CFOs discuss the external factors affecting their companies' performance and share how they deal with them.
CFOs are facing more and more challenges today, with internal corruption, rand volatility and economic uncertainty battering their businesses on all fronts.
We’ve asked some leading South African CFOs what external factors are affecting their companies and their profitability, and how they mitigate these.
DRDGold CFO Riaan Davel said “trying to compete in a volatile environment.”
“Dollar-gold-price volatility and extreme rand-dollar volatility definitely affect us. We are ultimately unhedged…”
However, according to Riaan, they have taken short-term dollar positions so they can manage the liquidity risk in the growth phase they are entering. “So, we try to control what we can.”
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Afrox CFO Matthias Vogt referred to three factors:
- Cost inflation
- Currency volatility
“With cost inflation, we need continued efficiencies, cost savings and productivity improvements, which we manage via a dedicated programme and project office, where all projects are consolidated, reviewed, challenged and controlled.”
Matthias says they also need proper price cost management. “With regards to currency volatility, this is not so much about strength or weakness of for example the South African rand but more about its volatility on an ongoing basis, as this impacts your planning and predictability, and ultimately your results.”
“Also, currency weights into the supply chain, so, better supply chain management is a mitigation to volatility. Policy making is, I think, still an indirect component which a lot of companies are looking at. How you mitigate this is to adapt and be agile.”
Jasco CFO Warren Prinsloo said political factors, which result in rand volatility, unexpectedly impacted the forward cover positions they had. This resulted in both profits and losses between 2015 and 2017.
"The rand volatility, where the currency moves in an unexpected fashion, is difficult to contend with. It doesn’t matter if you have a hedging strategy in place and if you regularly review this, our policy is not to speculate on the rand. When the rand does something suddenly you could end up with a smile on your face or a frown.”
Economic growth locally has also been a problem for Jasco, which is why they set up shop in Kenya, East Africa, in 2015. “There is a lot of opportunity there; resources are very qualified and we can train them on our technologies if needed. We are looking at our portfolio and what we can sell in the Kenyan market,” he said.
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Black Umbrellas CFO Madavo Dzumbunu said funding is a big challenge. “We have to devise new strategies to generate revenue and to see ourselves becoming more sustainable. Also, linking and strengthening our current relationships with our donors; so, spending time building multiple layered relationships with key stakeholders. Sharing the outcome of our programme and using that information to create excitement also works to our advantage – sharing the results and key statistics on the impact of our programme. We focus a lot of time and energy on stakeholder engagement, communication, marketing, and really distributing information about what our programme sets out to achieve and the impact of it thus far. We have recently also embarked on several new initiatives to get our brand out there.
“These pertain to doing business in South Africa. Because of the economic slowdown, most of the big companies, our customers, have come under pressure to not outsource their jobs and are cautious to spend. That’s a major factor. It significantly affects us so we are trying to open up new lines of revenue while still supporting our existing clients and showing them what new innovations we’ve come up with and other areas that might interest them into the future.”
According to Exxaro Resources CFO Riaan Koppeschaar, says in South Africa, it’s the integrity and credibility of the finance profession, what with all the corporate scandals we’ve had lately.
However, he believes that how technology is changing the world is a global factor.
“For finance, it’s being able to position itself to make sense of all of these new disruptors and technological developments,” Riaan said.
“In finance globally, there’s a lot of digitisation or automation taking place. So, the skillsets that are required of a finance professional will be different in the future. They’ll have to be more analytical to be able to make sense of complex sets of data. Collaboration will also be an important requirement in this new digital age; being able to collaborate with people across the organisation and outside the organisation, as well as working side by side with machines and robots!
“I think the finance profession these days is also faced with an ever-increasing regulatory environment. So, it’s being able to navigate these new and complex areas, distil information and ultimately be able to come up with relevant information that can be used for decision-making, on a forward-looking rather than on a reactive, backward-looking basis.”