News Letters

Know Your Client

The global fight against corruption, money laundering and terrorist funding activities has seen the obligation to ‘know your client’ become an inexorable international trend, which has been brought even closer to home with the Gupta, VBS, Steinhoff and Bosasa delinquencies. To bring South Africa in line with international efforts and to meet our commitments to the G20 in this regard, government promulgated The Financial Intelligence Centre Act (Fica) of 2001 (amended in 2017) to create the Financial Intelligence Centre, which has become one of the most effective institutions fighting corruption and crime in our society. Fica places the obligation on a wide range of professions and financial services companies to ‘know your client’, particularly with regard to who owns them. While section 26 of the Companies Act gives any member of the public the right to request the share register of a private company, the practicalities of accessing  this information tend to defeat the intention. In 2013 Moneyweb journalist Julius Cobbett requested the share register of Nova Property Group Holdings, which was involved in the Sharemax property syndication. Nova refused to provide it, and the matter went all way to the Constitutional Court which, in 2016, dismissed Nova’s appeal against the Supreme Court ruling against it, settling once and for all the principle that any person has an unqualified right to access the securities register of any company. However, while the right is there, the process to uplift this information is onerous. WOW, amaBhungane and the Helen Suzman Foundation have, for the last two years, been petitioning the Department of Trade and Industry to introduce legislation into the Companies Amendment Act which will obligate private companies to list beneficial shareholders on CIPC, as is currently the case with directors. We hope that we are being heard. Fica does state that outside sources may be used to verify data, and WOW has accumulated, over 39 years, ownership information on 180,000 companies. WOWEB users are increasingly using this information for know your client purposes.

Manufacturing leads growth

Dear WOW User The South African economy pulled itself out of its second recession since 1994 in the third quarter of 2018 with a quarter on quarter GDP growth of 2.2% with contributions from the following sectors; Manufacturing – 7.5% Agriculture  – 6.5% Transport  – 5.7% Trade – 3.2% Finance – 2.3% State – 1.5% Personal Services – 0.7%   Of the 12 industries research by Who Owns Whom in December 2018 and January 2019 six where in the high performing manufacturing sector; The Confectionery Industry South Africa has a sweet tooth with the chocolate market valued at approximately R6.4bn and sugar confectionery at between R12.5bn and R13.5bn. However, increasing health awareness is a threat to the industry and innovation and product differentiation will be important to remain competitive to ensure brands keep up with health trends. Technology plays a vital role for manufacturers to remain innovative and competitive and the focus is usually on launching new products but sometimes ‘old favourites’ are relaunched such as Tiger Consumer Brand’s Maynard’s Apricot Halves, Frutip’s fruit pastilles and Mister Sweet relaunched Frutus. While some consumers are reducing their consumption of chocolate confectionery many are also switching to premium chocolates and an opportunity exists to train young South Africans in the art of Belgian chocolate making. Western Cape chocolatiers such as Von Geusau in the rural town of Greyton and La Chocolaterie Rococo in the coastal town of Grootbrak have found trained Belgian artisans to teach their staff. The Manufacture of Clay and Concrete Bricks Against the tide of the declining and troubled construction industry since 2010 major brickmakers continue to report good results due to growth in smaller construction projects, affordable housing as well as retail and townhouse developments. More than 1.5 million RDP houses will be built between now and 2020 at a cost of R30bn per annum and Industry leader Corobrik, which produces approximately 28% of total industry output has announced significant investment in expansion. This is reinforced by the state announcement in the Medium-term Budget Policy Statement that investment in social and economic infrastructure will be a focus of economic recovery over the medium term with public sector infrastructure spend estimated at R855.2bn in this period. In this respect it is also useful that the industry takes social investment seriously and provides employment in rural communities and actively engages in community development programmes and is a significant supporter of SMMEs. It takes 26 man-hours to produce 1,000 bricks, providing four jobs per million bricks produced. Manufacture of General Purpose Machinery The DTI has targeted industrialisation as a key policy driver for a long time and in the latest medium-term expenditure framework a further R18.8bn is allocated for industrialisation and manufacturing incentives over the next three years. Another industry advantage is that it is a major exporter into Africa and stands to gain from the future infrastructure build on the continent. On the downside the sector is energy-intensive and sensitive to the instability of price and supply created by the problems at Eskom. The industry is also very critical of the upcoming Carbon Tax which it feels is simply a tax on production which will further decrease manufacturing competitiveness against imports.

Africa Beckons

South African-based companies have just under 5500 subsidiaries on the rest of the African continent, according to the Who Owns Whom (WOW) ownership file of 32 000 African companies. These are traditionally weighted towards SADC countries, but the last ten years has seen a surge of expansion into East and West Africa.

Land Restitution

The ANC’s land summit decision to expropriate land without compensation has raised concerns for a negative impact on property valuation and a consequent risk to the banking sector but it should be viewed in context. Land restitution in South Africa is an imperative if we are to live in a just society. When South African soldiers returned from the second world war the white soldiers were given farms and the black soldiers bicycles. The forced removals of black people from areas such as District Six and Sophiatown shredded the social fabric of those communities and is one of apartheid’s greatest crimes.