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Things your company can learn from the Ashleigh Madison hack

AMReputation is something you build over many years, it adds value to your brand and translates into shareholder value, studies have indicated that 75% of an average  corporation’s value is intangible. A tarnished reputation is therefore also something that can potentially destroy 75% of your corporation’s value in a blink of an eye!

Reputational value translates into greater profits and ultimately results in a sustainable business. In today’s global environment, the reliability, integrity and continued availability of an organisation’s information is a key determinant of its success. Recent studies have revealed that cyber-attacks, data breaches and security incidents feature in the top five risks to resiliency in 2015.

Do you really understand the cyber risk your company is facing and the associated reputational value risk?

An organisation’s reputational value consists of external and internal elements, market perceptions being the most prominent external element while unique intellectual property assets are the most valuable internal element.

The recent Ashleigh Madison hack is a perfect example of how a unique intellectual property asset (subscriber details) was exposed by a cyber-attack and the subsequent public reaction (market perception) to the attack.

With over 9,000 .co.za domains made public by the hackers, many of which belonged to well-known South African companies, the question is, do you really understand the cyber risk your company is facing and the associated reputational value risk?

Organisations need to follow a risk-based approach

By conducting a risk based reputational assessment, organisations are able to identify their internet footprint and exposure to potential threats. Identifying critical assets is a crucial step to understand what actions are necessary to defend against attacks. From an attacker’s point of view it is possible to analyse:

  • Internet domains, associated domains and Internet facing hosts;
  • Technology and hosting infrastructure vulnerabilities;
  • IP address geolocation and hosting provider assessment;
  • Employee identities and credentials available in cyber space; and
  • Evidence of compromise on existing Internet facing hosts, hosting facilities as well as exposure from internal networks

Contact us to engage in a workshop to assist with a roadmap to address deficiencies and improve your current cyber capabilities and maturity.

Henry Peens
Associate Director, Risk Advisory

Email: hpeens@deloitte.co.za

Tel: +27 (0)11 806 5625

Trusting big data: Perspective on data governance as a customer analytics investment

Many companies are investing significant amounts in customer analytics to drive their business and seek new ways to offer value to their customers. However, much of the potential value of that investment is at risk because data governance practices have not kept pace with the ways in which data is being used.

With the investment in customer big data programmes growing, the potential value add for companies that get this right is significant. However, success demands a robust control environment. Companies that underinvest or delay their investment in their control environments over customer big data, threaten that investment. Aside from the fact that a strong control environment have significant benefits, rising expectations of confidentiality and security in contracts, law, and regulation, as well as the potential from brand damage when data is leaked or misused, are quickly making this a business imperative. The companies that will ultimately succeed with customer big data are those who have a strategic and proactive framework that can get consistent and more reliable insights while carefully protecting that data.

Click here to read more.

To gain a comprehensive perspective on data governance as a customer analytics investment, contact the Deloitte TechSights Africa team.

VAT in a digital economy

blog_digital_vatDriving co-operation across borders

Global rule changes get a handle on eradicating the artificial shifting of profits, but hurdles remain

The increasing ease of transacting across borders is making profit shifting – even if achieved by means of legal structuring – an area of grave concern for tax authorities, including those in Africa.

Base erosion and profit shifting (BEPS) has been aptly described by the Organisation for Economic Co-operation and Development (OECD) as tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

Electronic commerce (ecommerce) has allowed for diminished physical presence in countries and accelerating growth of the digital economy has had a significantly adverse effect on value-added tax (VAT) collection. This is because high volumes and low value of supplies has also increased the volume of transactions in which VAT is not collected.

Action 1 in respect of the 2014 BEPS deliverables relate to “addressing the tax challenges of the digital economy”. If all VAT jurisdictions apply the “destination basis”, as endorsed by the OECD, and place of consumption rules set out by the OECD, the ability for multinationals to shift profits can be curbed as the imposition of VAT is based on where the recipient is located and not where the supplier may have established itself.

In terms of the destination basis VAT should be imposed in the jurisdiction where the good or service is consumed, which is the jurisdiction where the recipient of the good or service is located.

The OECD has, furthermore, established in its 2014 VAT Guidelines, as well as the draft 2015 VAT Guidelines due to be adopted shortly important principles in respect of VAT accountability.

In respect of business-to-business (B2B) transactions, where the recipient is an entity entitled to the full input tax (i.e. when a VAT registered company buys goods or services from another VAT registered supplier) deduction in respect of the goods or services acquired if VAT were imposed, the reverse charge mechanism should be applied whereby the recipient business is required to account for the VAT on the supply.

In terms of the reverse charge mechanism, the foreign supplier is not required to register for VAT in the recipient’s jurisdiction. However, this does not imply that the supply will not be subject to VAT in the recipient’s jurisdiction but merely that the recipient is required to collect and account for the VAT to the revenue authority and not the supplier. As the recipient is entitled to claim an input tax deduction in respect of the good or service acquired, the recipient’s VAT return would effectively reflect output tax (the VAT you charge on sale of your own goods and services) in respect of the VAT owing to the revenue authority, as well as a corresponding input tax deduction on the same return. This allows for an audit trail of the goods or services acquired despite resulting in a net nil cash effect for the recipient.

In this regard the destination basis still applies, as the VAT is due and payable in the jurisdiction where the recipient is located, but nevertheless provides simplicity and reduces the administrative burden of the foreign supplier having to register for VAT in the recipient’s jurisdiction.

 

In respect of business-to-consumer (B2C) transactions, where the recipient is an entity or individual not registered for VAT, the foreign supplying company is required to register for VAT in the recipient’s jurisdiction and impose, collect and account for VAT on the supply to the revenue authority in the recipient’s jurisdiction.

It must, however, be borne in mind that some multinationals, in terms of the B2C rules, would be required to register for VAT in multiple jurisdictions. It, therefore, is crucial for a simplified VAT registration and administration process to apply to such foreign suppliers. This is, furthermore, in keeping with the OECD principles of efficiency of compliance and administration and simplicity.

The B2B and B2C rules, along with the destination basis and the OECD five principles, allow for an effective application of VAT which may contribute to the reduction of BEPS.

While the destination basis, B2B and B2C rules and the OECD five principles appear to be a simple and straightforward solution to addressing BEPS, especially in the digital economy, a remaining hurdle to overcome is global co-operation and effective application of such rules and principles.

A movement towards harmonising with OECD principles and guidelines may be evident in Africa. An example of this may be the interim BEPS reports recently released by the Davis Tax Review Committee for public comment, with specific reference to the digital economy, which greatly references OECD commentary and principles. While final recommendations have not been released as of yet and, therefore, we still await amendments to the legislation as a result of such recommendations, it is evident that greater emphasis is being placed on what the rest of the world is doing, especially the OECD and assessing our current system in terms of the OECD guidelines.

In fact, the consistent application of these rules by all jurisdictions is essential to effectively combat BEPS and to ensure global tax equality. This means that these rules and principles, which may address and reduce BEPS from a VAT perspective, can only be achieved if all VAT jurisdictions are willing to co-operate. Where global co-ordination may have been difficult to achieve before, the digital economy is quickly contributing to an increasing corroboration between jurisdictions.

Key contacts:

Severus Smuts
Director
Email: ssmuts@deloitte.co.za
Tel: +27 11 806 5334
Severus Smuts
Anne Bardopoulos
Senior Manager
Email: abardopoulos@deloitte.co.za
Tel: +27 11 209 8671
Anne Bardopoulous

Protecting privacy in the age of analytics

Privacy by designThe era of Big Data is here, and it isn’t going away. The ability to use data to connect information, identify patterns and personalise interactions for maximum business result has reached an extraordinary level of sophistication.

Put simply, today’s data analytics enables organisations to make connections, identify patterns, predict behaviour and personalise interactions to an extent that could scarcely be imagined just a decade ago.

And therein lies the problem.

Download Privacy by design

Organisations must be alert to threats of unauthorised access to data, especially personal data. More broadly, these risks can include reputational harm, legal action, regulatory sanctions, disruption of internal operation and weakened customer loyalty – all of which can result in revenue and profit losses. Powerful analytics solutions can link data sets to reveal someone’s lifestyle, consumer habits, social networks and more – even if no single data set reveals this personal information. Take ‘nudging’, for instance, which is the use of identifiable data to profile individuals in order to analyse, predict and influence their behaviour. For example, someone with a bias against scarcity will automatically be served an ad that states “while supplies last”, while a person with a bias for following others will get an ad labelled “best- selling”. While it’s gaining popularity, nudging may be perceived as invasive.

The issue here is privacy. Almost any information, if linked to an identifiable individual, can become personal.

And individuals are growing concerned:

  • Ninety-three percent (93%) worry about their privacy online.
  • Forty-five percent (45%) do not trust companies with their personal information.
  • Eighty-nine percent (89%) avoid doing business with companies that they believe do not protect their privacy.

Organisations will continue to use data analytics to advance their strategic goals, but the smart ones will embrace privacy as a driver of creativity and innovation and embed it into their systems to ensure quality results.

Through careful planning and application of privacy techniques and principles, organisations can use data to move business ahead and protect the personal information contained within them.

 

South Africa: Investor’s Handbook 2014/15

For a comprehensive investment guide, click here to download a copy of South Africa: Investor’s Handbook 2014/15 

Is South Africa the investment destination for you? – Investing in South Africa CONTAINER

The question on many investor’s mind is “what are the investment incentives when investing in South Africa?” At the southern tip of the continent, South Africa has often been referred to as the gateway into Africa, providing investors with boundless opportunities as they navigate business on the continent. According to the World Bank, Sub-Saharan Africa’s GDP is projected to rise to 5.3% by 2017, which is being driven largely by infrastructure investment, greater agricultural production as well as a strong services sector.

As Africa’s second largest economy, South Africa is also a member country of BRICS (Brazil, Russia, India, China and South Africa), and has remained an important player in the global mining value chain and a key player in assembly plants for global automotive brands.

South Africa’s well established legal and political systems and macro-economic stability, coupled with an abundant supply of semiskilled and unskilled labour makes for a favourable overall cost of doing business compared to other emerging markets. For professional jobs, labour costs are less than half of the cost of European countries. For manufacturing trade, labour costs are around one-third cost of Europe. Knowledge of the landscape can only aid investors in helping them to achieve favourable returns in a challenging economic environment.

Deloitte, together with the Department of Trade and Industry (the dti), has published South Africa: Investor’s Handbook 2014/15. This publication outlines key features of the South African landscape across all industries, listing key investment incentives that we believe will help business navigate favourably through the regulatory, social and economic environments.

 

 

 

Data Analytics Trends 2015

Analytics trends

A below-the-surface look at the 8 analytics trends for the year

The choppy waters of data management’s past have given way to measured waves of analytics innovation. In 2014, a growing number of businesses accrued tangible results from their analytics initiatives: Incremental revenue gains through proactive pricing. Better customer engagement across channels. More resilient supply chains. Significant reductions in fraud, waste, and abuse.

The list goes on – and it’s likely to grow as long as businesses keep an eye on analytics advancements and take a strategic approach to adopting and applying leading analytics capabilities. The trend toward using data to make smarter decisions shows no sign of slowing. In fact analytics-driven decision making is becoming the standard for today’s competitive businesses.

Deloitte has assembled a list of 8 significant analytics trends to watch in 2015 that we think continue this momentum. Our trends offer some food for thought on how, where, and why the role of analytics is changing, and how businesses might respond. We have noticed many enterprises asking (and answering) some interesting questions around these trends:

The Analytics of Things: Are we capturing value from structured and unstructured data – including the Internet of Things? Should we be?

Monetize This: Have we considered all the value our data can provide – and how do we determine the value of information value anyway?

Bionic Brains: What are the possible implications of machine learning and artificial intelligence – not just for our business, but for society and daily living?

The Rise of Open Source: Does open source have a place in our analytics ecosystem? Can we govern it?

Tax Analytics: What critical insights can tax executives gather from the quantitative field of tax analytics?

Universities Step Up: How can future analytics professionals “skill up” to deliver on advances in data science and analytics?

The Accuracy Quest: When is data “good enough” to feed effective analytics initiatives?

And what about the continuing importance of data security? This “supertrend” affects nearly every inch of the enterprise – and it can play an important role within the other trends identified. From intrusion detection to malware countermeasures, analytics-driven security strategies can offer organizations a predictive, proactive approach to their security challenges.

Other areas of interest in the coming months include facial recognition and geospatial monitoring; the public call for data accountability, and analytics’ innovations that affect our daily lives – like smart cars and wearables.

In the meantime, our analytics message for 2015 is: Suit up and dive in; the water’s fine!

Completing the Formula for Digital Disruption

Digital DisruptionThe technology industry has continually generated discussion points over the past few decades and continues to do so to the present day.  Consumerisation of IT has brought many technologies from the home to the boardroom, not the least of which have been smartphones and tablets. Not far behind were the cloud based social networks and before we could blink BYOD was the de-facto standard. Now we live and trade in the era of “all-things-digital”. The ultimate threat and opportunity has become the ever present “digital disruption”. Of course, like most things technology – “digital” remains open to interpretation and application fit for purpose. The most commonly used term, in conversations around digital, is “SMAC” – Social, Mobile, Analytics (generally meaning Big Data) and Cloud.

Whilst fundamental, we think that these components alone cannot and should not drive digital strategies and even less so the definition of new business concepts driven by digital – i.e. Digital Disruption.

We believe that there are two critical components to this definition that are missing, but let us confirm our definition of SMAC as a start:

(S)ocial: Traditional communication channels have, in the past few years, been disrupted by the emergence of social business which allows for real-time, transparent, two-way communication between internal and external stakeholders within an organisation. Communication silos have been broken down within various levels of an organisation and amongst the brand and consumer. Social personas have been created to add a human element to the brand. Technology has made it easier for companies to engage on social networks, disrupt the way business is conducted and help us better meet the needs of customers within a specific market. Organisations can be flatter with collaboration replacing beaurocracy.

(M)obile:  Mobile devices have become the de-facto enabler into the digital economy. According to the GSMA’s 2015 Mobile Economy report, the mobile industry has now become the “cornerstone of the global economy”. It is expected that by 2017, a third of all mobile devices in Africa will be smartphones driving a rapid rise in internet usage over the next few years. Mobile money and banking solutions such as M-PESA in Kenya and HomeSend in Nigeria have started a revolution within the banking industry bringing portable financial services to a receptive population, whilst local and international players are scrambling to claim a piece of the action. With a vast installed base of Dumb, Feature and Smart phones and an ever growing network infrastructure, it is no surprise that Africa is dubbed the “mobile continent”. To reach and engage with the African employee or customer, it is mandatory for businesses to be thinking of a ‘Mobile First’ approach to their existing business models, irrespective of the industry or market in which they operate.

(A)nalytics: The proliferation of structured and unstructured (big) data, that is being created by mobile devices, sensorssocial medialoyalty programs and website browsing, is creating new business models built upon customer-generated data. Today, global digital transformation is increasingly relevant across all markets and industries such as healthcare and financial services. According to the Deloitte 2014 Tech Trends Report, “lagging response times can be a matter of life and death.” Analytics can, therefore, help address key challenges such as improving prediction accuracy, providing augmentation and increase the effectiveness and efficiency of delivery. Furthermore, analytics provides a significant way to bridge the gap between the promise of big data and the reality of practical decision makers.

(C)loud: Cloud based solutions and technologies have made it possible for organisations to consider high impact changes to business models, organisation structures and even product design. The ability to rapidly leverage and replicate applications, data and insight across time-zones, countries and companies provides the ideal bearer for any application or solution. Cloud – like mobile – is a default consideration during any solution re-architecting or corporate re-imagining exercise.

Despite the individual excitement caused by each of the components we have just discussed, we believe, that organisations who regard (SMAC) as a complete definition of Digital Disruption would remain challenged in generating material business impact through the application of these technologies alone. In fact, decision makers could be introducing significant business risk to their organisations, including the propensity to accumulate technical debt.

It is our view that Digital Disruption = Cs(SMAC)i

Where:

  • Cs is the pro-active and relevant application of cyber security technologies and practices to all digital solutions
  • i is the application of structured innovation techniques which will create the exponential value from the application of digital technologies.

(C)yber (S)ecurity:  It should come as no surprise that the majority of US CIO’s have picked information and cyber security topics in all or most of their Top 5 priorities for 2015 / 16.  With the constant presence and application of digital technologies, CIOs must go on the offensive when protecting their organisation’s information assets. The evolution of an organisation’s security infrastructure must match the digital disruptions that the organisation is experiencing or planning. It is therefore as important to innovate around securing the corporate information assets the disruption will produce as it is the application of digital technologies.

(I)nnovation: The final differentiator and the source of exponential value to be derived from the application of all five components of digital! All technologies should be led by business need and design. Structured innovation creates an opportunity to manage an ideation process that eventually culminates into proofs-of-concept. When combined with agile delivery models, this becomes a truly powerful tool to both mitigate business risk and enriching the collective understanding of the “art of the possible”.

Whilst individual application of “SMAC” technologies will yield some short term return and possible reduce the extent of EXCO pressure on the CIO, it is our view that tangible and sustainable business value will ensure when “Innovation” leads the application of these technologies and our Cyber Security innovations keep in step with (or ahead of) or Digital Disruption ideas.

To find out how our definition of digital disruption can help you solve your digital challenges; contact Tim Bishop on tibishop@deloitte.co.za  , Coenrad Alberts on calberts@deloitte.co.za  or Kamal Ramsingh on kramsingh@deloitte.co.za.

South Africa – 2015 Health Care Outlook

Across the globe, governments, health care delivery systems, insurers, and consumers are engaged in a persistent tug-of-war between competing priorities: meeting the increasing demand for healthcare services and reducing the rising cost of those services. And rising they are. As the economy recovers from prolonged global recession, health spending is expected to accelerate, rising an average of 5.2 percent a year between 2014 and 2018, to $9.3 trillion. This increase will be driven by the health needs of aging and growing populations, the rising prevalence of chronic diseases, emerging-market expansion, infrastructure improvements, and treatment and technology advances.

Deloitte’s new report, 2015 global health care outlook: Common goals, competing priorities, examines the current state of the global healthcare sector, describes the top issues facing stakeholders, provides a snapshot of activity in a number of geographic markets, and suggests considerations for the future.

Key content includes:

  • Recent trends that have fuelled the sector have also resulted in a mixed outlook for the sector’s future in the long term.
  • Challenges and opportunities emanating from the major issues that healthcare stakeholders face in 2015 include cost, adapting to market forces, transformation and digital innovation, and regulations .
  • Individual market updates from Australia, Brazil, Canada, China, Germany, India, Japan, Middle East, South Africa, Southeast Asia, United Kingdom, and the United States.

 

It is imperative that healthcare organisations gain a clear understanding of the forces impacting today’s market as they transformation their organisations and seek to position themselves for the future. Please take this opportunity to further explore the report findings. Please contact me should you have any questions.

Read the global report

Read the South African report

Contact us for more information

Your Tax Guide to business in Africa

The Guide to Fiscal Information: Key Economies in Africa 2014/15

Guide to Fiscal Info

 

A recently published IMF World Economic Regional Outlook estimated that growth in Africa over the next two years will continue to sustain on its strong growth trajectory over 5 percent, well above established developed economies and comparative emerging markets.

There are boundless business opportunities that present themselves to entities willing to take the next step to expand into the African market. Africa has established itself as a critical market in the global landscape which simply cannot be ignored by business.

Doing business in Africa however is not without its challenges, which includes political and regulatory uncertainty, shortage of skilled workers, corruption and excessive bureaucratic processes, inadequate infrastructure, lack of reliable financial information, etc.

It’s important to keep in mind there is no single uniform collective Africa to invest in. Multinational companies are advised to carefully consider the full regional landscape when investing in African markets. Most importantly business must identify the nuances and distinctions of the targeted investment countries.

To better navigate the African landscape across the different economies Deloitte has published its Guide to Fiscal Information: Key Economies in Africa 2014/15, which contains a summary of tax and economic information pertaining to key economies in Africa. Details of each country’s income tax, VAT (or sales tax), and other significant taxes are set out in the publication. In addition, investment incentives available, exchange control regimes applicable (if any) and certain other basic economic statistics are detailed.

 

African infrastructure en route to a brighter future – Full report now available

Construction Trends Report FB

Download the Deloitte African Construction Trends report here.

Investment in African mega projects surged 46% to US$326 billion last year led by heavy investment in transport, energy and power, according to the third annual Deloitte African Construction Trends report, which monitors progress on capital intensive infrastructure on the continent.

To qualify for inclusion in the Deloitte African Construction Trends report, projects must be valued at more than US$50 million and had to have broken ground by at least 1 June 2014. While the number of projects that qualified for inclusion in the 2014 report fell to 257 from 322 the year before, the total value of projects under construction increased from USD 222.77 billion in 2013.

Of the projects included in the 2014 Deloitte African Construction Trends report, no less than 143 were led by the public sector with a further 88 being private sector initiatives and 26 classified as public private partnerships (PPPs). Energy & Power accounted for 37% of the number of mega projects undertaken in Africa in 2014, followed by transport (34%), mining (9%), real estate (6%), water (5%), oil & gas (4%), mixed use facilities (2%) and health care (1%).

Southern Africa led construction activity on the continent, accounting for $144.89 billion in projects or 44.5% of the total value of mega construction projects on the continent last year. West Africa overtook East Africa with the region attracting US$74.84billion in projects, or 23% of the total projects on the continent by value. Central Africa experienced a massive 117% surge in the value of construction projects which reached $33.21 billion while North Africa saw the value of construction projects jump almost 36% to $9.12 billion. East Africa experienced a moderate 10% decline in the value of projects, which nevertheless totalled a respectable $60.67 billion in 2014.

Africa’s infrastructural transformation is being driven by increased output in the natural resources sector, which in turn has underpinned rising fiscal expenditure on infrastructure projects to facilitate rising international trade with the continent. At the same time, rapidly growing urbanisation and rising domestic demand in Africa has ushered in an unprecedented wave of foreign direct investment in the continent’s biggest and most dynamic economies.

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