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53: Buhle Hanise

Buhle Hanise explains why the SA vehicle market excites BAIC
It takes some guts to introduce new vehicle models into the market in the midst of an economic downturn, but that does not faze Buhle Hanise, CFO at BAIC South Africa. The Chinese vehicle producer is investing R11 billion in production facilities and sees plenty of opportunity in the South African vehicle market. Hanise explains why this makes sense at this time.
28 July 2020

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Buhle Hanise

It takes some guts to introduce new vehicle models into the market in the midst of an economic downturn, but that does not faze Buhle Hanise, CFO at BAIC South Africa. The Chinese vehicle producer is investing R11 billion in production facilities and sees plenty of opportunity in the South African vehicle market. Hanise explains why this makes sense at this time. 

CIARAN RYAN: My name is Ciaran Ryan and I am the editor of accounting weekly. Get over to www.accountingweekly.com to check out the latest news from the accounting profession. And we are doing the practice management conference for the South African Institute of business accountants. And this morning I'm very excited to be able to welcome Buhle Hanise, who is the chief financial officer at BAIC South Africa. Now that's BAIC spelled B A I C. First of all Buhle, welcome. 

BUHLE HANISE: Thank you. Thank you. 

CIARAN RYAN: Now for people who don't know BAIC SA is the, I think it's the latest car manufacturer to establish in South Africa, it arrived in 2017.There was an announcement of an 11 billion Rand investment in a vehicle manufacturing plant in port Elizabeth. And from what I've been able to read, it's launched two models so far, the D20 and the X25, which is the SUV model. Now you also sitting on the boards of OUTsurance, Transaction capital and Safcol to name a few. There are quite a few other boards that you also sit on. So I think that's quite an impressive CV, but I really wanted to zero in to start off with about BAIC South Africa. Could you tell us a little bit about this? The company has been going a couple of years. It is the latest manufacturing and vehicle manufacturing company to arrive in South Africa. How have things been going with the company? 

 

About BAIC SA 

 

BUHLE HANISE: Thank you. Yes my CV is quite, as you said, beautiful, if I could use that word. So, with the new role that I have taken over effective, 1st of January 2020, as the CFO of BAIC South Africa, I have stepped down on a few boards. So you are right the ones that you actually mention are the ones that are remaining and I just have one little one, which is one of our investments at the IDC. So let's get onto it, I do sit at BAIC as the CFO and it's been quite an interesting journey as I was just getting used to everything we were put on lock down. Fortunately for us at BAIC, we were already well communicating and working virtually because our holding company is in China, in Beijing. So we always have our meetings through the use of technology, so nothing much really changed there. As you rightly said, we have a plant in PE in Port Elizabeth. As you come through Town coming from the rest of the Eastern Cape, let's say you are coming from Graham's town, we have a big white building on the left hand side is if you're going through Port Elizabeth CBD you won't miss it. I'm sure a lot of people have seen it now as you take the offramp to Motherwell. 

So our plant was on the verge of being finalized, we were just finalizing the paint shop and we obviously were put on lockdown. The construction and most of the equipment that we needed for our production line to start had already been assembled in the plant. So, the production line was, supposed to start on the 1st of November actual production but fortunately for us, as part and parcel of our budgets and focusing, we were planning to assemble some of the products that we had imported from China because we wanted to obviously show and teach our South African people how to make the vehicle look exactly the same as you will find it in, Asia, in Europe and the rest of the world. We do have a few vehicles that are sitting in the warehouse that are ready for us assembling and we were supposed to kick off with the sales before lockdown was implemented. So our production line will obviously be affected by the lockdown, but we're not anticipating big changes because we hoping that with the levels changing, we will be able to finalise the assembling. 

So with level four, you would understand that the automotive industry has been given, a go ahead to at least that scaling up to 50% of employment and we've got limited operations. So last week we had our safety and health department go through to the plant, just to make sure that we are adhering into all the safety and health requirements that have been implemented under COVID-19.

So that's where we are right now. We are operating, virtually we have our meetings, like we have been having our meetings because I am based both in Johannesburg and in PE. So sometimes I'll be in Joburg and I'll be able to liaise with my finance department and in PE and the rest of the departments. So at head office, we have our sales and marketing and we have a few of the finance guys and also our legal department is at head office. So we've been able to work during a level five lock down and also now level four.

CIARAN RYAN: Right, so level four means that you can scale up to 50% employment I think you said, and your safety team is now putting in all of the health and safety measures that are required. What was your, so this is really the launch of, of BAIC South Africa in terms of vehicle sales and South Africa was supposed to happen around about this time, so I guess things have been delayed a little bit. What, what is your sales expectation for this year? Or, you know, what were you expecting to do? Was it going to be a huge launch? And how many vehicles were you anticipating selling in this year? 

BUHLE HANISE: Okay, so I'd rather not give you the exact numbers, but I would say to you, because you did say that we have obviously launched the vehicles. So how we do things we don't launch, by selling the products. So we've launched the products by introducing a specific car to South Africa and to the South African market to say, look, this is the car that we will be bringing to South Africa and as you said we had those two launches and that was before my time and that was the D20 and the X25. So, what we have been doing is as part of our sales and marketing, we have been using these cars for some of our employees, especially the sales guys, and we do have one or two dealerships in Johannesburg where we have been using as some kind of a pilot marketing strategy to see what's the appetite, where should we concentrate?

We did have our board meeting at the end of March, where we had put through to the board the forecasted numbers and the forecasted sales and we were anticipating to start those sales, as I said earlier, that would be rather than start production now we'll start production end of the year. In the meantime, we'll be assembling the products that we currently have, that were delivered to South Africa in the last few months. So that process was going to start, obviously after our board meeting, it approved everything in that was supposed to be April. So we are anticipating that we will have obviously a few delays there may be a few months delays and hoping that we will be able to start ourselves in July of 2020. 

CIARAN RYAN: Okay, so you're doing assembly of vehicles for the time being. The plan is later to introduce a full local production. Is that correct? 

BUHLE HANISE: Exactly, that's correct. So we do have a few experts from China that are mentoring if I can put it that way, mentoring and training our South African employees to ensure that they understand the intricacies of the production that's required to be in line to the group requirements as well. And ensure that if you are in South Africa and you're driving your X25, and you go to Europe, you'll get the same feel, the same car there won't be major differences. So that was the whole point of starting with the assembly line and also later on to the production hence we have those few technicians and engineers coming to South Africa to assist the South African employees.

CIARAN RYAN: Right. And, and so we're talking about two models here in terms of the, the pricing, where is the or at which end of the market are you pitching these vehicles? Is it the luxury end or is it the more economical end? 

BUHLE HANISE: No the economic end, we're not looking at the luxury end. We do have another vehicle that we'll be launching probably next year now that will be a luxury ended. It's more of a bigger SUV type of a vehicle that will we'll be launching, but we obviously can't really talk much about it now because for us to do anything, we need all the necessary approvals within the South African regulations to make sure that it's all in line with what the automotive industry requires. So we will have one that's in the luxury market probably from next year but for now the D20 and the X25 is within the economic market. 

CIARAN RYAN: Right, I mean, if one looks at the South African vehicle market, I guess, going forward, is it not a tough market to be coming into at this time?

BUHLE HANISE: Look, we've been having discussions around now that because of COVID-19 the reality is that people will definitely be spending less. Which is the right thing to do. But the reality is that in South Africa, we are still very much dependent on ground type of motor, if I can put it industry. So we still need, I mean for instance right now is you know, that process, obviously not doing great because the trains are not moving, but cars are still moving. So in my mind, we still believe that there is definitely a market for our vehicles and especially because people in South Africa still rely heavily on driving themselves if they're not in a taxi and the train system has obviously been going through its own difficulties in the last few years. So we have been taking advantage of that opportunity. Also, there's been a few I know you, you would know that GM left the country a few years ago and that's we, said, look, there's definitely opportunity for BAIC to take over some of that market and ensure that we would take full advantage of it and ensure that people know the product and understand that it's not a, it's not a luxury vehicle, it's a vehicle that you need for, for people to move around. Some people will use it, because we’ve got the X25 as a family car, you know, instead of buying a luxury, I don’t want to ditch some of the European German cars, but if you don't feel like driving an expensive Merc or BMW, you can get our X25, which sufficient enough. It's got clearance, it's big enough for the family. You can move around with it locally and outside of your local zone. So we do believe that there's still definitely a market for, for our products. 

 

Who is Buhle Hanise?

 

CIARAN RYAN: Alright, if we can just turn for a moment to yourself, tell us a little bit about yourself and where you grew up and studied, because your, as we spoke before, your CV is quite impressive, where did it all begin?

BUHLE HANISE: It all began in a small town in Umtata, in the Eastern Cape. That's where I grew up, with my siblings with my mom and dad and I started there up until my BComm degree at the university of Transkei and then I moved on to Port Elizabeth to do my Postgrad because the University of Transkei at that point in time was not accredited by SAICA because I knew I wanted to become a CA. I will probably tell you that story another time of how I wanted to become a CA. So I was pursuing that dream, I ended up in Cape town studying through the SAICA program, through Thuthuka as well. We were doing our CTA/Honours degree. I was there for a year, then decided, look, I want to go to Johannesburg, which was my ultimate goal. To be in the business of Johannesburg and that's where I did my articles through KPMG and then after articles, I decided look, I want to enter the financial services industry. So I went and became a credit manager at NedBank stayed there for a year, then moved on to become a senior credit manager at Standard bank at a department called mid corporate. I was in between CIB and PVB, so the people understand that where exactly I was, but I was just looking for something more. I could do credit with my eyes closed, I knew what was important for the bank from a credit risk management point of view and I just felt like I needed something more. Then an opportunity from the IDC came through in their workout and restructuring department to be one of their managers there and it was a good opportunity because it was more of a continuation of the work that I had been doing as a credit manager. So I stayed at the IDC for seven years in the workout and restructuring department, where I got promoted within that same department and then in the last 2/3 years, I was in the business rescue space and trying to introduce the business rescue that was introduced in South Africa, into our organization. People to understand putting policies and systems and procedures, to ensure that, the organization understands what business rescue is all about versus just doing normal turnarounds and restructuring. I felt like seven years was long enough time, I wanted more, I wanted to go up the ladder. Then this opportunity at BAIC came through and as you know, BAIC is obviously owned 35% by IDC so it was a great opportunity to at least move with them within the group. So that's who I am.

Besides that, I am a mom and wife and I'm somebody’s daughter and sister, so that's Buhle for you. And then outside of my work and also being a board member, I sit on an organization, a non-profit organization called the African woman Chartered Accountants. I think that’s one of my other callings is to support and make sure that I empower other women, because for me, I did get a lot of support from other women in that organization to ensure that I get to where I am today. So that's something that I do, we call it a labor of love type of work, because we do it without anything in return, without any financial return, but to make sure that we support other people that look exactly like me that have the same dreams that I had when I was still in Umtata looking and watching TV and realizing oh there's something called Johannesburg and I want to go there. So you know, I'm planting the seed to say, I'm also making sure that I'm making an impact somewhere.

CIARAN RYAN: Right. Yeah. I have the feeling that there's like some incubator for accountants down in Umtata because I keep on bumping into more and more who come particularly from the Eastern Cape. So I don’t know what it is.

BUHLE HANISE: I think that there's something in the water or the air way I'm finding, even with my friends, we are so ambitious, we are so driven. I think being in that small little town, you know, you just felt like there something more, it can’t just be this and that's it. I'll tell you the story some other time, but yeah, the lady and I keep on reminding her every time I see her, her name is Sindi Zilwa, who was the second black CA and came to my school and just told us about this profession. Since then, I've never looked back. So she was also our home girl and even the first black female CA Nonkululeko Gobodo was from my hometown. So I think it’s just, there's something in air there that just makes us want to do more than we have around us. 

Business Rescue and the effects

CIARAN RYAN: Right, right. Can we turn for a minute to your time at IDC where you were a business turnaround specialist and, it's quite an interesting area, particularly at this time of the lockdown, we're probably going to see a huge need for this kind of intervention for business rescue companies are going to put themselves in business rescue, I think there's going to be a certain amount liquidation from your experience. What are the main reasons companies end up in this kind of situation where they need business rescue?

BUHLE HANISE: It's a very good question and I've been talking to a few of my ex colleagues, in the last few weeks where we've been seeing the airline industry struggling. Everybody's now going into business rescue and some of them, I think SA express is now going to liquidation. So the reality is that, right now, because of COVID-19 years, we can say that's the reason. But when we did an analysis, especially when we introduced business rescue at the IDC. We realized that a lot of companies, I never recovered from the economic recession in 2008. Okay. Some of them slightly recovered, but from my perspective and when I was sitting at the IDC as a developmental financier, it was a different case to somebody who was sitting at a bank. Because at the IDC, we would obviously support companies from a developmental point of view, so you would find that a company had one or two clients. Now because of what happened with the economic recession, they probably lost one of those customers, and they were left with one customer, but from a normal financial institution, you would regard that as a very high risk. Whereas at the IDC, we looked at us and said, look, as long as you still have pipeline, as long as you're continuing to employ people, we would support that company and not let it go or force them to close down. But, and also, as long as the financials were showing that you are still profitable, they still makes them level of payments, or maybe I'd have to restructure some of the financials. So what we would call as a high risk client would normally go into business rescue and also where they've got too much concentration risk they would usually go into business rescue too, because they're trying to manage a situation where if this company doesn't do well, then they will not be able to pay their creditors. Another issue that we realized was that a lot of companies, you know had a good idea, but you still want it to continue business as that founder, but you don't necessarily know how to manage a business. So that company eventually ends up in the turnaround and business rescue to space. So we had to obviously teach a lot of clients to understand that yes, you might come up with an idea, but it doesn't mean you're the one that's going to execute the actual work, find the right people, find the right technical people find the right support that you need to be able to grow the business into a profitable and make sure that the company prospers going forward.

Well, there were a lot of issues, but I think because of COVID-19, we are definitely going to see a lot of companies going into business rescue because there's no production right now for most of the industries, companies are definitely going to be cutting jobs, which is not something I'm supportive of. I think being a developmental financier, you always want to contribute to the economy in some way the other, in this situation that we in, we not going to say this kind of industry is definitely going to struggle everybody is struggling. And we, uh, I mean I used to manage Com Air when I was at NedBank and I was really shocked that they are obviously putting the company into businesses rescue, but at the same time, I understand this is the right time to do it because you still have a good balance sheet in place. You still can manage and maneuver things around and it's not too late for them. So it's actually better to put it into business rescue right now. So I don't know if I've answered your question but there's definitely main factors that make you go into business rescue it’s not just one, but as you know, from a company's acts chapter six point of view, they're saying where you can see that you won't be able to pay your liabilities and your creditors in the next six to 12 months, then you can consider. But I think right now there's definitely a lot of factors that will make companies go into business rescue. 

CIARAN RYAN: Right, just from a CFO point of view now, a lot of finance executives seem to be under far more pressure today than in the past. The kind of pressures I'm talking about, I guess we've just been speaking about it COVID-19 and that kind of thing, I mean, what a curve ball that is for a lot of companies, nobody really expecting this thing. There's been a lot of discussion in the press about, you know, companies having to look at their balance sheets in an entirely different way, putting away cushions and reserves for the future in case something like this happens again, what would you say COVID-19 has done generally speaking for companies? Am I correct in saying that this is an entirely new type of pressure and they are going to have to look at their balance sheets differently going forward? 

BUHLE HANISE: Definitely. I think so. I think you are quite right if you were not taking your, your financial seriously now is the time. But one of the things in my mind, Ciaran that I feel, companies should definitely look out for, yes, I'm a financial person, I'm always going to encourage that you ensure you've got enough reserves, you've got a plan B in place. You know, we always have plan B before projects for everything in our lives, but for some reason a lot of companies don't have that and that's not right. So you must have a buffer somewhere and because you do have your, as a person, you have your savings, you've got your investments so you must do the same for your company. You must always try and see how you can expand your businesses to a level that you never envisaged before, and also just diversification of your products or your services.

In my mind, COVID-19 has shown us that business will never be usual again for us as a country and I think as the world, so it's important to get out of your comfort zone, find new ways of doing things. One more thing in my mind is all around the use of technology, you know we've been talking about fourth industrial revolution and we've been laughing and saying oh no, China and the rest of the world on the eighth and 10th industrial revolution, but we are now being forced to become part and parcel of the developed economies to say, how do we take advantage of technology? How do we do things differently from now onwards? Because things will never be the same. How do we support entrepreneurship for one, how do we make sure that people don't rely on companies to just give them jobs? Because the reality is that people are definitely going to be losing jobs. How do we ensure those people and not just sitting in around, doing nothing because if they are doing something, they are contributing to the economy of South Africa. So I think there's definitely going to be a lot as a financial person and otherwise that you will, we have to change our way of doing those strategies when you're sitting in those boardrooms, when we are executing those strategies and implementing those strategies as management, we have to do things differently. We can't continue a is because COVID-19 has shown us that things can change in one split second, that can affect businesses and people's lives all around. 

 

President for a year

 

CIARAN RYAN: Okay, well, we're running out of time, but I wanted to ask you this question quickly and it's a bit of an odd question. If you were president of South Africa for a year, what would you do to fix the country?

BUHLE HANISE: That was a very odd question. So I thought in my mind, I think there's a lot hey and there was an article or something that was speculated yesterday on Facebook, around the age of the cabinet ministers, how they're all above 60 years old out. I would definitely change that first of all, get more younger people, more innovative the millennials of this world are changing the landscape, get those people as part of my cabinet. And also I think I spoke about and encouraging entrepreneurship. I would definitely make sure that, I mean, even start informing education at schools, we need to have a course that's called entrepreneurship, whatever it's called, I'll think about another phrase if I have to. We, you know, we are encouraging people and students to study yes, you must study, but you have, you want to become a CA what happens when you qualify to still go and become somebodies employee instead of setting your own practice, things like that. So we need to equip our people to make sure that they are self-sustained. They used to go through your education, but what's next so I would as a president encourage entrepreneurship more because that's where I think in my mind, we'll be able to support and ensure that we don't have this high rates of unemployment in South Africa. Also, I think I would also encourage that we change the format of the grant system that we are providing to our unemployed and the sickly and all of that. But for the unemployed, I would say maybe find ways for them to contribute to society and prove to ISASA that look I've contributed this much to my community, so I do deserve to get my monthly grant in some ways or other. Just make people do something instead of getting things for free if I can put it that way. 

CIARAN RYAN: I think some great suggestions there. It is going to be the big challenge going forward is how to get people productive those who've lost their jobs. It's very, very demoralizing for a lot of people to be sitting through this and not knowing whether they're going to have an income next month. And of course, the challenge for government too is, you know, I think they, they really have limited options and it’s a question of can the individuals and entrepreneurs and the private sector also come up with solutions that are able to help solve this problem.

BUHLE HANISE: Exactly. 

CIARAN RYAN: Buhle I think we'll leave it there. It's been fantastic talking to you and I'd love to check in again with you and when things maybe are a little bit more calm and find out how things are going at BAIC. That's BAIC South Africa because that's a brand we're certainly going to find out about a lot more in the, in the months and years to come and I wish you the very best of luck with that and I hope you stay safe. 

BUHLE HANISE: Thank you so much. I will and I hope you stay safe too. Thank you. 

CIARAN RYAN: Thanks a lot. Bye bye now.



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