While most CFOs spend their days maximizing profit and fighting competitors, Eugene Lufhugu’s primary role is “to make sure our beneficiaries are taken care of and focusing on the long term sustainability of the Group”. However, just like his peers, the CFO of Rand Mutual Assurance sees cost management as one of his most important briefs. “I worked for FNB and Toyota Tsutso Africa, but I would not say I miss profit driven commercial business. I joined Rand Mutual when the company just started to think about growth and there are lots of exciting things happening.”
For a company that was founded in 1894, it may sound strange that it only starting to think about growth recently. "I think it has been one of our major initiatives to try and change the mindset of our employees and become more outwardly looking, because the organization was traditionally very conservative when I joined in 2007," explains Lufhugu. "We don't have to do what we've always been doing. We have to look at growth."
Rand Mutual was founded by mining companies as a non-profit mutual assurance company that would administer compensation for mining industry employees injured during their employment - and that is still its main business. The mines are still the policy holders and shareholders. "Over time we have added some non-compulsory products to augment the core COIDA product for the mining industry," says Lufhugu.
The biggest coup, however, will be for Rand Mutual to venture out of the mining industry. "We're hoping to get the approval from the Minister of Labour to start playing a similar role in the metal, iron and steel industry. That process has been going on for three years and we have almost reached the point that we will get licensed. That will diversify our business and we'll be aiming for a 50/50 split between mining and metal by 2016."
According to Lufhugu the development comes at an 'opportune' time. "Everybody knows about the challenges in the mining industry, it's really, really rough. Many companies are looking at doing the work with less people and going the automated route and closing marginal operations. We currently cover 402,000 employees in the mining sector, but there are potentially 350,000 metal workers. That is a big pool for growth and we'll also keep developing our supplementary offerings for our existing and future policyholders."
Lufhugu says he's enjoying his role a lot and learning plenty in the process. "In this role I have become more of a generalist understanding the operations of the business, being responsible for the financial aspects of the entire strategy. Our professional training focusses on the accounting and related technical aspects, but there is an important human relations side to the role, I have noticed. I had to learn that in practice." The work itself - like for every CFO - is a balancing act. "On the one hand we need enough revenue and income to sustain the business and to be able to keep honouring our obligation to paying claims; on the other hand the policy holders see our premium income as an expense."
Cost management is taking a fair chunk of Lufhugu's time. "I think we're slowly winning that battle. The nature of mining injuries is usually very severe which leads to high claim costs. We're very active on the ground to make sure that medical costs don't get out of hand. We have a program of proactively visiting some of our beneficiaries and ensuring that their conditions don't deteriorate and they have a support structure that promotes their wellness. All of our stakeholders - employers, employees and the board - are benefiting from this pro-active approach."
Lufhugu says he is proud of the sustained investment returns they have achieved over the last few years. "Although profit is not our most important goal, we need to keep investing successfully to fulfil our mandate and except for in 2008 we have managed to achieve targets and maintain solvency reserves at well above regulatory requirements."
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