Although the CFOs expressed their concern about sovereign debt, there were some silver linings.
This week’s CFO Community Conversation took place shortly after Finance Minister Tito Mboweni delivered his revised budget, as South Africa still grapples with the implications of the Covid-19 pandemic and associated lockdowns.
The mood in the online room was sombre as CFOs expressed their concerns about increasing sovereign debt, without much confidence of paying it back, and at a high cost to the state thanks to South Africa’s junk status by all ratings agencies.
Some of the concerning highlights of the revised budget included:
- The consolidated budget deficit will rise to R761.7 billion in 2020/21
- South Africa will miss its tax revenue target from the February budget by some R300 million
- Treasury forecasts that gross national debt will be close to R4 trillion, which is 81.8 percent of GDP by the end of the fiscal year
Many of the gathered CFOs expressed that they were willing to lend their expertise in running financially sound businesses to government, but expressed their concerns that their voices would not be heard, and that, potentially, their reputations would be tarnished by association with struggling SOEs.
“If we raise our hands, do they or will they listen?” said Mervyn Coopen, Strato IT Group CFO. “And there’s also a risk - we tarnish our names. No one wants to listen to you once you’ve made a mess at SAA or Eskom. But I think we should offer our services and perhaps make some inroads into these departments where we can add significant value.”
Precious Hawadi, the group executive: finance at NTP Radioisotopes, confessed that working at an SOE, this issue resonates with her. “It is always important to state your view. Sometimes with the designation CA(SA), people might not like what you have to say, but it’s important to always say what you have on your mind. As CAs, we owe it to ourselves to be unwavering on good governance principles, even if we go against the tide. We need to bring solutions to the table.”
UCT CFO Ashley Francis said that, “We need skilled leaders to run our SOEs, and these leaders should be surrounded by seasoned, skilled experts. SOE’s should provide a sound basis for economic growth, which is paramount at this point in time. We can ill afford to be throwing good money after bad.”
Meanwhile, Craig Sumption, the CFO of Hatch Africa, mentioned that his company is looking at how they can help facilitate infrastructure projects – all that’s necessary is for government to make it a little more comfortable for people wanting to invest here.
He encouraged all finance professionals and businesspeople to focus on what they can do to help drive the country forward. “If we focus on the big issues, there are so many that need to be addressed. If we wait for those to happen, they are going to go nowhere. So we have to do what we can, and push where we can push, and eat that elephant one bite at a time. We have to keep pushing away and building inroads on that basis. We have to do what we can.”
It was clear from the viewpoints expressed in the room that most CFOs would be willing to lend their expertise and insight to government projects to drive the economy forward. All that is required from government is that these projects should prioritise growth, and not some other unspoken or political agenda.