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Things to say to sound cool around the water cooler – part 1

FYI pic

We have all been in that situation when chatting to colleagues or some or other social environment where the financial/economic lingo gets the better of us. A good way of knowing if you understand something is if you can explain it. I thought it may be a fun idea to demystify some financial/economic lingo to increase your ‘water cooler cred’.

This is the first in a series to make sure that you are always up to date!

When talking investments:

Bullish- The price is going up - the market is showing confidence.

Bearish- The price is going down - the market is lacking confidence. World markets are currently bearish due to various factors including the poor growth outlook in China.

Blue chips- Companies that sell high-quality, widely accepted products and services and have a solid reputation with a proven track record. Blue chip companies generally provide reliable growth and operate profitably in adverse trading conditions.

Words I came across recently while reading financial news:

Referendum: A general vote in order to come to a decision on a specific proposal

Austerity: a set of policies with the aim of reducing government budget deficits which may include spending cuts, tax increases, or a mixture of both

Structural reform: changes to the way the government works

Buzz words

Do you know what the BBBEE status levels mean?



**Procurement spend recognition


100 points



95 but <100 points



90 but <95 points



80 but <90 points



75 but <80 points



70 but <75 points



55 but <70 points



40 but <55 points



<40 points


*This is based on the amended codes which became effective from 1 May 2015.

** This shows the amount of expenditure that can be recognised for making purchases from each level of supplier.


Example: Calculating BBBEE spend

If you spend R10 000 with a level 1 supplier, you can claim R13 500 expenditure as BBBEE spend whereas if you spend R10 000 with a level 5 supplier, you can only claim R8 000 expenditure as BBBEE spend.


Dashboard – relevant information about a business/company presented in a series of charts or graphically. It is a tool aimed at summarising the financial well-being of the business/company.

Catalyst- this refers to a change agent. You may often hear people say “this application may be the catalyst to the success of the business.”

Deep dive – perform extensive analysis on a problem or subject.

Low-hanging fruit – the most easily achievable target given a set.

Paradigm shift – This is actually a scientific term that has made its way into the business environment. The business interpretation means a significant change in thinking/business practice.

Synergy- The concept that the value created from combining ideas/companies is better than the sum of its individual parts. This is most commonly used in a merger and acquisition context. In an office environment, you may have heard the phrase “let’s create synergy amongst the divisions/departments…”


Clichéd phrases to avoid using

I read the following clichés in ‘Business insider’ and it made me laugh because it has almost become second nature for many of us to use these phrases without giving any thought to how over-used it is and sometimes, how ridiculous it sounds. Here goes…


“Break down the silos” – why not say “share information” or “work together”?

“It is what it is”- It’s one of those phrases used to bluntly let people know to get on with it.

“Take it off-line”- Need I say more.

“Think outside the box” – This is by far my favourite because just by saying it, you are being ordinary and the entire meaning is lost.


If you need a break and want to smile, check out this video that puts it all together:



Hope you enjoyed this!

Natasha Bhowani Seeth CA (SA)



South Africa- Repo rate adjustment


There are not many things we are able to control as South African individuals when it comes to economic decisions affecting the country. We may not be able to control these decisions, but it is worthwhile to understand them. In understanding some of the choices that are made which have a direct impact on how we live, it broadens our minds and aids us in changing some of the things that are in our control of.


Last week, the South African Reserve Bank (SARB) increased the repo rate by 25 basis points to 6% per annum resulting in the prime lending rate to increase to 9.5%. We know this is going to impact us in some way but do we understand why such an adjustment was made and does it matter?


Why the repo rate was increased

 An increase in the repo rate was not unexpected but rather anticipated, why?  

South Africa’s inflation target is between 3 and 6%. One of the ways of curbing inflation increase is to raise the interest rate. 

Gary Palmer, CEO of Paragon Lending Solutions, says; “An interest rate hike has been on the cards for a long time, especially with inflation increasing fuelled by petrol and food price hikes and the devaluing of the rand…” 

Firstly, it must be understood that inflation and interest rates have a direct impact on one another. Inflation is basically a rise in the price of goods or a reduction in the value of currency (i.e. R1 will buy less). 

The picture below depicts the relationship between interest and inflation: 


According to the SARB “Moderate interest rate hikes are likely to achieve price stability, the bank’s primary mandate, without unduly sacrificing growth,”

Price increases included (but not limited to):

  • - Wage rate hikes

  • - Increase in the average oil price resulting in rising fuel prices and in turn, rising food costs

  • - Eskom tariff application to increase electricity prices

Some other factors also included:

- The impact of the Chinese stock market crash, which led to a reduction in demand of commodities (“All of a sudden China slowed and we did not get the inflow we had anymore”- Sizwe Nxedlana Chief Economist FNB), and the subsequent decline in commodity prices, namely iron ore.

- The vulnerability of the Rand against the US Dollar.


You may have also read that the possibility of increased interest rates in the US will have an impact on South Africa’s economic outlook. The SARB in an attempt to remain ahead of the US rate hike increased the repo rate to reduce the impact on the rand and to minimise the subsequent impact on inflation.

Since South Africa is currently facing a current account deficit, it is reliant on foreign investment to boost capital inflows into the country. If the US raised its interest rates, investment within the US becomes more attractive which means that less investment will take place in South Africa.

Another factor that must be considered is if the US raises its interest rates, debt financing becomes more expensive i.e. the state borrows money that may be denominated in US dollar, this borrowing is now more expensive as a result of the interest rate hike.

The table below illustrates countries vulnerable to rising US interest rates with South Africa likely to be the least affected from the countries presented:

Economies Viewed As Being Vulnerable to Rising US Interest Rates


Morgan Stanley

Société Générale























South Africa

South Africa

South Africa

South Africa

South Africa

Source: Federal Reserve, Estado, Moody’s

What the increase in the repo rate means for the economy

Many analysts have advised against a rate increase citing that an increase is going to worsen a very weak economy and there is no need to worry about the interest rate differential in July as the US is expecting to delay its rate hike until December 2015. Needless to say, the increase is upon us and it only makes sense that we revise our budgets accordingly.

Consumers are already under pressure given the rise in the cost of electricity, fuel and food prices (basically increase in the cost of living), the increase in the interest rate means that consumers will have even less disposable income since car, home loan, credit cards and any other form of cost related to borrowing will increase.

The effect on the increase is particularly painful for the lower income earners.

“An increase in interest rates makes the cost of money more expensive and may crowd out private demand, particularly when investments show a significant sensitivity to changes in interest rates. This could lead to a decrease in aggregate demand, both directly through investment and indirectly through a lower wealth effect in the private sector and subsequent lower consumption. However, higher interest rates could also lead to an increase in savings and could attract foreign inflows that could lead to a currency appreciation.”- JC Jordaan, independent researcher (Bureau of Market Research UNISA)

Given that July was marked as national savings month, it is alarming to come across statements like: “A clear indication of the dire state that consumers are finding themselves in is the fact that according to Standard Bank, South Africans are among the worst savers in the world.” The increase in repo rate does not bode well for savings.

In light of this, there is a likelihood that banks will once again tighten their lending policies.

The interest rate hike is also favourable for investors who will enjoy a better interest rate or return on their capital. However, the tax man must not be forgotten. Increase in interest income may push investors over the interest-free bracket of R21 000. It may therefore be necessary to revisit the tax structuring of investments. It also makes the tax-free saving accounts very attractive.

Natasha Bhowani Seeth- CA (SA)

China unravelled

Have you noticed the amount of Chinese trade that has been occurring in South Africa over the past few years? You would have to be living under a rock if you have not encountered a China mall or market in any of the major cities, and this is just drop in the ocean for South Africa’s ties to China.

China has seen massive economic growth in recent years and was a preferred destination for research and development investment. Up until recently, China has stood as a haven of economic stability at a time when the US and other developed economies were facing financial turmoil. (World Economic Forum).

The low manufacturing costs made exporting goods a driving force in growing the domestic economy.

The current situation

China’s stock market actually began to show signs that shares were overvalued. A few warning signs included (Source: John Meade- Bezinga.com):

  1. According to Bloomberg China economist Tom Orlik, 5.8 percent of China’s new investors are illiterate and 60 percent have less than an 8th grade education. So? This means that thousands of un-educated participants were entering the marked resulting in exaggerated share prices. I.e. increased demand was due to lack of information rather than embedded value in the underlying stocks.

  2. Reckless lending as a result of interest rate cuts by the Chinese Reserve Bank.

  3. Increase in the number of unsold residential properties causing house prices to drop and resulting in a lagging real estate market.

China Crash 1


Given some of the warning signs, it was just a matter of time before we saw the bubble bursting. Investors started selling stocks (shares) at an alarming rate due to share prices dropping. This brought about a frenzy in the Chinese stock market causing trading to halt in an attempt to stabilise the market.

“On the Shanghai exchange, 353 companies suspended trading, equivalent to 32 percent of all listings. A further 970 were halted in Shenzhen, or 55 percent of the total.” (Bloomberg Business)

In an attempt to regain investor confidence, the Chinese Government have made every effort to support the share price. In must be borne in mind that China does not trade in a free market (free market- prices are determined by unrestricted competition between privately owned companies), meaning that Government intervention plays a big role in Chinese markets.

Some of these attempts included easing of lending rules in order to encourage people to invest and restricting the sale of stocks for six months for those investors holding more than 5% in any stock.

What if China goes into recession?

Since the Chinese stock market crisis, we have already seen a drop in prices of commodities like copper and iron ore. Iron ore is the fifth largest export for South Africa following gold, platinum, coal and diamonds. This means less income to the South African economy due to the drop in the price of iron ore.

The weak Chinese stock market has contributed to the weakening of the Rand against the US Dollar.

Investment in emerging markets will take yet another knock as investors become more risk averse during these trying financial times.

Another worrying factor that has taken a back seat is the impact on elephant poaching. How is this relevant to the Chinese crisis? Well, the Yuan (Chinese currency) weakened against the US dollar to nearly a three month low. This means that the export of ivory becomes more attractive resulting in more elephant poaching.

Some economists are saying that the problem in China could be far worse for the global economy than the problem in Greece. Why?

Firstly, China’s economy is approximately forty times larger than Greece. Secondly, “Since China is the second largest trading partner for both Europe and the United States, it goes without saying that a healthy Chinese economy is good news for the developed world.” – CNN Money. Lastly, China is one of the biggest consumers in commodities and has a far greater impact on the global economy.

It is clear that the impact of the Chinese stock market crash has far reaching consequences. I hope I have been able to give you some insight and a glimpse into the China saga.

Natasha Bhowani Seeth- CA (SA)

Greece breakdown

The purpose of this article is not to say anything different to what has already been said but to put everything together in a way that is understandable, because let’s face it, we live in a global economy and events happening around the world have a direct impact on us as individuals.

What actually happened?

The current Greek government won the election by promising the people of Greece an easy way of life (no different to what many politicians promise). The easy way of life came in the form of easing austerity (this word has been thrown around a lot and what it means in this instance is that policies were put into place to reduce taxes).

The Prime Minister of Greece, Alexis Tsipras promised the following (to name a few):

  • - A fair tax system

  • - Re-employ all public sector employees who were previously retrenched

  • - Free electricity

The problem with this plan is that there was no real mechanism for funding all these promises.

The promise of reducing Greece’s deficit was doomed from the beginning since additional funds would need to be borrowed to fund all the benefits promised to the people of Greece. The money being received by the Government in the form of taxes was less than expenditure incurred, resulting in a growing debt to GDP ratio.

The other problem that exasperated the situation of inflow of funds in the form of taxes, was that the level of tax evasion was too high i.e. taxes were not being paid and there was no immediate action taken to identify tax evaders and impose penalties and punishment in order to send a clear message that tax evasion will not be tolerated.

What about the Euro-Zone?

The International Monetary Fund (IMF) had bailed Greece out when it was unable to make payments to its creditors. Greece has since defaulted on the payment of approximately 1.6 billion Euros to the IMF.

This resulted in discussions on a way forward for Greece. The creditors have made certain proposals to allow extensions on payment. The Prime Minister of Greece called on a referendum to be made (a general vote by the Greeks in order to come to a decision on whether to accept the proposal or decline).

In order for Greece to remain in the Euro zone, it must accept the terms and conditions imposed by the European Union (EU).

The picture below explains the outcomes (Source: Bloomberg Intelligence):

Bloomberg - Greece


So what if Greece exits the Euro?

The European Union is made up of an agreement held by 19 heads of state. The exit of Greece from the Euro may cause a domino effect on other countries that are in crisis like Spain, Italy and France as mentioned by Chris Hart in an interview with Moneyweb.

For Greece, the exit will mean:

  • - No borrowing capability from European countries

  • - Legal disputes for business who will be forced to trade on dual currency during the transition

  • - Companies unable to pay debts to foreign lenders

  • - Living standards would drop

  • - Greece falling into recession

These are a few effects as a result of the Greek exit (commonly referred to as Grexit) - information adapted from BBC News.

For the rest of Europe, the “Grexit” will have the following effect:

  • - Investment may be cut due to fears surrounding the stability of the Euro (This has a particularly dire impact on investment in developing countries)

  • - Cut back on spending may cause the euro-zone into recession

  • - The Euro may lose value in the currency markets, this may promote export for Europe but imports from the US, Japan and China will be more expensive.

  • - In South Africa, we will be impacted by the Rand/Euro currency and investment.

  • - Since Europe as a continent is South Africa’s largest trading partner, a recession in Europe will have negative effects on South African Trade

Current state:

No further action is anticipated until after Sunday’s (5 July 2015) referendum is reached. Alexis Tsipras, the Greek Prime Minister will be backing a ‘no’ campaign.

So, should you be planning your next holiday to Greece anytime soon?

Greece remains an attractive tourist destination. What the current situation does mean though is that tourists may have to carry around hard cash in order to make payments and this should be in small denominations as some shops and restaurants do not have enough change for large denominations of cash.

Having said this, you may also want to be a bit more vigilant as pickpockets will be on the rise given the knowledge that tourists are carrying around lots of cash.

It is unlikely that you will experience protests outside of the city centre of Athens. Many of the beach resorts and popular tourist spots are continuing business as normal.

This article is merely a simplistic explanation to give you, the reader a basic understanding.


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