The 2007-2008 Global Financial Crisis is considered by many economists to have been the worst financial crisis since the Great Depression. Post crisis, recovery legislation has been put into place by governments across the globe, to act as failsafe’s against future crisis.
Financially, for many businesses 2014 has been a challenging year. CFO’s have had to navigate around smaller operating budgets, increasing operating costs and profit expectations from the boardroom. The general thought process is, “do more, make more with less”.
For the South African CFO, increased access to the digital world brings real time reporting to the foreground. The financial battlefield can rely on minute to minute time accurate financials which allow the boardroom to manoeuvre the company out of troubled waters before the storm weighs in.
The fundamental problem lies in the vast reporting gap between the digital world and the real economy. A Joint survey recently released by ACCA and IMA (Global Economic Conditions Survey Report: Q3) focusing on the real economy and global economic conditions; highlights the need for CFO’s to analyse financial indicators from both the real economy and the digital world. Companies generally rely on digital reporting which leads to the financial statistics becoming skewed. We can see this phenomenon within the recent financial data being released by the South African Reserve Bank (SARB). Growth has been marked at 1.4 percent, however within the real economy; the growth rate is well into negative territory.
“CFO’s are required to pull at two opposing forces, the fast past digital world and the grounded real economy” – Karen Smal, Acting Head of ACCA.
The ACCA and IMA survey touches on the need for accountants to understand the benefits of digital accountancy but remain grounded in the real economy. This proves challenging in South Africa as companies move towards reliance on digital reporting.
The survey author Manos Schizas, senior economic analyst with ACCA, said: “It is clear that the buoyancy of the financial sector has masked the true picture in the real economy.”
Stock markets may well be signalling a recovery, but the recent downgrading of the 4 major banks is an indication that the digital world is not in touch with the real economy. On the ground, financial indicators are showing a much higher inflation figure and recording negative growth. The real economy is still stuck in the 2008 global financial crisis.