Rowan de Klerk, CEO of the CFO Centre, unpacks why agility is a key skill for CFOs.
June and July were strange months for business in South Africa. While we try not to make blanket statements, this seemed to be the feedback from CFOs across our business.
On one hand, we had the Government of National Unity (GNU) being formed, we celebrated over 100 days of no loadshedding and then at the end of the month, the Bureau for Economic Research (BER) came out with 2025 economic growth figures of 2.2% – way outstripping the expectations from the Reserve Bank and the International Monetary Fund (IMF).
This is positive news.
At the same time, the uncertainty around the elections has meant that many businesses have sat back and waited for the dust to settle before making operational or strategic decisions.
Many of our clients reported that they were increasingly optimistic, but at the same time sales cycles were longer than normal.
This is where it is so important for entrepreneurs and their leadership teams to have a good handle on the information their business is sharing with them. On top of this, they need to be agile enough to respond to the conditions on the ground, and make important decisions.
Let’s look at a practical example – businesses in the solar sector in South Africa.
Going into the first quarter of 2024, solar was booming, with robust demand and plentiful funding for growth.
On 18 April, the government puts out an upbeat announcement saying we have now had 21 days of no loadshedding. Most people are a bit cynical about this news – it’s an election ploy, isn’t it?
We fast-forward to 24 May and Eskom comes out announcing 58 days of no loadshedding. Our solar business again doubles down on its assessment that loadshedding will be back with a vengeance: we just need to hang on to our people, keep the cost base, and stick with what has worked up until now.
At 120 days of no loadshedding, with solar installations no longer a priority for the consumer, the leadership team now realises they need to make a seismic shift in their operations. At the same time, they are burning cash, their fixed costs are too high, suppliers have realised they need cash in the bank and change up terms, and customers feel they now have pricing power.
This is where agility and data-driven decision-making becomes critical.
An experienced CFO would not simply be accepting teams saying: “Everything is going to be okay after the elections.” Rather they would be analysing the data from the business, identifying trends and assessing potential scenarios.
What are the productivity levels of our teams?
Are our marketing campaigns working?
What are the most favourable supplier terms we can get?
Is the quality of our order book declining?
Are there vertical or horizontal integration opportunities we can explore?
These kinds of discussions will invariably lead to tension between the CFO, the CEO and other members of the leadership team.
By their nature, entrepreneurs are natural optimists. “The next campaign will work”, “the cycle will turn” or “better days are around the corner”. On top of this, they are often fiercely loyal to their people and don’t want to be seen to be the person who must facilitate retrenchments.
Yet, as the solar example shows, if you don’t demonstrate agility when needed, you can end up compounding the problem. For a CFO, there are a couple of ways in which they can help navigate this dynamic.
The first is to use data-driven decision-making. In mining, they used to talk about “the canary in the coal mine” which was used to identify poisonous gases that miners couldn’t see until the effects had taken hold. Establish a dashboard that the organisation understands and make them aware of the metrics that carry the greatest risk. This can remove a lot of the emotion from the decision-making.
The second is not to focus purely on how to cut costs. Marketing is always a great battleground in an organisation. It is often the easiest to cut in the near term, but what happens if your inbound enquiries dry up and your sales funnel is empty? Instead of making wholesale cuts, get the marketing and the sales teams together to identify what is most effective.
A third option is to review short-term sales incentives. When things are slow, business development or sales teams can see their heads drop or lose focus. By mixing up some new incentives, you can breathe new life into your sales pipeline, which in turn can drive your revenue.
Lastly, an agile CFO will be looking at your drivers from both an expense and income perspective. This could be a case of renegotiating with a key supplier, adjusting payment terms with key accounts, or even looking at a merger or acquisition transaction to strengthen your position in the market. They can only do this if they are clear about what is happening in the industry around them.
It is encouraging to see some more upbeat data coming through, but the one thing we have learnt about operating in South Africa is that you need to be agile. Are you?
