Welcome to Dave Connon & Associates cc trading as Money Matters SA. Dave Connon & Associates cc t/a Money Matters SA, estate planning, income tax, retirement, investments, retirement planning, investment planning, investing money, investment broker, retirement broker, estate planning broker, estate planning boksburg, estate planning edenvale, estate planning jet park, estate planning kempton park, estate planning east rand, estate planning johannesburg, estate planning gauteng, estate planning south africa, income tax boksburg, income tax jet park,income tax edenvale, income tax kempton park, income tax east rand, income tax gauteng, income tax johannesburg, income tax south africa, retirement boksburg, retirement edenvale, retirement kempton park, retirement jet park, retirement east rand, retirement johannesburg, retirement gauteng, retirement south africa, investments boksburg, investments edenvale, investments kempton park, investments jet park, investments johannesburg, investments east rand, investments gauteng, investments south africa

Property

Many investors will claim that a portfolio without immovable property is not worth having. They have been influenced by the fact that either they or their
ancestors have accumulated considerable wealth by investing in immovable property. There have certainly been boom years in the property market. In the
recent past property has lost some of its attraction. This is particularly true of the residential property market in most parts of the country. Since the
elections in 1994, the residential property market has under performed the rate of inflation.

Money Market

The financial markets in South Africa are often divided into capital and money markets. The capital markets regulate the flow of long-term funds (such as
gilts, bonds and government stock) whereas the money market regulates the flow of short-term funds. The dividing line is usually accepted to be a term of
three years. Less than three years is money market business, more than three years is capital market business.

The money markets purpose is to facilitate the flow of short-term savings from lenders to borrowers. The participants in this market include commercial
banks, merchant banks, the Reserve Bank, the Post office and corporate and individual investors.

In bringing lenders and borrowers together, the banks make money by lending to the borrowers at a higher rate than they are paying the lenders.

The Reserve Bank is responsible for determining the monetary policy of the country. One of its most powerful tools in doing this is the "bank rate". This
is the rate of interest that the Reserve Bank will charge the institutions when they need to borrow short-term funds from the bank. A change in the bank
rate will always bring about an adjustment to the prime lending rates of the commercial and merchant banks. This adjustment helps to preserve their
operating margins.

Containers

Over the last decade the popularity of Tank Containers as an investment has grown enormously. South Africans are now the largest investors in tank
containers in the world. This has resulted from a declining currency and from exchange control. Until recently, a tank container was the only way to earn
an investment return in a hard currency. Their attraction as a rand hedge investment is obvious. There are now six companies offering container invest-
ments. Not all of them have the same contractual and administrative arrangements. Advisers should ensure that they research the company they
recommend to their clients.

Equities

When using the word equities, we mean the various classes of shares traded on a recognised Stock Exchange. Due to the strict exchange control
provisions applicable to South African residents, the only stock exchange that the South African investor has free access to is the Johannesburg Stock
Exchange (JSE).

Assurance

The life assurance industry has led the way in capturing the savings of the nation. Many will claim that this was entirely due to the unfair advantage that
life offices enjoyed in terms of the tax system of the country. Although there is undoubtedly truth in that belief, it ignores the attraction of inflation beating
returns that life assurers were able to produce through the decades of double digit inflation in South Africa. The fact that these returns could have even
been greater had the investment products been costed differently is beside the point.

The principle vehicle used for investment within a life assurers product range is the endowment policy. Prior to the 1970s the investment from these
investments came in the form of a bonus declaration which was made annually or even only every three years. In many cases the bulk of the return came
in the form of a reversionary bonus that was declared only at claim stage. The 1970s and the emergence of the unit trust industry in South Africa, saw
the introduction of the first linked portfolios. The concept of having the investment return linked directly to the performance of a unitised portfolio was
certainly revolutionary. Whilst long-term returns were good, the problem of early terminations and the cost to the investor of doing so is a problem that
has not yet been adequately resolved. This is one of the greatest challenges facing the life assurance industry at present. Greater transparency has been
forced upon the life offices by the linked products offered by a range of financial institutions. This has certainly led to a reduction in the costs incurred by
an investor choosing an endowment policy.

The front-end loading of endowment policies by the life assurers has unfortunately led to a stigma being attached to this form of investment. In truth, if
correctly structured, an endowment policy can be one of the most efficient and flexible investment vehicles around.

Hard Assets

Hard assets is the term used to describe property such as Persian carpets, stamps, antique furniture, works of art, coins etc. that are purchased as
investments. Great care should be exercised in the selection of hard assets as a means of investment. It should be regarded as a high-risk investment.
Certainly it is not very liquid and the safety and security aspects need to be carefully considered.

Another major problem associated with this type of investment is the tax treatment of gains made on the sale of the asset. In most types of investment,
it is possible to distinguish between the income and the capital portion of the asset. For example, with property, the income portion is the rental received
whilst the capital portion is the actual structure that earns the rental. The same analogy can be used in the case of share investments. Here, the income
portion is the dividend whilst the capital portion is the share itself. The sale of the capital portion will, all things being equal, produces a capital gain that is
not subject to tax. In the case of an asset like a Kruger rand, it is not possible to draw this distinction. The gain realised on the sale of the asset will,
unless the opposite can be established, be treated as income. The facts would seem to indicate that the intention of the investor in buying the coins was
to sell them again at a profit. In income tax parlance this is evidence of a gain of a revenue nature. In order to rebut this conclusion, the investor must try
and show that some other reason caused him to sell the asset. Arguments that have worked in the past include the need to raise cash to pay for unex-
pected medical treatment.

Hard assets are best left to the experts.