CFOs reveal how they are navigating the supply-chain disruptions brought on by crises.
According to data from risk consulting firm Verisk Maplecroft’s Civil Unrest Index Projections, 75 countries may experience an increase in protests by late 2022 – and South Africa has a medium-to-high level index score.
Many supply-chain issues are indeed out of the CFO’s hands, but for Laila Razack, Equites Property Fund CFO, bolstering resources for security is a good place to start, especially when it comes to strategic facilities and those deemed essential for the provision of food, medication, and basic goods. “Equites Property Fund is engaging with many tenants looking for innovative ways to improve security in the short term,” she says.
But, she adds, in the long term, society, businesses, and government need to understand the root cause of civil unrest and take active steps to remedy this. “We have a highly unequal society, with structural economic challenges. Unless we remediate some of these challenges, the strikes will remain a concern for us.”
Pramy Moodley, Sappi’s Southern Africa CFO, believes that CFOs and big business need to pressurise the government to improve infrastructure, which is not up to standard. “Sappi is often forced to use road instead of rail, and with that comes significant cost. Government must ensure that our ports are operating at the levels they should be, too. Despite being sub-Saharan Africa’s biggest container hub, Durban is a very poor-performing port by global standards."
According to a 2021 World Bank container port performance index, Durban was ranked 364 out of 370 (last place goes to Los Angeles Port, which in 2022 has seen ships having to float offshore for weeks before they can unload due to the container backlog).
Tiger Brands CFO Deepa Sita adds that Tiger Brands remains concerned about the potential for social upheaval to reignite, which is why CFOs must have contingency plans to mitigate risks. “The July 2021 civil unrest and looting placed that risk high on the agenda,” says Deepa. “The work we are doing to optimise our supply chain has gone a long way in contributing to how we mitigate any risks.”
For George de Beer, Imperial Logistics CFO, creating public-private partnerships will go a long way to increase investment into Africa’s logistics infrastructure, and boosting local manufacturing to enhance cross-border trade across the continent is critical. “For CFOs, a digital supply-chain strategy is key to enable growth by providing coherent processes and systems that support core business and strategic delivery, and by facilitating access to new value propositions and revenue streams.”
Chief financial officer or chief resilience officer?
For Pramy, the volatility in the markets makes it very difficult to forecast impacts on profitability, managing work capital, and ensuring you have sufficient cash flow to operate – and forecasting is key to what CFOs do. But this also means that CFOs need to be resilient and agile.
“I've been in my position for almost six years, and three out of the six have just been continuous change. It's no longer number-crunching; it's more about how you adapt to change and overcome this swiftly. Covid-19, riots, flooding – you must think on your feet all the time and find the best solution as quickly as you can, otherwise it impacts your operations, and your competitors will take bigger leaps than you.”
This special feature was originally published in the second edition of the 2022 CFO South Africa magazine.
Read previous installments of this special feature: