CFO Magazine South Africa - 1st Issue - 2017 by CFO South Africa

MAG AZINE FOR FINANCE PROFESSIONALS IN SOUTH AFRICA 1 • 2017 CFO.CO.ZA

N26’s Valentin Stalf How to build a bank from scratch Narriman Taliep CFO V&A Waterfront IT savvy and boardroom skills Sean Berrington CFO Group IT Standard Bank Billion dollar finance boss

Diary of a CFO Christiaan Engelbrecht’s first days at Ster-Kinekor Finance Indaba Africa 2017 12 and 13 October Sandton Convention Centre

Johan Geel CFO AFGRI Understanding Africa

DUE DILIGENCE! Experts + CFOs Sibanye and Telkom talk deals and don’ts

Adventures of the new

Silindile Kubheka National Treasury CFO

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Also trading as Stanbic Bank

12 & 13 October 2017

Sandton Convention Centre Finance Indaba Africa is the biggest annual expo and conference for finance professionals. It brings together peers, technology suppliers, platforms, banks, tools, specialists, CFOs and thought leaders. 5 000 visitors tap

into a wealth of resources, knowhow and inspiration. Gain unparalleled insights. Cut costs dramatically, send sales & productivity through the roof and boost your companyâ&#x20AC;&#x2122;s profits.

Exhibit at the Finance Indaba Africa 2017. Visit www.finance-indaba.co.za to ensure your exhibition space and reach more than 5 000 finance professionals, CFOs and FDs.

BRING YOUR TEAM

Finance Indaba: CFO’s best talent strategy Which CFO would say no to a finance team that is rejuvenated, full of new ideas and better connected than ever before - for FREE?

inance Indaba Africa is the only annual event on the continent where thousands of registered accountants and other finance professionals gather under roof for two days to advance their knowledge, networks and careers. CAs and members of other professional bodies also qualify for up to 14 CPD hours, but that is small change compared to the massive boost the event gives to the work finance teams produce. “At a time when CFOs face huge volatility and change, one of the most critical things to consider is how your talent strategy and the insights you’re offering your team will help your business survive,” says Graham Fehrsen, MD of CFO South Africa, which organises the annual finance extravaganza. “Given the incredible range of opportunities to learn among peers and industry leaders, CFOs would be crazy not to send their teams to Finance Indaba Africa 2017.” With nearly 5,000 visitors, more than 100 learning sessions and around 70 exhibitors and partners, the inaugural Finance Indaba Africa in October 2016 was an enormous success - resulting

in positive coverage in all South Africa’s major newspapers, radio and television. The momentum is such that CFO South Africa has secured the Sandton Convention Centre until 2020, in order to be able to plan for bigger and better events each year. Feedback received last year was that, for accountants and finance teams, the plethora of unparalleled insights into finance’s service providers and thought leaders was at times overwhelming and always exhilarating. Attendants praised the networking opportunities, the high quality of speakers, with special mention of the thought-provoking contributions by the legendary Prof Mervyn King and entrepreneurial whirlwind Vusi Thembekwayo. Planning for the 2017 event on 12 and 13 October is well underway, with a number of top quality speakers soon to be revealed, alongside a string of partners and exhibitors that will be announced over the course of the next few months. Standard Bank will once again feature as diamond partner at the Finance Indaba Africa, while other confirmed exhibitors include CIMA, ACCA, Purple Group, AdvanceNet, 4Most, 360T and This Is Me. l

“CFOs would be crazy not to send their teams to Finance Indaba Africa 2017.”

Vusi Thembekwayo

5 things you need to know 1. 12 & 13 October 2017 at the Sandton Convention Centre 2. Free of charge for finance professionals 3. Twitter hashtag #findaba17 4. Finance-indaba.co.za to exhibit or register 5. Email Sarah Chalmers at schalmers@cfo.co.za for team registrations

CFO MAGAZINE • CFO.CO.ZA

TABLE OF CONTENTS Due diligence

Sean Berrington

Big deal! A thorough, smart and stealthy due diligence process is among the top ingredients for successful mergers and acquisitions. We speak to dealmakers and finance executives from Sibanye Gold and Telkom about the homework a growth-hungry company needs to do. How should the CFO get involved? What does blockchain have to do with it?

Since mid-2016, Sean Berrington is the finance boss of a “billion dollar IT organisation”. Add to this his intimate experience with agile ways of working, and the CFO for Group IT at Standard Bank might just be the ideal person to talk to about the crossroads of threats and opportunities that technology and finance bring to banks and finance professionals.

37 Silindile Kubheka

“Can you please give me the opportunity to finish what I was saying?” A stunned splattering of men gasp, nod sheepishly and murmur ‘of course’. The very moment she asks for silence and respect from this room full of high-powered males is the making of the new Silindile Kubheka, National Treasury CFO.

CFO South Africa is the organisation for finance executives in South Africa. Our goal is to connect finance professionals online and off in order to share knowledge, exchange interests and open up business opportunities. CFO South Africa CFO Enterprises PTY ltd 33 Impala Road Chislehurston 2196

Johannesburg South Africa +27 (0)11 083 7515 CFO.co.za

© 2017 CFO Enterprises PTY ltd. All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other non-commercial uses permitted by copyright law.

CFO MAGAZINE • CFO.CO.ZA

MANAGING DIRECTOR Graham Fehrsen gfehrsen@cfo.co.za +27 (0)79 898 0227

SENIOR EDITORS Toni Muir tmuir@cfo.co.za +27 (0)82 908 8687

HEAD OF OPERATIONS Sarah Chalmers schalmers@cfo.co.za +27 (0)82 570 9482

Ebrahim Moolla emoolla@cfo.co.za +27 (0)79 506 4840

MARKETING MANAGER Judith Kamffer jkamffer@cfo.co.za +27 (0)82 859 1245 EDITOR IN CHIEF Joël Roerig jroerig@cfo.co.za +27 (0)76 371 2856

DESIGN Cor Lesterhuis PHOTOGRAPHY Patrick Furter OTHER CONTRIBUTORS Christiaan Engelbrecht, Kate Ferreira, Keith

Coats, Sungula Nkabinde, Tiisetso Tlelima PRINTING Novus Holdings coenraad.pretorius@ novus.holdings +27 (0)11 201 3460

TABLE OF CONTENTS Due diligence 23 Subtle and stealthy: Charl Keyter, CFO Sibanye Gold 26 Understand what you buy: Karin Hodson, Deloitte 28 Planning ensures success: Arie Maree, ansarada 30 Hidden gems: Andrew Balnaves, Standard Bank 32 CFO as connector: Charles Douglas, Bowmans

34 Use your best people: Deon Fredericks, CFO Telkom

Public sector 44 Public sector February event

46 Ayanda Mafuleka, CFO NCR: walk the talk

Banking 54 Adapt or die: futurist Keith Coats 56 Building a bank from scratch: Valentin Stalf, N26 62 Six questions for Nico Botha, CFO Citibank SA

Technology 64 IT savvy: Narriman Taliep, CFO V&A Waterfront 67 Cybercrime: CFO Summit February 70 Bricks and bytes: Jason Wright, CFO Cape Union Mart

Growth 74 CHRO South Africa launched 76 Diary of a CFO: Christiaan Engelbrecht joins Ster-Kinekor 79 Understanding Africa: Johan Geel, CFO AFGRI

And further 5 Finance Indaba Africa: bring your team 8 From the Editor in Chief: banking on change 10 From the MD: stay curious

12 CFO Awards 2017: finance celebration 13 Deon Viljoen joins Discovery 16 On the move: new CFO appointments 83 Calendar CFO South Africa events 2017 CFO MAGAZINE â&#x20AC;¢ CFO.CO.ZA

FROM THE EDITOR IN CHIEF

Banking on change

hen we spoke to AFGRI CFO Johan Geel about working smartly in the rest of Africa (page 79), the agriculture business had not yet announced its acquisition of the South African portion of Bank of Athens − and with that a banking licence. When insurance giant Discovery headhunted CFO of the Year 2015 Deon Viljoen from Alexander Forbes (page 13), they did so because he is a great finance executive but also because he has intimate knowledge of a process that he will be leading - securing a banking licence. Relationships, trust and knowing what to do with a whole heap of data are the factors determining success and sustainability of businesses today. Business plans and industry boundaries matter much less, something venture capitalists have known for a while − and something shareholders cannot discover fast enough. So why not start a bank? “Money is not the problem if you have the right team that executes well,” says Valentin Stalf, another person who started a bank (page 56), German banking sensation N26. One of the highlights of this magazine is the way Sean Berrington, CFO Group IT at Standard Bank, explores the ways agility and change are coming to town at a bank with a head start and a legacy of over a century (page 50). Citibank’s Nico Botha talks about change after the financial crisis and reveals what he has learnt by changing lanes from Johannesburg to London and back (page 62). A recurring theme in these articles is the way technology has become a com-

CFO MAGAZINE • CFO.CO.ZA

petitive advantage, rather than a tool or liability. We also talk about this with two Capetonian CFOs, Narriman Taliep of V&A Waterfront (page 64) and Jason Wright of Cape Union Mart (page 70), who are both transforming their businesses rapidly. With cybercriminals specifically targeting finance teams, it might also be wise to take heed of the tips from ethical hacker Sean Howell (page 67) to prevent disaster. A technological innovation that is impacting many CFOs is the virtual deal room, which is abling smoother, faster and more accurate mergers and acquisitions, something ansarada's MD Arie Maree talks about on page 28. That interview is part of a series that starts on page 20, in which our senior editor Toni Muir looks into the due diligence process with a group of eminent experts and the CFOs of Sibanye Gold (page 23) and Telkom (page 34), who know more about due diligence than most of the readers of this magazine will ever do. Just as for businesses, there is no better way to grow as a person and a professional than by banking on change. That is evident from the diary Christiaan Engelbrecht kept during his first 90 days as Ster-Kinekor CFO (page 76), from Ayanda Mafuleka’s drive to get a clean audit for the National Credit Regulator (page 46) and from our cover story with National Treasury CFO Silindile Kubheka (page 37). Her love for travel, literature and continuous improvement reveals a curious and nimble mind, the kind that defines the best finance leaders. Joël Roerig jroerig@cfo.co.za +27 (0)76 3712856

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FROM THE MD

Stay curious to be relevant in 2020

was recently reminded that artificial intelligence (AI) already has the ability to read, write, present and take on a physical presence, all with alarming intelligent and coherent patterns. By 2020, I imagine, a bot might write this piece, moderate a panel at a CFO Summit and deliver outstanding insights to you, the finance professional, across multiple platforms. If this bot can build trusted relationships with people and creatively collaborate, I am definitely out of a job. And so are you.

Accelerate and simplify While this scenario seems unlikely for now, remaining relevant in your daily work is becoming increasingly difficult, given what technology is doing to accelerate and simplify everyday work. Finance executives have certainly felt this acceleration. Technology has helped finance teams to be far more of a business partner than ever before and has also made finance more accessible to other professions and divisions across the business. There is also real movement towards AI finance solutions. In 2016 a startup called SMACC launched a self learning accounting system for SMEs. Not long ago, global player Deloitte announced a partnership with Canadian AI platform Kira Systems to drive its offering into the future.

Magic ingredient The relevance in your role is to some extent 10

CFO MAGAZINE â&#x20AC;˘ CFO.CO.ZA

about about keeping up with technology itself, but I think it will be much more about how you engage with and use the technology. There is little choice but to be committed to the speed of change around you, but the one quality that I am banking on for my personal relevance is curiosity. Curiosity, I think, is the magic ingredient to help all of us tackle the rapidly changing and increasingly technological orientation of our businesses and jobs. To support you in facing this immense challenge, CFO South Africa is hosting a unique CFO Summit series for finance leaders. We are extending this learning and discussion through our digital platforms, this magazine and the Finance Indaba Africa, for thousands of finance professionals. And we will again shine a light on success and excellence at the CFO Awards on 11 May. Our purpose remains to deliver finance professionals learning, network and career opportunities and insights. We look forward to offering the finance community the finest learning and insights possible and welcome your participation and feedback. We hope 2017 is an exceptional year for you and your curiosity.

Graham Fehrsen gfehrsen@cfo.co.za +27 (0)79 8980227

Visit the CFO Awards Summer Place Hyde Park on May 11th 2017. Dumisani Dlamini (CFO National Arts Council of SA) receives the 2016 Public Sector CFO of the Year Award from KPMG Partner Edson Magondo

CFO of the Year

Public CFO of the Year

Young CFO of the Year

Strategy Execution

Transformation & Empowerment

High Performance Team

Compliance & Governance

Finance & Technology

Moving into Africa

Finance Transformation

Meet 300 CFOs, share knowledge and boost business On 11th May 2017 the annual CFO Awards will be held at the beautiful Summer Place in Johannesburg. This prestigious event recognises CFOs of listed companies, large corporations, parastatals and government institutions and awards them for outstanding performance and leadership.

CFO South Africa invites you to buy a table at the CFO Awards, attend the CFO Conference, join the panel of judges and become our partner. Seats are limited, so book now to avoid disappointment. For more information visit CFOAwards.co.za or contact Graham Fehrsen at gfehrsen@cfo.co.za.

Visit CFOAwards.co.za

CFO AWARDS Nominations for CFO Awards 2018 now open

The ultimate celebration of finance

The best of finance gather at the CFO Awards: a photo from 2016, with four CA siblings and South Africa’s first black CA and his wife . From left to right: Christine Mazzocco (Deloitte), Hazel Nkuhlu, Mark Kathan (CFO AECI), Prof Wiseman Nkuhlu, Christine Ramon (CFO AngloGold Ashanti) and Veran Kathan (CFO Vodacom Business).

ho are the best finance executives of the moment? Which CFO has been a catalyst for spectacular results, guided an organisation through testing times or has made a crucial difference in any other way? CFO South Africa will again be celebrating the crucial role of CFOs and their finance teams at the annual CFO Awards on 11 May 2017. Meanwhile, nominations for next year’s CFO Awards have already opened.

CFO MAGAZINE • CFO.CO.ZA

With a panel of judges consisting exclusively of business leaders, accounting stalwarts and award-winning CFOs, votes are based on thorough interviews with the candidates and a dossier that also includes performance indicators. New judges on the panel this year are Prof Wiseman Nkuhlu, Chancellor of the University of Pretoria, and retired CFOs Simon Ridley (Standard Bank) and Leon Crouse (Remgro), both of whom received a Lifetime Achievement Award in 2016. l

Nominees CFO Awards 2017 This year, 26 CFOs have been shortlisted as nominees for the CFO Awards. If your favourite finance executive is missing, please nominate her or him for the longlist of the CFO Awards 2018 by sending an email to Sarah Chalmers at schalmers@ cfo.co.za. Visit CFOAwards. co.za for more information. • Charl Keyter Sibanye Gold • Chris Patricios Primedia • Debbie Ransby Takeda Pharmaceuticals • Elton Bosch Clover • Garry Pita Transnet • Imraan Soomra Oceana Group • Innocentia Pule National Empowerment Fund • Johan Geel AFGRI • Mark Godfrey Spar • Lucas Verwey Distell • Lushen Pather Sasfin • Mary Vilakazi MMI Holdings • Nichola Dewar PostBank • Nishant Saxena Cipla • Nishlan Samujh Investec • Nopasika Lila Eskom Pension and Provident Fund • Paul Marten Microsoft • Pieter de Wit Afrimat • Rajesh Mahabeer SANParks • Ramasela Ganda Ekhurhuleni Metropolitan Municipality • Reggie Boqo City of Johannesburg • Robert Katz Peregine Holdings Ltd • Till Streichert Vodacom • Umar Banda City of Tshwane • Wayne Koonin Omnia Holdings • Yvonne Chetty Department of Energy

MOVERS CFO of the Year 2015 leaves Alexander Forbes in most notable CFO move of the year

Deon Viljoen joins Discovery CFO of the Year 2015 Deon Viljoen will be leaving Alexander Forbes to become the new CFO of Discovery from 1 May 2017. The much-awaited appointment at one of South Africa’s flagship financial services companies comes after outgoing CFO Richard Farber stepped down to relocate to Australia.

eon is extremely passionate about the role of the CFO and has been a member of the panel of judges for the CFO Awards since 2016. He made a name for himself when he guided Alexander Forbes, the country’s largest retirement fund administrator, through a delisting and a relisting in a period of just seven years. He often mentions “finding sustainable solutions that accommodate all stakeholders” as his recipe for success. Discovery took a long time to appoint its new finance head, partly due to the fact that Deon was hesitant to respond to the initial overtures from headhunters. The company was looking for a CFO with experience at a large listed entity, preferably in the financial services sector, in particular in insurance and banking, given the retail banking aspirations of the group, which is best known for its health insurance and Vitality brands.

During his tenure at PwC, Deon has been involved in banking license applications. In an internal memo to the staff, Discovery CEO Adrian Gore mentioned the company has to be “non-negotiable about securing the top person for every role” to “realise our exciting expansion objectives”. He specifically mentioned Deon’s stature as one of the country’s best CFOs, having been named CFO of the Year 2015.

Market cap Despite the opportunity to join a company with a ten times larger market cap, Deon is understood to have struggled with the decision to move, having previously declined many attractive offers from other prominent

businesses. In the end, the opportunity to help steer a company like Discovery proved too tempting to dismiss. Early last year, Deon was talked about as one of the people in line to succeed Edward Kieswetter as Alexander Forbes CEO, after the latter’s surprise-resignation, but after acting as CEO for six months, Deon stepped back into his CFO role when financial services veteran Andrew Darfoor was appointed as executive boss in August. After Deon’s departure, financial director at Alexander Forbes Group Services Bruce Bydawell will take over as acting CFO. During his tenure at Alexander Forbes, Deon worked with four

Discovery CEO Adrian Gore specifically mentioned Deon’s stature as one of the country’s best CFOs, having been named CFO of the Year 2015. CFO MAGAZINE • CFO.CO.ZA

MOVERS

different CEOs. Besides the delisting and listing, he also overhauled the entire structure of the business and sold one of its biggest businesses, Guardrisk, to an international buyer. He was rewarded with the prestigious CFO of the Year Award in 2015, the same year that barnstorming Discovery Health CFO Brett Tromp nabbed two awards (Young CFO of the Year Award and the High Performance Team Award). Deon worked for the Alexander Forbes Group since 2003, first as finance director of Investment Solutions and since 2007 as CFO for

the group. Before that, he was a partner and director at PwC Johannesburg, focusing on assurance and business advisory services. He specialised in banking and other financial services clients, both in PwC’s Johannesburg and London offices. Not shying away from broader roles, Deon also served on industry bodies such as the SAICA Banking Industry Group. For years, he also chaired SAICA’s Investment Management and the Collective Investment Schemes Industry Groups. Deon studied at the Rand Afrikaans University (now University of Johannesburg) and qualified as a CA in 1987. l

Recognising the best Deon Viljoen is just one example of a CFO Awards winner whose career has skyrocketed. What happened to other previous winners? • Anoj Singh won two CFO Awards in both 2014 and 2015 for his strategic and tranformative work at Transnet. Despite the controversy around his CEO, Brian Molefe, Anoj is widely credited for stabilising Eskom since joining the utility as CFO. • Bongani Nqwababa, who won the Finance Transformation Award 2015 for his CFO work at Anglo American Platinum, is now CEO at Sasol. • Greg Davis, who won the Moving into Africa Award in 2015 as Africa CFO of Standard Bank, is now the Group CFO at Ecobank Transnational. • Cobus Grove, who won the Governance and Compliance Award for his turnaround tenure at DigiCore, is now Senior Vice President of Sales and Execution at Inseego, the California-based company that bought DigiCore’s Ctrack brand at a premium (see page 15) 14

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• Oceana CFO Imraan Soomra, who won the Transformation & Empowerment Award in 2015, has since been instrumental in the acquisition of Daybrook Fisheries, which has turned the company into a global player. He has also been nominated for the 2017 CFO Awards. • Discovery Health CFO Brett Tromp, who was Young CFO of the Year and winner of the High Performance Team Award in 2015, has since been named CEO of Discovery Healthcare Services in addition to his CFO role. • Last year’s double-award winner Walter Leonhardt, for his transformational role at SAB Miller’s soft drink bottler ABI, has since become CFO of the larger entity Coca-Cola Beverages South Africa. • Last year’s double-award winner Osman Arbee (CFO Imperial) is now the CEO of Imperial Motors.

MOVERS

Four quotes by Deon Viljoen “If you think you have a good deal, look at all the stakeholders again and craft an exceptional deal.” “At Alexander Forbes, our biggest asset is goodwill. We sell expertise, IP, relationships and trust. Reputational risk is very tough to manage. It is not on the balance sheet, but it is crucial to us. Our clients trust us and I feel that I contribute to that.”

“As CFO I am at the centre of the strategic decisionmaking. Although I joke about having aged in dog years during the last seven years in this role, I have also gained a lot of wisdom.” “In life, there are two types of challenges: those you voluntarily take on and those you inherit. Both are inspiring, but come from different parts of your being.”

From Pretoria to San Diego

nding what has been one of the most spectacular blitz-careers of South African CFOs in recent memory, Cobus Grove, his wife Marilize, his son Christopher and his daughter Kaitlyn boarded a plane early this year and left for California. The winner of the Compliance & Governance Award at the 2015 CFO Awards will remain CEO of Pretoria-based company Ctrack, but will be fulfilling his role from the San Diego headquarters of Inseego, formerly known as Novatel Wireless. “I have been appointed as Senior Vice President of Sales and Execution,” Cobus revealed during a quick chat in his busy schedule. “My role is effectively to manage the global sales strategy and to ensure effective implementation once transactions are closed.”

Then 34, Cobus received a CFO Award out of the hands of Prof Mervyn King in 2015, after he saved DigiCore from a certain demise and lined it up for an acquisition. “It was a tremendous learning platform for me,” admits Cobus. “I was exposed to so many business challenges and opportunities.” Cobus says he and his family are excited about the adventure: “The exposure and opportunities the US provides, especially for children, is tremendous and the fact that we will be moving to San Diego – which apparently has the best weather and long beaches – doesn’t hurt.”

attend those events. “The CFO South Africa platform is amazing. It allows a CFO to share experiences and to learn from experienced others on how to deal with challenging situations. The CFO Awards are also an amazing network and acknowledgement platform. Being a CFO is a bit of a ‘little reward’ role and being nominated and even winning an award provides great recognition.” l

Looking back at the CFO Awards and the various CFO Summits that Cobus has been involved in over the last few years, he calls on South African executives to

“The CFO South Africa platform is amazing.” CFO MAGAZINE • CFO.CO.ZA

MOVERS Cindy Hess starts at Media24, Matshepo More joins IRBA board

On the move Some of South Africa’s most talented CFOs changed jobs in the last few months, with notable appointments at Media24, Howden Africa, IRBA, WG Wearne, Resolute Mining and Shell.

the board and other relevant Sasfin subsidiary boards from 30 June this year.

Cindy Hess

n one of the most prominent CFO moves in the Cape Town area, Cindy Hess moved from Pioneer Foods to start her new role at Media24. Cindy was among the finalists of the 2016 CFO of the Year Awards for her work at Pioneer Foods. She says it is an honour to join Media24 “at such an exciting time in the media industry”. She takes over from retiring Media24 CFO Manie Mayman, who served the company in the CFO capacity from 2007 to 2009 and again from 2014 to 2016. Tyrone Soondarjee, Sasfin’s long-serving group FD, will be retiring this year. He will step back as group FD and retire from 16

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Following multiple CFO Awards nominee Megan Pydigadu’s resignation from her role as CFO, financial controller Paul Dell has taken over as interim CFO of MiX Telematics. He was also appointed to the board of directors. Stefan Joselowitz, MiX Telematics CEO, said: “I have complete confidence in Paul’s ability and know he will do a great job for us given his tenure at the company and the value he has added over the years.” Megan recently started her new role as CFO of Eazi Access Group.

Tyrone Soondarjee

Marinella Vigouroux

Marinella Vigouroux has taken over as Howden Africa’s CFO from Kevin Johnson, another former CFO Awards nominee. Kevin moved to the Colfax Corporation, where he accepted a senior position in the company. Commenting on her new role, Marinella, who has been with the company since June 2012, said: “I was appointed just as we embarked on the financial year end process. One of the key achievements in my role thus far has been the smooth transition by the team to the change of leadership and the successful year end process.” Marinella says her plans for the department this year include building on the key strengths of the individuals in the team,

MOVERS

Kevin Johnson

developing the finance leads’ technical and leadership skills, promoting further operational understanding and improving efficiencies within the department to provide additional operational value and promote growth in the business. Murray & Roberts has appointed

Prof Ben Marx heads accounting department UJ Popular auditing lecturer Prof Ben Marx has taken over from his long-serving colleague Alex van der Watt as head of the accounting department at the University of Johannesburg. “I am very excited to be leading the best accounting department in the country and to work with its great, hard-working staff,” said Ben, who has also been a member of the panel of judges of the CFO Awards for the last four years. As Alex van der Watt has taken up a role at the South African Institute of Chartered Accountants (SAICA), Ben will finally step up to the plate after no less than ten years in a

Daniel Grobler as its new group FD, effective 1 April. Daniel takes over from outgoing FD Cobus Bester, who was in the position for six years and is going to enjoy retirement. Daniel is a CA(SA), who joined Murray & Roberts in 2010 after various roles at Deloitte in South Africa, The Netherlands and the United Kingdom. Most recently, he was the MD of M&R Cementation, the group’s African underground mining business, with a yearly turnover of R3.5 billion. At the Airports Company South Africa (ACSA), Dirk Kunz has been appointed acting CFO following the recent resignation of Maureen Manyama, who is still active as non-executive director at JSE-listed company Aspen Pharmacare and the South

deputy role. “Nation building is very important for us at UJ,” said Ben, who lauds the transformation at the department. UJ is known to have the lowest differences in success rates between black African and white passes when compared with other universities at SAICA’s Initial Test of Competence (ITC). Ben emphasises he is not going to be wrapped up in meetings now in his new role as HOD: “I love teaching and I don’t think it would benefit the department if I would become a full-time manager.” Both Ben and Alex also play an important role at private company APC, which presents courses to prepare for SAICA’s Assessment of Professional Competence (APC).

African Reserve Bank (SARB). Dirk previously worked with Maureen as Group Manager: Corporate Finance, and has worked for ACSA since July 2008. In the mining sector, Victoria Milazi has been appointed CFO of coal mine Nkomati Anthracite in Mpumalanga, effective January this year. Victoria was previously the CFO of construction materials company WG Wearne, a post she held for just under one year after three years in the position of financial manager. To replace Victoria, WG Wearne has appointed Marius Bierman, who previously held the same position from December 2011 to December 2013. During his hiatus Marius was GM of finance for media company Caxton and he took a plunge into the entrepreneur-

also for students, he has noticed: “It is important to bring the classroom into practice and the other way around. It is nice to be part of the CFO Awards and to sit on a couple of boards and bring that experience back. Of the CFOs of listed companies, 80% are registered CA(SA). We like to believe we are educating future CEOs, CFOs and ministers of finance.”

Ben’s ongoing role as judge in the panel of judges of the annual CFO Awards is an exciting addition,

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MOVERS

ial space, with a company called Inspiren. Public Investment Corporation (PIC) CFO Matshepo More has been appointed to the Independent Regulatory Board for Auditors (IRBA) for a period of two years. “As a PIC Board member I am an advocate of corporate governance and keen on shareholder activism, which includes keeping a focus on good corporate governance, remuneration transparency, accounting and reporting based on IFRS. I am pleased to be appointed to the IRBA Board as I am committed to investor protection, promoting a stable investment environment and ensuring growth and transformation in the profession,” Matshepo said.

Further afield Lee-Anne de Bruin has been appointed CFO of Africa and Australia-focused gold miner Resolute Mining. She replaces Resolute’s long-serving CFO Greg Fitzgerald, who will retain the role of company secretary. Although she has been working in Australia since mid-2009, Lee-Anne is South African born and educated. She completed her Bachelor of Accounting in 1999 through Wits University and did her SAICA board exams in 2002. Lee-Anne’s namesake, Stefan de Bruin, has been appointed as CFO of Paratus Telecom, the largest privately owned pan-African telecoms operator. Stefan will be responsible for growing the company’s business in Africa and overseeing the financial affairs of the group, which has a presence in South Africa, Namibia, Botswana, Zambia and Angola. He will also focus on the financial evaluation of new telecom infrastructure projects in the continent.

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Jessica Uhl

and gas explorer, has appointed Bruce Burrows as CFO. Bruce is a member of the Institute of Chartered Accountants of Australia & New Zealand with a lot of experience in the oil and gas industry. He was previously CFO at Seven Energy, a Nigerian gas company, and prior to this, was finance director of Londonlisted explorer JKX Oil & Gas, a position he held for 14 years.

Royal Dutch Shell has a new CFO in Jessica Uhl, who took over from Simon Henry, who held the role for seven years. Jessica, an American, joined Shell in 2004. She will be an executive director of the company and a member of its executive committee, based in The Netherlands. Les Wood has been appointed Africa-focused Tullow Oil’s interim CFO, while Ian Springett, the actual finance head, is off on an extended leave of absence for medical treatment. Les joined Tullow in 2014 and previously spent 28 years at BP, including in regional CFO roles in Canada and the Middle East. The Londonheadquartered Tullow Oil has production assets in Ghana and exploration acreage in Mauritania, Namibia and Zambia. Millicom Africa CFO Mohamed Dabbour has been promoted to CEO of the telecoms company, replacing Cynthia Gordon. Millicom operates in Africa and Latin America under the Tigo brand name. Mohamed has been CFO of the African business since August 2015. He has been with the London-headquartered company since 2008, spending time as CFO of operations in Chad and Ghana. Lekoil, a West Africa-focussed oil

Delphine Maïdou

Judges Thusang Mahlangu has succeeded Delphine Maïdou as CEO of Allianz Global Corporate & Specialty (AGCS) Africa, as of 1 February 2017. Delphine, who was on the CFO Awards panel of judges from 2014 to 2016, will remain on the AGCS Africa Board as non-executive director. Thusang joined AGCS Africa in 2013 as Head of Market Management focusing on developing sales and distribution across Africa. He subsequently became Head of Property in 2014 and grew the portfolio in key African countries. Seelan Naidoo will take over the responsibility from Thusang as Head of Property, in addition to his existing role as Head of Engineering. Another former member of the CFO Awards judging panel, Riad Gydien, has been pro-

MOVERS

moted by his company SAS to Senior Regional Vice President role for the South and East EMEA regions. Riad, a South African who has been with SAS for ten years, was most recently active as VP for the Middle East and Africa. Carl Farrell, SAS Chief Customer Revenue Officer, has said of Riad’s appointment: “Riad has insight and relationships from his previous role that will transition well into this expanded manage-

ment position. As a seasoned leader, he will build on the demand we are seeing in the southern and eastern EMEA while ensuring that businesses and organisations are getting the resources and support they need to thrive in changing markets.” The Southern African Venture Capital and Private Equity Association (SAVCA) has appointed Tanya van Lill as CEO, effective 1 March 2017. She suc-

ceeds Erika van der Merwe, who served SAVCA for over four years. In her new role, Tanya, who previously held the position of Director for Academic Programmes at the Gordon Institute of Business Science (GIBS) and served on the board of the Executive MBA Council (EMBAC), will focus on increasing the industry profile and deepening relationships with all stakeholders. l

Three questions for Mohammed Akoojee, Imperial’s new Group CFO Mohammed Akoojee has taken over from award-winning outgoing CFO Osman Arbee, as Group CFO of Imperial, effective 1 March. Mohammed is a CA(SA) and CFA, having qualified as a Chartered Accountant in 2003. He completed his articles with Deloitte before moving into banking, where he worked as an equity analyst for 18 months. He then joined Investec as corporate financier, spending five years there. He joined imperial in 2009. We asked him three questions. 1. How do you feel about taking on this new role as Group CFO? “I am really excited about the role. Imperial is a large, listed company with annual revenues in excess of R120 billion and operations on six continents. We have market leading businesses in both the logistics and motor industries, with a clear strategy on how we can grow these

businesses and create value for shareholders. So, there is a lot to be done. It’s a big job but I am up for it and keen to get going.” 2. What will be first on your to-do list once you take over on 1 March? “I have been with the group for seven years, so I know the company well and won’t need to spend a lot of time understanding the business. I was the mergers and acquisitions and investor relations executive for the first five years of my tenure, following which I was the Imperial Logistics African regions CEO.” “I see the CFO role as not only a financial one but also as strategic. In a group like imperial, with operations in both the logistics and motor industries, Imperial Holdings, as the holding company, is the custodian of capital. Sourcing, allocating and controlling capital to achieve returns on invested capital superior to peers in similar

sectors and businesses is a key priority and objective.” 3. What do you hope to achieve during the course of this year? “The CFO must be a business partner to the CEO and must be involved in designing and overseeing strategy, operations and performance. I want to be a CFO that is proactive and innovative, and act as an independent transformation agent who adds value in the areas mentioned above.”

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STRIPPING THE COMPLEXITY OUT OF M&A DEALS

hile African M&A continues to rise, it seems information security remains a major

barrier to closing deals. Research conducted by ansarada

or leave a clear audit trail of access. Second, consider which data room best suits your deal. Will it proactively prevent mistakes and breaches? Can you track a document wherever it is?

found that 71% of CFOs involved in

Can you access it on any device, any

M&A deals have experienced increased

browser, without additional plug-ins?

risk and been delayed due to a loss of

Will the security assist the efficiency

information or a security breach. This includes a temporary or permanent

of the deal, rather than slow it down? Third, consider your Q&A process.

ARIE MAREE Finally, how secure is the data? Whilst VDR providers make similar security claims, the reality is that

loss of data within documents, emails,

Stay within the closed loop of a data

implementation differs wildly. If

devices and IT systems.

room so that sensitive questions

they claim the necessary ISO27001

and documents are only accessible

certification, does it apply to their

confidentiality at stake, it is alarming

by valid participants. By contrast,

whole business and product, or their

that information loss remains such a

exchanging multiple documents over

data centre? What is the escalation

big issue. So what can deal makers

email frequently results in documents

process for an information security

do to ensure they remain secure?

being sent to the wrong people, or

incident?

Considering the sensitivity and

Thankfully, CFOs are in the driver’s seat and can effect the most change.

bidders receiving conflicting versions of the same document. Q&A tools can expedite the

FOUR CONSIDERATIONS First, to share information for

be more in control of their deal

process by setting restrictions

information than ever. It’s disappointing

on volume, priority and scope of

to know they’re often not.

an M&A deal, fundraising, IPO or

questions - guiding bidders through a

tender, CFOs should choose a tool

faster, more focused exchange.

specifically designed to conduct due

With advancements in compliance, Q&A and security, CFOs should

A recent ansarada study found these

diligence. In-house FTP sites, email,

Q&A changes saved an average 27.75

instant messenger or file sharing sites

days per deal- a considerable reduction

won’t guarantee information security

in cost and workload for a CFO.

n Arie Maree, ansarada Managing

Director Middle East & Africa

ansarada.com

0% OF DEALMAKERS WANT DATA LOSS IN THEIR DEAL – 29% ACHIEVE THIS 71% of African executives have experienced data loss during their deals, causing security breaches and delays. Outdated IT practises during Q&A are a leading factor. Reduce data loss to zero. Bring Q&A out of email and Excel spreadsheets and in to the data room – the Q&A facility purpose built for secure deals. “ansarada’s understanding of, and ability to handle, the large volumes of complex technical data that is required for M&A in the resources sector makes the experience simpler and easier.” NICK TURNER, SENIOR ANALYST - GLENCORE

Sandton +27 118 815 742

Stellenbosch +27 218 828 571

ansarada.com

DUE DILIGENCE

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DUE DILIGENCE

Due diligence Big deal! A thorough, smart and stealthy due diligence process is among the top ingredients for successful mergers and acquisitions. In the next six interviews, senior editor Toni Muir speaks to finance executive and dealmakers about the homework a growth-hungry company needs to do. When should due diligence start? What information is relevant? How should the CFO get involved? What does blockchain have to do with it? How should the outcome of the exercise influence price, deal structure and future integration? Lessons come from a banker, a lawyer, a Big Four specialist, a virtual deal room boss and two top CFOs with intimate insight in the process: Telkom CFO Deon Fredericks, who played a pivotal role during the fascinating acquisition of Business Connexion, and Charl Keyter, who has been part of the insatiable executive team of Sibanye Gold, ever since it was spun out of Gold Fields and started buying up gold and platinum mines. CFO MAGAZINE â&#x20AC;˘ CFO.CO.ZA

DUE DILIGENCE CFO Charl Keyter shares due diligence lessons from Sibanye Gold

Subtle, stealthy and secretive “You don’t always want to let the staff of the other company or companies know you are doing this process. You have to be stealthy so as not to raise suspicions,” says Sibanye Gold CFO Charl Keyter. The process needs to be secretive and subtle, while still being accurate, thorough and revealing.

harl Keyter gives one of the best and certainly most amusing explanations of due diligence: “It is like the other company is lifting skirts. They let you look into their books, their operations and their processes.”

“I would definitely do a lot more work around the tax due diligence in future.” The due diligence process, while “more painful” than what is involved with a public offering to acquire another company, gives greater access to information and in greater detail, says Charl. “You can interrogate life of mine, for example. You can understand the real performance or under performance of areas and you can do physical site inspections. So, if we acquire a mine we can go on underground visits and see what the infrastructure is like.” If any South African CFO can provide some exciting insight into due diligence, it must be Charl, 24

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whose company is one of the most acquisitive ones around at the moment. Sibanye Gold was spun out of Gold Fields in early 2013, and over the past four years has enjoyed a rapid rise to success. It is widely regarded as one of South Africa’s most dynamic mining companies.

Stillwater After acquiring the Cooke asset and Wits Gold, Sibanye ventured into platinum in 2015. They put in an offer to acquire Anglo American Platinum’s Rustenburg assets, also making an offer to Aquarius Platinum shareholders, which was accepted. The Aquarius transaction concluded in April 2016. The next step for the company is abroad, with Sibanye being currently involved in a R30 billion acquisition of Stillwater Mining in the United States (platinum and palladium), a deal that is already approved by the South African Reserve Bank and expected to be concluded during the second quarter of this year. Charl has excellent insight into the role finance heads should play. “I don’t believe the CFO should drive this process but ultimately, when you do an acquisition, it must be funded either by internal sources or external. The role of the CFO is to ensure

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the due diligence is performed accurately and meticulously because ultimately, the guys who do the deal don’t sit with the deal afterwards, their work is done. The CFO must ensure prudence is applied in the process. You have to be on top of this because otherwise how can you say, with knowledge, whether the deal should go through or not?” One of the most important takeaways of the due diligence process, Charl says, is having a level of accuracy that can support the financing the company needs. He has also learnt some tough lessons along the way, particularly with regards to tax. “Experience has dictated that we had to do a lot of work post the acquisition as far as tax was concerned. I would definitely do a lot more work around the tax due diligence in future, getting legal opinions in this regard, and I would do this upfront.” Agreeing upfront on what sort of due diligence information is required also goes a long way to ensuring a successful due diligence process, says Charl. Having two willing parties helps too, as does adhering to timelines.

“In several instances we have questioned, when we are presented with a life of mine profile, why the business is being put up for sale if it is such a good story.” Be stealthy While there are numerous challenges to the process, Charl says keeping the investigation subtle can have a knock-on effect. “You don’t always want to let the staff of the other company or companies know you are doing this process. You have to be stealthy so as not to raise suspicions.” A downside to this, he says, is that the information you need may not always be forthcoming. “It can be a bit like pulling hen’s teeth. With it being secretive, you can’t play open cards or have frank discussions with staff. Sometimes the other party even limits you in terms of what line of questioning you can offer. You don’t always have unrestricted access.”

Another challenge, says Charl, is seeing through the make-up. “When something is put up for sale, it is dressed up. The challenge is to see through that to the actual results, performance and value of the assets to then make adjustments to internal models to ultimately come up with a company value.” He offers some words of caution: “In several instances we have questioned, when we are presented with a life of mine profile, why the business is being put up for sale if it is such a good story. Guys put their best foot forward and use their bestcase scenarios. You must be careful of that and be sure to look through historical information and make your own assumptions. Don’t rely only on the assumptions of the counterparty.” l

Charl’s due diligence top 5 1. Understand the asset that you are buying: what are the reserves and resources? 2. Conduct adequate legal due diligence. 3. Conduct thorough financial due diligence and understand the company’s operations fundamentals. Do not neglect the tax aspect and how this is structured. 4. Pay attention to the human capital process and the people involved and ensure that you can accommodate the Ts and Cs of their employment contracts into yours. 5. If relevant, conduct environmental due diligence.

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DUE DILIGENCE Deloitte’s Karin Hodson: Do not only do due diligence to tick the boxes

Understand what you buy “The due diligence report is often just used to tick the box and the findings are not adequately translated into the pricing and sale and purchase agreement,” says Karin Hodson, Partner and Transaction Services Leader at Deloitte. She warns that failure to undertake adequate due diligence can result in significant erosion in value and potential losses of customers, staff, and everything in between.

arin Hodson has worked in transaction services for 16 years and has been involved in close to 320 transactions during this time. Over the last two years alone, she has been involved in some 40 transactions. One of the more recent deals in which she was involved was the acquisition of Neotel by Liquid Telecommunications. That deal closed in eight months and was relatively quick compared to the prolonged Vodacom offer, which was eventually abandoned as regulatory approval was not obtained. “This deal was particularly interesting due to the complexities involved in understanding the debt and working capital requirements in the company and how this was translated into the sale and purchase agreement,” says Karin. “It was also particularly impressive how Liquid managed to act so swiftly to obtain all the required regulatory approvals to ensure the deal was closed in the shortest timeframe possible.” Due diligence is used to gain insight into operations, financial and legal matters. And it is fun, says Karin. “The ability to add tangible benefits through

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adjustments to the valuation model, input into the sale and purchase agreement, such as warranties, indemnities, conditions precedent, and purchase price and closing mechanisms, as well as transaction structuring and post deal considerations make the work enjoyable. Clients rely on this information to make an informed decision.”

Vendor due diligence “Companies must understand what they buy and what the transaction structure is,” Karin says. “Are they buying the shares or are they buying the business out of the company?” Companies embarking on a deal usually consider their own capabilities and what they can they do in-house before reaching out to specialists or advisors. Funders and investment committees often require independent due diligence reports. “There is also the vendor due diligence, which is commissioned by the seller and is made available to prospective buyers.” This allows prospective buyers access to the same due diligence report in a controlled manner and minimises disruption to the target entity. According to Karin, Deloitte approaches its financial

DUE DILIGENCE Karin’s due diligence top 5

access to information and management is limited. “Often, when a company is up for sale the market and employees are unaware, so you have limited access,” Karin explains. “Likewise, access to competitive information is often restricted.”

1. Understand the rationale for doing the transaction and the strategic fit. 2. Identify the risks in the entity and the impact this has on the valuation, sale and purchase agreement and post-merger implementation plan. 3. Understand the commercial drivers: customers, suppliers, competitive conditions, products and any risks or sensitivities. 4. Familiarise yourself with the operating model (systems, people, infrastructure) to enable integration with your business, as well as regulatory or legal matters that need to be addressed in the sale and purchase agreement, such as regulatory approvals, IP protection, restraints of trade and change of control clauses in contracts. 5. Understand the current and forecast cash flows of the entity and identify potential sensitivities that impact the ability to generate cash and achieve required returns and debt repayments.

due diligence by focusing on three areas: the valuation, the sale and purchase agreement, and post-transaction implementation risks. By analysing financial records, business drivers are highlighted as well as factors affecting the purchase price mechanism, such as net debt, net working capital and contingencies, she says. “We also consider any risks that require protection in the sale and purchase agreement, for example if there are contingencies that cannot be quantified or regulatory requirements that need to be fulfilled.” It is important that the due diligence findings are factored into the valuation, she notes, as well as the sale and purchase agreement. “The due diligence report is often used to just tick the box and the findings are not adequately translated into the pricing and sale and purchase agreement.”

Half-hearted “Success doesn’t necessarily mean the transaction is going to happen,” says Karin. In her opinion, a successful due diligence process includes setting expectations upfront, having regular communication throughout the process, and sharing information between work streams. Sometimes

Companies that overlook the due diligence process, or which do a half-hearted job, stand to lose value, Karin notes. “Financial risks relating to the valuation model may not be adequately identified, resulting in potentially overpaying for the acquisition. There could be customer and supplier losses, for example, if contracts include change of control clauses. You could also end up with HR issues if there are different corporate cultures and staff need to be integrated, or if you lose key people post transaction.”

“CFOs need to be intimately involved in appointing advisors and ensuring the points that affect value and synergies are covered.”

CFO’s role The CFO’s role depends on the transaction and the client, as well as who or which team is running the process, Karin says. “Certainly, I would want to see CFOs involved in this process. They need to think beyond just the financial implications and consider the strategic fit and the commercial viability.” It is also important to understand the rationale for doing the deal and to identify synergies, she notes. “CFOs need to be intimately involved in appointing advisors and ensuring the points that affect value and synergies are covered. They must also familiarise themselves with the risks they will need to deal with in their post-merger implementation plans.” l CFO MAGAZINE • CFO.CO.ZA

DUE DILIGENCE ansarada’s Africa MD Arie Maree about the power of virtual deal rooms

Planning ensures deal success “You cannot over-plan. Once the rubber hits the road with a deal there are tight timelines, plenty of stress and lots of money at stake. More planning means a smoother due diligence and ultimately, a smoother transaction,” says Arie Maree, ansarada Managing Director for Africa and the Middle East.

Arie’s due diligence top 5 1. Easy access to information and the structure thereof. 2. The speed at which you can communicate with everybody involved in the process – on both your side and theirs. 3. The security and safety of information, and applying adequate security to information in your hands. 4. Running the due diligence through a Q&A platform. 5. The insights you can draw from analysing reports, and being able to make decisions based on fact and data.

“

Our mantra is to simplify the due diligence process,” says Arie. ansarada operates virtual deal rooms – platforms via which all of a deal’s communication can be streamed, and through which the deal can be structured. The company, started in Australia 12 years ago, and with offices in Sydney, Chicago and London, has run in excess of 30,000 transactions in 5,000 cities. “Everything on the portal is trackable, so you can see which party looked at which document and when.”

ansarada’s way of working allows for such things as the Q&A process to be run in a controlled manner, Arie explains. “It also enables the person selling the business to structure the deal as they want it, which greatly reduces stress.” Fast, easy and secure, the platform features a reporting mechanism from which insights can be drawn. “For instance, you can see if a counterparty is focusing only on certain information, and prepare your team to answer questions on that same topic.”

Dump everything The concept of the virtual deal or data room began in the early 2000s. Prior to this, it was commonplace to have piles and piles of printed documents 28

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DUE DILIGENCE

– all labelled – kept under lock and key in a lawyer’s office, for example. “Bidders would fly in to access this physical data room before hopping back onto a plane and returning to their office, after which further dealings were conducted telephonically, via email and Excel,” says Arie. “From both a safety and simplicity perspective you can imagine how this used to be. Now you can do all of this on an iPad – with zero risk. You can even run a deal through your phone, via the deal room. The amount of time and money that this has cut out is huge. Technology has certainly simplified the due diligence process.” Despite the relative newness of the deal room concept, the way that this is used has also changed over time, says Arie. “These days, people are much savvier with regards to how deals are structured and the size of the data they put out to the buyer. In the past, we saw massive deal rooms, where people would just dump everything. Now people are structuring it more effectively and filtering out the unnecessary information to just present what is absolutely necessary to the buyer,” Arie says.

Data security A major failing for any due diligence process is being too lax when it comes to data security, says Arie. “Communicating via email or social media, for instance, is a definite no. We have seen people trying to run smaller deals on unsophisticated file share platforms. The problem here is that your information is often in the public domain. Not knowing where your information is and who is viewing it is very risky. In fact, some banks will not touch a transaction if there isn’t a platform in place that has the highest creditable security.” Arie says that the key to a successful due diligence is simplicity. “If you can cut away anything superfluous and focus only on the sophistication where it is needed, you should be successful. So, focusing where it really matters to the outcome of the transaction or value of the transaction.” Planning is also key, he says: “You cannot over-plan. Once the rubber hits the road with a deal there are tight timelines, plenty of stress and lots of money at stake. More planning means a smoother due diligence and ultimately, a smoother transaction.”

Due diligence speeding up ansarada’s bi-annual analysis of due diligence duration has revealed that the time taken to complete this process has decreased. “In 2014, the average deal room was about three to six months. Now we find it is closer to eight weeks,” says Arie. He attributes this to changing macro-economic conditions and people being more cost-sensitive. With the timelines being so concentrated, closing and re-opening of the same deal room is also more common.

Great help Given their global perspective, ansarada has identified general differences and trends between local and international ways of conducting due diligence. “Local processes are generally quite amicable,” says Arie. “While you can severely control and restrict security permissions on documentation, we find that in South Africa, people generally apply basic policies. Also, it is often allowed here for the buyside to download and print documents, which is indicative of the nature of the process.”

“We often find that on the sell-side, the business owner is emotionally attached to the business. This warps objectivity.” Arie says that CFOs are in a unique position as they can be objective during the dealings. “We often find that on the sell-side, the business owner is emotionally attached to the business. This warps objectivity,” he says. “The CFO is in a unique position in that they can use financial analysis and objectivity to the advantage of the asset or company being sold. The CFO can be involved with advisors and consult to the CEO or business owner to say what life after the transaction may look like. The CFO, aside from having acute financial expertise, can play a critical role in consulting back to the business.” l CFO MAGAZINE • CFO.CO.ZA

DUE DILIGENCE Standard Bank’s Andrew Balnaves: focus and timing are crucial

Uncovering hidden gems Prepare, make sure all parties are on the same page and do not get distracted by unnecessary details, advises Dr Andrew Balnaves, Executive Vice President of Africa Corporate Finance at Standard Bank.

“

Properly conducted due diligence might uncover hidden gems,” says Andrew. “If you uncover something in the due diligence that you weren’t aware of, that is a huge upside that you haven’t previously understood and makes the whole process more attractive.” According to Andrew, due diligence is “a professional and well-understood process” that should run smoothly. “Before you get started, consider why you are pursuing the transaction and identify which key metrics need to support the investment thesis,” he advises. “Plan and prepare, get clarity on the expectations of both sides, and ensure the counterparty is on the same page as you.”

“I foresee less physical inspection of accounts and, though this is perhaps five or ten years way still, blockchain accounting could play a huge role.” 30

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It is also important to enter a deal with a focused mind, Andrew says. “To this effect, you should know what your investment proposition is. Your due diligence should be aligned to this and tailored to suit the needs thereof.” He cautions against cultural or expectation mismatches, which he says can curtail a deal because the two parties end up frustrating each other. In this regard, expectations are extremely important, he emphasises, as is ascertaining the commitment of the other party before the process kicks off. “You don’t want to open your books to someone unless they are a credible party and they’re highly likely to execute the transaction,” he says.

Materiality Andrew’s experience of deal making has given him insight into the different stages thereof, what works and what doesn’t. For instance, people often get “too bogged down in the details,” he says. “You need some guidance on what the level of materiality is and what is really driving the business. Often, you will have very excited external advisors or technical advisors and they may get drawn into certain elements of the due diligence. You must ask whether this part of the due diligence is relevant to the overall value proposition. You’re always a burden to the counterparty in terms of

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what you are asking for, so you need to ensure the due diligence is appropriate. That’s key. You don’t want to frustrate the counterparty.” Timing is everything and timelines and deadlines should be agreed upon upfront, says Andrew. “I would even advocate delaying the due diligence process by a couple weeks if both parties aren’t ready,” he says. “It might be better to wait and have a shorter process with positive momentum and good lines of communication rather than a stopstart process that frustrates.”

100-day plan While the CFO certainly has a crucial role to play, Andrew doesn’t believe they should be overly involved in the day-to-day due diligence process. “The CFO is a busy person and they want to leverage and rely on the financial advisor, especially if it is a large due diligence. That is critical,” he says. “The CFO should only really come in at the beginning, for a few touch points at the middle, and then again at the end as the due diligence reports are finalised.” Andrew says the CFO should have an understanding of why the company is undertaking the transaction, and says the scope of work should try to tackle this and ensure there exists a key rationale supported by the due diligence, which can be referred back to. “At the end of it all, you’re going to get due diligence reports from various providers. It is important to sit down with your advisors as a CFO and grade those risks, high to low, and ensure they are appropriately communicated to the board, especially where the value proposition is concerned, to make everybody aware of what you have identified.” The due diligence plays an important part in post-deal integration, continues Andrew. “During this process, the deal captain or CFO should take the key findings of the report and ensure it fits into the 100-day plan. The should also get sign off from the board on how they intend to circumvent any risks or challenges identified in the due diligence report. That must fit into the integration plan.”

Backchannel If you are using a financial advisor, Andrew feels they should take on a project management role, and be a back channel and line of communication between parties. He feels that experts and advisers add value in that they are external to your team, and thus outside of your resources and time. “If you have got a small business development team and a lot of roles and responsibilities, the ability of an expert or adviser to guide those people and run the process for you is critical,” he says. “They have got their own expertise and they may identify elements that you may ordinarily not identify. They should be advising on how to mitigate recognised risks. You can leverage the combined experience of advisors and a technical team to support your deliberations.” l

Andrew’s due diligence top 5 1. Prepare and define the scope of what needs doing.

2. Communicate with the counter-party what you intend to do. 3. Keep to a tight, agreed timeframe and maintain momentum. 4. Ensure key findings are disclosed in the board pack and integration plan, and are factored into the price and other adjustments. 5. Be flexible and maintain an open mind so that if things change in the process, you can be agile where you need to be.

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DUE DILIGENCE Bowmans M&A head Charles Douglas focuses on contractual protection

CFO as connector “The CFO can really help to join the dots in a deal. The CFO is the connector between everybody involved because he or she understands how the business risk translates into the numbers,” says Charles Douglas of law firm Bowmans.

“

The best due diligence processes are the ones that are framed by an understanding of the business and the risk – that is the differentiating factor,” says Charles, who heads up the M&A lawyers at his firm. He highlights the importance of translating risks considered and risks identified into the transaction documentation. One approach is to develop things in tandem and get everything in writing. “Ideally, the CFO shouldn’t only focus on the financials, there needs to be a cross-over. The CFO, along with other execs, can really help to join the dots in a deal,” Charles says. He calls the CFO one of the people that can act as “the connector” between everybody involved. “The CFO is the one who understands the numbers as well as how the business risk translates into the numbers. CFOs sometime don’t like, or don’t immediately see the value in, going through the

“As a CFO, you really want both – the due diligence you compiled yourself and the set of promises from the sellers.” 32

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long list of warranties or promises about the business, because that is seen as the legal work-stream,” he says. This is, however, an important part of the process. “An optimal situation would be one where the CFO engages on the legal details, guided by the experts, to ensure that what concerns him or her from a financial and risk perspective is catered for in the contractual protections.”

Up at night If you plan to involve outside advisors or experts, Charles says it is important to ensure they are clear on which issues keep the CFO up at night. “It is incumbent on the advisor to ask the questions to try get the scope right. If you make a real effort as a CFO to ensure advisors understand why you want to do the deal, what is worrying you about the deal, and what the risk issues each advisor should be looking out for are, this will be massively helpful to the process.” Once you start your due diligence you are incurring costs, so you need to know you have got a deal to do before you start getting the various advisors involved. “It is a stage of the M&A process where the costs rack up quite quickly,” says Charles, adding that an astute company might start the process with a key risk analysis. “It is always a question of what the scope of the work should be. Quite often if it is not efficiently scoped and you can have people doing their jobs, but in a way that is not all that helpful to the company.”

DUE DILIGENCE Charles’ due diligence top 5 1. Ensure a proper understanding of the business realities and risks so that the due diligence work can be framed up and properly contextualised. 2. Ensure that the basis of the engagement is well understood with the target so that the fact that the due diligence is for the purchaser’s benefit is understood and does not interfere with the contractual protection. 3. Ensure the contractual protection is fit for business purpose so that if an issue arises, the way the contractual protection is framed up works within the context of the business. 4. Bridge the divide and know how to make things work if you are moving into unchartered territory. 5. Ensure access to and quality of information.

Charles Douglas in action

Charles notes that, because the CFO has a good understanding of the issues and the risks, it is their prerogative to ensure that contractual protection is a key component of what they are trying to achieve. While you might start with a set of standard warranties tailored to the maximum extent possible, based on the given understanding of the business, the more refined those warranties the better, he says.

An assumption “What often happens is that you run due diligence and get comfortable with the risks but there is an assumption that risks are adequately dealt with in the contract, for example that your contractual protection is going to work. So what sometimes happens is that you do the work, you negotiate the agreements and you buy the business, but then an issue comes up. You might check the contract to see how this is covered by the warranties, only to realise the warranties don’t quite fit the factual matrix. You are then left wishing you had spent more time thinking about the warranties to ensure they cover everything. That protection is there for unknown risks.” l

Charles works on between six and ten deals each year and calls the current M&A activity in South Africa “interesting and busy”. One of his most interesting recent jobs was advising IRESS Limited, a financial technology services and solutions provider listed on the Australian stock exchange, in relation to its acquisition of I-Net BFA, a South African financial technologies services and solutions provider, from Naspers-subsidiary Media24. As part of ongoing M&A advisory work that Bowmans has done for SABMiller, Charles recently also advised Anheuser-Busch InBev NV about its disposal of a 54.5 percent stake in joint venture Coca-Cola Beverages Africa to the Coca-Cola Company. That transaction was valued at $3.15 billion. This year Charles has advised Kansai Plascon Africa, a top global paint manufacturer and a subsidiary of Kansai Paint, in relation to its proposed acquisition of Sadolin Paints’ operations in Kenya, Uganda, Tanzania, Zanzibar and Burundi. “Although the deal value is undisclosed, this is considered to be one of the largest corporate acquisitions in East Africa in the last two years,” says Charles.

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DUE DILIGENCE Telkom CFO Deon Fredericks shares lessons from the BCX acquisition and beyond

Put your best people on the deal team Do two rounds of due diligence, put your very best finance team members on the deal and make sure you do your homework, says Telkom Group CFO Deon Fredericks.

“ Deon’s due diligence top 5 1. Validate the revenue stream. 2. Understand the costs. 3. Understand the strength of the balance sheet within the organisation. 4. Know the strength of the people involved.

5. Consider the cultural fit of the organisation.

In my opinion, a proper due diligence is the most important step in any acquisition,” says Deon Fredericks, whose long career at Telkom’s finance department culminated in the role of Group CFO a few years ago. To ensure effectiveness of that process, several things need to be in place, he says. “The first is a committed, dedicated team. Sometimes you let your advisors do most of the work and the challenge is that when the due diligence is finished, their role is finished, and they don’t carry that responsibility going forward.” In the past few years, Deon has been instrumental in managing a number of successful deals. One of these was the company’s acquisition of Business Connexion (BCX), a deal with a R2.7 billion price tag. Sharing some lessons learnt from the first 90 days’ post-deal, Deon highlighted the importance of understanding what you are buying, also noting the need to be mindful of the culture of the company being acquired. “Try to keep that entity independent and entrepreneurial as far as possible,” he says, citing the BCX example. Deon opines that the CFO’s role is an important one. “The CFO fits in upfront,” he says. “He is involved from the strategy stage. It is his job to ensure the target you are focusing on is not only attractive but also the right fit for the company and that it will help you achieve your strategic

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objectives.” The CFO gets involved in the critical decisions, he says, though he will not be part of the full process. “The CFO will be involved in key matters, and again when decisions are made to conclude on the transaction, at which point he will indicate his support or raise his concerns. Where the CFO really plays an important role is in price discussions and deal negotiations – specifically where there are long-term incentives that form a part of the management structure.”

Incentive schemes For a deal to be successful, staff involved in the due diligence need to understand the business and the industry and where both are going, know what to look for and what pitfalls to watch out for. “They must also build a good relationship with the company you are buying so that there’s openness in the dealings.” Deon offers words of caution in response to some common failings of the due diligence process: “Don’t think that if you rush things you can buy your way out of trouble. If you have a challenging situation you first need to ensure that it stabilises before considering buying.” He further warns against buying businesses that you do not understand, or about which you do not have adequate knowledge, abilities or people to manage it. “Also, be mindful of buying companies that are built around people,” he says. “If they don’t stay this will seriously affect your business. You will need to ensure that innovative incentive schemes are in place that will keep the talent and protect the company, if this happens.” Deon highlights the importance of good culture fit: “When you put two companies together you are going to spend most of your time trying to align the cultures. Trying to change something that is entrenched can be difficult. Sometimes, if management is the problem, you could go as far as to say I’m buying the business but without management. Because that might be easier in terms of integration.”

“Don’t just blindly accept what is presented to you.”

Two rounds “Always ensure you get your best people on the project,” says Deon. “We tend to think that, because we have a business to run, our best people need to focus on this and we put less than our best on the deal. But then you risk these people missing key things during the due diligence, which your best people would have picked up.” Deon advocates two rounds of due diligence, especially if a deal takes a very long time. “You need to ensure upfront before you agree to anything, that if it takes more than a certain time depending on the type of company and deal that you want to do a supplementary or complimentary due diligence, but you need to agree upfront to this.” The purpose of this is to validate for the last six months what the company has achieved – are they actually performing as they have said they are, he explains. “If it turns out they aren’t, you can reprice or walk away.” On deal making, Deon offers some pertinent words of advice: “Don’t just blindly accept what is presented to you. Ensure that you do your validation well and look at trends, what contracts are in place, the length of these, whether the revenue is dependent on people in the organisation and what would happen if those key people were to leave unexpectedly." Also, take your time, he says. “Sometimes the counter-party wants to disrupt the process. But wait until all the information is available before doing the due diligence. Ensure that all key information is available so that you can validate what management is presenting to you. And don’t become too emotionally involved.” l CFO MAGAZINE • CFO.CO.ZA

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National Treasury CFO: adventures of the new Silindile Kubheka

Swim. Skate. Climb. By the end of this interview, Silindile Kubheka has jumped into a deep pool, mastered a slippery ice rink and set off to summit the highest mountain. In the meantime, we have tried to unpack the remarkable metamorphosis of the National Treasury CFO from a shy, quiet serial student to a leadership powerhouse with strong views on boardroom dynamics, youth development and ways to professionalise government. By JoĂŤl Roerig CFO MAGAZINE â&#x20AC;˘ CFO.CO.ZA

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“

Can you please give me the opportunity to finish what I was saying?” A stunned splattering of men gasp, nod sheepishly and murmur ‘of course’. Contrary to her predecessor, the soft-spoken incoming CFO is not well known. But the very moment she asks for silence and respect from this room full of high-powered males is the making of the new Silindile Kubheka, National Treasury CFO. This moment is the second of two events that the 38-year-old Silindile pinpoints when asked what made her change from a shy, quiet person to a proud professional, who strides through the corridors of power with a confident gaze. She now dresses to impress and speaks her mind whenever she knows what she is talking about, which − judging by her rise to the top − is often. “I used to work at the National Treasury two jobs ago, but people that I worked with then don’t recognise me when they meet me now. At the time, I was in the middle of a pregnancy and I may have been very timid. I was always making sure other people were happy and would not speak up. When I meet my colleagues from those days and I tell them my name, they cannot believe it.” In 2015, Silindile worked at the Auditor-General and she did initially not apply for the CFO role, until she was convinced to throw

“Whatever fears you might have, whatever intimidation you might feel, you can either make it or break it.” 38

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her hat in the ring. “It was one of the toughest interviews of my life. I had to do a presentation on a case study, explaining how I would move an entity towards a clean audit. I was supposed to have 20 to 30 minutes, but just before the interview they told me they only had time for 15 minutes. Then they asked a lot of technical questions.”

Fears and intimidation During her earlier stint at the National Treasury, Silindile had dealt with DG Lungisa Fuzile as acting chief risk officer − or when sitting in meetings on behalf of the previous CFO. As tough as the interview was, the omniqualified Silindile counts the experience as the first of her two life- and career-changing events. “When presenting a case study like that, you really have to convince people. Whatever fears you might have, whatever intimidation you might feel, you can either make it or break it.” The definite breakthrough came during Silindile’s first exco meeting, with the DG and all his deputies present. “I could have just sat there, listened and been submissive, but I would not have been taken seriously,” she says. “You only have one chance for a first impression. So I spoke up. Now I always have things to say. I see these meetings as my best opportunity to influence strategy and I don’t just want to attend to occupy the space. There is a lot of pressure. I am always respectful, but I never confuse respect with blindly following others.” These days, Silindile discusses feminist literature with her Johannesburg-based book club and dreams of travelling to African countries and beyond.

“I am always respectful, but I never confuse respect with blindly following others.” The old Silindile had never left the greater Durban area until 2005, when she moved to Johannesburg as a newlywed.

Swatch watch “I come from a township called Kwamashu in Durban. I was an average student until I realised − only when I was in the Durban University of Technology − what was at stake, and managed to get bursaries,” Silindile explains. A daughter of a taxi driver and a factory worker, she remembers being a shy girl − except when it came to her “obsession with Swatch watches”. The solution: young Silindile Bophela did chores at home, so her mom could work longer hours to afford a watch for her daughter. “I pushed myself and I teach my kids to do the same. I always say that if you want to study and you can’t afford it, you need to convince someone else to pay through a scholarship. But then you also need to do your own part.” Her own resolve helped Silindile become a chartered accountant and certified internal auditor (CIA) with certificates in risk management, corporate governance and project management, among others. Those qualifications did not come quickly and she only chose the finance route after she realised there was “too much blood” involved with her first choice, zoology. As her highest

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mark in matric was accounting, the journey was charted, first towards a diploma and then the − admittedly arduous − path towards becoming a CA(SA).

break. “I decided to stay at home with my young daughter − my son was not born yet, but after seven months I realised I am not housewife material.”

From a bookkeeper at Ngubane & Co in Durban, Silindile moved to Nkonki in Johannesburg to work with clients in the investment and telecoms space. After qualifying in 2007 and a short-term contract at the State Diamond Centre, she joined the internal audit division at KPMG.

What followed was a job at National Treasury, one at the Auditor-General doing strategic projects and since April 2016 the CFO role, where she counts exco and parliament appearances among her most exciting working days. “I dream about the day that I can spend most of my time with the team − doing coaching. We have coaching sessions, but a full day would be the ultimate. I want to provide opportunities to people that are coming through the ranks. For me, coaching is not about telling them what to do, but sharing experiences and transferring knowledge. My wish is that talent development and succession planning in the public sector becomes a planned, transparent process.”

Why leave Nkonki? “During articles you have suffocated, you have cried. I wanted to develop and there are more opportunities at a big firm like KPMG. I wanted to explore and see where my career could take me. I got involved in the internal audit of banks, the automobile industry and telecoms, among others. It was very diverse.” Having said that, Silindile still fondly thinks back to the great learning curve at Nkonki. “Coming from Durban, which was very chilled then, with people driving 100 in the fast lane, it was a culture shock. It was steep personal development, with a telecommunications company as a highlight. At a smaller firm, you have to work relatively harder. You don’t want to be responsible for losing a client, as it would have a detrimental effect.”

No housewife material What looks like a dry bunch of career paragraphs on paper, was − in raw and real life − a precarious balancing act with studying, work deadlines and tiny children to juggle. After a short stint at Absa, a period back home to care for her ill father, and a second stint at Nkonki, Silindile took a

According to Silindile, the National Treasury has a massive role to play in making things better. “We are a training ground. We are appointing young people, they learn and then they leave and use their experiences, which is great. I am not apologetic about the fact that I want to contribute to black women progressing. There are not a lot of women in senior roles. For me, the DG and DDG are just a phone call away, but support for women is lacking in the lower levels. We need to break the barriers. There should be no limits based on colour or gender or age.” As much as Silindile beams passion about nurturing young talent, she feels the youth should be teachers too. “As a manager, you learn from your team. What worked five years ago, doesn’t

“When I tell people that I work in the public sector, people often assume I am part of the corrupt ones.”

work now. You need to be flexible and be open to new solutions. At the same time, you need to strike a balance, as you also work with older people. Being a mother, I relate much easier to people, I think. When chatting, I try to remove the position from the person. They can’t confide in you if they see you as the CFO.”

Serial student With the National Treasury being the ‘bank’ of the country, Silindile’s position is an interesting one. As the sole CA(SA) within the finance team, she is responsible for a finance team of 68, joins the minister and the DG in parliament on some occasions, but is mostly a background-operator. "Every financial decision that Treasury makes, I have to endorse. Who we hire, what we buy, which projects we embark on.” Silindile’s career is characterised by multiple studies and short stints at jobs, but that is about to change, she says with a smile. “I am a serial student and I have registered for a three-year MBA. I am a self-aware person. I love developing as a person,” says Silindile, who usually works for long hours in the evening after putting her children to bed. Her current role is perfect for that, says Silindile, who sounds

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ready to grab the bull by its horns − and shake it. “The position provides this power. That is a major realisation to have. I had never been a CFO before as much as I have worked in various finance-related positions, so I jumped onto the treadmill and had to learn so much. I had to be in control of my time.” Silindile says she joined the department during the era of cost-cutting and shoestring budgets, but she doesn’t see her − or the Treasury’s − role as having a narrow focus on numbers. “We need to explore how we can contribute to the rest of the public sector. I want to change the perception that Treasury is very arrogant. Just as a CFO can’t be a five-star performer as a manager when my team scores three-stars, the National Treasury cannot be seen as excellent if the rest of the public sector is lagging.”

Baggage and stigma Battling corruption is also high on the CFO’s list of priorities. “When I tell people that I work in the public sector, people often assume I am part of the corrupt ones. In my role I am shielded from politics, but there is the baggage and stigma of people being lazy, incompetent and corrupt. I want to change that and showcase that there are ethical professionals and people of integrity working in high positions within the public sector. What I do should not benefit myself, but the country. If you look back at my era, I want to be part of professionalising government.” Young accountants should also realise the massive opportunities to make a difference in the public sector, says Silindile. “For a CA, there is no opportunity to bring

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“When I was in the water I realised: I cannot give up now, because I will drown.”

IFRS knowledge into practice, but when you are in a position like mine you can work with a R599 billion budget. If you had such a responsibility in the corporate world, a CFO would rank very high on the scale.” Talking to the new Silindile Kubheka, it sounds like a story of a cautious talent who surprised all and sundry by being a good swimmer when thrown in the deep end.

Swim. Skate. Climb. “I have literally been taking swimming classes,” Silindile reveals, explaining she joined her two children during lessons. Swimming is not something kids growing up in Kwamashu would learn, but as a mother she did not want to be powerless in an environment where her kids thrived. “I started in June last year and got my certificate in December. When I was in the water I realised: I cannot give up now, because I will drown. The teacher doesn’t get into the pool. She just tells you to do dolphin kicks and butterfly strokes. She is in jeans, so I think by the time she jumps in to rescue me I will have drowned. It was hard, but I have realised I can do anything.” Recently, Silindile took up ice skating lessons too. “When I went to the skating rink with my daughter, I was falling all

the time even though I was trying to hold on to the railing. Afterwards my muscles were so sore, I could not walk. I hated that feeling of being afraid and helpless. When we got home, my daughter told my son: mom can’t skate. That is why I have secretly signed up for lessons and I will only tell my kids when I have mastered it.” It doesn’t take a literature scholar to see the parallels between Silindile’s personal and professional development. “Ultimately,” she says, “I want to summit Kilimanjaro. As black South Africans we tend to be very insular. I also lived a secluded life, but now I want to go out there and explore other countries.” Ever since she has left her KZN-roots, Silindile yearns for travel. With her husbandof-12-years and children they go as far as Jozini Dam and the Drakensberg, but Silindile wants more. Her curiosity has been ignited and stimulated by the friends in her book club, which she warmly mentions more than once during the interview. Back in Johannesburg, the new Silindile’s is drawing comparisons between patriarchal systems of her own Zuluupbringing and Ayaan Hirsi Ali’s Islamic childhood in Somalia in the bestseller Infidel. “I have become much more empowered. I want to know why Rwanda is the cleanest country in Africa, I am curious about the situation in Gambia. My book club consists of well-educated and well-travelled people. Not long ago I would have said: oh my word, would they listen to what I have to say about these books? They used to say words I had never heard of. Now I can talk for hours.” l

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PUBLIC SECTOR Award-winning NAC CFO Dumisani Dlamini kicks off City to City Public Finance tour

Vision, analytical skills and education Award-winning National Arts Council (NAC) CFO Dumisani Dlamini took time off his hectic schedule to share his experiences as a CFO in the public sector at the first City to City Public Finance session of the year, held at the Menlyn Boutique Hotel in Pretoria on 15 February 2017. By Tiisetso Tlelima

he City to City Public Finance event series is an initiative started by CFO South Africa, giving CFOs working in the public sector an opportunity to learn, network and share challenges they face. “Public sector challenges are unique from those of their peers in the private sector, so that is why I asked Dumisani to come here and share some of his experiences, how he has overcome the challenges and what he has planned for 2017,” said CFO South Africa MD Graham Fehrsen, addressing the attending CFOs. The session began with Dumisani sharing his story, but soon became a vigorous discussion with the attending CFOs also contributing to the debate and sharing experiences from their respective organisations. CFOs from other public sector entities agreed that they often experienced the same challenges

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that Dumisani spoke about. Jacomien Rousseau, CFO of Umalusi, added that her organisation had to have an upgraded system as they were using old technology in the past. Irene Mathatho, CFO of Companies Tribunal, pointed out that everything was done manually in her organisation and that they had to put better systems in place to improve the organisation. Having weak human resources and weak systems and controls can cripple an organisation, said Phetsile Magagula, CFO of the National Metrology Institute of South Africa (NMISA). “When you have the right and correct systems in place, people start to believe you and definitely will follow your lead. I had to centralise the IT system and other facilities so that they operate from one place, which has made the organisation more efficient.”

Saving money Throughout the session, it became

clear that three elements are needed to run a public organisation successfully as a CFO: vision, analytical skills and education. The vision of an organisation is vital because as a CFO you have to show the organisation where you are going, so that you can get a buy in. Staff members need to understand the benefits of choices that a CFO has made. It is also important that CFOs speak the language and understand how the organisation works before they can offer recommendations on how to save money. The role of a CFO is not only to look at the budget but to help people come up with strategies as well, therefore it is essential that they understand the environment. Sometimes CFOs find that some organisations do not really care about the budget and it is their job to show the rest of the organisation that they can get the same thing for less money and more efficiently.

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the board was making decisions without having all the necessary information at their disposal, which led to an increase in expenditure. The CFO’s task was to ensure that there was regulation of expenditure before paying for consultants or buying new equipment or approving upgrades.

Do the work

expressed that sometimes the CEO and the visionaries in the organisation, although they mean well, have unrealistic expectations and their visions are unattainable.

“In the public sector everyone wants a clean audit but no one wants to do the work to get there,” explained Irene. “When I joined the Companies Tribunal, I had to analyse the situation, understand it and explain it to the staff. I had to balance the organisational mandate with the finances, which is not easy.”

Funding artists

A recurring theme throughout the discussion was how do CFOs marry vision and finance and make sure that the vision becomes a reality. Most CFOs

There was always a problem of over-expenditure of the budget, which meant that the organisation was spending more money than there was in the budget. For example in one situation,

Earlier, Dumisani told CFOs that when he first joined the NAC he had to consolidate two subsidiaries, which was extremely challenging because he had to work hard to form relationships and even harder to turn things around.

Dumisani encouraged CFOs to always find out where and how they can cut costs and save the organisation’s money. “Instead of having maintenance all year for printers for instance, call them only when the printers break. That way you save money.” Dumisani shared with the attendees that, when he arrived at the NAC, he realised that the organisation was not spending the money it was supposed to spend on funding artists. At the end of the financial year the bulk of the money the NAC was supposed to use to develop artists remained with the fund. However, since he came on board this situation has changed drastically and the entity is now offering R34 million worth of grants per quarter. l

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“What is the depreciation for the lions and the reptiles?”

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PUBLIC SECTOR Why National Credit Regulator CFO Ayanda Mafuleka is nicknamed Pravin Gordhan

Walk the talk “I have been nicknamed Pravin Gordhan because I always say there is no budget,” says Ayanda Mafuleka, chief financial officer at the National Credit Regulator (NCR). Last year, Ayanda contacted CFO Magazine, describing herself as “a normal girl from Umlazi township who dared to dream”. What followed was a fascinating conversation about achieving clean audits, accounting for lions and baby animals and following in the footsteps of her role models Nonkululeko Gobodo and her two grandmothers. By Toni Muir

“

I am a very hands-on CFO and I am very driven,” says Ayanda Mafuleka. Her organisation, the National Credit Regulator (NCR), falls under the Department of Trade and Industry (The dti), led by the affable CFO Shabeer Khan, who has been a nominee for the prestigious CFO Awards in both 2015 and 2016. Ayanda explains that Shabeer has been on a huge drive to ensure the entire department and all its agencies have clean audits, through ‘clean audit implementation plans’. “We take all the challenges and findings from the audit that were raised by the Auditor-General previously and come up with a strategy plan of how to resolve those issues,” explains Ayanda, who was presented with this challenge when she joined the NCR towards the end of 2014. “I had four months to achieve a clean audit, so I had a plan and with my team we set about resolving things. I must say, getting buy-in

from your colleagues at exec level really helps. They supported the plan from beginning to end.”

Public Service and Administration (DPSA) guidelines. That allowed us to get a clean audit.”

Ayanda’s role includes overseeing the financial health of the organisation and ensuring that it complies with all the financial management-related legislation, as well as overseeing supply chain management and IT. A firm believer in the value of education, she is currently doing a Postgraduate Diploma in Forensic Auditing and recently applied at Unisa for an undergraduate degree in law (LLB).

“Paying invoices within 30 days can also be a challenge in the public sector. We have been able to get it right, because we have implemented a system that sets the payment period to 20 days, so all of our payments are made on time. I have also tried to upskill the team, because some of the challenges have included limited skills in the team. So, I have made some informal training available. I am a very hands-on team leader and engage with even the junior members of the team.”

How did you achieve a clean audit in your first year? “There were findings that related to asset management, so one of the systems I implemented was an automated system to electronically account for assets previously accounted for manually. With IT, I was instrumental in fast-tracking the implementation of the ICT governance framework as per the Department of

“Stand your ground, knowledge is power and never compromise your values and principles.” CFO MAGAZINE • CFO.CO.ZA

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Who is Ayanda? “I am a Pisces, so I love to dream and to project the future. At the same time, I am an introvert and indoor person. During the week, it is NCR time but over weekends I like spending time with my two daughters (15 and four) and son (five). On Sundays, we go to church, as I am a Christian before anything else. I like reading and I have also joined my daughter in playing chess. She is a chess champion and she is giving me lessons.”

What are the most valuable lessons you have learnt? “Stand your ground, knowledge is power and never compromise your values and principles. Once you appreciate a piece of legislation, you will be able to walk the talk. That is very important, because people don’t do what you say, but they learn from how you do things.” “In the public sector, we do see values being put under strain or compromised, but whatever I do has to be informed by legislation. Fortunately, finance, procurement and IT are in a space that forces us to comply and adhere to standards. Whatever I procure, goods or services, is informed by prescribed legislation like the PFMA or National Treasury regulations.” What accounting conundrums did you encounter in your previous role as GM Financial Accounting at Johannesburg City Parks & Zoo? “At the Zoo we were dealing with the parks and open spaces, and management of the animals. What was so interesting about

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it, was that our assets were not only desks, chairs and computers, but also the zoo animals. The curators had to school me on how to account for the animals. For instance, what is the depreciation for the lions and the reptiles? When these animals give birth, how do I account for the babies? What is the market value of the babies? Understanding the operations was very different!” What is your approach to risk management? “Everything I do is informed by risk. The NCR’s approach is that it takes risk management very seriously. Thus, on a quarterly basis, my team and I identify risks and come up with risk mitigating controls. We have a risk register where we look at the strategic and operational risks and monitor them, and come up with ways to eliminate them.” What is your personal style of leadership like? “I am very passionate about empowerment. I’m a nurturing leader. I believe I am where I am because someone believed in me and empowered me. How do I build capacity? The budget is an issue, so we might not go for formal training, but I encourage my team to study and we also have informal capacity building initiatives. I also have an open-door policy because I want to get the best out of each individual.” What do you most enjoy about the CFO role? “As a CFO, I get a bird’s eye view of the entity and I am involved in the strategy development, as well as operations. For me to allocate budget I need to understand the needs of the organisation. I am privileged to be a CFO, because I work hand

in hand with the CEO and other executives, as what they do also has a financial impact.” “The CFO is not always the mostliked person because you are the one cracking the whip when it comes to finances. I know I have been nicknamed Pravin Gordhan, because I always say there is no budget. It has been challenging to communicate this and make the business understand that, at the end of the day, we need a clean slate as far as financial management is concerned.” How did you come to pursue a career in the finance industry? “Initially I wanted to be a lawyer. The OJ Simpson case really sparked an interest for law. My issue was that I stutter. I asked myself, what could be another career where I won’t be doing as much talking, but which I could do well? In 1996 I was in Grade 11 and came across a career guidance book donated to our school by Anglo American. I paged through it and my eye fell on the CA(SA) qualification. It was more about numbers than talking. I decided this was what I was going to do. I didn’t even do accounting at school, I did science subjects. It was difficult but I don’t have any regrets.” “I recently applied at Unisa for an LLB because I still want to do law. I am so passionate about legislation and compliance. So, I find

“Initially I wanted to be a lawyer. The OJ Simpson case really sparked an interest for law.”

myself reading a lot of that. I was made to be a lawyer.” As “a normal girl from Umlazi township who dared to dream”, did you have any role models growing up? “My role model was Nonkululeko Gobodo – the first black female CA. I got to know about her when I was in my first year of varsity. Before varsity I wasn’t sure what I wanted to be. My grandmothers were my role models in their own way, and most of the learning and values, and who I am today, is because of them.” “My maternal grandmother was not educated at all and has never worked in her life, but what I learnt from her is invaluable. I learnt reading at an early age, because I didn’t know then that she couldn’t read. She pretended she couldn’t see, so I used to read the Bible to her. She belonged to stokvels and used to ask me to check things for her. She taught me responsibility at an early age, although I wasn’t aware of that at that time. She was a dressmaker and I would go with her to sell the dresses and would be her money collector. That helped me to ensure I was wise with money, which has helped me in this career. I was a mini-entrepreneur through my grandmother, without being aware of it.” “My paternal grandmother was a nurse and I saw ambition through her. One day she told me I needed to do better than her. She said I couldn’t be a nurse, so I said I would be a doctor. She sent me to a good school, a Catholic school, paying my school fees with her retirement money. She was educated and taught me the importance of education.” l

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BANKING Standard Bank’s Sean Berrington shares agility secrets for finance

Billion dollar IT CFO “You would be surprised at what you can achieve with the right mindset, collaboration and initiative,” says Standard Bank’s Sean Berrington in a candid conversation about change, agility, communication style, core banking transformation and his new job as CFO for Group IT. By Ebrahim Moolla

ince mid-2016, Sean Berrington is the finance boss of a “billion dollar IT organisation”. Add to this his intimate experience with agile ways of working, and the CFO for Group IT at Standard Bank might just be the ideal person to talk to about the crossroads of threats and opportunities that technology and finance bring to banks and finance professionals. It was supposed to all be very different, with a younger Sean telling his friends that they should question his sanity if he would ever end up in a core finance role. What happened in real life was that Sean became a chartered accountant, learnt about the banking environment at PwC and then joined Standard Bank to spend three formative years as head of finance for its (in)famous core banking transformation. After another three years as finance head for IT at Personal and Business Banking, Sean was promoted to become the billion dollar IT CFO of today. Core finance. Really? “Throughout my articles I never

dreamt of being a CFO. In fact there are a few occasions that I remember distinctly telling my mates that I would ‘have to have my mind read if I ever ended up in a core finance role’. In the early days I honestly didn’t know where or what I wanted to be and as time went on I set my career ambitions of becoming a partner in the broader IT consulting sphere.” “On returning to PwC South Africa after a few years abroad, I was given the opportunity to lead the Standard Bank IT consulting relationship, which, after a series of engagements, culminated in my being appointed by the bank as the Finance Head for the core banking programme. One thing led to another and, on the jungle gym that has been my career I have ended up as the CFO for Group IT. Reflecting on the short time I have had in this role so far, I am convinced that I have taken the right step. I couldn’t, however, have projected the journey ten years ago. It is the right place for me and I believe that the combination of deep IT and finance skills is invaluable to being an effective CFO for IT.”

From consultant to corporate: “a complete blur” “As a consultant you often have the luxury of making recommendations, issuing your report and then disappearing until the next engagement or report, never really having to deal with the long-term implications of your findings or, in the case of core audit engagements, having to deal with the implementation of the recommendations.” “With this in mind, the first year of my being in a corporate was a complete blur. Outside of the fact that I now had to deal with the implementation of my own recommendations and didn’t really get this finance thing, I was also delusional as ‘I thought I knew the bank’. This being said, I had a great set of sponsors in the bank, I had a pretty good understanding of ‘what good looked like’ and I had the will and determination to get this right. A few mistakes, reprimands and near misses later we got it right. “We built a small team from scratch with people from non-traditional banking environments,

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we drove the outcomes as best as we know how − not prejudged on existing organisational mindsets − and started seeing the benefits of our investments. Despite the fact that I have been in the bank for a few years, the team still adopts some of these principles today.” How to replace a bank’s core “Those of you close to the banking industry will know that Standard Bank started its core banking replacement programme a few years back with the intent of digitising and replacing its legacy processes, of which some were more than 40 years old, with a new, agile platform, namely SAP Core Banking.” “Being at the helm of the finances for the programme was tough. Besides the operational requirements to ensure that we stayed abreast of the finances for the hundreds of resources working on the programme, we were also required to develop a robust forecasting model, develop a robust business case supporting the programme and ensure that the business case was appropriately represented in the strategy. In addition to this, I was expected to actively participate in the operational management of the programme, giving me great insights into the juncture between IT, business and finance.” “Through this process, I also assumed responsibility for design of the financial processes within the core banking programme, allowing the opportunity to design frictionless financial processes from the bottom up, a privilege very few people have the opportunity to do.” What has happened since your promotion? “I never wanted to be ‘that guy’

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Sean’s lessons from the core banking transformation 1. It is impossible to manage every component of a mega programme. Make sure your processes are robust and you have a strong team to support you. 2. Make sure you have a key set of principles and stick to them. You cannot remember a different set of principles for every scenario. 3. Because of the above and the guarantee of consistency it will bring, do not be scared to ask tough questions.

who walked in and made sweeping changes. In fact, in one of the first few days I had in the role a staff member made a com-

ment to me ‘you know, Sean, that is how it is. The new broom will sweep clean' and this comment has stuck in my head. Influenced

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by this I have undertaken my role with the following five principles in mind: lead by example, take the team along on the journey with you, be willing to get into the detail, challenge and be challenged, and say it like it is.” Resistance to change at the oldest bank in town “My philosophy is that if you need to do something, just get it done. A lot of people in any organisation often express frustration at their inability to influence changes, but you would be surprised at what you can achieve with the right mindset, collaboration and initiative. I have not found Standard Bank to be at all resistant to change, in fact it is very change resilient given all the ongoing change within the organisation. Sure, Standard Bank is a complex organisation with ingrained legacy systems that make effecting change harder, but sometimes all it entails is asking the right questions, owning the problem and then driving through to resolution.” Balancing operations, IT and independent finance teams “You can’t be an effective CFO if you don’t know your business. When a tough problem pops up, it is important that you understand the context, the drivers and the levers that can be pulled to get it resolved. My deep understanding of IT in my role allows me to recognise the problem, the influencers and opportunities for resolution. IT is a black box for most people, but I am able to harness my skill set to hold constructive conversations that lead to investigation.” “IT does excite me and I want to get involved, but as a CFO I always have to have a degree of impar-

tiality and independence. With this context in mind, I encourage my team to get engaged and understand the business of IT. I encourage them to get into the work and to work with their business partners to solve problems, but regularly remind them about the need to be independent. It is important that they never get to the point where you have to manipulate a number or feel uncomfortable reporting a number, because then you know you have crossed the line.” Ringing the changes − agility “Standard Bank is fundamentally transforming its IT function. Moving from a stoic, ‘command-and-control’ type function to an agile, self-governed, engineering-led organisation. At the heart of this is a cultural transformation, the implementation of the Scaled Agile Framework − where more than 2,000 people have adopted agile ways of working in feature teams − numerous technical transformations and the need to achieve certain affordability targets.” “Through this process Standard Bank has been able to improve the cadence and speed of delivery of change, has seen significant improvements in employee engagement and has seen improvement in the cost of IT delivery. While not the primary intent, Standard Bank has also received numerous accolades and recognitions in the process, with Standard Bank often being referenced in conversations as being pivotal to the transformation of IT in South Africa.” Ringing the changes − communication “In the early days of the Group IT transformation it became

sean@home “I have a grossly overspecced fibre line at home and enough connected devices to embarrass most people. When I am not trying to get the darn thing to work, I am working on my home, going for a run or spending quality time with my wife, daughter and dog.”

clear that, unless the finance team transformed as well, we would become irrelevant. As a result we needed to radically relook at how we run our staff engagement and processes.” “Through this we adopted a more inclusive communication style. This is fundamental in all we do. Not only are we more open and communicative as a team, but we are also more inclusive in how we run certain of our processes, for example our month-end process consists of a series of ‘stand-ups’. Through this we have seen greater accountability for numbers, more predictability, less surprises and more stable numbers sooner. “We have also visualised our work through the use of Kanban walls. This is a great way to visualise all tasks in flight, prioritise and ensure accountability. This way the actions have collective ownership and there is clear transparency of when things are not on track. This has been great in ensuring the team owns the outcome.” “As a result, we are also starting to see greater staff engagement and more reliable and predictable numbers.” l

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BANKING Three unavoidable challenges facing banks according to futurist Keith Coats

Adapt or die The banking sector is under siege. From regulatory restrictions to new entrants into the financial service sector and from inherent IT legacy constraints to increasing customer expectations, the industry is facing some very real and present challenges. Futurist Keith Coats, director at TomorrowToday Global, says it is time for banks to face their demons. By Keith Coats

hy bank at all? It is the kind of question that can easily be dismissed with contempt, but it is one that shouldn’t be. It is the kind of question that invites us to challenge entrenched assumptions that underpin the banking industry. In order to adapt, challenging such assumptions, is essential. Several years ago, the Economist suggested that ‘real innovation’ was not about ‘product and service’, but rather it had to do with the ability to change one’s ‘business model’. Banks will need to rethink their traditional business models. In order to be futurefit and to meet the demands embedded in the future, banking will need to adapt. Banking will need to change the way things are done and will need to bring the delivery closer to the rhetoric. Here are three challenges banks are facing that will determine their future.

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1. The digital revolution The pressure from both customers and regulators means that banks simply do not have an option but to embrace digitalisation. The growing open banking initiative, as it has been called, means that smaller rivals to the big banks – both smaller banks and financial technology firms, will be able to build services onto existing customer accounts. What this means is that these smaller, more nimble competitors will be able to extract financial value and service benefits from existing clients of the big banks. The account holding bank will incur all the costs of maintaining and keeping that account, but the competition will extract the benefits of leveraging that account. The complexity and antiquated nature inherent within big banks makes it difficult to compete with this type of competitor, but the only real choice bigger banks have is to either partner or compete. Such partnerships point to the future

and will be the means whereby big banks can enter that future. Of course, the smartphone, smart devices and wearables are the weapon of choice for the customer. Many new banks are operating on a ‘digitally only’ platform and this type of service appeals to a generation that inhabit such platforms. Banks simply have to embrace digitalisation and their capacity to do so will ultimately determine their cost base, risk management and profit margins.

2. Rebuilding trust Last year Reuters reported that since the economic crisis of 2008, the top 20 global banks have had to pay approximately $235 billion in fines. A cultural change, greater transparency and accountability are desperately needed. Banks are slow to grasp this need and are even slower to innovate towards correcting this legacy constraint. In a survey on public trust in companies by sector, the finan-

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cial services sector rated stone last, being only trusted by 51 percent of respondents. Companies in the technology sector fared best with a 74 percent rating. Public trust is hard won and easily lost. Banks seem to not fully understand the public sentiment that holds them in contempt due to issues ranging from poor service delivery to unscrupulous charges and distorted executive pay-outs. Across seven metrics of the public’s perception of the most important trust-building attributes (such as: treats employees well, listens to customer needs and feedback, transparent and open business practices and takes responsibility), banks failed to match expected performance in every single category! In Capgemini’s World Banking Report 2016, it was found that 90 percent of banking executives acknowledge the need to innovate, especially in the face of the rising threat from FinTech. However, performance measures reveal a significant gap between this acknowledgment and the actual ability to implement the necessary innovative steps and process. The problem is not only the inherent inability to innovate but also the low trust base that meets any such innovative initiatives from big banks. Banks are in desperate need of rebuilding public confidence and trust, yet many of their pronouncements and actions do not seem to acknowledge this reality.

3. The adoption of big data Big data programmes will enable banks to not only be smarter in personalising their service and product offerings but also in managing their risk. There are several internal barriers to big banks

adopting big data, including current limitations concerning data integration capacities, a lack of in-house tools and skills, a lack of corporate vision and understanding of how important big data is to the future, and the costs of investment required to install big data capacity. Some powerful external forces are driving the need for banks to incorporate big data projects. These forces include compliance, regulation and legislation, customer demands and broad generic economic pressures.

even straightforward in a sector weighed down by both regulatory as well as systems legacy issues. However, in the face of fast-moving competitors who are more nimble, agile and perhaps hungry – competitors who are simply taking the bank’s most profitable customers and who understand the new platform that is blockchain, the challenge facing banks and banking executives is urgent as it is unavoidable. How these leaders and institutions respond to these challenges will determine their future – in fact maybe their entire existence. l

Big data is already being utilised in governance policing as was evident in the LIBOR and FX rate-rigging investigations. Big data is reshaping the medical and pharmaceutical sectors through the sheer capacity of analysing information, making reliance on human analysis and advice obsolete. Big data, AI and the technology to deliver this seamlessly to the consumer will be what shapes the future of banks and the financial sector. Some of this is still a way off, which perhaps makes it easy to be complacent or lazy in understanding both the threat and opportunity. Nonetheless, it poses a very real and present danger to those who choose not to ‘look out the window’ or who believe that yesterday’s logic will be sufficient to meet such turbulence. Of course there are many other challenges that banks will need to confront in order to be futurefit. None of what needs to be done is easy or

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BANKING N26 CEO Valentin Stalf reveals the secrets behind one of the world’s hottest FinTech startups

Building a bank from scratch “We have debunked the myth that banking is very complex,” says Valentin Stalf, co-founder and CEO of mobile bank N26, perhaps Europe’s best new bank on the block. We chatted to Valentin about the practical steps an entrepreneur needs to take to turn a brilliant idea into a thriving business. Money or even licensing are never the problem, he says. “Your success depends on your business model, your team and the customer feedback you generate.” By Joël Roerig

anking is like Formula One. Valentin Stalf’s observation comes a day after he has returned from the famous Monza race track north of Milan in Italy, where N26 was invited as the Fast Companies Series partner by British Formula One racing team Manor Racing. “Of course it was very cool to see our logo there,” Valentin says with a broad smile. “But when you are on the grid and in the pit lane, you also realise Formula 1 is a big myth. Just like banking, people think it is really complex. When you get closer to the action, you realise it is a group of normal people working on cars.” Besides N26, the people behind trendsetting apps Airbnb and Shazam were also invited to the race, with the logos of the three successful startups plastered on

the rear wings of the supersonic vehicles of Pascal Wehrlein and Esteban Ocon. For Valentin, it was proof that his 2013 startup, now one of the fastest growing retail banks in Germany, is among today’s best entrepreneurial ideas. Simplicity is the key to the success of the N26 app. The N26 team spends a lot of time working on algorithms “that learn with our customers”, enabling the app to automatically classify spending into relevant categories. The app includes popular features like cash withdrawals at retailers (CASH26) and money transfers via SMS or email (MoneyBeam). “In the long term, we build a smart bank to help our customers to find the right financial product or even advise you to buy a flat rather than to keep paying a landlord. We can

help people by showing them the opportunities that they have and what they are missing out on in a complex jungle of financial products.”

Extreme customer focus Any business, whether brand new or 100 years old, will say it focuses on customers. As the Uber or Spotify of banking – and to even set them apart from other neobanks – N26 takes this to the extreme; it only takes eight

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minutes to open an account. “For us it is about the execution and making people really love the product. On average, people log into the app at least every second day. That engagement provides many new opportunities.” A massive game changer for N26 came on 26 July 2016, one-anda-half years after the product launch, when it was awarded its own banking licence by the Federal Financial Supervisory Authority (BaFin) and the European Central Bank, allowing it to operate separately from other financial institutions – across the whole of the European Union. Once again, simplicity was the secret. Valentin proudly explains how, contrary to common belief, you "don't need an army of consultants, a battery of expensive tools and decades of experience" to comply with banking regulations.

Read the law “There are a lot of things that you don’t need,” says Valentin. We figured out that, when you are a small business, like us, and have the right IT infrastructure in place, you don’t need most of the commonly-used, expensive software, which takes half a year to install and requires a staff of 20 people to maintain. The most important thing is to be focused on what is needed to comply and sometimes that means to rather read the law than listen to consultants.” As a startup that challenges the old ways, even the old ways of complying with regulations, a very good relationship with the regulator is paramount, says Valentin. “To do it differently you need to be very close to the regulator. And you need

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to be very operational in what you are doing. Often the discussion around regulations is very abstract, which allows for so many companies and consultants to chip in. The main thing is to understand what the regulator wants.” The only way to eat an elephant is one bite at a time, which is why N26’s adventure started as an unassuming debit card for teenagers and an app for parents to control their offspring’s pocket money. “We looked at the consumer side of banking and recognised how slow the industry is in Germany and Austria,” explains Valentin, who grew up in Austria’s capital Vienna, studied in Switzerland and worked for Berlin-based Rocket Internet, which spawned many of Europe’s brightest FinTech entrepreneurs. Whereas ‘Rocket’ focused on the B2B space, Valentin started seeing opportunities in the way banks interacted with their clients. “Those established players are just burning money and their fee structure is very complex. At the same time, five of their advisors will give you five different answers to one simple question.”

Teenagers With his friend Maximilian Tayenthal, Valentin launched Number26, as the startup was initially called, partnered with Germany-based financial services company Wirecard, and rapidly grew a base of 200,000 excited users. “In the beginning building our own bank sounded so big,” Valentin admits. “That is why we first started with a pocket money solution for teenagers and went into a test phase with that. Teenagers received a

prepaid MasterCard and both parents and kids had access to an app to have a clear overview of the spending.” As entrepreneurs often find out, a good idea runs away with you. “People were using it for themselves, not for their kids. We received many calls from customers saying they wanted to use the app and the card for themselves.” As visionaries, Valentin and Maximilian were not taken entirely by surprise. “Building a bank had always been on our minds. From a technological side, it is not completely different. The product we have now is very similar to what we had for teenagers: a card and an app that sends push messages. We had also already established the online signup process. It is very similar to our key selling points today.”

“For me personally, the approval from the traditional regulator means the world.” Banking licence Once the feedback came pouring in, the next goal was their banking licence, which allows N26 to widen its platform from payments to savings, credit and investments – all from the same app, but sometimes powered by partners. The banking licence changed the rules of the game. “For me personally, the approval from the traditional regulator means the world,” says Valentin. “It means that we are able to be disruptive in an industry that is a thousand years old. Existing

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banks assumed licensing was too big a hurdle for a startup and we proved them wrong.”

lying regulation can still be very country-specific.”

Global bank

It also debunked the myth that banking is too complex for new entries, says Valentin. “You have to be close to consumers, but very few traditional players understand what matters for digital natives when it comes to mobile. Bigger banks are all organised in multiple layers and a lot of unnecessary complexity is created. We saw it during the financial crisis, where no one understood what was going on. As a customer-facing business, your focus needs to be on a specific problem that the customer has – and how to solve that. It is simple. Many traditional banks use the heavy regulations as an excuse to not be innovative. For us, it is because we have the licence that we can be much more innovative and offer customers something more.”

Valentin is quick to answer “yes!” when asked if a viable global bank can be started from scratch within ten years. But for now, the focus is on Europe. “We have only a little over 200,000 customers at the moment. What I have noticed is that banking needs around the world are not dependent on which country you live in, but rather what your lifestyle is. It doesn’t matter if you are in Europe, the United States or Asia. You might have different appetites for investment risks, you may use a card or app more or less, but you still want products like cashless payments, credit lines and investments. There are differences, but basic banking needs are the same. But does our management have capacity to go into the US and China now? No, not at the moment.”

N26’s fast ascent in Germany and Austria has been made a lot easier by recent changes in the law that allow for the use of video chat in Know Your Customer (KYC) processes – enabling customers to have their identification verified without physically having to meet with an N26 employee. So far N26 has launched in France, Greece, Ireland, Italy, Slovakia and Spain. While its banking licence is valid in the whole European market, associated regulations like KYC still prevent rapid expansion towards a ‘borderless bank’, says Valentin. “The vision of the EU is great and, fundamentally, the law is there that I can pay in Austria with my account registered in Germany, but some companies are still guilty of IBAN-discrimination. And under-

But what about security, isn’t that something big banks have to pour millions of euros into? Isn’t that hard to match for a startup? Valentin’s simple answer is that the investment does not need to be matched to reach a superior security level. “Our advantage is that our system was built in 2015 and 2016, whereas a lot of players are using systems that are 20 years old. If you bought a car 20 years ago, it will also not be as secure as a new car you buy now – no matter how well you have maintained it.” It brings up the classic FinTech question: are banks going to die? “Big banks have such a high market concentration. It is hard to imagine they will completely disappear, but there will be a big shift in market shares in the next

“Bankers of the future will be developers, designers and risk modelling people instead of personal advisors.” ten years. Bankers of the future will be developers, designers and risk modelling people instead of personal advisors,” Valentin predicts. “It is hard to transform with 100,000 employees, but the big banks – Deutsche Bank has 27 million customers – should be able to leverage their existing customer base. If you have so many customers, you can do a lot of great things.”

Product market fit With so many FinTech entrepreneurs vying for fortune and fame, Valentin’s thoughts on the way to develop an idea into a success provide a lesson for all. “We lost the most time ourselves because we started with the product for teenagers. For us that step was necessary, but it also meant our aim was lower and we were happy with ten new customers a day, while we now register over 1,000 new customers on a good day. If I could do it all over again, I would spend more time on the product market fit before starting the company.” Launching an MVP – a minimum viable product – is much harder in FinTech than in other industries, because there are so many regulations, says Valentin. It is hard to start collecting proper feedback on user experience, if you do not go through all the licensing steps, which requires

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a lot of upfront investment – of time and money. “That is often the problem,” says Valentin. “People have an idea, but no proof that others would use it. For example, if you ask anyone if it would be cool to transfer money anywhere in the world with one click, everyone would say yes that is cool. But how do you get a critical mass? Where is the business model?” A sound business model with margins, which shows the complete picture, is a crucial start for an enterprise and one that quite often gets skipped over too quickly by overenthusiastic entrepreneurs, says Valentin. “Then it is also crucial to get honest feedback from customers. If I ask my friends, they will all say it is great but nobody will buy it, so you might need to develop your idea a bit further towards an MVP, without going the whole way. Once

“There is so much money with venture capitalists and they all search for the best teams.”

you have enough information, start immediately before everything is set up. The third crucial aspect for a FinTech firm is the regulatory side, but that you can usually manage.”

The best team But what about the money? Aren’t the investors the ones calling the shots? Not at all, says Valentin. “Money is not the problem if you have the right team that executes well. There is so much money with venture capitalists and they all search for the best teams.” N26 has raised more than $50 million to date, including a $40 million round recently. PayPal co-founder and renowned Silicon Valley investor Peter Thiel is one of the financial backers. Valentin warns his peers that feedback from investors can be extremely useful, but your business model and the way you tackle regulatory issues, you have to figure out yourself. “As FinTech is a very complex field, only some very specific investors will be able to give input on your development. The majority of VCs don’t have insight to add to a business, whereas entrepreneurs like us spend 24 hours per day building it.” Investors can contribute useful insights to market sizes, says Valentin. “It is also very import-

ant to know if they like your team. It is never bad to get feedback, but you need to be the one calling the shots and take responsibility in the end. At N26 we always had a clear vision and then reflected on feedback throughout various funding rounds. Investors bought into our vision of a disruptive mobile bank and the first investors in the teenage product were rewarded – even though our strategy changed dramatically.” One of the next steps is developing “cool products” for businesses, “which are charged extremely high fees and get bad products by banks”, says Valentin. “You cannot open a business account without having to pay a couple of hundred euros.” With 2016 being a year of “completing our platform and growing from a niche player into a bank”, next year will focus on internationalisation, growth and offering the full suite of banking products, including payments, financing, credit and longer loans – mostly through collaboration with FinTech firms that are successful in those niches. “We want to grow our customer base from 200,000 to 1 million and we want to work with other FinTech startups and the best products of traditional players. We are not doing this for a fast exit. We want to build something big.” l

African FinTech Awards 2017 The pitches and the festive ceremony of the African FinTech Awards 2017 take place on 12 October 2017, during the first day of Finance Indaba Africa in the Sandton Convention Centre. Meet 400 hand-picked entrepreneurs, bankers, investors and advisors, demonstrate thought leadership, extend your network and develop your business. Sign up for the African FinTech Awards today. www.fintech-africa.com | www.finance-indaba.co.za

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CIMA CFO PROGRAMME POWERING THE SUSTAINABLE SUCCESS OF YOUR CAREER The CIMA CFO Programme is an exclusive pathway for CFOs, CEOs and Senior Financial Managers who have more than 10 years strategic experience in finance, are members of a recognised IFAC body and hold a MBA or Master’s degree in accounting or finance. Under this fast track programme, candidates will only sit the last paper of the CIMA qualification. With successful completion and the relevant work experience, the candidates will qualify for CIMA membership and earn the professional global designation of Chartered Global Management Accountant (CGMA). Candidates who are accepted into the programme will attend four workshops conducted by a CIMA tuition provider to prepare them for the exam – a three hour case study exam which involves the application of strategic management accounting techniques to analyse, recommend and support decisions, areas which fall within the job scope of CFO’s and senior management. The Programme costs an all-inclusive fee of R40 000 per candidate. Apply now by sending your detailed CV to cfo.sa@cimaglobal.com Closing date for applications is 30 April 2017

REGISTRATIONS NOW OPEN

4th Floor, 54 Melrose Boulevard, Melrose Arch, Melrose North, Johannesburg T. 0861 CIMASA (0861 246272) / +27 11 788 8723 www.cimaglobal.com

BANKING After the financial crisis: six questions for Citibank SA CFO Nico Botha

Peel back the onion Global political and economic ructions mean uncertain times for the banking industry. We chatted to Nico Botha, the well-travelled CFO of global banking behemoth Citibank’s South African operation, about his experiences abroad, transition and the challenges the industry faces in 2017.

ico Botha has been a chartered accountant since 2005, but chose a different career path than most. Together with his wife, he relocated to London in January 2007 and started his career in banking. After controllership roles at Goldman Sachs and Credit Suisse, and an accounting policy job at UBS, Nico joined Citigroup, the company that would eventually bring him home.

1. You worked out of London for many years. What did your role for Citi entail? “I joined Citigroup’s Accounting Policy team in July 2011, with a remit to widen the IFRS knowledge across the bank and develop formal IFRS accounting policies for the group. In April 2014, I was appointed the head of Accounting Policy for Europe, Middle East and Africa, covering all Citi’s businesses in that region. I was leading a team responsible for providing technical accounting guidance under both US GAAP and IFRS for new and complex transac62

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tions, new accounting standards implementation as well as providing input and comment on proposed new standards to the International Accounting Standards Board (IASB).”

2. What key lessons did you take away from your experience there? “I arrived in the UK about 14 months before the 2008 financial crisis began, so most of my career in the UK was post the crisis. Although there were incredibly uncertain times during the crisis, it was very exciting from a career point of view with ample opportunities to learn and develop. There were so many unprecedented issues which arose, that one had to develop a creative way of thinking in order to find solutions.” “A key lesson that I took away from my experience in London, and especially during the heights of the crisis, was that in the most challenging of times, when faced with the greatest adversity, most great leaders I have encountered have the ability to stay calm

and collected. Another lesson I took away from my experience in technical accounting is to fully understand any issue that arose, to ‘peel back the onion’ as some folks would say. Developing an approach of fully grasping a topic, seeking the root cause of an issue, coupled with a questioning and investigative mindset, has served me well in my career thus far.”

3. What has the transition been like in returning to South Africa? “It is really good to be back. South Africa is such a great country, and despite all the negative publicity that sometimes dominates the papers, there are so many opportunities. The people are fantastic, with so many smiling faces around. I sometimes think that people do not realise how fortunate they are to be living in South Africa. I deem myself fortunate to have been able to gain that perspective from my time overseas. The transition has been fairly easy, as in a way it is coming back home, with the added benefit of continuing my career with an organisation I am familiar with, albeit in a different role.”

BANKING 4. What are the key differences between operations in London and locally? “The only key difference is that the local operation of the South African franchise is much smaller than London in terms of employees. There are approximately 9,000 employees in the UK, versus approximately 300 locally. What I appreciate about only being about 300 local staff is that one feels more intimately involved with different aspects of the local franchise and relationships with other colleagues feels more personal.”

5. How do you view the local banking sector?

6. What developments are you keeping a close eye on in 2017?

“Established, sophisticated and safe. South Africa has the ability to produce great talent and that certainly benefited. The banking industry over the years to reach a level of sophistication that competes with the best in the world. Banking regulation in South Africa is also at the forefront and certainly contributes to establishing a safe banking sector, with South Africa being one of the first countries to fully adopt IFRS as well as implementing Basel 3 for prudential banking supervision by the South African Reserve Bank.”

“Political and economic uncertainty in South Africa will remain during 2017, and may have a significant impact on the local banking sector. A potential downgrade of South Africa’s sovereign credit rating remains a risk. There continues to be developments in the regulatory space, and more so than ever, is affecting a bank’s strategy. It will be interesting to see how regulatory requirements such as Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) impact the local banking landscape during 2017.” l

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TECHNOLOGY V&A Waterfront CFO Narriman Taliep reflects on what makes a great finance exec

IT savvy and boardroom skills “I believe that any CFO in business today needs to embrace and get on top of technology,” says Narriman Taliep, CFO at Cape Town’s bustling V&A Waterfront. We chat to Narriman about managing for change, dashboards that tell stories and the communication skills required in the boardroom. By Kate Ferreira

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We are targeting growth in excess of standard escalation in a somewhat restrained property industry market,” says Nariman Taliep, explaining that Cape Town’s famous V&A Waterfront has invested heavily into development and bringing new tenants and business into the district. The V&A Waterfront is one of Cape Town’s biggest rate payers, so it is crucial that its money is well-watched. Narriman – whose full title is Executive Manager: Finance and IT services at the V&A – has climbed the ranks in the organisation over 13 years, through its three owners. “I audited the Waterfront before joining them directly,” she explains. “I was approached by the then-finance executive to come across. I worked in various roles from the days of Transnet to the now shareholders Government Employee Pension Fund and Growthpoint. It was a period of many changes and we had to find stability at all levels again.” That stability always had to come with growth, but these days that is not easy to come by, Narriman admits. “There are not many properties to purchase that will give you great yield. So we aim to continue trajectory growth while also continuing development. We are a platform for job creation, a key strategic initiative, and we are strongly aligned and committed to the National Development Plan.”

Fibre installation The finance team that Narriman leads is centralised within the structure of the V&A. “Everything that is finance runs through this team, including

reporting,” she says. “We are also responsible for broad-based black economic empowerment (B-BBEE), insurance, rates, valuations, taxation strategy, and compliance. We manage internal audit on behalf of our board of directors.” One of Narriman’s most important portfolios is IT. This includes the V&A’s single-trench fibre installation that forms the backbone of connectivity and security provision in the district, and the extensive internal network, hardware and software. She is excited by the challenge this represents, arguing that any opportunity to learn – especially about technology – is to be welcomed. “For me, this is the future. It is a necessity, not a luxury,” she explains. “So the question is which aspects of the technology do you take on now, and how do you manage it.”

“You can’t stop change or decide not to take technological innovations on board. In a short time you will find yourself outdated.” The choice is not if, but how, she warns: “You can’t stop change or decide not to take technological innovations on board. In a short time you will find yourself outdated. Our core business remains property and development, but IT is an enabler. I believe that any CFO in business today needs to embrace and get on top of technology. It can only add value to a business.”

Plan B Narriman describes her leadership style as “outcomes based”, and believes that she is in the business of creating the next set of leaders in her division. “I want my successor to come from this team, so I push them. I want them to find the answers,” she says. “This can be uncomfortable sometimes, they must be willing to live with the consequences of their proposed solutions.” Of course, that does not mean free rein in the finance department. Rather, Narriman says she continues to play the oversight and guidance role she needs to play. Some mistakes are, naturally, not an option, she adds. "So I always have to know my Plan B or when I have to step in, which items are not negotiable, which ones can fall over. But I do believe you need to give people the space and opportunity to learn and make mistakes.” Creating this environment of trust and responsibility is critical to success, and this kind of relationship building – Narriman argues – a big part of the new set of skills CFOs need in a changing and shifting work environment. “If you have good relationships with your staff, your seniors, your consultants, then you have partnerships. You work in partnership towards the same end.”

Boardroom skills There are two other key skills that Narriman believes will set good CFOs apart in coming years. Firstly, the ability to embrace change – change in both business processes and in technology, to make the most of the efficiencies that result from these changes. Secondly, Narriman emphasises the need for robust, dynamic communication skills CFO MAGAZINE • CFO.CO.ZA

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“A big part of my role is managing expectations, those of the people reporting to me, among my peers at the executive tier, and at board level.”

in the boardroom. “This is not about talking to people in the traditional sense, but rather how we communicate business information in new and different formats,” she says. “When you look at reporting, you need to consider the value you are delivering. How do you reflect in the report what you are seeing on the ground? How do we join the dots in this business? How does a finance dashboard appeal to an operations person? We need to start telling the story, and start embracing this kind of communication.” This flow of timely and relevant business information is a major concern of Narriman’s – not just within the reporting structures of the V&A, but in managing expectations up and down the hierarchy of the organisation. And she believes this function should be a focus for any CFO. “I believe

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as CFO a big part of my role is managing expectations, those of the people reporting to me, among my peers at the executive tier, and at board level. Managing the expectations of your board of directors, in terms of what is coming, is such an important layer. To find yourself in a situation where your colleagues and board don’t know what is coming could mean your credibility.”

BAT and PwC This foresight and insight will come from a switched-on team too. Narriman will be looking for more analytical skills within team members, for people who can “see beyond the numbers”. “Yes, we have a core business, but we must also understand footfall, retail sales, commercial markets, why people are coming to the V&A, and why companies like BAT and PwC prefer the V&A as their office location,” she says.

“We need to know what they, our tenants, are looking for, and where their businesses are going. We need to put in the extra effort to understand what is happening in the markets, what is changing politically, and what it means if forex fluctuations are increasing. I want to be surrounded by people who think with me at this level. This is where our value is as a finance team.” Having spent much of her working life in an organisation brings with it considerable institutional knowledge, but it remains a place of learning for her, and that – she says – is one of the reasons why she has always stayed. “With all of the changes through the years here, I found the opportunity in each one to grow. We are not a small company, but neither are we exceptionally big. This gives me exposure to different layers of people, and I thoroughly enjoy this. When you work for the Waterfront, there is never a day where you walk away from the office and say ‘I now know everything there is to know about this role or this company’. It is what you make of it, and how you respond. That is the platform that the Waterfront has given me personally.” l

TECHNOLOGY Confessions from hacker Sean Howell and Standard Bank IT chief Graham Blain

CFO Summit: cybercriminals target finance Does it take a major cybersecurity breach for you to start taking hackers and online criminals seriously? Or have you learnt from the corporate disasters of the past and listened to the experts? CFO South Africa recently brought some thought leaders under one roof to discuss the topic with a large group of finance executives.

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For hackers, finance is a significant trusted path into organisations and, as a CFO, you will be a target, like it or not,” said Graham Blain, head of IT Governance Risk and Compliance at Standard Bank. Graham was part of the expert panel of the incredibly well-received masterclass The Art of Breaking In, one of the most popular sessions during the first CFO Summit of 2017, which took place on 22 February. Sean Howell, a professional ‘ethical hacker’ and managing director of Redshift Cyber Security, was the other expert on hand, explaining that traditional information security is about building a broad defence, cybersecurity is really an attacker-centric approach. “It is the knowledge of your attacker that drives your cyberinitiatives,”

he said after being introduced by the dynamic masterclass moderator Didi Sehume. “You can spend every cent you have on cybersecurity and still be hacked. The solution is to focus your efforts. Companies should spend money based on realistic attacks that are likely to occur. They need to understand hacker tools and techniques and their specific pathways through the organisation.” Sean is offering his services and IT savvy to the ‘good guys’. In a lively lecture and demo, which participants afterwards rated nine out of ten, he provided some unsettling insight and encouraged CFOs to start thinking like attackers in order to best protect themselves and their organisations. He also emphasised that no businesses are safe from attacks

or risk, as all businesses possess information that it vital to their operations and thus vulnerable to exploitation from hackers. “You have to think about what is valuable in your business, whether it is intellectual property or financial information.” Cybercrime is a global threat to any person and every organisation with a digital footprint, to the point that the World Economic Forum puts it high on the list of global risks every year. In 2016, a 752 percent increase in ransomware resulted in $1 billion in losses for enterprises worldwide, according to Trend Micro’s annual security roundup report that was published in March this year. There seems to be no end to security breaches of large corpo-

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Sean Howell

rations, which have had massive implications for not only their profitability and reputation, but society as well. This is why it is important for top executives, CFOs in particular, to have a sense of urgency in approaching matters of cybersecurity.

Lazy Although many companies have security systems in place, they have more vulnerability than they know, and this is how hackers thrive. During the masterclass Sean called it the trusted path, saying that it is what attackers perceive as the easiest way to break in. “They are quite lazy so they won’t go to where the most security controls are. They will infiltrate systems by getting low-level employees’ access credentials to break in. That way, when they perpetrate hacks, it seems as if it is someone in the company that is doing it. It could be done by getting the payroll administrator, for example. Firewalls are not walls at all. Attackers don’t look at a firewall

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and think, let’s smash it down.” Getting logins can be particularly easy, especially because there is always someone in the organisation who uses a basic password, like Password1, for example. And to find that person, hackers simply try that password for each employee, using LinkedIn to get their full name and surname to use as a username. After explaining the basics, Sean did a demonstration showing CFOs how easily a phishing attack worked, creating a clone website of the CFO.co.za website, which took all of five minutes. During the demonstration, he also showed how easy it was to create macro spreadsheets which, once clicked one, give a hacker complete control of a particular machine. “Information on how to do this is freely available on the internet. There are YouTube videos on how to do this.”

Enter the CFO During the panel discus-

sion, Graham Blain, head of IT Governance Risk and Compliance at Standard Bank, said one of the most important roles of the CFO in the context of cybersecurity is to elevate the discussion at boardroom level. He said the fact that these issues do not get enough attention at executive level was exacerbated by the secrecy. Unlike in the US, where companies are mandated to disclose such security breaches, cybersecurity breaches in South Africa are not talked about, which gives attackers more power because it means they can use the same attack on many different companies who may have been able to prevent an attack by learning from the experience of their peers. “In the past, I was very mindful of being accused of dispensing fear, uncertainty and doubt, and sensationalising this issue. But, having moved into the organisation I am in and the role I am currently in, I am confident that the situation is far worse than what we portray.

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There is a lot of skulduggery going on,” said Graham.

World record Graham spoke about the hacking of the power utility in Western Ukraine, which resulted in several days of dropped power. After shutting down the power, the hackers flooded the call centre so that there was no way anyone could find out what was going on. It caused untold mayhem from a socio-political perspective, because there was no news coming out of this organisation, as nobody could get hold of them to find out what the situation was. In the corporate world, similarly, from a data loss perspective,

2016 saw the world record for data breach broken twice by the same organisation, Yahoo. According to CNNMoney, the breach saw Yahoo’s purchase price drop by $350 million when it was bought by Verizon. “The infamous breach at Target in the US is another great example,” said Graham. “The final analysis suggested that it cost them hundreds of millions to remediate the situation when they lost credit card data. Access was through a third party: their air-conditioning servicing company’s account on their network was used to breach the entire system. The company’s entire board was replaced and most of the executive as well. It was an

organisational catastrophe.” When Sony was breached a couple of years ago, the company suffered massive reputational damage owing to the disclosure of its payroll data, among other things, which showed disparities in pay that inferred significant gender and racial discrimination. “As the finance community you need to lean in,” said Graham. “This isn’t somebody else’s problem. You are executives in your organisation and you are part of the solution to this challenge, and it is an onerous task. Look after your own stuff as well because for hackers, finance is a significant trusted path into organisations and, as a CFO, you will be a target, like it or not.” l

Cybercrime: what does government do? In the margins of February’s CFO Summit, we spoke to Redshift Cyber Security MD Sean Howell about the role legislation should play in the war against cybercrime. Here is his take. “Many South African firms still struggle with cybersecurity and a lot of it has to do with the mandate from government. The US and European governments have a mature approach to cybersecurity. Companies are required to report a breach if it involves critical national infrastructure and there are lots of support structures. We haven’t had this in South Africa, but we are moving in the right direction with the Cybersecurity Bill, which is inspired by our peers across the pond. The legislation will provide for protection of critical infrastructure, support for the private sector, awareness around cybersecurity and guidance in the event of a breach. My favourite part of the legislation is the clear increase in government effort to make cybersecurity an important part of corporate dealings.” “I hope to see a lot more collaboration, dialogue and transparency. We only hear about a fraction of attacks because companies tend to sweep things under the carpet for fear of reputational damage. The vast majority are being or have been hacked and just don’t know about it. Don’t put your head in the sand. I think we are moving towards a society where we can freely share the indicators of an attack and help other organisations in our sector to defend themselves.” “There is an ongoing escalation in capability of attackers and the internet is becoming more insecure and more vulnerable to attackers. Tech developments in the name of national security that intentionally make things insecure in order to access terrorist networks, for instance, leave institutions open to counterattacks. The security industry struggles to keep up with these developments, let alone the organisations that need to defend themselves. My prediction is that we are going to reach a tipping point where we see mass exploitation of everyone and everything (including internet-of-things connected devices). I think it is going to require a robust legal, technical and political solution to get this right and that means we all need to be talking more about this issue.”

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TECHNOLOGY Balancing online and physical stores: Cape Union Mart CFO Jason Wright

Bricks and bytes The contemporary retail CFO has both bricks and mortar stores and virtual ones to contend with. Luckily for Jason Wright, his background incorporates both areas of expertise – making for an ideal marriage of two disparate fields. By Kate Ferreira

ape Union Mart’s Jason Wright took an unusual route to the role of CFO. Having finished matric, Jason went into gainful employment in the IT space while his current peers likely headed to the accounting departments of universities around the country. Jason went on to study information systems, and gained experience in web development and project management. It was only in his mid-twenties that the commerce bug really bit. “Through that journey [in business and IT], I decided that a business qualification was going to be better for me. It was more closely aligned with my goals. So I converted that degree into a BCompt at Unisa where I studied through correspondence,” he explains. “I finished my articles at KPMG, and kind of started at the bottom again.” From there, Jason headed to McDonald’s. “I looked at a number of opportunities when I was finishing up my articles. I interviewed with a travel company, for example. McDonald’s just seemed, at the time, to be the

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most interesting.” Jason’s intuition proved right, he says. He gained valuable insight into franchising, and both local and international business at the fast food giant – as the Shanduka Group became the developmental licensee (DL) for McDonald’s South Africa. “I was then approached by Massmart to come join them within the finance team at Builders Warehouse. It was a more commercial role, more operationally focused than my McDonald’s experience. I worked on some very interesting projects there and I learnt a lot. As it is part of the Walmart group, I was fortunate enough to travel to the US and Canada, as well as the UK, so I got exposure to those markets as well.”

Cape Town lifestyle It was around this time that Jason and his wife had begun to think about the lifestyle they wanted, and saw a move to Cape Town as one means of achieving this. Fortuitously, Jason met Cape Union Mart CEO Andre Labuschaigne, who presented the opportunity to step

into a more senior role, move to Cape Town, and join an established South African retail brand with over 80 years presence in the market. Working in retail was an appropriate ‘coming home’ for him too, he says. “I had actually worked as a casual in Totalsports back in the day. I never imagined back then that I would land up back in retail almost 20 years later.” Retail is different from other traditional businesses, he says. “There is a lot going on. We have about 222 stores now, and that creates a lot of variety in the business. There is always something new coming out, and we have a number of chains, including Old Khaki and Poetry, Tread+Miller as well as our own brands like K-Way. We also have an online element to the business, with all four chains online. We manufacture some of our own products through K-Way. Plus, there is the import side. So, it’s an interesting business, and very dynamic.”

Online sales Jason welcomes the complex-

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ity this creates, saying he likes to keep his mind occupied. “I always want to keep things interesting.” The online sales aspect is just one of those challenges. At Cape Union Mart, both the financial and IT (including web) mandates fall under the responsibility of the CFO.

the Finance team, among other end-points. It is then used for the modelling of potential new sites. “Ours is not a cookie cutter model,” Jason says. “We examine every site on its merits. We have a committee for that, in which finance plays a big role.”

“You do often find IT reporting to the CFO or finance, but it does bring its challenges,” Jason admits. “You have a split focus. Instead of just looking at the numbers and the strategy with the CEO, you have to manage two functional departments to make sure they are running and operating effectively.”

“You always have to balance new staff and systems with the pace of growth.”

Thankfully, it is a split that is well suited to Jason’s particular skill set and professional background. He also sings the praises of his team, including solid IT and finance managers and senior teams. “We also have a treasurer to make sure that we are covered in terms of any currency risk or exposure.”

Data driven growth Collection and analysis of data – from both online and real world sales – is a key benefit that Jason and the team seek to make the most of. “We obviously generate a lot of data at point-of-sale. We can analyse profitability down to the product or SKU level. This is also done on merchandising, and on a per store or per region basis as necessary. We can look at turnover on a daily basis.” These reports consolidate daily by store or chain, and feed into

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It is all part of an ambitious growth plan that will also require growth in Jason’s team. “We are constantly looking at the capacity of the team and making sure that we have the right skills, so that they are able to support business. What you don’t want is an administrative brake on growth. You always have to balance new staff and systems with the pace of growth.”

Burgeoning web presence Although the group’s physical store sales still outperform online sales, it is a growing segment, and their web portal has to be able to support both serious online shoppers, and the “info gathering” browsers who search online but ultimately buy in store. “Initially, people didn’t expect a lot from their retail websites, but it is really starting to take off now. It is performing well,” Jason explains. “I think it really serves a customer need. Customers are more and more moving to online, even as a research destination. Typically, if you are looking for a

product, you start online. Also, if you are looking for stock and you want to know which store to go to, you go to the internet. We are definitely seeing massive growth in that space. It’s becoming more and more of a focus area. It is still small. I think any retailer will tell you that, as a proportion of total turnover, it is still small, but definitely something we are giving attention to right now.” To support this, Jason and his team have also had to implement an increasingly diverse number of payment options – for both online and physical stores. Beyond the cash, credit and debit cards, they’ve adopted a store card (underwritten by RCS), eBucks, Discovery Miles, digital vouchers, Gateway-based online payment, and even in-store appbased payments like SnapScan. “As a retailer, these are the kinds of things that we need to be mindful of. We must always look to the future, to see where retail is going. We need to invest at the right time so we are not left behind. And also not too early, so that we are there too far ahead of the customers.”

Hot water Cape Union Mart has an increasingly connected shopper base, who are comfortable making purchases online and even via app or mobile browser. Retailers who are not adapting to this new customer, will find themselves in hot water in the future, Jason warns. “Mobile transactions in South Africa are topping around R19 billion. Even if you exclude airline tickets and that kind of thing, people are becoming more and more comfortable purchas-

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“Online retailers are keeping everyone honest, often revealing the true cost of a product without physical stores and staff factored in.”

to match and close the loop.

ing online. In terms of the digital participation curve, people have a good experience online and they tell their friends and that builds confidence.” But even with this growth in confidence about online buying, Jason believes the Cape Union Mart brand heritage is one of the biggest advantages they have. “We are already a trusted brand, so the propensity to buy from us is a little bit stronger than if you have never heard of the brand before or they are an online only brand.”

Keeping honest Social media is another driver of this growth. “For a lot of South Africans, the world is becoming a lot smaller. People can see what is going on in more developed markets. Most people are aware of Amazon, even if they haven’t used it, and they want that experience as well,” says Jason. Local customers now have reasonable expectations of a smooth, seamless, safe online buying experience, with the realworld parcel delivery fulfilment

The cost of fulfilment is still a major consideration, and is one last place where Jason believes established physical chains still have the advantage on their online competitors. “As a small online retailer competing with us, or against groups like Foschini or Massmart with their efficiencies of scale, it is an uphill battle.” “On the other hand, online retailers are keeping everyone honest, often revealing the true cost of a product without physical stores and staff factored in. So, retailers are watching the online space, and they’re watching us. At the moment, the biggest threat to a retailer is still other retailers. But it is the customer who wins in this competitive space.” l

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GROWTH

CHRO SA aims to boost knowledge, network and career for HR executives

Forum for HR leaders launched Some of South Africa’s foremost HR executives shared experiences, ideas and knowledge during the inaugural launch event of CHRO South Africa, a sister organisation of CFO South Africa, established to help CHROs boost their network, knowledge and careers.

upported by the HR management software specialists from Workday, CHRO SA will launch its website and magazine in May. There are also four more high-level events scheduled for HR executives this year. Hosted by Vodacom’s CHRO 74

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Matimba Mbungela at Vodacom Park in Midrand, the group gathered on 9 March 2017 and broke away into two separate sessions, which were led by CFO Enterprises CEO Melle Eijckelhoff and CHRO SA manager Didi Sehume, before enjoying dinner and some drinks while networking. Judging by the feedback

from HR directors attending, the launch event was a massive success as CHROs feel they have found a new, safe home to swap notes about challenges and opportunities.

Adding value HR executives are increasingly realising that the onus is on them

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ple, one of the key things that we do quite well is thinking about how we drive efficiencies in the business and develop hard-core metrics of what an efficiency roadmap looks like,” said one of the executives.

Matimba Mbungela

to ensure they are heard by the other executives and boards of the companies they run, the participants of the event agreed. In order to ensure that critical issues are considered by the top decision makers in the company, HR leaders have to equip themselves with knowledge about the technical aspects of the business and relay people challenges in a way that relates directly to the impact they have on the business. “We tend to shy away from num-

Launch events participants: • Bahle Goba-Matsho, consultant and former ArcelorMittal HR executive • Matimba Mbungela, CHRO at Vodacom • Blair Mackenzie, Ericsson’s VP HR Sub-Saharan Africa

Join CHRO South Africa Find the CHRO South Africa group on LinkedIn and email CHRO SA manager Didi Sehume at dsehume@chro. co.za to receive exclusive invites and start benefiting immediately.

bers, but the business language is numbers. And that’s why HR professionals often feel like their contributions are perceived to be irrelevant. They don’t speak the business language. For exam-

• Busi Mtsweni, HR executive ICASA • Candice Watson, British American Tobacco’s Area Head of Talent • Anneke Andrews, Human Capital director at Deloitte • Donald Khumalo, HR director JSE Limited • Khaya Ngubane, regional director of HR Minor Hotels • Loshni Govender, Rhodes

The focus should be less on the “usual suspects of recruitment and retention”, an executive added. Even though those are also important, CEOs and CFOs are more receptive when HR leaders speak in terms of quantifiable targets and achievements. “When you do this, it is possible to go into the detail of what efficiency statistics should look like when the business looks at its long-term plans.”

High tech or high touch All participants agreed that the future of HR is digital. Basic HR processes like payroll, employee benefits and sick leave are becoming more and more self-service concepts. The days that an HR executive was just there as a mentor − almost like family to the employees − are over. “This is creating a culture shock in some organisations that are just starting to implement technology for employees," one of the roundtable participants concluded. l

University’s HR director • Mabore Sithole, executive head of HR Fraser Alexander • Sheila Motsepe, vice-president HR T-Systems South Africa • Thami Mvumbi, HR executive Murray & Roberts Construction • Kgomotso Molobye, managing executive HR Openserve (Telkom) • Yvette Wa Mbombo Mujinga Malengela, HR director Millicom.

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GROWTH Christiaan Engelbrecht’s first 90 days at Ster-Kinekor

Diary of a CFO In November 2016, Christiaan Engelbrecht joined Ster-Kinekor as CFO, a highlight in a finance career that started at Deloitte and Vodacom. He will keep a monthly diary for CFO. co.za to share his trials, tribulations and triumphs. This is part 1: the first 90 days.

here is nothing quite like gentle rain combined with a latte at my favourite coffee shop to make me reflect on my first 90 days in office. I smile as I revisit in my mind that day where my CFO journey started. “Do you want to go for a coffee?” These simple words, and the coffee with the executive team that followed, changed my life forever! It is just after 7am and the shop is still quiet; much like my first few days. I was presented with mountains of reports and other reading material. The outgoing CFO was still there and my introduction to the company was only scheduled for the first Friday after I joined. I had time to digest all the information. It was a very quiet period, barring the couple of employees who could not keep

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curiosity at bay and popped in to meet me. Similar to the baristas preparing for the morning rush, I had the space to prepare my intellectual self. Slowly, but surely, more and more customers arrive at the coffee shop. The regulars are usually first to arrive and the owner gives special attention to each one. My first few weeks filled up with the regulars: site visits and meeting the various heads of all departments. This was critical to understanding the essence of the company. I learnt a great deal about operations, revenue streams, cost structures and processes underlying these. All of this very important.

90 day plan However, the true value lies in my interactions and experiences of the different people across all levels and how the collective culture of the organisation influences them. Taking the time to meet with each department quickly built relationships and established credibility. It is only a few months later that I realise how critical these intangible benefits will be to our success.

Just before the morning rush, the floor manager of the coffee shop calls for a quick meeting with his staff. Even though I cannot hear what is said, it was very apparent that there are clearly defined goals and complete alignment within the team! Oh, the good old 90 day plan... A lot has been written on this topic, details of which I shall not bore you with. I had my 90 day plan! It adhered to the “SMART” principals and it was very achievable. I was poised to revolutionise the finance department. Now, after 90 days, I revisited this plan and noticed we achieved very little of it. Why? Did I fail? Quite the contrary, actually. The initial goals would have demonstrated how successful I am. It had the energy of selfish ego. I was fortunate enough to realise this a few days after I set the goals and shifted my efforts for the benefit of the company and all staff of the company. It is not enough to know my role in the organisation is about being selfless, serving of others, guiding and coaching. I need to live these qualities. I need to step out of the paradigm of all previous roles and put on a new coat.

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the time of the coffee production line. The owner stepped in immediately and communicated the issue to all the customers who came in. One of the baristas skilfully took apart the machine, fixed one of the ceramic grinders and cleaned the machine. Ready for service again!

Pawpaw

Unfamiliar? Yes. Necessary? Most definitely!

Way to go The goals we did achieve in 90 days were exponentially more beneficial for the company. We changed the entire perception of the finance department, bringing finance from a keep-quiet-in-thecorner back-office-do-not-care area, into a strategic business partnering function. Fully integrated in operations. Our team is now becoming the backbone of the company, rather than a by-product of archaic governance. Something many thought to be impossible to achieve in this short space of time. It is now the middle of the morning service. The coffee shop is

buzzing and there is a queue for coffee stretching into the parking lot. I’m in awe of the smooth service. Wow! Everyone is at the top of their game and there is a consistent, smooth and efficient service. Almost an effortless excellence. One would love to think that this is true for our companies. Truth be told: we have a way to go still. I reflect on the seamless teamwork of the staff in the coffee shop and decide that the next 90 days will be directed towards effortless teamwork between departments. A huge goal which scares and excites me at the same time! Morning rush did not pass without incident. At one point, one of the coffee grinders clogged up which had the potential to double

Life happens. Even though we had crystal clear plans of how our processes should be working and we are executing thereon, things do not always go to plan. Timing changes, deadlines are missed, information does not tie up, operations fail to produce, systems crash. As a department we consciously decided that every event that does not go according to plan will be a learning opportunity. This subtle shift in thinking had a profound impact! When the proverbial pawpaw hit the fan, each of us played to our strengths to resolve the matter at hand. Yes, that meant that I had to get my hands dirty on multiple occasions. I cherish these times, for this is where gold is forged! As the morning rush quiets down, the team gets together again. I am close enough to hear the owner thank everyone for their contribution. He highlights the good and encourages learning from the few issues he picked up in service. He does it with compassion in his voice and I can feel the bond between the members of his staff grow stronger. Wow! How inspiring! I can’t wait to get to the office and share this story with my team. My first 90 days have come and gone. It feels like an instant, yet I’ve grown as though it has been years. l

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The opportunity: Africa

Africa’s a continent of contrasts, unique challenges and amazing opportunities. Succeeding here depends on having a deep understanding of local issues, a global perspective, and the ability to use these to build tailored solutions. We’ve been doing business in Africa for almost a century, and over 9000 professionals in 66 offices are working with our clients to add value to their businesses. It’s what we do. At PwC in Africa, we see opportunities where others see challenges. www.pwc.com/africa

GROWTH AFGRI CFO Johan Geel chats about past, present and future

Understanding Africa When speaking about AFGRI’s initiatives in the rest of Africa, Johan Geel’s eyes light up. The chief financial officer sees massive potential on the continent for the food industry, as long as the approach is correct. “Find trustworthy people, work with the correct information, do proper research, go there and make sure of things yourself – don’t stay away.”

s CFO at AFGRI, Johan Geel has been nominated for the CFO Awards in both 2016 and 2017, an impressive double-whammy that less than a handful of other CFOs can boast about. We chatted to him about past, present, future and − of course − Africa. AFGRI started as a grain management cooperation in 1923, became a company in 1995, listed in 1996 and delisted in 2014. Now 60 percent is owned by Canadian companies (including Fairfax), management owns five percent, the PIC 15 percent and Bafepi the rest. “The last financial year was very rewarding. We are starting to enjoy the fruits of the hard work we have put in, ensuring an efficient transition following our delisting in 2014 and being able to respond to the international reporting requirements of our shareholders," says Johan.

What is new in your finance team of late? “AFGRI is a very challenging and eventful company to work for and that makes it incredibly exciting to come to work every day. Towards the end of the financial year we embarked on a group optimisation process. This is an exciting time for the AFGRI finance team as it provides an opportunity for the team to, yet again, demonstrate their ability to assist business in optimal value creation.”

“The focus for 2017 will be on transformation, bringing more diversity into the team on various levels.”

What plans do you have in place for your team for 2017? “In addition to finalising and implementing the optimisation process, the focus for 2017 will be on transformation, bringing more diversity into the team on various levels. Following the conclusion of the optimisation process, a bigger focus will be on our expansion plans into other parts of Africa and more contribution by the finance team in assisting business to create more value from a financial and social impact perspective.” What external factors have the greatest impact on the financial performance? “Weather, commodity prices of soybeans, maize and wheat, and exchange rates have the biggest impact. On the weather side, you cannot do much. Regarding commodity prices, we have a grain specialist who started last year advising on procurement. Our MDs are immersed in the markets and also know what’s going on.”

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GROWTH

“The big dream of the CEO Chris [Venter] and myself is to ensure people have proper work in Africa and everybody has at least a plate of food daily.” Two CFO Awards nominations in two years Johan has been nominated for the CFO Awards two years in a row. We asked him what the nomination means to him, and why he thinks he has been nominated two years running. “I am pleasantly surprised and incredibly honoured to be included in awards of such high stature for the second time in a row. It has been a humbling experience since the first nomination and I am incredibly happy to, once again, be counted among such outstanding talent.” “I personally believe that one of the qualities that differentiates a good CFO from a great CFO is having that instinct that wants to create value. As a CFO, you have to instantaneously want to find out where value is created and assist business in that regard. I also would like to believe that honesty and credibility have been one of my greatest assets. Equally important, my passion for people development and transfer of skills through mentorship have assisted some of the best young talent to grow both in AFGRI and in the profession.”

How would your internal stakeholders describe your finance team? “We have a great number of business units to consolidate as finance. Overall the relationship is good and fair, but around budget time people get itchy as we get tough around year-end. We do assist people where it is possible. We are now putting a finance template in place with all important things per business unit on two or three pages. There used to be more differences between finance and the business, but that noise is now dead.” How do you deal with ever-increasing and changing rules and regulations?

Alexander Forbes for operational risk. Through the committees, we identify what we are concerned about. The audit and risk committee meetings are very detailed, taking about five to six hours, and are held three times a year. These days we focus quite a bit on cybercrime and IT security in general.” What are the opportunities for your business in the rest of Africa now and in the future? “The big dream of the CEO Chris [Venter] and myself is to ensure people have proper work in Africa and everybody has at least a plate of food daily. That won’t happen overnight, but we want to play a role in this with AFGRI. There are lots of opportunities. We have been involved since the early days of 2000 and are active in countries like Zambia, Zimbabwe, Uganda, Ghana and Congo.”

“I have used a company to do an exercise around all acts and regulations and paint the regulatory universe for each of the business units. LexisNexis gives us updates too. In each business unit, we have a person responsible for governance, so it is slightly decentralised. You have to find the balance, but you cannot be outside the law, so as a business you need to make the best of it.”

“AFGRI consists of grain management, equipment (John Deere tractors), food and retail. Our biggest success is in Zambia, where we have opened a small AFGRI, which includes equipment, grain management and finance. Unfortunately, it hasn’t rained properly there in the last three years and the power failures have increased to 12 hours a day, but we have already had fair profits in Zambia before the drought and employ about 200 people. The rest of the world is developed, so if you look to 2050, Africa is the continent that can help the world meet its need for food.”

What does your compliance programme look like? “It is a detailed process. We have a risk and compliance department and our risk register gets checked at least every year. We are using Aon for insurance and

How is the finance function organised to manage the operations in Africa effectively? “We use our team in South Africa. We have an SA-based MD and FD per business unit, who look across the continent.

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“Before you start spending any money, make sure your information is correct and confirm this with external parties.”

system what happens outside South Africa. In countries, we have a country manager who takes responsibility to meet with government and work across the business units. That is not an easy role, because people like to report to one manager and in that case, there are sometimes more.”

We do use consultants, but we are trying to limit their involvement as much as possible. Most of the countries have a full-time team on the ground as well. Over time the need to fly people over will decrease.”

What advice would you give other CFOs whose companies are looking to expand into the rest of Africa? “Find trustworthy people, work with the correct information, do proper research, go there and make sure of things yourself – don’t stay away. Before you start spending any money, make sure your information is correct and confirm this with external parties. Understand your market:

“The MD of Equipment (John Deere tractors) can see on the

some information you get can be old. Understand the infrastructure locally and make sure off-takers will be there. It will help if you can create your own value chain. Keep the right staff and skills and realise that people think differently.” l

Up close and personal with Johan Geel What is your personal recipe for success? “One word: work. If you don’t do something with passion, you can never be successful. I give people around me breathing space. They tell me I am tough but fair. I involve my team in my decisions.” Tell us about your leadership style: how do you get the best out of your team? “I am family-orientated. Integrity is not negotiable and good values are important for me. I think I am a visionary who leads by example. I am an extremely hard worker, tough and fair. Sometimes I push too hard, but I make time to listen to people; what is their passion, where do they see problems? Sharing information is also very important. Most of the time you can unearth the information or insight you need by talking to your team, which means you don’t need a consultant who tells you what you already know.” What role does mentoring and coaching play in your working week? “Several people have asked me to be their mentor. I ask them what their goals are, what they see as their shortfalls, what was difficult in the last two weeks. I always try to find time late in the afternoon or early in the morning.”

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