The CFO Centre’s Rowan de Klerk reveals how CFOs can remain optimistic in the new year despite the challenging business environment South Africa is in.
2024 is shaping up to be an incredibly noisy year, and many executive leadership teams are expressing some trepidation when committing to their business strategies.
In South Africa, we are poised for one of the most pivotal elections since 1994 and it is easy to get caught up in the local electioneering, but if we consider that more than 40 countries, representing 40 percent of the world’s population, will be going to the polls in 2024 to pick new leadership, we start to recognise that we are just one cog in the wheel.
Throw in geo-political tension in Ukraine, Russia, the Middle East, China and Taiwan, and it is easy to quickly become discouraged or be paralysed by this constant flow of news and analysis being thrown at you.
As a CFO, one of your key jobs is to balance optimism and pessimism to allow leadership teams to make informed decisions about the strategic direction a business will take. When so many of your inputs are leaning toward a pessimistic lens, it can cloud your decision-making.
There was an interesting thread on X (previously known as Twitter) over December which caught my eye involving US Venture Capital heavyweight Marc Andreessen and a follow-up from Elon Musk.
Andreessen was responding to some comments around the disruptive nature of artificial intelligence, and said: “Pessimism as an attitude is fake sophistication; it always has been. Optimism is a more correct and a better way to live.
“Specifically, pessimism is easy to sell to young adults, since it sounds world-weary and wise. So it’s a cheat code for cynics and depressives who want followings. It’s only later that kids realise they’ve been sold a bill of goods, and by then it’s cost them dearly.”
To which Musk added his voice: “Never trust a cynic – they excuse their bad behaviour with the rationale that ‘everyone does it’.”
The obvious response to this is that it is somewhat easier to be an optimist when you’re a billionaire and enjoying another booming year for technology investors – but we shouldn’t lose sight of the core message: we cannot let pessimism be our default.
At a practical level, how does a CFO in South Africa maintain optimism in a challenging business environment?
First answer the “Why?”
While it is certainly easier to be an optimist when you are worth a couple billion dollars, one shouldn’t forget that a key reason why the likes of Andreessen and Musk have succeeded is that their optimistic approach to business and problem-solving helped them identify gaps in the market and create value.
For many entrepreneurs, their investments in their businesses will be a key building block in their wealth-building journey and they will want to extract the maximum value from the enterprise that they build.
If your goal is to unlock value through the sale of equity in your business, you want to be selling when your business is on an upward curve rather than when your business is flat-lining or down in the doldrums.
Measured optimism will be a key part of the magic in securing the best possible price for your equity.
Then answer the “How?”
The follow-up step is to ensure that your executive leadership is focused on the core of your business. What is it that you are good at and is this still a viable and profitable focus area?
Too often we start the new year with unbridled enthusiasm about new products, services or markets that we can tap and this becomes a distraction from the core competencies. This in turn puts unnecessary pressure on the rest of the organisation without the commensurate return.
An experienced CFO will work with the entrepreneur to develop people, systems and processes that ensure the core of the business is functioning optimally, so that resources can be deployed for growth opportunities without disrupting what is working.
Then recognise South Africa is part of a global economy
As CFOs we look at the numbers and we can’t escape the reality that South Africa has very real challenges.
This doesn’t mean that these challenges are insurmountable.
We are fortunate to work with a diverse range of entrepreneurs and more and more we are seeing these business owners expanding their horizons beyond South Africa. We have a client who exports food products and 70 percent of their income comes from outside of South Africa – it’s a great rand hedge – but they haven’t rested on their laurels. Rather, they’ve utilised their South African operations as a springboard into international markets.
Importantly, many of our clients who are working in international markets continue to enjoy the quality of life South Africa offers, and cost-effective workforces relative to many international jurisdictions. Much of this has been enabled because they have built a support structure and team around them to ensure they can be competitive in a global marketplace.
Whether you are an entrepreneurial CFO or a CFO working in an entrepreneurial business, there are reasons to be optimistic and 2024 represents an opportunity to build long-term value and wealth through the businesses you work in.