CFO Summit panellists unpack how they made rands and sense in the face of challenge

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Teamwork, people, and optimism all helped finance leaders to keep their heads above water.

During a panel discussion at the CFO Summit, on 19 April at the 180 Lounger in Cape Town, Hennie Nel, CFO at Santam, Pieter De Wit, CFO at Afrimat, and Welmie Schoeman, CFO at BPSA, painted a picture of how they were responding to economic challenges in their respective organisations, and how cost, interest, and currency all played a role in how their businesses fared in the face of the pandemic and the declining rand.


Where we are, where we should be, and where we are headed

Hennie emphasised that, despite the uncertainties, businesses had to develop – and are still developing – in an already unstable climate, where it was tough to grow, and there was no other way out. “We are growing in line with the economy,” he added. “We needed to find new ways to grow the business, such as new distribution channels and offering higher-value products. We also have to consider cost and make our products affordable, especially for the average South African.”

Hennie went on to note that it also included a few acquisitions here and there. Santam had to obtain a particularly fantastic insurance broker in places where he found one.

“Our value isn’t centred on being a large organisation, but rather on us looking for and working with smaller businesses that we come across."

From an international perspective, he indicated that Santam intended to examine how they could compete with companies outside of South Africa, particularly in terms of credit rating.

In Africa, Santam plays in the specialist space, according to Hennie. “We have a business arrangement in Kenya where if an individual is involved in an accident on a bus on their way to work or home, that individual is insured – and in some cases completely unaware of it,” he explained. However, he pointed out that it all comes down to the ties or collaborations you have in those countries.

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You need to partner with a local who knows how things work in that country – never assume that you know everything or would be able to operate in that country without the help of a local, he pointed out.

Welmie gave some insight into what is happening from a the petrochemicals perspective and mentioned that the entire energy sector is currently undergoing a transition. “What was before is no more; our regulations were written for a country that was refining-led,” she explained, but those refineries are no longer there. She pointed out that the KZN floods caused serious damage to one of BP’s dam walls, to the extent that it was irreparable.

“Don’t get me started on the red tape,” she said. “We had to jump through massive hoops just to stay afloat, even as a large entity. Mind you, this was also considering that at a certain point the industry owed the regulators roughly R20 billion, and recovery was tough from an economic perspective. We even saw other industry players falling off.”

Welmie is also quite keen on collaboration, especially with their international counterparts.

“If the plan is for the country and business to recover, we need to partner with global companies to make this a reality, which is exactly what we are doing at BP – to land product to shore and ensure energy gets to the country.”

“It’s about tackling the problem, spotting where the issues are by developing a strategy,” she explains. “As a global entity, we leverage our international network to collect that data. Coupled with that, we are also partnering with regulators like the South African Petroleum Industry Association (SAPIA) – lobbying with them – to rally the troops that will make us achieve some form of change, as small as it is.”

As far as growth is concerned, Afrimat has in the past 13  years grown by 22.5 percent, which means that they must be doing something right, says Pieter. He was very quick to point out that the figure was not merely the doing of one individual: the biggest influence was the people working at Afrimat.

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Of course, there was some strategy and negotiation that led to the company’s stellar performance. Pieter discussed how to get acquisitions right. “Yes, you do need a good balance sheet to start with, especially from an acquisition perspective,” he says. “However, you also need to consider the price you pay, and go in low in order to get the best value out of that deal. Again, collaborate! We work collectively from lower-level staff all the way to the executives.”

And, as the other panellists had indicated, you need to watch global trends. Pieter found it fascinating that international players prioritised profits above all else. However, as a major mining operation, Afrimat has other priorities to consider in an African setting.

“We are a mining company with at least 45 mining licences, probably the company with the biggest mining licences in the country,” Pieter notes.

“We mine in areas surrounded by villages, where you need to deal with the community, the workers and chiefs who reside there, ensuring that you provide some level of social responsibility, over and above the regulatory things.”

According to Pieter, there’s also a way around these economic issues even when the rand is not doing well. “As far as the rand is concerned, if it’s weak, you need to consider diversifying the business. For example, Afrimat has an iron ore business, which benefits if the rand weakens – that’s because we’re charging in US dollars.”

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A cause for optimism

However, not all hope is lost; the country’s financial elite all agreed that it has immense potential. If you look past the potholes and our energy issues, you will notice that we have an abundance of resources, they said

“South Africa is an extremely rich country; we have huge resources, we are rich in iron ore and other minerals, including sunshine and wind, and if we tap into those resources, we can turn that sunshine into solar or even wind energy – to address the energy crisis,” Welmie said.

“We just need the will and look at our own shores for opportunities. I am an eternal optimist; as such I’m more concerned about how we can use what we have and make it work. We have the raw material, but the question is, what can we do with them?”

“South Africans are extremely resilient and no other country faces the challenges that we do. But we need to consider how lucky we are to live in this country, which is why we need to remain optimistic – I’d rather live here than any other place in the world,” Pieter said.

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“There is reason to be optimistic, but we must figure out how to make a significant difference in the country. A working government and not just local governments, is one method to identify answers that can prevent future crises. For example, solutions to prevent future floods and veld fires,” Hennie concluded.

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