Encouraging a competitive market

CREATING COMPETITION

Measures must be implemented to open up the sector, says the former head of ACCA Southern Africa Pat Semenya.

Small and medium practices (SMPs) face numerous barriers to growth in the audit space. If the industry is to encourage diversity and inclusion, reduce the monopoly of the Big Four firms and maximise employment opportunities, steps need to be taken to overcome these barriers. This, says Pat Semenya, who until recently headed up the Association of Chartered Certified Accountants (ACCA) for Southern Africa, is key to achieving genuine transformation within the sector. Under Pat’s leadership, ACCA saw a growth in membership, accredited universities and approved employers. “Right now, the reality is that while we talk a lot about SMPs in the audit sector, they can’t really hold space among the Big Four, especially when it comes to multinationals that appoint an auditor based on where they’re headquartered, and then expect subsidiaries around the world to use the same firm,” she says. Pat believes that as the digitisation of the profession (and of business in general) continues, small firms won’t have the capital available to compete with larger players, which are investing significantly in technologies like data analytics and proprietary AI systems. “Once again, the gap widens,” she says. “The question then becomes what to do about this.”

Opening up the market to smaller players

With the industry starting to feel the effects of Covid-19, Pat says there are many organisations that previously insisted on using Big Four audit firms who can no longer afford them, which is an opportunity SMPs need to pursue. She also says that given the jobcreation potential of SMPs, steps should be taken to prioritise their growth. “A lot of the time, clients want SMPs to demonstrate experience in their sector, but it’s hard to develop that experience,” she says. “Perhaps we need to return to the model of joint audits, where a Big Four firm is appointed for 60 or 70 percent of the audit, and an SMP for the remaining percentage. What that does is ensure that knowledge sharing and capacity building are taking place, and that SMPs are getting exposure in the market. Otherwise, we’re only going to have four big firms continuing to take space in this sector, and the economy cannot afford that.” She notes that it’s widely recognised that small businesses can be the lifeblood of South Africa’s economy and says that if we truly believe that to be the case, we – from regulators to industry bodies and business at large – should be doing more to prioritise SMP growth. “This ties into the desire to re-instil trust in the profession too,” she says. “We need to bring in diverse opinions for better balance, which means ensuring the sector allows new entrants.”

Balancing the roles of people and tech

While she believes there’s currently not a level playing field for SMPs when it comes to investing in technology, Pat points to successful up-and-coming SMPs that have developed out of the Big Four as examples of companies doing good work when it comes to creating jobs. She underscores that there is also room for job creation in the advisory services divisions within

“We need to bring in diverse opinions for better balance, which means ensuring the sector allows new entrants.”

these businesses, and this provides another growth avenue and an opportunity to complement work done by the Big Four, such as finance and tax consulting opportunities. Pat also cautions against relying too heavily on technology. “I still see accountants and finance people playing an important role in working together with data analytics software to actually improve and make decisions in organisations. There are some clearcut things a computer can do, but when it comes to decision-making, it’s important not to lose the human element. We’re seeing a lot of accountants who might otherwise have been in the auditing or pure accounting industries moving into consulting in other finance streams, where they’re doing things like interpreting data analysis and giving strategic advice.”

Transformation of the sector starts with education

While it’s all fair and well to paint a picture of the future of audit based on current market trends and technology forecasts, Pat says it’s important to bear in mind that this future is underpinned by education. “Currently, at high school level, we’re not seeing adequate capacity-building initiatives to ensure learners are digitally savvy or have the right skills to take up a finance qualification at tertiary education level,” she says. Lockdown showed that while some schools are equipped for a digital future, the vast majority of South African schools still lack basic technology infrastructure and connectivity. Pat believes fixing this is an urgent issue. “Beyond the fact that it shrinks the numbers that we can feed into the education system from a finance degree perspective, it also increases the economic and social divide,” she says. While children in schools that aren’t digitally equipped will still pass matric, their employability is likely to be compromised as digital skills are prioritised. Rolling out free or subsidised internet connectivity and providing technology infrastructure and hardware for learning purposes should be a priority for South Africa if the country wants to ensure its economy is competitive into the future, Pat stresses. Along with this, she says there needs to be better recognition of prior learning and less accreditation red tape, which will ensure that there are more learning and career paths available for the professionals of the future. l