Turnaround Strategist/Business Rescue Practice – Trilord Consulting
After 39 years in the corporate sector, Rajesh Mahabeer, is drawing on his combination of vast experience, skills and competencies in launching Trilord Consulting, which offers their clients unique expertise to unlock value.
CIARAN RYAN: This is CFO Talks and I’m very happy this morning to be joined by a Rajesh Mahabeer who is a CA and he holds a string of other professional qualifications, including the FCMA, a CGMA, ACA, and a whole lot more. We’ll get into that in a minute. He’s got an MBA from the University of Derby in England and is currently reading for his PhD degree at Wits University. Now, Rajesh worked for a number of different companies, including AECI, Tetra Pak International, Walter Sisulu University, the Auditor General and South African National Parks. He’s occupied various different roles, including CEO, chief operating officer and CFO. Now, his most recent endeavour is the creation of Trilord Consulting, which provides financial and advisory services to the corporate world. So there’s a lot there to unpack. But first of all, welcome Rajesh, how are you and where are we talking to you from, are you in Joburg or where are you?
RAJESH MAHABEER: I am in Centurion at the moment,
CIARAN RYAN: In Centurion, for people outside of South Africa, that’s in the Pretoria area, not far from Johannesburg. I suppose we should start off by commending you on an impressively long list of academic qualifications, and it seems you’re still at it now that you’re working on a PhD at Wits University, what’s the subject of that?
RAJESH MAHABEER: Well, the, the subject is on corporate decline avoidance and business rescue practice in the South African context. So it’s really about trying to develop some new knowledge around how one can possibly avoid going into financial distress before it becomes a serious problem, and the interventions that one could take to try and navigate yourselves out of less stormy waters into calm waters, rather than very stormy waters and into a catastrophe.
CIARAN RYAN: Now, that’s an interesting subject because it’s something that has been discussed a lot in the media in South Africa, liquidation versus business rescue. Business rescue, of course, is quite new, it only was introduced in the Companies Act, the latest version of the Companies Act from 2008. What is your finding so far, what is the thing that jumps out at you?
RAJESH MAHABEER: Well, if one looks within the context of the business rescue regime, the current regime, I think the legislation per chapter six of the Companies Act 2008 is extremely empowering when compared to the previous 1973 Companies Act that spoke about judicial management, and it really had marginal impacts on restoring financially distressed companies back into the economy. However, despite the empowering legislations, the success rate of business rescue is still quite marginal. Remember that business rescue was promulgated in 2011, so we are a good nine years into it. Some of the initial findings, and it’s early days yet, but it really deals around the regulator, being the CIPC, perhaps awarding business rescue practice licenses to people who are appropriately qualified, but maybe are lacking in the skills required to turn around a financially distressed business because really and truly, you need a serious combination of many, many competencies, skills and experience to be a turnaround strategist. So that’s one of the initial findings that is to say that perhaps the criteria to register business rescue practitioners maybe needs to be looked at. The other more obvious finding is that sometimes management places the company into business rescue when it’s really a bit too late, the disease has become terminal.
Identifying business distress to prevent catastrophe
CIARAN RYAN: I imagine there is going to be a huge demand for business rescue practitioners in in the next couple of years, one can already see the distress that companies are in. It’s a question that was raised a couple of weeks ago when I was talking to a business rescue practitioner, there’s no harm at this point in actually calling in a practitioner and saying, listen, we are not sure how the next six months are going to go, what can you advise. Have you got any advice for companies or for accountants who may have clients in that position?
RAJESH MAHABEER: Absolutely, being an accountant is one thing, and I think it gives you a very good baseline understanding of business from a financial perspective, but to really consult, to help business leaders perhaps turn around financially distressed companies or to start to take some proactive steps to avoid the distress deepening, I think it starts to allude to a very specialised area of work, which is basically turnaround strategy. What I would suggest and advise colleagues out there from the profession is to identify when companies are starting to go into financial distress because they are able to easily do that, given the cashflow challenges that would start to emerge and then to make serious recommendations to the business leaders, the CEO, the CFO, and so on, to say, please go and consult with a turnaround expert. Then that would be a great starting point to try and circumvent what could become a catastrophic outcome.
CIARAN RYAN: So acting early is always the right thing to do. Now, I should just mention the South African Institute of Business Accountants does offer a business rescue practitioner license. So they’re one of the first in the country to do that. I think the academic side of that is in the process of being developed. But in my discussions with people, yes, I think there’s an element there of experience that’s required, and I want to come to that in a minute with you, the role of the CFO, because we, as trained accountants, we’re pretty good on the technical stuff, but of course there’s a whole lot of other disciplines that have to be brought to the picture, particularly when you’re dealing with a company in distress and forceful personalities, and people who maybe have done some things that they shouldn’t have done and they’re afraid of being found out and so on. There are a lot of very sensitive issues around this. Would you agree when you get into the business rescue space?
RAJESH MAHABEER: Absolutely, it’s a conundrum of many factors, including, of course, narcissism, and narcissism I talk about is really the ego of the business leader getting in the way of some serious interventions because some business leaders may come from a view that says, I know it all, I don’t need help. So that’s one of the challenges. The other challenge, of course, is the difference in perspectives coming through from shareholders on the one side and management on the other side, where shareholders may be saying, well, we need to preserve and conserve what we’ve got, let’s take those decisive steps to stem the tide against a continued financial distress. Management may be saying, but listen, we need a little time. So there’s always that dissection that comes through. The other challenge is that, of course, when a person is a consultant, a professional, the professional must be brave enough to say to the client, look, I’m a highly competent accountant, and I can give you some directions, but really and truly given where you guys are, you really need a super specialist because that’s what you really are as a turnaround strategist. You need to have very deep and broad understanding at the same time of many, many facets and fundamentals and principles of business, not least, of course, managing the relationships amongst the stakeholders that are normally involved in these kinds of crisis.
CIARAN RYAN: Let’s just move on, we’ll come back to that in a minute. I just want to find out what led you to launch Trilord Consulting. What was your thinking behind that, given your vast experience in the corporate world?
RAJESH MAHABEER: When I launched Trilord, which was on April 1 2017, it was coming straight out of a turnaround CFO role at the South African National Parks and really I had an awesome time there, I really enjoyed doing what we did. But I felt that after 39 years in corporate, I needed now to bring my skills into business as a strategist, as a consultant, as a business advisor, and more importantly, as a trusted advisor to business leaders. I felt that putting all of what I have together could be a very, very purposeful, very meaningful value proposition to business leaders, where I could go in and consult with them on very specific problems, help them to get going again and move on [indistinct]. So I thought it was just at that point of my life where I wanted to make a broader impact to the business community, rather than just being in one organisation yet again.
‘I think companies could do very well by outsourcing the CFO function’
CIARAN RYAN: Let’s just talk about the role of the CFO itself. Do you feel there’s space in the market for independent CFOs or what we like to call freelance CFO guns for hire. I get a sense that there’s more and more of this coming up, people with quite a lot of experience in the corporate world now making themselves available to smaller businesses that could otherwise not afford it. What’s your view on that?
RAJESH MAHABEER: I think it’s an excellent intervention and it’s something that is very necessary in my view. And it’s something that can richly serve businesses out there, employing a well-qualified, well experienced CFO fulltime generally comes with a heavy price tag. But I think by outsourcing the CFO role, where somebody may come in once a week, one day a week or a few hours a week, or whatever the case may be, becomes a more affordable proposition. What it means is that the company then can have the benefit of that level of expertise and oversight over the finances of the company without that heavy, huge ticket. I’m not saying that the ticket is not well worth its value, it certainly is. But I think that in the context of where we are with the distressed economy, decline in revenues, increasing costs, I think companies could do very well by outsourcing the CFO function. There are many prominent organisations and individuals that provide this service in South Africa.
CIARAN RYAN: You just talked about doing a turnaround project at South African National Parks. People overseas will know the Kruger National Park and everybody in South Africa would know that, and of course the other parks that we’ve got here now. Interestingly enough, we had the CFO for South African National Parks, Dumisani Dlamini, on this podcast about a year ago. It was a very interesting discussion because we got into what was the revenue makeup of the national parks. I always had this idea that the CFO is probably spending all his time on game parks, but of course, they’re not, they do rely on some government funding, but they also have their own revenue. It occurred to me during this lockdown that, of course, that revenue would have been cut almost to zero. So they’re in a difficult position right now, I would imagine.
RAJESH MAHABEER: Quite right. By the way, Dumisani is my successor at SANParks. I was CFO at the Auditor General when I was approached by the former SANParks board to consider joining SANParks, and after a robust interview process, a competitive process, I was appointed. There were many constructs that needed attention. For example, one had to sort out the financial record-keeping to an extent where you could avoid a qualified audit opinion. We successfully did that for two years in a row. That culminated in SANParks being given the Auditor General award for clean audits. So we were very proud of that achievement. But very importantly, SANParks is a very, very complex organisation, it’s perhaps one of the most complex organisations that I have worked for. One may not see it that way, given that it’s there to create leisure and pleasure. But honestly speaking, you’ve got the science behind conservation, you’ve got the hospitality side of things, you’ve got the ecology, you’ve got the fauna and flora. You’ve got world-renowned scientists who work at SANParks and these scientists have got global followings that you could get a scientist studying the behaviour of a lizard for 40 years. So it just shows you the level of complexity that this place has. But awesome people, great people and really one of the very exciting projects that I worked on was the rhino poaching in the Kruger Park and trying to stem the tide against that. We were awarded a substantial grant by the Howard Buffett Foundation, and the agreement was that we were to come up with novel interventions to reduce rhino poaching in the park. We had teamed up with the CSIR, who brought in the technical scientific elements, and we created very specific interventions that were novel in the South African context. We implemented that successfully, I might add, and it really started to demonstrate a decline in rhino poaching.
CIARAN RYAN: That is interesting, of course, and this is something that is getting worldwide attention because South Africa has the biggest population of rhinos. They are getting close to extinct if we don’t do something about it. Are we winning that war? It’s very hard to make any sense of it because you continue to hear stories about poachers continuing to operate, what’s the take on that, are we winning that war?
RAJESH MAHABEER: I believe that if one took a medium-term view, we’re certainly starting to turn the tide on it, but one must understand that the geographic nature of the park lends itself to coming under attack. So that’s the first thing. When I talk about the geographic nature, I’m talking about the sheer size of the Kruger Park, which itself is as large as Israel, as an example. We are surrounded by other countries and we have infiltration from some of those countries, but on a rather pervasive basis. There’s a well-structured criminal hierarchy that works with the rhino poaching attempts that. There are very successful interventions at stemming the tide against it but as long as there is a cultural belief by certain communities in the global village that, for example, the rhino horn has certain medicinal properties, which it doesn’t, by the way, it’s scientifically proven, it’s as useless as one’s nails or hair, it’s got absolutely no scientific properties or medicinal properties and that’s scientifically proven. But cultural belief is cultural belief. So for example, some countries believe that a couple of drops of the rhino horn in a liquid drink can work very effectively as an aphrodisiac. So the belief system is there and this creates a demand. Then there is the criminal hierarchy in certain countries surrounding South Africa, and even in South Africa, that results in these beautiful animals being mercilessly poached just for that small portion of their body, which is the horn, and the rest of it is then wasted. So I believe we are winning the war and these great interventions by the current leadership, by the Department of Environmental Affairs, by the South African government, so great work is being done by many organisations in the park, and I believe that we will continue stemming the tide.
‘The pathway from being a finance expert to being a CFO is a steep one’
CIARAN RYAN: It’s very hard to imagine that evil behind that, it just staggers me and infuriates people when you talk to them about this because somebody is taking something that is God given, from nature and is profiting from this on a totally bogus claim that it’s going to do some good for you. It’s a very hot button in South Africa and I think around the world as well. That’s good to hear that things are improving there. If I can change track here for a second and just go back to the role of finance executives and CFOs. Do you think that there’s a skills gap amongst finance executives and CFOs, bearing in mind there is really no academic path to CFO, and many of these skills have to be learned elsewhere on the job. Where do you pick up these skills?
RAJESH MAHABEER: It really must come from the university of hard knocks. It really depends on one’s personal ambitions in life because you’ve really got to go out there, apply your skills, learn, take on challenges that you may not ordinarily take, immerse yourself into the workings of a business, take on responsibilities more broadly than just being a finance person. Then you start to understand the various disciplines that make up a business, for example, manufacturing, marketing, production, those sorts of things, and really start to develop upwards a very broad skillset. A CFO in the modern times is really a shadow CEO. You’re really there to understand and be on the same page as the CEO, to support him or her, to help make really sound business decisions. Generally, you would serve on the board as an ex-officio member, you would be there to direct the board in all things financial and business. So really and truly, you cannot do that if you elect, for example, to be an IFRS expert or a tax expert or an internal control expert and so on. The pathway from being a finance expert to being a CFO is a steep one. It does require commitment, it does require you to be not entirely risk averse so that you understand the risk appetite of your business. It certainly does require you to have a personality where you can network, you can engage, you can have meaningful conversations. Ultimately it requires a level of confidence to be able to stand up, make a presentation, although it may not be in line with the broader thinking. So these are some of the attributes, there are many others, of course, not least of which would be to have immense levels of integrity so that people develop the trust in you that is required.
CIARAN RYAN: The South African Institute of Business Accountants has developed the CFO (SA) designation for this very reason that there is this gap in the academic approach to the CFO position. There are various studies around the world showing that there are all these various skills that are required. There’s a study out of university in Toronto, which about 34 of them [skills] and of course, accountants are very good on the technical side, but now you’re getting into strategy, you’re getting into marketing, you’re getting into team management, teambuilding, all of these kinds of things. So a designation that will put you on that path and take you there because, as you say, it’s the school of hard knocks for most people, and I’m sure a lot of the skills that you’re now able to offer to businesses you didn’t learn that in a book, you got that somewhere else.
RAJESH MAHABEER: Absolutely, I was a fulltime worker and a part-time student, so that’s been the model, right. So I started working straight after matric and that was in 1979 and, of course that was in the apartheid era in Durban, where I was born, and it was a different economy at the time. It was an economy that had very serious manufacturing businesses, very serious mining operations, very serious processes of businesses that were involved in beneficiation processes. The South African economy today is very different because most of the manufacturing sector has shrunk away.
So that means that the kind of experience that I was privileged to have then, when one compares to what one may experience or gain experience in these days, is very, very different. So I cut my teeth on the manufacturing floor. I had to understand manufacturing processes, I had to understand the flow of raw materials coming in, going through a work in progress and coming out as finished goods and eventually distributed, and then you collect your money. That whole value chain really, really enriched me in so many ways, it enabled me to start to develop the requisite experience to become a very broad thinker and more of a strategist and using my financial expertise then to gravitate towards more general leadership roles such as a CFO, CEO and so on. So in the absence of that kind of experience, in the absence of proper experience, there are many well known cases of very well qualified finance experts having taken CFO roles and, unfortunately, they ended off in failure, particularly, I might add, in the South African public sector, very notable failures as such. My advice always to business leaders is please, exercise some restraint when considering a strategic CFO role or a candidate for such a role, please give serious consideration to the business competencies that are required, and whether those competencies are evident in the candidate. As I said, we’ve had some spectacular failures.
‘I came from a very impoverished background’
CIARAN RYAN: Yes, indeed. I just wanted you to pursue this point, we’ve got a few minutes left, I think you said initially you were born in 1960, so that would make you 60 years old, and now you’re studying a PhD. I can’t tell you how impressed I am at your continuing quest for academic improvement. Just take us back to the apartheid years because you were working and you were studying, and you had to do this on your own. You were hit by a number of different challenges there, so just explain that for a minute.
RAJESH MAHABEER: It certainly wasn’t easy. I can share with listeners that I came from financially impoverished background, I was a late born, and when I was doing my matric, my dad was almost ready to retire. In the apartheid days, blacks were not allowed a pension fund, so dad really didn’t have a pension, so being the only son I had to then go and find a job and study part-time.
So my first qualification was the national diploma in cost accounting because that’s what I could really afford financially at the time, at the then ML Sultan Technikon, which had an absolute reputation for high academic stature. I completed that in three-and-a-half years. So coming through that era meant that I invariably had my supervisors or my manager or whoever it may be, being a white person, but in the working environment, I must say, that the relationships were always cordial, there were no acrimonious relationships. However, I was like a sponge, I decided I want to learn all I could from wherever I worked and whoever I reported to. So it was always ensuring that I put myself forward to take on more work than what my job description required, taking increasingly complex work and having it supervised and reviewed, and then progressing in that way. I must say that despite the legalised apartheid in the country at the time, I was able to work in these very large manufacturing companies in South Africa such as Tetra Pak International, AECI, OTH Beier and so on, and work very productively in gaining very awesome experience. So that held me in very good stead at a very early age, given it being apartheid and me being black. When I was just under 30 years old, I had secured a financial leadership role in a subsidiary of a listed company, and that was a great achievement for me because it placed me and positioned me into a boardroom, which I might add – and you can imagine this – all white gentlemen, most of whom were well over 50, going into their sixties, and I was a black 30-year-old in that boardroom and the only female was a white lady, who herself was at the time close to 60 years old. So one had to develop confidence in my colleagues by demonstrating that I absolutely knew what I was talking about, I was in control of my portfolio and I could make a significant contribution to the discussions. I must say that after two or three or four board meetings, the tenseness started to ease and I started to become accepted, and it became a very joyous time for me.
CIARAN RYAN: Was there any mentor along the way who took you under their wing and said, okay, I’m going to look after you and watch your back and develop you.
RAJESH MAHABEER: There were a few and, I might add, they all happened to be white men. I vividly recall one of them being the late Doug Anderson, who was the HR executive at Hart Limited, now Hendler & Hart. He was always so gracious and kind and caring and directing me because, I might add, that when I was younger my enthusiasm to get ahead sometimes got in my way. You become a little bit too robust in whatever you’re trying to achieve or to communicate. So he used to guide me, counsel me and that sort of thing and really, it was a very privileged position because he was a much older gentleman with a lot more wisdom than I had at the time. He guided me through some very difficult developmental phases of my life from a soft skills perspective.
CIARAN RYAN: Two quick questions, we are running out of time, you’ve covered your career journey, but I want to ask your opinion about the accounting profession in general, is it in crisis, given the number of scandals we see involving accountants? Is there a way the accounting profession can run itself better?
RAJESH MAHABEER: Well, I can share with you that I serve on the Independent Regulatory Board of Auditors, that’s the board that manages the auditing profession in South Africa, on the committee for auditor ethics, and it’s my second term. As you can imagine, when the whole bubble burst around the profession, as part of a committee, I was right in the middle of it from a regulatory point of view. It was a very difficult time for the profession in South Africa and I must give credit to the likes of KPMG that worked with the regulator in trying to resolve the problems that they were faced with. The consistency with which they continue to work on their challenges is quite evident to the point that very recently KPMG was appointed joint auditor for Absa Bank, so they seem to be coming back. I must say, that the tide against the erosion is starting to stem but I was one of the committee members who led the development of the new professional code of conduct for auditors in South Africa, the one that was recently implemented. That code had to bring in things, really control elements of the profession to consider the experiences of the recent past. So hopefully we would not see much of this recurring, but we must not become complacent. Whether one is a professional accountant or an auditor, one needs not to be complacent. The professional bodies must have strong oversight over its members and students or future members. The regulator, the auditing regulator, must also continue its strong oversight role. I think eventually we’ll trade ourselves out of the current situation and start to restore the confidence of the investor community in South African businesses, based on the audit reports that the audit firms produce.
CIARAN RYAN: Good answer, thank you for that. Final question, and I ask this of everybody I speak to on CFO Talks, are there any books that you would recommend?
RAJESH MAHABEER: Lately because of my PhD my focus has been on reading hundreds and hundreds of peer reviewed academic journal articles, and the reason for this is that knowledge gets outdated so quickly. That’s not to say that excellent books on management and leadership don’t remain relevant for many decades, they absolutely do. But if one looks at one’s areas of specialisation and one then is doing a PhD, then you’d be more inclined to read up on the academic peer review journal articles. What it brings to you then is the swift changes that are taking place in your areas of expertise. So I read very widely, those journal articles, and many of these are published on Google Scholar and I would recommend to colleagues out there to read some of these articles because what it does is that it brings you into the cutting edge of the research and the knowledge being created.
CIARAN RYAN: Fantastic Rajesh, let’s leave it at that. I’d love to get you back on again and pursue some of these other things, particularly as you develop your PhD research. I think there are some insights that we could spend a whole half an hour just talking about that and I’m sure you would agree?
RAJESH MAHABEER: Yes, absolutely and I’ll be delighted to return.
CIARAN RYAN: Let’s do that, then just focus on that particular aspect of it because a lot of accountants are having to become turnaround specialists, whether they like it or not. They are the guys who supposedly have the roadmap and their clients are looking to them to show them what to do. Let’s do that very soon. So I just want to thank you, it’s been a fascinating discussion. What an interesting life you’ve had, and your dedication to the profession, you never gave up studying, your will to stick to the core principles of accounting and your contribution in all sorts of ways, with IRBA on the ethics committee. So thank you very much for that and yes, we’ll definitely book another half an hour, if you don’t mind?
RAJESH MAHABEER: I would be delighted and may I take the opportunity of thanking the South African Institute of Business Accountants for hosting me on this interview and yourself for conducting this interview, I greatly appreciate it.
CIARAN RYAN: You’re most welcome. That was Rajesh Mahabeer, who is most recently the creator of Trilord Consulting.