World Competitiveness Report & The New Companies Act & Your Business – 14 July 2011

Breakfast Seminar

• World Competitiveness Report 2011 Results

• New Companies Act: What You Need to Know

• Date: Thursday, 14 July 2011
• Venue: Sandton Sun Hotel, corner 5th and Alice Streets, Sandton, Johannesburg

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“The 2011 results confirms a reality that despite the strength of our economy, it is still one of the most inequitable in the world. It is a further confirmation of the need of investment to support productive activities that increase the overall competitiveness of our economy. Of particular interest will be direct investment that brings with it skills, cutting-edge technologies, and access to global markets”
Sello Mosai, Productivity SA

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Andrew Honey, Publisher of Entrepreneur Magazine

Mr Alwyn Nel, Chairperson of ProductivitySA

Sello Mosai, Productivity SA’s executive manager of knowledge management and research

Michael Judin, director of Goldman Judin Attorneys

Bongani Coka Acting CEO of ProductivitySA

This event was proudly sponsored by:

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Seminar highlights challenges
hindering SA businesses

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South African enterprises need to embrace productivity and contribute to growing the economy by not being equals with their competitors, but instead raising the levels of quality and operating well-governed businesses. This is the overall message delegates at the Productivity SA business seminar were left with.

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SPEAKERS:

• Sello Mosai – The results of the latest World Competitiveness Report
• Michael Judin – The New Companies Act
• Bongani Coka – Closing Address

South Africa has upped its economic performance according to rankings derived from the macro-economic evaluation of the domestic economy;  South Africa notched a credible 54^th position, moving two places up from last year’s 56^th

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Session 1

World Competitiveness Report

South Africa is falling behind in terms of its competitiveness against other countries. Out of a total of 59 countries included in the latest World Competitiveness Report, it ranked 52nd in terms of its overall competitiveness – which is an eight place drop from its position at 44 in 2010. The report looks at four areas, namely: economic performance, government efficiency, business efficiency and infrastructure. Sello Mosai, Productivity SA’s executive manager of knowledge management and research, said that while South Africa’s performance was not as good as it had been in previous years, the past results proved that the country is able to perform better than it did in the current year.

Economic performance
The overall feeling about South Africa’s economic performance was fairly positive, moving the country from 56th to 54th in this category. This can largely be attributed to the gains achieved in international trade (from 26 to 19).

Government efficiency
South African executives’ sentiments on government’s efficiency saw a drop by 11 places since 2010, this was mainly in the international institutional framework, public finance and societal framework categories.

Business efficiency
One of the biggest drops was in the productivity and efficiency category (from 18 to 44), which contributed to a loss in business efficiency overall. Mosai said that this indicated a need from all parties involved to take responsibility in improving productivity within the business environment. “We have to look at this as leaders and think ‘how do we take this forward?’”

Strengths and weakness
Mosai pointed out the strengths and weaknesses highlighted by the World Competitiveness Report. South Africa achieved the top ranking in terms of the trade index which refers to the prices and volumes of its imports and exports. It was also fourth for cost of living, which Mosai said showed that the country is capable of being in the top 10 countries in certain categories.

The major weaknesses for the country included the unemployment rate and youth unemployment. Others included equal opportunity, labour regulations, skilled labour, life expectancy at birth and health and science in schools.

Attractive indicators
According to the report, the top five attractive indicators as per South African executives in the private sector are:

• Effective legal environment
• Dynamism of economy
• Access to financing
• Reliable infrastructure
• Competent management

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Session 2

The Most Critical Components
of the New Company’s Act

The need for good governance
Also discussed at the seminar was the effect the New Companies Act was having on local businesses. Legal expert, Michael Judin, director of Goldman Judin Attorneys, explained that good governance is no longer something that the government would like business owners to comply with, instead it is now essential. If directors are found in breach of the provisions of the Act they face long jail sentences and personal liability.

How the Companies Act is impacting business

• One of the major changes Judin pointed out was the introduction of a Business Rescue provision which would give companies facing liquidation a little “breathing room” so that they did not have to fold, so jobs would not be lost and creditors would be paid at a later date.
• Another change was that while the State has the right to enforce the Act, class action had also been introduced.
• Judin also spoke about the business judgement rule which protects business owners who are considered to have acted act as a reasonable person would in those particular circumstances, at that particular time.
• Directors’ duties have been extended to include liability to directors, prescribed offices and people sitting on committees.
• The Act allows companies to indemnify directors. For all directors and officers, liability insurance is a must.
• Directors need to be properly informed. They need to stress test all the reports, know where the information found in them came from and who put the reports together. Don’t make any decisions unless you are properly informed.
• If someone in a board meeting is seen as having a conflict of interest, they must leave the room and if they know something they are obliged to tell before leaving the room.
• The New Companies Act says courts may look at foreign law for guidance.
• The common thread throughout the Act is that of alternative dispute resolution. Companies will be encouraged to find ways to avoid going to court and resolve issues in a quick way.
• Shareholders Agreements may not be in conflict with the company’s Memorandum of Incorporation (MOI). There is currently a two year transitional period, but after this it needs to be aligned.
• ESG, which stands for Environmental Social Governance is a concept directors should introduce in their companies, because it is something that is going to affect the way South African businesses.

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On the right path

Closing the seminar, Productivity SA acting CEO, Bongani Coka, reiterated that the challenges business owners currently face were not insurmountable, and that there could be a turnaround to make South Africa more competitive. He also said that the business rescue provision in the New Companies Act was encouraging as more businesses would have the opportunity to be turned around and he hoped more companies would come to the doors of Productivity SA for assistance with this.

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Contact:

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Productivity SA
www.productivitysa.co.za
+27 (0)11 848 5300

Goldman Judin Attorneys
www.elawnet.co.za
+27 (0)11 268 0287

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