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Accountant Nov Dec 07 THE PROFESSIONAL Accountant

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					                         Nov/Dec 07
THE PROFESSIONAL


Accountant             Official journal of the
                   South African Institute of
                   Professional Accountants




International
honour for SAIPA
Chairperson




                           ISSN: 1680-7537
                                                                                                                                           NOv/DEc 07



contents
Rare honour bestowed upon SAIPA chairperson                2
                                                                                                                                        Official journal of
                                                                                                                                        the South African
Q & A with new SAIPA Deputy chairperson &                                                                                                      Institute of
Board Member Joseph M. Tshiwilowilo                        4                                                                                  Professional
                                                                                                                                              Accountants
A case of irrational exuberance?                           8

Pushing the art of management accounting                   10

Revoking an irrevocable power of attorney                  15
                                                                International honour for SAIPA                           THE PROFESSIONAL
Emerging Markets – chinese Markets Evolve                  19   chairperson – See page 2

Plain language starts with the reader                      21
                                                                                                                       Accountant
                                                                EDITORIAL BOARD                             SAIPA NATIONAL OFFIcE
The current Law on Restraints Of Trade                     22   S Daniels                                   SAIPA House Howick Close,
                                                                M Enslin                                    Waterfall Park, Vorna Valley
                                                                A Proudlock                                 Midrand
can shareholders, aggrieved at the way the directors are        P Sinamane                                  PO Box 2407
                                                                Prof. D Venter                              Halfway House 1685
running the company, ask the court to intervene?           24                                               Tel 011 207 7840
                                                                ADvERTISING ENQUIRIES                       Fax 011 805 0105
                                                                Vanessa Benjamin                            www.saipa.co.za
Who will guard the trustees?                               26   011 440 7841/ 082 440 1878
                                                                Yvonne Sinclair                             The Professional Accountant
                                                                011 325 2920/ 082 451 6237                  is published by The Eagle
IFAc: 30 Years of Progress                                 28                                               Publishing Co (Pty) Ltd,
                                                                DESIGN AND LAYOUT                           PO Box 41928,
                                                                The Eagle Publishing Company                Craighall, 2024
Encouraging Quality and Building Trust                     28                                               Phone: 011 325 2920

                                                                The views expressed by the contributors do not necessarily reflect those of The Institute
                                                                The reading of this magazine qualifies for unstructured CPE hours as required by The Institute
    Rare honour bestowed upon
    SAIPA chairperson
    Shahied Daniels | chief Executive, South African Institute of Professional Accountants


SAIPA is proud to announce that the                             His appointment affords South Africa and the African
Chairperson of the South African Institute of                   continent well deserved recognition for contributions
Professional Accountants (SAIPA), Mr. Saleem                    made to the advancement of accounting in developing
Kharwa, has been appointed by the Public                        and developed countries.
Interest Oversight Board of the International
Federation of Accountants (IFAC) to serve on               Saleem Kharwa is an esteemed academic and
the IFAC International Accounting Education             practicing accountant who has made a major
Standards Board for the period 1 January 2008           contribution to the advancement of accounting in
to 31 December 2010.                                    Southern Africa, diligently devoting much of his time
                                                        and expertise towards inculcating an accountancy
  This is a very rare honour that is preserved for culture in historically disadvantaged communities. He
eminent persons in the accounting industry that play an is Head of the Department of Financial Accounting at
important role in the advancement of the profession. the Durban University of Technology (DUT), a member
                                                                   of the Council of the DUT, a member of
                                                                   the Senate of the DUT, Chairperson of the
                                             Saleem Kharwa         Examinations Audit Committee, and an
                                                                   Assessor of New Programmes for the Council
                                                                   on Higher Education. Furthermore, he is
                                                                   the Chairperson of SAIPA, and an Executive
                                                                   member of the Board of the Eastern
                                                                   Central and Southern African Federation of
                                                                   Accountants (ECSAFA).

                                                                              During his time as Chairperson of SAIPA
                                                                           he has radically restructured the Institute,
                                                                           placing it on a course where it is increasingly
                                                                           well equipped and positioned to eradicate the
                                                                           inequalities that still exist in the accountancy
                                                                           profession. Through his principled leadership
                                                                           and guidance, the Institute has re-established
                                                                           itself as a very important player in the overall
                                                                           accountancy profession.

                                                                              Within his community he consistently
                                                                           and unreservedly contributes time, energy
                                                                           and financial resources to improve the
                                                                           livelihood of those who have suffered the
                                                                           ravages of apartheid’s disastrous attempts
                                                                           at social engineering, and to mitigate the
                                                                           consequences of natural or manmade
                                                                           disasters. As a member of the Board of the Al
                                                                           Ansaar Foundation, he has been instrumental
                                                                           in setting up one of the most viable and
                                                                           successful community organisations, and
                                                                           establishing a highly influential community
                                                                           radio station, Radio Al Ansaar.

                                                                             On behalf of the South African accountancy
                                                                           profession, and accounting education in
                                                                           particular, the Institute extends its heartiest
                                                                           congratulations to Mr Kharwa on his
                                                                           appointment to the IAESB. n
2     The Professional Accountant
                                                        19
                                                  L(earn)erships
                                                          When opportunity knocks,
                                                              open the door!
 Fasset is the Sector Education and Training Authority for Finance, Accounting, Management Consulting and other Financial Services. Fasset
   encourages and drives skills development in the sector through various initiatives, including the vitally important aspect of learnerships.

    A learnership is a work-based education and training programme that relates to an occupation. It combines structured institutional learning
    (theory) and structured workplace experience (practical) and culminates in a NQF registered competence, which is nationally recognised.

 The learnerships that fall within Fasset`s sectors are listed and further information regarding participation in any one of these learnerships
can be obtained from the relevant contact person. However, respondees should not direct job applications to the learnership offices as these
                                                               cannot be dealt with.
                Learnership                       NLRD No     NQF                    Learnership Code                        Contact Person
                                                              Level
1    Professional Qualification Chartered          20399         7                    01/Q010005/00/780/7    Association of Chartered Certified Accountants
     Certified Accountant                                                                                    (ACCA )
2    Certificate: Accounting Technician            20397         5                    01/Q01001300/390/5     Ms Tonia Couloubis
                                                                                                            (011) 459 1900
                                                                                                            couloubis@acca.org.za
3 Professional Qualification: Chartered            20400         7                    01/Q010012/00/930/7    Chartered Institute of Management Accountants
  Management Accountant                                                                                     (CIMA )
4    National Diploma: Management                 24406         6                    01/Q010017/00/240/6
     Accounting                                                                                             Ms Charleen Davids
5    National Certificate: Business Accounting     24418         5                    01/Q010016/00/120/5    (011) 268 2555
                                                                                                            charleen.davids@cimaglobal.com
6    Post Graduate Professional Qualification:     20392         7                    01/Q010007/00/480/7    South African Institute of Professional Accountants
     Professional Accountant in Business                                                                    (SAIPA)


7    Post Graduate Diploma: Professional          20391         7                    01/Q010008/00/480/7    Mr Moin Khan
     Accountant in Practice                                                                                 (011) 207 7840
                                                                                                            mkhan@saipa.co.za
8    Certificate: Accounting Technician            20402         5                    01/Q010018/00/241/5    FASSET
                                                                                                            Ms Susan Harper
                                                                                                            susan.harper@aat.org.uk
9    Certificate for Registered Accounting Clerk   20362         3                    01/Q010014/00/120/3

10 Certificate for Registered Bookkeeper           20363         4                    01/Q010015/00/120/4

11 National Diploma: Technical Financial          36213         5                    01/Q010022/28/251/5    Institute of Certified Bookkeepers (ICB)
   Accounting
12 National Certificate: Small Business            48736         4                    01/Q010023/24/120/4    Wedaad Shira
   Financial Management
                                                                                                            (021) 421 1110
13 Certificate: Office Administration               23618         5                    01/Q010021/00/120/5    enquiries@icb.org.za
14 Certificate: Public Sector Accounting           20352         4                    01/Q010019/00/120/4    IPFA
                                                                                                            Ms Karen Prinsloo
                                                                                                            (012) 470 9450
15 Diploma: Public Sector Accounting              20353         5                    01/Q010020/00/240/5
                                                                                                            Karen@ipfa.co.za
16 Chartered Accountant: Auditing                 48913         7                    01/Q010001/00/480/7    South African Institute of Chartered Accountants
                                                                                                            (SAICA)
                                                                                                            Mr Gerald Ndlovu
17 Chartered Accountant:                          48912         7                    01/Q010002/00/480/7    (011) 621 6600
     Financial Management                                                                                   geraldn@saica.co.za
18 FET Certificate: Debt Recovery                  49021         4                    01/Q010024/26/149/4    FASSET
                                                                                                            Mr Aboo Amod
                                                                                                            (011) 476 8570
                                                                                                            aboo.amod@fasset.org.za
19 Certificate: General Internal Auditing          20359         7                    01/Q010025/00/120/7    Institute of Internal Auditors (IIA)
                                                                                                            Mr Lawrence Chetty
                                                                                                            (011) 450 1040
                                                                                                            lawrence@iiasa.org.za




                                                                            F A S   S E   T




                                                             www.fasset.org.za   |        tel: 0861010001
                                                                                                                            The Professional Accountant           3
    Q & A with new SAIPA Deputy chairperson
    & Board Member Joseph M. Tshiwilowilo
The Professional Accountant speaks to Joseph M.                   I do not remember studying without a casual job
Tshiwilowilo about his life, his career, SAIPA, and               or part-time work throughout my primary, high
other issues...                                                   school and university life.. I have washed cars, sold
                                                                  fruit, caddied at a number of golf courses, worked
Q: Your resume tells an amazing story of your path to             as a gardener, driven a Taxi and enjoyed amateur
   an accounting career. Please tell us about it?                 photography. I bought my first car from the proceeds
                                                                  of my photography business while I was still at
A: It is indeed a very long story, but I will make it brief.      school.
   I was born 51 years ago in Alexandra Township, the
   fourth child in a family of eight children. During the         Due to the disruptions that followed the 1976 riots,
   forced removals in the early sixties, my parents were          I was unable to write my matric examination in 1977
   moved to Diepkloof zone 2 where I grew up. At the age          at Madibane High School. In 1979 I, however, went
   of five my parents sent me to Venda for four years to          back to school at Orlando West High to complete my
   learn Tshivenda.                                               matric. Thanks to the Principal, Mr. Mzaidume, who
                                                                  accepted me despite the fact that the school did not
    Neither of my parents were well educated, my father           have a Venda teacher, I succeeded.
    worked as a labourer for a tyre manufacturing company,
    and my mom was a domestic worker. As a norm during         Q: Why did you eventually choose accounting as a
    that time, my elder brother and I did various odd jobs        career?
    to supplement our parent’s income.
                                                               A: For this I owe my sincere thanks and gratitude to the
                                                                  principal at Madibane High School, Mr. Phillip Mehlape,
                                  Joseph Tshiwilowilo             who knew the importance of studying Mathematics
                                                                  and Accounting. The importance of these two subjects
                                                                  was impressed upon us; we understood that whether
                                                                  you were a lawyer, a doctor or a business person, a
                                                                  basic knowledge of these two subjects was essential.
                                                                  Our principal was a History teacher, instilling a love
                                                                  for History with his pupils. As the study of history
                                                                  studies has always been associated with the legal
                                                                  profession, it inspired my interest in studying law. I
                                                                  was very excited, thinking that I was cut out to be a
                                                                  Lawyer.

                                                                  After completing matric at Matseke (Orlando West
                                                                  High), I met Deborah, our school secretary at Madibane
                                                                  High in Diepkloof where I completed my form three
                                                                  (grade 10) and form four (grade 11). She asked me
                                                                  to visit the Institute of Race Relations in Braamfontein
                                                                  where I was interviewed for placement. I received two
                                                                  placement possibilities, one to Caltex Oil (SA) as a
                                                                  Computer Operator at the Caltex Depot in Industria,
                                                                  and another for a Code 10 delivery truck driver at
                                                                  Tedelex in Booysens.

                                                                  The computer job was intimidating, as I did not know
                                                                  what a computer looked like or how it worked. I
                                                                  therefore went for the driving job. On my arrival the
                                                                  interviewer was away at lunch. As he was still not back
                                                                  thirty minutes after lunch, I decided to rather go for the
                                                                  Caltex possibility. I was initially employed as a Junior
                                                                  Clerk, butin the same year I was promoted to Senior
                                                                  Clerk and Relief Accountant.
4   The Professional Accountant
Q:    Has this     accounting   career   been    personally     Q: Why did you choose private practice instead of public
     fulfilling?                                                    accounting?

A: Yes, very much so. In 1988, after nine years at Caltex,      A: By 2000, I had already spent two decades in the public
    I joined the company that had looked after me during            accounting arena, and I was now getting bored and
    1978 when I worked there before returning to school             frustrated, as there were no new challenges. I saw
    to complete ny Matric.                                          private practice as a remedy for my routine life.

     The nine years of experience I gained at Caltex Oil        Q: What have the best aspects of your career path
     came in handy, as I was subsequently appointed                been?
     as an Accountant for two manufacturing entities.
     In 1992, I was appointed as Assistant Head Office          A: To see no less than fifteen bookkeepers and accountant
     Accountant at Swift Engineering, a former Murray               that I have trained taking up very senior positions in
     & Roberts subsidiary that is now owned by Henred               the private and the public sector.
     Fruehauf, a subsidiary of a JSE listed entity, Trencor.
     Thereafter, in 1996, I was appointed Group Head                 To be one of the thirteen companies appointed to
     Office Accountant at Henred Fruehauf Trailers,                  implement and manage the Financial Management
     responsible for eight subsidiaries and four associate           Controls at Gauteng Schools.
     companies.
                                                                     My involvement in various NGOs’ as Trustee, Treasurer,
     In 1998 I completed my accountancy degree, and in               Board Member and Director.
     1999 I registered as an Associate General Accountant
     (SA) with the South African Institute of Chartered              My appointment as a Board Member of Natalspruit
     Accountant.                                                     Hospital, a Board Member of SAIPA, a SAIPA EXCO
                                                                     member, SAIPA Deputy Chairperson, serving on the
     In June 2000 I established JMT Executive Tax &                  SAIPA Investigations Committee, and serving in the
     Accounting Services CC in Vosloorus, a Township in              AGA (SA) Committee at SAICA.
     Ekurhuleni, vacating my positionat Henred Fruehauf in
     December 2000 to devote all my attention to JMT Exec,           I derive fulfillment from the various roles that I have
     the entity that I am still running today.                       played in numerous companies within the buoyant
                                                                     economy in our country.
Q: What has the biggest challenge in your career been?
                                                                     What more can I ask for? This is a rewarding profession
A: Two things have been very challenging, completing my              for those who work hard! I am fulfilled, andsincerely
    Junior Degree at the time my employer entrusted me               believe that God has been very good to me.
    with the huge responsibility of Group Accountant. The
    second, having to look after my wife and three kids         Q: What steps does your practice take to help struggling
    amidst these responsibilities. I joined study groups,          students find their feet in the accounting profession?
    and read my Unisa study guides in the taxi whilst
    beingboth driver and passenger.                             A: JMT is an Approved Training Centre (ATC), approved by
                                                                    SAIPA, Pastel, ICB and City Guilds. It is also registered
     After completing my degree, I believed the upward              with Fasset as a levy payer, and for the purpose of
     mobility will now be easy, as I was one of a small group       Learnerships.
     of senior black employees in our company. I was,
     however, very mistaken. Although the buzz words in              In 2004 JMT established a Training Centre in Vosloorus
     the then five year old new South Africa were Affirmative        to provide computer literacy and computer skills
     Action, Employment Equity and Black Empowerment,                training.. Trainee bookkeepers and accountant are
     the management proved to be very intrasegent when it            given theoretical and practical experience, and are
     came to transformation.                                         mentored until they are confident to move out on their
                                                                     own. We believe in on the job learning. Our learners
Q: How did you come to own and manage your accounting                are encouraged to enrol at professional bodies.
    company?
                                                                Q: What route led to your becoming a Board Member
A: In June of 2000, while still employed, I registered             of SAIPA?
    JMT Executive Tax & Accounting Services CC, and in
    December 2000, I resigned from HFT to join my two           A:     As a member of Association for the Advancement
    employees at JMT. This move was motivated by the                 of Black Accountants of South Africa (ABASA), a key
    need for my services in the area, as there were only two         role player in the Accounting Profession tasked with
    established bookkeepers.                                         advancing the cause of black Accountants and bridging
                                                                                                  The Professional Accountant   5
    the historical gap, I was given the responsibility of the         SAIPA is an International Accountancy body gives its
    Accountancy Charter.                                              members the legitimacy to take advantage of the many
                                                                      opprtunities to also work in other parts of the globe.
    SAIPA, in its quest to transform the profession and to be
    transparent in its own transformation, invited ABASA to        Q: Are the professional standards of the South African
    enter into a strategic alliance to tackle transformation.          accounting profession as high as they shoud be,
    The ABASA Leadership saw this as a value-add for                   and do they match up to the standards in other
    ABASA and the Profession.                                          countries?

    The ABASA leadership approached me to assist in                A: Yes, our standards are high in terms of International
    finding a suitable candidate for this rask. I immediately          Standards, and are respected in the global accountancy
    grabbed at this opportunity, as I saw it as a way of               village. At SAIPA we have recognised the need to
    moving closer to my organisation, and contributing to              constantly improve our standards, hence our affiliations
    the transformation and development of the accounting               with the International Federation of Accountants (IFAC),
    profession in the new South Africa. I did not hesitate             and the Eastern Central and South African Federation
    to make myself available, and both organisations                   of Accountants (ECSAFA).
    fortunately endorsed my appointment.
                                                                      A number of South Africans are working overseas with
    I am proud and thrilled to be part of this fast transforming      South African qualifications, and are in most cases
    organisation. I strongly believe that my association              accepted without the need to write entry examinations
    with, and my involvement in SAIPA at board level will             in countries such as Australia and Canada, to name but
    open new doors for those previously excluded due to               two.
    lack of funding and various other social reasons.
                                                                   Q: How does an organisation like SAIPA contribute to
Q: What does your role as a Board Member of SAIPA                     transformation of the accounting profession in
   entail?                                                            South Africa?

A: SAIPA, and its board members are committed, and are             A: The recent endeavours to work with all stakeholders
    very serious about transformation the organisation                 from the accountancy profession is proof of the
    to address the disparities caused by the educational               organisation’s coomitment to transformation.
    system of the past.
                                                                      Then there is also SAIPA’s empowerment Flagship, the
    Apart from my appointment to the Investigations                   Accountancy Olympiad, which targets students at high
    Committee, I see my role as that of advocacy, and of              schools by encouraging them to participate.
    acting as a bridge between SAIPA and those previously
    excluded from the profession.                                     There is also SAIPA’s intent to work very closely with
                                                                      ABASA; an intention that needs to be known in the
    I intend attracting more new previously disadvantaged             business community and the accounting fraternity.
    entrants from the PDI’s to the accounting profession,
    and acting as the link between black business and              Q: How can we as an institute improve and speed up
    SAIPA.                                                            transformation?

Q: What, in your opinion, are the advantages of belonging          A: The Board and the various committees of the Institute are
    to an institute such as SAIPA?                                     addressing the issue of speeding up transformation. We
                                                                       have merged some of the regions, and have amended
A: The benefits of being a SAIPA member are innumerable,               our constitution to bridge the divides concerning
    especially the advantage of receiving instant                      PDI’s/HDI’s. An audit of the current situation has been
    professional support in accounting, legal and taxation             completed,and based on that outcome, we have set
    matters.                                                           ourselves certain goals and objectives. Our targets are
                                                                       reasonable, achievable, and measurable, and deadlines
    Subscribing to the Continued Professional Development              or timeframes are in place.
    (CPD) seminars offrred by SAIPA affords members the
    opportunity of keeping abreast of new developments                There are also clusters have that been formed and are
    in the profession.                                                regularly monitored and evaluated.

    Furthermore, the are also the structured training and             Various other interventions have been planned and will
    development programmes where professionals address                be implemented as and when the need arises, such
    members on topical topics.                                        as bridging courses for students from disadvantaged
                                                                      backgrounds.
6   The Professional Accountant
   As redressing disparities is a process, not an event,          No, with regard to some of our students from
   it is crucial to periodically monitor and evaluate             predominantly black high schools and universities.
   progress.                                                      It is clear that they are from institutions that lack
                                                                  the necessary resources. It is imperative that we
   SAIPA also fully supports the initiatives of Guarantee         narrow the gap by engaging with those from these
   Trust and FASSET.                                              backgrounds.

   Sadly, we still see only a few jobs that are advertised     Q: could you sum up your vision for SAIPA for the years
   requesting SAIPA qualifications. This has to change.            ahead?
   Both the private and public sector need to know about
   SAIPA, its approach, and the positive initiatives it has    A: Yes, but not my vision, but the vision of SAIPA’s members
   embarked upon.                                                  and prospective members, and of the global community.
                                                                   Transformation requires collective leadership.
   The issue of women playing a more significant role
   in the profession is also receiving due attention.             Our slogan should be: To be a Globally Professional
   Transformation without addressing the question of              Accountancy Institute of Choice. That says it all.
   women in the new South Africa is incomplete.
                                                                  Our Professionalism dirrentiates us from the rest.
   Our youth, particularly those from township schools,           Our goal must be to provide a Premium Accountancy
   must be targeted if we are to create a critical mass. The      Qualification (PAQSA).
   ABASA leadership is geared and ready to assist in this
   regard.                                                        We have clearly identified our niche. Our values
                                                                  bring real comfort to our members, clients, aspirant
Q: Is South Africa attracting quality students to the             Accountants, local Associates, International Associates
    profession, and, if we are, are we training them well         and the Authorities.
    enough?
                                                                  AWARDS: Joseph was the 2001 Winner of the Sowetan
A: Yes and No. Yes, in the case of those from a model C           and Hollard Super Achiever Category for outstanding
    backgrounds, and the former white universities.               achievement as an entrepreneur. n




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                                                                                                 The Professional Accountant   7
    A case of irrational exuberance?
    By Matthew Lester | Tax Professor, Rhodes University


It may well be, says Rhodes University Tax
Professor and well-known columnist Matthew                       Matthew Lester
Lester. Here’s how to play it smart and safe in
2008.

   It’s not easy being an emerging economy, what with
interest rates that change direction depending on US
consumers’ appetite for shopping and the apparently
unquenchable thirst of the oil-guzzling-fire-breathing
dragon that is China. As we prepare to welcome the
New Year, it appears the only certainty is economic
uncertainty, and those who wish to enter 2009 smiling
will need to read the signs of the times and tread very
carefully.

How high will they fly?

   South Africa’s interest rates are on the up and up again,
although according to Rhodes University Tax Professor
Matthew Lester, we’re unlikely to see the super-high rates
of the late 1990s.

   “The past few years have seen generally lower interest
rates under the watch of Reserve Bank Governor Tito
Mboweni,” says Lester. “But he’s fast running out of
options and regrettably the only way forward for the
foreseeable future is up.”

   The boom in US consumerism since 2001 has been
one of the greatest contributors to our lower rates,
although now American spending appears to be slowing
down, reducing the demand for raw materials from South            It’s not just oil that’s the problem, however. Massive
Africa.                                                        expenditure on capital equipment, cheap overseas cars
                                                               - and basically, cheap everything - is putting a lot of
  “This, however, is not the main reason that Mboweni is       pressure on the Reserve Bank Governor.
being forced into a corner,” says Lester.
                                                                  “The volume of imports is overwhelming and the cost
   His real problem is thick and sticky…and we’re not          of oil, coupled with a downward trend in South African
talking about any presidential candidates.                     consumer spend, is just making things worse,” says
                                                               Lester. “And with the presidential debate coming up and
Black Gold                                                     the accompanying uncertainty, chances are that Mboweni
                                                               will have to raise interest rates even more. He really
   In 2002 oil cost around $20 per barrel. Now it’s close      doesn’t appear to have a choice.”
to the $95 mark and it’s showing no sign of slowing
down. But, according to Lester, the particularly disturbing    Is property still a sure thing?
development is that where oil prices usually drop back
at the beginning of winter once the northern hemisphere          It depends on who you speak to and which graph they’re
has stocked up on oil ahead of the cold weather, this year     waving in front of your nose, says Lester.
the price has not dropped.
                                                                  “The ubiquitous ABSA property index, used by every
   “Oil is dissolving our foreign exchange, leading to a       estate agent who wishes to add a little pressure to a sale,
situation where Mboweni is forced to raise interest rates      is misleading because it doesn’t show the volume of
in order to attract more forex into South Africa,” says        transactions,” says Lester. “But if you dig a little deeper
Lester.                                                        you’ll find that the 18 month property boom which started
8    The Professional Accountant
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around 2003 has been over for quite some time. The                                                                 appears that the financial flows that have been benefiting
property market is well and truly overcooked.”                                                                     us up to now are beginning to swing away from emerging
                                                                                                                   markets, says Lester.
   According to Lester, if you’re serious about making a
decent return on your property investments, you should                                                               “We seem to be entering a time that’s reminiscent of
forget about trying to make a quick buck off the back of 2010                                                      the 1980s, the only difference being that the Cold War has
and investigate commercial property where you’re likely to                                                         been replaced by the war in Iraq.”
make real money over the long term - say 20 years.
                                                                                                                     The US has been dropping interest rates to encourage
Equity anyone?                                                                                                     spending, but the turnaround is not happening fast
                                                                                                                   enough. Also, US consumers have continued to borrow on
  As with investing in the property market, investing in                                                           their properties, but now that property prices are slowing
the equity market carries the same health warning – don’t                                                          down, they’re forced to curb their spending with the result
do it unless you’re happy to avert your eyes while the                                                             that US orders for imported goods from China and India
market dives and wait patiently for it to rise, as it always                                                       have dropped too.
does, over the long term (10-20) years.
                                                                                                                     As an emerging economy, South Africa is vulnerable to
  “If you want a return in under three years, stick with                                                           catch Asian flu when the US sneezes:
cash products; if you want to be a bit more adventurous
with bonds or shares, it’s going to be closer to 10 years                                                             “Reduced orders spell trouble for South Africa because
before you get a good return.”                                                                                     basically, we dig for China and India, and if we’re exporting
                                                                                                                   less, our forex levels drop too, again placing pressure on
   “When it comes to investing in the equity market, South                                                         interest rates,” says Lester.
Africans need to stop switching so darn much and learn
that patience reaps the greatest rewards,” adds Lester. And                                                          And with no control over an oil price that’s likely to
if you really want to make 25% return or more, you had                                                             keep on rising as Asian growth increases (there aren’t
better start getting lucky with the horses, he advises.                                                            enough refineries to supply oil demand), the government
                                                                                                                   has little choice but to adjust interest rates as the primary
Uncertain Times                                                                                                    tool for keeping a lid on inflation…leaving Tito with one
                                                                                                                   very earnest request for Santa Claus this Christmas – a
  As Finance Minister Trevor Manuel predicted in 2006, it                                                          super-sized festive shopping spree for America. n
                                                                                                                                                                                                The Professional Accountant                        9
 Pushing the art of
 management accounting
 By Alexander Mersereau | cMA, FcMA, D.Sc., professor, HEc Montreal.


Despite the many strides the profession has made                 Review in 1990,2 declared that “the most exciting and
over the years, some still believe that management               innovative work in management today is found in
accounting practices haven’t taken as strong a                   accounting.”
hold in organizations as they should. The author
describes the challenges that are slowing the                       Fifteen years later, it’s a good idea to ask ourselves what
adoption of critical management accounting tools                 has happened to this reform. On one hand, the new tools
in broader business                                              that came from that period are evidently in use. Advanced
                                                                 management accounting practices such as ABC and non-
   Management accounting practice has developed                  financial performance measures are included in all major
substantially over the past century, but recent studies          management textbooks. Studies of activity-based cost
suggest that the practice is no longer making the strides that   management (ABC) have reported generally positive user
it once did. Unless management accountants take a hard           perceptions of benefits. Most of the larger companies
look at the effectiveness of current practice, this situation    appear to have experimented with Balanced Scorecard (BSC)
isn’t likely to improve. In some companies, radical changes      techniques and studies have linked elements of scorecard
are needed to the structure of the finance function, the         use to higher profitability. Economic value added (EVA)
nature of the interactions management accountants have           research has reported positive results. On the other hand,
with other managers and the performance metrics used to          despite these positive results it would appear that the
guide the function itself.                                       adoption of advanced management accounting practices
                                                                 once again has slowed.
The good news
                                                                 Slipping standards
   The early part of the 20 century was a period of rapid
                               th


development for the field, when scientific management                Studies estimate that the use of ABC has fallen and is
sought to identify what costs should be and economic             now below 20%, and the percentage of those considering
organizations began to use budgets and relate returns to         implementing ABC has also fallen. Of companies that have
levels of investment. However little development occurred        introduced activity-based techniques, only a minority claim
in the following years and, by the early 1980s, management       that it is embedded in their organization. Strategic cost
accounting had reached a point of stagnation. H. Thomas          management techniques, such as attribute costing, seem
Johnson and Robert S. Kaplan,writing in 1987, declared:          little known outside academia. The majority of firms adopting
                                                                 EVA measures apparently don’t use them significantly.
    Today’s management accounting information, driven            Balanced Scorecard researchers have concluded that
by the procedures and the cycle of the organization’s            most users make little attempt to link their non-financial
financial reporting system, is too late, too aggregated and      performance to strategy and that only a small minority
too distorted to be relevant for managers’ planning and          attempt to validate the cause and effect linkages included in
control decisions... Management accounting reports are of        their models. Moreover, Balanced Scorecard practice seems
little help to operating managers as they attempt to reduce      to have developed an independent momentum, excluding
costs and improve productivity.1                                 the finance function altogether in some organizations.
                                                                 There is even pressure for management accountants to do
   This call for renewal was widely heeded. Their book           less. In his autobiography, Jack Welch complained: “The
Relevance Lost: The Rise and Fall of Management Accounting       budget is the bane of corporate America (and) never should
became a best seller for the editor of Harvard Business          have existed” and research that would enable organizations
School Press and set off a wave of innovation and interest       to move beyond budgeting is underway.
in the management accounting profession worldwide.
Among the numerous technical innovations that came                  Therefore, it isn’t surprising that despite the wave of
from this period were activity-based cost management,            innovation in management accounting in the late 1980s
the Balanced Scorecard, benchmarking, life cycle costing,        and early 1990s, a recent study by IBM consulting reported
target costing, economic value added measures and                that less than half of managers received role-specific
strategic cost management. Management accounting was             information to support ad hoc decisions. Fewer still
also able to build upon innovation in other fields such as       received frequent operational metrics related to processes
Total Quality Management, Six Sigma, Kaizen and Business         under their control and very few could obtain information
Process Reengineering. The development was rapid and             across functions, processes and geographies. A similar
interest spread well beyond the management accounting            study by Accenture/Economist Intelligence Unit reported a
community. Peter Drucker, writing in the Harvard Business        significant gap between potential and actual practice.3
10   The Professional Accountant
  These indications of a slowing pace of management                The management accounting communications process
accounting change may be due to a range of factors. In          begins with a set of inputs to the accounting information
some cases, new management accounting tools aren’t              system. This data is then encoded into information using a
adapted to organizational strategy or structure and can’t       language (accounting) and transmitted to a recipient. Here
be used. And in some cases, innovation has failed due to        is our first monkey, the speaking one. The management
implementation-related factors.                                 accountant can’t possibly observe, measure and report
                                                                on everything. She must select from a wide field what to
   However, the main problems aren’t technical or               report, how to report it and when. To do this well, she must
structural; they lie in the need for a better management of     anticipate how this information ought to be used, have a
the management accounting process itself.                       language at her disposal that succinctly codifies the key
                                                                data observed, and have a communication medium that
Getting involved                                                reaches the intended audience efficiently and effectively.

    At the heart of the management accounting process              The next leg of the communications process is the
is a communications system, or a set of communications          receipt of the information.
systems, that provide information to managers. The ability of
management accountants to improve the scope, timeliness            Here we confront the second monkey, the hearing one.
or quality of the information they provide depends on how       Managers must be able to correctly decode the reports they
well they understand and manage these systems. There            receive. They must therefore be familiar with the concepts
are three main areas in management accounting systems           used in the accounting models that are used to prepare the
in which communication problems can occur, which are            reports and understand what the variances in the numbers
illustrated here using the tale of The Three Monkeys.           signify.

    The three monkeys that most people know are Speak No           Finally, managers act on the information received. How
Evil, Hear No Evil and See No Evil. In this medieval Japanese   they will act depends on how they interpret the message.
illustration, a trio of monkeys is depicted with one having     This is a separate challenge and introduces the third
his hands over his mouth, another covering his ears and         monkey, the seeing one. Individuals interpret and act on
a third his eyes. The original use of this image seems to       information using personal decision rules that they have
have been to illustrate wisdom. The three wise monkeys, as      learned over time. A large part of any manager’s decision
they were referred to, counselled the disciplined avoidance     strategy will be guided by how he views his organization
of evil. Conversely in modern times the image of the            and his role in it, and personal and corporate objectives are
three monkeys has been used to emphasize stupidity and          never completely aligned.
negligence, or the unwillingness of people to get involved.
Here they are used in the latter sense to illustrate the need      The actions that a manager takes as a result of receiving
for management accountants to become more involved in           information (including actions taken in anticipation) and the
this communications process.                                    consequences of these actions should be of great interest
                                                                                                  The Professional Accountant   11
to the management accountant. These consequences               with the least mental flexibility, the most closed minds and
become part of the world she must observe. This is the first   the least willingness to take risks.
monkey all over again, and so the cycle continues.
                                                                  While some of the blame for this impression can be
Big picture providers                                          attributed to poor public relations, the selection and training
                                                               of accountants remains a significant issue. Management
    How do some organizations meet the challenges              accounting requires practitioners with a “big picture” point
illustrated by the three monkeys? Let’s look again at the      of view who are able to challenge operating managers
first monkey, the speaking one. To be able to communicate      as peers. Formal education may actually have a negative
to managers, accountants must have a clear picture of the      effect on recruitment. Several studies have suggested that
strategic importance of the phenomena they observe, and        accountants may follow a training regime that is too highly
they must have a clear idea of how operating decisions are     oriented to the financial aspects of their work and not
made. Some of this can be learned in university but most       sufficiently directed to the behavioural side.
of it comes from day-today experiences within operations.
This requires frequent contact between management                 Others have observed that the financial bias to the
accountants and other managers.                                educational component has the regrettable consequence
                                                               of attracting candidates to the profession who are more
   However, the cycles of monthly, quarterly and annual        comfortable with a formula-based approach to decision
planning and reporting are punishing and accountants           making and less at ease with the ambiguities that
regularly work overtime during these periods. To overcome      characterise managerial work.
these barriers, some organizations encourage contact by
physically locating accountants with other managers. Some      Educating others
deliberately place accountants on interfunctional working
groups and many ensure that management accountants                Let’s turn now to the hearing monkey, which refers
have either dotted or solid line accountability to operating   to the ability of managers to understand the accounting
managers. Some organizations have adopted a structure in       reports they receive. When financial accounts are prepared
which some management accountants don’t have routine           and distributed externally, accountants are permitted to
reporting responsibilities.                                    assume that the reader is trained in accounting. This isn’t
                                                               the case inside the organization, where a vast majority
   A complicating factor is how management accountants         of managers haven’t completed any significant formal
are themselves received when dealing with operations           accounting training, and those who have will have forgotten
personnel. Over the years in some quarters accountants         much of what they learned.
have earned a reputation for bringing an unbalanced and
overly financial point of view to problem solving, which has      Some organizations are attempting to overcome this
diminished their position in the hierarchy. Some managers      problem by supplementing or replacing financial reports
have characterized financial managers as among those           with symbols or colours (green for OK, yellow to signal
12   The Professional Accountant
issues and red to announce a real problem). While such           communications will fail to achieve their objectives and
systems have the advantage of simplicity, questions              that management accounting system change will be further
need to be asked about the overall content of such               delayed.
communications. What does yellow or green really mean?
What about the grey areas in between? And in the political       The way forward
context of organizations, how might these ambiguities be
exploited for personal benefit?                                     Improving management accounting begins with a
                                                                 commitment to change. For many organizations, this is a
   Rather than reducing the content of accounting messages       huge step. Accountants have been found to be the first to
to one of three possible states, accountants need to help        resist accounting change, and the failure of various ABC and
end users become more proficient in reading accounting           scorecard projects has been linked to the unwillingness of
reports. Some organizations have built accounting training       accountants themselves to see the project through. Many
modules for their managers that help them understand             accountants are afraid that radical change might endanger
the specific reports they receive. Management accountants        existing systems and processes.
have an important role to play in preparing and delivering
training materials. In today’s complex managerial                  To ensure that change is permanent, commitment to
environment technical functions, especially accounting,          change must come from the top and must be sustained.
need to become more than suppliers of information. They
must become a kind of a school where managers can                   As the previous examples illustrate, improving
receive training. Yet in many organizations, accountants         the management accounting function often requires
are too busy to become trainers and internal reward              structural reorganization. If everyone is consumed by
systems likely discourage such activities. Here the training     the routine reporting cycles, there will be no one left to
activity itself needs to be repositioned to make it attractive   assume emerging roles in areas such as management
to accountants.                                                  training. In some organizations bringing in new people
                                                                 will be necessary. Management accounting is more than
   As the scope of management accounting messages                just accounting, it requires people who understand the
widens to include non- financial performance indicators,         behavioural consequences of numbers and who can link
management accountants acquire an additional challenge.          controls to strategy.
Many managers have difficulties visualizing the cause
and effect relationships that link value drivers to financial       Last, but not least, the management accounting
returns. Yet this is the key knowledge needed to manage          process requires new metrics. Most accounting functions
value, and training is often required to help managers           measure timeliness, in terms of the delay between the end
understand better the cause and effect relationships that        of the reporting cycle and the issuing of the report, and
underlie shareholder value.                                      many measure the cost of the finance function relative
                                                                 to revenues. Few organizations measure the use or the
   The third monkey, the seeing one, refers also to the          usefulness of the management accounting information
manager, this time to the conflict that exists between           provided. The absence of such measures guarantees that
shareholder values and the interests of individual               things will remain the same.
managers. Increasing functional specialization means that
managers are increasingly disconnected from shareholder          Diagnostic
values. Many managers are strongly committed to the
organization without being committed to the financial               Management accountants should conduct frequent
goals that drive it. Management accountants have a role          analyses of their communications processes. Such a
to play in instilling financial discipline and conveying         diagnosis would include the following questions:
financial values to non- financial managers. One method is
to require operating managers (rather than accountants) to       What changes to management accounting practice have
systematically prepare and present the financial analysis          you initiated in the last two years?
of their business unit. Shareholder value training is also
important.                                                       l How many people are committed to real change?

   At the same time that the management accounting               l Do accounting personnel regard themselves as members
function must pay greater attention to the effectiveness of        of the operating team?
its internal communications processes, other demands are
arising. There is increasing pressure to reduce the overall      l How much time do management accountants spend with
cost of the finance function as a percentage of revenues.          nonfinancial personnel?
There are increasingly time consuming demands for more
detailed external reporting. While these latter goals are        l Are management accounting personnel physically
important and must be achieved, putting the priority               located in such a way as to bring them in regular contact
there only increases the risk that internal accounting             with nonfinancial managers?
                                                                                                   The Professional Accountant   13
l Do management accountants have             a   reporting    l Do performance measures other than cost and timeliness
  responsibility to operational managers?                       exist for the management accounting function?

l Do reports to individual managers/units contain a           l What priority is given to these metrics and how are they
  maximum amount of information about that specific             used?
  unit?
                                                                The more management accountants can respond
l Are accountants given responsibilities that can only be     positively to these questions, the better organizations will
  discharged by working with operational people?              become at managing the communications processes that
                                                              underlie management accounting.
l Do the accountants who have these responsibilities have
  sufficient status to maintain working relationships on          This will create a better understanding of the role that
  the basis of mutual respect?                                management accountants can play in achieving success and
                                                              it is in this context that significant management accounting
l How many accounting personnel do not have significant       change will occur. n
  routine reporting responsibilities?
                                                              Reference
l How much financial training is provided for operating
  management?                                                 1 Johnson, H. & Kaplan, R. (1987), Relevance Lost: The Rise
                                                                and Fall of Management Accounting, Boston, Harvard
l Does this training explain the links between financial        Business School Press, p 269.
  and operational events?
                                                              2 Drucker, Peter (1990) The Emerging Theory of Manufacturing
l Does this training explain why financial goals are            Harvard Business Review May/June pp. 94-102
  important?
                                                              3 Accenture Finance Solutions (2004) Best in Class How
l Are operating managers required to systematically prepare     Finance Business Process Outsourcing Can Help Create
  and present the financial analysis of their unit?             a High Performance Finance Function.




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14   The Professional Accountant
  Revoking an irrevocable
  power of attorney
   By Mark costa, candidate attorney, Routledge Modise.

1. Introduction                                                         Mark costa

  A power of attorney is a document which sets out the powers
conferred on an agent (or grantee) by his principal (or grantor)
and may be either special or general.

   This article relates to the legal issues concerning the
question of whether a power of attorney given irrevocably is
in fact irrevocable.

    For the purposes of this article we will use the following facts
as an example: X borrows R1 000 000 from Y (“the creditor”),
a financial institution. As security, X registers a mortgage bond
in favour of Y over his immovable property. Some time later
X falls into arrears with his payments. Y issues summons. X
approaches Y and requests an indulgence. Y agrees to this
indulgence subject to X signing an irrevocable power of attorney
in Y’s favour, entitling Y to sell X’s immovable property in the
event that X defaults again. When X again defaults, Y attempts
to enforce the irrevocable power of attorney while X attempts
to revoke it.

   This example is not simply a case of X (“the borrower”)
employing a conveyancer to pass a bond over his immovable
property; it refers to an entirely different transaction. The          possibility that a prospective creditor may exploit the weak
object of the transaction is for the borrower to give security to      financial position of a borrower, coupled with the borrower’s
Y (“the creditor”).                                                    often misplaced optimism about his prospects which may result
                                                                       in the creditor, by way of a pactum commissorium, obtaining a
  The principles enunciated below would apply to any money             windfall disproportionate to the extent of the indebtedness of
debt and not just to a loan.                                           the borrower to the creditor.

2. The issues                                                              Paratie executie is a provision in an agreement which entitles
                                                                       the creditor to execute, without recourse to the borrower and
  It is suggested that there are three issues to be looked at          the court, and selling the borrower’s property privately. This
when dealing with the example, namely:                                 clause is invalid insofar as immovable property is concerned.
                                                                       It is valid in respect of movables but this is under attack at
   1)    pactum commissorium;                                          present.

   2)    paratie executie;                                                The aforegoing extend to agreements which, whatever their
                                                                       form, are of a similar purpose and effect.
   3)    the legal effect of the term “irrevocable”.
                                                                          In the case of Mardin Agency (Pty) Ltd v Rand Townships
3. Pactum commissorium and paratie executie                            Registrar 1978 (3) SA 947 (W) Viljoen J held that in principle,
                                                                       the irrevocable power of attorney in rem suam (which is dealt
   A pactum commissorium is an agreement which provides                with later) is no different from a paratie executie provision and
that, upon default by the borrower, the creditor will be entitled      has for reasons similar to those relating to paratie executie and
to keep and acquire ownership of the property (movable or              pactum commissorium, been characterised as invalid.
immovable) which has been pledged or mortgaged regardless
of the amount of the debt or the value of the property.                  As a result, the crucial issue is to ascertain whether the
                                                                       purpose and effect of the document constitutes a pactum
  This type of an agreement is illegal and consequently void in        commissorium or permits paratie executie. This of course will
South African law. The reason for the prohibition is the inherent      depend on the facts of the case.
                                                                                                            The Professional Accountant   15
   This issue arose in the Supreme Court of Appeal case of     when the borrower is in default and proceedings have been
Citibank NA v Thandroyen Fruit Wholesalers CC & Others         instituted against him.
[2007] SCA 61 RSA in which judgment was delivered at the
end of May 2007.                                                  If a power of attorney is signed by the borrower at the
                                                               time of advancing the loan and before he was in default,
   In this case the bank and the respondents concluded         then it is submitted that the purpose and effect of the
a written agreement of settlement of claims the bank           power would constitute a pactum commissorium or permit
had against them. The agreement, inter alia, authorised        paratie executie. This is because a borrower cannot, before
the bank to sell certain immovable property belonging to       defaulting, authorise the creditor to sell the immovable
the respondents if they defaulted. The bank had to find        property on his behalf without recourse to the courts as
a purchaser, was responsible for marketing costs and for       this would amount to the creditor taking the law into its
all rates, taxes and other levies imposed on the property      own hands.
prior to sale. If the selling price was less than the agreed
amount, the bank would have borne the loss but if a greater       However, the position is different where, once the
amount was realised, the bank would be entitled to retain      borrower is in default, he signs the power of attorney
the excess.                                                    authorising the creditor to alienate his immovable property.
                                                               One could argue that the purpose and effect of this would
   The respondents argued that this settlement agreement       be similar to a sale of the property to the creditor as stated
was unenforceable in that although it did not, strictly        by the Supreme Court of Appeal in the Citibank NA case. In
speaking, constitute a pactum commissorium or permit           this respect, the creditor, by instituting legal proceedings,
a paratie executie, its similarity to both was sufficient to   would already have had recourse to the law, but before
categorise it as contrary to public policy.                    completion of the action, a type of settlement is reached
                                                               with the borrower.
   The Supreme Court of Appeal disagreed with the
respondents’ argument and decided that none of the               Another argument could be that the creditor would not
features of a pactum commissorium or a paratie executie        be acting on the basis of the original loan agreement, but
could be found in the provisions of the settlement             on the basis of a new agreement which was concluded after
agreement. The court stated that although the agreement        the borrower was in default.
was not one of sale of the property by the respondents to
the bank, its effect was similar.                              4. The legal effect of the term “irrevocable”

  Applying the above principles to the example, it is             There is a profusion of uncertainty surrounding the
suggested that one must distinguish between the period         question of whether authority can be given irrevocably.
when the loan is advanced to the borrower and the period       This is mainly due to our courts adopting the proposition
                                                               of English law that authority is irrevocable if it is coupled
                                                               with an interest or forms part of a security. Some of our
                                                               courts have said that this proposition has a parallel in
                                                               Roman-Dutch law in the procuratio in rem suam which was
                                                               mentioned by one of the Roman-Dutch writers, Johannes
                                                               Voet, who lived during the period 1673-1743.

                                                               4.1 Procuratio in rem suam

                                                                 The words procuratio in rem suam refer to the situation
                                                               where an agent is authorised to do an act for his (i.e.
                                                               the agent’s) own advantage and not for the principal’s
                                                               advantage. A power of attorney generally requires the
                                                               agent to act for the benefit of the principal.

                                                                  Although this article can by no means be seen as creating
                                                               order out of the chaos that currently exists on this subject, an
                                                               analysis of the case law analogous to the power of attorney
                                                               given in the above example can be used as a guide.

                                                                  As a starting point, a power of attorney which purports
                                                               to be irrevocable is not necessarily irrevocable. This would
                                                               depend upon an interpretation of the transaction concluded
                                                               between the parties. There is no particular magic in the use
                                                               of the term “irrevocable”.
16   The Professional Accountant
4.2 Revocation of authority                                           The court reiterated the general rule of law that a
                                                                   grantor of a power of attorney can revoke it and stated
4.2.1 Historical background                                        that that rule applies where a power has been granted to
                                                                   an agent authorising him to transact certain business on
   In Roman-Dutch law irrevocability of authority was              behalf of the principal (i.e. as in the case of a contract of
regarded as being in conflict with the very nature of authority.   mandate referred to in paragraph 4.2.4 below). But the
This was because it was believed that an irrevocable power         court went on to state that the power of attorney in that
of attorney could lead to abuse. Voet made an exception            case was not an instance where the general rule applied as
to this rule, namely the procuratio in rem suam coupled            the authority given to the bank enabled it to do something
with a cession of a right of action. However, it has been          on its own account and for its own benefit; it enabled the
contended that in Voet’s day a procuratio in rem suam was          bank to secure itself; it was given for the benefit of the
regarded as nothing more than a cession.                           bank and not for that of the grantee. Consequently, the
                                                                   Registrar was ordered to treat the power of attorney as
   Early classical Roman law did not provide for the               valid notwithstanding the revocation.
cession of a right of action. This lacuna was overcome by
a procedural device in which the person who wanted to                De Villiers C.J., in Van Niekerk v Van Noorden 1900 17 SC
transfer a right of action to another appointed the latter as      63, was faced with a similar irrevocable power of attorney
his procurator to institute action against the debtor.             and was of the opinion that it could be revoked at any time
                                                                   by means of the borrower paying the whole amount of the
   By the time the exchange of pleadings in the action was         debt due, but so long as the debt remained, so too did the
completed, the procurator became dominus litis (literally          power remain irrevocable.
translated as master of the suit) and judgment was given in his
name. The procurator would then be bound to restore to the            In Hunt, Leuchars & Hepburn Ltd: In re Jeansson 1911 NPD
principal what he had recovered from the debtor. In contrast,      493 X borrowed money from Y and gave him an irrevocable
in the case of a procuratio in rem suam, the procurator did        power of attorney “to let, sell, acquire, mortgage, manage,
not have to restore to the principal what he had recovered.        and generally to administer a certain piece of land”. After X’s
                                                                   death Y approached the court for leave to act upon the power
  However, in Roman law the procuratio, even in a                  of attorney. The court granted leave on the ground that the
procuratio in rem suam, was revocable and fell away with           power, having been given as security, was irrevocable and
the death of either the principal or the procurator.               did not lapse on the death of the principal.

   It has been contended that when cession of a right of           4.2.3 Procuratio in rem suam nothing but a cession
action was recognised, the procedural device of procuratio
in rem suam became an empty shell.                                    However, if one has regard to the historical origin and
                                                                   development of the procuratio in rem suam it is difficult to
4.2.2 The English proposition                                      support these decisions. A better view is that an authority
                                                                   coupled with an interest or forming part of a security
   In a number of decisions Voet’s exception was used              is nothing but a cession. The hallmark of a mandate
to justify the adoption in South African law of the English        amounting to a cession is that it should give the agent an
proposition that whenever there is vested in a person an           interest not merely in the exercise of his authority but in
authority and an interest, the authority is irrevocable.           the very thing vested in or entrusted to him by his principal.
This would apply to cases where the authority is given             No particular form of words is necessary to constitute a
as a part of security; not to cases where the authority is         cession, provided the intention to cede is clear.
given independently, and the interest of the creditor arises
afterwards and only incidentally.                                     This was illustrated by the case of Pick v Estate Neylan
                                                                   and Others 1910 CPD 100 where X inter alia agreed to lend
   Those who support this view contend that Voet’s exception       £300 to Y. In return, Y undertook to grant X or to any person
referred only to cases where a power has been given to an agent    nominated by him an irrevocable power of attorney to draw
to bring an action and where cession of the action has also been   and receive, month by month as it should fall due, a monthly
given to him for that purpose. It does not apply to instances      pension. In pursuance of this agreement, Y executed a power of
where no action is contemplated, like in the example.              attorney authorising X’s nominee, Z, to receive the pension and
                                                                   irrevocably authorised Z to exercise these powers for a period
   This is what happened in the old case of Natal Bank             of eight years. Subsequently, Y’s estate was sequestrated and
Ltd v Natorp and Registrar of Deeds 1908 TS 1016. The              it was contended that the power of attorney had consequently
respondent gave the applicant an “irrevocable” power of            lapsed. The court disagreed and decided that a valid cession
attorney to register a bond on the respondent’s land to            had been effected.
secure an overdraft. Before the bond was registered the
respondent revoked the power by giving notice to the                 Greenberg J stated in Lawrie v Lawrie N.O. and Others 1934
applicant and Registrar of Deeds.                                  W.L.D. 51 that:
                                                                                                      The Professional Accountant   17
   “…an irrevocable authority coupled with an interest is              However, the crucial part of the judgment is where the
often, if not always, equivalent to a cession of rights and        court stated that the respondent’s case was not that its
certainly is in this case”.                                        authority was irrevocable in the strict sense of the word
                                                                   (i.e. that it could not be revoked by the appellant if the
   In Ward v Barrett NO & Another 1962 (4) SA 732 (N) the          appellant no longer wished to sell), but merely in the
court decided that a power of attorney given by a principal        sense that the premature termination thereof constituted
as security for recovery of what is owing to the grantee is        a breach of contract which entitled the respondent to claim
irrevocable, but to make it effective as against the principal’s   damages from the appellant in lieu of the commission it
creditors requires a cession of the rights to the agent. The       would have earned, but for such breach.
court went on to state that where the security has been
perfected by a cession, the power of attorney in conjunction          The general rule regarding the contract of mandate is
with which the cession is given, is the true case of a power       that the principal has the power and the right to revoke
coupled with an interest.                                          it without incurring liability for damages to the agent.
                                                                   However, the terms and circumstances of a particular
   In such a case the power of attorney is entirely irrelevant.    mandate may show that such a revocation is a breach of
The cessionary does not need a power of attorney or                contract.
authority, irrevocable or not, to exercise his rights. He does
so by virtue of being vested with a right of action by reason         It is clear from the above, that the power in the example
of the cession.                                                    (being a revocation of authority) is very different to a
                                                                   contract of mandate and the two should not be confused.
   In Kotsopoulos v Bilardi 1970 (2) SA 391 (C) the
appointment of a person “irrevocably and in rem suam” to           5. conclusion
receive and collect moneys payable to the person making
the appointment was held to be a cession. The court pointed           In the light of the above, insofar as paratie executie
out that a person who gives another an irrevocable power           and pactum commissorium are concerned, it is suggested
of attorney to receive money does not, in the absence of a         that the power in the example would be invalid and
cession of his right of action, divest himself of the power to     unenforceable if granted by the borrower at the time
claim the money from the debtor.                                   of the loan being advanced. However, if granted by the
                                                                   borrower after proceedings have been instituted and
4.2.4 Contract of mandate                                          after he has defaulted, it would probably be enforceable
                                                                   although, as stated below, depending on which view
   Another reason for the uncertainty surrounding the              one subscribes to, it would either be revocable or
question of whether authority can be given irrevocably is the      irrevocable.
failure of our courts to distinguish between authority on the
one hand and the termination of relationships arising out of         Insofar as the legal effect of the term “irrevocable” is
a contract of mandate on the other hand. Once again, it is         concerned, there can be no doubt what the intention of
necessary to have a brief look at the case law.                    the parties in the example was. The borrower’s intention
                                                                   when he gave the power to the creditor was that it should
   In the case of The Firs Investment Ltd v Levy Bros              remain in force until the creditor had acted upon it or until
Estates (Pty) Ltd 1984 (2) SA 881 (A) the appellant gave the       the borrower had discharged his debt.
respondent (a firm of estate agents) “the sole irrevocable
authority expiring on 20 June 1980 to effect the sale” of             The question is whether one wishes to follow the view
a shopping centre on certain terms and conditions. Within          incorporating the English proposition or whether one
the period of its mandate the respondent found a purchaser         wishes to place a greater reliance upon the language used
who was prepared to buy the property on the terms and              by Voet.
conditions laid down by the appellant. Before a deed of sale
was drawn up, the appellant decided not to sell and withdrew         This is an issue which has not yet been resolved by our
the respondent’s mandate. The respondent argued that the           courts and ultimately the Supreme Court of Appeal will
words “sole and irrevocable authority” gave it the sole right      have to examine whether those wide generalisations about
or power to dispose of the property even if the appellant no       the revocability of powers are really applicable to today’s
longer wished to sell.                                             ordinary commercial transactions, where value has passed
                                                                   and is given, on the belief that the power of attorney will
   The court interpreted this agreement as one in which            remain in force.
the appellant granted the respondent an exclusive right or
power to effect the sale of the property on its behalf and,           My view is that the Roman-Dutch authorities, in a large
by so doing, the appellant, in effect, deprived itself of the      way, speak of the revocability of all powers of attorney.
right to sell the property, except through the respondent,         One thing is certain though, holders of irrevocable
or to appoint anyone else to do so during the specified            powers should be aware of the uncertainty surrounding
period.                                                            this issue. n
18   The Professional Accountant
  Emerging markets –
  chinese Markets Evolve
 By Mark Mobius, Ph.D., Executive chairman, Templeton Asset Management Ltd.




Emerging markets have been posting strong                          Interest rate cuts by central banks in September were
returns despite high volatility. In 2007 through                well received, as they provided extra liquidity to markets.
October 15, the MSCI Emerging Markets Index                     Money supply is highly correlated to market gains and,
has returned 41.4%, the MSCI Emerging Markets                   longer term, we might see some excesses.
BRIC Index returned 57%, the MSCI Emerging
Markets Latin America Index returned 48.3%,                        Most emerging markets are still reasonably priced,
and the All Countries Asia Pacific ex-Japan Index               though not necessarily cheap. If markets in general continue
returned 43%.                                                   to rise as strongly as recently, we could experience a repeat
                                                                of the 2000 dot-com boom and bust.
   After this summer’s subprime-related volatility, investors
feared that mortgage problems would spread to emerging             However, the only market that we can say with certainty
markets. However, their concerns subsided when they             has become a bubble is the domestic A share market in
realized that most emerging market companies had limited        China. In the first nine months of the year, the MSCI China
exposure to subprime mortgages.                                 A Index returned 170%, and over the past 12 months,
                                                                returned 292%. That is expensive, especially compared to
   Curiously, although markets in the U.S. were shaken by       other Asian markets.
subprime problems, emerging markets were actually seen
as a safe haven.                                                   Hong Kong-listed H shares had been trading at up to
                                                                a 70% discount until the Chinese government recently
  This makes sense given that currencies in many                announced a decision to allow investment in overseas
developing countries are strengthening against the dollar       markets. That caused the Hang Seng China Enterprises
due to higher economic growth. Many have healthy current        Index, an H-share index, to climb by 42.6% in the third
account surpluses, contrasting sharply with conditions          quarter. The gap is narrowing somewhat, but plenty of
during the financial crisis of a decade ago.                    room still exists for H-share growth.
                                                                                                  The Professional Accountant   19
   It is also important to put the current sharp rise in Chinese       At the same time, several notable state-run industrial
domestic markets in the context of their virtual stagnation        conglomerates, which have significant listings in
just a couple of years ago. To revive the local stock market,      offshore markets, are shortly due to launch IPOs in
the government resumed approvals of initial public offerings       the local China A share market. These IPOs may well
(IPOs) and expedited the expansion of the Qualified Foreign        spur the market further. However, some officials might
Institutional Investor (QFII) scheme, allowing selected foreign    argue that an increased supply offers the best way to
entities to invest in China A shares.                              relieve the shortages of investment opportunities for
                                                                   local investors. Moreover, further privatization should
   Although excess liquidity in China is sending the A             lift productivity and financial transparency.
market valuations higher and higher, since China’s capital
account is still under control, expensive valuations could last       The Chinese government’s implementation of
longer than most would expect. The Chinese government              structural, economic and financial reforms, along
has realized the dire risks of an overheated stock market,         with efforts to tackle corruption, has been beneficial
and we believe it will introduce more measures to contain          for the markets and for investors. We have also seen
the excessiveness. Having said that, we also believe the           improvements in corporate governance, and many
Chinese government would not like to see the stock                 companies are striving to meet international financial
market experience dramatic falls, as this could give rise to       standards. n
economic, social and political repercussions




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20   The Professional Accountant
 Plain language starts with the reader

A lack of objective standards and benchmarks                   “To put it simply, plain language programmes must
for plain language pose significant challenges              start with the reader. A document that is in plain
for South African companies that are driving                language is one that meets the wants and needs of the
the adoption of plain language in their                     person reading. To comply with the NCA’s definition
communications to meet the demands of new                   of plain language and the ‘ordinary consumer’ test,
laws and regulations.                                       businesses may have to do reader-testing,” says Burt.

   That’s according to Candice Burt, a partner at plain        “It is important that the definitions of plain language
language training and consulting firm, Simplified.          in the NCA and CPB recognise that vocabulary and usage
Burt is a plain language lawyer and the South African       are only two areas that companies must consider when
representative of Clarity, an international organisation    writing their documents.
that promotes the use of plain legal language.
                                                              “Completeness of information is also important: does
  Companies need to be able to demonstrate that             the consumer have access to all the information needed
their documents are in plain language to live up to         to make an informed decision? During reader-testing,
the demands of new legislation, including the National      companies should test whether readers do understand
Credit Act (NCA), which became fully operational this       the document, not simply whether they believe that they
year, and the Consumer Protection Bill (CPB), which will    do (a common problem with many reader-tests).
come into effect in early 2009.
                                                               “Many businesses believe that plain language is simply
   While the NCA does offer a broad definition of plain     a case of using everyday words instead of acronyms and
language, it does not give objective benchmarks that        jargon and crafting short, active voice sentences in their
companies can use to judge whether their documents          documents, but the actual content of the document, the
are in plain language or not, says Burt.                    way it is structured and even the design and layout all
                                                            contribute towards its readability,” says Burt.
  Instead, the Act demands that the audience the
document is intended for should reasonably be able            “Companies need to consider elements such as
to understand it, and leaves the tests of whether this      document structure, customer logic, headings, design,
obligation has been meet or not up to the National          fonts, justification, the information supplied and
Credit Regulator and the courts.                            navigability as they try to write contracts, brochures,
                                                            and other customer documents in plain language. The
   Likewise, the CPB requires that an ordinary consumer     needs of different audiences and media also complicate
with ‘minimal experience as a consumer of the               the adoption of plain language into a company’s
relevant goods and services’ be able to understand          communications.
and appreciate a company’s documents, but does not
outline specific criteria these documents should meet         “Many elements of plain language can be measured
in terms of language, style, structure and so on. No        using tools and methodologies available from companies
local precedents have yet been set that companies can       such as Simplified, but these benchmarks should be
fall back on to shape their criteria forplain language.     combined with user-testing to ensure that the people
                                                            who a document is intended for can reasonably be
   Burt says that companies should look at the intentions   expected to understand it.
and spirit of the laws when they start to implement plain
language in their documents.                                   “Companies may be given further certainty about
                                                            their plain language obligations if and when regulators
   The goal of the NCA and CPB is to correct imbalances     formed under the laws (the National Credit Regulator
in negotiating power between consumers and companies        and the National Consumer Tribunal for the NCA, and
by ensuring that customers understand the content and       National Consumer Commission for CPB) publish plain
purposes of consumer documents such as policies and         language guidelines for businesses.
contracts.
                                                               “We believe any guidelines will include various
    In other words, consumers must understand why the       objective criteria based on international best practice
document is important to them, why they should sign         (such as plain words, short sentences, and the active
it, and what the consequences of agreeing to the terms      voice) as well as reader-testing,” she says. n
and the conditions are.


                                                                                             The Professional Accountant   21
     The current Law on Restraints Of Trade
     By verlie Oosthuizen, Shepstone & Wylie, Employment law department


Restraints of trade are always a hot issue for                common law is that restraint is enforceable in principle
both employees and business and debates rage                  and will only be unenforceable, not invalid or void, if it is
about their enforceability.                                   contrary to public policy or the public interest.

     There are two main forms of restraints:                    The onus of proving that the restraint is unenforceable
                                                              and contrary to the public interest rests on the person
1. A seller of goodwill in a company promises not to carry    seeking to avoid the restraint and this onus is not easy
   on a similar business in competition with a purchaser;     to discharge. The Court will look at geographic area,
   and                                                        the duration of the restraint and the manner and extent
                                                              to which the employee will be restrained to determine
2. An employee agrees with an employer not to compete         whether a restraint is reasonable.
   against them by setting up rival business or by entering
   the service of a rival trader.                                There are two main considerations that a court will
                                                              always bear in mind when dealing with a restraint case are
  A third form of restraint, which is quite unusual, occurs   the competing interests of the parties. On the one hand,
when business rivals agree not to compete. The prevailing     the fact that agreements freely entered should be honoured
                                                              and on the other, the principle that everyone should be
                                                              allowed to enter business or the professional world and
                                                              should be able to practice their trade or profession.

                                                                 One of the most important legal concepts in a restraint
                                                              matter will always be whether there is a “protectable
                                                              interest”. This is a concept that was introduced in the case
                                                              of Basson v Chilwan 1993 (3) SA 742 (A). In determining
                                                              whether there is a protectable interest the court will look
                                                              at the following:

                                                              l Is there an interest that deserves protection after the
                                                                termination of the agreement?

                                                              l Is that interest being prejudiced or under threat of
                                                                being prejudiced? If the answer is yes, how does that
                                                                interest measure up, when weighed qualitatively and
                                                                quantitatively against the interests of a person to
                                                                remain economically active?

                                                              l Is there an aspect of public policy that requires the
                                                                restraint to be rejected or maintained?

                                                                If there is no legally recognisable interest to protect
                                                              and the restraint merely seeks to exclude or eliminate
                                                              competition it will be considered to be unreasonable,
                                                              contrary to public policy and unenforceable.

                                                                In the recent SCA judgment of Automotive Tooling
                                                              Systems (Pty) Ltd v Wilkens 28 ILJ 145 (SCA) this concept
                                                              was discussed in some detail.

                                                                 This case noted that there is a very thin dividing line
                                                              between an employee using his own skill, knowledge and
                                                              experience (which he cannot be restrained from using),
                                                              and the use of an employer’s trade secrets or confidential
                                                              information or other interest (which he can be restrained
                                                              from using).
22    The Professional Accountant
   The case involved a business which manufactured special              It was found that a value judgment is required when
purpose machinery in a highly specialised technological              determining whether a restraint is enforceable and one
field. The employees, who were skilled tool makers, were             must examine whether the restraint is “reasonable and
restrained in terms of their employment contract. When               justifiable in an open and democratic society based on
they left the company they went to work for a major client           human dignity, equality and freedom.”
of the employer.
                                                                        Mr Reddy was a systems engineer with Siemens for 8
   The employer approached the Court to enforce the                  years when he decided that he wanted to go and work
restraint and alleged that its former employees were using           for their competitor Ericsson. When he was interdicted
confidential, technological “know-how” that was learnt               from taking up employment with Ericsson the judge of the
during their employment with them. The employer alleged              court a quo said that it was not necessary for him to find
that that “know-how” constituted a proprietary interest              that Reddy would use confidential information and trade
that was worthy of protection.                                       secrets, it was sufficient that he could use it.

   The Court pronounced that the interest must be one                   This was even though Reddy was not going to be
belonging to the employer, rather than the employee. It              involved with any of his old Siemens clients and the
must be “proprietary to the employer”. In this case the              extensive training that he had received on the Siemens
Court found that the know-how that the employer sought               systems would be of no more than academic value as the
to protect was nothing more than machine manufacturing               Ericsson systems were completely different.
skills.
                                                                        The Court found that Reddy was in possession of
  The skills had been acquired in the process of the                 confidential information which, when assessed objectively,
respondents developing their trade. They belonged to                 was at risk of being exposed to a competitor if he commenced
the employees’ general stock of skill and knowledge                  employment there. “His loyalty will be to his new employers
which they could not be prevented from exploiting.                   and the opportunity to disclose confidential information at
Another recent case from the Supreme Court of Appeal                 his disposal, whether deliberately or not, will exist.”
on restraints is Reddy v Siemens [2006] SCA 164 RSA
(2007) 28 ILJ 317 (SCA). In this case the Court asked                   Reddy’s restraint was found to be enforceable as he was
“Does the restraint go further than necessary to protect             clearly in possession of confidential information which
the interest?”                                                       constituted a protectable interest. n



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                                                                                                      The Professional Accountant   23
                                   can shareholders, aggrieved
                                   at the way the directors are
                                   running the company, ask the
                                   court to intervene?
 By Rc (Bob) Williams | BA LLB (cape) LLM (London) H Dip Tax (Wits) PhD (Macquarie) Professor in the Faculty of Law,
 University of KwaZulu-Natal, Pietermaritzburg


Many apparently complex factual scenarios                        An attempt by JcI to recoup its reputation and
involving companies fall into place once                         profitability
fundamental principles of company law are
applied to them. Conversely, businesspeople and                     These were the issues underlying the recent case of
their advisers fall into serious error when they                 Letseng Diamonds Ltd v JCI Ltd and Investec Ltd (High
lose sight of the fundamentals.                                  Court, Witwatersrand Local Division, case 2 1525/06; not
                                                                 yet reported) which arose out of attempts by JCI to retrieve
   Nothing, for example, is more common than for                 its reputation and its profitability after the chaos left behind
shareholders to be dissatisfied with the way the directors       following the death of its erstwhile director, Brett Kebble.
are running the company and with the contracts to which the
directors have committed the company. The shareholders             JCI, under the control of Kebble, had suffered great
may even believe that the directors’ conduct in this regard      damage to its reputation and, as the judgment recounts,
is so egregious as to amount to a breach of their fiduciary      “had lost all credibility in the market place”. The company
duties.                                                          was facing ruinous litigation and a writ of execution for
                                                                 some R60 million had been issued and served on it.
  But (assuming that the shareholders are not party to the
agreements they are complaining about) what rights and              JCI needed capital to try to trade back into profitability, but
remedies do shareholders have in such a situation? Can           no one was willing to provide loan finance until, on 30 August
they, for instance, apply to court for an interdict to prevent   2005, Investec agreed to lend JCI R540 million (referred to as
the company from performing the contract, or for an order        the Investec Loan Agreement or ILA). The ILA was subject to
declaring the contracts void or voidable?                        numerous conditions, inter alia that the board of JCI would
                                                                 resign and be replaced by a board nominated by Investec.
Locus standi and the rule in Foss v Harbottle                    The agreement stipulated a raising fee of R50 million.

   The first question any would-be litigant must ask                Thereafter, JCI entered into a number of further
himself before instituting legal proceedings is – do I have      agreements relating to additional loans to the company and
locus standi in relation to my complaint? This issue is no       the provision of further security by JCI. The JSE classified the
less important, and considerably more complex, in the            ILA and those other agreements as “affected agreements”,
context of the relationship between a company and its            in consequence of which shareholder approval of the
shareholders.                                                    contracts was required prior to the reinstatement of JCI’s
                                                                 listing on the exchange. The JSE agreed that such approval
   Where a shareholder is complaining about the running          could be given by way of a ratifying resolution after the
of a company, the issue of locus standi leads ineluctably to     agreements had been concluded.
a fundamental question. Assuming the truth of the wrong,
then the first leg of the rule in Foss v Harbottle declares        The fortunes of JCI then lifted substantially, and within
that, if there is to be litigation, then the company is the      about a year it had repaid the loan from Investec.
proper plaintiff and indeed the only proper plaintiff.
                                                                 A shareholder tried to prevent the contract from
   It is only where one of the exceptions to the rule in Foss    being carried into effect
v Harbottle applies that a shareholder can institute legal
proceedings in respect of that wrong. Also to borne in              In September 2006, Letseng Diamonds Ltd (which, as
mind is that section 266 of the Companies Act 1973 now           indicated above, was a shareholder in JCI) applied to the
provides for the possibility of a statutory derivative action,   High Court for an urgent interdict to prevent a general
which enables a shareholder to set the wheels in motion          meeting of JCI from considering two ordinary resolutions
for the company to institute action to vindicate the wrong       in which the shareholders were, in accordance with the JSE
done to it.                                                      stipulation, being asked to ratify the agreements between
                                                                 JCI and Investec.
24   The Professional Accountant
                                                                  articles say so – which is unusual and was not so in the case
                                                                  at hand.

                                                                     The judge went on to say (at par [19]) that a person cannot
                                                                  interfere in a contract entered into between two other parties
                                                                  and that (in terms of the rule in Foss v Harbottle), in the
                                                                  context of a company, “a shareholder is a stranger to the
                                                                  company in its dealings with third parties”. Consequently, a
                                                                  shareholder cannot institute legal proceedings to complain of
                                                                  an irregularity (as distinct from an illegality) in the conduct of
                                                                  the company’s internal affairs if the irregularity is one which
                                                                  can be cured by a vote of the company in general meeting.

                                                                     Consequently, said the judge (at par [22]), as was laid
                                                                  down in Prudential Assurance Co Ltd v Newman Industries
                                                                  Ltd no 2 [1982] 1 All ER 354 at 357, the proper plaintiff
                                                                  in an action in respect of a wrong done to a corporation
                                                                  is the corporation itself. Moreover (again in terms of the
                                                                  rule in Foss v Harbottle), where the wrong is of a kind
                                                                  that is ratifiable by the general meeting, no shareholder
                                                                  is permitted to institute a legal action in respect of that
                                                                  wrong, except where what has been done amounts to fraud
                                                                  and the wrongdoers are in control of the company.
   The basis of Letseng’s complaint was that the
circular to shareholders was inadequate and contained                Applying these principles to the facts on hand, Blieden J
misrepresentations. An interdict was also sought to prevent       held (at [33]) to be wrong in law the contention advanced
JCI from paying the agreed raising fee to Investec.               by the applicants that the actions of the alleged “rogue”
                                                                  and “supine” board of directors of JCI resulted in a wrong
   In the same proceedings, three other companies (which          being done to the shareholders, who therefore had a right
the judgment describes collectively as “Trinity”) which held      to institute legal action.
shares in JCI sought an order declaring that the ILA was void
for vagueness or impossibility of performance.                       The true position, said Blieden J, is that if directors,
                                                                  acting on behalf of the company, enter into a contract that
   The core issue in these proceedings was the right of           breaches their fiduciary duties, and if the other contracting
shareholders in JCI, namely Letseng and the Trinity group         party was aware of that breach, the company and only
of companies, to have a suite of agreements entered into by       the company may elect to declare the contract void. A
JCI, including the ILA (to which neither of these shareholders    shareholder cannot usurp the functions of the directors and
was a party) declared invalid.                                    exercise that election on behalf of the company.

The locus standi of the applicants                                  Hence, the ILA and other agreements complained of by
                                                                  Letseng could be impugned only by JCI, the company, and
   Letseng and Trinity, as shareholders of JCI, alleged that      not by its shareholders.
the directors of JCI were a “rogue board” or a “supine board”
which was “not capable of performing and did not perform             Blieden J pointed out (at par [45]) that it was for the
its fiduciary duties”. Hence – so it was argued – the ILA which   general meeting of the shareholders of JCI to decide whether
those directors had caused JCI to enter into was void.            or not to ratify the agreements in question. All that JCI was
                                                                  trying to do was to get the general meeting, not individual
   This squarely raised the issue of locus standi. For,           shareholders, to ratify the greements that the company had
assuming that Letseng and Trinity’s complaints were               entered into with Investec, and this was a business decision
true (and even if there were irregularities in the contracts      to be taken by the shareholders.
complained of which involved breaches of fiduciary duty)
did they, as shareholders, have locus standi to institute            In short, said that judge (at par [49]), minority shareholders
legal proceedings to vindicate the wrong?                         such as the shareholders in the present matter had no locus
                                                                  standi to interfere in the contractual arrangements arrived
   In his judgment, Blieden J began by pointing out (at par       at between JCI’s board of directors and Investec. n
[16.1] of the judgment) that the powers which the articles of
a company vest in the board of directors are held exclusively     The Corporate Law, Partnerships and Trusts Sibergramme is
by them, and that the general meeting of shareholders does        a regular update written by Prof Bob Williams and published
not enjoy concurrent powers with the board, unless the            by Siber Ink. Reproduced here by kind permission.
                                                                                                      The Professional Accountant   25
     Who will guard the trustees?
     By Alex Eliott, Director, Knowles Husain Lindsay

Many beneficiaries of large trusts have suffered                     Moreover, a trust cannot, in its own name own anything
financially as a result of the poor decisions                     either. Any property it may acquire must be held by the
made or even fraud committed by the trustees.                     trustees in their representative capacities. The trustees
These losses seem particularly galling when one                   however do not own the property themselves.
considers the obvious connotations of the words
trust and trustee .                                                  Therefore, the underlying assets exist in a kind of legal
                                                                  limbo.
    This article discusses whether there is still a place for
trusts in our commercial and legal landscape, adding that         The basis for the existence of a trust is no less
if there is, the rules of the game must be spelled out. In        problematic if one asks how the functions of the
short, in this era of hyper-regulation, trusts are in desperate   trust are performed.
need of proper, some, any regulation.
                                                                     A trust cannot do anything at all, except through the
   Losses suffered would not be so surprising if one asks         trustees in their representative capacities. If all the trustees
the question: What is the legal nature of a trust (not what a     were to die in a plane crash, the trust would for all intents
trust can be used for)?                                           and purposes cease to exist. In other words, a trust has no
                                                                  separate existence apart from its trustees.
  The answer is not simple; particularly if one considers
that the commercial foundation of western civilisation is           If the trustees are the mind, body and soul of a trust, where
based on the concept of private ownership.                        do the trustees get their mandate and their powers from?

     But, nobody owns a trust.                                       From a written trust deed (although oral trusts are still
                                                                  legal in this country): The trust deed is essentially a private
   Beneficiaries might have at most a “vested interest” in        contract between the founder of the trust and the initial
a trust, which means nothing more than that they can be           trustees. There are no laws governing the contents of a
taxed. And, since a trust cannot be owned, beneficiaries          trust deed; and the terms of the deed cannot be varied by
cannot own their interests in a trust, and accordingly their      the trustees except in terms of the deed (or an application
status as beneficiaries cannot be sold.                           to Court in exceptional circumstances), just as a private
                                                                  contract cannot be varied except in terms of the contract.

                                                                  And how        then     are    trustees     appointed       and
                                                                  removed?

                                                                     Again, this can only happen in terms of the trust
                                                                  deed. There are no laws governing qualifications and
                                                                  disqualifications of trustees; and no laws governing the
                                                                  appointment and removal of trustees save that in terms of
                                                                  the Trust Property Control Act no. 57 of 1988, the Master
                                                                  of the High Court can remove a trustee on the basis of
                                                                  various disqualifications.

                                                                    The Act consists of 27 concise sections. It confers
                                                                  considerable powers on the Master, but no rights on
                                                                  beneficiaries (other than, thankfully, the right to go to Court).

                                                                     It imposes on trustees a general duty to act with care,
                                                                  diligence and skill, but in its brevity gives virtually no
                                                                  content to that duty.

                                                                    A curious counterpoint to the benevolent neglect that
                                                                  characterises the Act is that a newly appointed trustee
                                                                  may not act unless and until he/she has received written
                                                                  consent (called Letters of Authority) from the Master of the
                                                                  High Court.
26     The Professional Accountant
   Since the existing Letters of Authority must be submitted         If one compares trusts to companies, the difference in
to the Master to obtain a new one, the entire group of trustees    the level of regulation is staggering.
is hamstrung until the new Letters of Authority is issued. This
draconian provision can leave the trust’s affairs in limbo for        There are hundreds, if not thousands, of textbooks on
months or even years if the Master delays in providing; or         company law; there is an enormous body of judicial precedent
even refuses to provide new Letters of Authority.                  on company law; and the Companies Act no. 51 of 1977,
                                                                   which is already comprehensive, is about to be surpassed by
   Here again, the Act does not set out the requirements           an even more comprehensive Companies Bill. The reporting
for registration of a new trustee or the circumstances             and disclosure obligations of companies, the requirements
under which the Master can refuse to provide Letters of            for the appointment and removal of company officers, and the
Authority (save that the Act provides that the Master can          obligations of company officers, are all codified. The corporate
require the Trustee to put up security). In practice, the          governance of companies is the subject of many codes and
Master’s office has its own set of rules, which are not            works of literature. The concept of private ownership is firmly
within the public domain.                                          embedded in the structure of a company.

   Further, the Act does not impose any disclosure obligations        It should not be surprising therefore, that most business
on the trust, whether this be to report to the Master or to the    people have a sound grasp of what the legal nature of a
beneficiaries. There is no law creating an obligation for the      company is, how it is structured, what the difference is
trust to appoint an auditor, or even maintain financial records.   between shareholders and directors, what the duties of
The Act provides only that the Master may call on a trustee to     directors are, and so forth.
account for his administration and disposal of trust property .
                                                                      In the virtually unregulated environment of a trust,
  There is also no law conferring any sort of remedy if            it is therefore unsurprising that most business people
beneficiaries feel oppressed by the trustees. (These matters       do not understand what the legal nature of a trust is, or
could be dealt with in the trust deed but, if they are not,        what trustees are supposed or obliged to do, or what the
there is nothing the beneficiaries can do about it.)               remedies are of beneficiaries who are unhappy with the
                                                                   performance of the trustees. It is but a short step from
   Further, there is very little literature or guidelines for      that point to disastrous consequences for the beneficiaries,
the corporate governance of trusts; and only a handful of          particularly the beneficiaries of a large trust.
textbooks available on the law of trusts. Although there is
a body of case law on the subject.                                   Which is why the need for proper regulation of trusts. n
                                                                                                                                           FR     N
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                                                                                                                    The Professional Accountant                                      27
IFAc: 30 Years of Progress
Encouraging Quality and Building Trust
In many ways, 1977 marked a year of firsts: The               academia, collaboration with its member bodies remains
Concorde jet inaugurated regular transatlantic                integral to meeting these challenges. So, too, is outreach to
supersonic flight. The first Apple II microcomputers          the profession’s many stakeholders. Even more important
went on sale to the general public. The movie                 today than at the time of IFAC’s founding is its ongoing
“Star Wars” debuted on the big screen. And the                dialogue with regulators, standard setters, development
International Federation of Accountants (IFAC),               agencies, and governments who share IFAC’s commitment
with 63 founding members representing 51                      to strengthening accounting and auditing so that they can
countries, convened for the first time ever in an             continue to effectively serve the public interest.
auditorium in Munich, Germany.
                                                              Role of Members in IFAc’s Evolution
   Three decades later, the Concorde, Apple II
microcomputers and Star Wars are a memory, while IFAC            From the start, IFAC provided support for the profession
continues to develop, bolstered by the strength of its        in nations struggling to develop the financial, accounting
members and supported by international organizations          and market infrastructure that would support domestic
that recognize its value in promoting economic growth and     growth and encourage international investment. By 1977,
stability worldwide.                                          the need for a global federation to unite the accountancy
                                                              profession around the world and promote consistent,
   Some of the challenges for IFAC in 1977 remain today,      high quality practice was widely recognized both by
including meeting the needs of increasingly global markets,   the profession and those who rely on its work – from
supporting accountants in addressing ever more complex        governments, to businesses, to investors. One of IFAC’s
technical and business issues, and providing direction and    primary roles was, and continues to be, bringing together
institutional mechanisms to keep accountants worldwide        professional accountancy organizations at varying levels of
on the right ethical path.                                    development to share resources, ideas and experiences for
                                                              the benefit of the profession as a whole.
   While IFAC is now a significant, global organization
of 155 member bodies and associates in 118 countries,            IFAC came to life on October 7, 1977 at the 11th World
representing over 2.5 million accountants employed in         Congress of Accountants in Munich, Germany when 63
public practice, industry and commerce, government, and       national professional accountancy bodies signed the
                                                              Constitution establishing the organization. At the first
                                                              meeting of the IFAC Assembly in October 1977, a 12-
                                                              point work plan was developed to guide IFAC committees
                                                              and staff through the first five years of activities. Many
                                                              elements of that initial work plan still guide IFAC’s work
                                                              today, including developing international standards,
                                                              establishing a code of ethics, developing and reporting
                                                              on management processes and techniques, and fostering
                                                              closer relationships with users of financial statements. In
                                                              addition, the plan called for IFAC to communicate with and
                                                              facilitate the involvement of its member bodies.

                                                                 From the beginning, member bodies have been integrally
                                                              involved in all aspects of IFAC, including its structure,
                                                              governance and boards and committees. Member bodies
                                                              actively shape IFAC’s strategy through their participation
                                                              in the IFAC Council (previously called the IFAC Assembly).
                                                              They also help IFAC in achieving its mission by nominating
                                                              individuals for IFAC’s committees and boards, sharing
                                                              intellectual capital and resources, and promoting high
                                                              quality performance by professional accountants working
                                                              in all sectors of society.

                                                                 Since its founding, IFAC has also worked closely with
                                                              regional accountancy organizations, particularly with
                                                              respect to promoting the development of the profession and
28   The Professional Accountant
encouraging convergence to international standards. From         Kingdom. The current IFAC staff comes from more than 15
the beginning, meetings of the IFAC Council were attended        countries and collectively speaks nearly 20 languages.
by three regional organizations then recognized by IFAC: the
Union Européenne des Experts Comptables Economiques                 One of the primary focuses for IFAC staff is supporting
et Financiers (now the Fédération des Experts Comptables         the more than 150 volunteer members of IFAC’s boards
Européens), the Confederation of Asian and Pacific               and committees. These volunteers provide knowledge,
Accountants, and the Interamerican Accounting Association.       skills, and expertise that greatly contribute to IFAC’s
IFAC continues to work with these organizations today as         development of high quality international standards in the
well as with its other recognized regional organization,         areas of auditing and assurance, ethics, education, and
the Eastern Central and Southern African Federation of           public sector accounting. Volunteers also bring insight
Accountants, and with regional groupings.                        and experience in specialized areas having worked as
                                                                 professional accountants in business, in small and medium
IFAc’s Leadership                                                practices, and in developing nations, which better enable
                                                                 IFAC to serve these constituencies.
   Over its 30-year history, IFAC has had 13 Presidents
from 11 countries on five continents, reflecting the             Developing International Standards
globally diverse nature of the organization. The President
serves as Chairman of the IFAC Council and the IFAC Board.          Even before IFAC’s founding, the need for a single set
Together with the Chief Executive Officer, the President is      of international standards was recognized. During the
also a primary spokesperson for the organization. From           last few decades, companies have increasingly expanded
its first President, Reinhard Goerdeler of West Germany, to      their operations internationally, and investors have looked
the current President, Fermín del Valle of Argentina, IFAC       to capital and credit markets in other countries for new
Presidents have always served as a driving force in leading      opportunities. The multiplicity of national accounting and
the development of the profession and in uniting the many        auditing standards, however, complicated this process by
cultures and backgrounds that make up the profession. (A         adding reporting costs for companies and making it more
complete list of IFAC Presidents is provided below.)
                                                                 Growing Adoption of IFAc Standards
   Since its founding, IFAC has had four Chief Executive
Officers/Executive Directors. The first Executive Director,      l More than 100 countries have adopted ISAs or are
Robert Sempier, was instrumental in launching the IFAC             using them as the basis for national standards.
headquarters, which were originally staffed by two people
and operated on the premises of the American Institute of        l The Financial Stability Forum lists ISAs as one of its
Certified Public Accountants. Bob Sempier was succeeded in         12 Key Standards for Sound Financial Systems.
March 1991 by John Gruner, who served as IFAC’s Director
General throughout the 1990s and led the development of          l The World Federation of Exchanges has endorsed the
IFAC’s first strategic plan. Peter Johnston of Scotland served     IAASB’s standard setting processes and recognizes
as IFAC Chief Executive from July 1999 to March 2002, a            the importance of ISAs.
period of great change for the accountancy profession
and for IFAC. IFAC’s current Chief Executive Officer,            l More than 50 countries have adopted IPSASs or are
Ian Ball, has served since March 2002 and has led the              considering adoption.
organization as it undertook significant reforms designed
to further strengthen the organization’s standard-setting,       l The United Nations, the Organisation for Economic
transparency and public interest focus.                            Co-operation and Development, NATO, the European
                                                                   Commission, Organization of American States, and
  Today, IFAC is an organization of just under 50                  other international organizations have adopted IPSASs
professional and administrative staff based primarily in           or support them as a global benchmark.
New York City, but also in Canada, Australia, and the United
                                                                                                  The Professional Accountant   29
difficult for investors to compare financial statements from     and the quality of financial reporting were seen as
companies in different countries. Having a single set of         significant problems.
international standards was seen as critical to enhancing
global trade and investment, improving the transparency             In response to the crisis and calls for the profession to
of financial reporting, and enabling investors to better         focus on its civic responsibility, IFAC increased its outreach
compare the financial statements from other countries. In        to and support of developing nations, it established an Anti-
addition, international standards were seen as a means for       Corruption Task Force, and it expanded the independence
developing nations to built trust in financial reporting and     and other ethical guidance in the Code of Ethics. The
auditing and, thus, increase investment in their countries.      crisis also evoked responses from market regulators and
                                                                 central bankers, leading to the strengthening of several
   In the early days of IFAC, three committees were              international organizations and the creation of the Financial
established to develop and promote international                 Stability Forum.
standards in the areas of auditing and assurance, ethics,
and education. These committees became the International            Global capital markets continued to grow in the
Auditing and Assurance Standards Board (IAASB), the              years leading up to the millennium, but moved sharply
International Ethics Standards Board for Accountants             downward in 2001 following the collapse of Enron and
(IESBA), and the International Accounting Education              financial reporting scandals at WorldCom and other
Standards Board (IAESB). In 1986, a new IFAC committee           companies. A wave of worldwide legislative and regulatory
was created to address issues related to public sector           measures followed, lead by the Sarbanes-Oxley (SOX) Act
financial reporting. Later, there was increasing recognition     in the United States. This act established new corporate
of the need for international standards for the public           governance requirements for publicly listed companies
sector, and the committee was subsequently reconstituted         and created a new entity, the Public Company Accounting
as the International Public Sector Accounting Standards          Oversight Board, to develop standards for listed entities
Board (IPSASB). The need to improve public sector financial      and to conduct inspections of audit firms’ work. The SOX
reporting and financial management was acknowledged              Act was a milestone for another reason: its reach extended
by the World Bank and other national and international           beyond national borders to include foreign companies
organizations which continue to provide funding for this         domiciled outside the United States.
activity.
                                                                    Significant regulatory changes also occurred in a number
    The international standards set by IFAC’s independent        of other countries as governments explored more external
standard-setting boards are increasingly being recognized        regulatory options and looked at how self-regulation and
and used by countries and organizations around the               external regulation could more effectively reinforce one
world. The IAASB’s International Standards on Auditing           another. At the international level, IFAC too explored how
(ISAs) have been adopted or are being used as a basis for        to strengthen regulatory structures for the profession to
national auditing standards in more than 100 countries           better protect the public interest.
worldwide. The IPSASB’s International Public Sector
Accounting Standards (IPSASs) are also increasingly used            Working with a group of international regulators and
worldwide, with more than 50 countries having adopted            organizations – including the International Organization of
IPSASs or considering adoption. In addition, the standards       Securities Commissions, the Basel Committee on Banking
are supported by a number of international organizations,        Supervision, the Financial Stability Forum, the International
including the United Nations, the Organisation for Economic      Association of Insurance Supervisors, and the World Bank
Co-operation and Development, NATO, and others. The              – IFAC developed a series of public interest reforms that
International Education Standards, set by IFAC’s Education       were unanimously adopted at the IFAC Council meeting
Standards Board, and the Code of Ethics for Professional         in November 2003. One of the most significant of these
Accountants, set by IFAC’s Ethics Standards Board, are also      reforms was the establishment the Public Interest Oversight
increasingly being adopted by countries around the world.        Board (PIOB) in February 2005 to oversee IFAC’s auditing
                                                                 and assurance, ethics, and education standard-setting
Reforms and Oversight                                            activities as well as its Member Body Compliance Program.
                                                                 The PIOB’s creation was the result of collaborative effort by
   As IFAC achieved a more significant global profile, events    the international financial regulatory community, working
in the external environment began to have a greater impact       with IFAC, to ensure that auditing and assurance, ethics
on the organization’s role.                                      and educational standards for the accounting profession
                                                                 are set in a transparent manner that reflects the public
   In 1997, the East Asian financial crisis disrupted the        interest. Additional reforms implemented by IFAC in the
economies of several Asian nations, demonstrating their          past five years include:
interconnectedness to one another and to the wider global
economy. While there were a number of causes attributed            The establishment of the IFAC Member Body Compliance
to the East Asian financial crisis, including economic and       Program, which requires IFAC members and associates to
financial policies at a national level, a lack of transparency   demonstrate their commitment to promote adoption of
30   The Professional Accountant
international standards and establish quality assurance          Growth in IFAc Membership (1977 – 2007)
and investigation and discipline programs;

   Enhanced transparency of IFAC governance and the
standard-setting process, including holding standard-
setting board meetings open to public observers and
providing more information about IFAC and the work of its
standard-setting boards through its website;

   Expanded public interest input to all IFAC standard-
setting boards, including having public members serve on
each of the boards and extending the comment period on
all proposed standards and guidance to at least 90 days;

   Establishing or expanding the roles of Consultative           (IASB). With the formation of its SMP Committee in 2005,
Advisory Groups to provide the standard-setting boards           IFAC has launched new initiatives to support SMPs and
with public interest input from users of their standards;        the small and medium entities (SMEs) they serve. These
                                                                 activities include organizing international forums dedicated
  Enhanced nominations process that provides greater             to addressing SMP/SME issues, leveraging technology to
access to membership of the Public Interest Activity             facilitate the sharing of knowledge ideas and resources, and
Committees from interested parties and a move to 50              developing implementation guidance to support SMPs in
percent of membership from non-practitioners; and                effectively performing audits and otherwise serving SMEs.
                                                                 These initiatives recognized the increasing role of SMEs in
  The creation of the IFAC Regulatory Liaison Group to           the global economy. SMEs today represent 99 percent of all
work with the Monitoring Group of regulators.                    enterprises in the European Union, 99 percent of businesses
                                                                 in the Asia Pacific Economic Cooperation region, and 99.7
   These reforms received the unanimous support of               percent of all employers in the United States.
member bodies at the IFAC Council in November 2003.
They were also supported by the large accounting firms that         As the profession has grown globally so, too, has its impact
participate in IFAC through the Forum of Firms. Established      within businesses and organizations. Professional accountants
in 2001, the Forum provides a means for international            in business – those working inside business, industry, the
networks of audit firms to have a role in IFAC activities.       public sector, the not-for-profit sector, and academia – today
Members of the Forum agree to meet certain significant           represent over one-half of the membership of IFAC’s members
requirements, including committing to raising the quality of     and associates. This broad and diverse constituency has seen
international audit practice, using international standards      a shift in its role and focus from traditional bookkeeping and
and applying relevant sections of the Code of Ethics for         financial reporting functions to encompass many new areas,
Professional Accountants. The executive committee of             including information technology, management, strategy
the Forum is the Transnational Auditors Committee (TAC),         development, risk analysis, and helping to shape the ethical
which develops good practice guidance on topics including        tone of the organization.
application of International Financial Reporting Standards.
The TAC also provides nominees for IFAC’s auditing and               Reflecting the changing and expanding responsibility of
assurance, ethics and education standard-setting boards.         its constituents, IFAC’s Management Accounting Committee,
                                                                 which was created in 1978, was renamed the Professional
Serving the Diversity of the Profession                          Accountants in Business (PAIB) Committee in 2004. For
                                                                 more than a decade, the PAIB Committee has published
   The turn of the century also marked a time of expanding       its annual collection of Articles of Merit on current issues
focus for IFAC on serving and giving a voice to other            facing professional accountants in business. The changing
segments of the profession, including small and medium           focus of these articles is indicative of the changing roles of
practices (SMPs) and professional accountants in business.       accountants in business. While the winning article of the
To address the needs of these constituencies and to ensure       first Articles of Merit competition focused on budgeting,
that it had sufficient professional support to carry out its     the 2007 winning article provided new insight into finding
public interest programs, IFAC’s staff expanded to include       the proper mix of strategy and management practices in
experienced professionals who can address the broader            enhancing company performance. The expanding scope of
range of issues facing IFAC.                                     topics in Articles of Merit is just one sign of the increasing
                                                                 breadth and depth of issues that are being addressed by
   In recent years, IFAC has acted to ensure that the voice of   IFAC member bodies around the world.
small and medium practices (SMPs) is heard by its independent
standard setting boards and also by other standard setters,         As it looks to the future, the PAIB Committee has started
such as the International Accounting Standards Board             to develop good practice guidance on key issues impacting
                                                                                                    The Professional Accountant   31
professional accountants in business, including developing       Chief Executives of its member bodies in various parts of
corporate codes of conduct, internal control, and enterprise     the world to be able to keep a pulse on the profession’s
governance.                                                      challenges as well as on national initiatives. To further
                                                                 strengthen communications, IFAC’s President, Chief
Expanding Markets and Membership                                 Executive Officer, and other leaders regularly visit
                                                                 member bodies around the world. In the past two years
   In its first fifteen years, IFAC’s membership had doubled     alone, IFAC’s President and CEO visited nearly 40 member
to include 106 professional accountancy bodies in 78             bodies in 34 countries on six continents.
countries, representing more than one million accountants
worldwide. In 1989, the world witnessed the fall of the Berlin      Together with member bodies, IFAC has also developed
Wall. The fall not only symbolized the end of the Cold War       tools to make resources and information more widely
between Eastern Europe and the West, but also offered the        available to accounting professionals worldwide. In
opportunity for many nations to join the economic mainstream     October 2006, IFAC and 13 member bodies launched the
and to begin building capital markets. The development           KnowledgeNet for Professional Accountants (IFACnet.com),
of capital markets in these countries required the skills of     a global multilingual search engine targeted specifically to
professional accountants and auditors, and a number of           professional accountants. Member bodies also played a
formerly Communist countries saw the establishment or            key role in the development and launch in August 2007
further development of professional accountancy bodies,          of the multilingual IFAC website that features information
many of which joined IFAC in the following years.                and news in Arabic, Chinese, French, Russian, Spanish, and
                                                                 English, IFAC’s official language. IFAC and its members and
   Since IFAC’s founding, there has been recognition of the      associates are also working together in communicating key
unique needs of the profession in developing and emerging        messages, including the attractiveness of the profession,
nations. Over the years, IFAC has grappled with how to           its role in economic growth and development, and the
address issues specific to developing countries and how best     profession’s shared ethical values, among others.
to serve the professional accountants who contribute to these
economies. Solutions to the unique problems of developing           In marking its 30th anniversary, IFAC celebrates Thirty
countries have come about through collaboration with IFAC        Years of Progress that have been achieved by working
member bodies in more developed countries, which are             with member bodies and associates, regional accountancy
often the most experienced and best equipped to serve as         organizations, and the hundreds of professionals who
mentors for less developed professional organizations.           serve and have served as volunteers on IFAC boards and
                                                                 committees. It is ultimately their dedication that has
   As IFAC matured, a more comprehensive program to              contributed to the evolution of IFAC and that has encouraged
support developing nations was established. With the             accountants worldwide to carry out their responsibilities
creation in November 2005 of the Developing Nations              with integrity, transparency and expertise, and in so doing,
Committee, IFAC further strengthened its relationships           to make positive and lasting contributions to the societies
with governments and others working to develop the               in which they work and live. n
profession worldwide. It also began arranging international
forums to raise awareness of the issues affecting                 Presidents of the International Federation of
developing nations and to bring together individuals and          Accountants
organizations that can make a meaningful contribution to          1. Reinhard Goerdeler, Germany           (1977   -   1980)
developing the profession in particular regions. To support       2. Gordon Cowperthwaite, Canada          (1980   -   1982)
the establishment and development of professional                 3. Washington SyCip, Philippines         (1982   -   1985)
accountancy bodies, IFAC produced a Developing Nations            4. Robert May, United States             (1985   -   1987)
Toolkit. This important guidance has been translated into         5. Richard Wilkes, United Kingdom        (1987   -   1990)
Spanish, Russian, and French to make this resource as             6. Bertil Edlund, Sweden                 (1990   -   1992)
widely available as possible.                                     7. Peter Agars, Australia                (1992   -   1995)
                                                                  8. Juan Herrera, Dominican Republic      (1995   -   1997)
   These initiatives have indeed made a difference. By 2007,      9. Frank Harding, United Kingdom         (1997   -   2000)
IFAC’s members and associates together represented nearly         10. Tsuguoki Fujinuma, Japan             (2000   -   2002)
120 countries and jurisdictions, and the organization had         11. René Ricol, France                   (2002   -   2004)
advanced closer to its ultimate goal of establishing an IFAC      12. Graham Ward, United Kingdom          (2004   -   2006)
member body in every country in the world.                        13. Fermín del Valle, Argentina          (2006   -   2008)

celebrating 30 Years of Progress

  As part of its work to support developing nations
and to facilitate collaboration with its members and
associates, IFAC has made spokesmanship and outreach
a priority. IFAC holds annual meetings with groups of
32   The Professional Accountant
                                                                                           Chartered Secretaries
                                                                                                                                                                             Southern Africa
    CIS – the premier international professional career support package

                                                                                 Professionals in Governance – Administration

                                                                                   Course material for the CIS International
                                   SECRET A
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                What is Corporate Governance l Definitions and Issues in Corporate                                                                    The Secretary, Directors And Members l The Role Of The Company
                Governance l Concepts: Ethics and The Role of The Company                                                                             Secretary l The Directors The Members l Compliance l Company
                Secretary l Directors and Shareholders: l Powers and Rights                                                                           and Close Corporation Formation l The Memorandum and Articles of
                l Balance of Power on The Board l Non-executive Directors                                                                             Association l Statutory Compliance: Companies Act and Close Corporations
                l Relations with Shareholders l Financial Reporting, Rewards and                                                                      Act l Regulation of Listed Companies l Annual Report, Financial
                Risk l Financial Reporting and Auditing l Directors’ Remuneration                                                                     Statements and Auditors l Corporate Governance l The Close
                l Risk Management and Corporate Governance l The History of                                                                           Corporations Act l Meetings and Resolutions l Meetings of The Members
                Corporate Governance l A History of Corporate Governance in the                                                                       l Meetings of The Board l Shares l Shares and Share Capital
                United Kingdom l An International History of Corporate Governance                                                                     l Share Registration l Dividends l Employee Share Schemes

                ANNEXURES: l1. Principles for Corporate Governance in the Commonwealth                                                                ANNEXURES: l 1. King II Report on Corporate Governance 2002: Summary of
                (CACG Guidelines) l 2. King II Report on Corporate Governance: Summary of                                                             Code of Corporate Practices and Conduct l 2. Corporate Governance Report:
                Code of Corporate Practices and Conduct l 3. Guidance on Internal Control                                                             An Example l 3. Charter of The Board of Directors: An Example
                (The Turnbull Guidance) l 4. Board Charter l 5. Delegation of Authority to                                                            l 4. Delegation of Authority to the Executive Director: An Example
                the CEO l 6. Terms of Reference: Audit Committee l 7. Terms of Reference:                                                             l 5. Board Evaluation: An Example
                Remuneration Committee l 8. Internal Audit Charter l 9. Code of Ethics
                l 10. Glossary

      These books are highly recommended for accountants, directors,                                                                               Name: ___________________________________________________
      prospective directors, company secretaries and students.                                                                                     Address: __________________________________________________
      These books retails at R420,00 including packaging and postage each.                                                                         __________________________________________________________
      Cheques should be made out to ICSA, PO Box 331 Wits, (Tel: 011 403 2900)                                                                     Tel _________________________ Fax _________________________
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