Making Businesses Work by Adding to the Bottom Line
Donald Nieuwoudt has 22 years of experience at executive management level at various JSE listed and multinational organisations, now this strategy thinker and process changer is scanning the horizon for new opportunities.
CIARAN RYAN: Today’s podcast is sponsored by Draftworx, which provides automated drafting and working paper financial software to more than 8000 accounting and auditing firms and corporations. CFO Talks is a brand of the South African Institute of Business Accountants. I am very happy today to welcome Donald Nieuwoudt to CFO Talks. He’s part of a growing breed of CFO guns for hire. Having come from a 20-plus year career in finance, in sectors, ranging from IT to telematics, fast-moving consumer goods, distribution and retail. He last served as head of finance at Ingram Micro, which is a Forbes 100 company involved in mobile phones, IT distribution, supply chain, and logistics. Now, he was appointed head of finance to fix a very dysfunctional finance and operations team that had seen four heads of finance before him, and within a short timeframe, he was able to motivate and pull together a team of 15 staff and sort out problems that were highlighted by the international internal audit team and problems that were delaying the sign off of the annual financial statements, and that was going on for many years. After a successful business restructure through reducing the head count by 100 and closing down parts of the business, launching a new legal entity and selling other parts to an external buyer, he was promoted to the country manager role. Overseeing the sales and marketing team operations and finance and admin. So first of all, welcome Donald, where are you talking to us from? Are you in the Johannesburg area or are you somewhere else?
DONALD NIEUWOUDT: Good day, thank you for the opportunity. Yes, I’m currently in Johannesburg, I live out in the north, with prospects of maybe moving back to Cape Town 21 years in Johannesburg, it could possibly be something that I could have a look at.
CIARAN RYAN: I’d like to kick off with what I mentioned in the intro, you entered a dysfunctional finance department and you had four people before you trying to fix what you eventually did fix now. How did you get this right where the others before you didn’t manage to do it?
DONALD NIEUWOUDT: I think you need to be present and you need to actually lead your team. I found that it was a little easier than I initially thought it would be, from the point of getting the team motivated and changed. So they need to know that they have someone who’s looking after their backs at the management level. We had previously the regional CFO from our Singapore office flying in for two weeks a month to try and sort out the issues, which obviously wasn’t ideal. He was dealing with high level issues, but not listening to what the staff needed when they had possible problems, questions and when guidance was needed. So I think I came in, I settled that as quick as possible, we had obviously a few fatalities with one or two of the more senior CA-type staff leaving, but with the staff that we had, we had a good set of staff. So we started chipping away at the problems that were being seen and having to be managed at that time. The other thing is obviously dealing with a team that’s very diverse from an age point of view and race was a little challenging, but, we pulled together and I think as a team and a small family unit we knew what the goal was and eventually then had to get it done.
CIARAN RYAN: When you were running the finance department there, of course, Ingram Micro, that is a Forbes 100 company, how many staff were employed in South Africa at that time?
DONALD NIEUWOUDT: At that time and we changed the business model it was about 120, 130 staff plus, depending how busy we were, we ran a 10,000 square metre warehouse just outside the airport. It was a high secure warehouse, we were dealing in mobile phones. So the likes of Samsung Nokia then and Microsoft phones, and then doing our own white labelled phones for the likes of Pep stores, Edcon and Foschini Group. So there, as I said, we had quite a big warehouse staff, I had my team of about 15, which included procurement, some of the other services, admin-related staff, and then the finance staff, which was the full spectrum from management accountants down to creditor clerks.
CIARAN RYAN: I see that Ingram Micro pulled out of South Africa. So tell us about your career and what you’re doing now.
DONALD NIEUWOUDT: My career, as I said, has been about 20 years in the making, from leaving Cape Town and studying at the University of Stellenbosch, doing my articles, becoming a CA. I then was employed in Cape Town by a newly listed IT company, which was during the IT boom. Within the first year I was asked to relocate up to Johannesburg to work at the head office, under the CFO, financial director at that time, and he gave me great opportunities. I was with them for about seven-and-a-half years. I then moved on to another JSE listed in the telematics, I guess we would call it IOT-type sector. I was with them for 10 years and then decided I wanted to make a change, and then I was looking and saying, okay, I want to work for multinational. So Ingram Micro came around and I started with them. As I said, we were mainly focused on the mobile phone industry, doing distribution and then a bit of IT equipment and IBM training in the country. We were the only training partner that was really present of the five that were globally employed by IBM. So that’s where we started, obviously we came to a point where the regional office in Dubai decided to exit the mobile phones industry and to focus more on what their core focus was, which was the new industries and technologies of cyber security, cloud services and POS systems. So we came to a point that we had to restructure the business. So that meant closing down some of the divisions, obviously it was easy to close down the mobile phones division because we just didn’t sell to our customers anymore. So we closed that down, but the distribution business and the warehousing business was still pretty profitable. So we got to a point where we actually were looking to sell that again. We sold it to one of the old owners of the company previously, and that became a task in itself to do that. We then launched a new business with the new legal entity in the north of Johannesburg, which was focusing on the areas that I spoke to you on. we were at that for about two years when Ingram Micro had some big ideas as to how to grow the business, but we were having some troubles being competitive in a very competitive and already established market in South Africa. So they took the decision at the end of 2019 to actually close down operations in South Africa, they were looking and saying business risk and reputational risk, it may be better to shut it down and they then did that within six weeks.
‘I think the CFO currently is not just your finance guy, I think he’s part of the business executive.’
CIARAN RYAN: One of the things that we’ve noticed here on CFO Talks is that there are a lot of people with experience like yourself, who’ve been around in the finance space for 20-plus years, and they’ve dealt with multinationals, they’ve dealt with banks, they have a good network in the finance sector for raising capital and that kind of thing. Now, give us a sense from your point of view, the role of the CFO and financial executives, generally that has been changing over the years, it used to be the case that you’d be required to get the annual financial statements signed off, that was the primary function. Of course, it’s evolved into something much more involved than that, and from your point of view, is it more challenging than in the past, and why is that?
DONALD NIEUWOUDT: Yes, I must say that is definitely the case. I think over the 20 years there’s always been a shift and a change and things developing, but I think the rate at which things are changing and developing currently has actually gone up many, many times quicker than it was in the past. So I think the CFO currently is not just your finance guy, I think he’s part of the business executive, which possibly pools most of the different parts of business together because I suppose at the end of the day, it’s the finance there that really has to touch all parts of the business. So you become the springboard of the CEO, where you are looking at the ideas that are coming out of the board, the CEO, the EXCO, and seeing how you can actually make that work. You’re then also having to deal with a lot of other issues, like compliance and risk, where those things have become more and more intense over the years. You look at new threats that you have in cybercrime, new technologies that are coming out and how could they actually affect business and work in business in the future, like blockchain and crypto currencies. So it’s ever-changing, you’ve obviously got big data, and I understand that the data that is being generated is just doubling and tripling every year or whatever it is. So you’ve got those kinds of protections that need to come in with your GDPR and your POPI Act. So all these things start to affect the CFO and he needs to make sure that that is all kept in tune and not going amiss, as well as still running a finance department, which makes sure that the reporting is done correctly, the audits are signed off, that your internal audit committees are kept happy, that policies and processes are as they should be and as robust as can be. So yes, definitely ever-changing, you now are more a business executive than anything else. I always say I like to get my finance team all settled for the day, and then I would go and do everything else that was required, and that’s negotiating at times with landlords, with insurers, it’s ever-changing. So from one day to the next it’s not a repetitive thing, which is what I enjoy and what is great.
CIARAN RYAN: I guess one of the things as well is the whole issue that you touched on there about compliance, when you’ve got changing IFRS standards, and you mentioned the POPI Act the Protection of Personal Information Act, which is a very serious piece of legislation that all companies have to adhere to. You’ve got these things happening and it’s coming, it’s almost being fire-hosed at you all the time. So you’ve got to make sure that you’re A. compliant with all of these things as fast as they are changing, but one of the questions I had, you probably had external auditors, being an international group, most of these international groups, they like to standardise on the external auditor. It’s a question that came up, you’ve noticed they’ve changed now the way that external auditors are going to engage with companies, they’ve got this audit rotation that is happening every ten years, and some people are saying, well, it’s a bad idea, and some people are saying it’s a good idea. One of the problems that you’ve had and we’ve experienced in South Africa here, where you have the same auditor that’s been with a company sometimes for 40 or 50 years, you can get a bit too close. What’s your view on that? Did you get to this Stockholm syndrome effect where you get way too close to the external auditor and they can get compromised? How did that work out in practice with you?
DONALD NIEUWOUDT: I think that that is the case. Strangely enough, I have had to have changes in auditors a couple of times through my career within Ingram Micro because the group did change auditors, so we had to change auditors as well. We then also became too small in the new entity for the big four audit house that was actually auditing us. So we needed to change to a smaller one, which was then also used by our regional office, which was in Dubai. So from that point of view that that has happened naturally. But I think generally it is a good idea to change auditors, at times I think fresh eyes may see things, which once you get too close to it, and that’s from the auditor point of view, you tend to misjudge things or not see things as clearly as always. I suppose it’s the intent of the company how transparent you want to be, how much value do you want the auditor to give to point out these things that could maybe be roadblocks and possibly some things that you’re not seeing because you’ve been blinded from doing it so much. I suppose one of the other things is that audit teams do change within an audit firm, so you’ve got new audit clerks coming in every year, they go through the ranks, so you’ve got new audit managers working on the job. So that tends to maybe help a bit, but obviously your end person that you’re turning to and who’s actually signing off is the audit partner. So I think it is a good thing tto have a change, I’m a compliance-type guy, so, I think that is good. But time will tell how it actually works out practically. It could possibly chase up fees because now you’ve got a new audit firm coming in, they need to do all their work in getting to know you as a client. So I think it’s got its positives and negatives.
Learning on the fly
CIARAN RYAN: Are there some things that you can only learn through experience and hard knocks, I’m talking now as a CFO or a senior financial executive, things that you’re not going to learn in the accounting school. So you’ve already mentioned your typical day, where you get the finance team settled and then you’d be negotiating with the landlords and with insurance companies, and you have an obviously very kind of varied day. Now, these are things that you’re not going to pick up in accounting school, what’s expected of you. Sure, you might have an understanding of this new IFRS standard and how that gets translated then into your financial statements, but you’re dealing a lot at the very, very top level of the business, you’re engaging with clients, so there are certain skills there that you require, negotiating skills, communication skills, human resources, and sometimes being tough, you’ve got to lay off people. These are things that you’re not taught in accounting school, right?
DONALD NIEUWOUDT: Yes, that’s definitely for sure. I have always said that when I’m looking to employ someone, I will generally look at someone who has studied at university. The only thing that that really tells me is that they have the ability to think and to process things. So every single day you are going to learn new things, you’re going to have to work it out as you’re going, and if you’ve got that ability to think, I think that’s a great thing. Obviously, if you start doing things more and more, you gain that experience, that confidence. Just processes and procedures, it’s easy to
work that out in a textbook, but when you have a live situation that you’ve got to do it, you possibly applied the basics, but you then definitely still need to tweak it and tune it, not just for business in general, but for the type of industry or the company that you’re actually working for. So you’d find the policies and procedures that we had within the JSE listed companies were a lot different to the ones that we had when it was a multinational, and you’ve got a totally different framework that you need to work to, you had SOX and that kind of thing, where in South Africa that wasn’t a biggie, but you had to learn those new things, as I said, on the fly, while you’re still working at it in this new company.
CIARAN RYAN: When you talk about SOX, are you talking about state-owned companies.
DONALD NIEUWOUDT: No, the Sarbanes–Oxley Act.
CIARAN RYAN: Oh, Sarbanes–Oxley, okay, one of the things that has come up a lot is, for example, the South African Institute of Business Accountants has a designation CFO SA, and that was developed really out of this need or this perceived need to recognise finance executives who have gained this experience and who’ve come up through the ranks as you have but it really is in recognition of all these other disciplines that are required of a senior finance executive. There was a study, and a few studies actually, coming out of Canada, for example, one is called from CA to CFO, and they look at all these different disciplines and competencies that are required and they came up with 34, and that would include those things like communication, team management, strategy. Well, all of these kinds of things that you’re not really getting in your academic route up through the accounting field. So the armoury for a CFO, his toolkit, is ever expanding. He really has to become almost at the level of a CEO in terms of the type of competence that he’s expected to have. Would you agree with that?
DONALD NIEUWOUDT: Yes, for sure, and things that they don’t teach, maybe for those lecturers out there who are listening to this, something like emotional intelligence, so EQ, dealing with people, as I said, from various age groups. In the workplace you need to know that, and it’s something that needs to develop and actually needs to be there because otherwise you can’t really function, ideally because you’re getting all these other problems that come in. So that was one of the good things with Ingram Micro, where they had an internal learning programme and you could choose different things that you wanted to learn and there were online courses that you could go through, and emotional intelligence was one of those things. I’ve just found also that the disciplines that you need are vast and, as I said, ever-expanding. The role of CFO now I have seen to actually have another connotation added to it, which is the commercial CFO. Now, you would have thought a CFO would be commercially-minded but that’s now something that’s been added, where you need to be more commercially-minded in now dealing with contracts and within the space of the customers and that kind of thing as well, how your service delivery is going to be. You’d think that would be more for the operations manager and COO, but I think that’s where the CFO is very multi-tasked in their dealing with everything from start to end, with finances probably still being key and important, but most probably playing less of a role because hopefully you have your teams below you who are looking at that.
CIARAN RYAN: Just give me an idea about the most challenging assignment that you’ve had and what was the outcome of that? Some things are fairly routine but then you’re presented with a real monster of a task. Tell me what that was.
DONALD NIEUWOUDT: Maybe just to mention two, obviously one of the biggest issues when I started at Ingram Micro was we had a marketing funds account, which was in the balance sheet, sitting as a debit. So obviously for any good accountant or financial director, debits sitting on the balance sheet, you either need to be able to touch it or to collect it or to explain it somehow, if it’s more of a tangible type thing. A debit on the balance sheet is generally not a good thing if you can’t do those. That was one of the problems that the internal auditors, as well as the external auditors, had because this was sitting at a debit of R15 million…
CIARAN RYAN: Sorry and this was a marketing expense?
DONALD NIEUWOUDT: Yes, it was a marketing, it was meant to be a flow-through account, but it had hit debit side. So obviously the team that was already busy couldn’t get to that and focus on it, and it had been building up over a number of years already. So looking at that and saying, well, how do we get through this because the auditors are just going to say expense it, you can’t take a
R15 million expense into the balance sheet or into the income statement when you don’t know what it’s really about. So what happened eventually is I said, okay, well, how do I get around this? At times you’ve got to say to get the task done, you need to pull in extra help, which I then did. At times you may not have the budget for it, you may not want to try and explain it to management. In this case it was to our regional office in Dubai, but I said, this is what’s needed, and we had a good end result. What then transpired was going through it basically entry for entry and maybe taking the last month and saying, okay, well, let’s see how it’s moved in the last month because that may give us some insight. Eventually after having this external consultant lady come in, she’s brilliant at Excel, and working through things and sorting things, we basically saw there was a big issue when it came to us actually claiming the VAT on certain items. So that was lucky, something that we could touch, collect, so we knew where that was, so it ended up not being a big write off at the end of the day. We couldn’t explain maybe about R2 million of the R15 million, but for the rest we had solid evidence for where the process went wrong. So that meant then changing the process so that it didn’t happen in the future, educating the staff who were dealing with that account to say, look, you need to look at it this way, that way, these are the double checks you need to do. Then from my point of view, every single month to look and see that this wasn’t a growing debit, it should have actually, if anything, been in a credit, and checking it and keeping an eye on it on a monthly basis when reviewing the management accounts at the end of the month to make sure that everything was then 100% there. So the good outcome was that we didn’t have a write off, we actually got back a lot in cash and yes, that pretty much worked out pretty well. The other big task that we had was with the restructuring of the business, the sale, and here where you’re dealing with overseas parties, where you have local people, but then having to report everything back to the overseas group, negotiations become a bit difficult. I remember that we had not signed off the financial statements, yet the Ingram Micro directors had resigned, and we had the new owners, directors that had been appointed and coming not to a point which could never have really been foreseen that now the financial statements need to be signed off. But the new directors are saying, but we don’t want sign responsibility for this when we had no ownership of those results at that time. So that became an issue of how do we deal with this now because we can’t get the old Ingram Micro directors to come back on board for a day or two, just to sign the financials. Eventually that was a negotiation that I actually got through and eventually we got it signed off by the new directors, but with the old directors giving the authority to the new directors to say we’re comfortable and we would have signed these if we could. So it’s those things that flip up that you don’t expect, but then eventually you have to find a solution, and if you think long and hard enough, you eventually do.
CIARAN RYAN: A couple of quick questions here then for you to wrap up. If you’re looking three, five years down the road, where do you see yourself?
DONALD NIEUWOUDT: That’s an interesting question. I think I’m looking currently for a new opportunity, where I can grow possibly in a different sector to where I’ve been in previously. I’ve got a keen interest in aviation, the whole leisure industry, not that those are good industries to be in currently, I suppose, in our current Covid scenario, but to look at those. So a new opportunity possibly in the Cape. I’m heading towards 50 currently, so you’re getting to that role, which says, well, if I have worked for a good service period for my previous company, I’m heading towards retirement age, where maybe board appointments and things become then more of a situation. So looking for that new keen opportunity where I can just really make a large impact as my current possible large job before heading towards retirement stage.
‘I’ve always been told that if I didn’t become a CA, a quantity surveyor would have been a good second choice.’
CIARAN RYAN: What do you do in your downtime? How do you relax?
DONALD NIEUWOUDT: Things have changed a bit to where they were previously, I enjoyed travel, I’ve seen a lot of the world, so that’s great. Other than that, on a day-to-day basis I try and keep as healthy as possible, go to the gym, maybe for a run or for walks, put the leashes on the dogs and take them for a walk around the park. So that is one of my interests. One of the other interests is actually building things and creating things. I have got a keen interest in architecture. I’ve always been told that if I didn’t become a CA, a quantity surveyor would have been a good second choice because that deals with the finance side of things and calculating things, and then also design and architectural type things. So, yes, that’s where my interests lie.
CIARAN RYAN: Have you done some building in and around your house there, and doing the measurements, how much materials you are going to need for this, that and the other?
DONALD NIEUWOUDT: Yes, I have actually. So that was one of my projects, most probably too long ago that I did do, I was actively involved in building the house that I currently live in, which I was quite lucky to have featured on Top Billing a couple of years ago, where the architect, who was well-renowned in Johannesburg, was asked to do an expose on his complex that he had built, and one of the houses that was exposed was mine, It was quite exciting because you can see what you had thought of as something in your mind, which has now become a reality. So that was great.
CIARAN RYAN: Final question, any books that you would recommend?
DONALD NIEUWOUDT: During lockdown I was going through some cupboards and I generally enjoy books that tell someone’s story or how they’ve seen life. So I actually found a book that I think someone had had left here when they came to visit, it was Richard Branson’s autobiography. So getting through that was very interesting, the copy I have was last updated in 2007, so obviously to see in 13, 14 years how he’s actually progressed since then, which is really exciting. He’s just someone who’s got vision and eventually makes things happen. So I think that is a good book to get through. Then just a personal friend of mine, a book called The Vagabond – Is Your Life Worth Living? by Frank Rautenbach. People may know him as an actor of Faith Like Potatoes and he acted in Sewende Laan. We were both starting out our careers and moved to Johannesburg from Cape Town 20 years ago, I knew him down in Cape Town and in Johannesburg, and just to see how things have gone and how things are not always easy. Things don’t always work out as rosy as one hopes and, and pictures it to be. But eventually we carry on and we live life. So that was an exciting book to go through as well.
CIARAN RYAN: So like the biographies and the personal stories and overcoming adversity on the way to somewhere good.
DONALD NIEUWOUDT: Yes, I think we all have adversity sometime in our lives. So you need to know how to handle it and you need to have the right attitude in that. So the best way to find that out is by reading people’s stories.
CIARAN RYAN: Fascinating stuff, Donald, we’re going to leave it there. Some great insights and thanks for sharing some of your stories there. I really do wish you the very best on this and keep in touch with us and let us know how things are going in the months ahead. These are very interesting times for finance executives and for CFOs. I think you’ve really laid out some very, very interesting ideas and perspectives there that we really do appreciate. So thank you so much for coming on.
DONALD NIEUWOUDT: Thank you so much for the opportunity. It’s really been good chatting.