SAIBA’s CEO, Nicolaas van Wyk, provides interesting feedback from the recent CFO World Congress in Mexico, how developments at COP26 will soon change a CFO’s reporting obligations, and the trends for CFOs going into 2022.
Today’s podcast is sponsored by Draftworx, which provides automated drafting and working paper financial software to more than 8000 accounting and auditing firms and corporations. CFO Talks is a brand of the South African Institute of Business Accountants.
CIARAN RYAN: It’s very fitting that for the final podcast for CFO Talks in 2021 we’re going to have Nicolaas van Wyk, who is the CEO of the South African Institute of Business Accountants, also the founder of CFO Talks, and we’re going to be recapping some of the highlights and lowlights of the year. Welcome, Nicolaas.
NICOLAAS VAN WYK: Hello, Ciaran.
CIARAN RYAN: One of the things I am very keen to hear from you is you just recently got back from Mexico. Tell us about your trip to Mexico, what were the impressions. I don’t know if you’ve been to Mexico before, I haven’t, I’d be quite keen to get your overall sense of the country, is it vibrant, are they optimistic, and from an accounting point of view, what was it that you got out of that visit?
NICOLAAS VAN WYK: Annually, SAIBA, together with our international colleagues in ten other countries, host what we call the CFO World Congress. Back in 2016, when we had just launched our own designation for CFOs, we hosted the first African CFO World Congress, it was in Cape Town at the Convention Centre. Then annually a different country hosts the event, and the idea is that all our colleagues and partners, associations like SAIBA, that focus on events and networking and designations for CFOs, get together once a year and then the local country arranges the experts and speakers, and they talk about the economy, the finances, the challenges faced by CFOs. When you as an international delegate attend, obviously you get immersed in the culture, that to me is the primary reason why I would really recommend all CFOs to attend these World Congresses and that’s that cultural experience. We are so cocooned in South Africa, and we’re so focused on our own problems and our own solutions, but when you get to go to another country, just that trip that you do is obviously a lot of effort, flying. The Mexican trip took us about 32 hours to get to Mexico and then attending a two-day conference but that whole travel experience changes you, you suddenly become aware of a bigger environment, other than our small country. Also, when you’re in that conference and you start hearing about the local country’s challenges, opportunities and growth prospects, you develop an ability to compare and then obviously bring that information back to your home country and your home company, you become so much more of an enriched CFO. One of the things that I experienced in Mexico is the relative size between South Africa and Mexico, we’re both in the emerging category of countries but Mexico’s population is double that of South Africa, it’s 120 million, we’re 60 million. But interestingly enough, their GDP $1000 billion, whereas ours is only $350 billion, so there’s a massive difference there, primarily because of their location next to the US and their trading with the US and Canada, it’s obviously a big boon for them. But from what the colleagues shared in the conference, they struggle with similar problems to us, how to equally distribute funds, how to get better schooling and skills, how to fight corruption, which seems to be endemic, not only in South Africa but also in other parts of the world, and then how to create more efficiencies.
‘A lot of information was shared about COP26 and it seems like that is gaining huge momentum and affecting CFOs drastically.’
On a global perspective there were considerations on climate change and climate reporting, I participated in that panel discussion, and it was quite interesting to see that a lot of information was shared about COP26 and it seems like that is gaining huge momentum and affecting CFOs drastically. So that together with AI and robotics and the changes on international tax are the three most important discussion points, trends, developments for the CFO going into 2022. So that’s climate change reporting, where it seems that the world’s investors would stop investing in your company, if you do not issue a progress report on how to get your company to net zero. The driver of that reporting will obviously be the CFO. SAIBA is developing, together with our colleagues in Mexico and France and elsewhere are starting to participate and to present the voice of the CFO at these international forums because that is also what we saw that the CFO isn’t fully represented in all these changes. The others, as I said, is AI and robotics, building more efficiencies, especially now during Covid, how do you retain revenue or expand it but together with reducing expenses and capital payments. The way you would do that is obviously through technology, so there’s a big focus area for CFOs. Then international tax, with countries competing for tax income, the pressure will just increase on the CFO to make sure that they stay compliant and as they expand internationally, they pay the appropriate amount of taxes.
CIARAN RYAN: I think all of these are fairly contentious areas, just taking one of those, the first one that you mentioned, climate reporting after COP26, and I know that you did a survey fairly recently on LinkedIn, where you were just canvassing people in the finance field to see what did they know about COP26, what were these requirements and are they prepared for what’s coming. What was your feeling after attending this conference in Mexico, are CFOs ready for this, are they on top of it?
NICOLAAS VAN WYK: It seems to me that prior to COP26 there was a wait and see approach about climate change and climate reporting, but after that there’s a real momentum building. There are big international investment firms like BlackRock, which is the world’s largest investment company, governing trillions of dollars of pension fund money, that issued statements saying that in the next couple of years if your company doesn’t present a proper climate report and show how they’ve moved to net zero emissions, then they start withholding funding. We expect the same will happen locally, there are a lot of listed companies in South Africa getting loans and credit from the PIC and soon the PIC will also start requiring these types of reports. So the whole emphasis now is on the International Accounting Standards Board and they’ve issued new protocols on climate reporting and the interesting distinction there is that there are two sets of protocols or soon to be standards, the one is related to climate change and then the other is related to sustainability, which relates to the business efficiencies. So it’s interesting that the focus isn’t only on climate change and reporting thereon and how to reduce emissions, but also on business efficiencies. So that you will eventually have the CFO focusing on three reporting areas, the traditional IFRS, then secondly, business efficiencies, and then because of the difficult economic circumstances we are in, the only way that you can still maintain the bottom line is through better efficiencies. The last one is then climate change. What is happening internationally, the various CFO organisations from Mexico to France to South Africa, Italy, Germany, Tunisia, Morocco, all have to start working together and have the CFOs voice heard, decide on a typical training course or support mechanisms to share with our members how to best do this reporting and how best to do the standards, and start preparing them because this is going to be the next big thing.
‘The stakes are very high, and we want to make sure that CFOs are fully aware of the coming changes.’
CIARAN RYAN: I think one of the things that I’ve noticed in doing CFO Talks over the course of the year is that I get sense that there’s a lot of attention on compliance, the CFOs are aware of this, maybe the climate change thing is still quite new and they’re still getting their teeth into it. But I think CFOs are so attuned to regulatory changes that they will embrace this quite easily, I don’t see that this is going to be particularly challenging for them. It does require resources, the measures, I’m sure, are going to be a little bit strange to work with in the beginning but I think they are going to get on top of it. What’s your feeling about that, is this going to be a challenge for them or not?
NICOLAAS VAN WYK: The nature of the CFOs has been revealed in the podcast that you and I have hosted with the CFOs over the years clearly indicates the resilience and their adaptability and agility. They’re a unique part of the board in their ability to come from a finance perspective and then interpret the data for business decision-making. So they definitely have the ability. I think what becomes challenging is how do you ensure that all companies of a certain size, specifically listed companies, state-owned entities and large private companies, how do they report in the same manner in terms of the same standard, using the same measurement because it has to be globally measured and globally comparable. To do that you need to have a fixed set of standards, you have to get all companies to buy into these standards and then you have to get the auditors to issue reports following, again, a universal methodology on where the companies are following the standards. The stakes are very high because you can lose your funding and investments and that means losses of jobs, losses of expansion of new branches or factories. So the stakes are very high and we want to make sure that CFOs are fully aware of the coming changes.
CIARAN RYAN: I think you’ve already mentioned BlackRock, the biggest asset management company in the world, they are driving this, they will only invest in companies that are in compliance with carbon emission standards worldwide. You’ve mentioned the PIC. I almost get a sense that this is going to be driven by peer pressure, that companies are only going to engage with peers that are abiding by the same rules as everyone else. I think very quickly you’re going to get compliance on this.
NICOLAAS VAN WYK: It goes a little bit further than that, we attended a conference with the Department of Trade and Industry, and they are looking into changing the Companies Act to make it a requirement for companies to issue these types of reports. So there’s huge opportunity for auditors, specialist accountants and a lot of requirements soon to be imposed on CFOs in terms of the Companies Act. This flows from South Africa’s commitment that we made at the United Nations in terms of the sustainability development goals that we need to comply with and start reporting to the UN, and that is now filtering through into our Companies Act.
CIARAN RYAN: I just want to change gear here for a second, talk about the CFO (SA) designation, it really is quite new but it’s causing quite a ripple in the senior finance executive market, people are beginning to understand the brand, they’re beginning to understand the value of this. What has the experience been like this year for the CFO (SA) designation.
NICOLAAS VAN WYK: When we first started to expand SAIBA and add a section for the finance executive, the CFO, finance director, we first became a member of the international association for CFOs and then that was a whole new experience. Traditionally, SAIBA has focused on being a traditional professional body like a SAICA or a SAIPA, where we regulate member conduct, register in terms of South Africa’s legislation as a professional body, set standards and issue designations. But then with our expansion into the CFO market, we saw a different approach and it was interesting to see, especially in Europe and the United States, which is a little bit different from South Africa, the number of non-finance CFOs. On one of our podcasts, we had the CFO from Hollard Insurance South Africa and he’s an actuary, but he has the position of CFO. So companies are moving in that direction because of the varied skills required of a CFO. Then most CFOs expand from, if they did study accounting, they add an MBA to their repertoire and that reflects their career development, moving from a technical accountant, into the role of a board member, a senior manager, a finance executive, where they need the strategic and the operational and the HR and the innovation skills to assist the company, going from just financial reporting to business interpretation and making the right decisions with masses of amounts of data. So once we started to see this development, we then thought how do we give recognition to the accomplishments of these amazing people who we call CFOs. From our podcasts, and we’ve done 162 of them so far, it’s very clear that CFOs continue to learn, they’re very committed to their self-development, they also work in many, many companies, they build their CVs through the experience they gain at a variety of different types of companies.
As they move from manufacturing to retail, to the service industry, they get this experience that they need to be at the pinnacle. But then they need theoretical underpinnings, they then add to the typical BCom, CTA, they add their MBA, and they work another eight or ten years to get to the top, and at that point, they then get the appointment as a CFO but the question is how do you objectively verify that competency and, secondly, how do you make sure that it’s internationally recognisable. That is then why we started our own designation, Certified Financial Officer, in short, people call it CFO (SA), and we registered this with the South African Qualifications Authority to ensure that it has the rigour as required in terms of our registration with SAQA, and because it’s built on an MBA, it’s the highest level of designation in terms of the underlying qualification relevant in our accounting sector. Once we’ve established it in South Africa, we’re now trying to export this to make it a global brand because we also saw that CFOs are very mobile, they can work in any country, they understand the language of business, so they need a designation that can open up doors for them and that’s recognisable in different countries. So that’s where our international cooperation with our partners is really coming in very useful.
CIARAN RYAN: When you were in Mexico recently, did this come up as a point of discussion, was there a lot of interest in actually importing this CFO designation to these other countries?
NICOLAAS VAN WYK: All companies are in competition and there are limited resources available these days, so the traditional CFO associations were more like networking clubs, where they had the entry criteria that you should be a CFO of a large company, with a certain level of turnover, but they are now moving into and starting to consider the viability of designations because that will make them compete in their local countries with the CPAs or the CAs that traditionally issued designations. But our partners in Mexico, I had discussions with their CEO, we discussed our global designation and there’s very much an interest in doing this. Similarly in Brazil and Argentina, and there are many other countries that will follow soon just to ensure a proper mobility. As I said, it’s a different type of accountant and many of them are not even accountants but they’re still fulfilling this role of the CFO, so you need this global designation to make sure that there’s a similar standard everywhere.
‘Another point that we’ve seen from our podcasts is also how committed CFOs are to the development of their own staff members.’
CIARAN RYAN: Yes, we’ve interviewed quite a few European CFOs on CFO Talks and what is astonishing there is the number of who come from a non-accounting background. They come from urban planning, they come from information technology, and they also have quite strong business experience or theoretical business grounding like an MBA or something like that. One of the things that I have observed in the course of doing CFO Talks is how committed the senior finance executives are to self-development, this point that you made, they continue to study, they continue to accumulate qualifications and read very, very broadly, so they become polymaths in the sense that they study all sorts of things, not necessarily related to accounting. Is that your experience?
NICOLAAS VAN WYK: Yes, definitely, I think it comes with the demands of the job that they do, they have to work across all departments, and they have to be able to interpret information, they have to, through their budgetary process, drive efficiencies. If you don’t understand, for example, how the factory works, how the supply chain works, where exactly are there losses, what is causing delays, what is increasing costs. So you have to have a very clear mind of systems and processes so that you can bring that data back, understand the information that’s in front of you and interpret it for the other board members. I think another point that we’ve seen from our podcasts is also how committed CFOs are to the development of their own staff members, they very much like to share information. So it’s not only gathering information but also sharing that with their finance team. Any economy, it’s crucial for them to protect and enhance their CFOs because these are highly skilled individuals, they are high net worth individuals, they have such a vast knowledge, and their ability then to train the next generation is so important because if that knowledge isn’t shared, then as a country we won’t be able to compete. I think this is the learning I can take away from all these interviews we did with our 162 podcasts, is that we’re working in an economy and that economy consists of millions of companies and each of those companies has a finance department, which is led by the CFO. It’s this role of the CFO in this network function across an economy that is so crucial to our success. I don’t think there’s been enough emphasis placed on the role of the CFO.
CIARAN RYAN: I think one of the other things I have also observed, particularly in the course of the last 18 months, is how important the CFO has become to the strategic direction and the strategic planning of an organisation. Bearing in mind, this has been a period where they’ve had to contend with lockdowns, reduced markets, shrinkages, destruction of certain markets as well. So they really have had to become creative thinkers in the way that solve problems, chase down revenue find new markets. That’s something that I didn’t quite see in the previous years, I don’t know what your take on that is, but I see a definite change in the toolkit that’s required of a CFO these days.
NICOLAAS VAN WYK: Yes, Ciaran, I agree with you, when we connect with the CFOs on LinkedIn to invite them to our podcasts, it’s clear from the series that’s available on LinkedIn that there are a number of them doing MBAs, they are either busy with their MBA or they have completed it. That again, demonstrated the need of the company for them to be strategists. We also found this when we sent out our competency framework for CFOs, that based on international research, you can split the function of the CFO into four categories, steward, operator, catalyst and strategist. That talks to your point about the CFO playing this important function within their company and having to have a bigger picture, and that doesn’t always come naturally for many accountants because we are more restricted in our thinking. So that’s why they then add the MBA to open up their minds and have a bird’s-eye view on all sections and departments within the corporate, and not only locally but also internationally. So strategy is definitely an important skillset for a CFO and that’s also what we assess in applications for CFOs, we look at the underlying qualifications, at the MBA, and then we verify the experience, and then all our candidates are assessed by experienced and highly qualified assessors, who are themselves CFOs. Then we have this discussion about their strategic background and skillsets, so it’s a very important part.
‘I think if life didn’t have problems, then there wouldn’t have been opportunities for improvement.’
CIARAN RYAN: Okay, just wrapping up here, we’re coming to the end, it’s been, I would think, a pretty amazing year, an extremely challenging year from certain aspects but an amazing year for CFOs, certainly from the interactions that you and I have had with the many dozens of CFOs we’ve had on the podcast. But looking to 2022, it’s a whole new ballgame, are we going to be living in this twilight world of semi-lockdowns or periodic lockdowns and then we’re free to go back out into the sunshine again and that, of course, is going to have ramifications for business. What is your take, are you optimistic for 2022?
NICOLAAS VAN WYK: I am, I think I am just an optimistic person. I think with each challenge that we are faced, there’s a multitude of options available. I think if life didn’t have problems, then there wouldn’t have been opportunities for improvement. So to me, a problem is just something that you have to overcome, without a problem, it’s like an indicator of a new way of doing things. So it’s not particularly a negative. Then I think for many years we have some fat built into the system that is being revealed. So there are a lot of expenses that are unnecessary, a lot of inefficiencies still within our own systems as companies and that must be addressed, and I think that is then crucial for the CFO going forward. Warren Buffett had a saying that if the tide goes out, you’ll see who is swimming naked, and I think we are entering that stage now, where you will see that if your staff members haven’t been trained appropriately, if your company culture isn’t underpinned with adaptability, if you don’t move fast enough, then you’ll be caught out, you’ll be shown to have swum naked, which will reveal those companies that are either inefficiently run or run on grants and subsidies from government. So in a way it’s clearing up the inefficiencies in the system by putting so much pressure on it. But obviously we hope that Covid lockdowns won’t need to be implemented again and won’t happen again in the world. It’s always better not to have those things. But we have to adapt, we have to make a living, there are so many millions of people who are dependent on successful companies, and I think that’s something that we as South Africans often forget, that our economy is built on the ability of companies with their CFOs to deliver products for us and services to make our lives bearable.
If we consider South Africa’s economy, at the moment we’re only 0.6% contribution to world GDP, which is shocking if you think about it. I know that living in South Africa it’s very easy to get an overconcentration on our own problems and that’s like an inward-looking mindset. But just stand back a bit and consider our GDP, our contribution to world GDP is only 0.6%, which in a certain way is pathetic, if you think about it, and that has to be addressed. So with each percentage increase or 0.5% increase, you double employment, and we hope that government will look at the bigger picture, this comparison, see what we are doing wrong and make us more competitive. I really dislike when our politicians and leaders go and ask for handouts or contributions from our trading partners and from first world countries. I’m almost of the view that we can make it ourselves. Most of our problems relate to management problems, we’re making the wrong management decisions, it’s not about resources. We can do better, and we should do better. What we as SAIBA decided to do is register this designation to ensure a proper competency framework for CFOs and in that way improve profitability of companies and by doing that, we’ll be able to pay more taxes and support more social grants for the destitute. But always with this focus of making us more competitive in comparison with other countries. If we can get that right, then as a country we’ll grow and there will be more employment and we hope that we can get that right.
CIARAN RYAN: It used to be that South Africa contributed about 1% to global GDP, so if we’re down to 0.6% that’s a pretty serious contraction. But it is largely policy related and it can be corrected, so it’s a political problem. I like your optimism there about problems creating opportunities, and they really do, they force us to confront certain obstacles and find better ways of doing things, I think that’s a wonderful lesson to take away from this.
NICOLAAS VAN WYK: And cooperation, it’s why we started our global outreach to our colleagues in other countries. We need more efficiencies, our circumstances are dire here, we have to start cooperating and that’s what we’re trying to do. So when we next have a CFO World Congress, we took about 20 CFOs to Mexico, and next year it’s possibly in China, then we want to take 50 people and we want to bring back all of that information. That’s what I continue to tell my own staff members and I also want to tell our own CFOs, let’s emulate the best and the brightest economies in the world. We go there, we see what works and then we bring it back to South Africa and make it better.
CIARAN RYAN: Wonderful, okay, on that note, Nicolaas, I think we’ll wrap up. I want to wish you and your family and everyone listening, to our CFO Talks community, a very happy Christmas and new year. I am really looking forward to kicking off 2022 and see what we can do to make it a better place and a more competitive and efficient place, and I think what we’re doing is part of that, it’s an exchange of information.
NICOLAAS VAN WYK: Thank you, Ciaran, also have a blessed Christmas and rest period, and then we’re back in 2022. There is much to learn, and I think that’s the nice thing about living in South Africa and working here, there’s still so much to be done and if we stand together, we’ll be able to do this. It’s going to be an exciting ride and, like you said, CFO Talks is there to walk the path with the CFOs, and I recommend to anyone listening to this now to go and listen to those 162 interviews. In preparation of our interview, I went and read a few of them and there are some gold nuggets in there that will definitely help me to run SAIBA much better. So if you need advice and guidance and you need to connect with your CFO colleagues, listen to CFO Talks, it’s an amazing podcast.