Change is the mother of uncertainty. Yet, since Cyril Ramaphosa’s appointment as the new president, a wave of positive sentiment has swept the country.
This was confirmed by a survey which was the result of the joint effort of Duke University; the South African Institute of Chartered Accountants (SAICA); Africa Investment Advisors and CFO Magazine South Africa. The study surveyed 27 South African Chief Financial Officers (CFOs) in quarter one (Q1) and 15 in quarter two (Q2). While there was a sharp rise for the first quarter with 89% of those surveyed being more optimistic about the South African economy than they had been at the end of last year, the second quarter shows a substantial decrease with 67% of those interviewed being more optimistic. However, this is still a massive increase compared to the end of quarter four in 2017 being less than 10%.
“The research measures the opinions of CFOs, which are informed by their experience and education. We as accountants and financial strategists are by nature cautious beings, so this continued and overwhelming vote of greater levels of optimism by CFOs over the past two quarters is all the more remarkable,” says Zimkita Mabindla, Senior Executive of Corporate Reporting at SAICA.
The significantly increased optimism of the first quarter was counterbalanced by the finding that ‘economic uncertainty’ and ‘the volatility of the political situation’ were the CFOs most pressing concerns. Third on their list of woes was ‘currency risk’ – a factor directly related to the preceding afflictions.
Corruption and white-collar crime made it into the top-five concerns, preceded by ‘government policy’. While in the first quarter corruption remained relatively border-line, it comes up as a clear concern in Q2 at number two on the list of most pressing woes, which makes sense considering the volatility the private sector has been experiencing over the last few months. “Less notable sources of concern uncovered in both quarters were: ‘access to capital’ and ‘regulatory requirements’. 30% of the CFOs noted the former as a pressing concern while only 18% were perturbed by the latter, in Q1, with not much shift in these numbers in Q2.
The remainder of the CFOs’ list of trepidations in both quarters were comprised of anxieties relating to: ‘employee retention’; ‘commodity prices’; ‘employee productivity’ and ‘the imbalance between transformation and service delivery’.
Interestingly in the first quarter, only 3.7% of the interviewees were vexed by ‘inflation’ and ‘the cost of borrowing’.
By the second quarter none of the CFOs were most concerned by inflation but the percentage of those most concerned by ‘the cost of borrowing’ had grown significantly to 13,3% of those interviewed.
The effects of unethical behaviour on the national psyche are impossible to measure. Yet, the economic effects of such behaviour are measurable; so too is the perceived harm caused by corruption. The survey found that of the CFOs interviewed in the first quarter:
- 75,6% believe corruption reduces the quality of goods and services
- 6% believe corruption increases prices
- 63% believe corruption reduces tax revenues collected by the government
- 63% believe corruption hinders the expansion process
- 6% believe corruption hinders competition
The assertions of the CFOs were made quantifiable by the Minister of Economic Development, Ebrahim Patel. In September 2017, in an article published by Business Tech, he is quoted as saying: “Corruption costs the SA gross domestic product (GDP) at least R27 billion annually as well as the loss of 76 000 jobs that would otherwise have been created.” Many would say the estimate is on the low side.
The president has vowed to fight against corruption – and by extension its nefarious social and economic effects.
In his state of the nation address, President Cyril Ramaphosa said: “We are determined to build a society defined by decency and integrity that does not tolerate the plunder of public resources, nor the theft by corporate criminals of the hard-earned savings of ordinary people.” He continued: “This is the year in which we will turn the tide of corruption in our public institutions.”
Acknowledging the obvious and persistent problem of corruption is a start. The specific details of how victory over corruption will be realised are left to the imagination. Only time will tell if these measures will suffice.
Against the backdrop of political change, technological advancement continues. Yet, the vast majority of CFOs interviewed, remain unconcerned regarding the threat of advances in financial technology affecting their businesses. Technologies such as Blockchain, Bitcoin, Smart Contract and Robo Advisor, are viewed by most CFOs, as being unlikely to gain significant traction.
For investment, and therefore the economy, to flourish and to create the jobs we so sorely need, action is needed. To be sustainable and to create real change, optimism needs evidence. As far as business is concerned, feelings are nice but facts are better.