Month: March 2020


Moody’s Downgrade

Moody’s Downgrade Announcement – Finally it Happens!


On Friday, the 27th of March, Moody’s rating agency downgraded South Africa’s credit rating to a level below investment grade, also known as “Junk”. Moody’s finally confirmed what we had spoken about and anticipated for close on two years.

Given that our government’s financial position has deteriorated over the past ten years, it is no surprise that Moody’s did downgrade us. Our government simply does not receive enough income from taxes (our GDP growth figure is too low) to enable it to spend efficiently on infrastructure and services. We have to borrow to pay for these annual expenses, and this level of borrowing has increased by nearly double in the last ten years.

What practically happens now that we are downgraded?

The practical effects of this type of downgrade are that global asset managers that manage money for individuals/corporates/government pensions/etc. could have rules about which level of credit rating they are allowed to invest in.

South Africa has been a popular destination for these asset managers over the past ten years to some degree, as we offer high-interest rate returns on government debt, often referred to as “yield”. Our exchange rate has depreciated against the major currencies. Still, despite this currency depreciation, the real return offered by government debt for global asset managers has been enticing enough for them to take the risk.

With Moody’s announcement on Friday, we expect that some global asset managers will now have to disinvest from South Africa in the bond market, as their investment rules do not allow them to invest in countries that do not hold an investment-grade rating. The flow of money out from South Africa has the potential to increase the interest rate that our government can offer for their bonds. This will directly impact the government’s debt repayments.

What is the short and medium-term consequence of the downgrade for South Africa?

Although some global asset managers will be taking money out of South Africa post this downgrade, many other asset managers are allowed to invest in South African bonds. As mentioned, this decision by Moody’s was widely expected by the investment community, and that has already reflected in the rate of interest offered by the South African government on their bonds. We can always expect an overreaction from the market in the short term, and this could result in the Rand weakening further against major currencies. Our interest rates payable on bonds could increase too, but this will come back down in time.

Brazil was downgraded into sub-investment grade in February 2016. South Africa’s economy is similar in terms of its structure (commodities dominant, unemployment rate, etc.) even though our population is much smaller.
After Brazil was graded as Junk, its stock market has increased by approximately 215% in the past four years. Their government bond yield was at 16.5% in February 2016, and it now sits at 7.8%. The downgrade forced the Brazilian government to make significant changes to their economy, and this resulted in the advantageous moves in the stock market and bond yields.

Of course, the big overlaying factor is the current COVID 19 pandemic, and the effect this will have on our economy and the world. We believe that it is better for this downgrade to have happened now rather than when the world returns to a new normal. We can now focus on changing the economic landscape that our country so desperately needs.


Investing is a patience game


I find it hard to believe that it was only a month ago when I shared with clients around the country the positive 2019 market returns. Jeremy Gardiner spoke about the global economic and political arena. He touched on the Coronavirus and the chaos it was causing in China. This virus to us was foreign, probably not dissimilar to Ebola and SARS. In the space of weeks this disease spread across the world, we were the 79th country to have our first case, and now we are one of 168 countries around the globe who are dealing with this pandemic.

With this genuine scare and rapid infection rate comes panic; not only is it a deadly virus, but it is on our doorsteps and a very real threat to us all. Every three days, the figure of those infected doubles, which has seen SA go from 1 case on the 5th March to 927 cases 3 weeks later. These figures alone justify the extreme lockdown which our President has imposed. Fellow South Africans have justifiably applauded him, and he stands out above many of the leaders of the largest economies in the world, including the US and UK, who have not moved as swiftly.

Our lives are all impacted in many ways, and for most of us, fear and uncertainty prevail. Many employees have lost their jobs, and most South Africans have lost their job security. Calling our team in, and sharing what this potentially means for Chartered, was the hardest day of my 26-year career.

I must commend our clients on how they have handled the news over the past three weeks. Personally, as an avid reader of current affairs, it has been challenging to keep one’s wits about one’s self. The panic and extreme uncertainty have created a very volatile market, every week, new records are broken both in upward and downward swings.

So, where does this leave us all today? We have seen our JSE come off 31% from a high to a low this past month, as of today, 25th March, the market has recovered almost 17% from the low, all in the last three days. This rebound could be a great example of the initial panic selling. Then slowly, sense has prevailed, supported by quantitative easing by the government. I don’t think we are out of the woods yet, but let’s bank this week as a good week. The rand has weakened by approximately 14% over the last month. This depreciation has helped cushion the blow from international markets, which have not been as impacted as our local market.

In Summary, no one knows whether our market will be up or down today, tomorrow, or the next. Our investment consultants, Portfoliometrix and Old Mutual Multi Managers, decide on your asset allocations. They then choose fund managers to manage the various asset classes, being bonds, property and equities. These investment managers are doing all the work in which we feel so eager to meddle. When stock markets go down, they always go back up. Investing is a patience game, sit tight, we will get through this.

Wishing you good health as you spend the next 21 days in your homes. All the staff at Chartered are working from home, and we are here to assist you wherever possible.

All the best


Chartered offices closed but business as usual


Who would have thought that our lives could change so drastically in just a few weeks. As the Coronavirus has emerged and spread, we have watched the world’s reaction with fascination and fear. The transmission patterns have been unpredictable and hard to detect. It’s these two variables that have left people panicked, with much uncertainty of what lies ahead, and no one knowing how to respond effectively.

For all of us, our health is of primary importance, and especially for our older clients and those whose health is compromised. It is for this reason that we have decided to close our offices as of this past Friday 20 March 2020.

We have spent this last week at Chartered preparing for the inevitable shut down of our offices. We have installed software on all of our mobile phones enabling clients who phone the office to have access to any of our staff wherever they are. Our team has all received training on how to have online meetings, both internal and external. We can do a full financial planning review with you while we are all seated in our respective homes. We intend to help our clients over the weeks ahead, enable you to get online and have face to face engagements via computer. We can show you presentations, documents of interest, etc. For any clients who are wishing to do any transactions, we will be doing this in a paperless environment. We will share with you how we will do online signing etc. Both Chartered Tax and Legacy will continue to work under these new conditions and are also available to assist you as required. These new initiatives will take some patience and perseverance. I am confident that we will grow through this time, and new opportunities will emerge.

You have all heard of social distancing, and this is something we now need to do at work, at home, and in our communities. We don’t know how long this will last, but we do know we will need to encourage each other at this time and be true to our resolve to overcome the weeks and months ahead. Please embrace this moment with the gravity it requires, keep fit and healthy, and, most of all, enjoy this downtime with your loved ones; this only comes once in a lifetime.

Although our offices are closed, the business continues as usual, and our team at Chartered are all looking forward to our engagements over the weeks ahead. Please contact me or your Retiremeant™ Specialist should you have any concerns. We will be communicating more frequently over the weeks ahead, if you do not get The Beacon and Inflight communications please email to be added to the list.

Warm regards


Kind and calm thoughts are contagious

As I prepared for a day of Dare to Lead learning with my Chartered family last week, I briefly wondered if there weren’t more urgent projects to focus on with the outbreak of the COVID-19 Coronavirus. As the day progressed, I realised again how important the work that I brought home from Brené Brown’s facilitation course last year is. It prepares us as a company to lean into our vulnerability, engage in tough conversations and mentor and coach our clients with empathy and understanding in the face of the uncertainty and fear that COVID-19 brings.

Let me share some take-outs from the teachings of Brené Brown that may just help as we prepare to keep living our best lives in the next few week and months in the midst of all the uncertainty.

We are all going to feel extremely vulnerable. Brené defines vulnerability as “the emotion we experience during times of uncertainty, risk and emotional exposure.” You have to consciously accept this emotion, and recognise that vulnerability is not a weakness. Vulnerability is the underlying emotion that we’re all feeling. When you accept that you are feeling vulnerable, you can lean into your vulnerability, rather than avoid or become anxious because of it. This gives you the strength and the courage to face your fear and uncertainty.

We are all going to need to be brave. Anxiety and panic are natural reactions to scary events. But, we cannot allow ourselves to become overwhelmed with fearful emotions. When we’re overwhelmed by uncertainty or fear, the rational parts of our brain shuts down – and we panic! We make our worst decisions in this state of panic.

We need to remind ourselves of our most important values and stay true to them. Check in with your values regularly and let them guide your behaviour. Knowing what you value above all else is a powerful tool and makes you feel in control of your actions. This is especially helpful in situations where you feel you have little or no control.

And lastly, keep practising gratitude. There may be many events that you have no control over as the government guides our country through the crisis. Reflect on what you are grateful for and replace anxious thoughts with rewarding behaviours that make you feel good. Be grateful for your part in minimising the spread of COVID-19; spend more time with your immediate family; reach out to those in need; pamper yourself, spoil your partner and connect with your inner peace.

We may not be able to connect with our colleagues or loved ones in the same way we always have. We will probably hug less and miss our face-to-face meetings, but our thoughts and love for one another will pull us through this pandemic as a collective.

We may be separate, but through kind words and brave thoughts we are much stronger together,



COVID-19: ‘going viral’ takes on a new meaning


Recently, Jeremy Gardiner from Investec Asset Management (renaming as Ninety One, in recognition of its date of inception) shared with us developments unfolding on the local, international, political and economic fronts. He expressed concerns about the Coronavirus and its potential threat to the global economy.

Following his talk, as I was about to address the audience, a notification came through confirming South Africa’s first case of Coronavirus … in Hilton, my hometown.

All the hype suddenly became a reality.

Not unexpectedly, panic set in, and people reacted by heading to the shops for supplies, hand sanitisers being highest on the list of priorities – stores were sold out in minutes. My wife, Angela, described the scene at our local Clicks, where queues snaked outside the door as people stocked up.

Unfortunately, global markets took a significant knock as a result of COVID-19. This, coupled with Saudi Arabia’s drastic move to drop to the price of Brent Crude Oil, both so-called ‘black swan events’ (unexpected occurrences with a major impact), has left the markets extremely volatile. Much uncertainty prevails over the impact on the world’s economy of the spread of the Coronavirus. We have seen moves of 5% or 6% in a day, demonstrating the magnitude of the uncertainty. The rand weakened, primarily as a result of foreigners selling their emerging market investments.

Added to these woes, persistent negative news means that South Africa remains in a difficult place. A positive was our Finance Minister’s annual Budget Speech. We were expecting adverse tax increases, and were pleasantly surprised by Tito Mboweni admitting that the only way to resolve our crisis is to cut spending, as he plans to do. Moody’s rating agency is questioning if the proposal to cut the public sector wage bill will be possible to implement, though, with pressure from the unions.

At Chartered, we are aware of the turbulent environment we find ourselves in, and continue to review our clients’ Retiremeant™ plans while encouraging them not to allow emotions to shape decisions. Last year the positive returns surprised us all – none of us would have predicted these after closely following media reports.

Chartered supports the drive to take funds offshore; however, with the volatile rand, caution is advisable, as are carefully planned and executed decisions. The rand- dollar fluctuated by 16% last year between its high and low; had you changed rands for dollars this time four years ago, you would still find yourself in negative territory. We feel that, if the decision to invest offshore is to be made, it should be with a ten-year time horizon.

Thank you for the continued positive engagements with your Planners. Together, we will charter these rough seas.

Warm regards


Sleuthing SARS on a mission


Despite numerous warnings in the media and from economists, South African tax-payers did not receive the promised “nasty surprise” in FinMin Tito Mboweni’s annual Budget Speech on 26 February. There was no increase in VAT or Capital Gains Tax, no sin tax hikes and no introduction of a once-off personal tax levy. Do I hear a collective sigh of relief?

Instead, the public service wage bill is in focus to achieve the R160 billion in cuts over the medium term.

Among those targeted for a reduction in benefits and salary are the millionaire 290,000 public servants earning R1million plus per annum. This seems to be more in line with the President’s 2018 State of the Nation address, where he promised a lifestyle audit, a tool widely accepted to combat tax evasion.

Both KPMG and Eskom reportedly conducted lifestyle audits on their staff last year, with the latter reporting that violations among their 365 senior employees amounted to R1.3 billion for the 2019 financial year.

SARS gets tough on defaulters

Despite a reprieve from a tax increase, South African tax-payers should not be lulled into a sense of complacency. SARS is, by all accounts, working hard to recoup its former reputation as a globally respected institution. One of its most obvious priorities is to increase revenue generation. For the financial year ended 31 March 2019, SARS had collected R14.6 billion less than estimated in the revised Budget.

SARS’ success in pursuing outstanding defaulters has featured in recent headlines.

In one report in early March, a Cape Town businessman’s assets were seized by SARS to settle a R354 million tax debt. The article cites SARS Commissioner Edward Kieswetter, who said, “this latest protracted legal battle is further evidence that SARS is working hard to regain capacity lost over the past few years in dealing with taxpayers avoiding their tax obligations through an abuse of the legal system” (

An earlier report, dated February this year, saw yet another Cape Town businessman evicted from his home, which is held by a company. The Constitutional Court dismissed his appeal to place the company in business rescue, as it is already in liquidation.

“SARS will make it costly for those determined to be non-compliant and will oppose vexatious and frivolous litigation up to the highest court in the land,” Kieswetter promises (

“Tax crime, like corruption, is not a victimless crime. It directly affects the poorest of the poor, who are dependent on basic services, including a social security safety net for pensioners, child grants and provision of housing and education.”

And inadvertent errors?

Unintentional errors are treated the same as intentional non-compliance, but SARS considers overall tax behaviour when penalties are determined. It is therefore of utmost importance for tax-payers to use the services of qualified and SARS-registered tax practitioners to submit their tax returns.

Reason for hope

South Africa undoubtedly faces a herculean challenge in getting its economy on track, with global ratings agencies’ threats hanging over us. Calls for President Ramaphosa to move more quickly against corrupt elements that persist in the ANC grow louder and more urgent. Nevertheless, as SARS’ vigilance reveals, processes are underway to restore financial stability.

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