Global uncertainty marks drop in business confidence

The South African economy has recorded its fair share in business confidence declines since the 2008 market global crash. Recently, in the 4th Quarter of 2016, the RMB/BER Business Confidence Index declined to 38 from 42 points. This would be equal to levels last seen in the 1970’s and 2010’s.


The latest Global Economic Conditions Survey from ACCA (the Association of Chartered Certified Accountants) and the IMA (the Institute of Management Accountants) point to a similar global business confidence drop in Q4. The findings of the survey highlight businesses and economic forecaster’s sentiment towards 2017 and a new age of uncertainty.



Fall in Government investment; changes in political landscapes and economic isolation are all contributing factors to the decline. The survey of over 4,500 finance professionals and business leaders worldwide has found that while the economic outlook has improved slightly in the US and China over the last quarter, the Eurozone has hit its lowest confidence levels since 2012. In South Africa, business confidence levies are lower than last seen post-2008.


44% of respondents expressed concern over falling income due to low levels of government expenditure, with another 43% reporting worsening business confidence.


Across the Eurozone, the resignation of Italian Prime Minister Matteo Renzi in December 2016, combined with a series of upcoming national elections, has led to a downbeat mood while UK business confidence fell sharply ahead of Brexit negotiations.


 “Current political uncertainty is clearly having an impact on global business confidence. In the US the Trans-Pacific Partnership is unlikely to be ratified while likely restrictions on trade with key markets including China and Mexico are also major factors here. In Europe, uncertainty over the outcome of elections in the Netherlands, France and Germany – which could lead to major policy shifts for regional trade and the future direction of the Eurozone – all contribute to a gloomy outlook going into 2017.”findings Faye Chua, Head of Business Insights at ACCA



Despite this and the slowdown in manufacturing worldwide, the global economy may be on course for growth in 2017, supported significantly by China’s growing response to its economic stimulus programme and the US maintaining a partial recovery.


In South Africa, there is an overall consensus that the Rands strength could beat 2015 levels. A stronger Rand equates to economic stabilisation, steady inflation, and stronger GDP figures. What South African economists are now looking towards is the level of uncertainty brought on by rapidly changing domestic and international economies, politics and trade figures. However, the State of the National Address  will give clearer guidance locally to the year ahead and market analysts can have more concrete views on how we emerge on international trade pacts.


To view the survey visit


Fieldwork for the Q4 2016 GECS took place between 24th November and 13th December 2016 and attracted 4,551 responses from ACCA and IMA members around the world, including more than 350 CFOs.




The Role of Fraud in the Economy


According to various reports, fraud is South Africa’s number one economic crime and considering that fraud accounts for 7% of company revenue worldwide, any further increases in this figure could prove detrimental to an organisation in these difficult economic times. In South Africa alone, it is estimated that fraud costs the economy in excess of R2 billion a year. There are a number of reasons why people fall victim to the pressures of fraud. In the economic state that we find ourselves in there is scarcity of jobs and this has resulted in people using unethical methods for financial gain. On the other hand, in an attempt to reduce costs, companies usually resort to measures like retrenching staff (which may affect the segregation of duties doctrine), reduced training, abandoning cheques and balances which may be in place, or cutting back on internal audits, amongst various other things. In such conditions, an organisation is susceptible to fraudulent behaviour from its employees both internally, as well as externally in transactions binding the firm. Ever since the 2008 downturn the relationship between the finance industry and consumers has changed. According to an ACCA report titled Culture vs regulation: what is needed to improve ethics in finance, “the crisis shattered the public’s trust in the banking system and as the examination of financial institutions continues the relationship between the bank and the public continues to deteriorate as ever more scandals are announced”. A number of policies have been drafted to aid this situation, but policies and regulations can only go so far. Regulations and policies alone will not be able to combat fraud in business. Regulation failed to prevent the 2008 crisis; risk was constantly discounted. In some instances it was considered non-existent. Technological developments and complex products can be created rapidly, which means that the regulator will always be playing “catch-up”. So maybe in highlighting the impacts of fraud on the economy and how these affect each of us directly there might be some improvements that emerge. Below are some of the impacts of fraud on the country:

  • Corrupt activity hinders development
  • Contributes to the depletion of the public purse and distorts markets
  • Hinders local and foreign direct investment.

Countless studies around the world show how corruption can interrupt investment, restrict trade, reduce economic growth and distort the facts and figures associated with government expenditure. But the most alarming studies are the ones directly linking corruption in certain countries to increasing levels of poverty and income inequality. The issue of ethics comes to play, and these are determined by the culture of an organisation. The ACCA report looks at the culture of tolerance in an organisation, for instance, is profit valued more than the means. Does an organisation promote a culture of high risk overlooking regulations and policies? It is important that business managers realise that these “insignificant” hints lay foundations to bad or good behaviour. Over-reliance on regulators has been found wanting in days of old when dealing with fraud and corruption, it is therefore important that business managers understand that the most power lies in the culture of the organisation and they have the most influence on this than external regulators.

Do CFO’s play a role in social economics?


In a recent Deloitte report, CFO’s operating in Romania are more optimistic about the future today, than they were a year ago. 92.6% of participants expect that the Romanian economy will continue to grow. A similar report, completed by Deloitte for CFO’s in South Africa paints a different picture.

In an essence the Romanian and South African economy structures show similarities in the challenges they face. Both Countries’ economies have suffered from years of economic sanctions and isolation due to political mismanagement and oppression. In order for CFO’s to truly understand challenges faced, would it be wise, when future planning, to understand and include the social economics of the country as well? South African CFO’s tend to tread with conservancy and sometimes act with scepticism towards future economic growth and planning. Many larger companies are focusing on off-shore investing opposed to local portfolios. Why? Is it simply financial savvy, or perhaps a result of a skewed understanding and the lack of wiliness to solve social economic challenges?

CFO’s in the European state are focusing on mechanics to boost local production and competitiveness within the union and abroad. Both countries have social economics influences that can be perceived negative towards economic growth. Yet Romanian CFO’s are tackling this data with a keen understanding of the negative, a possibly positive, effect social economics has on financial planning. The question remains; are South Africans CFO’s inherently negative? If both states face similar challenges, would the misinterpretation of social economics not skewer financial planning?

“CFO’s would need to factor in and solve social economic challenges in order to overcome negative perceptions”Karen Smal, Acting Head of ACCA South Africa

Case in point, a joint report recently released by ACCA and Longitude Research highlights the fact that financial institutes using “limited” financial information in order to support small businesses are seen as slow in decision–making, risk-averse and “ripe for disruptions”. Financial institutes in South African are seen as ‘risk-free’ lenders. If a keener understanding of social economics were factored in, would South Africa see a boom in small business activities through investments?

There is no doubt that South Africa faces challenges. However in the spirit of nation building the understanding and willingness to change the social economic landscape, would lead to an investment environment that would show optimism, evening in the darkest times. CFO’s would need to factor in and solve social economic challenges in order to overcome negative perceptions.

Is the Global Recovery an Illusion?


As long as there has been demand and supply of goods and services there has been some sort of economy. Real economy is the part of the economy that is concerned with the actual production and delivery of goods and services. In South Africa, the real economy accounts for a substantial amount of revenue. (Services alone account for approximately 65.9% of GDP).

According to the GECS (Global Economic Conditions Survey), the third quarter of 2014, the real economy has taken a direct hit. The concern highlighted in the report was the illusion that financials and selected emerging markets maintain, and how this illusion is far set from the real economy. The GECS, jointly carried out by ACCA and IMA, recorded a slowdown in confidence by finance professionals (recorded at 28%, down from 30%). The slowdown in confidence has a ripple effect on the struggling South African economy.

Finance Minister Nhlanhla Nene, recently revised South Africa’s projected growth to 1.4%. The realty though is that the economy is worse off the anticipated. Key economic focus areas tend to be the financial markets and currencies. However the real economy needs to be taken into account in order to gauge whether the global recovery is real or an illusion.

GECS Report 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, where despite growth capital being at its most accessible since the global economic crisis, the lack of genuine business opportunities has meant that investment has been subdued around the world.”

Manos Schizas further reports “The drop in demand for oil and other commodities has also been a test for many emerging economies, which rely on fuel and mineral exports for continued growth and financial stability.” A recent media report mirrors Schiza’s claims by attributing a possible Nigerian currency and budgetary crisis to the drop in global oil prices.

South Africa is not left unaffected as mineral prices bottom out due to over demand and lack of investor confidence. South Africa’s real economy growth cannot live up to the expected 1.4% target announced by the Finance Minister, as many of the companies producing and delivery services are struggling under the current economic conditions.

Karen Smal, Acting Head of ACCA South Africa reiterated the need for local accountants to take the real economy into consideration when advising on growth rates and company growth targets.

Despite this, majority of finance professionals (58%) were still optimistic about the state of the economic recovery, these results are not worrying in themselves but the latest GECS report digs further into the survey responses to uncover a number of worrying trends: a second consecutive quarter of falling global business confidence; a growing reliance on government spending; fears of deflation in the developed markets; and a synchronised fall in capital spending around most of the world.

The shift to Global Business Services – Part 2


The move to a Global Business Service (GBS) model has some interesting effects on the finance function. According to the ACCA report, Global business services: a game changer for the finance organisation, GBS is evolving into a genuinely different way to attack back office delivery cross-functional, under single management and reconfigured processes to cut across functions, to deliver an enhanced level of value to the enterprise. For the finance organisation, the GBS model fundamentally represents not only a further refinement in both scope and scale but notably, it essentially becomes GBS’ customer. No longer does finance run its own operations; it has the opportunity to leverage investment facilities, technology and infrastructure in concert with other GBS functions. No longer are finance operations run vertically: its processes are now linked and governed with other enterprise-wide tasks in more efficient ways.

While this shift can create exceptional value for the organisation as a whole, as well as the finance function itself, making the change work in the finance function needs to be carefully mapped out and managed. To do this, the change drivers in the finance function need to ask the following key questions:

  1. How fast or how slow should the organisation move?

The ACCA report, Transformation challenges in finance sums it up perfectly. “There is no recipe when it comes to the velocity and extent of change; leaders approach finance transformation in various ways, depending upon the institutional, contextual and structural markers that characterise their organisations.” Essentially there are two speeds – revolution or evolution. The benefit of revolution is getting everyone on board quickly which has the potential to decrease debate and confusion and get everyone working. However, revolution is expensive and demands that adequate resources are invested in making the necessary changes. Evolution, according to Unisys’s Chris Gunning, “Is size and scale dependent. Not every organisation has the wherewithal to create a revolution. If there is no money, it’s a matter of delivering small, quick wins to build credibility.”

  1. What is the best step forward?

This is a critical question in changing to GBS. In order for any organisation to determine a firm starting point, those leading the change need to look at their organisation in terms of size, geography and culture. For instance, Anirvan Sen of Chazey Partners looks at size as a key factor, saying, “For us, it’s a matter of getting started in areas big enough to deliver some early wins.” Describing how their organisation handled transformation, John Ashworth of Pearson says, “We sequenced in the right cultural order.” Size, geography and culture are key factors in determining an organisation’s first step.

  1. Old hand or external expert?

Effective leadership drives successful change. Organisations need to examine whether its current leadership holds adequate expertise to drive the change to GBS. The question of whether to bring in external experts or not greatly depends on the organisational context and the scale of the change. Whatever is decided, communication is always key, as is building and maintaining good working relationships both within leadership and between leadership as well as the rest of the stakeholders – whether leadership is ‘old hand’ or external expert.

  1. What does our corporate culture dictate?

One of the critical success factors in any change management programme, regardless of scale or model, is understanding the culture of an organisation. This means looking at the various demographics of your organisation. For instance, how many baby boomers, gen XY and noughties does the organisation have? How does each of these segments react to change and how can the organisation then guide them appropriately? How do the employees of the organisation in different countries adopt change and how does the organisation tailor its change management programme to accommodate them?

Once these four questions have been answered, it will be easier to create an effective change management programme for the move to a Global Business Service model that actually takes the people of the organisation into consideration along with the strategic reasons for the shift, and the processes and programmes that will effectively drive the shift.

The shift to Global Business Services – Part 1


One of the key areas of change facing the finance function within businesses is in structure. Beyond an organisation’s shift to outsourcing or shared services is the steady rise in popularity of the Global Business Service (GBS) model. The GBS model is an even bigger challenge to the finance function in terms of effectively managing transformation because of one key fact – by its very nature it has the potential to change the career path of finance leaders and redefine processes in the finance function.

According to ACCA’s  report, Global business services: A game changer for the finance organisation: “With many finance activities no longer in the finance function under this new business construct, and instead placed in a global business services function,  finance professionals will need to adapt their ways of working to be better prepared for working and reporting cross functionally.”

Essentially GBS means managing finance processes alongside processes of other enabling functions, such as human resources and IT. The report, states that “GBS models have the ability to change fundamentally the way finance functions operate. They could change the basic principles of ownership and governance, further reduce cost and increase efficiency, and lead to new business insights.”

Global Business Service has the following characteristics:

  • Global multi-functional architecture: the scope of GBS encompasses the entirety of the enterprise’s business operations, whether it is delivered through internal shared services operations, or through outsourcing relationships. In effect, GBS becomes the corporate back office entity.
  • Shares across functions: leveraging locations, management and administration, customer interfaces and sourcing methodologies. The GBS scope reports to one corporate leader, with clear reporting lines across all functions within the scope.
  • A unified governance structure: the methods, protocols, measurement and oversight are managed across the enterprise rather than within each business function.
  • Primacy of process over functional silo: business functions are managed and governed together as end-to-end processes that cut across functions such as finance, procurement and human resources. In effect, processes become the basis for performance management and measurement of back office procedures. For instance, in an ideal GBS structure the accounts payable function is aligned with upstream procurement processes, with performance throughout managed and measured in its entirety.

From the abovementioned characteristics, the benefit of a GBS model is clear. With consistency of process across functions driven by the business strategy there is great potential for enhanced value and profitability.

Getting to the point of a fully functional Global Business Service is the ultimate challenge in transforming the finance function thus the decision to adopt the model should not be taken lightly. Due to the influence that the model has on both the finance leader as well as the processes of the finance function, George Connell of Shell says, “I think that the strategic question is this: is GBS good for business? And then if it’s good for business then how do we embrace that and embed it and make it work within finance?”

Can the evolution of Bitcoins sustain accounting?


Dubbed the ‘currency of the people’, Bitcoin is a widely recognised form of digital currency created and held electronically. It enables instant payments to anyone, anywhere in the world. Created in 2009, Bitcoin is as electronic payment system based purely on mathematical proof.  It is anonymous, transparent and easy to set up. Transaction fees are minimal and you can send money anywhere, at any time and it will arrive minutes later. Moreover, the Bitcoin transaction network is safe and sound. It verifies transactions with state-of-the-art encryption. Users can hold numerous Bitcoin addresses. Normally, these addresses are not linked to names or any other personally identifying information. It is decentralised, in other words, the Bitcoin network is not controlled by one central authority. Nobody owns it. In principle, Bitcoin has a lot going for it.  ACCA’s 100 Drivers of Change for the Global Accountancy Profession document cites the virtual “Economy” as a significant driver of change. According the document, virtual reality offers the potential for going a step further and immersing oneself in a manner that enables the delivery of multi-sensory experiences.

As of late, it has been whispered that Bitcoin could possibly replace four career fields. One of these professions is accounting. It appears that Bitcoin could, in reality, be used to automate quite a few accounting functions and in some cases, it may possibly do a better job than human accountants. But can Bitcoins really replace accountants? This question has indeed raised a few eyebrows. Bitcoin remains a niche area, generally followed by the dyed-in-the-wool, techno savvy few. A considerable number of entities in technologically advanced nations are incorporating Bitcoins little by little. According to ACCA’s report on Digital Darwinism: thriving in the face of technology change, accountants and finance professionals must be open to the changes created by digital currency.

“The accounting and financial profession can initiate a more proactive response to digital technologies. By embracing technological advances, the profession can actively reshape it, rather than simply being reshaped by it.”-  Karen Smal, Acting Head of ACCA.

However, the usage of Bitcoins has not quite received sufficient acceptance in Africa. Many individuals are still not sold on the notion of investing money in a form of virtual currency. Interestingly, South Africa as well as a number of other emerging market countries has voiced a keen interest in setting up Africa’s first Bitcoin ATM.

Realistically, Bitcoins may never replace accountants. Alternatively, Bitcoins may contribute greatly to sustainable accounting. By automating complex transactions and improving cash flow management Bitcoins could increase productivity. Bitcoins might also broaden access to financial resources and investment opportunities plus expand the market as a result cultivating industry growth. It promotes elements such transparency which contributes further to sustainable practices. For the accountancy profession, adoption of intelligent tools that can analyse and interpret large volumes of data rapidly could transform activities such as audit and forensic accounting.

Bitcoins are indeed growing in acceptance around the world and might be one of the world’s most important developments. Frankly, the evolution of Bitcoin may perhaps revolutionise the accounting and financial profession and will undoubtedly streamline and optimise the industry.