"The best CFOs are intellectually persuasive without being arrogant," says Nedbank CEO Mike Brown, a former Chief Financial Officer himself. In a candid interview with CFO South Africa Brown talks about himself, growth opportunities in the rest of Africa, the importance of small businesses to jumpstart the South African economy and the characteristics that set brilliant CFOs apart from merely solid ones. "You need to be able to read the tea leaves and persuade others about what this means for the future and what the organisation needs to do differently as a result."
What makes you a typical Nedbank CEO?
"I don’t believe there is such thing as a typical Nedbank CEO. Every individual has his or her own style, strengths and weaknesses. That is extremely healthy, because those differences provide energy to the organization."
"Having said that, there are some characteristics I believe all Nedbank CEOs should have, like deep industry knowledge as banking is an extremely complicated business. Leadership skills and humility as well as the ability to attract, retain and motivate a team of skilful people, are crucial.
"In the rest of the African continent GDP is growing faster than in SA and our customers are moving into several countries. That is why it is really important to have a 10, 15 or even 20 year view of the development in the rest of Africa."
Most importantly, a CEO needs attributes that are appropriate for the culture of the company. At Nedbank things like long term sustainability need to be in your DNA because they are so close to our brand. Accountability, integrity and respect are also core values one needs. "
If you did not work in banking, what would you do?
At different stages of my life I wanted to be a vet or golf pro, but in the case of the latter my family would have starved... If I was not in banking, I would probably work in private equity. I enjoy business strategy and the valuation and negotiation of buying and selling businesses.
Nedbank recently acquired a stake with a pathway to control in Banco Unico in Mozambique and it has subscription rights to 20% of Ecobank. How crucial is expansion into the rest of Africa?
"The rest of the continent is extremely important to us, but we are still the smallest of the big 4 banks in South Africa, which means we have the biggest opportunity domestically. When we measure economic profit pools, 70 to 80 percent of our opportunities are still in South Africa. For the next 5 years that has to be our primary focus."
"That said, in the rest of the African continent GDP is growing faster than in SA and our customers are moving into several countries. That is why it is really important to have a 10, 15 or even 20 year view of the development in the rest of Africa. If you wait, you will be too late. In SADC countries and in East Africa we understand the market well, so that is where we will be building our Nedbank franchise. After our recent acquisition, Mozambique is the 6th country in the rest of Africa where we operate."
"In Central and West Africa we prefer a partnership approach. The market is more complicated and harder to understand. Our chosen partner is Ecobank and we have had a strategic alliance with them for over 5 years. Before November we will have to decide if we exercise our subscription rights to purchase up to a 20% shareholding in Ecobank. That would give us exposure to 34 countries. Ecobank is the biggest bank in Ghana and the 6th biggest bank in Nigeria. This is in line with our strategy, but we also have to make sure that the risk is not too high. Ecobank has been dealing with some well publicized governance related issues, but we think they have done all the right things to deal with those."
Do you worry about the investment climate in South Africa?
"It definitely worries me. The business of a bank is very closely correlated to the macro-economic environment. Globally, the economic climate is difficult and the financial markets are nervous. There is also a disconnect between the somber economic prospects and the optimistic outlook reflected in relatively high stock market valuations and low volatility."
"You need to be able to read the tea leaves and persuade others about what this means for the future and what the organisation needs to do differently as a result."
"South Africa is standing out for the wrong reasons: the current account deficit, the fiscal deficit and strikes. All countries have challenges. What investors want to see is a visible program to resolve issues and that is currently lacking here.We have the NDP but need to do more to show implementation progress. The labour relations issue is the biggest issue at the moment in the South African economy and it needs to be addressed urgently by all parties."
What is needed to jumpstart the South African economy?
"A lot of effort from government and the business world went into the creation of the National Development Plan. That is a good document, which provides a diagnostic and a vision. It now needs to become a real plan with prioritization, funding and an implementation timeline to track progress."
"In the short term we need to find a better labour dispute mechanism. We also need to sort out our infrastructure issues, primarily around the lack of electricity. Generally, we need a shift towards a more business friendly environment. Jobs only come through economic growth, especially when small businesses are thriving. A booming SME sector is really crucial for job creation, because big business is not great at job creation."
"Long term, what needs to happen is much more around educational and skills related issues. But even though education and training are a challenge, I don't believe South Africa's position as gateway to Africa is in danger, because we have unrivaled characteristics. If you read the Global Competitiveness Report of the World Economic Forum, we are well ahead of other African countries in terms of the foundations needed to be a financial centre."
Almost all CFOs under 40 want to become CEOs. You made that switch at a young age. How did you manage to be a successful CFO and gain skills to become CEO at the same time?
"My advice to any CFO is to spend some time outside of the finance streams. I was extremely fortunate that after a period at Deloitte I worked for 10 years in the front office at Nedbank in varied disciplines including structured finance, private equity and property finance.
"The best CFOs are intellectually persuasive without being arrogant."
The combination of those client facing positions and a period as CFO has provided me an almost unique overall perspective of Nedbank when I was appointed as CEO. I have a very real understanding of what our frontline people are dealing with. That enables me to understand what the real issues are, because mostly I have seen the movie before."
How do you compare the roles of CFO and CEO?
"I have always enjoyed every job I have had. In my current role I have much more interaction with stakeholders. I am representing the organisationat numerous levels, which is very time intensive. That was quite a change for me, because it means that the amount of time I have to spend on things outside my day job is huge."
What are the best and worst parts of being a CFO?
"The worst part of being a CFO is producing the repetitive, monthly accounts. The best part is the unique insights you can generate into the business and using those to create value for stakeholders."
What makes a CFO brilliant instead of just good?
"The most important thing is being able to read the tea leaves: understand what is going on in your environment, what is going on at competitors and what is going on in your own business. You need to know what your leading indicators are and you need to be able to analyse trends. How do you pull together those tea leaves? That is the difference between a brilliant and a solid CFO. Then you need the persuasive powers to convince the team of your insights and get the organisation to act differently as a result, which is often the hardest job."
"As a CFO, you are a custodian of enormous amounts of data. You have to be able to use that to predict the future. Your job is to work with the CEO to lead people in a common direction.
What advice do you have for aspirant CFOs?
"There is no substitute for hard work, there are no shortcuts. You need to learn to work longer, harder and smarter than anyone else. You also really need to understand the importance of IQ and EQ. A CA generally ticks the IQ box, but you also need to be able to communicate and persuade people without being seen as arrogant. If you want to be a brilliant CFO it is important to develop those skills."
If you also would like to share your ideas with the CFO community, you want to be part of the leading CFO South Africa Community or you want to know more about hosting a CFO South Africa event, you are most welcome to get in touch with CFO SA. Please contact Jurriën Morsch at [email protected]
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