CFOs should take on challenges with an “South AfriCAN” attitude

Heiner Freese says leaders need to work together to navigate the impact of unrest and Covid-19.

The last year and a bit have been truly chaotic. Every time we think that the worst is over, there seems to be another wave of bad news, either as a side effect of the original lockdowns for the first and second Covid-19 waves in South Africa, or a further lockdown as we have just experienced in June and July 2021.

When I first penned this piece, the Zuma protests had just begun. Since then, the province of KwaZulu-Natal, where SBS® Holdings has its head office, has been in the news daily for protests, widespread looting, and arson. Other regions of the country, including Gauteng, have experienced unrest and looting.

The after-effects of the lockdowns and now the malicious theft and damage to property and assets, will probably be with us for many years to come. Despite every business owner, manager, or employee’s valiant attempt to catch up time lost, we already find ourselves a stubborn three to six months behind the curve.

Why is that?
We need to look at business management as a whole and the following strikes me as applicable to our constant catch-up attempts, and our seeming inability to make up this lost time:

As business leaders we set ourselves challenging annual and five-year targets based on good trading conditions. For many, these are stretch targets in terms of sales, GP and NPAT and even in perfect conditions they are difficult to meet. If you take out one or two anticipated “slow months” in a year, being the Christmas and Easter periods, then add a further two months for lockdown, you are already behind from a pure time resource by around three months. While the Christmas and Easter slowdowns can possibly be caught up with rescheduling, the other two months will be virtually impossible to recoup.

In the water and food security, as well as the construction and infrastructure development sectors, taking a deeper dive into the main markets paints an even gloomier picture.

The government sector, at municipal level, operates on a budget-based cycle, starting with annual budgets in July. This is followed by project planning for a few months, then contractual obligations to get the various stakeholders and service providers aligned. In March there is often a flurry of activity to meet deliverables and spend budgets before the end of April or, in some cases, before the end of June. If the process is delayed by two to three months due to lockdowns, then projects do not get off the ground and we get into a perpetual cycle of carry-over projects that get delayed year after year.

With the national government practice of having to hand back the unspent portion of allocated funds, there are some projects that will remain half-finished for years to come. That means that orders may be placed with service providers, who may have manufactured goods for those orders that then sit on the floor for many months. In some cases, businesses close due to cash flow or the financial challenge of sitting with stock or goods. This gets costed in for the next round, making for spiralling price increases.

The private sector, including the commercial and industrial markets, is highly governed by business sentiment and any bad news causes the bear to lift its paws and to stop spending. The long-term effect is that capital expenditure is delayed, and when and if the good times return, there is a shortage of supply and increased cost of supply. For many it is a time to re-evaluate their commitment to South Africa, as unfortunately we are only as good as our customers.

For manufacturers, importers, and exporters making use of a worldwide network for the supply of raw material and delivery of finished products, the uncertainty of lockdowns and the unsynchronised timing thereof results in reluctance by local and international customers to place orders, and if they are placed, to stick to the timelines that were discussed at the time of pulling the trigger.

The adage of always putting the customers first and trying to accommodate them as best as possible means huge losses, especially when the supply side has been held up by shutdowns in other countries. In South Africa, the recent downgrades to our shipping resource have been a large contributor to higher costs and the lack of commitment from international customers and our supply chain. The container shortage has also had an impact and delivery times have far exceeded any that we could possibly have imagined.

Where management teams set their own targets, coupled with their own personal goals in the form of their career path, bonuses, vacation time or even retirement, the effect of the lockdowns has a cumulative and seemingly perpetual impact on the working life of individuals. That is without the added demotivating effect of always being behind the curve.

Employees are perhaps the most affected by the continual uncertainty. While they may appreciate their jobs more, the task of keeping people motivated is a continual battle that has kept Human Resources teams on their toes.

While this perhaps paints a bleak picture, it is one that warrants a silver lining which can be found in the South AfriCAN approach to business. Essentially it means that as South African business leaders we need to continually set out to achieve the goals of making our companies bulletproof.

How do we do that?
We collaborate with partners that are reliable. They may not always be the cheapest, but they are the most reliable, the most honest and have a like-minded commitment.

We ensure that our quality is right, and we stand by our products. We don’t try to cover up our mistakes, but we do try to rectify them as fast as possible, even if we were not the ultimate cause of them. No quibbling or horse-trading. What you see is what you get – we don’t run away.

We pay on time, every time so that our suppliers and employees are motivated to offer their best. We value and honour the people that have made our companies their key partner or, in the case of employees, their second home.
We put people over profit and are engaged in ethical business practices that create a better atmosphere.

We listen to the market through collaboration with a network of like-minded business people who have their ear to the ground. We detest pessimism. We remain proudly South African and are wholeheartedly committed to making this country, and the other countries that we touch, better places for all.

We work smart, always innovating and finding better ways to do things. Sometimes we take a step back, but always with the intention of taking two steps forward.

May we live long enough to look back on this time of extreme challenge with a smile and the knowledge that we have done the very best with what we had! In the words of our leader, “May God bless South Africa.”