BRICS launched new development bank

Leaders of the five BRICS nations agreed on the structure of a $50 billion development bank by granting China its headquarters and India its first rotating presidency, according to a summit statement. Brazil, Russia and South Africa were also granted posts or units in the new bank.

BRICS leaders agree on development bank, 16 July 2014 (photo: Moneyweb Today)

The leaders also formalized the creation of a $100 billion currency exchange reserve, which member states can tap in case of balance of payment crises, the leaders of the five nations said at a meeting in Fortaleza, Brazil. Each member country has the right to withdraw different amounts from the joint currency reserves, according to a statement from Brazil’s central bank. China can withdraw half of its contribution or $20.5 billion. Brazil, Russia, and India may withdraw their entire contribution or $18 billion, while South Africa can tap $10 billion, twice its input.

Both initiatives are designed to provide an alternative to financing from the International Monetary Fund and the World Bank, where BRICS countries have been seeking more say. The measures coincide with a slowing of economic growth in the five countries to about 5.4 percent this year from 10.7 percent in 2007.

According to an expert, the biggest winner among the BRICS and its newly created bank may be South Africa, as it stands to gain financial expertise, investment and trade.

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Treasury: Adhering to NDP

Minister of Finance, Nhlanhla Musa Nene, presented the Performance plan 2014/2018 in parliament promising to adhere to the National Development Plan (NDP). The presentation was given to the Standing Committee on Finance in National Assembly.

Nhlanhla Musa Nene, Minister of Finance (Source: GCIS)

The Economy was growing at a moderate pace and performing below expectations. Further, the minister the projected that a growth rate figure would be published in the Medium Term Budget Policy Statement (MTBPS). To advance the poor and eradicate poverty, South Africa must grow at a higher rate. With reference to the SA Revenue Service’s (SARS’s) strategic plan, the minister said it had been developed at a time with better global outlook on economic growth. SARS is expecting to revenues of R1 trillion. The Minister said the volume of national government debt would increase from R1.4 trillion to R2 trillion in 2016/17, which was equivalent to 43% of Gross Domestic Product (GDP).

The present Director General referred to a reform of the financial sector aiming the sector to be more tightly regulated. Treasury intends an upgrade of the management of the financial systems to allow government a better s supply chain management. “The chief procurement officer”, a new office, had been given an elevated function and reforms would centralise procurement to reduce leakage and waste of money.

Additionally, it was announced that

• Some of the arrangements with BRICS member states would be made priorities – among those is the establishment of a bank and a pool of virtual reserves;
• The management and processing of civil and military pensions will be modernised;
• There would be a technical support programme for infrastructure projects provided by a Government Technical Advisory Centre (GTAC).

[Presentation:TreasuryPerformance 2014-2018]

Financial statements are the success factor

Ask entrepreneurs what ingredients form the lifeblood of their businesses and most will say enthusiasm, commitment and dedicated service. While all of these are very important, entrepreneurs who know where their businesses stands financially are the most successful. They also know that financial statements are the glue that holds any business together.

Financial statements enable business owners and other professionals such as accountants, bankers, and potential investors in a business, to see how a business is performing. The main elements of a financial statement are:

Financial Statement (Photo credit: LendingMemo)

Balance sheet

A balance sheet, which gives a full picture of a business, provides detailed information about a company’s assets, what it owes (its liabilities), the number of shareholders in the business and the percentages they own (shareholders’ equity).

Income statement

An income statement shows the revenue earned during a defined period and the costs and expenses involved with earning the revenue. It shows whether the company was profitable or not.  An income statement tells the owner what the gross profit of the company is. This is derived by taking total sales (total monthly turnover) and deducting the cost of sales (any costs undertaken in providing a service or making a product).

Cash flow statement

A cash flow statement reports on cash inflows and shows what has been paid by customers. It also shows cash outflows such as money paid to suppliers and stock purchased. It also adjusts for provisions like depreciation where no actual cash has changed hands. A cash flow statement also helps the owner focus on reducing debtors, controlling stock and other aspects of the business.

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R172m for small businesses in the Western Cape

The Western Cape government would spend R179m for small businesses in the Western Cape, Premier Zille said in her State of the Province address.

The Western Cape government will focus on opening opportunities for citizens and creating conditions for economic growth. The government would address goals in the National Development Plan and Provincial Development Plan. Zille is in agreement with President Zuma that change could only come about through creating employment and increased investment.

Helen Zille, Premier of the Western Cape Province (Photo credit: Wikipedia)

The government wants the province to be a leader in broadband access. To this end, the province, State Information Technology Agency, and Neotel signed an agreement to provide broadband to around 2 000 government sites over the next two to three years.

The province would look to the business process outsourcing, information and communications technology, and aquaculture industries as vehicles for work opportunities. Addressing coastal concerns, the province wanted the area between Hermanus and Gansbaai to be declared a special economic zone and would  push for the development of the province’s 12 small fishing harbours.

In education, the Western Cape would focus on improving language and maths results and upping the quality of school leaders, governing bodies and environments. The Premier said almost R3.3bn would be spent on building and upgrading health facilities in the next five years. The biggest challenge was building housing and the province was working on a new housing model that would incorporate partnerships and strategies with the city of Cape Town and other municipalities.

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