Managing member at Punta Accounting and Business Solutions cc, Petrus Samuel, says the biggest challenges of is job is streamlining processes and improving productivity; running a global business efficiently; achieving real-time visibility across the organization, and handling financial consolidation efficiently.
He regularly networks with fellow CFOs and finance managers where he learns about “the good and bad of other sectors”.
For Samuel, the greatest opportunities posed by his job is meeting prominent people seeking his services and learning about new business ideas.
He hopes the upcoming IAFEI World Congress (www.iafeiworldcongress.com) will help delegates to gain knowledge on analysing critical executive management issues and skills on research and development.
On South Africa and investment:
Samuel says although the country plays a vital role in the global financial world, investment can be affected by political instability, recession and crime, although the business market is booming.
He would encourage international companies to invest in South African companies, especially in finance where there is a demand.
He believes South African companies can also play an important role in the economic growth of the African continent by helping to increase the GDP and foreign exchange reserves, and by creating a diversified economy with a growing and sizable middle class.
To Samuel’s mind, there are several risks that investors in South African companies face on the continent.
“Starting a business is a lengthy procedure in sub-Saharan Africa and can cost a significant proportion of income per capita. This is partly true of South Africa, although the cost of starting a business is only 0.3% of income per capita compared to over 60% elsewhere on the continent.”
He says the cost of dealing with construction permits is also extremely cheap in South Africa in comparison to the continent as a whole. “Taking 13 procedures and 127 days, it is also a relatively seamless process, although several steps must be completed that may be quite foreign to firms new to the country.”
Electricity is another big concern for businesses in South Africa. It takes 226 days and involves a string of lengthy procedures. “Eskom, the electricity public utility, can take 60 days to provide an estimate after the application has been received, and 165 days to complete external connection works.”
“Paying taxes takes 200 hours to complete per year and requires nine payments. Corporate income tax and unemployment insurance contributions (UIC) are two of the most arduous procedures.”
Another concern is property registration which takes 23 days and six procedures, “although that can fluctuate significantly depending on how quickly a rates clearance certificate can be obtained from the local authority and how long it takes the conveyance to lodge the deed at the Deeds Registry”.
Other concerns are paying taxes, trading across borders, enforcing contracts and resolving insolvency.
“Paying taxes takes 200 hours to complete per year and requires nine payments. Corporate income tax and unemployment insurance contributions (UIC) are two of the most arduous procedures; the former is also one of the most expensive,” says Samuel.
As for trading across borders, he says South Africa is a notoriously tricky place to conduct overseas trade, although big strides have been made in rectifying difficulties experienced when trading across borders. Cost is a concern, but the time required to compile documents and gain approval is the most taxing aspect of international commerce.
When contracts have to be enforced, Samuel says Trial and judgement can take almost 500 days on average in South Africa, and the cost of an attorney and court fees can make the procedure an expensive ordeal.
“It takes two years on average to resolve insolvency, costing 18% of the estate with a recovery rate of 35.4%.”
On the positive side, he says South Africa ranks first in the world for ease of getting credit, according to the World Bank and IFC, and also has good structures in place to protect investors. Culture also plays a role in the business environment, says Samuels.
“There are multiple cultures and a number of different languages spoken in South Africa, which means adopting a bespoke approach to different regions is crucial. The business environment is quite informal and South Africans can be rather direct in their approach. Although South Africa is a transactional culture, they are a personable people who have deeply rooted traditions and it is a good idea to try to build a rapport as well as furnish counterparts with some background information about oneself or company.”
On the constraints of expanding into Africa:
Here Samuel lists the following possible scenarios: damage to reputation and/or brand; business interruption; economic slowdown and slow recovery; regulatory and legislative changes; increasing competition; distribution or supply chain challenges; computer crime, hacking, viruses and malicious codes; technology and system failure; failure to innovate or to meet customer needs; and failure to attract or retain top talent.
Despite these risks, Samuel believes that the opportunities are worth the effort to help improve the execution of strategies across business functions.
Samuel believes that the South African economy is now more likely to fall back into recession and that extreme currency volatility indicates that a downgrade of its credit rating to non-investment grade in December is now almost inevitable.
“Bi-lateral security cooperation and aid programmes face less disruption. The South African economy is the most exposed to the global economy and its currency in particular is the most volatile among its emerging market peers. South Africa is reliant on foreign capital to finance its wide current account deficit.”
He says additional fears of euro-scepticism in other EU countries have also stoked fears that South Africa’s trade with the EU is under threat. South African exports to the EU reached over USD14.2 billion in 2015.
“However, the impact on the South African economy would be short-lived and relatively manageable. In a worst case scenario, where the UK economy were to shrink by 5% and UK imports were to drop by 10%, South Africa’s economic growth would fall by only 0.1% (according to research by North West University).
“The effective implementation of a new foreign exchange mechanism and liberalisation of the fuel sector will face fresh hurdles as the UK withdraws from the EU. Nigeria will also struggle to attract interest in new debt sales aimed at financing its expansive budget. The main impact of a ‘Brexit’ on Nigeria would be further deterioration of the country’s already struggling economy, which has been caused by the fall in global oil prices and a steep drop in local crude production due to an insurgency in the Niger Delta.”
On the changing role of the CFO/finance manager:
Samuel says in the accounting services sector where he works, finance managers and CFOs are creating more value than in the past, including developing strategies for sustainable value creation; enabling value by supporting the governing body and senior management in making decisions and facilitating the understanding of performance of organizational functions or units; preserving value through asset and liability management, managing risk in relation to setting and achieving the organization’s objectives, and implementing and monitoring effective internal control systems; and reporting value by ensuring relevant and useful internal and external business reporting.
In his own position, Samuel had to acquire new skills such as interpersonal skills, business skills, leadership and project management skills, strategic agility, communication skills, problem solving skills, change management skills, risks management skills, accounting skills and IT skill. “I acquired these skills through continuous education and short courses.”
He says companies are now expecting these alternative skills from CFOs and finance managers because they are regarded as proactive professionals that play a vital role in the going concern of a business.
Samuel believes that in future the key focus areas for CFOs will be strategy design, governance model, inorganic growth, portfolio optimisation, capital allocation, market positioning, risk management and performance management.