last issue - AlphaWealth

06/2015
ANGLE
Keep it. Simple.
Message from the CEO
The Alpha Angle keeps getting better thanks to the research and dedication of our expert contributors. In this issue you
can find out about Clem Sunter’s five red flags for South Africa.
Our residential property company, Saresco, is offering excellent returns and we explain how our asset management team
went for the gap in residential property accommodation required by corporates.
Wealth manager, Chris Pretorius, shares his unconventional thinking questioning whether retirement fund products
actually make sense for high net worth individuals.
Does ‘Sell in May and go away’ also apply in South Africa? Nick Pawley analyses the local situation.
We recently hosted Bernd Ondruch, CIO of Astellon Capital Group a business which is the authority on investing in
German-speaking markets. We analyse the Astellon European Opportunities Fund for your consideration.
There are three types of tax clearance certificates and we consider what you need to know.
Finally we look at some top international stocks.
Enjoy this issue. We look forward to hearing what you think.
With best wishes,
Kerry
@kerrywestfynn
JOHANNESBURG |
CAPE TOWN |
DURBAN |
LONDON |
GENEVA |
kerry@alphawealth.co.za
MAURITIUS |
MALTA |
HONG KONG
03 2015
1
At a crossroads, armed with 5 red flags
ANGLE
Dale Peckover, Wealth Manager
This year has seen our Rand weaken close to 6% against the USD, almost touch R12.60 and reach unbelievable highs.
Three of our biggest historical blowouts are circled in
the image to the right. It is significant that the third
blowout was not due to a global economic meltdown.
So what is driving concern and weakening our rand so
significantly? I recently attended a presentation where
Clem Sunter discussed South Africa’s five red flags.
Clem worked for Anglo American from 1971 and served
as its Chairman and CEO from 1990 to 1996. In the early
1980s, he established a scenario planning function
in Anglo with teams in London and Johannesburg
and members who headed up the scenario planning
department at Royal Dutch Shell. Clem is now South
Africa’s most highly regarded scenario planner and
strategist.
South Africa’s Historical Blowouts
12.00
10.00
8.00
6.00
4.00
2.00
100M
1971-1974 1975-1979 1980-1984 1985-1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2014 2015
Clem describes red flags as “flags that would indicate you are moving from one scenario into another” and “clues that the future
always has on offer to signify imminent change.” He shared some of South Africa’s red flags that are enormously concerning to his
clients (many of whom are existing/potential foreign investors in South Africa at present) and I dug a little deeper into each of these:
05/2015
2
At a crossroads, armed with 5 red flags continued
ANGLE
Dale Peckover, Wealth Manager
1
CORRUPTION
This was highlighted as the primary concern for many of our existing/potential investors and this year seems to have broken all the
records. We have seen everything from e-tolls, an almighty R250 million palace for a president and his numerous wives, police ministers
clearing “abused state funds” charges, SARS withdrawing sequestrations, FIFA scandals, to the latest incident where the Sudanese
President (wanted for alleged genocide and war crimes in Darfur) was allowed into and out of our country for the AU summit.
Last year South Africa ranked 67th out of 175 countries on the Corruption Perceptions Index. A country’s score indicates the perceived
level of public sector corruption on a scale from 1 (least corrupt) to 175 (most corrupt). And this year the country was left in a position
where our very own Public Protector had her reports and investigations overruled.
Corruption is a major issue for existing/potential foreign investors for 3 main reasons:
It creates a hidden tax system
It creates reputational risk
Tenders are awarded to companies/people that cannot actually do the job
According to the Institute of Internal Auditors, South Africa has lost R700 billion to corruption over the last 20 years.
m
N per
STAGE 3 LOAD SHEDDING
80
N per
COST TO ESKOM IN
ADDITIONAL DIESEL USAGE
DUE TO “HUMAN ERROR”
AT KOEBERG
250
IO
L
IO
LLION
ek
onth
m
onth
40
IO
7.5
BI
MIL
LEADERSHIP
STAGE 2 LOAD SHEDDING
BILL
3
N per
COST OF UNSERVED TO
THE PRODUCTIVE
ECONOMY IN SA DUE
TO “HUMAN ERROR” AT
KOEBERG.
we
So just how much does load shedding cost our country?
20
IO
BILL
The International Monetary Fund stated that a prolonged period of
load shedding would see the country’s economy grow by 2% or less in
2015, with local economists echoing these views. In addition to lower
growth rates, Eskom’s electricity tariff hikes will put further pressure
not only on the large and small businesses but very importantly on
the country’s finances.
BILL
Eskom tops infrastructural issues as the biggest concern.
STAGE 1 LOAD SHEDDING
onth
INFRASTRUCTURE
m
2
r
N pe
The current leadership in South Africa emerged as one of the key red flags for both current and potential foreign investors.
The concern around leadership, of course, comes with many of the corruption allegations against our president this year and historically.
However the concern is also that South Africa lacks inclusive leadership. Nations that have done well invariably experienced spells of
inclusive leadership where the President or Prime Minister of the country acted successfully in bringing the majority and minorities
together into a cohesive team.
It is a shared view that leadership comes from cooperation between business and government. Perception is a crucial element.
The current negative perceptions are leading to very little confidence in the South African economy. This lack of confidence is
counterproductive to driving investments, and as such, counterproductive to driving jobs which, in turn, is counterproductive to driving
further growth and further opportunities.
05/2015
3
At a crossroads, armed with 5 red flags continued
ANGLE
Dale Peckover, Wealth Manager
4
ENTREPRENEURSHIP
Another flag that was identified was entrepreneurship. South Africa has a history of producing successful entrepreneurs, but unfortunately
there is a significant shortage of support for small businesses and entrepreneurs. Because of this, we are losing these entrepreneurial
individuals and businesses to other countries. Elon Musk is a classic example of this. Elon was born in South Africa and is now a Canadian
American entrepreneur, who was recently awarded IEEE (Institute of Electrical and Electronics Engineers) Honorary Membership. “It’s
not politicians that change the destiny of nations, its entrepreneurs,” Sunter said. We need to embrace our entrepreneurs and focus
on not losing them to countries that provide a better platform for budding entrepreneurs. The focus needs to shift to supporting small
businesses and the understanding that in reality it’s not the big business, medium-sized business or even government that is going to
create five million jobs. Instead it is one million new small businesses and a new entrepreneurial generation that will create the much
needed jobs.
5
POCKETS OF EXCELLENCE
Clem highlighted a few of South Africa’s pockets of excellence. These included, SARS, MTN (now the largest cellular network in Nigeria
as well as being a major player in Syria, Sudan and Iran) and 5 000 of our schools that are reasonable to excellent. But how we use these
pockets of excellence is what can make or break us. “If they are used to raise the performance of the nation as a whole, that is a great
flag. If they are dumbed down in a bid to eliminate anything that appears elite, that would be one of the worst flags of all,” he said.
CONCLUSION
So although these 5 flags highlight the major concerns and seem negative (because they are), we can choose to either let corruption,
infrastructure and poor perceptions of South Africa damage the country’s reputation, create obstacles to foreign investment, limit flows
to the stock market, hinder global competitiveness and inevitably the development and economic growth of our country; or we can
take the opportunity to improve leadership, use our entrepreneurial talent, grow our pockets of excellence, and enhance out-thebox thinking to transform South Africa - a nation filled with potential - towards a flourishing and successful economy. “We’re at
a critical crossroads. We faced our political crossroads in the 1990s and we are now at the economic crossroads. You can only have a
successful society if you get both right,” concluded Clem Sunter.
05/2015
4
Saresco - AlphaWealth’s residential property company
ANGLE
Chris Ball, Investment Analyst
AlphaWealth prides itself in being an asset management team with a continuing entrepreneurial spirit. This is visible in the way the
team looks at opportunities in the market, none more so than the creation of Saresco, the AlphaWealth residential property fund.
After two years of heavy losses, the Don Group took a strategic decision to exit the overcrowded hotel and tourism industry and place
their attention on the residential opportunities in key hubs in South Africa. Through the strategic change, the company was able to
reduce its cost base but also had to pay back a large portion of an IDC loan due to the change in business. This forced the Don Group
to sell some of its major assets. Meanwhile, a growth market was brewing in the Johannesburg business nodes. In 2013 over 100,000 people moved in and out of
Sandton for work or leisure purposes. It was in the same year that Sandton saw a second round of growth. With major corporates
relocating their head offices in the Sandton business zone, it is expected that an additional 25,000 people will be working in Sandton
in 2016.
Standard Bank moved its head office out of
the Johannesburg city centre to Rosebank.
This move saw a regeneration of corporate
business space in the area and it is now one
of the fastest developing business nodes.
FEB
JUL
ACQUISITION OF
SANDTON & ILLOVO
BUILDINGS
ACQUISITION OF
ROSEBANK & ARCADIA
BUILDINGS
MAR
BLUE CHIP
CORPORATE LEASE
JUL
DEC
BRAEMAR NICOL
DEVELOPMENT
STARTED
This combination of events created an obvious
APR
gap in the market and sensing the opportunity, the
SALE OF ILLOVO
AlphaWealth property management team quickly
2013
2014
ASSET
made unconditional offers on the key Don Group
BEFORE TRANSFER
OFFER TO PIRCHASE FOR
ARCADIA BUILDING
properties positioned in Arcadia in Pretoria, Sandton,
Rosebank and Illovo in Johannesburg. The Don Group properties are now called The Residency. The team’s ability to
see an opportunity and act quickly meant that they were able to pick up well located property assets in key nodes.
HURLINGHAM
DEVELOPMENT
COMPLETE
OCT
2015
AlphaWealth’s property management team got to work to run each of the properties in the most efficient manner. The main task was
to manage the tenants that inhabited the buildings on transfer, as well as building relationships with corporate tenants.
05/2015
5
Saresco - AlphaWealth’s residential property company continued
ANGLE
Chris Ball, Investment Analyst
Since inception, the Net Asset Value of the fund has grown
steadily with the asset appreciation of the buildings along with
new acquisitions. The internal rate of return for the fund on
current valuation sits at c.28% for all investors that have joined.
Saresco is in the process of a rights offer to raise R30 000 000 to
fund the rest of the Hurlingham development, along with capital
to fund new investments that are imminent.
The Residency in Sandton is situated on the corner of
Pretoria Avenue and Rivonia Road - in the heart of Sandton. All
42 apartments are held by blue chip corporate tenants. After
reviewing the standard of accommodation, Huawei are extending
their two year contract.
The Residency Rosebank is situated at 10 Tyrwhitt Avenue,
Rosebank. The building is in close proximity to the Rosebank Mall,
Rosebank Gautrain as well as big businesses such as Standard
Bank.
The Residency Rosebank is the preferred accommodation building
for foreign employees for three blue chip corporate tenants.
The companies provide their employees with accommodation
allowances, and underwrite any non-payments.
The Residency Braemar Nicol is centrally located on the
corner of Braemar Avenue and William Nicol in Hurlingham. The
AlphaWealth property management team is in the late stages
of negotiation with one of our partner corporate tenants over a
corporate lease for the full 30 units.
To enquire about the fund or any of the buildings for corporate
lease purposes, please contact Yolandi Carr on 011 707 1352
THERESIDENCY
SANDTON
Purchase date
Purchase drice
Valuation at Feb 2015
Number of apartments
Debt value
Current gross yield
Feb 2013
R 40 000 000
R 57 200 000
42
R 29 650 000
13.5%
17 Studio apartments
13 One bedroom apartments
8 Two bedroom apartments
4 Three bedroom apartments
Apartment size
Zoning
Land area size
Building size (excluding parking areas)
51 m²
73 m²
107 m²
136 m²
Residential 4
4 501 m²
3 534 m²
ROSEBANK
Purchase date
Purchase price
Valuation at Feb 2014
Number of apartments
Debt value
Current gross yield
21 Studio apartments
35 One bedroom apartments
Apartment size
Zoning
Land area size
Building size (excluding parking areas)
August 2013
R 36 000 000
R 43 400 000
56
R 18 130 900
10.2%
47 m²
68 m²
Residential 4
3 098 m²
4 995 m²
BRAEMAR NICOL
Land purchase date
Total development cost
Number of apartments once completed
Expected completion date
Apartment size on completion
Zoning
Land area size
Building size (excluding parking areas)
Jan 2015
R 40 867 453
30
Nov 2015
2 bedroom apartments
78m²
Residential 4
5 350 m²
2 340 m²
05/2015
6
Do retirement products make sense?
ANGLE
Chris Pretorius, Wealth Manager
We have always been told to save for our retirement, to put as much as possible into our retirement. The logic is that we get immediate
tax relief and our money grows in a tax free environment. I challenged this logic, however, as when you invest in a retirement product,
your investment decisions are dictated to you by the Pension Fund Act or the so-called Regulation 28. The other problem is that when
you withdraw your funds, you are taxed at your marginal tax rate. So in effect, your pension turns your 13.7% capital gains and 15%
dividend withholding tax into normal 41% income tax.
Regulation 28 dictates that you are only allowed to have 75% of you portfolio invested in equities with the remaining invested in bonds
or cash. By investing the funds in your own name, you could invest 100% of your portfolio in the stock market. There are numerous
other constraints and potential future risks, such as forcing you to allocate more to government bonds in the future.
For the purposes of this calculation I have assumed the following:
You invest R100,000 into your pension for 25 years;
Equity market return is 8% real;
Bond market returns are 2% real;
Inflation is 6%;
The 2015 retirement tables apply;
I applied an administration fee of 0.5%;
I have assumed that there is no advisor fees payable;
Investments in your own name are 100% percent invested in the stock market and an 8% real return applies. Normal capital gains
and dividend withholding tax are applied;
As a result of the tax deduction, the annual contribution in your personal name is only R59,000.
05/2015
7
Do retirement products make sense continued?
ANGLE
Chris Pretorius, Wealth Manager
The table to the right provides the results of the analysis.
In short, investors are 12% better off not making use of a
retirement product. There are however other benefits to
making use of retirement products:
1
2
3
Pension products are a forced saving to which you
have no access up to the age of 55. Thus you are not
able to withdraw from your investments to do house
improvements or go on holiday. They protect you against
yourself. However if you are a disciplined individual, they
do not make sense.
My assumption does not hold if your marginal tax rate
falls after retirement. This generally does not apply to
high net worth individuals as their investment income
always places them in the top tax bracket.
Retirement products do not attract any estate duty.
However in my example, this problem could be solved by
investing the R100,000 per annum in a trust and making
use of your donations allowance and the AlphaWealth
wrapper which has a tax rate of 10%.
In conclusion, investing in your retirement by making use of
a retirement annuity or pension fund makes no sense unless
your marginal tax rate is going to fall upon retirement. Using
my example, your marginal tax rate post retirement has to
fall to 30% for the pension after tax value to be equal to the
voluntary investment option.
RETIREMENT
PRODUCT
VOLUNTARY
INVESTMENT
Total Contributions
2,500,000
1,475,000
Total Asset Growth
12,282,295
10,757,632
Total Pension Before Taxes
14,782,295
12,232,632
TAXES
Retirement Table
0% on first R0.5m
0
18% on next R0.2m
(36,000)
27% on next R0.35m
(94,500)
36% on Remaining 1/3
(1,395,875)
41% on Remaining 2/3
(4,040,494)
Income Tax 41%
-
Capital Gains 13.7%
(1,345,411)
Dividend Tax 15%
Total Taxes to be Paid
TOTAL VALUE AFTER TAX
(222,625)
(5,566,869)
(1,568,036)
9,215,426
10,296,125
05/2015
8
Why not sell in June and go away?
ANGLE
Nick Pawley, Wealth Manager
I’m sure you’ve heard of the cliché “sell in May and go away”, describing the notion that the spring and summer months in the northern
hemisphere tend to be highly correlated with weaker stock price performance. At this time of year it’s not hard to come across some
sort of financial media punting the strategy of divesting from your portfolio until November, only to reinvest in time for the Santa Claus
rally at the end of the year. Although this approach is highly impractical, it does appear to have some merit. Numerous researchers have
shown time and time again that regardless of sector, stock performance over the May to October period is worse than the remainder
of the year. This can be seen not only in the US but in a multitude of developed markets.
While researchers have proposed a handful of reasons for this anomaly over the years, the northern hemisphere summer holidays seem
to be the most significant.
“Sell in May and go away; don’t come back till St Leger Day” reminds us of a time when wealthy individuals would depart for their
country estates in the summer, attending sporting events rather than tending to their portfolios. St Leger Day is the last day of the
summer horse racing season, a time when money managers would get back to their desks, thus returning trade volumes to pre-summer
levels. While a four month holiday remains a pipe dream for most us, the data indicates that during summer, trading volumes are much
lower, daily volatility is much higher and stock returns are significantly weaker.
Most of the research on this topic focuses on developed world markets such as the US and UK, and while most of our clients have
a large chunk of their investments offshore, we thought it would be a worthwhile exercise to see how the numbers stack up locally.
We observed monthly stock price performance of the JSE All Share Index (including dividends) from 1995 through to May 2015. Given
that this is a global phenomenon, it made sense to use a period in which our market was integrated with global markets. This sample
period is well shorter than most, in fact our 20 year sample period is dwarfed by studies in developed markets where they have
hundreds of years to work with. Nevertheless the results seem to be fairly consistent proponents of the sell in May theory, at least to
some extent.
From the tables below its quite clear that the JSE has historically experienced weaker returns in the second half of the year. In terms of
percentage positive months, June has consistently underperformed, only experiencing positive returns 37% of the time. Additionally,
on average, June is the only month to experience a negative return over the same period.
05/2015
9
Why not sell in June and go away? Continued
ANGLE
Nick Pawley, Wealth Manager
%
AVERAGE MONTHLY JESE RETURNS SINCE 1995
POSITIVE MONTHS SINCE 1995
Jun
37%
Sept
0.1%
Sept
45%
Aug
0.5%
May
50%
July
0.7%
Nov
55%
May
0.9%
Mar
55%
Mar
1.0%
Dec
60%
Nov
1.1%
Aug
60%
Feb
1.3%
Jan
60%
Jan
1.9%
Oct
65%
Apr
2.0%
Jul
65%
Oct
2.3%
Apr
65%
Dec
2.7%
Feb
65%
Jun
-0.6%
So hypothetically speaking you wouldn’t want to be out of the
market from May through to October, but it would make sense
to avoid the month of June entirely. The graph below shows the
difference in cumulative performance if you were to avoid being
invested in June each year since 1995. Interestingly enough the
divergence has only become apparent in the last eight years.
2500%
2000%
The numbers do tell a story and while we’ve already seen a sharp
selloff in our local markets in May and in the early days of June
this year, I think it’s naive to place too much emphasis on the
predictability of this phenomenon.
1500%
1000%
500%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1998
1999
1996
1997
1995
0%
JSE EXCLUDING JUNE
JSE INCLUDING JUNE
The recent pullback doesn’t surprise me, especially given that
valuations are stretched at historic extremes. Two of the most
relevant topics on investors’ minds at this point are the Fed’s
actions, which are likely to raise rates for the first time in eight
years, and whether Greece will remain in the Eurozone. At the
end of the day the real drivers of equity markets come down to
fundamentals, macro economic factors, and market sentiment.
Traditional factors that have a high degree of significance cannot
explain all market moves and therefore we believe that we should
take market anomalies such as this one with a pinch of salt.
05/2015
10
Astellon’s European Opportunities Fund
ANGLE
Jacques van Rooyen, Wealth Manager
The Euro area has plagued global markets again with fears of a Greek exit in recent weeks, something that we’ve seen much of over
the last couple of years as the crawling economy struggles to meet the demands of the likes of Germany and France. While no one
knows whether Greece will stay or go, the Euro region looks set to deliver attractive returns, with earnings recovery, a weaker currency
helping exports, an improvement in credit extension, a lower oil price and reasonable valuations. Finding a manager on the ground
with a proven track record is key to making the most of this opportunity, especially if you aim to protect capital during periods of
heightened volatility.
The Astellon European Opportunities fund aims to do just that, and has been
on our radar for a number of years. In fact, our global hedge fund offering has
benefited by being invested in this Euro-focused fund as the region has continued
to gain strength. Unfortunately, until now, the fund has only been accessible
through our Global Dynamic Leveraged Hedge fund. Recently, however, we have
managed to gain access to this skilled team at a much lower minimum investment
of €10 000. With a 43% return since inception, the fund has a low volatility, capital
preservationist approach targeting net returns of 10-15% per year. The fund has
achieved a net annualised return of 11% despite the stormy weather such as the
taper tantrum in 2013 and the Russia-Ukraine crises in mid-2014.
The Astellon Capital group is a 17-member investment team based in London
with a rooted focus in German-speaking markets. The team prides itself on its
deep value proprietary research approach and its on-the-ground knowledge
of middle to upper market German companies in the industrial, fin-tech and
chemical sectors.
~43% ITD:KEEPING A LIMITED MA RKETEXPOSURE
43% ITD: KEEPING A LIMITED EXPOSURE
Exposures(LHS)
andPer
nce (RHS)si
nceincep
tion SINCE INCEPTION
EXPOSURES
(LHS)
&forma
PERFORMANCE
(RHS)
185%
185%
165%
165%
145%
145%
125%
125%
105%
105%
85%
85%
65%
65%
45%
45%
25%
25%
5%
45%
42%
39%
39%
36%
36%
33%
33%
30%
30%
27%
27%
24%
24%
21%
21%
18%
18%
15%
15%
12%
12%
9% 9%
6% 6%
3% 3%
(0%)
(0%)
(3%)
(3%)
45%
42%
5%
(15%) (15% )
Gross% NAV (Excl
.cash)
GROSS% NAV (EXCL. CASH)
NetBeta We ighted Exp Dax (% ofNAV)
Perf.(ITD)
NET BETA WEIGHTED DAX (% OF NAV)
PERF. ITD
05/2015
11
Astellon’s European Opportunities Fund continued
ANGLE
Jacques van Rooyen, Wealth Manager
Bernd Ondruch (CIO) and Christian Vogel-Claussen (CEO) founded Astellon Capital Partners in April 2011 upon securing $50m from
their original European investors for their Luxembourg-based SICAV, ready for a September launch. In June that year, Greece secured
its first bail-out while communists stormed the Acropolis. Given the market environment at the time, it took several weeks longer than
anticipated to consolidate the structure and secure investor comfort, but by Mid-December Astellon started trading.
It’s fortuitous that the same events that delayed Astellon’s launch were perfect for its event-driven long/short strategy, which seeks out
value that can be unlocked by corporate activity catalysts. Despite market uncertainty at the time, Astellon was launched to exploit an
opportunity set that is as much structural as short term.
The investment team’s approach to deep value research with a catalyst may include, inter alia, restructurings, refinancings and
recapitalisations, IPOs, spin-offs, as well as potential M&A candidates. 70% of Astellon’s portfolio is invested in German-speaking
Europe. The portfolio’s typical exposure consists of an average of 20-30 core ideas targeting market caps of €500m - €10bn with an
average investment horizon of 6 – 24 months. The fund invests in listed equity and maintains that no single position exceeds 10%
of the fund. The investment strategy focuses on companies that form part of the region’s economic backbone, usually in the upper
middle-market segment and often with a 40% anchor shareholder that in some cases may be a family. Ondruch’s mantra is that “To get
Europe right you have to get Germany right”. Germany is the political and economic centre of gravity in Europe, accounts for roughly
one third of market activity, market capitalisation and deals. Ondruch and his team believe that Germany is a very decentralised market
in the sense that there are limits to what you can do from London and New York. At least one member of the team is in Germany almost
every week of the year.
Astellon does not play an activist role, but Ondruch assures that the continuous dialogue with 35 CEOs and CFOs every month provides
the team with unique expertise and insight into economic activity in Europe and leads to many “read-across” situations in the rest of
Europe. Astellon keeps itself connected to the pulse of the German market by having its management visit company headquarters,
by attending various structured capital market events and by doing bespoke trips to meet various subsidiaries in other countries,
competitors and key shareholders. One third of Astellon’s investors are based in Germany and Switzerland, having been with Astellon
since inception. Two thirds consist of American blue chip institutions such as pension funds, insurance groups and family offices.
While the fund launched into a plethora of opportunity, the ongoing euro-zone crises and Astellon’s tight risk management mandate
that drawdowns must never exceed 5%, led to a first year of very low net market exposure and a strategy geared towards the sluggish
European economy. Three years into the euro-zone recovery, we are seeing increased European M&A activity. Ondruch claims that, the
sort of consolidation seen in real estate and cable three years ago started to show up in healthcare in 2014 and expects the Euro-Zone
to become a more fertile source of corporate events.
05/2015
12
ANGLE
AN OVERVIEW OF TAX CLEARANCE CERTIFICATES
Connie Constantinou, Compliance & Fiduciary Specialist
TAX CLEARANCE CERTIFICATES (TCC) ARE ISSUED TO VALIDATE A TAXPAYER’S STATUS, TO SHOW THAT THE
TAXPAYER IS COMPLIANT AND UP TO DATE WITH ALL THEIR VARIOUS TAXES.
A FEW KEY POINTS TO NOTE REGARDING TCCS:
They are issued free of charge by SARS
They are valid for 1 year from the date of issue provided that the taxpayer remains compliant during this period
The taxpayer must have a registered Income Tax Registration number prior to applying for a TCC
Tax numbers must be active
There must be no outstanding tax debt, including penalties and interest owing to SARS, before a TCC will be issued
Information contained on the application forms must match up with the details captured on the SARS systems
THERE ARE CURRENTLY
TCC-001
3
TYPES OF TAX CLEARANCE CERTIFICATES ISSUED BY SARS
APPLICATION FOR TAX CLEARANCE IN RESPECT OF TENDERS & GOOD STANDING
These types of TCCs can be applied for online and take approximately 48 hours to be issued. They are required when applying
for tenders or bids advertised and show good standing, as they are used to confirm that the applicant is tax compliant.
FIA-001
APPLICATION FOR A TAX CLEARANCE IN RESPECT OF FOREIGN INVESTMENTS ALLOWANCE FOR INDIVIDUALS
This application form must be completed for any lump sum amount, or annualised amounts in excess of R30,000 (i.e. R3,000
per month x 12 months) and for recurring foreign investments not exceeding R30,000 p.a. A detailed statement of assets and
liabilities as at the date of the application must be attached to the application. Without this, the application will be declined.
The application also requires:
Rand amount to be invested
Are you currently aware of any audit investigation against you?
Expected annual income from this foreign investment
Information on the type of investment
Details of foreign investment to be made (call deposit, shares,
other financial instruments, etc)
With which institution will the investment be made?
When will this investment be made?
What is the anticipated duration of the investment?
In which country will this investment be made?
The application also requires information regarding
the source of funds and supporting documentation:
Loan
Inheritance
Donation
Latest bank statement of relevant bank account
Sale of property
Savings/cash/bank account
The process for applying for this type of TCC is to submit to any SARS branch and allow at least 5 days for the TCC to be
issued. SARS processes all applications for Foreign Investment Allowances regardless of the amount involved. SARS applies
various risk rules internally, which may trigger a request for additional information or verification of income which can be
submitted at any SARS office. Verification of income differs from an audit, as an audit will entail SARS scheduling a meeting
with the taxpayer for a specific date and reviewing documentation on site.
IT21(a)
APPLICATION FOR A TAX CLEARANCE CERTIFICATE IN RESPECT OF EMIGRANTS Arrangements have been made with the South African monetary authorities to ensure that authorised foreign exchange
dealers (such as a bank) may only authorise the transfer of a settling-in allowance if the SARS branch office issues a certificate
confirming that your income tax obligations have been met or that you have made adequate arrangements to meet such
obligations.
A certified copy of the final form MP336 (Request for settling-in allowance) submitted to a foreign exchange dealer must
accompany this application.
AFTER SUBMISSION TO ANY SARS BRANCH, YOU NEED TO ALLOW AT LEAST 14 DAYS FOR THE ISSUING OF THIS TYPE OF TCC.
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Stock News
JP Louw, Investment Specialist
Short news snippets from some of the local and global stocks we monitor. If you’d like to discuss any in more depth, please contact your
wealth manager.
Fitbit Inc. Fitbit shares opened 52% above their IPO price on Thursday, 18 June, putting it on track to rank among the top 10 stock
market debuts of the year. The stock opened on the New York Stock Exchange at $30.40. More than 40 million shares of
Fitbit had traded by early afternoon, with shares at $29.93. For comparison, data storage firm Box traded 42.6 million
shares in its first full day of trading on Jan. 23. The fitness wearables maker had priced its initial public offering at $20
a share on Wednesday, 17 June, a day after it raised its IPO price range to $17 to $19. The company is currently valued
at $4.1 billion. Still, Fitbit is competing in an increasingly crowded market, with rivals like Apple, Garmin and Jawbone
competing for a piece of the lucrative space. Fitbit CEO James Park said ahead of the IPO that he believes his company can
stay competitive even as Apple and other electronics makers ramp up marketing for all-purpose wearables like the Apple
Watch. Reuters
Fitbit’s sales more than tripled last year, to $745.4 million. The company earned $131.8 million, reversing a nearly $52
million loss in the previous year. The number of wearable fitness devices used by customers is expected to triple by
2018, to more than 70 million, according to a report by Juniper Research in November. Apple is not in this market with
comparable performance in terms of either price point, or integrated GPS, or battery life, so there’s a lot of room for
Fitbit to maneuver within the next couple of years. AlphaWealth
Naspers
Naspers, Africa’s biggest company by market value, said full-year earnings per share excluding one-time items will be as
much as 30% higher than last year’s R21.81, missing analyst estimates. The company, which owns a 34% stake in Chinese
Internet operator Tencent Holdings, was forecast to make R28.68 per share in the year ending March, according to the
average of 15 analyst estimates polled by Bloomberg. Earnings per share will be as much as 145% higher in the period,
mainly as a consequence of gains recognised by their associates. Bloomberg
Naspers is also in the process of investigating the possible sale of the Brazillian e-commerce website Buscape. Naspers
acquired Buscape 6 years ago for $350m. Since 2013, Buscape has been experiencing restructuring, reducing personnel
and closing non-profitable business segments. AlphaWealth
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Stock News continued
JP Louw, Investment Specialist
Twitter
Twitter chief executive Dick Costolo is surrendering his post, handing the reins back to co-founder Jack Dorsey as the
popular service struggles to boost its ranks of users. Costolo will step down on July 1, and Dorsey will take back the Twitter
chief job in an interim capacity. Dorsey previously held the job for about a year and a half, leaving the post in 2008. Costolo
came on board in 2010. Dorsey said he would stay at the Twitter helm while the board finds someone to replace Costolo
long-term. Costolo will remain on the Twitter board of directors, and Dorsey will continue to be chief of mobile-centred
financial transactions company Square that he co-founded in 2009. The shake-up comes amid rumours that Costolo was
under tremendous pressure from investors to prove his worth by ramping ranks of Twitter users and revenues brought in
by the globally popular one-to-many messaging service. MarketWatch
Twitter Inc. was downgraded to neutral from buy at MKM Partners on Tuesday, June 16, on the premise that its CEO
search will introduce uncertainty and the company isn’t doing enough to stymie stalling user growth. AlphaWealth
Sainsbury’s British supermarket Sainsbury’s on Wednesday posted a sixth straight quarter of declining underlying sales as a fierce price
war and record deflation hurt the industry. The group, which trails market leader Tesco and Wal-Mart’s Asda by annual
revenue, said sales at stores open for over a year fell 2.1%, excluding fuel, in the 12 weeks to June 6, its fiscal first quarter.
That was bang in line with analysts’ consensus forecast but worse than a fall of 1.9% in the previous quarter. Sainsbury’s,
in common with its major rivals, is battling to win back ground against the discounters Aldi and Lidl through price cuts. All
players are also having to deal with record commodity-driven industry price deflation. The firm has previously guided that
it expects like-for-like sales to be negative in the full 2015-16 year. Trading conditions are still being impacted by strong
levels of food deflation and a highly competitive pricing backdrop. Reuters
We would expect Sainsbury to accelerate its price investments to defend its price competitiveness versus Tesco
and Asda, which are both accelerating their price efforts to drive back volumes. The latest report from credit rating
agency Moody’s suggests that the “Big Four” have now trimmed much of the fat in an effort to match the discounters.
AlphaWealth
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Disclaimer
This document is intended to provide general information regarding AlphaWealth, its affiliates and Group companies (“AW”) and its
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consult your professional advisor before you make any decision, or take any action which might affect your personal finances or business.
Please be advised that this is not a full disclosure of the risks involved in making an investment in any financial solution, product, stock
or fund referred to in this report. The value of currencies, securities or investments and the price of shares which might be mentioned
in this newsletter could fall as well as rise. Investment performance is not guaranteed in any way and past performance is not a
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are subject to fluctuation and may be volatile. An investor may not get back the full amount invested. Any performance information
included in this report is unaudited. The returns shown are calculated net of fund management costs only. Other costs and taxes may be
applicable. Certain strategies employed may include unregulated investments. All information as set out in this document is provided
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financial services providers in terms of the Financial Advisory and Intermediary Services Act, 2002. FSP no, 13808 and 534.
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