INSURANCE
Exclusions for grid failure
Almost all South Africa’s large short-term insurers have either introduced to plan to introduce clauses that explicitly exclude cover in the event of the collapse of the electricity grid. News24 reports this is because the unprecedented levels of load shedding have prompted global reinsurers to press local insurers to reduce their exposure to business interruption claims arising from the failure of public utilities and public telecommunications.
OUTsurance believes that although total grid failure is a remote possibility, it is no longer an unforeseen event. OUTsurance South Africa chief executive Danie Matthee said if it did happen, it wouldn’t be possible for an insurer to cover the accumulation of all related losses.
Full News24 report (subscription required)
Refund for buyer who unwittingly bought a written-off car
The Gauteng Regional Court has ordered a used-car dealership ordered to refund the full outstanding financed value plus interest of a vehicle a consumer bought without knowing it was previously “written off” by an insurance company.
According to Moneyweb, the magistrate issued order was issued despite acknowledging the evidence does not show that that the dealership had actual knowledge of the defects to the chassis of the Golf detected during an assessment, and that there was no evidence that it fraudulently failed to disclose those defects.
The judgment follows reports of unsuspecting consumers buying cars without knowing they were previously written off because the vehicle’s registration code was not amended to Code 3 on the National Traffic Information System to reflect this.
This led to the South African Motor Body Repairers’ Association (Sambra) again appealing to the South African Insurance Association (Saia) to allow public access to the vehicle salvage database (VSD), so consumers can check whether a vehicle has been written off before concluding a transaction. Sambra said Saia has agreed that a VSD will be published towards the end of the first quarter of 2023.
Warning about certificates of compliance for residential solar
South Africans who instal a home solar-generation system must do so through an accredited installer or electrician to avoid insurance claim issues if something goes wrong, according to King Price client experience partner Wynand van Vuuren, who said the onus is on homeowners to ensure that their installation is 100% correct.
MyBroadband reports Van Vuuren as saying that a certificate of compliance is essential for building and household content insurance.
The head of Auto & General, Ricardo Coetzee, said that solar panels and some generators are fixed to the property, meaning they do not need to be specified separately. However, insurance companies must be informed of the value of such a system to adjust the policy accordingly.
TAX
Coronation judgment ‘has wider implications’
The Supreme Court of Appeal’s judgment against Coronation Fund Managers has significant implications for South African companies will international operations, Moneyweb reports.
The main issue before the court was whether the net income of Coronation’s Dublin-based Coronation Global Fund Managers (CGFM) should have been included in the taxable income of its South African holding company, Coronation Investment Management SA.
CGFM was a controlled foreign company in terms of the Income Tax Act, and the question was whether the tax exemption relating to foreign business establishments was applicable to it. The Western Cape Tax Court found it did apply, but the SCA found it did not.
Charles de Wet, executive consultant at ENSafrica, says many fund managers in South Africa have similar structures to Coronation and should scrutinise their business models to make sure they meet the requirements to qualify for the tax exemption. However, the implications of the judgment extend beyond the fund management industry.
Support for Constitutional Court appeal
FNB portfolio manager Wayne McCurrie says he hopes Coronation will take the judgment on appeal to the Constitutional Court. The fund manager maintains that its tax treatment of its Irish operations was appropriate, News24 reports.
“Obviously, whatever this is about, it’s not black and white. Clearly, this is subject to interpretation,” said McCurrie. “Whatever the result, I hope they stand by their view that they’ve done nothing wrong and take it to the highest level.”
McCurrie said whether the Constitutional Court would agree to hear this case was another matter. But with two conflicting rulings, taxpayers need certainty. In 2021, a Tax Court in Cape Town ruled in favour of Coronation, saying it didn’t owe Sars.
Full News24 report (subscription required)
Emigration is a threat to tax system – Standard Bank
South African Revenue Service Commissioner Edward Kieswetter said last week said the narrative around emigration is “overstated”. But days later, Standard Bank said renewed emigration by skilled and high-income earners poses a threat to South Africa’s fragile tax system, according to the continent’s biggest bank, Bloomberg reports.
“South Africa’s tax system rests on a pinhead,” Goolam Ballim, the chief economist at Standard Bank, said. “Emigration is a budding threat to South Africa’s public finances given the disproportionate reliance on a few hundred thousand individuals who contribute the bulk of South Africa’s tax take – not just income taxes, but also indirect taxes.”
Fewer than 16 million individuals in a working age population of 40 million are registered income taxpayers, National Treasury data shows. About 330 000 individuals earn more than R1 million annually and pay 41.5% of all personal income tax.
GENERAL
SA still in line to be grey-listed, says Batohi
There are indications that South Africa has not done enough to avoid grey-listing by the Financial Action Task Force (FATF), National Director of Public Prosecutions Shamila Batohi told Parliament’s Portfolio Committee on Justice. The FATF was expected to meet om 24 February to discuss whether the country will be added to the list.
Although South Africa’s presentations were well received during January’s FATF meeting in Morocco, it would be tough to avoid grey-listing, Batohi said.
“What we’ve been able to do as a country and as law enforcement is nothing short of remarkable, but there’s an indication that we will not tick all the boxes that FATF requires to be ticked.”
