The struggle of saving

We live in a time of ever-increasing living costs and financial pressure. Fuel price hikes. Food price increases due to the drought. High interest rates. Rising taxes. It is becoming more and more difficult to save, and for some people it often feels like an accomplishment just surviving from payday to payday. This struggle from month to month makes it easy to forget the importance of saving for our future.

Healthier lifestyles and medical breakthroughs are contributing to people outliving their retirement funds forcing them to be dependent on others. We do not realise how large our future financial liabilities will be, and go on the assumption that we will be okay when retirement comes. The scary truth is that we probably won’t be.

According to National Treasury, 94% of South Africans are not saving enough for their retirement. Surveys show that South Africans allocate only about 15% of their income towards savings; this has been consistent since 2015. This low savings rate, coupled with lower expected investment returns thanks to the slow growing economy, is not enough for people to settle down with at retirement.

Personal financial management should involve preparation for the future. Our spending and savings patterns should reflect our perceptions of our entire lives. We may not be able to control investment returns or how long we can save for, but we can control how much we can save.

Behaviourally, as humans, we tend to distort information and struggle (or make excuses) in our decision-making, particularly when it comes to our savings decisions. We tend to select the default or easy option, telling ourselves that by at least saving something we should be okay. This is however not enough. Our own financial wellbeing should be priority, and we should not allow our emotions or lack of self-control to interfere with it.

Debt – the danger of living beyond your means

It is an unavoidable fact that we live in a consumerist society which values a pleasure-seeking way of life funded by debt. The reality is that a growing number of people from all ages are living beyond their means. It is a trap that is so easy to fall into, especially when we allow our emotions to trump rational decision-making.

South Africa’s household debt as a percentage of disposable income is currently a shocking 72.5%, which means that for every rand earned, nearly three quarters is spent on debt.

It is crucial to have a grasp on your debt, and to make its repayment a priority. As the cost of debt will always exceed returns earned on savings, it makes sense to repay your debt before you start working on your savings plan. Don’t incur unnecessary and additional debt and prioritise its repayment, starting with the most expensive.

Tips to improve your financial health:

  1. Have a good look at your budget, and differentiate between your wants and needs. This will assist you in cutting out unnecessary spending.
  2. Focus on your spending and saving goals. Set deadlines to achieve these goals and pursue them rigorously. Keep track of where your money is going and make sure to stay aligned with your goals.
  3. Pay yourself first – make the goals you have set for yourself a priority.
  4. Seek out professional financial advice – a financial planner can help you get the most out of your money, and assist you in making sure that your hard-earned savings are growing and working for you.

On savings and taxes

When Benjamin Franklin said that nothing in life is certain besides death and taxes, he had a point. Taxes can however be dealt with by reviewing one’s savings and investment vehicles, and ensuring the way you are saving is tax efficient.

There are various tax-efficient savings vehicles available for us as South Africans to make use of, including retirement annuities, unit trusts and tax-free savings accounts. These vehicles offer great tax breaks that can really help you to get the most out of your savings.

Retirement Annuities (RAs) are particularly tax efficient to encourage longer-term saving. Contributions are tax deductible up to a set limit and the growth in your RA is not subject to tax on interest, capital gains tax or dividends tax.

TFSA (Tax-Free Savings Accounts) are the next most tax-efficient savings vehicle. Introduced by government in 2015, it was aimed at encouraging consumers to get into the habit of setting aside fixed amounts to save each month, instead of exhausting their income on spending. Through TSFA’s you are able to save up to R33,000 a year, completely tax-free, up to a lifetime limit of R500,000. This means you pay no tax on the growth of your savings, including dividends, capital gains or interest. As with most savings funds, they should ideally be allowed to mature over time to get the most benefit out of compounding growth.

TFSAs are an ideal vehicle for topping up your retirement savings or saving toward specific goals, depending on your needs and savings objectives.

Financial freedom is something that I’m sure we all want. Even though we live in hard times, the truth is that it is available to everyone. By making use of the tools available to us, and dedication to our goals month after month, we can take control of our financial health and make our money work for us.


CA Success Stories: Zizipho Nyanga

Confident and capable, Zizipho Nyanga, the CEO of  Old Mutual’s Masisizane Fund, has been working hard to change the face of entrepreneurship and make a real difference in the lives of ordinary South Africans

The old proverb, “Failure is the stepping stone to success”, is apt when it comes to uncovering what drives Nyanga. Ironically, a failed stint as an entrepreneur is one of the reasons she’s so good at her job and committed to helping small businesses.

She left a promising and stable career to follow her entrepreneurial  passions and even though it didn’t work out, it was a valuable learning curve.

“ I’ve never been a typical CA. I’m not just a number-cruncher. I’ve also been interested in creating, rather than consuming and I wanted to  create a legacy. I started my career at E&Y, spending almost four years there before moving on to Kagiso Media as a Financial Manager. It was then  that I  decided to branch out and try entrepreneurship.

“In August  2008 I  got involved with a start-up firm, Motlalepula  Investments, working in outdoor advertising and property deals. I did the financial due diligence, looking for funders, pitching to private investors and I was happy. I’d found my niche in the development finance space.”

However, given the impending financial downturn, the budget cuts in advertising spend and the inability to access funds from its property deals,  the company ran out of money by the end of 2009.

“I tried to stick it out. I even went without a salary for two months. It was incredibly difficult  trying to pay the bills. But I never regretted my decision. I was young and prepared to take the fall, but I couldn’t put my family at risk any longer. Still, it was a valuable experience and I appreciate the understanding and perspectives it gave me in my current role.”



The rise of the robo-accountant

There is no truth to the rumour that accountants will be replaced by robots soon, but robo-accountants are coming. Luckily Mark Lee, accountancy-focused futurist and mentor, has a plan for future proofing accounting practices against them.

Lee, who recently spoke at South African Institute of Chartered Accountant’s (Saica) Cloud in practice conference, admits that the future of the accounting profession will change drastically through robo-accountants and software, but says none of this is a replacement for human accountants.
“While researching this talk, I came across an article by Jeanne Viljoen, Saica’s project director: practices, on this very topic, and I agree with her that computers and algorithms may increase accuracy when it comes to number crunching and processing vast amounts of information at an increasing speed,” says Lee.

“But they have no feelings and cannot learn common sense or the ability to plan creatively and cannot deploy human judgment or professional scepticism. And insights, support and advice are all things that future accountants will still get paid for, even if robo-accountants will be doing most of what general practice accountants do in 2018. Clients recognise these skills to be valuable, and they are willing to pay for them.”

Artificial intelligence

Referring to a variety of systems that use artificial intelligence (AI) and which are already widely in use in accounting firms, Lee admitted that new systems are simplifying bookkeeping for both small business owners and for their accountants. “But none of these developments has revolutionised what accountants do in practice.”

Adding the ability to process and analyse big data as well as other new technology will revolutionise the accounting profession, confirming that robo-accountants are definitely a future power to be reckoned with. “New technology will mean that the nature of your work will change, as will clients’ perception of your work. In practice this means that the work accountants do to earn good money will evolve.”

Lee says that the changes currently experienced by the accounting profession are not unprecedented. He told the audience how comptometers were still used when he started training as an auditor in 1977. “Then came pocket calculators, 16-column analysis pads, spreadsheets and word-processing systems and very basic DOS computer programmes.”

Secretarial staff components at modern day accounting firms are also significantly smaller nowadays, says Lee, adding that it’s hard to imagine life without email, smartphones and connecting via the cloud. “These changes were quite revolutionary, and changed how we did work for our clients, but not what we did for them. The core of our services remained bookkeeping, accounts, tax returns and audits.”

The impact of robo-accountants will mean more changes, and the impact will be different for each individual accountant. “Four different perspectives will play a role: your firm, your staff, your clients and your work. Factors like age will play a role. For instance, many younger staff members will want more flexibility and will have shorter career paths. New skills sets are needed – for instance, accounting practices already need IT staff. Your clients will also have different preferences when it comes to communication, e.g. video or virtual meetings instead of face-to-face meetings, or communicating via Whatsapp instead when you have younger clients.”

Add to this that changing compliance needs and the fact that younger clients might not be as happy to pay time-based fees as older clients, and it’s clear that accountants of the future will have to relook their future way of working. While no robo-accountant can ever replace the human touch, Lee warns that the future accountant will have to be more human and more visible than ever before.

“You will be expected to inspire what your best clients want now: trust, confidence and peace of mind. Clients will want evidence of your expertise and insights beyond that generated by AI. They will require you to hold their hands and interpret what the robo-accountant software generated.”
According to Lee, this will have an impact on firms, requiring a flatter staff structure with fewer junior staff. “It is very important to realise that you cannot force fit the future to your current business model. In this instance, the past is not always a good guide for the future.”

But there is hope for those fearing the rise of robo-accountants. “They can be beaten by improved systems and service delivery in practices. Accountants will have to focus on the impact they make and their ability to identify the gaps in the service their clients need.”

Future-proofing your firm

Lee says it is possible to start future-proofing your firm against robo-accountants by doing a few basic things in the next few years. He suggested accountants need to focus on three time frames at once. So during the next 18 months, firms should start by developing (or expanding) their business advisory services for current and new clients.

“If you haven’t done so yet, move your practice bookkeeping into the cloud. It’s only then that you will really understand what it’s about and that you’ll be able to help your client properly. Build a referral network with fellow accountants offering expertise that complements your own, as this can lead to mutual referrals. Invest wisely in new tech, AI and client apps. Ensure junior roles are appealing, as the war for talent is tough.”

Increasing your client contact and building relationships should be another focus for the next 12-18 months. “It is important to set clear service expectations right from the start. Also track internal workflows and key performance indicators – you get the behaviours that you are seen to measure and reward. Equally important is reviewing software choices and training your staff on how to get the most from what you have.”

During the next phase of preparing for the rise of robo-accountants – about two to three years from now – accounting practices must start planning to replace lost fees, increase services and fees, and drive innovation and growth. Lee said it is also imperative to assess external factors.

“For instance, advances in cloud computing as well as its widespread adoption will mean you will have to start doing things differently.”

Future drivers

“Your goals and ambitions need to reflect what we call ‘future drivers’. And as I frequently stress, a plan is a dream with a deadline. Don’t simply assume more of the same. Consider preparing ‘what if’ scenarios and plan for changes in your client base, service offerings and staffing. Ask yourself what talent, skills and experience will you need? Who should be leading for you on your choice of and adoption of robo-accounting software? Someone in their 50s or someone in their 20s?”

The third and final phase of future-proofing your practice requires you to plan for what will be happening in four or five years from now. “Review, revisit or restart your strategy and plans for the future. Not just what you want to do but also what you will do as things change. Make sure your goals are realistic whilst still being prepared to be patient and nimble.”

Now will also be a good time to focus on developing key business skills like value pricing, effective communication, commercial awareness, strategic business advice, business leadership and influence and persuasion. It is equally important to focus on continuing professional development.

“This will take you beyond the technical competence and auditing, bookkeeping, accounting and tax updates. Key business skills like predictive forecasting and insights, collaboration and relationship building, maximum exploitation of tech developments, cyber security and data privacy and practical visionary skills and ingenuity will definitely help you beat the rise of the robo-accountant.”