Rates & Restitutions - Menachem Kay, Managing Director, Octagon Financial Services
With the World Cup behind us, many of us are looking for the next ‘big thing’ to get excited about. And whether or not financial markets warrant war cries, vuvuzelas and mirror socks, investing one’s energy in better understanding interest rates and the market is at least a good distraction.
Indeed, many were pinning their hopes on an interest rate cut and were disappointed with the Reserve Bank’s decision to leave it at 6.5 percent. Speculations as to the outcome abound: although retail sales had improved 3.2% year-on-year in comparison to April’s 2.9%, credit card transactions, trade confidence and employment growth remain poor and many believe that this is not good enough for South Africa’s economy. Furthermore, there is still no certainty on how the July electricity price increases will affect the consumer price index.
However, Reserve Bank Governor Gill Marcus did leave the door open to a potential cut down the line. And many speculate that if the cut did not come now, it would likely come at the next meeting in September. So whilst the markets may remain choppy for a while, we’re confident that the knock-off effects from the World Cup will materialise, and that markets will once again stabilise.
Speaking of the Reserve Bank, companies have, for the first time, been included in a new Reserve Bank initiative to encourage tax-paying entities who took money offshore illegally to disclose their investments for a flat penalty of 10% of the market value of the asset.
Termed the “Voluntary Disclosure Programme’, the idea is similar to the ‘amnesty’ offered to individuals in 2003. There is, however, much speculation as to whether this new offering should be send as an ‘amnesty’ – a term that previously caused resentment. Rather, it should be interpreted as part of the gradual libersalisation of exchange controls. Business leaders said tht the new rules would help companies to regularize their affairs, whilst Neren Rau, CE of the SA Chamber of Commerce and Industry, maintained that this programme “benefits the exchange-control environment in the long run”. Whilst there is no limit to the amount that companies can take offshore, they must first apply to the bank; thereafter, applicants would have a window of 12 months from November 1st to disclose their assests. This amnesty will also be offered to individuals. At the time of going to print, SARV had not finalized the exact details, but as soon as finalized information becomes available we will post it on our new and revised website. As in the previous amnesty Octagon Financial will continue to facilitate the applications for these amnesties. Please feel free to contact us for any further assistance.