‘The CFO needs to be alive to changes’
Welcome to this SAIBA CFO podcast, SAIBA is the South African Institute of Business Accountants, it has more than 12 000 members and specialises in a wide range of disciplines such as accountancy and tax, training and development, career enhancement, legislation, designations and financial reporting.
My guest today is Dawn Mbatha, she is the CFO of the Electoral Commission of South Africa or the IEC, as it’s commonly known. The IEC, under her leadership, has received a clean audit for the past two financial years. She has been in this position for nearly three years, and it follows after she was the interim CFO for a year, so she has been at the helm of the IEC’s finances for close to four years.
Dawn is a chartered accountant and a finance professional with eleven years of management and operations experience in both the public and private sectors. She was also a board member of Cricket South Africa and a member of the audit committee of CATHSSETA, as well as the CFO of the Road Agency Limpopo, a state-owned enterprise. Before that, in 2015, she was also an audit partner at Ngubane & Co.
Dawn, before we dive into your role at the IEC, tell us a little bit about yourself, where did you grow up and when did you decide to become an accountant?
I’m actually from a very small town called Vryheid in KwaZulu-Natal, I was there up until matric and then I went to the University of Pretoria. Regarding the decision to become a chartered accountant, I was probably in standard two, which is now known as grade four, I read an article written by Nonkululeko Gobodo and she said that she was the first black chartered accountant, and she elaborated about the skills required to become a chartered accountant. I think what caught my attention is that it’s someone with very good maths skills and I think that’s when it started off and it planted a seed in my heart to say this is exactly what I want to do. I then got an opportunity to work for her when I was a manager at what is now known as SNG.
So having read her article way back in standard two, now I actually had the opportunity to be led by her and she’s quite a phenomenal woman. I didn’t report to her but there were certain things, for example, big tenders that we did that gave me a chance to interact with her, although I was at a very junior level.
When did you assume your first CFO role?
My first CFO role was at the Road Agency Limpopo, where I acted, it was an interim role and I was really seconded there.
Was it a difficult decision to choose to go the private sector route, as opposed to the public sector route?
It was difficult because I want to say that I’ve always had feet in both spaces, so it was never really difficult. It’s difficult in terms of the requirements that you need to meet but in terms of a preference I still like both, to be honest with you.
Are they significantly different from each other?
Yes, your stakeholders are completely different. The one side, I’m not saying the other is not, but the public sector is highly regulated, you’re also looking at public funds and then on the other side you are looking at shareholder’s funds.
Here there’s a lot of scrutiny, there’s a lot that comes into the public domain.
If you’re in the private sector you’re rather under the scrutiny of your board or your shareholders but in the public sector, there’s much more scrutiny and accountability.
There’s a perception that there’s a lot of corruption within government and everybody looks at the audit opinion from the Auditor General and if it’s not unqualified or clean, immediately people assume that there’s widespread corruption within the agency or organisation. That must put a lot of pressure on the CFO.
A lot of pressure but the public sector also needs to start attracting professionals so that we can clean up. It does need the likes of me if we’re going to move forward. The perception is there but what’s also unfortunate is that there’s also not enough education in terms of some of the opinion or the compliance issues that find themselves in the public domain. For example, the issue of irregular expenditure, the minute you talk about having irregular expenditure, the perception is that you’ve gone into a transaction illegally, someone has pocketed the money and there’s fraud in the institution. But there are also very technical issues in the procurement space.
You would have seen that the procurement regulations have been taken to the Constitutional Court to be challenged. So there’s that technical element that people are not educated and everything is put into one pot, and the conclusion is that if there’s an irregularity, someone has pocketed it. So I think that’s my main concern.
Let’s talk about the IEC, it’s a critical institution in the country, how big is the IEC and how complex is this agency’s finances?
We have got offices in over 300 locations, I am operating in three spheres of government, local, provincial and at a national level. At a national level I also have four core functions, which include corporate services, electoral matters, outreach and party funding. In addition to the IEC’s mandate, we are also tasked with an additional mandate of managing party funding. So that’s the simplest way to explain the complexity of the institution.
The IEC has now received two clean audit opinions in the 2021 and 2022 financial years, and it follows after you received several unqualified audit opinions. Congratulations on the latest clean audit, I think it’s a phenomenal achievement. But tell us about the journey, how difficult is it to move from an unqualified opinion to a clean audit opinion?
It’s not easy, in going into this journey you need to mobilise everybody to assist you. When I started off, we were definitely sitting on unqualified and I started engaging my auditors and saying, guys, what is it going to take for us to get to a clean audit. People thought I was joking because when I got here there was irregular expenditure, there were certain things that were really not put in place. But I persisted and what I then did after my first year here I then started asking the question and I went to the CEO and said, we need to get this, if I look at your management report, these are the areas that we need to fix, based on the AG’s recommendation, this is what we need to do.
After then tabling that to the CEO I then took up the conversation with the Commission, which is our equivalent of the board. Once I had the leadership’s support it became really doable to start pushing it at every level. So I made it a culture and I also committed to an organizational KPI, where everybody was committed to the KPI of achieving the clean audit.
During the first year I focused on the irregular expenditure, I started by cutting the irregular expenditure by 500%, subsequently then 20%.
But that was my huge starting point because the AG was identifying a lot of irregular expenditure. I also then started implementing very strong compliance processes, having soft audits in preparation for the audit. So before the AG came I would do my own audit, I’ve got a very strong audit background, so I took that into consideration in starting to prepare for the audit, identifying the issues and resolving them.
Once that was done, I think everything started falling into place, I had the backing of the organisation and I had very strong backing from the leadership in terms of achieving this. So that’s what we worked for as a collective to achieve the audit outcome. Once you get the whole tone of doing things right, it becomes a culture.
How closely do you work with the CEO?
We work very closely, there needs to be a proper synergy because if you are out of sync, you are not going to be able to achieve what it is that you want. I work very closely with him, he’s very supportive, even when I have those technical issues, I get the necessary support in doing the right things.
Do you think that it’s critical to work well together and participate in the formulation of strategy, for example, to assist in getting a clean or a good audit outcome?
It’s very critical, it can make or break you because this is about the tone at the top. I’m not at a very senior level, so it will become difficult to put pressure on people who don’t report to me if the CEO does not support my view of getting a clean audit. So his involvement becomes very strategic in saying that we are setting an organisational KPI and then everybody follows.
Let’s talk about the role of a CFO in a modern organisation, what do you think are the key skills that a CFO must have to really make a difference in an organisation?
I think what is key is that the CFO needs to be alive to changes, they need to be alive to the risks that face the organisation, they also need to make sure that they are actually sitting in all these strategic places. For example, they form part of the board, they form part of the commission, so that they are involved in those strategic decisions. I also think that it’s very important that from a technical perspective that we are up to date, whether it’s statutory or accounting, and also alive to the environment, the political environment, the finance environment and just having your finger on the pulse.
I also think it’s very key to be a hands-on CFO.
Yes, it’s a strategic role, but at some point, you have to get yourself into some of the detail if you want to push the output that you want. If you’re going to be a number-cruncher in your office with closed doors, you are not getting anywhere, you need to be out there. You need to be at the heart of the business, assisting them and giving them that technical advice.