Starting out as a Chartered Account, this qualification led to Val Davies’ current position as COO at EY. After qualifying as a CA and completing her articles at EY, she joined the EY Tax practice.
“My main area of specialisation was corporate restructuring and transaction advisory services. I was then asked to lead the EY Tax practice, in addition to being appointed to the Executive Committee. In 2008, I was appointed as the COO for the EY region across Sub-Saharan Africa. Looking back, it has been the diverse career opportunities that have enabled me to continuously develop new skills and achieve my potential.”
She says in today’s world of change and innovation, it is impossible to do your job well if you are not connected – both in the local market and internationally.
“As our firm operates as a global business, there are regular forums to share best practice between the various geographies. In addition, I spend time talking to my peers at our clients, sharing our firm’s priorities, some of the challenges we face in operating as an integrated firm across the continent and hearing from them how they are responding to the current and future environment.”
On the changing role of finance managers:
According to Davies, traditionally the model of the CFO position was solely focused on past performance, on the numbers and on financial reporting. Today, the role not only includes financial planning and analysis, but information about where the business is going and how quickly it is getting there. “The CFOs of today need to fully understand the impact of disruption on their business, particularly in the area of technology. Failure to do so is likely to result in them becoming uncompetitive and less relevant to the market.”
She thinks that decision making have become more complex in terms of recognising the various short and long term influences in the market and the need to be more collaborative and diverse coming up with responses and solutions.
“We usually think of finance professionals as being able to tell us how things need to be accounted for in a set of books. This is no longer enough. Finance professionals actually have to be business professionals and have a much wider understanding of their business strategy – how the various elements intercept with one another and what risks that may present to the financial health of the business. Finance professionals need to move from a reactive state of analysing what has happened in the past to identifying value creation opportunities and ensuring that these are realised through effective business performance management and execution.”
Davis says companies are certainly expecting alternative skills from finance managers.
“At the centre of a business’s purpose to grow its market share and the need to ensure that it has access to the right resources to fund that growth and those resources are deployed effectively and efficiently. The modern finance team needs to create the confidence from the business that it is able to do so. The team needs to be at the centre of the execution of the firm’s strategy rather being an interested bystander. This is particularly important in a multi-location but integrated business.”
She says the finance role in South Africa will have to continue to respond to disruptive technologies and its impact on how business is done. “There will be an increased requirement to team with other functions in the business and ensure that there is more integration of front and back office.”
“The CFO’s of today need to fully understand the impact of disruption on their business, particularly in the area of technology.”
Davies says an important topic of discussion at the upcoming the CFO World Congress (www.iafeiworldcongress.com) will be the impact of disruptive technologies on the Finance function and the role of the CFO.
“It would also be an opportunity to showcase Africa as an investment destination – balancing the shorter term risk with the longer term opportunity.”
She says since EY operates as an integrated firm across the African continent, Davies says that working across multiple geographies, in different regulatory environments and with people of different backgrounds and cultures makes for a lot of diversity and complexity.
“Disruption is also challenging the way the world works. Business, government and people are responding to shifts that would have seemed unimaginable a few years ago. This comes with more complexity but also significant opportunity to improve the way that business is done. The increased focus on technology, globalisation and demographics are creating new megatrends which business needs to respond to if it is to be relevant in the world of tomorrow.”
On South Africa’s role in the global financial world:
“South Africa plays a key part in the Africa rising narrative,” says Davies. “As an emerging economy, investors remain interested in South Africa’s well-developed economy and infrastructure and its status as a launch-pad into and across the continent. The depth of South Africa’s capital market – being the most sophisticated in the Africa – and other supporting drivers, such as liquidity in the market – is the strongest on the African continent.”
She says whilst there has definitely been a slow-down in the growth rates on the continent – largely driven by the impact of global trends such as a decline in the oil price – Africa remains an important investment destination for investors taking a longer term view.
“As the most developed of the African economies and the largest recipient of foreign direct investment, South Africa has a critical role to play in ensuring that Africa realises its potential as a future economic powerhouse.”
She says according to EY’s latest Africa Attractiveness analysis, investment continued to flow to South Africa in 2015, even as macroeconomic indicators remained soft. After declining in 2014, the country reported 8.3% year-on-year growth in FDI projects with capital investment up a strong 32.5%. “There is no denying that the slow growth in the South African economy will make investment challenging – this is not because the opportunities are no longer there, but rather because these opportunities are likely to be more uneven than previously. It is now more important than ever for organisations and investors, who sometimes place too great an emphasis on shorter term economic growth trends, to adopt a granular, fact-based approach to assessing investment and business opportunities for the longer term.
“EYs 7P model for effective strategy execution in Africa help investors develop an appropriate strategy and mitigate the risks of execution.”
Davis says in the short term to medium term growth has stalled in South Africa, but over the longer-term, the country’s role in Africa still provides a strong stimulant for investment and growth.
“Investors from UK, US, Germany and India announced more projects into South Africa than in 2015. From a sector perspective, there was an increase in investment in business services, consumer products and retail, cleantech and automotive.”
On growth potential on the African continent:
Davies says investment exposure in South Africa provides many opportunities to the rest of the African continent, which gives exposure to earnings growth and what is still the world’s second fastest growing region.
“Planning, patience and diversification of portfolio will be important considerations for investors.”
She says through embracing shared value – the central premise behind creating shared value is that the competitiveness of a company and the health of the communities and economy around it are mutually dependent. “It is a fundamental business philosophy that recognises that profit and purpose can co-exist and be mutually reinforcing. For EY, a philosophy of shared value is underpinned by core purpose as an organisation – building a better working world – a working world with increased trust and confidence in business and capital markets, the development of talent in all its forms, greater collaboration across private, public and social sectors, and inclusive, sustainable growth at its heart; a purpose that is more relevant in the African context than ever before.
“Fostering entrepreneurship – as one of the main engines of growth in any healthy economy, small and medium sized enterprises (SMEs) will be the main drivers of the job creation required to realise inclusive, sustainable growth. For organisations genuinely committed to shared value and collaborative partnerships, the promotion of local content and enterprise development should clearly be a key business priority.”
Davies says anyone serious about doing business, be it in South Africa or across the African continent needs to take a long-term view on particular markets and should be staying the course. “Of course, resolve will be tested by what seem like ever greater levels of uncertainty — the most recent being the still as yet unclear impact of Brexit on African economies — and it may be necessary to make adjustments based on changing market conditions. However, shorter-term tactics should not confuse nor deflect from long-term strategies.
On opportunities and risks of expanding into Africa:
Davies says that given the scale, complexity and fragmented nature of the African continent, making well informed choices about which markets to enter when, and via which mode, will be more critical than ever. “While there is clearly no substitute for feet on the ground in key markets, an analytical approach that combines available data with frameworks that encourage strategic engagement, should help enhance the quality of analysis and accelerate decision-making. More so than ever, the organisations that succeed in doing business in Africa will be those that plan systematically, and revisit their plans frequently to align and recalibrate.”
She thinks the opportunities outweigh some risks. “Africa’s rise over the past 15 years is real; what we have witnessed has been a structural evolution rather than cyclical change that has marked previous boom and bust periods in Africa’s post-colonial history.”
She says although exports from many African economies remain commodity-orientated, private consumption has become a key growth driver, as has investment in infrastructure. “The services sector constitutes an increasingly significant proportion of most African economies, and, while still small, the role of (and investment into) manufacturing is increasing. This process of structural evolution – as with anywhere else in history – will likely take decades. However, most African economies are in a fundamentally better place today than were 15 to 20 years ago, and overall growth is likely to remain robust relative to most other regions over the next decade.”
On the impact of Brexit on South African companies and investment in Africa:
According to Davies the vote will inevitably create changes for business and many countries over the next few years, potentially disrupting markets, supply chains, trade agreements etc. Great change can spark great opportunity.
“Those African countries with stronger trade ties to the UK, could see declines in exports – these being South Africa and Mauritius. On the other hand, the shorter term Brexit has stimulated emerging market currencies, as it shifted investor appetite back to emerging markets.”