Cutting the costs of bad debt is high on the agenda of the telecommunication giant Telkom, reports Karen
Telecommunications giant Telkom plans to implement a new strategy to stem the millions of rands lost each year through bad debt.
Last year, the company wrote off 2,1 percent of its R9,6-billion turnover to bad debt — an amount of more than R200-million. In July alone this year, 30 000 accounts were declared bad debts.
About 20 percent of this debt is incurred by businesses which go insolvent — leaving Telkom with unpaid accounts, and little chance of reclaiming the money.
In an insolvency case, secured creditors such as the banks get paid first, followed by preferential claims such as unpaid employees, and finally concurrent claims such as Telkom’s and other creditors.
More often, after the secured creditor is paid, there are no assets left in the estate and creditors could end up having to pay legal costs without their claims ever being settled.
“We have to lodge and prove a concurrent claim against the estate which is a time-consuming and labour- intensive exercise. We run the risk of contributing, should the estate have little or no assets,” says financial accounts general manager Anthon Meyer.
Now Telkom plans to ask for personal guarantees from the directors or members of new companies which apply for telephone services.
“This will enable us to lodge a claim against the personal assets of the individual as well as the estate if the company is liquidated,” says Meyer.
In addition, certain new companies which pose a greater risk than others, will be required to pay a deposit of a minimum R1 200 a line.
“We will credit scan the company as well as the directors or members –and if there is a bad credit record, we’ll insist on a deposit per line,” says
However, he adds that new companies without any credit record will not necessarily be required to pay a
“We are not prejudiced against a new company simply because it has no credit rating — the deposit will only apply to companies or individuals which have defaulted in the past,” says Meyer.
Senior manager,credit control, Gerhard Cilliers says certain high-risk companies will also be required to pay deposits regardless of their credit rating.
“In the case of a telephone bureau which has several lines and whose main business is running up calls, we may require an additional deposit as the traffic on the lines is high and our risk greater.”
He adds that in a high-risk situation such as an import-export business, Telkom may monitor the lines for consumption and, at its discretion, ask for an interim payment before the usual end-of-month
BUSINESS BAROMETERIscor project dropped
* Iscor has dropped out of the R4,7-billion Saldanha steel project ‘in its present form’ because delays have affected capital cost escalations and forecast project returns. Environmental concerns flared up when the project was first announced and a commission of inquiry has been investigating complaints. MD Hans Smith said the company’s overall strategies could not be disrupted by delaying decisions “on investments of this magnitude for undetermined periods”. A re-evaluation of the project will be undertaken and this will determine whether the project would go ahead in some form.
Blow for Sol’s empire
* The proposed Gambling Bill, released this week, will require Sun International to lose 10 gambling operations in the Northwest and Eastern Cape to meet its stipulations that no single company or person can have more than two licences per province, or more than 16 nationally. Sun International has seven operations each in these two provinces.
Commercial crime
* Commercial crime with an actual and potential value of more than R2-billion was reported for the first eight months of 1995. This is some R1,6 billion less than for the same period last year.
Hey, big spender
* South African businessmen who visit Britain spend an average of Stg 153 a day, beating their German, American and Japanese counterparts. Only visitors from Singapore, Saudi Arabia, Hong Kong and the United Arab Emirates spend more. The business travel sector spends some R2,6-billion a year in Britain which accounts for 26 percent of the country’s tourism revenue.
World Bank lends less
* The World Bank says it has had a good year, but lending is down by $500-million in Africa and it fears a drop in United States contributions will leave its most critical lending fund short. The bank’s annual report released this week said lending rose from $20,8- billion last year, although fiscal 1995 lending was $1.2-billion below the bank’s 1993 total and $200- million below 1991 loans. Lending to African nations dropped from $2,8-billion last year to $2,3-billion, the lowest level in more than a decade.
August trade deficit
* The trade account again recorded a deficit in August, this time R516-million, following a marginal surplus of R320-million in July. Imports surged further to R9,760-billion, the highest this year, from R9,093- billion the month before. Exports shrank to R9,244- billion from R9,413-billion.
Price index drops
* The annual rate of increase in the production price index for all commodities for South African consumption dropped 1,5 percentage points in July to 9,0 percent from 10,5 percent in June.
Levi’s charity is in its genesLevi Strauss & Co clothes itself in a charitable fashion reports Reg Rumney
Giant apparel company Levi Strauss & Co and its associated foundation plan to spend just under $300 000 this year in charitable giving in South Africa.
Director for Europe and Africa of the Levi Strauss Foundation Alan Christie revealed this in a speech at the Mail & Guardian and NNTV Investing in the Future Award breakfast function at the South African Broadcasting Corporation in Auckland Park, Johannesburg.on Friday last week.
Christie handed a plaque over to Freegold chairman Clem Sunter on behalf of co-sponsors the Mail & Guardian and television channel NNTV. Freegold won the award for their role in the Kutlwanong housing project near
The award, which aims to give public recognition to social investment, is accompanied each year by the Mail & Guardian Investing in the Future Supplement, which covers social investment issues.
This year the supplement reported in detail on the six finalist projects. Those projects, and the award judging process, will also be the subject of an in- depth documentary to be screened on NNTV on October 4 at 7.30 pm. The documentary, filmed by Mail & Guardian TV, was commissioned by NNTV.
Worldwide giving by Levi Strauss and the Levi Strauss Foundation will be $17-million this year, he said.
Christie noted Levi Strauss had only recently returned to South Africa after pulling out of the country in response to calls to boycott the country.
The company resisted pressure to return quickly. Some employees and consumers saw investment in the New South Africa almost as “a test of our political correctness,” Christie said.
The decision to invest was driven, not only by the prospect of viability, but also by a judgment about the social and political circumstances of the new South Africa
“That was a judgment driven by our corporate values — by the ethical principles which underpin all of our business decisions.
“The Mission Statement of Levi Strauss and Company states that our task is ‘… to sustain responsible commercial success…’ and that ‘… we will conduct our business ethically and demonstrate leadership satisfying our responsibilities to our communities and to society’.
“In these two statements we try to encapsulate a corporate tradition which can be traced back over 140 years to Levi Strauss himself.
“It describes an approach to business which looks beyond the bottom line. It speaks to corporate values which describe the way we choose to do business and which we believe are important contributors to the success we enjoy.
“When cynics hear us talk in this way about ethics and values and social responsibility, they mock us and dismiss us as a bunch of woolly do-gooders who should get on with the business of business.
“Our response is that Levi’s is a $6-billion company, the largest branded apparel company in the world and the clear market leader in jeanswear. We just happen to believe social responsibility is the business of business and that our success has been built, in part, on our adherence to our values.
“Cynics also say that it is easy for Levi’s to be ethical because we are a private company that doesn’t need to satisfy public stockholders and investment analysts. Maybe so, but on the other hand there aren’t many public companies that would turn down the growth we have enjoyed over the last eight years.”
Levi Strauss rejected the approach that saw social responsibility as a marketing tool divorced from the community and designed for short-term commercial gain.
The company stressed partnership in its social investment, Christie said.
“We don’t think you can or should ‘brand’ social responsibility. We are grateful for any recognition we receive for the work we do in the community but our aim is to do the work, not get the recognition.
“I think that more and more companies recognise the validity of that approach and we are willing to play their part as corporate citizens in addressing the problems faced by our communities,” he concluded.
Levi’s had identified three priorities for its social investment: community economic development; AIDS and disease prevention; and social justice.
Levi’s worked in partnership with community-based, not- for-profit organisations which serve low-income and disadvantaged people, and tried to support organisations that involve the people being served so that they have some say in the services delivered. The foundation was also prepared to support new, ground- breaking initiatives.
The initial focus of Levi’s social investment in South Africa is on young people and women and those excluded and oppressed by apartheid.
Christie mentioned some of Levi’s-supported projects:
* Levi’s is the lead sponsor of a photo exhibition, called “Positive Lives”, which opened in the National Gallery of South Africa in July. It describes various experiences of people living with HIV and AIDS.
* Levi’s is helping to fund a job-creation project in Cape Town.
* Levi’s will fund a home for children with AIDS, a tuberculosis prevention programme and several other small-scale community help projects in the Cape Town area.
“Later this year we hope to co-sponsor a conference in Johannesburg that will focus on the support needed by small business and the help that can be offered by the private sector and others to a part of the economy that we suspect will be of importance to the future of large numbers of people in this country.”
Levi’s also has a policy of encouraging employee involvement in the community, and will ask them to help direct some of its social investment
Where will the Budget axe fall?
Government departments are under pressure to make deep cuts in their spending, reports Reg Rumney
Rumours of severe — possibly crippling — cuts in departmental budgets in the coming fiscal year have surfaced as next year’s Budget begins to take final
The Department of State Expenditure says this is only a perception — but, despite government commitment to a more transparent budgeting process, no details can be
State Expenditure planning chief director Gerrie du Preez confirms state expenditure will be kept to the same level as this fiscal year in real — adjusted-for- inflation — terms.
He says the impression of drastic cuts may have been created because of the “zero-based” budgeting process begun this year of examining spending items and redirecting State expenditure the Budget.
In terms of this process, departments were asked for their requirements — but this was then balanced against funds available and guidelines supplied on how to set priorities. “This creates an impression of drastic cuts.”
Nonetheless, government spending is being kept in check, says Du Preez.
“The size of the cake doesn’t increase with the new
In other words, the process of identifying needs could have resulted in greater expectations than the government could afford.
Government commitment to strict fiscal discipline is putting pressure on departments.
This week Deputy Finance Minister Alec Erwin said at the Chartered Institute of Management Accountants international conference in Johannesburg that the government was trying to reduce the seven to eight percent Budget deficit to 4,5 percent by 1999.
Chairperson of the Budget committee of the Joint Standing Committee on Finance Barbara Hogan says the finance department is cutting down on what departments are asking for, but probably not on last year’s spending amounts. “Departments are being asked to take a long hard look at their budgets from zero, and look at what is necessary.”
However, the ability of departments to do this varies. “We are still very much in a transitional stage.”
What cuts are being proposed and where is important because of a growing desire inside and outside government to reshape the traditionally secretive and obscure budget-making process.
Budget watcher Iraj Abedian comments that by the time the Minister of Finance presents the Budget to Parliament on the third Wednesday in March, it is too late to make changes. Abedian is director of the University of Cape Town’s school of economics’ budget
“The choices being made now are crucial choices,” says Abedian, who believes the public should know the Budget process leaves little room to manoeuvre. He remarks too that in this area there is no transparency.
Hogan says a complete overhaul of the Budget process is needed, both to deal with the provincial spending powers in the new constitution and to move to multi- year budgets from the present incremental system.
That may take time. Budget reform, Abedian believes, expressly cannot be done by decree. Much preparation and training has to precede it.
Democratic Party finance spokesman Ken Andrew says the Budget, unlike other tabled legislation, is presented as a fait accompli.
The problem with changing the budgeting process to be more inclusive is that it ties the hands of Parliament, which can scarcely criticise a product in which it is supposed to have been closely involved.
The roles of the legislature and of the executive should be kept separate. “We do think that Parliament through committee systems should have limited discretion to amend legislation.”
However, the DP believes Parliament should have more discretion to amend the Budget after it has been presented to Parliament.