Being a CFO in South Africa Today
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Being a Chief Financial Officer (CFO) in a tough economic climate requires Buffet-style intellect, wisdom, perseverance and foresight to be able to gauge the markets and make calculated decisions in the interests of the company, its employees and shareholders. A touch of the modern day maverick like Elon Musk and the courage of a Mohamed Ali in the boxing ring, are also helpful in leading the finance function of a company through a downturn. In this article, Mindcor InterSearch takes a look at some of the considerations facing CFOs today.
Requirements and Challenges
South Africa is a challenging environment in which to do business with a dismal 1.3% growth predicted for 2019 (World Bank, 2018). Driven by political policy uncertainty, rising populism, corruption, inadequate infrastructure, electricity hikes, waning investor confidence, and fierce competition for a share of a dwindling consumer wallet, this situation has the potential to keep any CFO up at night.
Since the eruption of the Steinhoff/KPMG debacle last year, CFOs are also feeling the pressure to restore confidence to the once-honourable image of the accounting profession, and compliance with increasingly complex financial governance and reporting standards must be managed without sacrificing productivity.
It is against this backdrop that the CFO must balance ever-increasing operating costs with acceptable price increases for customers, whilst satisfying shareholders with profits and a measured strategy for sustainable growth.
Leaders polled for PWC’s Global Survey, are focusing their energies in 2019 on internal initiatives such as operational and process efficiencies. This is a departure from 10 years ago, when many South African businesses focused their attention outwards to the rest of Africa, which was considered the nirvana for new markets and exponential growth. Today these same pioneers are a lot more cautious – not only is corruption rife on the continent, but the lack of skills and auditing shortfalls present real threats. There is money to be made by tapping new African markets, but the risks are great and in this margin-squeezed market, CFOs are calling for restraint and comprehensive examination before stepping across the border.
Instead, leaders are turning inward to drive revenue growth and capture new markets within our borders. The traditional knee-jerk reaction for a CFO in a financial downturn is to slash budgets allocated to marketing and innovation, but some of our clients actually believe that marketing and innovation efforts should be doubled at this time. Creative use of targeted messages offering consumer discounts and rewards can help differentiate a business from its competitors. Investments in consumer-friendly innovations such as the enhancement of existing products, or offering a service combined with a product can help retain existing customers and attract new ones even in a depressed market. Solution selling can facilitate deeper, more lasting relationships with customers.
The temptation for CFOs weathering a downturn is to hold off on investments with long-term benefits, such as technology or artificial intelligence. This behaviour can place the company behind the curve when the economy regains momentum, and the opportunity for savings through increased efficiencies is lost. Working out how to strike the right balance between expenditure on short-term priorities and long-term success requires a strategic mind-set. Convincing a concerned board in a difficult, low-growth environment of the wisdom of making an upfront capital expense, with benefits realised only in the long term, requires courage and foresight.
Employees are critical to a company’s capacity and resilience to weather the storm and a decision to tighten the purse strings of a human resource budget needs careful consideration. Resignations affect the bottom line as it can be expensive to replace an employee, not only in terms of cost, but in the time taken for the new employee to be fully productive. Salary is not the only attractor: our clients have found that investing in the positioning of their businesses as a preferred employer is necessary to attract and retain the brightest talent. The loyalty and dedication resulting from building and maintaining a strong company culture to make your organisation an attractive, enticing place to work is priceless. Continuous learning particularly related to the modernisation of skills in the digital era forms part of this investment; with statistics demonstrating that organisations with the strongest digital leadership capabilities financially outperform the rest (CNBC).
Businesses in South Africa will always be confronted with volatile political events, and threats to the stability of the world economy. CFOs with Buffet-style intellect and wisdom, a touch of Musk’s innovation, and the courage of Ali will help your business survive, and perhaps even thrive in a low-growth environment. CFOs that stay close to the business tell us that their future envisaging, coupled with the ability to adapt and make real-time decisions, is what keeps their roles interesting.
For assistance in finding the right CFO to navigate the uncertainties of the current market and find creative ways to fund growth, please speak Mindcor InterSearch.