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How Tax-Free Savings Could Fund Your Child’s Education

Sending your child to university is pricey which is why parents need to start saving as early as possible for their child’s future.

Investec Specialist Bank and Asset Management

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Five South African universities have been included in the Times Higher Education BRICS & Emerging Economies Rankings 2015 – a list of the top 100 universities in countries classified as emerging economies.

The ranking reportedly looks at all core missions of a world-class university, using carefully calibrated performance indicators.

The University of Cape Town (UCT) ranked 4th in the list, with the Universities of the Witwatersrand and Stellenbosch at number 14 and 17 respectively.

Much further down in the assessment, the University of KwaZulu-Natal came in at 47 and the University of Pretoria ranked 77th. Accolades such as this bolster an institution’s reputation, but in terms of student registration, the biggest barrier to entry for many prospective students, is the cost.

Related: Three Funds You Can Tap into Right Now

The exorbitant cost of attending university in South Africa means that for many parents planning the options for their child’s tertiary education, this route is simply not a financially viable one.

Many universities have levied annual fee increases well above inflation year-on-year – a point noted by Higher Education and Training Minister Blade Nzimande earlier in the year. Declining government funding has been blamed for this, but the end result is a university degree that’s simply too expensive for household budget’s already under pressure.

No time like the present

If parents start saving early enough for their child’s tertiary education, enrolment at a South African university suddenly becomes a possibility.

According to René Grobler, Head of Investec Cash Investments, the sooner parents begin contributing to an investment plan, the sooner their money can begin working for them and thanks to National Treasury’s new tax-free savings initiative launched on 1 March, that time is now.

“Treasury’s confirmation that parents can open a tax-free savings account for each of their children provides the optimal mechanism to begin saving literally from as soon as your child has an ID number,” says Grobler.

Introduced in a bid to turn the tide on non-savings, the tax-free savings initiative aims to stimulate saving over and above retirement-based savings. This provides an excellent opportunity for parents to take advantage of this compelling opportunity to save for their child’s education.

Make education your goal-based saving

As an example, if a parent started contributing R30 000 per year into a tax-free savings account with a 7% fixed interest rate, before their child turns 17, they would have met the current lifetime contribution limit of R500 000.

If they left this in the tax-free savings account until their child turns 18, thanks to compound interest (at a constant rate of 7% per annum) their accumulated savings would have grown to R1,04 Million. A valuable investment in anyone’s language.

Minister Blade Nzimande agreed to a meeting with vice-chancellors to discuss various issues, including what is responsible for driving high costs at universities. But currently, typical first year tuition fees for a student studying a straight BCom at UCT range from R50 000 to R62 500.

According to Grobler, parents using a tax-free savings account to save for their child’s future should regard the investment as a long-term one.

“For clients who exercise the restraint required to leave their investment for the full term, thanks to the positive effects of compounding interest, they will reap the most benefit,” she says.

Related: Taking South African Financial Skills to the World

While Treasury has stipulated that the tax-free savings account offers full liquidity within 32 business days in the case of an emergency (with a minor product-specific penalty fee applying) without any prescriptive terms and conditions on its usage, clients should note that the account cannot be reimbursed with the withdrawn amount at a later stage.

Withdrawals will therefore negatively affect the tax-free growth of the investment over time. Also, it’s important not to exceed the annual or lifetime maximum contributions, since any amount over these thresholds will be taxed at 40%.

Investec Cash Investments falls under Specialist Banking and offers cash solutions to individuals, small businesses and financial intermediaries. Clients can choose from a range of cash products with guaranteed capital and highly competitive annual returns, ranging up to 9.2%*. These savings and cash investment products offer capital preservation, a high level of security and exceptional returns with various levels of accessibility. There are no fees attached.Investec provides a wide range of financial products in South Africa through its Specialist Banking, Asset management and Wealth and Investment divisions.

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The Alfa Romeo Stelvio – More Than An SUV

The All-New Alfa Romeo Stelvio draws inspiration from the legendary mountain pass linking Italy to Switzerland, with 48 hairpins in quick succession.

Alfa Romeo

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The All-New Alfa Romeo Stelvio draws inspiration from the legendary mountain pass linking Italy to Switzerland, with 48 hairpins in quick succession. The Stelvio pass is widely seen as one of the most beautiful and engaging roads on the planet.

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Enhance Your Entrepreneurial Flair With An Online Postgraduate Diploma From The University Of Pretoria

The Department of Business Management at the University of Pretoria, a leader in business management education, will be offering an Online Postgraduate Diploma in Entrepreneurship for the 2018 academic year with some seminars to enrich your action learning experience.

Dr Alex Antonites

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The Department of Business Management at the University of Pretoria, a leader in business management education, will be offering an Online Postgraduate Diploma in Entrepreneurship for the 2018 academic year with some seminars to enrich your action learning experience.

The programme content focuses on the start-up processes, creativity and opportunity recognition, business planning and marketing as well as financial management. Furthermore, the programme emphasises entrepreneurial growth and small business policy development with relevance to the enabling environment.

Who should enrol?

The programme is designed for pre-, nascent and start-up entrepreneurs who want to attain an advanced degree in entrepreneurship. It is also intended for individuals who work in an entrepreneurial environment and are involved with small business policy development. Although many students in the programme have academic credentials in entrepreneurship or business management, the programme is also appropriate if your education and/or experience may be in other disciplines (e.g. engineering or medicine).

Admission requirements

A relevant bachelor’s degree.

Related: This Enterprises UP Expert Explains Why Start-Ups Really Fail

Additional programme information

The duration of the course is one year. The language of tuition is English and the course will be presented in two blocks by means of the blended learning method (70% online and 30% contact sessions). Students need continuous access to the internet to complete the course.

Course Contents

Overview of modules for Block A

  • Ideation-to-market: Starting up
  • International Business Venturing
  • Venturing Strategy Building (Part 1)

Overview of modules for Block B

  • Entrepreneurial Marketing
  • Entrepreneurial Supply Chain Management
  • Entrepreneurial Finance
  • Venturing Strategy Building (Part 2)

Click here for more information.

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Win A Business Makeover With Retail Capital To The Value Of R250 000

Retail Capital is giving SMEs an opportunity to win a makeover to build their brand with an investment of R250,000.

Retail Capital

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Retail Capital is giving SMEs an opportunity to win a makeover to build their brand with an investment of R250,000. During the summer campaign, SMEs are encouraged to share the vision of how they would like to see their business grow, and led by a team of experts, Retail Capital will work with the winning SME to help make their vision come true.

While South Africa’s economy is not faring well, Retail Capital CEO Karl Westvig remains optimistic about the country’s retail and hospitality sectors. “We are seeing some green shoots, with an increase in turnover in these sectors – starting from the end of September. Economic conditions remain very tough, but businesses seem to be trading well into October and we’re hoping this continues into the festive season trading.”

According to recent statistics from Statistics South Africa (Stats SA), South Africa’s retail sales rose by 5.5% year-on-year in August 2017, following a downwardly revised 1.6% gain in the previous month and above market expectations of 2.3%. It is the biggest gain in retail trade since August of 2012.

Related: How To Raise Working Capital Finance

“I do believe that these sectors will see an improvement during the summer season. But, key to this will be for small business owners to ensure that they have the right amount of stock, adequate cash flow, as well as other systems in place to meet the ever-changing needs of customers,” says Westvig.

For many small businesses, however, continually adapting to market changes requires cash injections that they don’t often have.

The prize includes the following:

  • Business plan/consulting
  • Marketing strategy
  • Design and branding
  • Website and social Media and,
  • R50k capital to gear your business.

Westvig explains that the summer campaign tagline ‘Your Vision. Our Belief’ really speaks to why Retail Capital first opened its doors. “Our goal is to see the potential of small businesses and to work with them in making these become a reality.”

He adds that the idea is not to simply help one business during the campaign either. Westvig points out that one of the biggest challenges that small businesses face in the sluggish economy is enough foot traffic through their doors. “Generally, the main hurdle in creating brand awareness and projecting credibility of their establishments boils down to establishing a strong online presence.”

“One of the first ways that South Africans identify a business or service provider that they want to work with is over social media – even in a country where the digital divide has traditionally separated the technological haves from the have-nots,” he says.

He explains that companies that don’t have a social media presence are running the risk of being overlooked entirely. “They may attract customers in their own community with signage or word of mouth, but to grow a business, they need to expand their reach – and that’s where social media comes in.”

But, the reality is that resource and time constraints mean that for many SMEs, social media is not prioritised. “Unfortunately for the average small business owner, they don’t have the time or expertise to get connected.”

Understanding the importance of having an online presence, Retail Capital has also committed to developing the digital presence of all campaign entrants. This would include setting up each entrant’s digital presence on platforms such as Google, Facebook, Twitter, Tripadvisor, Zomato and any others that may be relevant to their specific market or industry.

“As a partner to many SMEs in South Africa, we are continually looking at new and innovative ways to help provide them with the much-needed support in order for them to realise their visions. SMEs need to be supported with initiatives like targeted education and training, supportive legislation, and funding opportunities that collectively help them grow our national economy,” says Westvig.

Related: 6 Great Tips For A Successful Shark Tank Pitch

Who we are and what we do:

“More than R1.25 billion has been extended to a range of businesses including food trucks, hair salons, restaurants, spas and franchised retail stores. Many of these businesses have not been able to raise funding in any other way, other than to go to unscrupulous lenders,”says Karl Westvig, the CEO Retail Capital, a company that provides working capital with the help of innovative lending technology.

“We have also estimated that for every R160 000 we lend, we create a new job. This means that 625 jobs have been created purely by enabling small businesses to get the funding they need for working capital requirements or expansion opportunities.”

Retail Capital’s system, which enables it to advance funding to small businesses, based on real time information on credit card transactions, is providing a new funding alternative to entrepreneurs who have previously been turned away by banks. Because it is able to get actual sales information, it can approve funding immediately, and allow for flexible repayment options based on sales cycles of the particular businesses it is funding.

“This creates significant opportunity for small business owners to focus on their business and grow volumes or look for expansion opportunities rather than spend their time frantically trying to repay debt or keep the business alive after debt repayments have eaten away at any cash reserves they might have had.”

Retail Capital funding is repaid by it taking a percentage of a business’s recorded credit or debit card sales, with repayments fluctuating in line with their business cycle. This has the effect of ensuring that it isn’t overburdened with debt.

“In the past six years since starting the business, small businesses have had the benefit of R1 billion in funding they would have been unable to get through traditional channels,”says Westvig.

Against the backdrop of recessionary conditions in South Africa, Retail Capital’s client information reveals growth in informal sector turnover across a number of industries.

“We believe that growth in the informal sector is outstripping that of the formal sector,”says Westvig.

As a large proportion of the businesses it funds are women- and black-owned, there is evidence that entrepreneurs who have previously been excluded from access to finance are now enjoying success now that their access to finance problem has been solved.

Win A Business Makeover with Retail Capital

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