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As a central knowledge portal to the retirement and related industries, EBnet publishes a range of daily articles submitted by a range of industry organisations, experts and contributors. Readers can also comment on and contribute to articles.


Shari'ah investing - principle-based and socially responsible

Shari’ah investing, a form of ethical investing, is arguably a scarcely understood discipline within discretionary fund management (DFM), even by seasoned investment professionals. With its Quranic basis and grounded in Islamic trite law (Shari’ah law), there is the belief that Shari’ah investing is exclusively for investors who follow Islam. This is a misconception, says Imraan Khan, Research and Investment Analyst at Glacier Invest. Specific investment objectives Shari’ah investing helps investors who have an ethical or moral interest in where their money is being invested. Shari’ah-compliant funds avoid stocks and shares in any company or industry whose core business and revenue are deri

MTBPS - Limited options need political will to execute

Highlights Economic growth and inflation rates revised significantly lower. Tax revenue collection shortfall of R52bn in 2019/2020. Debt to GDP ratio rises above 70% over the medium term and continues to rise thereafter. Moody’s will likely change the outlook from stable to negative on 1 November followed by a downgrade in 2020 if no reforms are implemented. Bond yields will likely rise and the rand will weaken against the US dollar although it appears that the negative rating action is largely priced in already. Fiscal unsustainability to trigger negative rating action and market sell-off The Medium Term Budget Policy Statement (MTBPS) highlights the unsustainability of the debt trajectory

MTBPS laden with rhetoric but short on spending cut details

Finance Minister Tito Mboweni’s second Medium-Term Budget Policy Statement (MTBPS) paints a stark financial picture. The consolidated deficit numbers for next year, the 2020/21 fiscal year, have risen from a projection of 4.3% in the February 2019 Budget to 6.5% now. This massive increase reflects the inability of government to make hard decisions. While Mboweni’s speech was filled with rhetoric around commitments to cut expenditure and narrow the deficit by February 2020, there were no details on how government proposes to cut spending. South Africa has one of the steepest yield curves in the world. In English this means that there is a large difference in the interest rate that the gove

Rand plummets on bleak MTBPS

The rand lost 1.5% against the USD early in the MTBPS as the Finance Minister compared South Africa to a winter season, where the ground is dry. He emphasised that debt is accelerating at an unsustainable pace and the economic landscape is dismal. He stressed that a weak global environment is adding to pressure on the local economy and that drastic action is needed to ensure that SA creates a sustainable economic environment. Domestic policy missteps were highlighted as one of the key issues for emerging market turmoil, touching on Mexico and Brazil. Expected GDP growth is now set at 0.5% for 2019, adjusted downwards from the 1.5% anticipated in February. This highlights the unfavourable sit

Just Share’s preliminary comments on Sasol’s Climate Change Report

Sasol Limited’s long-awaited Climate Change Report was released on 28 October 2019. The report, titled “Positioning for resilience in a low-carbon future”, is dated 30 June 2019 and is the company’s “first report aligning with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)”. Sasol’s outgoing Chairman Mandla Gantsho acknowledges in the company’s 2019 Integrated Report [1] that concern expressed by stakeholders at its 2018 AGM had resulted in the company conducting “accelerated resilience testing of our corporate strategy against various climate change scenarios, including the Paris Agreement’s goal, which we support”. Civil society organisations includin

Retirement Annuity: How much can you invest offshore?

With all the uncertainty in the South African market and concerns about future investment returns, many investors are looking offshore for investment opportunities. A diversified investment portfolio is always a good strategy when saving for retirement but before you set off looking for greener pastures in offshore markets, take note of Regulation 28 and its integration in retirement annuity funds. Retirement annuity funds are governed by Regulation 28 as per the Pensions Fund Act and prescribe certain maximum limits on the various asset classes you can invest in. Regulation 28 is enforced to protect investors against capital loss and smooth out investment returns by diversifying their inves

The 2019 Medium Term Budget: South Africa has options

Years of fiscal consolidation - cutting expenditure and raising revenue mainly through tax increases, have failed to deliver the desired outcome. The Main Budget deficit is likely to exceed 6% of GDP in 2019/20 with the gross loan debt ratio increasing to more than 60% of GDP by the end of this fiscal year. Granted, a debt level of this magnitude is, in itself, not a great concern. After all, it’s unlikely to prompt Moody’s to downgrade South Africa to sub-investment grade this year, given the methodology followed by the ratings agency. We do have a problem But that does not mean there isn’t a problem. Should growth remain modest in the medium term – a likely scenario considering current inf

Taking some investment lessons from the Rugby World Cup

While each country participating in the Rugby World Cup dreams of winning the trophy, becoming the champion is not that simple. It depends on a lot more than just having the best players in your team: player selection, game strategy, and team dynamics all play a role in the eventual outcome. It’s not about picking the previous winner No-one would think predicting the winner of the Rugby World Cup is as simple as looking at the previous tournament’s winners. It is easy to appreciate the uncertainty involved and that a single match can change the outcome of the entire tournament. Despite this, investors often base their investment decisions on selecting last year’s winners, rather than followi

How your client's longer life impacts portfolio construction

Accumulating capital for retirement has, for decades, been underpinned by traditional portfolio construction thinking. This presents a problem for retirees in the decumulation – or income drawdown - phase of their life journey. The reality is that people are living longer and as a result, their capital is at risk of not lasting. So say Leigh Köhler, head of Business Solutions and Rafiq Taylor, head of Implemented Consulting at Glacier Invest, who frame a compelling argument for rethinking portfolio construction and creating the difference between financial want or a comfortable life into old age for clients. What keeps retirees awake at night How long will I live? How much income will I need

FSCA warns the public to act with caution when dealing with Humble Security and Trading (Pty) Ltd.

The Financial Sector Conduct Authority (“The Authority”) has launched a formal investigation into the activities of Humble Security and Trading for suspected breaches of financial sector laws. This comes after the Authority was made aware that the entity is offering forex investment packages to the public without authorisation. Furthermore, these investment packages promise what appear to be unrealistic returns. Humble Security and Trading conducts its business in South Africa from their offices based in Pietermaritzburg and Umzimkhulu. Mr Zolani Phantsi is the sole director of Humble Security and Trading. Neither Humble Security and Trading, nor Mr Zolani Phantsi are licensed to conduct any

Why looking for a catalyst is not always helpful

As any parent of young children will attest, the need to know “why” and “when” is a natural human tendency. It is also the mainstay of daily market commentary and investment articles. Human beings believe that if we know why something happened, it will help us make sense of it and form a better basis for future decisions. We want a thread of causality – and, if at all possible, a linear one with a timeline. Investors are sceptical about South Africa When considering an investment that is in any way connected to what happens in South Africa (notably in SA Inc.-related shares and local government bonds), investors are sceptical. They ask why the investment case will materialise, why the value

Timing the FOREX market – can it be done?

Many South Africans are actively looking to move funds offshore, for reasons that range from travel and investing to importing or exporting new products and launching new businesses. But without observing the correct exchange control procedures, you or your business could quickly land in hot water with the South African Reserve Bank (SARB). First introduced in 1961 in an effort to ensure currency stability and manage the country’s balance of payments, exchange controls are used to manage, measure and report South Africa’s total foreign exchange inflows and outflows. Consequently, all foreign exchange transactions must be reported by authorised dealers to SARB as the relevant regulatory autho

Early retirement is tempting – but can you afford it?

The temptation to retire early and adopt a life of leisure can be particularly seductive as you enter your fifties and sixties, especially after many years spent with your nose to the grindstone. But can you afford it? There are two main drivers which determine if early retirement is even an option for you. They are: How much capital you have, and How much you need to draw to sustain your standard of living. Clients often ask us “How much capital will I need to retire”? However, the answer is directly related to how much you require on a monthly basis to sustain your current standard of living. One of the very basic calculations I give my clients is to take their current monthly expenditure

The "TIPping" point for economic transformation

The “TIPping” point for economic transformation Formation of a new asset class – a listed portfolio of BEE schemes Unique financial structure – majority black-owned at all times Unlocking black capital – promoting greater financial inclusion With an ANC 2019 election manifesto that reaffirmed its commitment to raising industrial and enterprise financing for black industrialists alongside ongoing government support for the Black Industrialists Fund, a theme of Cyril Ramaphosa’s presidency is evident. The Department of Trade and Industry is also ramping up efforts to develop black entrepreneurs and build its black industrialist incentive programme. But, as Ramaphosa noted in his 2018 State of

Five at-retirement annuities explained

One aspect of retirement fund management involves explaining the various annuity options to staff as they approach retirement via the retirement benefit counselling process, pre-retirement workshops and targeted communication including personalised quotations in order to enable staff to make sound and appropriate annuity choices. Thiru Govender of Old Mutual Corporate Consultants explains five options and the questions to ask before deciding on the type of annuity that may be suitable. The important role of employers As an employer, you will be well aware of the importance of offering your staff a pension or provident fund, or retirement annuity fund. What is less appreciated is the vari

A Path to Prosperity for SA and shifts in thinking about savings and retirement

Investec and Adrian Saville, professor of Economics and Competitive Strategy at the Gordon Institute of Business (GIBS) have joined hands in researching and analyzing the major issues regarding savings and investment in SA. The Investec GIBS Savings Index for SA, started three years ago, has become an important barometer and measure of savings levels in the country. At the same time, Investec has just released a comprehensive report "Path to Prosperity for SA" which is attached to this email as background. Adrian is interviewed by Jenny Crwys-Williams in this podcast - link provided here - https://tilt.egnyte.com/fl/m2qE3HD3Tx in which they touch on some of the major insights from the

Understanding the legal principles that distinguish a retirement fund from the employer

It may surprise many employers to realise that there are currently no legal obligations placed on employers to give an employee any retirement benefits, and very often the employee is left to make his own arrangements. It is even more critical for employees to understand that where retirement benefits are in fact provided, the employer is a separate legal entity to the retirement fund, and the division between the legal liabilities and obligations that lie on these separate legal persons, are critical to understand. The purpose of a Fund is to assist the employee to save for retirement. An employee becomes a member of the Fund, usually when the employer requires or allows, it, and the employ

#RiseOfEmergingAssetManagers Conference 2019 - Feedback

Motswedi Emerging Manager Strategists successfully hosted their unaugural #RiseOfEmergingAssetManagers Conference 2019 at the JSE auditorium in Sandton on the morning of the 16 October 2019. Motswedi is an independent asset manager research house that focuses on researching emerging and transformed asset managers. Their higher purpose is premised on reshaping the South African asset management industry by promoting transformation, gender equality, skills development and stimulating economic growth through supporting and investing with transformed asset management companies. Through the solutions they provide, they aim to see more asset owner’s being comfortable to invest with transformed ass

Best practice in handling complaints

Complaints are an inevitable part of any service-oriented business, but how you view and handle the complaints procedure can make all the difference between a complaint being a hassle or useful tool from which to learn and improve your service. Ten to 15 years ago it was rare for South Africans to complain. But times have changed. People are more aware of their rights and complaints are commonplace. Companies too are more aware of the need to treat customers fairly (TCF). Here is a checklist against which you can measure your current practice regarding complaints. Do you have a written complaints policy? This should give turnaround times for complaints and a documented procedure on how to ha

Women with breast cancer may qualify for a higher income in retirement

Breast cancer survivors may qualify for a higher income in retirement by declaring their full illness history when purchasing a guaranteed life annuity. The latest inhouse research by retirement income specialist Just shows that of Just’s medically underwritten cases, approximately 30% qualified for an uplift of at least 5%. Unlike living annuities, which pay out a portion of a retiree’s savings each year and offer no income guarantees, an enhanced (underwritten) life annuity guarantees retirement income for life. In addition, the pre-determined monthly amount can never decrease. It will either remain the same, or increase year-on-year, depending on the type of life annuity purchased. An en




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