FOCUS: TOP 35: THOUGHT LEADERSHIP

 

Accelerate Job Creation

If you are a young person between the ages of 15 and 24 in South Africa, you are more likely than not to find yourself without work − the latest Quarterly Labour Force Survey reports an unemployment rate of 56% for this group. Total unemployment stands at a level not seen in South Africa since 2003 and this jobs crisis is undeniably the most significant economic challenge of our times

As competitive pressures mount, consumer demand stagnates, and efficiencies are sought across industries – big business doesn’t seem to be the likely source for the job creation that we need. More often small, medium and micro-enterprises are held out as having the greatest potential for job creation – indeed, 90% of jobs created in South Africa are attributed to these SMMEs.

Within this context, there has been an emergence of small business incubators and accelerators funded by the private sector and government that have sought to address the lack of entrepreneurial skills, business development support, physical infrastructure and access to finance. In the United States, where there are more than 1 400 of these types of incubators and accelerators, questions have been raised regarding their success rates. Researchers at the Kaufmann Foundation studied 35 articles about their performance and found no significant difference between businesses that had been incubated and those that had not. Similarly, in South Africa, their results would appear to be mixed too.

What stands out is the overt focus on getting small businesses funded first – often quoted as their most significant challenge. Many of these programmes only close-out their programmes with networking and opportunity identification – rather than start with it.

Perhaps then the greatest challenge facing small businesses is getting business in the first place. It’s why I think we have the incubator and accelerator model directionally wrong in many cases and why so many entrepreneurs that go through these programmes still cite access to market as the number one obstacle to growth.

I think we need to start with the business end – and this is exactly where big business can get more involved in supporting the eco-system of small business development. It’s good for big business, too – a thriving ecosystem of small businesses, established on a foundation of stable off take agreements from larger businesses creates more choice for procurement managers, it increases competition, and it can drive product innovation. Most significantly, it also creates jobs.

A year ago at Distell, we launched the E+Scalator Programme with a focus to support small empowered enterprises to do more business with us. We inverted the typical incubator and accelerator models – starting with what we can provide off take for, and analysing the gap between potential enterprises and suppliers to see where specific rather than generalised support was required. Where there is a gap, we provide candidate specific business development support and access to zero-interest funding for high-impact potential suppliers.

We aligned the programme to our procurement shared services capability, leveraging this technology platform to discover and engage more empowered suppliers, quicker than ever before. We also challenged and redesigned our internal processes to make it simpler and easier to do business with us. And it works – we’re doing business with more than 300 new EMEs and QSEs this year.

Our focus on opportunity creation also responds to the concerning reversal in the perception of good opportunities amongst entrepreneurs. Between 2001 and 2015 there was constant year-on-year increase in perceived good opportunities by the Global Entrepreneurship Monitor report on Small Business in South Africa. In 2016, this reversed dramatically – taking us back to 2009 levels. Similarly, entrepreneurship intentions dropped by a third – which is particularly concerning given the regional average is four times higher than South Africa.

So, if you believe that we are all better off when big business pulls up another chair at the table for small business, and that this is also probably our biggest opportunity for job creation, it is interesting to try and put a figure to this. My back-of-an-envelope calculation starts with looking at the R330 billion NPAT reported by JSE-listed companies that made profit in the last year. Per the B-BBEE codes, 3% were allocated to enterprise and supplier development, which gives a potential pool of around R10 billion; or R14 billion if those amounts are applied as interest-free loans rather than grants. The next step requires one to take a view of the cost to create a job – a difficult estimate by any means and very dependent on the industry type and capital intensity. Jobs Fund has shown this can be done on a match-funded basis for around R30 000 per job; other reported figures in the SME space suggest

R50 000 – R60 000 per job is a more realistic figure.

At R50 000 per job, and assuming that the total enterprise and supplier development funding can be loaned and repaid against three-year investment cases, that works out at close to a million jobs created over a ten year period. I’ll be the first to acknowledge that there are a lot of assumptions in there – but hopefully the assumption that I can challenge is that it is always the access to finance that should come first: indeed it is the access to market and how we go about creating it that really matters most if we want to create more jobs.

Author: James Wilkinson (33), Group General Manager: Business Improvement at Distell Group Limited

 

Sustainable socio-economic solutions for SMMEs in South Africa

Research has revealed that there is a 70%–80% failure rate in small, medium and micro-sized enterprises (SMMEs) in South Africa. This high attrition rate seems contradictory to the achievability of the target set out by South Africa’s National Development Plan in 2010, however. This target is for SMMEs to contribute 90% of the 11 million jobs to be created by 2030

The sustainability of small businesses has been hampered by a myriad of challenges which vary from restricted access to capital, lack of collateral for securing funding, lack of know-how, and insufficient financial literacy to a lack of access to markets. Despite the initiatives and support programmes developed by the South African government to tackle these challenges, the survival rates of SMMEs remain depressed, which is indicative of a bigger underlying problem that is mitigating against the success of small businesses.

Fortifying the status quo

In order to achieve the envisioned success, a deeper delve is required into how to bridge the apparent gap towards a unified nation, otherwise known as emotional settlement. Tackling this challenge requires innovative thinking and a targeted three-way partnership between government, large corporations and small business towards sustainable industry-specific solutions. To some extent, this initiative has been performed through programmes and tools whose impact is aimed at addressing ground-level challenges hindering the development of broad-based black economic empowerment (B-BBEE) beneficiaries.

Public-private partnerships

In South Africa, formalised industry-specific empowerment development programmes have been set up. These are centred on the ideology of creating a sustainable presence of previously disadvantaged individuals. The programmes link high-potential previously disadvantaged individuals to experienced owner-managed businesses who have a proven track record and who are willing to diversify their personal investments while retaining operational control.

The objective of the programmes is to utilise small businesses as a training ground for the development of entrepreneurs through formal education, as well as practical training through mentorship from established business owners. A further aim of the programme is to create opportunities for successful candidates to acquire equity stakes in participating entities. The core of the programmes is to broaden, accelerate and retain transformation through targeted human capital development.

In addition to spurring entrepreneurship, the programmes will ensure improved succession planning through structured personal development programmes within the participating companies. The programmes also assist in facilitating the transfer of critical skills and competencies from existing successful business owners through structured mentorship and coaching. True skills development has evaded many of South Africa’s industries and pairing successful entrepreneurs with future aspirants in a hands-on approach portends to deliver more efficacy and more lasting results.

This model has been employed by investment management companies in South Africa such as the Musa Group’s Retail Empowerment Development Programme and Emerging Farmers Programme, which is focused on identifying, training, and establishing qualified black entrepreneurs and emerging farmers. Awethu Project, through their SME Equity Fund, target the transformation of the manufacturing industry.

Shared value

A classic example of solving business challenges through a hands-on approach is that of Nespresso, a division of Nescafé. Nespresso tackled their challenge of a lack of a constant, reliable supply of premium coffee through revolutionising their procurement cycle. The division’s coffee suppliers are predominantly small farmers in Africa and South America. In order to fortify the productivity and quality of the coffee supply, Nespresso supported its suppliers through securing quality inputs, in-the-field support and guaranteeing bank loans. This achieved higher yields per hectare, a better production quality and higher growers’ incomes. Nestlé also set up local facilities, which allowed them to purchase premium coffee beans directly from the growers, increasing the returns of both parties. Bringing this example closer to home, large corporates could consider the use of government grants and initiatives to support their supply chain.

The fundamental growth of our people, our country and our continent invariably depends on our ability to recognise and pursue opportunities that solve business challenges while harnessing socioeconomic advancement. A challenge is therefore being posed to business to tackle the social and economic realities prevalent in South Africa through creative solutions, ultimately driving greater growth in our economy and ameliorating the legacy effects of our national history.

Author: Janice Sambaza (34), Senior Associate – Industrials at Musa Group

 

The ethical time is now!

We are living in a time when many of our so-called leaders are lacking the leadership skills required for a thriving economy, both at a public and private level. Damian Judge explains why the time for CAs(SA) to fulfil their leadership roles is now

As part of the SAICA training programme, young aspiring CAs(SA) should showcase a skillset of professional conduct, acting ethically, and showing leadership. Skills that far too many leaders, both in South Africa and globally, are lacking – and that are continuously highlighted in the mainstream media and trending on social media such as Twitter.

A qualified professional who has been specifically trained in development leadership and management skills is best placed to take up the challenge of leadership in our country, and should be striving to do so. I am confident that a person with these skills would restore confidence in the leadership of any organisation or country.

The level of corruption being exposed across all facets of the public and private sectors highlights the paramount need to address the lack of professionalism and ethics being shown by individuals in leadership and management positions, both in government and private organisations.

It is time for those professionals, who have been trained in ethical behaviour and who claim to uphold and represent a professional standard, to start addressing our current culture of bad leadership, one that lacks basic honesty.

This is not to say CAs(SA) are immune to unethical or corrupt behaviour, but we need to be reminded that we have a responsibility to our industry. Every single registered or aspiring CA(SA) needs to strive to act accordingly, setting a high standard of professionalism together with integrity, both of which have become synonymous with the CA(SA) brand.

Our first act of leadership is with ourselves, ensuring we live by the professional standards that have been set for all of us.

As part of the Top 35-Under-35 process we were asked the question, ‘What does it mean for you to be a CA (SA)?’ In answering that question, I can’t help but draw from some profound words of wisdom from a rather random source, being the Spiderman comics: ‘With great power, there comes great responsibility.’

As CAs(SA) we are trained to occupy positions of power within organisations, but we must never forget the responsibility those positions hold. We must not only uphold the standards set by our Code of Professional Conduct at all times but should also represent the principles within the organisation.

If we are to truly win the fight against corruption in South Africa, we require the right ethical individuals in the right positions.

The time is now for the CAs(SA) of South Africa and those who are to follow to stand up to the accepted culture of unethical and corrupt leadership and speak out on making a change that is paramount to our future.

The time is now – will you accept the challenge?

Author: Damian Judge (34), Financial Director at Kaymac Pty Ltd t/a Kaytech

 

Why NPOs need chartered accountants

The non-profit sector plays a critical role in South Africa, supporting the South African government in delivering on its constitutional mandate. For this reason, the sector traditionally attracts highly skilled technical and programme staff such as medical doctors and researchers but tends to be overlooked by finance professionals in the job market

The fact that finance professionals in the job market sometimes overlook the non-profit sector when job huntingis often due to misconceptions about the working environment a non-profit organisation (NPO) may offer and the compensation available. More often than not NPOs are seen as small organisations with minor finance functions that will not offer the same career prospects and growth avenues as corporate firms.

In reality, the non-profit sector can provide a range of challenging career opportunities to qualified financial professionals. In particular, it creates an excellent platform for CAs(SA) to bring their broad set of skills to the table while investing in civil society.

Managing complex funding profiles

A significant number of NPOs in South Africa are funded by multiple donors – many of them foreign. This results in highly complex compliance, reporting and audit requirements. In an increasingly stringent funding environment, it is more important than ever for NPOs to ensure financial accountability and transparency. That being said, investing in non-programme-related support systems is often regarded as a luxury and responding to the complexities of a multinational, multi-funder environment can therefore prove challenging. CA(SA) training provides a comprehensive understanding of audit and compliance principles that can be applied in any context. Using this knowledge, CAs(SA) can navigate multifaceted information sets and implement simplified solutions to allow accurate and efficient reporting.

Ensuring efficiencies

Funders are not only varied; funds are fewer. With economic constraints leading to global cuts in donations, NPOs reliant on donor funding need to find innovative ways to raise and sustain funding. The strong analytical skills and business acumen of a CA(SA) can provide valuable insights into possible cost-saving measures and ways to streamline activities to ensure maximum output for funds invested.

A network to call on

Another benefit a CA(SA) can bring to an NPO is the vast network of peers and business contacts built up through studies and training. This immediate access to professionals in varying roles and industries can be invaluable to NPOs, which often operate in a resource-constrained environment.

NPOs operate in a dynamic environment that is constantly changing. They must be able to keep up and to respond quickly and efficiently to unexpected obstacles.

It can be challenging to work in an environment that is mission-driven, with the goal posts constantly moving out. But what I enjoy most about my job is being able to interact with highly driven individuals from different career paths that all support the same cause.

Budget meetings and management reports take on a different meaning when you know that each number signifies a tangible impact on someone’s life.

Author: Surene Beagly (32), Management Accountant at Kheth’Impilo Aids Free Living

 

Become a change agent in the public sector

Kuben Pillay believes all CAs(SA) have the responsibility to make the greatest impact in the path they choose to follow. Deciding to positively impact society through his role at TB/HIV Care rather than pursuing a career in the corporate world, has been uplifting and rewarding for him

The concept of responsibility comes across very strongly in the path to becoming and practising as a chartered accountant. We are constantly faced with complex and far-reaching decisions, but one thing remains constant – responsibility. South Africa continues to face great socio-economic imbalances. There is a need to provide access to basic needs such as education, housing, water, electricity and health, to name a few. There is a large amount of commitment and resources from a variety of sources within the public sector to try and correct some of these.

A chilling statistic is that there are over 2000 new cases of young women (aged 15–24) being infected with HIV every week! This is a basic indicator that quality interventions are needed. At the launch of the National Strategic Plan (2017–2022), Deputy President Cyril Ramaphosa said: ‘This is a pivotal moment in our fight against the epidemics because, despite our successes, we need to significantly expand and accelerate our efforts if we are to make meaningful progress. We still have a large number of new HIV infections.’ These statistics and statements motivate me to fulfil my responsibility to impact.

My position as CFO of TB/HIV Care allows me the privilege to use my skills as a CA(SA) to build stakeholder confidence in our support functions (finance, IT, HR, grants management and operations). As a result TB/HIV Care is now one of the biggest organisations in South Africa that is funded by the US Government’s President’s Emergency Plan for AIDS Relief (PEPFAR).

TB/HIV Care operates at the highest level with donor funding in South Africa and the impact on the health sector is significant. The annual budget has grown from R160 million to over R600 million per annum and in the last year the staff complement has increased from under 1 000 to more than 1 600.

TB/HIV Care as a prime recipient now manages 12 sub-partners with a budget of over R300 million per annum. Our programmes reach a variety of populations and the interventions fulfil some of the basic health needs of South Africans.

As a leader of our support functions, it is my responsibility to ensure that our reach is extended as efficiently and far as possible while maintaining the highest levels of accountability.

My training and mentoring at Deloitte as a trainee accountant established the building blocks that laid the foundation for me to create maximum impact along my chosen path.   The path of a CA(SA) is tough, but the skills learned are invaluable.

Our challenge is to convert those skills and apply them to fulfil our responsibility to impact. I am proud to say that I work with a highly motivated and dedicated team at TB/HIV Care. As part of the support units, I do not see the direct impact at ground level, but the efforts of the support staff are vital to reaching more people.

I keep that at the centre of what I do and the drive to see that impact motivates me daily.

The public sector demands the highest level of accountability. Funding must be used for the purpose intended.

The role of CAs(SA) in the public sector is critical in order to increase the level of accounting, reporting, systems and cash management. CAs)SA are drivers of systemic change and efficiency optimisation.

The impact of these efforts directly benefits service delivery users and within the public sector, this could mean life-saving interventions.

As a CA(SA) working in the public sector, I am daily challenged intellectually, technically and emotionally. I learn something new and I am reminded of my responsibility to make an impact every day.

Being involved in the donor-funded environment has opened my eyes to the significant investment in development. Quality use of funds and quality interventions need quality support.

This is the support that CAs(SA) can provide. I have been able to start fulfilling my responsibility as a CA(SA) and it is fulfilling that my impact can be felt in society.

Author: Kubendren Pillay (32), CFO at TB/HIV Care Association

 

Ethical courage

As CAs(SA) and leaders in business we don’t only influence the bottom line but the lives of those people in our organisation, communities and the country for which we are responsible, and therefore we need to ensure we drive with ethical values

Growing up, we were taught the basics of knowing right from wrong by our elders. Through our religious beliefs and culture, we had these codes of ethics and discipline further instilled into us. It became easier and second nature to distinguish, through feelings, right from wrong. Simply put, ‘if something went against our beliefs – it was considered wrong’. It took great courage to stand up for what you believed in, and sometimes to even question the principles set, especially in a world where everyone’s beliefs were shaped by their experiences and often how their peers viewed the world.

The influential leaders whom have fought for what they believed in (Nelson Mandela, Dr Martin Luther King Jr, Mahatma Gandhi) gave the world a sense of purpose. They held the moral high ground to stand up against what was wrong and through courage and determination created togetherness (ubuntu). The greatest lessons of these leaders prove – by having the courage to pursue on moral beliefs while weathering all circumstances, you would create a legacy for others to follow.

Ethical courage is standing up beyond fear for what is right. Ethical choices are easy to make when it is a choice between right and wrong, but a difficult one when we have to choose between two rights. This ethical dilemma, if left unguided, can cause different views of ethics in an organisation. By defining (through examples) what is acceptable ethical behaviour and what is not acceptable ethical behaviours, would set the tone of ethics for others to follow.

As CAs(SA) and leaders in business we don’t only influence the bottom line but the lives of those people in our organisation, communities and the country for which we are responsible, and therefore we need to ensure we drive with ethical values. We have a social responsibility to build organisations that not only stand the test of time, but also deal ethically in the world.

Living with high ethical standards is tough in a country where fellow leaders are seen as lacking integrity. We should not be influenced by these peers and instead remember what our beliefs are rooted in – to be a responsible corporate citizen. By having the ethical courage to stick to our core, we will be able to create a movement that will set new high moral standards for our society and renew that sense of purpose that was left behind.

As the leaders, the legacy we leave behind should encourage others to have ethical courage to stand up against their fears. This would then paint a great future for our children and South Africa.

‘I learned that courage was not the absence of fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear,’ said Nelson Mandela.

Author: Logamal Ramiah (33), CFO at Netsurit

 

Growing SMEs into globally competitive businesses

Jacobus de Nysschen says his passion for growing SMEs into globally competitive businesses stems from his unwavering passion to do what is best for his people and not just himself. And anything that can be done to stimulate SME growth is not only altruistic but in for our own best interests

The National Development Plan expects that 90% of new jobs in the year 2030 will be created by SMEs. For South Africa to overcome poverty and reduce the proportion of people who are dependent on welfare payments from the state, the SME sector would have to grow significantly and be globally competitive.

The number of people employed grows rapidly with sales turnover and with the length of time an SME survives. It is not sufficient to only stimulate SME creation to create jobs – the stimulation of existing SMEs to grow may be more beneficial to job creation. The larger the SME, the more likely it is to employ significant numbers of people.

This passion is the driving force behind Creative CFO. We are largely driven by the mantra of ‘optimise for growth, not profit’ and it is about helping as many businesses as we can without losing quality of service. Every new team member that joins Creative CFO symbolises another milestone because of the value they bring and the input of fresh ideas, opinions and energy.

We believe that innovative solutions are an interconnected web of small problems solved brilliantly. By walking through all aspects of the financial processes in a business and solving problems along the way, we have developed a full service solution that stimulates SME growth.

Some of the biggest hurdles SMEs have to overcome is finding customers, compliance with legislation, tackling business issues ranging from market adoption and product development, hiring and obtaining financing.

A lack of financial planning and control is at the heart of their problems. SMEs need to have basic financial acumen: whether through training programmes or a business advisor, this capability is essential to assist them in managing their financial risk of failure.

SMEs need strong financial access and technical support to scale into globally competitive businesses. We unlock value by creating a platform for business owners to manage and focus their creativity, energy and financial resources. We identify key action items to get the business to where it needs to be and actively encourage those SMEs who have survived the first few years to grow by implementing improved planning and structuring and creating more efficient ways of introducing risk capital to SMEs that show promise.

SMEs have a tangible need for a complete financial picture in an easy-to-understand format. This holistic view of the entire organisation will enable them to embark on a rapid growth trajectory. By combining information technology and financial accounting, we were able to bridge the gap between the system, the accounting and the SME owner and provide the clarity that has previously eluded them.

The main reasons for SME failure are cash flow related. Managing cash flow is difficult – it involves knowing when to expand and take on risk such as an extra staff member. You’ve got to find great people to help grow the business and deliver on the offering. Once you know you have a good product or service, if you find someone good, get them on board. We often suggest building up two months’ operational cash flow in the bank. It may sound conservative, but it’s a good goal to aim for and will keep your financial stress down so you can focus on growth.

A difficult task is creating the right expectations on value, which is a function of quality and price. It’s easy to get busy without being paid. Ensuring that you’re constantly in line with customer expectations and delivering exceptional value at a reasonable price is an ongoing challenge. You have to innovate in your processes and the technologies you use, and find efficiencies wherever possible.

All these difficulties may seem insurmountable, but that’s what is at the heart of building a good business. The more of these problems you solve, the more stable your business becomes and the more valuable your offering is.

Author: Jacobus de Nysschen (32), Director and Co-owner of Creative CFO

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