Weekly Newsletter – 02 June 2020

Reflection

Lockdown Day 68: Everything rises and falls upon leadership. It almost feels like I do not have to go any further with this statement, there is so much weight in it (it is like biltong, can chew on it for a while).

Leaders first see the vision, they just see a little further than the rest. The importance of communicating the vision and the leader surrounding himself/herself with trusted team members, that carry the same values, provides the foundation to ensure that the process is successfully executed.

Many South Africans are questioning some of our country’s leaders logic behind certain decisions, distorted guidelines and moving the “goal post” after decisions have been made. My personal reflection during this season is the importance of clear communication, to make decisive decisions and for accountability to ensure that our teams are able to follow a clear path.

I think it was easier to promulgate lockdown measures than to manage the complex phasedown of an economy to full openess while assessing the pandemic’s impact on business. The government’s main focus is to save lives and livelihoods and we as leaders in business also need to apply this approach to ensure that our teams and families remain safe while being able to earn an income.

 

Repo rate cut

South African Reserve Bank (SARB) on 21 May 2020 cut the repo rate by an additional 50 basis points to 3.75%.

This marks the fourth interest rate cut this year, bringing the interest rate to levels last seen in the 1970s, as the SARB aims to provide financial relief for households distressed by the economic downturn.

The repo rate is the standard interest rate at which the SARB lends money to other banks. When the repo rate is cut, it cascades down to banks as they, in response, adjust the interest rates they charge for lending money to their clients.

This also reduces the interest that banks pay out on savings and money market accounts.

We explore a few advantages and disadvantages that a repo rate cut has on business owners:

Advantages:

a) If you are paying off debt, such as a home loan, personal loan or business loan, and are already cash-strapped, then a lower interest rate may help to reduce your repayments if you have a loan with a variable interest rate. 

b) A lower interest rate allows you to repay your debt faster, if your cashflow allows you to stay committed to the monthly instalments at higher interest rate levels.

Disadvantages:

a) For someone living off of savings, then an interest rate cut would not be welcomed as it would directly affect the interest income from their savings. Unless the money was invested under a fixed interest rate.

b) A lower interest rate will make it even less attractive for foreign investors in South Africa to invest in the country or keep their funds here as they can expect lower returns.

While an interest rate cut may help consumers save a bit of money, it will unlikely inspire consumers to borrow more money to spend and help stimulate economic growth as long as uncertainty remains.

 

Unregistered workers can now claim UIF TERS

The long awaited May applications for the Unemployment Insurance Fund (UIF) TERS benefit are open. The UIF announced that employees who were previously not registered with the state entity can now also claim.

This would enable all workers who were put on leave, were laid off temporarily, or whose employers could no longer afford to pay their full salaries due to the coronavirus crisis are entitled to the UIF payouts, regardless if they were previously registered.

The maximum payout a worker will receive is R6,730 a month (if they typically earned more than R17,700) – while the minimum amount is R3,500.

Final thought

Take care of yourself, your team, your clients and your community. Seek the opportunities that will undoubtedly arise and monitor your finances closely. You have our full support.
 
Together, we’ll do this!