The Financial and Personal Implications of Paying Ubuntu Tax

The meaning of the word ‘Ubuntu’ is deeply rooted in African philosophy and ideology. A Nguni  term, ‘Ubuntu’ roughly translates to ‘human kindness’ and often encompasses greater aspects of humanity and human essence, largely in relation to other people.

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At Northwood Financial Services cc, we use the word ‘ubuntu’ with our clients to describe a situation that develops when our extended family expects us to be kind, even if their demands are unaffordable.

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Credit Scores for the South African Government are a Cause for Concern

When you or I ask a bank for money, the bank goes to a credit bureau and asks them how we conduct our finances.

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The bank will then assess:

  • Our income earned each month
  • The value of debt we owe
  • How we manage our debt (whether it is paid on time or whether debit orders bounce due to insufficient funds)

Following the assessment, the bank will then allocate a score to the client. This score will determine whether the client is eligible for a loan, and then they’ll determine the applicable interest rate.

The same process applies when a country applies for credit. The most popular credit rating companies for government credit applications are:

  1. Standard & Poor
  2. Fitch Ratings
  3. Moodys

The amount of debt that the South African government owes its international credit investors is a cause for concern. Between the years of 2008 and 2016, South Africa had doubled its debt, and at present, it costs our country a frightening fee of R150 billion to pay the interest on our debt alone. At this time, our Government Debt; expressed as a percentage of gross National Product; equates to 50.1%. Our neighbouring country Malawi owes 18% of their GDP.

To put this into context, if South Africa were to start paying back half of our debt, we would be able to give every university student in South Africa free education, just from the savings in interest payments.

While we have a temporary reprieve until December 2016, I am convinced that our cabinet has no idea of what we face if they don’t stop spending what we do not have. A further downgrade will not only lead to an increase in the unemployment rate and a hike in interest rates, but it will damage our economy further.

We have to show our Government that restraint is needed. We say to you, stop spending money on huge projects that we can no longer afford, and stop closing your eyes to corruption.

The Benefits of Paying UIF

As standard tax payers, we, as South African citizens contribute to UIF (the Unemployment Insurance Fund) every month.

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If I were to ask why do we pay UIF, most people would respond by saying that they would be able to get financial support in the event that they were to lose their job. In a nutshell, this is true, but what most people don’t realise is that paying towards UIF means so much more…

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Fees vs Commission Based Financial Planning for Property

Earlier this month, a representative from an insurance company (that will not be named) had sent me an email. Assuming that I was an Estate Agent, the email presented me with a sales tactic that would drastically increase my income from house sales had I been a property agent. Highlighting a paragraph from the email, this is how the information was presented, word for word:

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“Mr. Andrew (age 45) and Mrs. Adel (age 44) Smith have just bought a R 3 million house, and their request for a home loan has just been approved. So even through transfer has not yet happened, they have now met all suspensive conditions, and hence have become liable for the full purchase value of the home.   

At this time you could sit down and assist with a Mortgage Protection Cover for the Smiths.  Continue reading