52: Armand Wolmarans
Chief Financial Officer: Prosperios Consulting
Armand Wolmarans is part of a new breed of CFO guns for hire, bringing high level CFO experience to smaller and medium-sized companies. At a time when many companies are in need of funding, strategic or turnaround advice, this is likely to be one of the big trends emerging from the Covid-19 lockdown.
8 April 2020
CIARAN RYAN: I am Ciaran Ryan from Accounting Weekly and CFO Talks and today I'm delighted to be joined by Armand Wolmarans, who is going to tell us his story and it's quite an interesting one about offering outsourced CFO services. Without further ado let me welcome Armand Wolmarans, how are you Armand?
ARMAND WOLMARANS: I'm good Ciaran, thanks for having me.
CIARAN RYAN: Are you in Johannesburg?
ARMAND WOLMARANS: I am based in Johannesburg, born and bred, so if you want to get hold of me I'm stuck at home like every South African under the Covid situation.
CIARAN RYAN: Yes there is no question as to where you are right now, as everybody in the country would know. Just kick off with telling us a little bit about yourself, you already said you grew up in Johannesburg and that you studied here. What's your career journey and how did you get to where you are today?
ARMAND WOLMARANS: Well it's an interesting one, so at school level, I wasn't worried about anything else apart from sports. There was one subject that I didn't need to study for and that's probably why I ended up going into it and that was Accounting. I thought it just made sense for me to do it and my mom told me one day that my grandfather was a CA and that I should consider doing it as it was just coming naturally to me. So I was inclined towards it and went to go study it, studied it part time through UNISA and actually worked at a mid sized audit firm during those days. So what helped is that I started off ahead of my peers in getting exposed to the industry a little bit earlier and stuff but I must admit it was hard yards doing it part time and obviously a big work load and technically very challenging. I then joined KPMG to do my articles and from thereon I got headhunted by the likes of Grindrod when I was in my final year of articles and worked a couple of years for them and did a lot of traveling up into Africa and got great exposure through them. I also joined other great companies in the facilities management industry, cyber security industry and then started my own consulting company after my last stint as CFO within the cyber security industry. To your point it is outsourced CFO services, with the focus to help SMEs that cannot afford a full time CFO on board and helping them to look at different funding structures or tax restructuring or accounting needs that they have and not just limited to that we even focus on legal matters as well as debt collection.
How Prosperios started
CIARAN RYAN: All right so the company is called Properios like prosperity but Prosperios Consulting and where can people find out about that?
ARMAND WOLMARANS: It's still in the form of getting its final website, it's actually something that started morphing at my time as CFO of Performanta when I had to help out a property portfolio. I did this in my personal capacity, basically raking up some clients as I was going along and eventually I saw a gap in the market and figured it's worth my while to touch more people's lives and do something like this and that's when I formed Properios in January. You can find out a lot more about it through my LinkedIn profile and I'm busy refining and getting it to a final stage and hopefully by this month it will be full blown and out there on the web.
CIARAN RYAN: You mentioned that you spent time in Africa, I just want to drill into that a little bit, was this when you were with KPMG?
ARMAND WOLMARANS: No, it was actually when I was with Grindrod, when I joined them they were forming a new rail division which was quite interesting. So they were focusing a lot on investing a lot of money in the rail industry within South Africa because the CEO of that division and I still speak very highly of him, James Holley who I learnt so much under was and is still of the view that if South Africa invests a lot more into railways and get more of the trucks off the road, we can obviously see a big increase in our GDP. It's a lot more cost effective, it creates jobs, less damage to your roads, so from a logistics point of view it just made a lot of sense and we saw this thing grow to massive levels so it was great experience.
CIARAN RYAN: Where in Africa were you?
ARMAND WOLMARANS: I basically had to spend a lot of time in Mozambique, for 2 of my 3 years at Grindrod I spent my time in Mozambique and in various parts of it not just in Maputo but all the way up to Beira. I kid you not you see mosquitos there that you won't see in South Africa!
CIARAN RYAN: Mosquitos the size of bats?
ARMAND WOLMARANS: Absolutely and like they say its not the big one that stings you it's actually the big one that lifts the bedding so the little ones can zap you. I spent a lot of time in Mozambique and also did a lot of business in other African countries where I didn't really have the time to travel as frequently but I also went out to Zambia but I managed companies from South Africa within Mozambique, Zambia, Sierra Leone, Nigeria and various other African countries. Also Mauritius and got a lot of Mauritius exposure as well and that's also part of the services that Prosperios are offering now was basically moving HQ's from South Africa into Mauritius due to tax efficiencies.
CIARAN RYAN: Let's talk about Grindrod investing in railways, I wasn't particularly aware of that, have they privatized railways in Mozambique? How does that work?
ARMAND WOLMARANS: So it was a manufacturing company, they manufactured locomotives and it was all manufactured in Pretoria West, from scratch to a full blown operational locomotive. They would then export the locomotives to the respective African countries where they operated and its either on a lease or sale basis. Over and above that they would have an operational company operating the locomotive and then there would also be the construction of railways and training offered for the respective services to deploy staff. Its something that at that stage was quite big but that division has subsequently closed down, it was something that was a big prospect for the company but like I say has since dried up and went back under Transnet.
The South African market
CIARAN RYAN: It's just interesting because South Africans will be well aware of the terrible scandals that there have been around the locomotive suppliers to passenger rail agency in South Africa where I think there was an order for over 1000 locomotives but they were the wrong size. I wasn't aware that we were able to make these things locally.
ARMAND WOLMARANS: Yes it was amazing to see it. I remember looking at progress of a locomotive model, you know where the guys basically built it in a matter of weeks and having a full blown locomotive operating and being more diesel efficient than the model that was being used at Transnet in those days but it was mind blowing to see it all happen and like you say all happening locally in Pretoria West in a factory there. So, a lot of money has been spent and invested there but it just never really took off because of the whole privatization challenges that comes with it.
CIARAN RYAN: It was extremely corrupt, I mean let's be honest, I'm talking about the passenger rail agency, I have read about this for years now. I think one of the things that is going to happen as a result of this lockdown is countries are going to be looking at more internal supply. The whole supply chain networks are going to be reexamined, its something I was looking at over the last week, where even a company like Kumba that exports more than half it's iron ore to China. You know that's quite risky because if you have a shut down as they did, they shut down all the steel mills and straight away that kills your company if that is extended. Fortunately it looks like in China the steel mills have reopened but every company in the world will surely be looking at this as a key risk factor, we have to spread our markets and we have to spread our supply lines. Would you agree with that?
ARMAND WOLMARANS: Absolutely and like I say the vision the divisional CEO already had at that stage, James Holley, I still have very high respect for him, is to this point is still very relevant I believe and within South Africa can create a lot of jobs. We are still very inclined to mining and its something that we have to definitely focus on, trucks are just not that efficient and that cost effective compared to say a locomotive. So it is something we have to dig into a little bit deeper from a supply chain point of view but that market is also very reliant on commodities right.
CIARAN RYAN: Yes. Well I mean if you go back 25 years, the whole South African economy was based on this apartheid era being resistant to international sanctions which were enforced at that time, I think they were lifted in 1994 only. As a result of which you had all kind of monopoly, you had Sasol, you have oil companies which get sort of let's call them monopoly benefits in terms of pricing in this country. Widely criticized we went through this whole process of globalization and now I think if you are a national planner you are going to say hang on we need a bit more of that, we need to be more self-reliant as a country. I think this is something even companies are going to be looking at now, the world has changed fundamentally. What do you say to that?
ARMAND WOLMARANS: Absolutely, in fact we have gone back 25 years, the whole system has re booted because of COVD-19. If you look at the Sasol share price it is back 25 years but I mean we've obviously got a lot more feathers in our hat now having learnt what we've learnt throughout the past 25 years with globalization and being more self sufficient right. So the Sasol shares price obviously speaks for itself from a timing perspective, it's very sad to see but yes the country has to become more self-sufficient, there has to be a lot more focus on entrepreneurial businesses, we can actually see it happening a lot more and its just people have to generate a lot more and manufacture a lot more within this country. There are so many imports happening its mind-blowing to see the amount of imports vs exports year on year just growing from a South African perspective, its actually concerning.
CIARAN RYAN: It is and of course nobody here in this country if you are in the clothing industry can manufacture anything like the price that the Chinese can, however with the Chinese factories now reopening in Wuhan and elsewhere and global demand has just tanked completely. You can imagine for the next year the kind of support that the Chinese government is going to give to these factories in terms of pricing. It will be so attractive that when things start picking up again and the pricing that you can get right now will be an extremely deflationary period, I don't say its going to last too long but I think it will last for several months to try re stimulate demand.
ARMAND WOLMARANS: Absolutely I fully agree.
About Properios Consulting
CIARAN RYAN: Ok so Prosperios Consulting is an outsourced CFO services operation, it is quite new however you come with quite an attractive CV I must say. So who are you aiming at, well who would be in the market for an outsourced CFO?
ARMAND WOLMARANS: So, I am looking into the SME market mainly your medium sized entities more that have got a board of directors but not really a full time CFO on board. They have their accounting function which is running and working well they achieve a certain turnover level and they are starting to face BEE challenges in terms of compliance because their turnover is reaching that limit of R50million and that's basically my target market. Interestingly enough I have landed one of the biggest pharmaceutical companies in the world and I am busy consulting for them on a full-time basis. Helping them on various aspects whether its on systemization, efficiencies, I am just taking a load off the CFO's plate there and its interesting to see how we can expand into that market as well. I have also been working a lot closer to individuals, wealthy individuals and having their tax become well making their tax more efficient and planning to more wealth offshore and especially on estate planning which is becoming a more prevalent topic around the baby boomers that are phasing out and retiring.
CIARAN RYAN: You have got a background in cyber security correct?
ARMAND WOLMARANS: Correct, that was my last stint now as CFO before I started going out and consulting on my own.
CIARAN RYAN: Alright so with Covid-19 now the lockdown, the implications for businesses have been widely discussed over the past few weeks. What does this mean for Cyber security? One is hearing some fairly alarming things about the extent of hacking people at home, you know hackers have got spare time on their hands, are things going a little bit crazy right now?
ARMAND WOLMARANS: I fully agree, you have hit the nail on the head, I actually spoke to one of my colleagues from Performata last night just to touch base around the whole Covid situation. Quite frankly my view regarding Cyber Security it's a bittersweet approach to the market now, because if you look at Cyber Security its an industry in itself that's going through a rapid change, specifically in South Africa. It used to be your box dropping exercise that happened where people would just come and install technology on your computer in the form of various anti viruses and firewalls and that would then be your controls in making you safe. But obviously hackers have become a lot more efficient and a lot smarter and bypassing all of those areas so it's become a lot more service focused where your sophisticated Cyber Security company like Performanta would have their own security operations centre and even your big corporates will then outsource it to them. They have people full time monitoring your firewalls and all of your different IT systems to see if there are any breaches and it's a 24/7 365 well in this case a 366 day exercise and its also becoming more and more cost effective to outsource it even for the big banks and other corporates. So the bittersweet comment that I made earlier is you are going to see technology sales and renewals obviously drying up during this period because you need to physically be on site to deploy the technology and have it implemented. Whereas I think service contracts for your essential service clients likely banks, stock exchanges the whole lot like that will obviously I think put a lot more pressure on the Cyber Security companies in ensuring that they stay compliant. Because to your point people are at home now they have got a lot more time on their hands to either do something wrong or be a victim of a cyber security attack for that matter on either individual at a personal level, a lot of the time where you see the network gets breached is through an individual within a company its not necessarily at top or server level. During this time, one thing that is never going to go away is the likes of GDPR compliance and GDPR which is basically hand in hand with what we know as South Africans as POPI compliance which is due to the rolled out soon.
CIARAN RYAN: POPI is the Protection of Personal Information Act right?
ARMAND WOLMARANS: That's correct, yes
CIARAN RYAN: Which really regulates the way you have to handle client information
ARMAND WOLMARANS: Correct and very difficult to be compliant to that information, so quite frankly you know the European version of it is rolled out live and we have seen some big fines going out in the market because of it and its just going to become worse. But quite frankly its actually been a copy paste exercise of what South Africa even implemented before that in the form of POPI so that's not going to go away during this period and that's why I think from a cyber security point of view there is massive opportunities and if you can just spread yout way to not be on client sites or do roll out solutions to them, then you have hit the sweet spot.
CIARAN RYAN: So you see cyber security as a big growth market?
ARMAND WOLMARANS: Absolutely, its becoming more and more prevalent, I think the only reason its not growing is because of a lack of awareness in the market, people don't appreciate whats going on around them. I will never forget my CEO at Performanta Guy Galon always used the example that if someone breaks into your house or if there is a massive financial crash, alarm bells go off and everybody knows about it, if you have been hacked its dead quiet nobody knows that its happening, its usually when you identify it, its already too late.
CIARAN RYAN: You see the threat of hacking and ransomware and all that kind of thing, you see that growing?
ARMAND WOLMARANS: Absolutely, people are just becoming more and more sophisticated in breaching those kinds of things. I mean if you haven't been a target or if you haven't been a victim or if you haven't experienced something, some or other form of phishing or anything coming through to you, you are either living under a rock or you are very lucky, I mean everything is interconnected nowadays.
CIARAN RYAN: Right, right ok so this is obviously another skill that you bring to the CFO services that you offer. Just talk for a minute about finance executives, they seem to be under a hell of a lot of pressure these days, more so than in the past, do you agree with that and why is that? Is it just the burden of regulation or is it the market conditions themselves that it is making their lives that much more difficult?
Finance Executives and the pressure they face
ARMAND WOLMARANS: I think it's a bit of both Ciaran, in my view compliance has become more of a challenge, while a lot of businesses don't always see the benefit of being compliant, because there is obviously a cost benefit analysis that happens with a lot of the compliance stuff. Especially in your smaller companies, your big corporates can't afford not to be compliant, but I mean if you see the inefficiencies and everything that comes along with it, its quite a burden to stay complaint. Everything just changes so rapidly from your IFRS standards to your other accounting and auditing standards so I think that puts a lot of pressure on Finance Executives. But also, we work nowadays in a fast paced environment, everything can take up a lot more volumes, everything being electronic and globalization all of that adds a lot more pressure and risks to the system. If you see you know I mean yes compliance is a challenge in my view but also if you see what has happened in South Africa in the last couple of years and given some of the cases that have come out recently its difficult to avoid it as well so it's a bit of a chicken and egg exercise that we are finding ourselves in. Our reliance on technology is just key as well and that technology cannot function without people so for me it's a bit of a compliance issue but a bit of a people's challenge where you know you need to have the right skills on board and its not necessarily that people have enough time on their hands nowadays to train and develop people to be at the level where you need them to be, specifically in South Africa. So the demand on Finance Executives is becoming more and more prevalent.
CIARAN RYAN: Right and of course there ate software tools that for example Caseware, when you are putting together your financial statements to make sure that you are complaint with all these various different IFRS regulations and various other things. Ok here is a bit of a trick question for you, if you were President of South Africa for a year, what would you do to fix it? Ok Mr. President Wolmarans what are you going to do?
President for a Year
ARMAND WOLMARANS: Ai, what a time to be President right, and I wish the best to Cyril he's got his hands full that's for sure. Frankly the first thing I would definitely look at is and its probably because of the Accounting side of me coming out is the whole structure of our tax policies within South Africa. I would definitely want to focus on incentivizing your high earners or shall we say your super tax bracket more by investing more in SMEs and start up businesses in South Africa, that way you can actually generate that entrepreneurial spirit in South Africa, that is actually quite prevalent if you look around. Especially that a lot of them end up relocating, a lot of them start their own businesses in other countries or so it's amazing to see that survival spirit within South Africans but I think there is not enough of an incentive within our system to help a smaller business grow from crawling to walking if I can use that for lack of a better term. But I mean tax in itself everybody talks about it but nobody really does something about it, it needs to become a mandatory subject at school level.
CIARAN RYAN: Tax?
ARMAND WOLMARANS: Yes, tax in itself because it is unavoidable and people just need to be aware of the basics, its sometimes scary when you sit across the table of a shall we say a seasoned business person and you realise they don't really appreciate even the basics of how to be more tax efficient or compliant for that matter. So I think its something that I would definitely look at making it a mandatory subject at school level and like I say incentivize the super tax payers to help the like I say smaller businesses in South Africa. That way you can actually look at generating a better supply within country and hopefully reduce the imports.
CIARAN RYAN: So, your solution would be to basically just massive stimulus for the entrepreneurs and the small business sector.
ARMAND WOLMARANS: Yes, that's the future of South Africa I believe in.
CIARAN RYAN: I like that. Ok now from, I don't know if you saw this letter that has been going around on social media from Alan Knott-Craig who used to be the Chief Executive of Vodacom it was sent to me a day or so ago by my wife. It's quite interesting I thought, a very interesting take on South Africa because we have been so down on South Africa for years now on the mis governance and that kind of thing but the picture that he paints is that you know we might have a perfect storm that is beneficial to the country in some surprising ways. For example, the very fact that we are in lockdown now means that we are not having power cuts so it gives Eskom our electricity provider time to repair the power stations which need maintenance, it means that our railway services are no longer under stress, our roads are no longer under stress so our infrastructure is suddenly up to the task. Having been exposed as woefully deficient and in need of repair and investment, now all of a sudden it seems to be functioning quite ok. The other important thing about South Africa is that most of us from this part of the world we were given this anti TB vaccine which seems to have some built in immunity to this Covid virus, that may be nonsense I don't know but you just look at our death rate in South Africa there are only about 1600 positive cases of Covid reported here and I think it is 12 or 13 deaths, I'm talking here now the first week of April 2020. So, there are some good things that could come out of this and the fact that we have been downgraded by Moody's now, well the whole world is downgraded, everybody's credit, every corporation is looking like it's in trouble, I just throw that in there as something to ask you, you're President and you say well I'll take that and I'll run with that and let's just get the small business sector going, what do you think?
ARMAND WOLMARANS: I agree with that in fact I see Covid-19 as a bit of a blessing in disguise for various reasons so at a macro economic level which is basically touching most of the subjects you have raised now, I think the timing of it couldn't have been better for South Africa. We were due for a downgrade some or other time and you know it's almost as if you can use Covid as a bit of a blame shift due to this whole thing. I still believe Cyril's done a great job at locking down the country and being proactive in making big and bold steps. Yes considering the economic impact is one thing but to your point the whole world is suffering and I mean if you follow the stats on a day to day basis, developed and first world countries are having it a hell of a lot worse than we are from a death rate point of view. So, it is ideal and with that said you know it gives people time within South Africa to get their house in order. So, at a macroeconomic level but also at a micro economic level, I think people are gonna go out back from this with their priorities and things a little bit reshuffled. It's something that I have actually started seeing within the last 2-3 years in my career where different companies would work around on some dodgy tactics in delaying payments to suppliers on that front and basically being very aggressive in collecting from customers and that already is a sign on a microeconomic level that something is coming down at a macroeconomic level. So this whole thing is a worldwide pandemic it's not just a South Africa problem, but to your point, I think we are quite unique in how we handle it and we can definitely come out stronger through this. It's a lesson that is necessary and that we need to learn from and put that feather in our hat going forward.
CIARAN RYAN: Ok we are running out of time here, 2 quick questions, what do you do for fun?
ARMAND WOLMARANS: I'm quite a keen golfer, that keeps me out of trouble. I play league golf for my club and it's one thing I have never really dropped on despite my long working hours and everything. It's my way to clear my head after a heavy week, but obviously being in lockdown now it's a bit of a different challenge. I also partake in different other sports we would either play the likes of action cricket or volleyball, I was always very active and busy but I mean you know throughout my career I have lost a bit of time for that, but I am getting back into training quite a bit now and trying to up the fitness levels again. I enjoy travelling and getting to know different cultures and so on, I read quite a lot and is key for me to always learn new skills and pick up different aspects of things. I am also blessed with a good family and friends which also keeps me busy from that front and that's basically outside of the whole working front that is my focus points in my downtime.
CIARAN RYAN: I ask everybody this what books would you recommend?
ARMAND WOLMARANS: I have finished a book, it is quite an easy read but a very very good book from Scott Galloway it is called the Algebra of Happiness. He has written it in such an easy way to digest, it's about 250 odd pages but it is all done through pictures with some small and short paragraphs in between and it just puts things into perspective for you but its funny that during this time I'm busy with 2 books because I flip during various books when I read of James Rickards, I'm not sure if you are familiar with him.
CIARAN RYAN: The famous book he did about the collapse of the dollar?
ARMAND WOLMARANS: Yes. The books name is The Road to Ruin and I'm busy with that one now where he basically predicts the collapse of the dollar and money as a whole in the death of money, where he predicts the likes of negative interest rates being implemented and stuff going forward. We just seeing everything happening with Bitcoin or so we are in this Covid situation where we realise a lot of the things we added a lot of value on is being challenged and questioned, so these books are opening up a little bit of different thinking for me, during this stage.
CIARAN RYAN: I am aware of James Rickards, I haven't read any of his books but I am aware of the theme that he is quite negative on the dollar or on fiat currency and just on that point I see that Bitcoin was slammed at the start of this Covid crisis but it has bounced back quite aggressively. So, I think a lot of what people have been saying about fiat currency and Bitcoin being a bubble and being a Ponzi scheme and all that kind of thing, I'm sorry I don't see it. I see it as people looking to this an escape from just terrible terrible treasury management around the world and central bank quantitive easing programs and so on.
ARMAND WOLMARANS: No definitely, but I think the challenge still with Bitcoin is if you ask 20 people you get 20 opinions, it's not really something you can in theory explain to someone, but its an interesting thing to watch. I think during times like this especially pandemics or challenges you've got one constant and that's gold. Then people start losing their trust in money and they start investing in gold and the gold price speaks for itself and its also dollar denominated. It's interesting how many people contact me and say "listen should I start investing in dollars now because I can just see this thing running away?" but America is facing more challenges to your point than we are from a Covid point of view and you know eventually that is going to have an impact on it as well and the Fed can keep on printing money but we know what the negative impacts on that would be. Its just a supply and demand issue from a dollars point of view but let's check the gold and oil price now and see what happens throughout this period.
CIARAN RYAN: Mmmm, ja indeed, ok Armand Wolmarans, we are going to have to leave it there, but great talking to you, great for your insights that has helped us understand things a little bit better. Very interesting that you are sort of an outsourced CFO and you are putting yourself out there and I'm sure we are going to see more of this going forward, you know companies that don't necessarily want to take on a full time CFO, but want that high level insight, will no doubt be knocking on your doors and others who were planning to go down that route as well. So thanks very much for coming on and talking to us on CFO Talks.
ARMAND WOLMARANS: Perfect, thank-you very much Ciaran
CIARAN RYAN: Bye now
ARMAND WOLMARANS: All the best and stay safe, bye.
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