FINANCE FOR NON-FINANCIAL MANAGERS MODULE EMERGING MANAGERS PROGRAMME (EMP) Mr Steven Msomi Ohpis Nevets Investments (Pty)Ltd

Transcription

1 FINANCE FOR NON-FINANCIAL MANAGERS MODULE EMERGING MANAGERS PROGRAMME (EMP) by Mr Steven Msomi Ohpis Nevets Investments (Pty)Ltd

2 Ohpis Nevets Investments: who we are?

3 To Be Covered

4 To Be Covered 1. FINANCIAL STATEMENTS o ITHALA DELOPMENT FINANCE CORP o ITHALA SOC 1. South Africa s 2014/5 Budget 2. RATIO ANALYSIS 3. FOREX Rate Determination o Inflation o Interest Rates 3. Capital Structure 4. Budgeting Process 5. LEGISLATION ( PFMA, FICA, FAIS, NCA, BASEL III)

5 THE TRAP:

6 30% RISK:RETURN RELATIONSHIP E(Rp) 18% Capital Market Line (CML) 16% 12% 6% 0 8% 12% 14% 22% RISK ( )

7 THE INVESTMENT BACKGROUND An investment can be defined as postponed consumption OR An investment is the sacrifice of certain present value for future value

8 B. THE INVESTMENT BACKGROUND Three main attributes of an investment: time inflation risk

9 LOCATION (Risk & Return Line)

10 SAVING & INVESTMENTS available investment vehicles property cash Investment vehicles choice bonds equities ISITOKOFELA

11 B. THE INVESTMENT BACKGROUND diversification Never keep all your eggs in one basket!

12 C. THE ECONOMY business cycles peak through through

13 MASLOW Hierarchy of Needs:

14 FINANCIAL Markets:

15 RATING Agencies:

16 Tax Revenue (2015/6):

17 Budgeting, 2015:

18 Budget Estimates:

19 EDUCATION Budget:

20 SOCIAL PROTECTION Budget:

21 FOREX Rate Determination:

22 FOREX Determination: INFLATION If two countries that are engaged in trade with one another, the one with higher inflation rate between the two, is the one whose currency is expected to weaken within medium term.

23 FOREX Determination: INTEREST RATES If two countries that are engaged in trade with one another, the one with higher interest rate between the two, is the one whose currency is expected to strengthen within short to medium term.

24 Capital Structure: It is vitally important for a business to determine the ratio between debt & equity in its funding Debt is considered cheaper to certain level. After that level, higher levels of debt become risky. Please explain how this happens?

25 RATIOS Formulae:

26 Balance Sheet:

27 Income Statement:

28 ADDITIONAL Infor: For market value measures we assume that Cathula has 35 mln shares issued, which sold for R88 per share at the end of the year. If we recall Cathula net income was R385 mln, we can calculate EPS, PE & Market to book ratios.

29 IDFC Income Statement- 2015

30 IDFC Income Statement- 2015

31 IDFC Balance Sheet 2015

32 IDFC Balance Sheet 2015

33 UW FINANCIALS

34 THE BANKING LICENCE ISSUE:

35 THE BANKING LICENCE ISSUE:

36 TRAINING NUMBERS:

37 STATS: OPERATIONS

38 STAFF NUMBERS:

39 PROPERTY, HIGHLIGHTS:

40 BUSINESS FINANCE:

41 BUSINESS FINANCE:

42 LEGISLATION

43 THE STRUCTURE:

44 STRATEGY:

45 ITHALA SOC

46 ITHALA SOC THE PERFORMANCE

47 ITHALA SOC THE PERFORMANCE

48 BALANCE Sheet, 2014 &2013 NON-CURRENT LIABILITIES & RESERVES

49 INCOME Statement, 2014 &2013 REVENUE

50 ITHALA SOC THE FINANCIALS

51 CASH FLOW Statement, 2014 &2013 FROM OPERATIONS & INVESTING

52 ITHALA SOC THE BALANCE SHEET

53 MOSES Mabhida,2014 &2013

54 MOSES Mabhida,2014 & REVENUE R R EXPENDITURE R R DEFICIT R R

55 BUDGTING, The Municipality THE POLICY MUNICIPAL FINANCE MANAGEMENT ACT, ACT 56, 2003 The Council must yearly approve a budget; The Mayor must present the budget to council (Subsection-2 of Act) This should be 90-days before start of Budget Year; The budget must address diverse community needs; The Budget must accommodate Macro-economic & Fiscal policies of SA; Major Players in Budgeting:- o THE COUNCIL o THE MAYOR o ACCOUNTING OFFICER (MM) o CHIEF FINANCIAL OFFICES o SENIOR MANAGERS o THE COMMUNITY

56 BUDGTING, The Municipality THE PRINCIPLES Cannot budget for a deficit Revenue projections need to be realistic THREE year budget needs to be prepared and annually approved by the council (MEDUIM TERM REVENUE & EXPENDITURE FRAMEWORK) MTREF must always be within Municipal Integrated Development Plan;

57 BUDGTING, The Municipality THE PREPARATION PROCESS FORMULATION OF THE BUDGET PUBLIC PARTICIPATION PROCESS APPROVAL OF THE BUDGET PUBLICATION OF THE BUDGET SERVICE DELIVERY & BUDGET IMPLEMENTATION PLAN

58 PFMA ACT 1, 1999 Focus on outputs & responsibilities Flexibility with accountability Clarity of role of accounting officer Let the managers manage, But hold them accountable

59 PFMA THE AIMS OF PFMA To regulate financial management To ensure all revenue, expenditure, assets, and liabilities are managed efficiently and effectively; To provide for the responsibilities of persons entrusted with financial management; Applicable to all public entities, except the Reserve Bank, Auditor General, higher education institutions and local authorities (own acts)

60 PFMA KEY OBJECTIVES OF PFMA Modernise the system of financial management Enable public sector managers to manage, but at the same time to be accountable Ensure timely provision of quality information To eliminate waste and corruption in the use of public assets

61 PFMA NATIONAL TREASURY, SEC 6(1) &(2) Promote and enforce transparency and effective management in respect of revenue, expenditure, assets and liabilities Must prescribe uniform Treasury norms and standards Must enforce the PFMA and any prescribed norms and standards May assist departments in building capacity for efficient, effective and transparent financial management May investigate any system of financial management and internal control in any department

62 PFMA RESPONSIBILITIES OF ACCOUNTING OFFICERS Must ensure that the department has and maintains Effective and efficient systems of financial and risk management and internal control A system of internal audit under control of an audit committee An appropriate procurement and provisioning system which is fair, equitable, transparent and cost effective Responsible for the effective, efficient, economical and transparent use of resources of the department Must take effective and appropriate steps to prevent unauthorized, irregular and fruitless and wasteful expenditure and losses resulting from criminal conduct Must take effective and appropriate disciplinary steps against any official who Commits an act which undermines the financial management and internal control systems Makes or permits an unauthorized, irregular or fruitless and wasteful expenditure Delegate in writing any powers or duties to an official in the department

63 PFMA RESPONSIBILITIES OF OTHER OFFICIALS Must ensure that the system of financial management and internal control established for that department is carried out Is responsible for the effective and efficient use of financial and other resources Must take effective and appropriate steps to prevent unauthorized, irregular and fruitless and wasteful expenditure Is responsible for the management, including safeguarding of the assets within that officials responsibility

64 PFMA FINANCIAL MISCONDUCT An accounting officer commits an act of financial misconduct if willfully or negligently fails to comply with a requirement of sec 38 An official of a department to whom a power or duty is assigned in terms of section 44 commits an act of financial misconduct if willfully or negligently fails to exercise that power or perform that duty An official of a treasury to whom a power or duty is assigned in terms of section 10 commits an act of financial misconduct if willfully or negligently fails to exercise that power or perform that duty An accounting officer is guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding five years, if that accounting officer willfully or in a grossly negligent way fails to comply with a provision of section 38

65 PFMA THE PROCUREMENT SYSTEM Accounting Officer must ensure that his department has and maintains an appropriate procurement and provisioning system (Sec 38) Accounting Officers must accept responsibility and accountability for AD HOC tenders Accounting Officer must submit procurement procedures to national treasury for accreditation Preferential Procurement Policy Framework Act (no 5 of 2000) requires that criteria to be applied during evaluation and adjudication must form part of tender documents. Procurement reforms aims to strengthen accountability, ensure a fair and open system and to prevent corruption

66 WACC:

67 IN CLOSING We simply attempt to be fearful when others are greedy, and to be greedy when others are fearful

68 PLEASE THINK THIS OVER Anything that CANNOT go on forever WILL END

69 QUESTIONS: