There’s no secret South Africans love their coffee – with new stores popping up on a weekly basis across the country, both through independent and retail chains.
Two of the country’s biggest players in their respective industries are leading the pack in the explosion of coffee in SA, with Vida e Caffé and Shell announcing the opening of their 100th store in South Africa, in Dorp Street, Stellenbosch.
The Vida-Shell relationship started off in 2013, and after just two years the partnership has hit a significant marker, coming together to offer South African motorists a moment of sanity amidst the malaise of their daily commute.
Vida introduced a new brand within its stable, known as Torrador, specifically to work within the majority of Shell sites, together with Vida stores in selected large Shell forecourt environments.
With over 100 Vida e Caffé, and Torrador by Vida e Caffé, coffee bars at Shell service stations across the country, the pairing have seen a very positive consumer response with robust growth in coffee, food, convenience retail as well as fuel sales. Motorists are now becoming accustomed to getting their coffee fix at Shell whether in the Cape, Gauteng, KZN or at a Shell Ultra City somewhere in between.
After a great deal of research into convenience trends in the South African market, Shell identified the rapid emergence of the coffee culture in South Africa as a significant opportunity and key lever of its convenience retail strategy.
South Africa had been identified as a key growth market for the business and building on Shell’s 113-year heritage in the market, Shell invested in upgrading its store formats and non-fuels offers over the past few years.
Related: Wiesenhof Coffees: The Cream On Top
After considering all potential partners both locally and globally, the Vida brand stood head and shoulders above competition given the critical role the brand has played in creating and establishing the coffee experience in South Africa.
To meet the varied trading environments within which Shell operates, the Torrador sub-brand was then established, ensuring that the Vida experience is readily available across the Shell network.
Mike Templeton imparts some useful insights from Vida’s expansion:
1. Meeting customer expectation
Identify the demand and plan the full solution accordingly. While any expansion plan may be all mapped out on paper, be sure to keep top of mind what it is the customer likes about your offering and what they’re expecting, and then give it to them. If you veer too far from that, your plans may not net the required result.
2. Build management teams
Select wisely and develop the people that will be rolling out and leading the realisation of your vision. All too often, those that are expected to perform are not in place. Identify and employ the right individuals and how to get there. Share the vision and the journey with them, train them, and ensure they have absorbed the entire concept and how to make it a reality.
3. Training and routine
It’s imperative that there has been ample investment in human resources to ensure the stores are operational and excellent at all times. Businesses are built on skilled and motivated people. Be sure to take it slow, pilot and test, fail, assess and re-design, then improve and roll-out.
4. Maintain day to day involvement
Keep a close and watchful eye on the brand, ensure compliance with standards and operational guidelines, as this will give you the best opportunity to stay true to brand delivery.
5. Keep it fresh
It’s all too easy to get a bit stale and complacent once you have launched. But as time progresses, it’s critical to stay motivated, seeing what the customer sees, and making the necessary amendments to exceed customer expectation. Continuous improvement and innovation is a key principle in good business.
6. Partner up
Leverage your partnerships, identify the strengths in each other’s skills and brands. Use one brand or offer to drive feet for the other which will increase your total basket.
7. Consistency long-term
Launching and building a business is the easy part – running the operation and keeping the quality and energy up is the challenge. Stay the course.
Vida e Caffé has had an impressive 12 months. Alongside the 100 Shell stores, they continued their development of new stores that opened in corporate and mall environments throughout Africa.
Explains Vida e Caffé CEO Darren Levy, “We spent the last year focusing equally on coffee, the in-store experience, and our food and beverage product innovation. October 2015 was our new food launch and this contributed significantly to some fantastic growth in the past few months. As an organisation we have placed a high level of importance to the sourcing and roasting of quality components that make up our coffee blend. To this end, we have been actively engaging importers, roasting experts and industry experts as we continue to evaluate the taste profile in line with international and local trends. Much of the success of a perfect in-cup experience is attributable to the methodology followed to make the flat white or meia in store. The coffee market is growing exponentially in SA and we have to do what is necessary to remain on top in a very competitive space. I think we’re well positioned to do that.”
3 Stealthy Tax Hikes Payroll Managers And Employees Need To Take Note Of
By Rob Cooper, tax expert at Sage, and chairman of the Payroll Authors Group of South Africa
“Dammed if you do and dammed if you don’t.”
The adage summarises the difficult decisions government and the Finance Minister faced when balancing the country’s books, rescuing state-owned enterprises, and reviving the growth of our economy. Given the economic pressure that most taxpayers are facing, government ideally needed to achieve all of that without direct increases to personal income tax in the most recent Budget Speech.
Personal income tax has comprised at least a third of South Africa’s total tax revenue in recent tax years, despite growing unemployment. The 2019 Budget, presented in February, forecasts that personal income tax will account for nearly 39% of tax collected during the upcoming (2019/20) tax year. Given that we are in an election year and that the tax base is fragile, it’s not surprising that the Finance Minister and the National Treasury avoided direct increases to the statutory tax tables used to calculate PAYE for employees in the budget.
Nonetheless, government has made inflation work in its favour to impose some tax increases by stealth. Here are three ways government is raising more revenue without direct tax increases:
1. Bracket creep
The statutory tax tables used by payrolls and employers have not been changed for 2019/20, nor have the brackets been adjusted for inflation. This effectively amounts to an indirect tax increase that will yield a revenue saving of approximately R12.8 billion for government’s coffers.
It is not unusual for government to use ‘bracket creep’ to effectively raise more revenue. But unlike previous tax years, even low- and middle-income earners are not getting much relief. Rebates and the tax threshold are being increased by small amounts to allow some relief, but many people this year will feel the pain as inflationary salary increases push them into a higher tax bracket.
2. Medical aid credit not adjusted for inflation
As proposed in the 2018 Budget, the Finance Minister did not apply an inflationary increase to the Medical Tax Credit, which allowed him to raise an extra R1 billion in revenue for the year. Surprisingly, these funds will be allocated to general tax revenue rather than ring-fenced for healthcare. In previous tax years, revenue generated from below-inflation increases on medical scheme credits was used to fund National Health Insurance (NHI) pilot projects.
There is still no clarity on how the NHI is going to be funded except for a general statement that the funding model is a problem for the National Treasury to solve, and that the principles of cross-subsidisation will apply. One wonders if any real progress will be made soon, given the fiscal constraints government faces.
3. Business travel deduction left untouched
The Budget leaves the per-kilometre cost rates used to determine tax deductions for business travel untouched. By not increasing travel rates to account for inflation, government effectively increases income tax collection at the cost of the taxpayer. This will be a blow for people who need to claim from their employers for business travel in their personal vehicles. This change has slipped through largely unnoticed and the budget does not provide numbers for the expected increase in tax revenue.
Amid political turmoil and uncertainty, the Finance Minister presented a balanced budget for 2019/20 that offers hope for the future along with some tough love. With government taking steps to accelerate economic growth and improve revenue collection, we should hopefully see a steady improvement in government finances, which will translate into less pressure on the taxpayer in future years.
SMEs: Staying On The Right Side Of The Taxman
Remaining SARS compliant can be a constant challenge for small- to medium-enterprises (SMEs), especially when they are trying to focus on growing their businesses and streamlining their operations.
EasyBiz Managing Director, Gary Epstein, says submitting taxes can be a seamless process that does not have to take up more time than is necessary. “If business owners understand what is required of them and they put a few processes into place to deal with their tax submissions properly, their lives will be so much easier.”
What are the top three considerations for SMEs when submitting tax returns?
“Firstly,” says Epstein, “SARS returns must be accurate and submitted in terms of the relevant Act. Secondly, returns should be submitted and paid on time to avoid unnecessary penalties and interest, and thirdly, business owners must follow up on queries issued by SARS. “Do not ignore these queries, act on them as soon as possible”.
What are the major SARS submission deadlines for SMEs?
Epstein points out that small business owners need to adhere to various tax deadlines, each with their own particular dates for submission. “It is important that business owners diarise the dates (and set advance reminders for themselves) and/or enlist the services of an accountant or financial adviser to help them keep abreast of requirements.”
Value-added tax (VAT)
VAT payments need to be submitted in the VAT period allocated to the business, according to various categories and ending on the last day of a calendar month. This may mean making payments once a month, once every two months, once every six months or annually, depending on the category.
Provisional tax should be submitted at the end of August (first provisional) and at the end of February (second provisional) – for February year-end companies.
In addition to submitting an annual reconciliation (EMP501) for the period 1 March to end of February for Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF), employee tax, in the form of an EMP201 return, needs to be submitted by the seventh of every month.
When can SMEs get extensions and is it worth it?
Epstein says SMEs can apply for various extensions, but these are subject to the Income Tax Act and Tax Administration Act.
“It is best for SMEs to consult their tax professionals to get advice regarding extensions for their businesses.”
What is SARS not flexible about?
SARS is not flexible when it comes to late returns and late payments.
“I cannot stress enough how important it is for SME owners to ensure their tax returns are submitted on time. In this way, they will avoid the inconvenience and expense of additional fines and interest,” notes Epstein.
What skills do SMEs need in their organisations to be able to submit to SARS efficiently?
Business owners often don’t have the time or expertise to deal with tax submissions throughout the year. If the business cannot afford to employ a full-time accountant or financial services expert, it would do well to outsource its tax requirements to a registered tax practitioner.
“I would recommend that even if they are not submitting the tax returns themselves, business owners should have a broad understanding of the tax regulations and what is expected of them. There is a lot of helpful information on the various Acts and tax requirements on SARS’ website,” says Epstein.
How does the right software help SMEs remain SARS compliant?
SME’s (and their accountants’) jobs can be made easier by using reliable accounting software to calculate accurate VAT reports. These reports are only as accurate as the data entered into them, which means care needs to be taken when inputting data into the accounting programme. Epstein says a good accounting software package must be reliable, easy to use and functional.
“SMEs need to check that the software has thorough reporting capabilities and can interface with other software solutions. Of course, it is also important to find out whether the software is locally supported by the vendor or not.”
4 Dangers Of Business Under-insurance
A common short-term insurance peril that many SMEs face when submitting a claim following an insured event is the risk of being underinsured.
Malesela Maupa, Head of Products and Insurer Relationships at FNB Insurance Brokers says, many small business owners mistakenly believe that by merely having a short-term insurance policy in place they are adequately protected against unforeseen events.
“This is technically correct provided that the business is covered for the full replacement value of the items insured. However, in circumstances where the sum insured does not cover the full replacement value or material loss of the item insured, the business is underinsured,” explains Maupa, as he unpacks the dangers of business underinsurance:
1. Financial loss
The most common risk is financial loss on the part of the business. If the business is underinsured or the indemnity period understated, the short-term insurance policy will only pay out the sum insured for the stated indemnity period as stated in the schedule, with the business owner having to provide for the shortfall. This often leads to cash flow challenges, impacting profit margins or rendering it difficult for the business to recover following the financial loss.
2. Reputational damage
Should an underinsured business not have sufficient funds to replace a key business activity or critical component following a loss, this may impact its ability to fulfil its contractual obligations, leading to a loss of business or market share, and irreparable reputational damage in the worst-case scenario.
3. Legal action
A small business also faces the risk of customers or clients taking legal action against it, should it fail to deliver on goods and services following a loss or be unable to honour its financial commitments that they committed to prior to the loss.
4. Survival of the business
A catastrophic event such as fire, which could result in the loss of stock or company equipment and documentation, could threaten the survival of a small business that is not yet fully established, if the business assets are not adequately insured.
Working with an experienced short-term insurance broker or insurer is essential when taking up short-term insurance to ensure that business contents are covered for their full replacement value.
Furthermore, depending on the nature of the business or item insured, the policy should be reviewed on a regular basis to avoid underinsurance as the value of items often change overtime due to fluctuations in economic activity. Where it’s necessary, evaluation certificates need to be kept up to date.
“Lastly, SMEs should ensure that the sum insured does not exceed the replacement value, which would lead to over insurance. Should a business submit a claim following a loss, the insurer would only pay out the replacement value, regardless of the higher sum insured,” concludes Maupa.