Covid-19 challenges kept CFOs on their toes
CFOs shared how they navigated 2020 and the challenges Covid-19 introduced into their companies.
Not business as usual
Shoprite CFO Anton de Bruyn (pictured above) heads up finance in a 15-country African supermarket business, spanning nine industries. When Covid-19 arrived, they were in the midst of IFRS16 implementation, discontinued operations and hyperinflation.
Shoprite has various brands that cover different LSM categories and the sales trends in each of those brands has been a clear indicator of the market’s reaction to Covid-19. Referring to the company’s results presentation in February, Anton says that Checkers had been performing well. However, as people are faced with reduced salaries and retrenchments due to Covid-19, the Usaves, a low-cost limited assortment discount chain, will play an important role in the retail market in South Africa.
“Our strategies are based on the performance of the various brands and we are formed around the different brands in those different LSM brackets. Each will perform according to the spending power of the customer,” says Anton.
Anton has a very strong finance team and together, they support each other’s wellness at work. “My finance team is 60 percent female, a stat I am really proud of but I have to say my whole team is world class. I joked the other day we should set the board exam: start with a 15-country African supermarket business spanning nine industries, throw in IFRS16, discontinued operations and hyperinflation. It actually is quite exciting in real life. I must say, I love what I do and I think everybody around me does too. That’s all in a day here at Shoprite – being the biggest retailer in South Africa is certainly a team effort.”
Agility and resilience not likely to rebound quickly
Nishal Lalla, CFO of the Recording Industry of SA (RiSA), has had a front row seat to the troubles that the music industry has faced this year, with major festivals, live shows, and tours across South Africa and all over the world postponed or cancelled.
He admits that the industry faces an uphill battle. “An extensive list of major concerts and events have been cancelled. Artists generate the majority of their income from live shows, so the impact has been devastating.”
He recalls during lockdown, having to kick up things like emotional intelligence to make up for not being able to see each other in the office in person and miss out on the cues of face-to-face communication. “Every person on our team is important and we have made it a point to give extra mental support to those who need it. During a crisis, people respond differently to pressures, and when you still need them to deliver at the highest standards, you need to provide an environment that supports them.”
Operating as an essential service during lockdown
Douglasdale Dairy CFO Bradley Wentzel reveals the inner workings of operating during lockdown. Bradley says that there has been a shift towards consumers buying long-life milk during lockdown. “While this shift in demand is to be expected, as a fresh milk producer this has created some sales pressure. Luckily, we supply to the major retail chains, which has really helped us to limit the impact of this shift.”
Given Douglasdale Dairy’s strict food safety protocols and hygiene processes, the lockdown had little impact on its day-to-day operations. It tightened its controls to further reduce contact between employees. It put in strict shifts so that its workers didn’t come into too much contact with others. Office workers were also separated from the processing teams, and even the different processing and production teams were required to work separately.
He believes there is opportunity ahead. “We’ve got a lot of smart minds and hard-working people that are committed to South Africa. If we all band together, there’s just too much opportunity for us to go wrong. If we can focus on ourselves and stick to our core principles, I think we as a country will be fine.”
The role of business leaders in assisting government during the Covid-19 pandemic
Implats CFO Meroonisha Kerber was determined that Implats would support government during this challenging time for business and society as a whole, in whatever way they could, but specifically in contributing to national efforts to reduce the Covid-19 infection rate.
“Given the challenging times we face as a country, I believe it is incumbent on each of us, and especially those of us in leadership positions, to contribute in a meaningful manner to assisting government in fighting this pandemic. Implats is committed to contributing to the extent it can, to supporting the government’s efforts to flatten the curve of the Covid-19 infection rate,” she said.
Ensuring finance supports the challenges of the new environment
Cape Union Mart’s K-Way factory in Ottery, Cape Town, answered the government’s call to assist with producing face masks instead of producing its regular technical outdoor apparel.
The company’s group financial executive, Landi van Staden, says for the group, the decision to produce face masks was an easy one. “Not only did this allow us to use our local manufacturing capabilities during lockdown, but it also provided us with the opportunity to support small businesses who work with us and do our small part to help the country fight the Covid-19 pandemic.
"As a CFO, I was incredibly fortunate that the strong manufacturing and merchandise teams were able to run with and manage this project with little direct input from me,” Landi says.
Her key role in the broader business has been to provide dynamic financial information and models. These help the company make informed decisions across the group in a timely manner and support negotiations with external business partners. “As a CFO, you also need to ensure the finance department and processes are best placed to support the challenges which come with the new business environment,” she says.
Looking at a long recovery ahead
“We operate in the hospitality sector, which has been materially impacted by the Covid-19 pandemic and will probably be one of the industries that will lag the recovery,” says Sun International CFO Norman Basthdaw. “In the face of pervasive challenges, Sun International has responded proactively to protect its business in the short term and position the group for sustainable recovery post the Covid-19 lockdown over the long term.”
The Covid-19 pandemic had a significant impact on the group, with all operations being closed for just over three months and March trading significantly disrupted. Consolidated income declined by 56 percent from R8.5 billion to R3.7 billion and adjusted Ebitda reduced by 96 percent from R2.1 billion to R79 billion. The group adjusted headline earnings declined from R172 million to a loss of R885 million with an adjusted headline loss of 702 cents per share.
He explains that at the beginning of lockdown the finance team knew that there was a possibility that they would have to complete the reporting while working remotely. “What did stand us in good stead to deal with reporting while working remotely was our robust processes that were formulated and continuously improved over the last couple of years,” Norman says. “Our processes were really ‘stress tested’ over this period and while we can make some changes, these are minor.”
Stepping forward during Covid-19
Pick n Pay CFO Lerena Olivier says that dealing with Covid-19 has been a major challenge. “The executive team running the crisis have been incredible and are a true reflection of what teamwork can deliver. It’s been an important lesson for us all about what we really can deliver when we work as a team with a firm goal in sight.”
She believes the values of Pick n Pay have never shone through more clearly than during Covid-19. “We stepped forward when it counted, and our people have performed truly heroic work in this national emergency.”
Lerena acknowledges the Pick n Pay and Boxer teams’ outstanding behaviour, the IT team’s faultless delivery in responding to substantial additional demands from people working from home as well as the sharp increase in online sales, the supply chain team’s tireless work to keep the stores full, as well as the store teams’ labour under punishing pressure.
“As an essential service, we are not only working under extraordinary circumstances, but are also managing the financial impact of trade restrictions and social distancing measures on our business, and of the additional investments necessary to make sure our people and our customers are as safe as they can be in our stores,” she says. “It has placed demands on all of us to be more flexible, more understanding, and certainly faster in our decision making and execution.”
Leaving no one behind during Covid-19
For University of Johannesburg’s CFO Nolwazi Mamorare, the Covid-19 pandemic was a real test of the institution’s business continuity plans. “Our goal was that the academic year must not be lost and that no student should be left behind,” she said at the Finance Indaba Network.
“Fortunately, we began investing in blended learning some time ago. This meant that we were able to open the academic term only one week later than the calendar. We are also able to complete our academic year, which is unusual compared to other universities.”
She is extremely grateful for her experience in financial governance and revenue. “It allowed me to see the bigger picture, which is quite important for any CFO of any institution. If you walk in blindly from outside the sector, it’s easy to miss the important issues.”
Nolwazi predicts that universities will evolve to offer continued value to students. “We expect that a hybrid model of contact and online learning will emerge. We will need to cost this model differently. We must also compete for students with international online universities. The digital world makes these studying options open to local students.”