Dear reader

For those of you who have chosen to celebrate the business New Year with a year-end date of 28 February, we wish you success with closing the books and the endeavours that go with it.

Regards

Tilman Friedrich

Tilman Friedrich's Industry Forum

Benchtest Monthly 01.2010

In January the average prudential balanced portfolio returned minus 0.83% (2.06% December). Best and worst performance for the month was delivered by Allan Gray (0.32%) and Prudential (- 1.88%), respectively. In the current economic environment we expect the performance of most conventional asset classes to be muted in 2010. We do not expect equities in general to perform but stock picking can add value. Hedge funds should also be able to produce positive returns. Any further increase in the price of precious metals will probably be offset by the strengthening Dollar for local investors. For more information and our views , click here...

Have we learnt from the financial crisis?

We believe that uncontrolled speculation was one of the key contributors to the financial crisis we are still busy muddling through. How otherwise can an oil price be explained, of around US$ 25 at the end of 2002, increasing slowly to around US$ 60 by the end of 2006 to around US$ 90 end of 2007, then touching US$ 140 middle of 2008, to all of a sudden decline to US$ 30 without any obvious justification?

Much of our expectation of market movements going forward is dependent on whether or not laws will be put in place to prevent a recurrence of such wanton speculation.

It does seem that there are serious moves in the US to do just that, where former Fed chairman Volcker testified before the US Senate Banking Committee, suggesting that hedge funds and private equity funds should be allowed to both profit and fail but on the basis of not threatening public deposit taking institutions by outlawing any interconnection between these.

Namfisa requests information for its database

All Principal Officers should have received correspondence from Namfisa concerning a request for submission of data and other information about their fund.

We remind our clients that the information is due to be submitted by the end of February.

The Financial Institutions and Markets Bill (FIM Bill)

AGovernment has given authority to the Minister of Finance to submit the long awaited Financial Institutions and Market Bill (FIM Bill) to the Cabinet Committee on Legislation where after it will be submitted to the National Assembly for deliberation. This law will replace the Namfisa Act and will consolidate a number of other financial services acts such as the:

• Short Term Insurance Act
• Long Term Insurance Act
• Pension Funds Act
• Friendly Societies Act
• Medical Aid Funds Act
• Stock Exchanges Control Act
• Unit Trust Control Act
• Participation Bonds Act
• Inspection of Financial Institutions Act
• Usury Act
• Credit Agreements Act.

The Bill proposes the introduction of a Board of Appeal and a Complaints Adjudicator. Namfisa indicated at an industry forum last year that it aims to have this Bill pass the legislative process by the end of 2010.

We have commented extensively on the implications of this Bill in previous newsletters, and re-emphasise that we are seriously concerned about the possible consequences of this Bill.

We pose the question – should new legislation with potentially far reaching repercussions for the business environment not be preceded by an independent impact assessment study, as would normally be carried out in respect of any project that may have an impact on our natural environment?.

The National Pension Fund – quo vadis the private pensions industry?

We understand that the consultants hired by SSC have submitted their report to the SSC. The proposals will now be deliberated on internally at the SSC.

The public is likely to be informed only once the SSC has taken a view on the proposals and will then be invited to submit their inputs.

We are seriously concerned about the impact a National Pension Fund may have on the pensions industry and are doubtful whether the existing pensions industry, the public or any other interested parties will have the resources to provide properly reasoned and researched input that will stand up to the proposals formulated by a group of consultants hired specifically for this purpose.

A National Pension Fund clearly may have far reaching consequences for the business environment and we are of the opinion that it should be preceded by an independent impact assessment study.

Charlotte Drayer's Administration Forum

Payment of resignation benefits

As mentioned in the last newsletter, the Receiver of Revenue is not issuing tax directives in cases where there are outstanding tax certificates. Employers can assist by ensuring that staff has properly registered with the Receiver as a taxpayer and in reminding staff to keep tax returns up-to date.

Normally, payment of a resignation benefit can be expected about 6 to 8 weeks after the member’s resignation date, provided that all forms were fully completed, signed and provided on time together with all supporting documentation.

Note that the resignation date is not necessarily the member’s exit date from the fund since processing is done for full calendar months and not for parts thereof. Membership of a fund should continue to the end of the month in which the member resigned from the employer.

Where a fund applies final monthly returns, these are only available towards the middle or end of the next month, after which the monthly processing must still be completed. This means that the final value is only available towards the end of the month following the exit date from the fund. Some of these funds allow special arrangements for earlier payment of the benefit in exceptional cases and the employer’s HR department should be able to inform the member accordingly.