Friday, 19. June 2009, 10:44:49
The type of investments you choose will depend on whether you are saving for long-term or short-term goals. Your time horizon is the expected length of time you will be investing in order to meet your goal. Determining your time horizon will help you decide which types of investments are appropriate for you.
For your long-term goals, you may want to consider long-term, growth-oriented investments like general equity unit trusts. With this long-term view of your investment there is no need to try and take profits should the market be at exceptionally high or low levels. While risk sounds like something to avoid, there are definite upsides - greater risk offers opportunity for greater rewards. With a longer investment time horizon, you will be better able to recuperate from a bear market allowing investors to assume more risk and hence greater returns.
If you have only a short term investment time horizon, you should stay in money market funds. You will not want to invest in something that could cause you to lose your investment, regardless of how well the markets appear to be going.
In addition to looking at your time horizon, there are at least two other factors that you may want to consider.
First, there is the 'sleep factor'. How much risk can you assume and still sleep well? You need to decide how much risk you can stomach before investing.
The second is the amount of capital you have available to invest. You should never invest more than you can comfortably afford to be without during your time horizon.
Your short-term goals call for investments that are more conservative, and more accessible. For example, saving for emergencies. You'll want quick and easy access to your funds and you will not want to take on any major risk.
Monthly unit trust investors must take cognisance of rand-cost averaging and not try 'time the market'. Investing on a monthly basis will buy more units of a unit trust when prices are low and fewer units when prices are high. Provided the fund gains value over the long term, you will profit from your purchases during short-term declines. When investing 'new' money, first consider your investment goal based on when you are actually going to need this money. Investors must remain disciplined and not interfere with their portfolios with long-term time horizons, so as to allow fund managers to unlock the real value.
Words from the Wise:
'If you are going to sell every time the stock goes down, you will never win, anymore than a general who always retreats when the enemy advances' - John Train
Friday, 22. May 2009, 06:15:24
This post will be of particular interest to people who resign from their jobs and consider taking their retirement benefits as a lump sum from their pension or provident fund prior to retirement. Currently the law in this regard is undergoing significant change and is due to take effect 1 March 2009 retrospectively.
The tax consequences of the changes envisaged by the South African Revenue Service [SARS] require your careful consideration prior to taking a cash withdrawal, as opposed to preserving your retirement benefits for actual retirement.
In the draft Taxation Laws Amendment Bill the following important changes concerning the taking of lump sums prior to retirement are:
- The tax free 'resignation benefit' upon the withdrawal from a pension or provident fund has been increased from R1 800 to R22 500;
- Between R22 500 and R300 000 a lump sum withdrawal will be taxed at 18%;
- From R300 001 to R600 000 the tax on the lump sum withdrawal will be R54 000 +27% of the amount over R300 000;
- From R600 001 and above the tax on the lump sum withdrawal will be R135 000 +38% of the amount over R600 000
The above changes will only become effective once public comment has been worked through to ensure that no further changes will be required. So far, SARS has issued a tax directive allowing for the first R22 500 to be exempt from tax on withdrawal from a pension or provident fund. However, SARS will still tax amounts over R22 500 at average tax rates until a new directive confirming the above is issued.
SARS has confirmed that by the time that the 2010 tax year is assessed the income tax system will have been updated with the latest changes. The normal annual income assessment will thus be correct and may result in a tax refund or tax due.
Important Warning
The implication of the proposed bill is that the R22 500 will be cumulative and applies to all withdrawals over a member's lifetime. In addition, the tax-free amount plus all withdrawal lump-sums taken will reduce the R300 000 tax-free amount at retirement. Government's intention is clear and is aimed at encouraging you to preserve your retirement benefits until actual retirement date. The proposed changes could be seen as a type of double taxation by government and a means of discouraging the early withdrawal of Retirement Funds.
Thursday, 30. April 2009, 14:01:30
The South African Reserve Bank’s monetary policy committee has cut the repo rate by 100 basis points [1%], bringing the prime lending rate down to 12% offering further relief for cash strapped consumers. The following Statement was issued by Mr. Tito Mboweni, Governor of the South African Reserve Bank:
1. Introduction
1.1 The global economy continues to be in the midst of a severe synchronised downturn with a number of countries already experiencing recession. The G-20 countries, including South Africa, have committed themselves to a programme of action in order to contribute toward the earliest possible global economic recovery. Despite a generally positive response to the G-20 summit in April, it has become increasingly accepted that the slowdown is likely to be severe and protracted, and that the global recovery is likely to be gradual.
1.2 Domestic output and expenditure growth are declining or negative, and the growth outlook is dependent to a significant extent on a broader global recovery. Despite the widening domestic output gap, inflation remains sticky but is expected to continue on its downward path.
2. Recent developments in inflation
2.1 The year-on-year inflation rate as measured by the consumer price index (CPI) for all urban areas increased to 8,6 per cent in February 2009 and then moderated to 8,5 per cent in March. Food price inflation continued its downward trend, increasing at a year-on-year rate of 14,7 per cent in March, compared with 15,8 per cent in the previous month. Food prices remained the largest contributor to the inflation outcome, contributing 2,3 percentage points. The largest price increase was recorded by electricity and other fuels which increased by 30,1 per cent. Significant increases were also recorded in the prices of tobacco, housing maintenance and repairs, health, recreation and culture, and education. Countervailing pressure came from petrol prices which declined by 14,9 per cent, despite the petrol price increase of 45 cents per litre in March.
2.2 Producer price inflation, which reached 19,1 per cent in August 2008, continued its downward trend, measuring 7,3 per cent and 5,3 per cent in February and March 2009 respectively. Prices of agricultural food products declined at a year-on-year rate of 2,1 per cent in March, while manufactured food price inflation moderated to 9,4 per cent.
3. The outlook for inflation
3.1 The most recent central forecast of the Bank shows a near-term deterioration in the inflation outlook but inflation is expected to follow a downward trend and to average 5,4 per cent at the end of the forecast period in the final quarter of 2010. The slightly higher expected trend is a result of revised assumptions about administered prices and the higher-than-anticipated inflation outcome for February.
3.2 Inflation expectations show a mixed picture. The inflation expectations survey which is conducted on behalf of the Bank by the Bureau for Economic Research at Stellenbosch University reflects somewhat divergent inflation expectations between the different groups of respondents. In the survey conducted in the first quarter of 2009, average CPI inflation expectations for 2009 declined from 8,6 per cent to 8,3 per cent. Expectations ranged from 6,1 per cent for analysts, to 9,7 per cent for trade unionists. Inflation is expected to average 8,0 per cent in 2010, up from the 7,5 per cent measured in the previous survey. While analysts expect inflation to average 5,4 per cent in 2010, business executives and trade union officials expect inflation to average 8,6 per cent and 10,1 per cent respectively. Inflation is expected to moderate to 7,8 per cent in 2011.
3.3 Wage settlements, which generally follow inflation trends with a lag, have also edged up slightly. According to the Andrew Levy Employment Publications, the level of wage settlements increased by 10,2 per cent in the first quarter of 2009, compared to the 2008 average of 9,8 per cent. Nominal unit labour cost increased over four quarters by 12,8 per cent in the final quarter of 2008. Nominal wage settlements are expected to moderate somewhat as the inflation rate declines. According to the Quarterly Employment Statistics survey by Statistics South Africa, in the fourth quarter of 2008, employment levels showed their first decline in four years.
3.4 The risks to the inflation outlook as assessed by the MPC have remained relatively unchanged since the previous meeting of the committee, although the recent appreciation of the rand exchange rate, if sustained, may have reduced the degree of the upside risk to the inflation outlook. The rand exchange rate remains affected by changes in global risk aversion, but there has been a decline in the degree of volatility. Since the positive market reaction to the G-20 summit in early April, sentiment towards emerging market economies in general has improved and most emerging market currencies have appreciated against the US dollar.
3.5 As noted earlier, the global economy remains under pressure despite fiscal and monetary stimuli in many countries. In January 2009 the International Monetary Fund (IMF) forecasted global growth of 0,5 per cent and 3,0 per cent for 2009 and 2010 respectively. The IMF now expects global output to contract by 1,3 per cent in 2009, before recovering gradually to 1,9 per cent in 2010. The advanced economies are expected to contract by 3,8 per cent while the emerging and developing economies are expected to experience positive growth of 1,6 per cent, with China and India expected to grow by 6,5 per cent and 4,5 per cent respectively. The growth forecast for Africa has been reduced from 3,4 per cent to 2,0 per cent. The risks to these forecasts are seen to be on the downside, given the current heightened levels of uncertainty. World trade has also declined and is expected to contract by a further 9,5 per cent in 2009.
3.6 World inflation is expected to remain subdued as a result of these growth trends and lower commodity prices. World inflation is expected to average 2,5 per cent in 2009 and 2,4 per cent in 2010. Although a number of commodity prices have recovered somewhat from their lows in the fourth quarter of 2008, they are expected to be restrained by the weak global demand. The price of North Sea Brent crude oil declined to around US$35 per barrel in late December 2008 but has been trading at around the US$50 per barrel level for most of April 2009. During this month, the higher international oil product prices have been more or less offset by the appreciation of the rand against the US dollar, and the domestic price of petrol is expected to remain relatively unchanged in May.
3.7 The outlook for domestic economic growth remains subdued, with no indications of a quick recovery. The high frequency data continue to suggest that the negative conditions recorded in the final quarter of 2008 persisted in the first quarter of 2009. The physical volume of manufacturing production declined at a year-on-year rate of 15,0 per cent in February, following an 11,1 per cent contraction in the previous month. The outlook for manufacturing remains negative, with the Investec/BER Purchasing Managers Index declining further in March. Total mining production declined at a year-on-year rate of 12,8 per cent in February, while the real value of building plans approved declined by 42,7 per cent over the same period.
3.8 The sluggish domestic demand conditions also appear to have persisted. Wholesale trade sales declined at a year-on-year rate of 8,9 per cent in February while retail sales declined by 4,5 per cent following a modest increase in January. Total new vehicle sales declined by 30,3 per cent in March, reflecting the continued weak demand for durable goods. However, the FNB/BER Consumer Confidence Index, while still at low levels, showed an increase in the first quarter of 2009. Falling house prices and weak asset markets are also expected to restrain consumption expenditure.
3.9 Domestic credit extension continues to reflect the declining trend in domestic expenditure as well as more stringent credit criteria being applied by banks with respect to loans to both households and companies. Year-on-year growth in total loans and advances to the private sector declined to 10,2 per cent in February and 7,3 per cent in March 2009. The quarterly growth declined from 6,2 per cent in the fourth quarter of 2008 to 0,1 per cent in the first quarter of 2009. Instalment sale credit and leasing finance reflected the weak demand for durable goods, with increases of 3,1 per cent in February and 1,6 per cent in March.
3.10 In line with the previous MPC statement, the committee assesses the main risks to the inflation outlook to emanate from cost-push pressures, particularly administered prices, which include the risk of higher-than-expected electricity tariff increases. Food price inflation at the consumer price level, which has remained relatively unresponsive to lower inflation at the producer price level, appears to show signs of moderation. Should this downward trend accelerate, it could have a significant downward impact on the inflation trajectory.
4. Monetary policy stance
4.1 The Monetary Policy Committee considered the severe synchronised downturn in international and domestic economic conditions and noted their potential future downward impact on inflation, notwithstanding the higher-than-expected recent domestic inflation outcomes. The committee is of the view that the adverse economic conditions continue to tilt the balance of risks to the inflation outlook to the downside over the medium term and has therefore decided to reduce the repurchase rate by 100 basis points to 8,5 per cent per annum with effect from 4 May 2009.
TT Mboweni
GOVERNOR
Wednesday, 22. April 2009, 10:06:26
Today I pray for peace in our fledging democracy in South Africa, and am looking forward to exercising my hard-fought democratic right to vote. Albeit viewed by most and I am mostly in agreement, I was probably on the wrong side of the fight. As a soldier I was not racially motivated. As a soldier I was taught to defend my country. I still sometimes struggle with why I was not able to consciously realise this “disproportionate inequality”. Suppose my innocence and the will to be a story book hero was overshadowed by the then South African Government propaganda war machine. I lost it then. I now live with my decisions and the power to vote. My first Vote was to choose “YES” giving all South Africans the privilege of free will. I now vote so that my children will experience equality. My right to vote was also hard-fought.
A Proud Dad, husband and South African
Friday, 17. April 2009, 10:00:49
In 2008 many investors turned to money market type investments as a safe haven but with interest rates on the decline and reducing after-tax yields one has to question whether staying in a money market fund is still a wise choice as, historically, the after-tax returns from money market funds have not beaten inflation.
Although it is envisaged that 2009 will still be a bumpy ride, if you have a long term investment time horizon it is a good idea to take advantage of the relatively strong long term return prospects of equities. Buying into equities now may seem risky but just keep in mind that there are currently good buying opportunities and you will need to hold equities to protect you from inflation in the future.
Over the past year we have learnt that nothing is guaranteed in life as many renowned banks in the Northern Hemisphere failed. Now it appears that the word ‘guarantee’ has been replaced by 'capital preservation'.
Capital preservation endeavours to produce returns at least equal to inflation. Individuals who are close to or within their retirement years often prefer these portfolio strategies so that they can ensure their life savings are not lost or reduced for any reason other than their own withdrawals, needed for living expenses.
I continues to do research in this category to established a Fund which seeks to offer investors total returns that are in excess of inflation over the medium term with a high emphasis on capital preservation. The Stable Fund combines funds, which we have identified as having the objective of capital preservation over a period of 12 to 24 months, into one portfolio. What’s more, the Stable Fund invests in a portfolio of funds that have a much lower weighting to cash compared with money market funds. In this way there is about a 50% to 60% saving of income tax.
Capital preservation stands in stark contrast to a capital growth investment strategy invested in equity-based funds. Sometime in the future inflation is going to be a problem and you will need to hold real assets such as equity or property funds. Bear in mind, however, that equity or property investment is only recommended if you have a long term investment time horizon.
Thursday, 2. April 2009, 10:46:35
In the latest edition of South Africa - The Good News, Ian Macdonald and Matthew Choate make a cogent case for being positive about the South African Economy.
The papers are full of 'recession-talk'. The simple fact of the matter is that we aren't even in a recession, or guaranteed to be in one in the near future. Admittedly, we are close. A recession is two successive quarters of negative economic growth, and we recently had our first, after the longest economic upswing in our history. But as Finance Minister Trevor Manuel said recently in a radio interview 'Technically, we're not in a recession. (I know there is) an argument, that if it walks like a duck and quacks like a duck, it probably is a duck; it probably is a recession but, in technical terms, we're not in a recession. We're not in recession yet, that's a very important point.'
Take a look at a number of factors in our favour:
Exchange controls have trapped liquidity within South Africa that may otherwise have been exposed offshore.
The National Credit Act has enabled the country to manage credit better than many of our global counterparts.
We had a budget surplus in 2007 which means that government is able to increase spending to maintain economic growth.
Our banks are more sound than the Swiss (and the German, the British and the American banks) according to the World Economic Forum.
Our property market is in better shape than most.
We are investing in vast public infrastructure projects that are aimed at attracting investment and reducing unemployment.
What many people do not know is that independent organisations such as the World Bank, Business Unity South Africa, the Bureau for Economic Research, Germany's Ifo Institute and the Paris-based International Chamber of Commerce have recently predicted that the South African economy will continue to grow in 2009.
But can a recession be a self-fulfilling prophecy? Can the tail wag the dog? If one constantly reads that we are heading for a recession, won't one act accordingly, whether it's true or not? With the perception of a recession imminent, business and consumer confidence drops; people stash their cash instead of investing it, they stop spending money. Businesses don't invest and they lay off staff. Aggregate demand drops and the perception of the 'imminent' downturn becomes the cause. Economics is a lot about confidence.
Having said that though, there is very little doubt that the world is entering a very difficult period. And even if South Africa is able to avoid a recession, we are almost certain to experience an economic slowdown. South Africa is sound, but we are not immune to the financial crisis. We service global demand and as that drops, we will be negatively affected.
But as with most crises, unprecedented opportunities abound. There is consensus amongst some experts regarding how South Africans should respond to the cooling economic climate.
Regarding your stock market investments: (As per a specialist at a top investment firm in South Africa)
If you have any money to put away, buy equity unit trusts, which invest in quality shares. Yes, some companies are struggling, but look at balance sheets to check if they are sound. Some companies will always be cash generative, look out for those.
South African companies are blessed with good conservative management teams, the type who will always have cash on their balance sheets.
South Africa's debt to income ratio has increased over the last few years, but not near the levels of the US and the UK.
Our banks are some of the few in the world that still have the ability to lend.
The emerging markets offer the big growth opportunity after the crisis. China is looking at 4 - 6% growth this year; this is lower than previous years but is still very good.
South Africa's fiscal policies have helped us immensely and infrastructure spend underpins this. When things turn, South Africa will be able to take advantage of this.
This is a perfect time for young South Africans, with no risk, to get involved in saving in equity unit trust funds. You don't have to be rich, or have a great job, but you can plan to retire a wealthy man or woman.
Now is the time to buy and/or hold on to property and to start a business. Not only will those who grasp these opportunities benefit in the long run, but they will also help to keep the economy's head above water and to avoid the sustained recession that so many think to be inevitable.
Source: South Africa - The Good News
Friday, 27. March 2009, 07:38:03
Earth Hour 2009 is a global initiative by the World Wide Fund for Nature, which acts as a
worldwide call to action to every individual, business and community to take a stand against
Climate Change. Sanlam has committed itself to this initiative.
To show your support, commit to switching off your lights for one hour on Saturday, March
28th at 8:30pm. Originating in Sydney, Australia in 2007, the Earth Hour initiative proved
more than worthwhile when it witnessed 2 million people coming together to switch off their
lights for one hour for this vital cause.
Following on from this success, 2008 saw an estimated 50 million people taking part. Global
landmarks such as the Golden Gate Bridge in San Francisco, Rome's Colosseum and the Coca
Cola billboard in Times Square, all stood in darkness, as symbols of hope for a cause that
grows more urgent by the hour.
This year, 2009, Earth Hour will see the lights go out on some of the most recognised attractions
on the planet, including Cape Town's Table Mountain, Christ the Redeemer in Rio de
Janeiro, Merlion in Singapore, Sydney Opera House, the iconic 6-star hotel, the Burj al Arab,
in Dubai, Millennium Stadium in Cardiff and the world's tallest completed building, the Taipei
101.
Earth Hour 2009 has one major aim: to unite the citizens of the world in the fight against climate
change in order to convince governments and world leaders that our planet cannot wait
any longer.
Please visit
www.earthhour.org.za for more information and to add your name to the global petition for combating climate change. Source:Sanlam Bulletin Board
Tuesday, 24. March 2009, 15:34:02
The South African Reserve Bank’s monetary policy committee has cut the repo rate by 100 basis points [1%], bringing the prime lending rate down to 13%. The following Statement was issued by Mr. Tito Mboweni, Governor of the South African Reserve Bank:
Introduction
The global economy has continued to weaken significantly in recent months as a result of the turmoil in the financial markets. There is growing uncertainty regarding the depth and duration of the economic slowdown. The South African economy has not escaped the impact of these developments, and domestic production has contracted as a result of weak domestic demand and a significant decline in export demand. Against this backdrop of widening domestic and global output gaps, the balance of risks to the inflation outlook has changed somewhat.
Recent developments in inflation
Inflation as measured by the reweighted and reconstituted consumer price index (CPI) for all urban areas (which is the new target measure) measured 8,1 per cent in January 2009. Food and non-alcoholic beverages prices, which increased at year-on-year rates of 15,7 per cent in January, contributed 2,4 percentage points to total inflation. The housing and utilities category contributed 2,1 percentage points, and together with food accounted for more than half of the measured inflation increase. The transport component had a minimal impact on the overall CPI as a result of the 20,3 per cent reduction in petrol prices during January. Producer price inflation, which reached 19,1 per cent in August 2008, continued its downward trend, measuring 9,2 per cent in January 2009. Despite the depreciation of the rand during 2008, producer prices of imported goods declined at a year-on-year rate of 5 per cent in January.
The outlook for inflation
The most recent central forecast of the Bank shows a near-term deterioration in the inflation outlook but a more favourable trend is forecast for the medium term, which is the relevant time frame for monetary policy. Consumer price inflation is expected to average 8,1 per cent in the first quarter of 2009 and then to decline to below 6 per cent in the third quarter of the year. As a result of technical base effects, inflation is then expected to marginally exceed the upper end of the inflation target range, before returning back to within the range in the second quarter of 2010 and to remain there until the end of the forecast period in the fourth quarter of 2010, when it is expected to average 5,3 per cent. The heightened levels of uncertainty and the rate of change of global developments make these forecasts subject to higher risk than is usually the case.
Expectations by analysts are similar to those of the Bank, with the Reuters consensus forecast showing a moderate upward revision of inflation in 2009 and a relatively unchanged forecast in 2010, when inflation is expected to average 5,5 per cent in the final quarter. Most forecasters expect inflation to have increased moderately in February 2009 before resuming its downward trend. Inflation expectations, as reflected in the yield differential between inflation-linked bonds and conventional government bonds, have increased slightly since the previous meeting of the MPC but remain within the inflation target range.
The inflation outlook has been dominated by the continued weakening of the global economy and financial markets, notwithstanding significant monetary and fiscal measures introduced by central banks and governments. The decline in global demand has resulted in a marked contraction in international trade. The International Monetary Fund, which in January was forecasting global growth to average 0,5 per cent in 2009, now expects the global economy to contract by up to one per cent in 2009. Numerous industrialised and developing countries are already experiencing negative growth. World inflation is being restrained by declining demand and lower commodity prices which are expected to remain subdued under these conditions of negative or low growth.
The weak global demand has been reflected in the export performance of the South African economy. However, the decline in the value of exports in the final quarter of 2008 was more than offset by a lower value of imports, mainly due to declining international oil prices. Combined with a narrowing of the deficit on the services, income and current transfer account of the balance of payments, this resulted in a narrowing of the deficit on the current account from 7,8 per cent of GDP in the third quarter of 2008 to 5,8 per cent in the final quarter. However, the published January trade data, which showed a further considerable decline in the value of merchandise exports, suggest that the improvement in the trade deficit may not be sustained to the same extent seen in the fourth quarter. The deficit on the current account of the balance of payments measured 7,4 per cent of GDP for the 2008 calendar year.
Domestic demand conditions have also deteriorated further. In the fourth quarter of 2008, gross domestic expenditure and domestic final demand contracted by 3,9 per cent and 0,4 per cent respectively. Final consumption expenditure by households declined by 2,7 per cent, mainly as a result of a 20 per cent contraction in consumption of durable goods. The growth in gross fixed capital formation moderated further, recording an annualised growth rate of 3 per cent. Motor vehicle sales, which have been under pressure for some time, declined at a year-on-year rate of 35,6 per cent in February. In January, real retail sales increased at a year-on-year rate of 1,7 per cent -the first year-on-year increase in 9 months- while wholesale trade sales declined by 4,5 per cent over the same period.
Domestic demand conditions are expected to remain under pressure as a result of declining disposable incomes, tighter credit conditions and negative wealth effects. Credit extension to the private sector has continued its downward trend, a result of lower demand and more stringent lending criteria being applied by banks. In January 2009, growth in total loans and advances to the private sector measured 11,4 per cent. The slower rate of credit extension has resulted in a further moderation of the ratio of household debt to disposable income to 76,4 per cent in the fourth quarter of 2008, compared with a peak of 78,2 per cent in the first quarter of that year.
Domestic output has been impacted appreciably by these external and domestic demand developments, resulting in a further widening of the domestic output gap. In the final quarter of 2008, gross domestic product contracted at an annualised rate of 1,8 per cent, mainly due to a 22 per cent decline in manufacturing sector output. The high frequency data indicate that these adverse conditions may have persisted in the first quarter of 2009. Manufacturing and mining output contracted at year-on-year rates of 11,1 cent and 8,7 per cent respectively in January, while the Investec/BER Purchasing Managers Index reached a new low in February, reflecting continued strain on the manufacturing sector. The latest Bureau for Economic Research manufacturing survey indicates extreme and broad-based weakness in this sector in the first quarter of 2009. The RMB/BER Business Confidence Index surveyed in the first quarter of 2009 reached its lowest level since 1999, particularly in the manufacturing, wholesale and construction sectors. The confidence of retailers of non-durable goods increased somewhat.
On a trade-weighted basis, the rand has been relatively stable since the beginning the year and has appreciated by about 2,5 per cent since the previous meeting. Movements in the rand exchange rate in recent weeks have been mainly reflecting volatile international currency developments. After the previous meeting of the MPC, the rand first depreciated to around R10,60 against the US dollar, as the dollar strengthened against most currencies. Since then the US dollar has weakened somewhat, and the rand is currently trading at levels of around R9,45 per US dollar.
The upside risks to the inflation outlook emanate primarily from cost-push pressures, particularly from administered prices. These include possible higher-than-expected electricity tariff increases. The decline in inflation may also be delayed by continued high rates of increases in food prices, despite marked declines in producer price food inflation.
Monetary policy stance
Against the background of a slowing global and domestic economy and an improved medium-term outlook for inflation, the Monetary Policy Committee has decided to reduce the repurchase rate by 100 basis points to 9,5 per cent per annum with effect from 25 March 2009.
TT Mboweni
GOVERNOR
Friday, 20. March 2009, 05:33:38
Financial Planning is about determining realisable goals. Taking the ‘dream' out of the dream and developing attainable goals. But this requires action. A personalised, time-based financial plan will help you control your destiny. Easily done, if you set realistic goals, commit yourself and stick to it. In this way you will make steady progress, even with ups and downs along the way.
Create a budget and spend less than you earn. There is a fine line between spending appropriately and spending above your means. Remember that sensible old adage: it is always better to forego purchases until you can pay for them in cash rather than to borrow from the future to meet your needs now. It's a fact, in today's society, that many of us get trapped in credit agreements that we can no longer afford, either due to changes in circumstances, rising interest rates or a misunderstanding of the conditions and provisions of a credit agreement.
The exception to this rule could be the purchase of a house. Although it will raise your cash expenses dramatically, it is often wise because it is generally an investment which adds to your future net worth.
Budgeting must be both realistic and manageable. If the goal of your budget is to save R100 each month and you are not able to save any money the first month, don't give up on the process. The more you scrutinise and understand your budget the better you will be at sticking to it and meeting your goals.
The Rules of actioning a Personalised Financial Plan
Start as soon as possible
Plan with a new frame of mind
Have realistic expectations
Live within your means
Rationalise your spending
Stay out of credit card debt
Save money
Prioritize your investment time horizons
Beware the cost of delay. The sooner you start working towards your goals the sooner you can achieve them. It can cost a lot more to do these things later.
Little girls are taught the fine art of surrender and dream of the day when they will be swept away by a prince on a white horse. And little boys are instructed in the techniques of capture, and then fitted into suits of armor to go forth. But nobody ever tells you the end of the story and whether it really was a happy ending.
Start today!
Wednesday, 18. March 2009, 06:57:01
This yearrs budget has brought about some significant changes that could have a positive impact on your estate duty plan. Finance Minister Trevor Manuel made an important announcement which went by almost unnoticed.
The effect of this announcement is that the definition of the R3.5 million estate duty exemption will be extended to surviving partners, where partners leave their respective estates to each other. [For tax purposes, a partner is a spouse to whom you may be married by religious, civil or customary ceremony or someone with whom you have a permanent relationship (this includes same gender relationships).]
Previously, where partners left their estates to each other, there was no estate duty on the first death [Section 4 (q) of the Estate Duty Act] and on the death of the surviving spouse a R3.5 million estate duty exemption would apply. In effect this meant that any estates over the value of R3.5 million paid estate duty at a rate of 20%.
The proposal in the Budget is to amend the Estate Duty Act so that couples can leave R7 million to their heirs without having to set up expensive, structured wills and trusts to take advantage of the rebates. The proposal is to amend the Act so that any unused portion of the estate duty exemption is automatically passed onto the surviving partner, who may then leave up to R7 million to his or her heirs without the estate incurring estate duty. The overall tax saving, for the average taxpayer, can be used to pay off debt and/or be put aside as extra savings.
For example:
John and Mary are married and their total estate is worth R5 million. John dies and in terms of his Will he leaves his entire Estate to Mary. In terms of Section 4 (q) of the Estate Duty Act, no estate duty is payable. Five years later, Mary dies and leaves her entire estate, which has grown to R8 million, to her children. As it now stands Mary's estate will have a R7 million Estate Duty exemption. R1 million will be subject to 20% estate duty of R200 000. Under the old system, the estate duty would have been R 900 000, being 20% of R8 million less the R3.5 million exemption.
If you currently have a structured will in place reflecting a trust as part of your estate duty planning we recommend that you contact our office to set up an appointment to review the necessity of that trust in terms of the proposed estate duty exemption changes.
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