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Fitch Ratings has affirmed Ethiopia&#8217;s Long-Term Foreign and Local-Currency Issuer Default Ratings at &#8216;B&#8217; with a Stable Outlook. The issue ratings on Ethiopia&#8217;s senior unsecured foreign-currency bonds have also been affirmed at &#8216;B&#8217;.

Fitch affirms Ethiopia at ‘B’

Kwasi Kpodo | WASHINGTON
Ghana&#8217;s central bank will not finance the government&#8217;s budget, its new governor, Ernest Addison, said on Friday as the regulator seeks to keep fiscal consolidation on track.
Ghanaian lawmakers last year passed a law allowing the central bank to finance the deficit up to 5 percent of the previous year&#8217;s tax revenues, breaching terms of a $918 million aid deal with the International Monetary Fund which demanded that such funding be eliminated.
The major commodities exporter signed the three-year deal in April 2015 to restore fiscal balance to an economy dogged by high deficits, widening public debt and inflation.
Addison said Bank of Ghana did not finance the deficit last year, although the current law allows limited funding.
<blockquote>&#8220;We are staying on course&#8230; we do not expect that we’d have a situation where the government will come for financing from the central bank,&#8221; he told reporters in Washington on the sidelines of this year&#8217;s IMF Spring meetings.</blockquote>
The government of President Nana Akufo-Addo, inaugurated in January, has outlined plans to restore fiscal balance, spur growth and create jobs driven by the private sector.
Addison, who assumed office this month, said he would pursue price stability and ensure the alignment of central bank&#8217;s policy rate with interbank rates by adopting a better transmission system.
<blockquote>&#8220;We think that inflation-targeting has worked for Ghana. It’s effective and once the appropriate conditions are in place, we expect that the framework will provide the guidance for us to implement our monetary policy objectives,&#8221; said Addison who previously worked as chief economist at the African Development Bank.</blockquote>
The central bank is on track to meet its 2017 inflation target of 11.2 percent towards the government&#8217;s medium-term vision of single digit inflation at 8 percent plus or minus 2 percent spanning 2018-19, he added.
Addison said he expects Ghana&#8217;s cedi to sustain its recent stability against the dollar, supported by the government fiscal policy, improvement in export earnings and reduction in import bills.
He said Bank of Ghana had written to some troubled commercial banks that defaulted on loans from the central bank and asked them to recapitalise.
<blockquote>&#8220;We are waiting to look at the recapitalisation plans. It has to be credible and we’re hoping that in the next few weeks &#8230; some decisions will have to be taken,&#8221; he said without giving details.</blockquote>
(Reporting by Kwasi Kpodo; Editing by Cynthia Osterman)

Ghana central bank will not finance budget deficit – governor

By Bernardo Vizcaino
Kenya&#8217;s government has unveiled a package of initiatives under its latest budget to develop Islamic finance in the country, as part of efforts to mobilise local funds and set Nairobi as a regional hub for the sector.
The moves could spur Kenya&#8217;s decade-old Islamic banking sector and help the government fund infrastructure in a country where Muslims account for about 10 percent of the population of some 44 million.
Finance Minister Henry Rotich outlined the steps as part of the country&#8217;s 2017/2018 budget, released on Thursday, aiming to level the playing field between Islamic and interest-based transactions.
Amendments to the Public Finance Management Act will also allow the government to issue Islamic bonds, or sukuk, as an alternative funding source.
This could prove useful for a government that has set aside billions for infrastructure, with a fiscal deficit set at 524.6 billion shillings ($5.10 billion).
Implementation could be quick as most changes have already been drafted by the Islamic Finance Project Management Office (PMO), a body setup by the government to coordinate efforts among its regulatory agencies.
&#8220;The primary objective is to prepare the groundwork for a sovereign sukuk but also equally to attract corporate sukuk from the region,&#8221; said Farrukh Raza, managing director of IFAAS, an Islamic finance consultancy which designed the PMO&#8217;s framework.
The government has commissioned IFAAS to run the PMO, which is working with law firm Simmons &amp; Simmons to help develop Islamic Finance in Kenya.
The Treasury has said it is considering a debut sale of sukuk this year, although national elections in August could delay those plans.
http://cnbc.africa/videos/2016/09/22/growth-potential-for-islamic-finance-in-africa/
TAX NEUTRAL
The amendments will benefit Kenya&#8217;s two full-fledged Islamic banks and several Islamic windows, which until now have operated by way of exemptions.
They will be joined by Dubai Islamic Bank, which last month received approval in principle for a banking license from the central bank.
Changes to stamp duty would ensure their products are tax neutral against interest-based transactions, as the asset-based nature of Islamic finance contracts often means they can incur multiple tax charges.
This is designed to be revenue neutral to the government and would not compromise fiscal revenues, said Raza.
Exemptions to value added tax would allow returns from Islamic deposits to be eligible for deductions similar to interest-based products. This would apply to individuals, corporates and government entities, Raza said.
The budget also calls for amendments to cooperatives and savings societies, while new regulations will help setup an Islamic pension scheme based on the risk-sharing concept of takaful.
This would aid the government in achieving financial inclusion and financial diversification targets, Raza added.
http://cnbc.africa/news/2016/11/04/ethiopia-looks-to-islamic-finance-to-tap-domestic-savings/
(Reporting by Bernardo Vizcaino in SYDNEY; Editing by Randy Fabi)
&nbsp;

Kenya’s budget paves way for Islamic finance

Decision to dismiss Minister and Deputy Minister of Finance has severe consequences for economy 
<ul>
<li>Setback to work done by government, labour and business to avoid a downgrade </li>
<li>Progress towards inclusive economic growth potentially undermined </li>
<li>Lack of investor confidence in South Africa will hurt the poor the most</li>
<li>Question whether vacuum of leadership created by cabinet reshuffle is in country’s best interest</li>
</ul>
The CEO Initiative is gravely concerned and disappointed by the ill-timed and irrational dismissal of a trusted and well-respected Minister of Finance and Deputy Finance Minister. This decision, and the manner in which it was taken, is likely to cause severe damage to an economy that is in dire need of growth and jobs. The rationale for the removal of other ministers in key departments at a time when the country is beginning to make progress on a number of fronts is also questionable.
The speculation relating to the fate of the Minister of Finance that has reigned since the start of this week – and this morning&#8217;s announcement – have created unnecessary instability at one of our country’s key institutions and caused immense uncertainty among international investors. South Africa is an emerging economy in a global community, in need of capital from all corners of the world.
If investors lose faith and trust in our economy, all citizens – not just big business – pay the price for this, in the form of higher inflation, decreased buying power as well as decimated savings, pensions and investments. A lack of investment also means that growth – and much-needed job-creation – will be stifled.
More than a year ago – at the request of President Jacob Zuma, Deputy President Cyril Ramaphosa and the South African government as a whole – representatives from government, labour and business started working together with unprecedented urgency. Their goal was to achieve inclusive and sustainable growth, for the benefit of all who live in South Africa.
We maintain this is the most responsible and sustainable way of achieving true economic transformation. The dismissal of Pravin Gordhan as Minister of Finance and his deputy creates a high risk of derailing any progress that has been achieved in this regard and will deal a serious blow to the economy at a time when the country can ill afford this.
Commitment to fiscal discipline is of the utmost importance if we are to protect the economy from outside shocks and maintain an investment grade credit rating.
The role that the National Treasury plays in maintaining investor confidence in South Africa should not be underestimated. Pravin Gordhan and Mcebisi Jonas have always acted with the utmost integrity in their relations with business, while continuously challenging our approach to economic transformation and inclusive growth, in a manner that was entirely consistent with the Constitution and policies of the ruling party.
The combined efforts from government, labour and business have resulted in a vastly improved outlook for the economy compared to a year ago.
Firstly: the risk of a downgrade to sub-investment grade has significantly reduced. A healthy and stable credit rating forms the basis of creating an environment in which growth can thrive, as it attracts investors and ensures the country can borrow at an affordable rate.
Secondly: government, labour and business have made progress on various initiatives to support growth in the economy. This includes the establishment of a R1.5bn SME Fund to invest in small and medium-sized businesses; a Youth Unemployment Scheme aimed at providing employment opportunities to one million young people over a period of three years; as well as various investment initiatives underway in sectors such as agriculture, tourism, manufacturing and healthcare.
All three major rating agencies have acknowledged the combined efforts from government, labour and business in their year-end assessments in 2016, as South Africa maintained its investment grade sovereign ratings. However, the country still has to implement a significant number of reforms in order to create inclusive and sustainable growth that is necessary for true economic transformation.
The Treasury has shown great courage in taking difficult decisions to safeguard the credibility of the country’s finances, while paying heed to social challenges including the university funding crisis and welfare spending. Rating agencies and global investors have lauded South Africa’s efforts in this regard and the importance of continued rigour cannot be emphasised enough.
South Africa is well on its way to fulfilling its developmental mandate and creating a more equitable distribution of income by working towards the goals of the National Development Plan, but this has to be done in a disciplined and responsible manner – not by spending excessively on the short term with little regard for the future.
It is of the utmost importance to all South Africans that the integrity and capacity of the National Treasury be maintained.
We call on the new Minister, the government as a whole, and the ruling party to ensure that this great national institution is not further harmed by capricious executive decisions and that South Africa’s fiscal management remains as strong as ever in support of the South African competitive national advantage.
&nbsp;

CEO Initiative responds to the dismissal of Minister of Finance

Nigeria&#8217;s monetary and fiscal authorities must cooperate on their policies to help Africa&#8217;s largest economy to develop, the central bank governor said, according to his spokesman.
Central Bank Governor Godwin Emefiele made the comments at a two-day retreat for members of the bank&#8217;s Monetary Policy Committee and the ministers for finance, budget and investment. The closed-door meeting, which takes place about three times a year, ended on Saturday.
OPEC member Nigeria is in its first recession in 25 years, largely brought on by low oil prices. Crude oil sales account for about two-thirds of government revenue.
The central bank has faced criticism from investors for keeping Nigeria&#8217;s currency, the naira, at a rate some 30 percent above the black market, where entrepreneurs are forced to go for foreign exchange with the dollar scarce on official channels.
&#8220;Godwin Emefiele reiterated the need for the country&#8217;s monetary and fiscal authorities to collaborate and harmonize standpoints so as to develop the economy rapidly,&#8221; central bank spokesman Olalekan Ajayi said in an emailed statement on Sunday.
The finance ministry has previously said adjustments were needed to narrow the spread between exchanges rates on the official and black market. The central bank devalued the rate for retail customers in February after Nigeria&#8217;s top economic advisor body called for an urgent review.
The bank&#8217;s Monetary Policy Committee is due to meet on Monday and Tuesday to set interest rates. Twelve out of 13 economists polled by Reuters predicted that the bank would leave its benchmark interest rate unchanged at 14 percent on Tuesday.
(Reporting by Camillus Eboh and Alexis Akwagyiram, in Lagos, editing by Larry King)

Nigerian central bank head urges cooperation on monetary & fiscal policy

South Africa&#8217;s Finance Minister Pravin Gordhan said on Tuesday he was &#8220;fairly confident&#8221; social security payments will be paid on April 1 despite a service-provider dispute that has cast doubt over the welfare benefits.
&#8220;I am fairly confident grants will be paid,&#8221; Gordhan told parliament&#8217;s public accounts committee.
The South African Social Security Agency (SASSA) is scrambling to ensure that as many as 17 million people continue to receive their money, despite concerns that retaining the existing service provider is both unlawful and costly.
(Reporting by Wendell Roelf; Editing by James Macharia)
&nbsp;

South Africa’s FinMin “fairly confident” SASSA benefits will be paid in time

Zimbabwe&#8217;s economy is now expected to grow 3.7 percent this year, from an initial projection of 1.7 percent, the finance minister was quoted as saying by the state-owned Herald newspaper on Friday.
The southern African nation&#8217;s economy stagnated last year following a devastating drought while its budget deficit exploded as President Robert Mugabe&#8217;s administration struggled to pay its workers, which helped fan anti-government protests.
(Reporting by MacDonald Dzirutwe; Editing by Tiisetso Motsoeneng)
&nbsp;

Zimbabwe finmin revises 2017 economic growth forecast to 3.7 pct: state newspaper

Old Mutual is on track to complete its break-up into four parts by the end of 2018, although improvements to IT systems at its UK asset management unit could take longer and cost more than expected, the chief executive said on Thursday.
The Anglo-South African financial services group is splitting itself up into its four main businesses because it says regulatory change has made it too complex to run the disparate group in its current form.
The firm said in August 2016 that a new platform for Old Mutual Wealth would cost 450 million pounds ($547.07 million) and be completed around the end of 2018.
&#8220;This is a very, very complex new build of a replacement platform &#8230; these projects tend to take longer and cost more than one would like&#8221;, chief executive Bruce Hemphill told Reuters by phone, though he added he didn&#8217;t think any changes to costs or timing would delay the group&#8217;s separation plans.
The firm said in a trading statement it planned to give more detail on the platform upgrade within the next two months.
Old Mutual plans to dual-list its UK asset management and African emerging markets businesses in London and Johannesburg and cut stakes in its U.S. asset management division and South Africa&#8217;s Nedbank. It has already started selling its stake in OM Asset Management (OMAM) down to 51 percent.
It has also said it is open to offers for its businesses, amid speculation of private equity bidders for some of them.
Hemphill said the break-up plans had &#8220;sparked a lot of interest,&#8221; without giving more detail.
Eamonn Flanagan, analyst at Shore Capital, said &#8220;the news that the UK platform transformation is expected to take longer and cost more is not going to be taken well&#8221;, but reiterated his buy rating on the stock after stronger than expected results.
Old Mutual posted a slightly above-forecast 2016 adjusted operating profit of 1.67 billion pounds, up 1 percent from a year earlier, helped by a focus on costs in a volatile political and economic environment.
The profit compares with 1.61 billion pounds in a company-supplied consensus forecast.
The group also said it appointed former South African Finance Minister Trevor Manuel as chairman of its emerging markets business, following a review which means a greater focus on sub-Saharan Africa.
Old Mutual shares were trading at 225.8 pence at 0850 GMT, down 1.4 percent and compared with an 0.5 percent drop in the FTSE 100 index.
Old Mutual said it would pay a final dividend of 3.39 pence and total dividend of 6.06 pence, down 32 percent from a year ago.
(Reporting by Carolyn Cohn; Editing by Jane Merriman and Edmund Blair)

Old Mutual break-up on track for 2018 despite UK tech issues: CEO

South Africa&#8217;s biggest lender by value, FirstRand, reported a 14 percent rise in half-year profit on Thursday, helped by a strong showing at its auto finance unit.
FirstRand said headline EPS totalled 212 cents in the six months ended December, compared with 185 cents a year earlier.
Headline EPS, which strips out certain one-off items, is the main measure of profit in South Africa.
Wesbank, its auto finance business, posted a 9 percent rise in earnings, outpacing a 2 and 3 percent growth in retail and investment banking units, respectively, FirstRand said.
(Reporting by Tiisetso Motsoeneng; Editing by Sunil Nair)
&nbsp;

South Africa’s FirstRand H1 profit up on auto finance boost

In his 2017 budget estimate of national expenditure, South Africa’s Finance Minister, Pravin Gordhan, allocated the following to prioritise both national and provincial economic infrastructure:
&#8211;          The Provincial Road Maintenance Grant is allocated R10.8 billion in 2017/18, taking into account the increase in road traffic volumes.
&#8211;          SANRAL receives R15.4 billion over the period ahead for strengthening and maintenance of the national road network, which now stands at 21 946 kilometers.
&#8211;          The Department of Telecommunications and Postal Services receives R1.9 billion over the medium term to invest in high-speed internet connections in public buildings and schools in eight NHI pilot districts.
&#8211;          The Passenger Rail Agency of South Africa continues to implement its modernization and rolling stock renewal programme. Over the medium term, R16.7 billion is allocated for 70 new train-sets for Metrorail.
&#8211;          The development and operation of integrated public transport network, funded through the Public Transport Network Grant receives R6.2 billion in 2017/18.
&#8211;          To support higher density housing, subsidies for social housing have been rationalized and R600 million over the medium term is reprioritized to Social Housing Regulatory Authority for investment in rental housing units.﻿

R51.6 billion to fund national and provincial economic infrastructure requirements; S.A Treasury

South African Finance Minister Pravin Gordhan said on Monday he sees a &#8220;difficult political year&#8221; for the ruling African National Congress (ANC) but that he saw &#8220;green shoots&#8221; of growth in an economy that is barely growing.
The ANC has a major policy conference at the end of June and late this year will pick a new party leader to replace President Jacob Zuma as its candidate when his second term ends in 2019.
In an interview with the eNCA TV news channel before the unveiling of his annual budget on Wednesday, Gordhan said: &#8220;We seem to be improving slightly on the growth side, seeing some green shoots which we will describe for you on Wednesday.&#8221;
&#8220;At the same time we have our challenges,&#8221; he said, including: &#8220;A difficult political year for the ruling party which will create its own dynamics.&#8221;
Asked about fraud charges that were brought against him last year and then dropped, Gordhan said: &#8220;That kind of abuse is totally unacceptable in our kind of young democracy.&#8221;
That saga unsettled markets and led to speculation that Zuma and his allies wanted to remove Gordhan, who commands huge respect among investors.
Ratings agency Standard &amp; Poor&#8217;s said last month that ANC infighting could derail government efforts to improve policy implementation and that Pretoria had little room to boost spending. South Africa risks having its debt downgraded to junk status.
There has been widespread media speculation that Zuma, who has called for &#8220;a new chapter of radical socio-economic transformation&#8221;, still wants to replace Gordhan.
The political noise comes against the backdrop of a tough economic situation.
In his October mid-term budget statement to parliament, Gordhan cut the 2016 economic expansion forecast to 0.5 percent from the 0.9 percent previously predicted by the Treasury, but said GDP growth would recover to 1.3 percent next year.
 
(Reporting by Ed Stoddard; Editing by Louise Ireland)﻿

S.Africa's FinMin Gordhan sees difficult political year for ruling party

CNBC Africa, the only Pan-African business and financial news channel will break from regular broadcasting to bring you live coverage of South Africa’s State of the Nation Address on Thursday, February 9th 2017 in Cape Town. President Jacob Zuma’s State of the Nation Address is one of the biggest events on the country’s calendar to watch.
Almost 21 years after the signing of the country’s Constitution, South Africans are eager to learn what the future of South Africa could look like.
Tune into CNBC Africa, DStv channel 410 at 18h30 CAT for all the action from parliament and to find out how it will impact the economy and businesses. Alternatively, visit CNBC Africa’s YouTube channel to livestream SONA 2017.
Twitter: SONAon410
-ENDS-
For further media information, contact:
Monique Vanek
CNBC Africa News Editor
+27 11 384 0300
<a href="mailto:Monique.Vanek@abn360.com">Monique.Vanek@abn360.com</a>
Twitter: @CNBCAfrica
 
Upcoming events on CNBC Africa
Budget Day 2017: February 22nd
World Economic Forum Africa 2017: May 3rd – 5th﻿

CNBC Africa brings you South Africa’s SONA 2017

From a small and medium enterprises (SME) perspective, the current economic environment is more conducive to growth and opportunity than it was a year ago. This is according to Ben Bierman, Managing Director of Business Partners, a specialist risk finance company for formal SMEs.
2016 saw a shift in terms of global politics and economic issues, specifically in South Africa, which brought about stronger cooperation between the private sector, government and civil society to better foster and increase the success of SMEs in 2017.
In the year ahead SMEs can expect better economic growth, inflation that will not be as severely impacted by rising food costs and an interest rate environment that will at worst not show dramatic increases in the prime rate, says Bierman. These improved conditions should provide a more solid platform for local SMEs to grow and pursue their objectives in their respective sectors.
Economic growth on both a global and local level is forecast to accelerate moderately this year. The International Monetary Fund (IMF) this month released its World Economic Outlook: January 2017 report which forecasts improvements in both global and Sub-Saharan African growth to 3.4% and 2.8% respectively. South Africa’s economic activity is expected to rise by 0.8% in 2017, up from 0.3% in 2016, while locally, the South African Reserve Bank and National Treasury predicts growth of more than 1% for South Africa this year.
The higher rainfall expectancy is one of the contributing factors behind a more optimistic growth rate forecast for South Africa. Coming out of a devastating drought, the agricultural sector is set for a better harvesting season in 2017. This should positively contribute to the revival of the rural economy and economic growth in general and lessen South Africa’s reliance on food imports. Even though the sector contributes less than 3% to the GDP directly, it remains important as a growth stimulus due to its forward and backwards linkages with other economic sectors.
The commodities cycle is also picking up, continuing on from the recovery experienced in 2016. Apart from indicating increased demand, the higher prices should bode well for our current account deficit and the mining sector. 
Business confidence levels are also up from last year, according to the December 2016 Business Confidence Index (BCI) released by the South African Chamber of Commerce and Industry. December saw a reverse of the severe year-on-year decline of 10 index points in 2015, with a year-on-year increase of 1.6 index points in December 2016. This is the first time since February 2015 that this BCI has improved on a year-on-year basis, which means local businesses are more bullish about their prospects.
Confidence levels are an essential pre-requisite for growth in investment. With 13 out of 19 indices showing improvement on the broader confidence indices being published, we can look forward to improved levels of investment and growth.
There are still some dark clouds on the horizon. The sustainability of South Africa’s social grant system is dependent on accelerated economic growth, increased job creation and the resultant broadening of the tax base. Without a concerted effort to grow our economy, the ability of Government to sustain the current levels are questionable. Other threats lurk in the prospect of a downgrade, which has not completely disappeared.
However, the South African consumer has the capacity and the financial wellbeing to increase consumption and support growth through increased demand. Levels of indebtedness have remained manageable and the consumer’s good performance in servicing the debt obligations are signs that there is capacity for demand-led growth. The South African consumer, despite all the headwinds of 2016, continues to be well positioned to stimulate economic growth through increased consumption and, in turn, stimulate small business growth.
Despite the challenges that face the local economy, the fundamentals are in place for local SMEs to have a much better year in 2017, provided that all stakeholders in our economy also play their part.
We need to continue with the initiatives to improve the framework within which SMEs operate, namely business-friendly policies and improved access to markets from both the public and private sectors. The reduction of unnecessary red tape must also continue in order for the SME ecosystem to be conducive for business formation and growth.
Furthermore, all stakeholders need to believe in a positive future for South Africa and take a leap of faith by investing in South Africa’s growth as this will be the first step in ensuring a positive virtuous cycle that will lead to further local growth and improved confidence. We have the capacity and the potential to turn things around in 2017, we just need to take appropriate action. ﻿

Op-Ed: SMMEs can expect light at the end of the tunnel in 2017

In much the same way you’d enlist the help and advice of a professional when dealing with issues of a medical or legal nature, financial planning generally requires the same type of specialised input from a financial adviser. Calculations around life expectancy, replacement ratios and drawdowns are often complicated, and as a consumer you might not be aware of all the financial products on offer, which is why the help of a professional can be invaluable.
 
Valuable guidance
Gareth Stokes of the Financial Intermediaries Association of Southern Africa (FIA) maintains that financial advisers are important given the complex nature of investment and risk products. This makes it “difficult for a consumer to structure a product portfolio that meets all of their needs.
A good financial adviser will conduct a comprehensive overview of your financial needs and assist in structuring a portfolio of investment and risk products that matches your income and life stage. A financial adviser can offer valuable guidance when critical financial decisions must be taken and often dissuades clients from making ill-thought-out decisions with costly consequences.”
Take the time to find a financial adviser that you can trust; this will increase the odds of it becoming a long-term relationship. Finding a financial adviser that you can trust is crucial.
“Trust is the most important aspect in the client-adviser relationship,” says Stokes. “Trust is built on a number of character traits, including honesty, integrity, competence and a commitment to acting in clients best interests. Trust sustains the business relationship between adviser and the client.”
Stokes also says that building a relationship over time makes sense, especially where a comprehensive portfolio of financial products is concerned. And, given that your financial adviser will have the knowledge and context of your situation over time, they’ll be well-placed to conduct a “thorough review of your financial product portfolio on an annual basis”. This ensures the best chance of being able to identify shortcomings and implement the “necessary corrective actions”.
 
Regulated industry
There are some checks to ensure you find the right adviser. The industry is regulated and financial advisers, as well as the firms they work for, need to be registered members of the Financial Services Board (FSB). Many financial advisers are also members of the industry’s trade association, the Financial Intermediaries Associa tion of South Africa (FIA). Stokes says it is also helpful if your financial adviser has a professional qualification. “The Financial Planning Institute (FPI) is an accreditation standards body for financial services professionals and issues the Certified Financial Planner (CFP®) accreditation in South Africa.”
It may also be useful to ask any potential adviser some basic questions in an initial meeting. Stokes says these questions could include: “What are your qualifications?”; “What is your value proposition?”; and “What value do you offer in return for the fees you charge?”
“Most practices will provide this information – and more – in their introductory letter to clients,” he points out. Financial advisers would also typically be able to provide detailed answers to questions about their investment philosophy during the financial needs analysis process and subsequent structuring of an appropriate investment portfolio.
 
Fees and commission
You should expect to remunerate your financial adviser for their professional advice.
“Where the financial adviser is remunerated by commission, the maximum commission is prescribed by law,” says the FPI’s David Kopp, “However, some financial advisers charge a fee for their services. This fee could be a monthly retainer, a fixed amount for services or a percentage of your investment.”
Stokes says that “there has been a growing trend towards financial advice practices that base their businesses on a combined fee and commission model with recent legislation encouraging them to focus more on fees than commissions”.
There is no standard fee for financial advice, given the vast amount of variables and uniqueness of every person’s situation. The Retail Distribution Review (RDR), currently underway and being driven by the FSB, is focused on reforming the way financial products are sold, and it’s this review that has strongly encouraged fee-based remuneration.
Fees tend to fall into one of three areas: an initial planning fee (a consultation-based charge for planning), an implementation fee (work done to execute the agreed-upon plan) and an annual advice fee (effectively for the monitoring and review of a strategy and portfolio). The last of these is often overlooked, as financial planning is misconstrued as an event, not an ongoing, long-term process.
“But”, says Stokes, “how the financial adviser is remunerated is less important than the value that the financial adviser adds for what he or she charges.” A financial adviser should be able to demonstrate the value they have added in return for the fee they have charged.
For more detail on the services you can expect a financial adviser to provide, and what recourse is available to consumers, see our interview with David Kopp.
 
For more information on investing for retirement, speak to your financial adviser.
This article is part of an investment series by Discovery Invest.

How to choose a financial adviser

South Africa needs to fix its politics in order to grow its economy, as credit rating agencies have emphasised, Treasury director-general Lungisa Fuzile said on Monday.
S&amp;P Global Ratings downgraded South Africa&#8217;s local debt by one notch to BBB on Dec. 2 but kept its sovereign credit rating unchanged at BBB- with a negative outlook, warning that political tensions could hamper efforts to boost GDP.
Fitch and Moody&#8217;s also warned that political turmoil could derail economic growth when they affirmed their own investment grade ratings.﻿

South Africa needs to fix politics to grow economy

South African Finance Minister Pravin Gordhan has ordered an investigation into the tax collection authority, officials told parliament on Thursday, underlining rising tensions between the Treasury and the revenue agency.
Gordhan has expressed concerns at the leadership of the South African Revenue Service (SARS), saying earlier this week he could not vouch for the accuracy of the information it provided because of a lack of accountability and cooperation from its top management.
SARS said in a statement on Thursday it was concerned over the comments questioning the integrity of its leadership.
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News of the latest investigation adds to the impression of a system in turmoil after months of tension between President Jacob Zuma and the finance minister, who himself survived a separate probe into allegations of fraud while he was the head of SARS.
The tensions have unnerved investors at a time when Africa&#8217;s most industrialized economy is stalling, with growth forecast at 0.5 percent this year by the Treasury.
An 8-member team set up by the Treasury to investigate governance at SARS said in a presentation to parliament, seen by Reuters, that it was studying whether the agency was sufficiently accountable and had the capacity to deal with illicit financial flows.
It was unclear when the probe was initiated, but Business Day newspaper quoted the head of the committee, Dennis Davis, as saying it had been carrying out its work for several months.
Davis could not be reached for comment at the number provided on the committee&#8217;s website. SARS spokesman Sandile Memela and Treasury spokeswoman Yolisa Tantsi did not immediately reply to telephone and email requests for comment.
&#8220;The implication is that he has a lack of confidence in the top leadership at SARS,&#8221; political analyst Daniel Silke said, referring to Gordhan.
Gordhan and SARS commissioner Tom Moyane, who was appointed in 2014 by Zuma, were at loggerheads earlier this year when Moyane refused to halt an operational turnaround plan that had been vetoed by the minister.
At the time, media reported that Gordhan had threatened to resign from the cabinet unless Moyane was removed from his role.﻿

South Africa's FinMin Gordhan orders inquiry into tax agency

Fitch Ratings has revised the Outlooks on South Africa&#8217;s Outlook to Negative from Stable, while affirming the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at &#8216;BBB-&#8216;.
The issue ratings on South Africa&#8217;s senior unsecured long-term foreign- and local-currency bonds have also been affirmed at &#8216;BBB-&#8216;. The Country Ceiling has been affirmed at &#8216;BBB&#8217;. The Short-Term Foreign and Local Currency IDRs and the issue ratings on senior unsecured short-term local currency securities have been affirmed at &#8216;F3&#8217;. The rating on the RSA Sukuk No. 1 Trust has also been affirmed at &#8216;BBB-&#8216;, in line with South Africa&#8217;s Long-Term Foreign Currency IDR.
KEY RATING DRIVERS
The revision of the Outlooks on South Africa&#8217;s Long-Term IDRs to Negative reflects the following key rating drivers:
Political risks to standards of governance and policy-making have increased and will remain high at least until the electoral conference of the African National Congress (ANC) in December 2017, negatively affecting macroeconomic performance. The conference will elect a new ANC leader, who will be the ANC&#8217;s presidential candidate in national elections in 2019.
The in-fighting within the ANC and the government is likely to continue over the next year. In Fitch&#8217;s view, this will distract policymakers and lead to mixed messages that will continue to undermine the investment climate, thereby constraining GDP growth. A report by the public protector made allegations of influence peddling and improper procurement practices involving close allies of the president, although it will be subject to a judicial review and a commission of enquiry. The report underlines the risks to state-owned enterprise (SOE) governance and has led to the resignation of the CEO of the state-owned electricity company Eskom.
The South African economy may have started recovering from a series of shocks, but business confidence remains depressed and investment has continued to contract. We expect only modest GDP growth of 1.3% in 2017 and 2.1% in 2018, although this is an improvement from 0.5% in 2016. The economy had been hit in 2015 and 2016 by electricity shortages, the worst drought in decades, a sharp fall in international prices for some of South Africa&#8217;s main mining commodities and rising policy uncertainty.
As a result of low GDP growth and weaker-than-expected tax revenues, the government in its Medium-Term Budget Policy Statement (MTBPS) raised the budget deficit forecast for the fiscal year ending March 2017 (FY16/17) to 3.4% of GDP from 3.2% in the February budget, with a gradual narrowing to 3.1% in FY17/18, 2.7% in FY18/19 and 2.5% in FY19/20. The deterioration would have been worse without the government&#8217;s decision, announced in the MTBPS, to raise additional revenue of ZAR13bn and lower the expenditure ceiling in FY17/18. Together with measures included in the February budget, fiscal tightening in FY17/18 relative to previous plans will amount to 1% of GDP. The government has not announced which taxes are to be raised, but the fiscal targets now look only mildly optimistic. Fitch expects the deficit to shrink to 2.8% in FY18/19 from 3.2% in FY17/18.
Total general government debt (including local government debt not covered by the MTBPS debt numbers) will rise to 55% at end-March 2019 from 51.5% at end-March 2016. The debt structure remains highly favourable, with 90.7% of debt denominated in local currency and an average maturity of government debt securities of 14.6 years at end-September 2016.
Additional spending on student bursaries as a result of student protests was absorbed by using the contingency reserve, some one-off financing and a re-prioritisation of other expenditures, but the protests showed that social pressures could lead to further spending needs. Growth of the working age population of around 2% and high and rising unemployment, at 27.1% in the third quarter, also contribute to spending pressures. However, the fact that expenditure ceilings introduced in 2012 have never been breached suggests such pressures have so far been well managed.
Debt of SOEs remains an important contingent liability to the sovereign. Debt of the nine major SOEs amounted to ZAR743bn (18.2% of GDP) at end-March 2016, of which ZAR280bn was subject to government guarantees. In addition, the government provides guarantees on electricity prices to independent power producers complementing Eskom&#8217;s electricity generation.
ANC factional battles may undermine government efforts to improve the governance of SOEs, which could affect the plan to stream-line the SOE portfolio. The plan to build nuclear power stations has run into substantial opposition because of concerns about governance. As a result, the government announced in November that the first plant will not be commissioned until 2037, alleviating concerns over any medium-term fiscal impact.
The &#8216;BBB-&#8216; Long-Term IDRs also reflect the following drivers:
The net international investment position turned positive in 2015, at 13% of GDP, for the first time since at least 1990, although this was largely due to the depreciation of the rand. The current account deficit also remained on a narrowing trend in 1H16, partly reflecting import compression as well as a lagged effect of earlier depreciation on competitiveness so that the current account deficit is likely to shrink to 3.9% of GDP, from 4.3% in 2015. However, imports will strengthen again as the economy recovers gradually and gains in competitiveness could be eroded by continued high wage growth, leading to a renewed widening in the current-account deficit in 2017 and 2018.
Despite weak macroeconomic conditions, the banking sector remains a rating strength. The total capital adequacy ratio of the system increased to 15.5% in September from 14.2% at end- 2015. However, total domestic credit growth slowed to 7.5% in August, the lowest since 2014 and only moderately above inflation. Non-performing loans stood at 3.2% of total assets, barely above the trough of the current cycle of 3.1%, although a gradual rise is expected, reflecting the rising average age of assets and the impact of continued economic weakness on asset quality. Inflation has risen back above the upper limit of the inflation target range of 3%-6% of the South African Reserve Bank (SARB) but is likely to ease, to an average of 5.6% in 2018, so that SARB is unlikely to further raise its interest rates beyond the current level of 7%.
Indicators of economic development are weaker than &#8216;BBB&#8217; category medians. GDP per capita at market prices is estimated at USD5,140 for 2016, compared with a median of USD9,188. The World Bank&#8217;s governance indicator is broadly in line with the median but this might not fully reflect the recent political tensions.
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch&#8217;s proprietary SRM assigns South Africa a score equivalent to a rating of &#8216;BBB-&#8216; on the Long-Term Foreign Currency IDR scale.
In accordance with its rating criteria, Fitch&#8217;s sovereign rating committee decided not to adopt the score indicated by the SRM as the starting point for its analysis because the SRM output has migrated to &#8216;BBB-&#8216; from &#8216;BBB&#8217;, but in our view this is potentially a temporary deterioration that may not be sustained.
Consequently, Fitch&#8217;s sovereign rating committee kept the starting point for the qualitative overlay adjustment at &#8216;BBB&#8217; and adjusted the output from the SRM to arrive at the final Long-Term Foreign Currency IDR by applying its QO, relative to rated peers, as follows:
&#8211; Macroeconomic Performance, Policies and Prospect: -1 notch, to reflect South Africa&#8217;s weak growth prospects relative to the &#8216;BBB&#8217; category median, with important repercussions for public finances.
Fitch&#8217;s SRM is the agency&#8217;s proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a Long-Term Foreign Currency IDR. Fitch&#8217;s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable or not fully reflected in the SRM.
RATING SENSITIVITIES
The following risk factors could, individually or collectively, result in a downgrade:
&#8211; Continued political instability that adversely affects standards of governance, the economy or public finances.
&#8211; A failure to stabilise the government debt/GDP ratio or an increase in contingent liabilities.
&#8211; Failure of GDP growth to recover sustainably, for example, due to sustained uncertainty about economic policy.
&#8211; Rising net external debt to levels that raise the potential for serious financing strains.
The Outlook is Negative. Consequently, Fitch does not currently anticipate developments with a high likelihood of leading to an upgrade. However, future developments that may, individually or collectively, lead to a positive rating action include:
&#8211; A track record of improved growth performance.
&#8211; A marked narrowing in the budget deficit and a reduction in the government debt/GDP ratio.
&#8211; A narrowing in the current account deficit and improvement in the country&#8217;s net external debt/GDP ratio.
KEY ASSUMPTIONS
Fitch expects global economic trends and commodity prices to develop as outlined in Fitch&#8217;s September Global Economic Outlook. ﻿

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