Smart spending drives tax-free savings growth
The financial impact of the COVID-19 pandemic on people’s lives is set to last long beyond the initial crisis, in some cases permanently changing consumer behaviour. Sisandile Cikido, the head of retail investments at Nedbank, discusses how increased cost-cutting can help to improve the long-term saving and investment culture in South Africa.
According to a recent McKinsey survey on the impact of the pandemic on consumption behaviour, 79% of people in South Africa have started to save in their everyday lives, with most of them intending to continue doing so beyond the pandemic.
South Africans affected in one way or another by the outbreak and its associated lockdowns have changed stores, brands, and the way they shop, with an astounding 90% in growth of intent to shop online across all categories. There is a shift to value-for-money items, and sticking to essentials and foregoing discretionary or luxury purchases.
However, consumption is just one area in which consumers can make real savings, and is itself limited in its long-term impact on overall wealth.
It’s therefore advisable to return to saving at the same level as before the pandemic or even more, as soon as the opportunity presents itself.
Although a regular cheque account might seem like a safe place to keep extra cash, it’s eroded by inflation from one year to the next. Also, when the money is there, it’s much easier to spend it.
However, when invested, the money can go to work, earning a return, and is much harder to spend on non-essentials.
The cost of forgoing spending in the present alongside market fluctuations is a reality of retirement planning and wealth creation. However, you can at least save on taxes while taking advantage of inflation beating investment returns.
In 2015, to encourage saving, the National Treasury launched a tax-free investment incentive offer to all South African citizens. The annual individual contribution limit was increased to R36 000 (with a lifetime maximum of R500 000).
Tax-free savings accounts (TFSA) include a range of vehicles, such as a monthly savings account, a fixed-term bank account, a unit trust investment, and others.
While the risk profile of each of these products varies, they all have a substantial edge over cheque accounts and an additional benefit over several investment accounts.
The simple fact that they don’t attract tax means your investment growth won’t be affected by your individual tax threshold, making them a must-have investment.
The extent to which South Africans are taking advantage of this is unclear, but South Africa continues to grapple with a high rate of personal debt, with 10 million South Africans having impaired records, a total of 20.7 million accounts, according to a recent National Credit Regulator report.
Through disciplined spending and living within their means, people can leverage the benefits of tax-free savings accounts not only to chip away at their debt, but also embark on a long-term path to financial freedom.
Landmark Kentridge works up for auction
Works from 40 years of international superstar William Kentridge’s career go under the hammer this month.
The 14 exciting lots by the pre-eminent South African artist on Strauss & Co’s May Virtual Live Auction span nearly 40 years of Kentridge’s evolving career as a print maker of international repute.
The most recent work in the sale, Refugees (You Will Find No Other Seas) (estimate R600 000 to R800 000), dating from 2017, was produced as part of Triumphs and Laments (2016), a monumental “drawing” project using large-scale stencils and pressure-cleaning equipment to create images reflecting the artist’s personal interpretation of the history of the city on the walls that line the Tiber River in Rome. The technically distinctive large-scale aquatint etching on the Strauss & Co sale was printed using 36 separate plates on paper, mounted on a raw cotton support, which unusually folds up into a clam-shell presentation box.
The oldest Kentridge work in the sale is Domestic Scenes – A Wildlife Catalogue (estimate R200 000 to R300 000), another multiplate image which dates from 1980. It casts a satirical eye at a motley crew of human and animal characters, including cats and a warthog, that sometimes reappear elsewhere in Kentridge’s extensive repertoire. Four single-plate etchings from the same series are also on the sale and, at estimates of R30 000 to R50 000 each, are likely to be snapped up by novice collectors keen to grow their investment in contemporary art.
A highly unusual work dating from 1994, when Kentridge was less famous than Afropop sensation Mango Groove, is a stand-out work on the upcoming sale. The charcoal and pastel drawing was used in the stop-motion animation music video created and directed by Kentridge in support of the band’s studio album, Another Country, only months before South Africa’s landmark democratic elections.
The band’s eponymous single, infused with a powerful sense of optimism for the country’s democratic future, became the anthem of the country’s joyful crossover period. Video of Claire Johnston, the band’s vocalist, was inserted into the charcoal-drawn narrative that moved between evocative mine-dump landscapes, banner-carrying crowds, towering pylons, wrapped monuments, and booming megaphones. Poignant images of a violent past flashed across billboards and drive-in screens, but clear starry skies and cleansing rains promised clarity and renewal. The artwork shows a jostling mass of figures surrounding a megaphone-topped pylon, with banners in Kentridge’s familiar colours of red and blue a shock beneath the grey sky. Often seen as a symbol of authoritarian control, this megaphone tower crumbles to dust in the final frame of the video.
Although best known for his drawings and films about Johannesburg, Kentridge’s sensibilities as an artist have also been strongly influenced by his travels. A particularly noteworthy mid-career lot is Untitled Drawing Il Ritorno d’Ulisse (estimate R5 million to R6 million), which depicts the ruins of the Baths of Caracalla in Rome. The drawing was one of roughly 40 drawings Kentridge made for the very first opera he directed, Il Ritorno d’Ulisse, commissioned by the organisers of the Kunsten Festival des Arts in Brussels in 1998.
Two lots demonstrating Kentridge’s mastery of large-format graphic composition – Music Box Tondo (estimate R200 000 to R300 000) and the diptych Rumours and Impossibilities/Entirely Not So (estimate R300 000 to R500 000) – will appeal to knowledgeable contemporary art lovers and institutions alike, along with the lithograph Undo, Unsay, Unremember (estimate R120 000 to R160 000), which depicts the ubiquitous Kentridge typewriter loosely rendered in sloshy black ink on a “found” book page.
Two characteristic Kentridge Irises, an etching and a digital print, round out the artist’s offering on the May Virtual Live sale, which takes place in the company’s Johannesburg offices. The action starts on Sunday, 16 May, when a single-owner private collection of fine wines from Bordeaux, Burgundy, Alsace, and Champagne goes under the hammer, and continues with three sessions of modern, post-war, and contemporary art on Monday 17 and Tuesday 18 May.
“The range and breadth in our May catalogue is astonishing,” says Susie Goodman, an executive director at Strauss & Co. “Besides Hugo Naudé’s luscious riverine study of Port St Johns and various otherworldly Namibian landscapes by Keith Alexander, Adolph Jentsch, and Maud Sumner, there is a gorgeous triptych, Three Views (estimate R220 000 to R280 000) from Durban artist Andrew Verster’s glorious Fragile Paradise series. Another highlight has to be John Meyer’s remarkable photorealist rendering of an eastern Free State landscape at Golden Gate.
All the lots as well as interactive digital catalogues are available on the Strauss & Co website along with easily accessible, user-friendly information about registering for the auction, bidding, and buying.
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