Investec’s Itumeleng Merafe unpacks how CFOs can navigate the Russia-Ukraine crisis.
It has been business unusual for South Africa’s mid-market business sector since early 2020.
Businesses that managed to access funding lifelines from trusted banking partners and mastered the pandemic pivot stood ready to capitalise on the post-pandemic recovery, which was gathering pace in early 2022. But Russia had other plans. The current conflict in Ukraine put the brakes on global recovery and has far-reaching implications for economies across the globe.
From a South African perspective, the loss of crude oil supplies from the Ukraine and Russia will affect diesel production in the country. The resultant price increases will fuel inflation due to pass-through costs from South Africa's road freight industry – the dominant cog in the local supply chain.
The conflict has also affected food production from Russia and Ukraine, creating food security concerns globally. And China and India continue to buy food in bulk, placing additional strain on an already constrained global food supply chain.
The economic shocks from these energy and food related challenges will generate headwinds that slow the economic recovery and create knock-on effects for businesses as consumer spending wanes.
As such, businesses must take bold action to stay afloat in the current economic climate. Now is not the time to freeze in the face of another crisis – decision paralysis will sink any business that fails to keep moving forward.
And while this economic turmoil is transient, business leaders must act fast by identifying and leveraging their strengths to sustain the business through these tough trading conditions. When competing for a smaller share of wallet in a contracted market, identifying and leveraging your competitive advantage becomes a strategic imperative.
Now is the time to manifest your strengths and focus on areas of your business that separate you from your competitors, like deepening beneficial relationships with existing customers and captive markets, rather than trying to capture new market share.
Business leaders also need the courage and conviction to make bold decisions in the moment, using whatever information they have available at the time to keep driving the business forward, because opportunities don’t wait.
Moreover, they require the agility and perspective to fail fast if things don’t work, and to pivot when needed. Doubling down on a bad call can often prove costly or, worse, terminal.
Taking these bold, often difficult decisions becomes an easier proposition when business leaders partner with industry experts that stand alongside you when times are good and bad and look for possibilities and opportunities even in a crisis. Partnering with banking providers that do more than merely fund the business and offer something beyond products, processes and digital solutions becomes critical. Banking partners that also hold significant intellectual property and industry experience can help clients navigate the current crisis by thinking differently in times of uncertainty.
Ideally, businesses require experienced, responsive partners that understand their business and industry, and see themselves as an extension of the business, rather than merely a service provider. More importantly, businesses need access to experts who are available and responsive and leverage intelligent technologies to offer insights and advice that inform decisions, rather than dictate them.
Engaging with a person who has your best interests at heart, rather than just a digital interface, also builds trusted relationships – an essential commodity in times of crisis. Ultimately, the better a bank knows a client and understands their business, the easier it is to help them navigate challenging times.
Successfully surviving the pandemic cemented the notion that relationships built on trust typically lead to success, and now is the time for bold moves.