After a two week renovation period, the first branch of The Deli Coffee Co has opened, on Kloof Street, home to the former Melissa’s, ironically the first outlet which Melissa van Hoogstraten opened twenty years ago. Melissa’s has closed down all its company-owned stores, while most franchise stores have changed their names, and are continuing to operate, the company having gone into liquidation. Continue reading →
* The price of petrol went up by 44 cents a liter at midnight, the increase being blamed on the weakening Rand, and increased demand for petrol in Europe and Asia, reports EWNews.
* The inaugural Ethiopian Airlines flight landed in Cape Town yesterday, the airline flying between Cape Town and Addis Ababa six Continue reading →
Last week, taxing tips of waiters and other employees, who receive gratuities from customers for good service, was a hot topic on Twitter and other social media platforms, following the publishing of a clarification of the payment of tax on tips by SARS. Legal views confirm that employers cannot deduct PAYE, the Skills Development Levy (SDL), and UIF from employee income generated from tips, but it also means that the tip income of employees cannot be used as a basis for pension and medical aid benefits.
Business Report wrote that “Waitrons can keep their hard earned tips for themselves and don’t have to worry about the tax man… According to the last week’s ruling, the transfer of tips handed over to an employer by an employee for ‘safekeeping’ did not constitute a payment of remuneration”. This view is based on the Group Tips Policy, by which staff pass on their tips to their employers for safe-keeping whilst they are working. Legal firm Cliffe Dekker Hofmeyr is quoted as saying that the Group Tips Policy sees tips “…as gratuitous payments to which the employees have no entitlement or an expectation of receipt as part of the performance of their duties”, and therefore should not be taxed.
Far more complex is an article by lawyer Stephan Spamer at ENS and candidate attorney Jonathan Sacks, writing on Moneyweb.co.za. They write that the increased usage of credit cards by customers for safety reasons has led to a large percentage of tips being added to credit card payments, going to the employer instead of the employee. The employer then has to transfer the tips to the employees. According to the Fourth Schedule to the Income Tax Act, 58 of 1962, ‘gross income’ includes ‘any amount received or accrued in respect of services rendered or to be rendered, including a voluntary award, as well as any amount received or accrued in respect of or by virtue of any employment’. The lawyers argue that a ‘causal relationship’between payment received and the service provided must exist for that income to be defined as ‘gross income’. On the basis of this relationship, the writers argue that the tip payment is part of gross income, and is therefore taxable, especially if the expectation at the time of appointment of the employee was to receive tips. The article becomes confusing when the writers argue that the definition of ‘remuneration’, including ‘all payments and amounts payable, in cash or otherwise, whether or not for services rendered and includes salary and wages, leave pay, bonuses, gratuities, commissions, over time pay and other amounts paid for services rendered as well as allowances and advances’, is similar to that of ‘gross income, but that it does not mean that the employer must deduct the valid taxes and deductions. They argue that it is not the employer paying the tip – in essence it is the customer paying it via the employer, who just holds the tip on the employees’ behalf, and therefore as this cannot be viewed as remuneration, no taxes and fees have to be deducted from the monies paid to employees. Employees can, however, request in writing that the employer deduct PAYE to reduced their tax liability. Given their conclusion that no tax is payable on tips by employees, the writers argue that no SDL and UIF is deductible either.
Given the complexity and legality of this SARS Tip Tax ruling, we quote an extract of an article on Moneyweb, written by Cliffe Dekker Hofmeyr Employment Law Director Gillian Lumb and associate Pranisha Maharaj: :“ ”.
The new Tip Tax directive by SARS has been back-dated to August 2010, and covers the five year period from that date. This raises the following questions:
* Can employees that had PAYE, SDL and UIF deducted between August 2010 and July 2011 receive their tax and other deductions back, from the employer and/or SARS?
* Can employers deduct the tip income that went through their credit card machines, and was therefore deposited into the business bank account, from their taxable income for the calculation of VAT and income tax?
Interestingly, yet not surprising, the hotel association FEDHASA has not officially published a guideline about this Tip Tax amendment for their hotel and restaurant members! On Twitter, the FEDHASA Cape Director for the Restaurant sector, Rey Franco, wrote that tips received via credit card are taxable, and that only cash tips received by waiters directly are not taxable. We believe that, in the light of the above, he is incorrect.
Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com Twitter: @WhaleCottage
Three months ago we conducted a survey of top-end hotel rates in Cape Town. Given the tourism crisis in the Cape, I repeated the survey on Monday, calling the same hotels, asking them for their August rates. Ellerman House remains the most expensive Cape Town hotel by far, starting at R5000 per room, and the Peninsula All Suite Hotel remains the least expensive 5-star hotel, at R1500 per room. The survey found that the average rate of the sixteen 5-star Cape Town hotels is R 2715 per room, just under R1400 per person, an average decrease by 8% relative to the May rates. Across all 27 hotels surveyed, the average rate per room is R2227, or just over R1100 per person, only 8 % lower on average than in May.
Once again it was interesting to hear how the calls were handled, most hotel reservation departments asking careful questions, to identify if the caller was a travel agent/tour operator or a corporate caller, the questioning being very specific in this regard. Holders of a South African ID book or a Protea Hotel Prokard would have had different rates quoted. Few hotels called had a rate sheet from which to quote immediately, having to access their computer for the ‘best available rate’ information, costing time. I was shocked at the poor quality of the call handling and quoting by the hotel Reservations departments, quoting odd rates (i.e. not rounded off) very quickly, making it difficult to understand and record them accurately; interrupting while one was still speaking; having a radio blaring in the background, affecting their ability to understand and hear the request; not all quoting rates with breakfast included, despite being asked for this rate (Protea Hotels quote room only, and refused initially to quote the add-on breakfast rate); an hotel line rang engaged three times; another hotel line was not answered at all; one hotel had a trainee answer the phone, and she did not know that hotel’s telephone number; one staff member sounded in the depth of depression, as if she hated her job; one hotel did not disclose that it is undergoing major renovations, and its rates have not changed due to the renovations; and one hotel switchboard put me through to the kitchen when I asked for reservations, and I had to call again, as they could not transfer me back to the board. Worst of all for the hoteliers whose rooms the staff have to sell is that only one (Victoria Junction Hotel) of the 27 hotels I called had a call to action, asking if I would like to book!
Some hotels have not changed their rates in the past three months, or only by a small percentage. The Protea Hotel Fire & Ice increased its rate by an astounding 64 % to R1480 per room, making this 3-star hotel more expensive than a number of 4-star hotels. Interesting is that a number of 4-star hotels are more expensive than some 5-star hotels. The Queen Victoria Hotel rate has increased by 25 % relative to its opening special rate. However, only eleven of the surveyed 27 hotels dropped their rates, noticeably the Newmark Hotels’ The Ambassador and Dock House (by 35%), and V&A Hotel (by 40%). The Cullinan Hotel has also dropped its rate sharply, by 30%, as have the Westin Grand Cape Town Arabella Quays, the Twelve Apostles, and the Crystal Towers hotels.
The rates were checked for 3 – 6 August per room for 2 adults sharing and inclusive of Breakfast per day, so as to compare the rates fairly. We added breakfast to the rates where these were quoted separately. We have ranked the hotel rates from most to least expensive, and reflect the rate change relative to our survey for May 2011 in brackets:
Ellerman House, 5 star, R5000 – R15700 (the new villa has 2 rooms offered at R48600 and 3-rooms at R60500), Tel (021) 430-3200 (no rate change)
Cape Grace Hotel, 5 star, R 4980 – R 14 530 for the penthouse, Tel (021) 410-7100 (10% rate increase)
Cape Royale Luxury Hotel, 5 star, R 3590 – R20816 for the Presidential Suite. Tel (021) 430-0500 (1% rate increase)
One&Only Cape Town, 5 star, R3489 for South Africans – R5590 for non-South Africans. Tel (021) 431-5888 (10 % rate decrease)
Table Bay Hotel, 5 star, R3166 Tel (021) 406-5000 (International rate dropped, no rate change)
Mount Nelson Hotel, 5 star, R 3000 – R 9000. Tel (021) 483-1000 (no rate change)
15 on Orange Hotel, 5 star, R 2620 – R 2820, Tel (021) 469-8000 (5 % rate decrease)
Dock House, 5 star, R2430 (but pay for 2 days, stay for 3 days offer). Tel (021) 421-9334 (35% rate decrease)
Queen Victoria Hotel, not graded yet but seeking 5 stars, R 2350 – R 2715, Tel (021) 418-1466 (25 % rate increase from its opening special)
Twelve Apostles, 5 star, R 2190 – R 3940. Tel (021) 437-9000 (24% rate decrease)
Westin Grand Cape Town Arabella Quays, 5 star, R 2160 – R 3640. Tel (021) 412-9999 (27 % rate decrease)
The Taj Hotel, 5 star, R 2150 – R 2650. Tel (021) 819-2000 (2% rate decrease)
Crystal Towers Hotel & Spa, 5 star, R 1700 – R3250. Tel (021) 525-3888 (20% rate decrease)
V & A Hotel, 4 star, R 1640 – R1905 (but special pay 2 days stay for 3 days offer), Tel (021) 415-1000 (40% rate decrease)
Commodore Hotel, 4 star, R1600 – R 7780. Tel (021) 415-1000 (no rate change)
Portswood Hotel, 4 star, R 1600 – R 3960. Tel (021) 415-1000 (no rate change)
Bay Hotel, 5 star, R1600 – R2100 for South Africans, R 2600 – R 5500 for non-South Africans. Tel (021) 438-4444 (no rate change)
Cullinan Hotel, 5 star, R 1515 – R 3400. Tel (021) 415-4000 (30 % rate decrease)
Peninsula All Suite Hotel, 5 star, R 1500 – R 3240. Tel (021) 430-7777 (4% rate decrease)
Protea Hotel Fire & Ice Hotel, 3 star, R 1 480 – R 2300, Tel (021) 488-2555 (64% rate increase!)
Winchester Mansions Hotel, 4 star, R 1470 – R 3390. Tel (021) 434-2351 (no rate change)
President Hotel, 4 star, R 1460 – R 2550. Tel (021) 434-8111 (no rate change)
Southern Sun Waterfront Hotel, 4 star, R1450 – R 3000. Tel (021) 409-4000 (17% rate decrease)
Cape Sun Hotel, 4 star, R1300 – R 5500. Tel (021) 488-5100 (13% rate decrease)
Ambassador Hotel, 4 star, R 1250 – R 1950 (but stay for 3 and pay for 2 nights offer), Tel (021) 439-6176 (35% rate decrease)
Protea Hotel Breakwater Lodge, no star grading, R 1220 standard, R1465 business rooms. Tel (021) 406-1911 (5% rate decrease)
Victoria Junction Hotel, 4 star, – Tel (021) 418-1234 (Only re-opening in September, with rate of R1990)
On Moneyweb yesterday, the FEDHASA hotel association was quoted as saying that the ‘hotel industry is being hard hit by the economic climate and there is very little light at the end of the tunnel’. FEDHASA CEO Brett Dungan, who tried to sell South African hotels down the MATCH river for the World Cup, is quoted as saying that hotel rates have come down ‘dramatically’ (by about 10%, according to him) in the past three years, and that hotel occupancy has decreased by 10%. The African Sun hotel group, which operated the 5-star The Grace and The Lakes Hotel and Conference Centre in Johannesburg, has not renewed its operating agreement with these two hotels, saying that the 5-star hotel industry in Johannesburg is ‘no longer sustainable’! The Southern Sun on Grayston Drive in Sandton is also expected to close its doors next year. Singing a somewhat different tune, to that of a few weeks ago, Arthur Gillis, CEO of Protea Hotels, expressed his optimism for the industry. Location is the prime asset of a hotel, he said. “I don’t think the industry is in trouble. I think certain individuals and institutions are in trouble”, he said. Many would disagree!
POSTSCRIPT 3/8: Cape Town Tourism has sent the following response to this blogpost: “Cape Town Tourism met with hoteliers recently to review the value proposition of luxury hotels in Cape Town in particular. The outcome of our meeting and position on price, value and demand will be included in our next industry communication and feedback given at the industry sessions scheduled for next week. As alluded to by MEC Winde, business will react to pressures in different ways as they see fit in terms of their own strategies, market demands and business imperatives. It is common knowledge that published rates are not necessarily what are achieved, particularly in the current climate. Whilst we can offer advice, intelligence, guidelines and input in terms of customer feedback and trends, the market will dictate and business will adjust to market demands as they see fit. Our concern must be with the over-all value proposition of the destination i.e. full pallet of accommodation, experiences, restaurants and services rather than too much focus placed on one segment of the industry. Here is an extract from our industry communication to be published: It is clear that the current depressed nature of arrivals has more to do with externalities and the consumer climate than with accommodation pricing. Cape Town boasts an exceptional, quality product offering and if you look at the complete pallet of accommodation and, experiences on offer, excellent value. We don’t want to undermine the strength of our destination brand by devaluing it. Visitors to Cape Town leave the destination overwhelmingly impressed and willing to return. Post World Cup figures found that 92% of foreign visitors said they would recommend South Africa to others and 96% said they would return. This does not suggest a fundamentally flawed product or pricing problem. Cape Town boasts some of the world’s best small hotels, B&B’s and guest houses that are competitively priced and offer excellent value for money. The fact that Cape Town has a luxury hotel offering that compares with, and in many instances exceeds, our competitors in terms of quality and setting is an asset to our destination. It is commonly recognised that destination price perceptions are driven more by travel time and distance (transportation costs) than by in-destination costs. There is no evidence to suggest that Cape Town’s in-destination costs have detracted from its value proposition. If we can address the demand problem we face, then the cost of flights should become more competitive.”
POSTSCRIPT 3/8 : Provincial Minister of Tourism Alan Winde has responded as follows: “It is always interesting to see how markets and management react to these pressures. I am also very interested in the new season where we have seen new airlift directly to CT. From France, Switzerland, UAE, Zambia and more in negotiation at the moment. I have asked for a report on our market fact into these places. This will only be good news if we see bums in seats. I will keep you posted once I get the report”.
Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com Twitter: @WhaleCottage
The power of FIFA in organising the world’s largest sporting event is hitting home to the media, which is subject to draconian requirements if media representatives want to be accredited for the event, according to www.moneyweb.co.za
Some of the media restrictions for media accreditation include:
1. Newspapers may not publish photographs or videos relating to the event on their websites – only copy may be transferred there
2. Reporters may not write about the hotels at which the soccer teams are staying
3. Newspapers may not be sold in a restricted area around the stadium, in a radius of about 800 meters
4. Whilst FIFA commits to guaranteeing freedom of speech, it has a clause that states that news organisations “may not bring Fifa into disrepute”.
“Freedom of press is guaranteed”, says FIFA’s Head of Media, Pekka Odriozola. “That is very important for us, and you will be able to cover the World Cup in the best possible conditions. We really work hard to have the best possible facilities, the best possible access to the teams, and the competition. I can tell you that the international press in general are always satisfied with the service because at the end of the day, we are servicing the media. Really, there is nothing to fear” he added.
FIFA came under fire in Germany for its media restrictions. It appears that the media simply ignored FIFA’s restrictions regarding positive reporting about FIFA, and no journalists appear to have been evicted in that country in 2006.
The South African National Editors’ Forum (Sanef) says as follows: “It’s outrageous what Fifa is used to get away with. The tragedy though is the virtual absence of outrage by local media and editors on the violation of freedom of the press on such a scale.”
Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com
Mboweni announced the interest rate cut a day after the official announcement that South Africa is in a recession, having experienced two successive quarters of negative economic growth. The economy contracted by 6,4 % in the first quarter of 2009, Mining and Manufacturing taking the biggest knocks, at 33 % and 22 %, respectively. The category “Wholesale, retail, restaurants and hotels” had the smallest decrease, at 2,5 %, while the construction sector grew by 9 %, reports The Times.
Mboweni made his announcement against the background of a downward inflation trend, expected to average 6,9 % this year and 5,5 % in 2010, with food inflation peaking at 17 % but slowing down (Mboweni blamed a food cartel for the high food inflation); the second quarter is expected to have a lower negative growth rate compared to the first quarter; and the global downturn is showing “tentative signs” of “bottoming out”, according to Moneyweb.
The interest rate cut is the fifth since Mboweni started cutting the interest rate in December 2008. Consumers are hoping for a drop in the price of petrol next Wednesday too.