International Institute of Business & Tax Excellence Newsletter (IIBTE.com)
Edition 1 - February 2020
Welcome to the first iteration of the IIBTE newsletter, welcome to edition 1!
The International Institute of Business & Tax Excellence is poised to harness globalization, one business at a time.
In this edition:
The World Economy - Where To From Here (2020 -2030)
by Ridwaan Asmal of Coral International Asset Managers (Pty) Ltd
www.coralassetmanagers.comDoing Business in Mauritius
by Saijal Singh of Cayman International Asset Managers (Pty) Ltd
www.caymanassetmanagers.comAccounting Methodologies - An Introduction to International Financial Reporting Standards
by Azhar Mia of Kreston KZN
www.krestonsa.com/kznSouth Africa’s Restrictive Labour Laws Impact on Unemployment
by Nazneen Adam of Coral International Asset Managers (Pty) Ltd
www.coralassetmanagers.com
Article 1:
THE WORLD ECONOMY - WHERE TO FROM HERE (2020-2030)
A look back at the turn of this century shows how much the world can change in just 20 years. Back then, only 12 percent of people owned a mobile phone now, over 60 percent do. Facebook, which today has almost 1.5 billion users, was non-existent. These and other developments have changed how consumers live, think, and do business.
Disruptive forces can cause dramatic reversals. In the year 2000, Kmart was the third-largest US retailer, with $36 billion in sales, by 2014, its annual revenues had declined by two-thirds. Over the same period, Amazon’s annual sales grew to $89 billion from about $2.8 billion.
The World Bank forecasts global growth to be around 2.5% in 2020. China recently announced that their GDP for 2019 was 6%, its worst in three decades. A far contrast from the years of unsustainable breakneck growth.
The cause of this declining or very sluggish growth is the unprecedented run-up in debt worldwide, and the prolonged deceleration of productivity growth, which needs to pick up to bolster standards of living and poverty eradication.
How to rekindle growth? Although, the next decade will bring its share of industry upheavals, the outlook remains optimistic. Efforts are needed to stimulate private and public investment, upgrade skills to boost productivity, help resources find the most productive sectors, understanding evolving geopolitical dynamics, reinvigorate technology adoption, investing in automation and digitization and promoting a growth-friendly macroeconomic environment.
As an example, given the massive shift to mobile shopping, companies will need to develop a mobile-led omnichannel strategy rooted in a “mobile first” mind-set. Already, leading consumer companies are allowing customers to “scan to buy” products from the luxury of their homes of offices. For retailers, a mobile/smartphone and loyalty platform-available on any mobile device and featuring all the functionality and information that customers need in order to make buying decisions and digital payments will be first prize.
By 2030, we can expect retailers to create new retail “worlds”-virtual stores that make use of augmented reality to give customers the experience of walking down a store aisle, for instance, or personalisation engines that link to real-time biometric data to recommend meals with optimal nutritional content.
However, for now as one global fund manager aptly summed up the current global mood, “no-one’s in a hurry.”
BIBLIOGRAPHY
Richard Benson-Armer, Steve Noble and Alexander Thiel.
https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-consumer-sector-in-2030-trends-and-questions-to-consider; accessed-26/01/2020
https://www.worldbank.org/en/news/feature/2020/01/08/january-2020-global-economic-prospects-slow-growth-policy-challenges; accessed-28/01/2020
Emerging Trends in Real Estate-The global outlook for 2019.
www.pwc.com/real-estate-trends-global; accessed-09/12/2019
Article 2:
TITLE: DOING BUSINESS IN MAURITIUS
A. INTRODUCTION
According to the World Bank (2019), Doing Business measures aspects of business regulation and their implications for company establishment and operations. The report does not include all relevant issues for businesses’ decisions but covers pertinent aspects which are under the control of policy makers.
The World Bank (2019) stated that Sub-Saharan Africa has the widest variation in performance, with Mauritius ranking at 25 and Somalia ranking at 190.
Mauritius was selected for profile analysis as the current highest performing Sub-Saharan African nation.
B. STARTING A BUSINESS
Mauritius has measured strong as compared to other nations in ease of starting a business. The factors of measure include procedures, time, cost and minimum capital to start a limited liability company.
In 2016/2017, Mauritius simplified preregistration and registration formalities hence reducing regulatory related time and costs spent on starting a business, making business in Mauritius a simpler, more attractive process.
Foreign individuals may look at Mauritius to start a business as they have scored strongly in this aspect and remain the highest-ranking African nation in Doing Business 2018.
The time frame for incorporation of a company ranges between 3 days to 6 weeks based on the level of due diligence, Know-Your-Client and Anti-Money Laundering background checks that are required for the directors and beneficial owners of the company.
The time frame for bank account opening procedures may be as short as 2 days, provided that the client has satisfied all documentary requirements.
Anti-Money Laundering, Counter Terrorism and Know Your Client regulations are stringent in Mauritius, in order to comply on a global scale.
C. DOING BUSINESS
On the World Bank Index (2019), Mauritius has ranked in 8th place indication that doing business within Mauritius is efficient and compliant with international standards of reporting.
The Annual tax submission may be completed annually by your accountant in Mauritius while corporate filings are conducted quarterly by your accountant. Regarding the efficiency employed in resolving a commercial dispute, parties engage the services of the Arbitration and
Mediation Centre of the Mauritius Chamber of Commerce and Industry.
Mauritius has significantly improved trading across borders regulations in terms of time and cost to export and/or import products of comparative advantage.
Improved facilitation of customs administration for exports and imports, decreased number of intrusive inspections, reducing border compliance time for exports and imports by 10 hours have improved ease of cross border trade.
Furthermore, to ensure the coordination of efforts across agencies, Mauritius has formed a regulatory reform committee which uses indicators to improve the business environment.
Economic development with gradual shifts from the primary sector of agriculture, to manufacturing of textiles, to services including financial services, information and computer technology were noted.
Politically, Mauritius has experiences colonization of the Dutch, French, British and India and adopted various business and regulatory techniques through interaction with the various nations.
Romer (1992) argues that importing ideas, through inward Foreign Direct Investment (FDI), is an effective alternative to growing them domestically and increases economic development through capital injection, job creation and taxation and regulatory costs. Globalization, improved trading across borders and ease of starting a business in Mauritius serve to increase FDI and related benefits to Mauritius.
D. CONCLUSION
Internationally, policymakers recognize the economic and political benefits of improved business regulation as encouraging new venture creation and entrepreneurship hence necessitating an environment with transparent, accessible and predictable regulations. As a nation, Mauritius is leading the African nations by their international standard of entering and doing business within the country.
E. BIBLIOGRAPHY
Romer, Paul, 1992, “Two Strategies for Economic Development: Using Ideas and Producing Ideas,”
ABCDE, World Bank.
Gao Shangquan, 2000. "Economic Globalization: Trends, Risks and Risk Prevention," CDP
Background Papers 001, United Nations, Department of Economics and Social Affairs.
World Bank. (2019). Doing Business Report 2019 “Ease of Doing Business Report 2019.”
Article 3:
ACCOUNTING METHODOLOGIES – AN INTRODUCTION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
INTRODUCTION
International Financial Reporting Standards (IFRS) is the international accounting framework which uniformly prepares and reports financial information. It is currently the required accounting framework in more than 120 countries. IFRS requires businesses to report their financial results and financial position using the same rules; this means that, barring any fraudulent manipulation, there is considerable uniformity in the financial reporting of all businesses using IFRS, which makes it simpler to compare and contrast their financial results.
OBJECTIVES
The objectives of the IFRS are:
To develop, in the public interest, a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles. These standards should help investors, other participants in the world’s capital markets and other users of financial information make economic decisions.
To promote the use and rigorous application of those standards.
To promote and facilitate adoption of International Financial Reporting Standards, being the Standards and Interpretations issued by the International Accounting Standards Board (IASB), through the convergence of national accounting standards and IFRS.
The IASB is the standard-setting body of the IFRS Foundation. The IASB is selected, overseen and funded by the IFRS Foundation, and it has complete responsibility for all IASB technical matters including the preparation and issuing of IFRSs.
COMPOSITION
IFRS comprises the following mandatory pronouncements:
International Financial Reporting Standards;
International Accounting Standards;
IFRIC Interpretations; and
SIC Interpretations.
SCOPE AND AUTHORITY
IFRSs set out recognition, measurement, presentation and disclosure requirements dealing with transactions and events that are important in general purpose financial statements. They may also set out such requirements for transactions and events that arise mainly in specific industries. IFRSs are based on the Conceptual Framework, which addresses the concepts underlying the information presented in general purpose financial statements. The objective of the Conceptual Framework is to facilitate the consistent and logical formulation of IFRSs.
IFRSs are designed to apply to the general purpose financial statements and other financial reporting of profit-orientated entities.
IFRSs apply to all general purpose financial statements. Such financial statements are directed towards the common information needs of a wide range of users, for example, shareholders, creditors, employees and the public at large.
BENEFITS OF IFRS
IFRS brings transparency by enhancing the international comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.
IFRS strengthen accountability by reducing the information gap between the providers of capital and the people to whom they have entrusted their money.
IFRS contribute to economic efficiency by helping investors to identify opportunities and risks across the world, thus improving capital allocation. For businesses, the use of a single, trusted accounting language lowers the cost of capital and reduces international reporting costs.
BIBLIOGRAPHY
A guide through International Financial Reporting Standards as issued at 1 July 2014
Article 4:
SOUTH AFRICA’S RESTRICTIVE LABOUR LAWS IMPACT ON UNEMPLOYMENT
Statistics South Africa revealed that the South African unemployment rate increased from 29% in the second quarter of 2019 to 29.1% in Q3. This places it as the highest unemployment rate recorded since STATS SA started measuring unemployment using the QLFS (Quarterly Labour Force Survey) in 2008.
This translates to the total number of unemployed people in SA being 6,7 million in Q:3 2019.
A very concerning number indeed.
It would prove beneficial to understand the reasons for these numbers so we can actively work towards reducing it. There are various factors to consider which include, our history of apartheid and its long-term effects, industries that have become more capital intensive and less reliant on labour as well as the risks that investors are wary of when investing in SA.
However, we can also view the restrictive labour laws that South Africa has which also plays a role in the high unemployment rate.
In 2014, global law firm DLA Piper compiled a report that compared labour legislation governing redundancies and restructuring in 23 countries around the world. South Africa received an A-rating together with other countries which included Australia, Austria, Belgium and United Kingdom amongst others. Aadil Patel, director and national head of the employment practice at Cliffe Dekker Hofmeyr (a local law firm), said that an A-rating indicates that legislation is balanced, providing protection and legal recourse for both employers and employees.
On the other hand, the poverty and inequality created by the high unemployment rate can also be linked to the very restrictive labour laws we currently have in place. Small firms find the high levels of regulations a deterrent to employ staff and as a knock-on effect, do not focus on expanding their operations.
Small businesses make a significant contribution to the economy and possess the ability to employ unskilled people but even as a small firm they are subject to the labour laws in place. They will find the dismissal of an employee time-consuming and costly, employing skilled people to handle labour law requirements and operating in an environment where there are bargaining councils and trade unions a stumbling block to efficiency.
The implementation of the National Minimum Wage Act has further compounded this issue and created a barrier to employment. Whilst an act like this certainly has its benefits, we have to consider that the disadvantages may far outweigh it. Workers who are unskilled and willing to gain experience may be content in accepting a wage that may be below the stipulated amount but they are not able to freely negotiate their remuneration with an employer. It is unfortunate, that – due to this legislation, many people are still living in poverty and experiencing destitution.
As much as small firms feel the impact of the stringent laws, so do large organisations who may choose to reduce their staff complement and use machines and technology instead.
Many businesses are choosing to downsize in the current economic environment and it is evident that it is not confined to small businesses but has extended to various industries and in addition, has impacted a number of corporate firms.
It is vital that we assist companies in removing the constraints that hamper their efforts in creating jobs. This would include barriers that raise the costs of employment and those that make employers hesitant to hire inexperienced and unskilled people.
BIBLIOGRAPHY
1. Africa, S. (2020). Statistics South Africa | The South Africa I Know, The Home I Understand. [online] Statssa.gov.za. Available at: http://www.statssa.gov.za/ [Accessed 5 Feb. 2020].
End.
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