics, we must have the agro-processing capacity as well. In fact, all the way to marketing of the final product,” Madlala says. IN RECENT YEARS THE mushrooming of new and modern property developments around Ithala-owned properties in remote areas – where most developers would not previously have dared to set foot – has brought fierce competition to the entity’s property portfolio.
Sibusiso Khwela, Ithala’s acting properties executive, said the competition had resulted in an increase in their vacancies and a loss of revenue.
“As Ithala, we had to identify where our shortcomings were and come up with a solution,” said
Madlala was a small-scale farmer who together with fellow land reform farmers Lindiwe Hlubi and Andile Buthelezi started a wave of disruptive innovation when they challenged the status quo of the South African sugar industry – and farmer representation – which was then only possible under the dominant South African Cane Growers Association.
Some of the key challenges that led to Safda’s formation was the decrease in the number of small-scale farmers from 50 000 in the early 2000s to about 20 000 currently, as well as the lack of development and growth of land reform.
Today Safda has unlocked a
R172 million purse, has the ear of Parliament, memoranda of understandings with relevant government departments, key stakeholder relationships and, more importantly, a resounding voice in the South African Sugar Industry Council and, even more importantly, its own ink to write its destiny into the future.
“It has been just more than two years of struggle, but in that time we have taken our destiny into our own hands, we are championing our own development, we have changed representation in the industry and just in October 2017, the dti (Department of Trade and Industry) enacted legislation that forced the Khwela. He said the unit had to accept that among the reasons the new developments were a threat was because their properties were in a bad state and lacking maintenance and modernisation. Ithala then started to refurbish most and remodel some, which has helped the portfolio to stay afloat.
The refurbishment programme which started about two years ago has seen Ithala reviving old retail centres, with some work being done in Kwanongoma to change the ambience of the retail centre, the building of a new taxi rank and an ablution block and the property being nicely fenced. Eshowe was still recognition of Safda,” said Madlala.
Safda has fought successfully for fast-tracking of tariff reviews, which have enabled small-scale farmers to benefit from industry subsidies such as transport as well as to carry incentives into their pricing mechanisms.
“This has forced the industry to share the spoils with the poor blacks,” said Madlala.
Safda is distributing its own fertiliser, which has enabled farmers to cut down on prohibitive costs as they now acquire the product at wholesale rates, because their association charges cost-recovery prices. The organisation has a farm management company, which looks into streamlining standards, practices, skills transfer and the more practical efficient sharing of equipment.
The association sees itself as a case for South Africa’s economic transformation in the agribusiness sector and a home for all progressive farmers – black and white, small, medium and large.
“Sure, there will be times when we stumble and fall, as we want to run when we should be walking
(and who can blame us, we have waited for so long!). But the true test will be in how we pick ourselves up and continue our journey to true transformation.” It is a story Madlala will tell over and over again. undergoing the refurbishments.
Khwela said there were huge plans for Tugela Ferry, where they were increasing the trading area for the new anchor, building a taxi rank and modern stalls for hawkers inside the centre. The stalls are intended to help relieve the congestion from the main road, which was currently difficult to drive on.
There are also plans to remodel its retail centres in Kwamashu, Estcourt and Madadeni, and to convert the old Ngwelezane office block into a mixed-use property.
Ithala’s property portfolio said it aimed to provide more space for businesses to thrive.