Business & Economy

Monday, 13 July 2009 21:19

Companies scramble to beat financial illiteracy as economic crisis bites deep

{pp}Nothing provokes more lies than money and little tempts more shameless bragging. We all use money all the time and forget how hard it is to understand its workings. But a failure to understand finances also gets individuals, companies and governments into serious trouble.
This month a new television documentary, The Ascent of Money is launched in the United States on PBS and written by Niall Ferguson, a Harvard scholar. It examines why most economists failed to predict the world’s current financial turmoil and suggests that they were too immersed in day-to-day issues and lost sight of long-term impacts.

Liza van Wyk, CEO of AstroTech a major management and executive training company says demand for training courses on financial management are rising as companies realise more than ever the dangers of financially illiterate staff: “Even those educated about finance are finding it difficult to assess today’s economic barometers. In South Africa at the beginning of 2009 economists were crowing about how this country was beating the global economic slump, but even as they spoke the economy was haemorrhaging 179 000 jobs, exports fell 55% including vehicle exports which are down by half, mines are closing, food prices continue to rise and strikes have intensified. But too repeated surveys have shown that South Africa has high levels of poor financial or maths ability.

“What we can anticipate is that government too is going to take harsher steps against those that fail to deliver on VAT and tax returns.” The end of July is the cut-off date for income tax returns. Minister of Finance Pravin Gordhan has already warned that the South African Revenue Service (SARS) is increasing its focus on tax compliance. Gordhan said: "At the moment, we are about R19-billion below our benchmark target for revenue. If the present trend continues, we could be as much as R50bn to R60bn below our target by the end of the year.” This is a huge loss considering South Africa needs about R10bn over the next three years to create millions of job opportunities according to Trade and Industry Minister Rob Davies. The costs of salary increases for doctors alone will exceed R10bn and a National Health Insurance system when introduced, will cost a further R100bn a year.

Van Wyk said it has never been more important for companies to ensure their staff understand financial information. “South Africans are consumers and contributors to the economy. They really need to become more informed about their own financial affairs, those of their company and of the nation.” Gordhan has already warned that companies are being fined for not complying with PAYE requirements or filing late and the same will apply to individuals.

AstroTech offers a business training course Finance for Non Financial Managers which introduces managers and executives to the language of accountancy and finance. The course assists those in positions of responsibility within business to fully understand the financial implications of their business decisions and deals with key practical concepts critical to all managers such as budgeting, return on investment calculations and the importance of cashflow.

“Some of the key topics covered are financial statements, understanding a trial balance, the impact of cash flow, costing, shares and budgeting. Taxation is also included in the course. When one considers that recently SARS issued 7 000 letters of penalties to businesses for not providing adequate staff information and there were a further 4 000 cases where employers had failed to submit their tax which have now been referred for criminal investigation and prosecution it underscores the importance of staff at senior levels being adept at financial management.”

Wayne Ford who facilitates the course on Finance for Non Financial Managers observes that: “Government spending boosts the domestic economy, so the more money government has to spend, the more jobs are created and the more wealth there will be in circulation, thereby boosting everybody's fortunes.” Ford noted that government has increased spending to meet the needs of the 2010 World Cup and to meet poverty shortfalls. “The money to pay grants as an example, is becoming an ever-growing slice of government budgeting.” At present more than 13 million citizens are receiving social assistance benefits according to Social Development, Minister Edna Molewa.

In April government increased all grants, including old age and disability grants from R960 to R1 010, the child support grant from R230 to R240, foster care grant from R650 to R680 and care dependency from R960 to R1 010. Government extended the Child Support Grant to children up to 15 years in January 2009 to benefit an additional 300 000 children. The department will register an additional 200 000 children under 15 years by the end of August 2009. And in response to rising food prices, the department increased the social relief budget from R124 million to R624 million. “All of this has made it imperative that government improve tax collection which is difficult at a time when those in employment are dropping due to retrenchments and company closures. Companies and individuals must anticipate harsh action from the taxman for any failures.”  Ford said: “In the current economic climate I am personally reviewing all my financial affairs and if there is any way that I can save or possibly get cash back - I do it and that includes filing my tax return early.”

Finance for Non Financial Managers will be held next on the following dates: 19 to 21 August 2009 (Durban) 26 to 28 August 2009 (Johannesburg) 26 to 28 August 2009 (Cape town)

Contact information and Photographs:
011 582 3211
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Charlene Smith Communications (Pty)Ltd
Contact: Leila Beltramo
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Tel: 021 762 2656

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