zimbabwe cforeport 2014 - deloitte us€¦ · • the role of the cfo this has provided us with...

CFOReport2014

We’ve climbed mountains. Now we’re ready to do it again.

Zimbabwe

Zimbabwe CFO 2014 Report 2

Deloitte conducts its CFO surveys each year to provide a better understanding of the current mind-set of financial stewards operating across the world.


ForewordDear Reader

We are proud to present our very first Deloitte CFO Survey for Zimbabwe. The fact that we have been able to gauge a sufficient number of responses in Zimbabwe to justify a standalone report for the country speaks volumes to both our growing presence in the country as well as the maturity of its economy.

Deloitte conducts its CFO surveys each year to provide a better understanding of the current mind-set of financial stewards operating across the world. From this survey, we hope to gain a better understanding into the underlying mood of Zimbabwean CFOs and to ascertain what the underlying drivers that are shaping their behaviour and strategic choices. In our survey, we also seek to determine whether there is a convergence or divergence of views on a number of topics and whether there are common trends among actions proposed by CFOs that may be insightful to their peers and to other readers of this report. This involves canvassing CFO views on:

• The economy and current business climate

• Their strategic intent

• The cost of funding (interest rates) and the availability of funding

• Short-term and medium-term currency outlook

• Cash flow and investment priorities for 2014 and beyond

• Availability and use of key talent

• Growth opportunities in the rest of Africa and other markets

• Topical subjects such as industry challenges, smart technology and social media

• The role of the CFO

This has provided us with rich insights as to what is top of mind for CFOs in Zimbabwe as they navigate through today’s challenging but exciting times. Deloitte recognises the crucial role that CFOs play around the globe as key decision makers in their respective companies and the daily challenges that CFOs face as they juggle the roles of steward, operator, catalyst and strategist. We have a well-established CFO Programme with the purpose of supporting and partnering with CFOs to better equip them to meet these everyday challenges.

We have assisted many CFOs in unlocking great potential for themselves and their companies. We sincerely hope that the insights and information provided in this report will be of great value to our valued clients and readers alike.

Best Regards

Tich Mudede Roy CampbellAdvisory Lead – Zimbabwe Partner – [email protected] [email protected]

Welcome to the 2014 Deloitte Zimbabwe CFO Survey


SummaryDeloitte has been conducting a CFO Survey in Southern Africa for a number of years, but in 2014, we have received – for the first time – sufficient responses from Zimbabwean CFOs to compile a separate report. We trust that this report will provide insight into the thinking of CFOs in one of Southern Africa’s most significant economies. While the bulk of Zimbabwean respondents represented relatively small companies, with 42% hailing from entities with an annual turnover of below $25 million and a further 38% representing companies with turnovers of between $25 million and $50 million, we believe the feedback provides useful insights to both large and small corporates.

A key theme to emerge is that very few Zimbabwean companies are looking to expand into the rest of Africa. Only 12% of Zimbabwean respondents indicated a desire to expand in Southern Africa this year, while a mere 4% said they were planning to establish a presence in East Africa. While the appetite for expansion is limited, this does follow a general trend that emerged from the Southern Africa CFO Survey, where respondents favoured expanding within their region rather than venturing into comparatively unknown parts of the continent.


Southern Africa

Undecided

East Africa

0

12%

4%

4%

Deloitte has been conducting a CFO Survey in Southern Africa for a number of years, but in 2014, we received – for the first time – sufficient responses from Zimbabwean CFOs to compile a separate report.

Figure 1. Regions for future expansion

Key Finding

Respondents that indicated their companies will be expanding beyond their boarders, favour the Southern African region


0

20

40

60

80

100

20144% 4%

15%15%

39%

42%

69%

12%

19%

8%

19%

27%

27%

2015 2016

Much the same

Slight improvement

Significant improvement

Significant deterioration

Slight deterioration

In keeping with the generally downbeat assessment of CFOs in other parts of Southern Africa, Zimbabwean CFOs exhibited mixed reactions when questioned about expectations of company performance for the current year. No less than 19% of respondents predict a significant deterioration in company performance in 2014, with a further 8% expecting a slight deterioration and 27% opting for a continuation of the status quo. The remaining of 46% expect slight to significant improvement.

Figure 2. Company performance outlook

Key Finding

CFOs in the region exhibited mixed reaction with regard to their company’s performance outlook

Expected company performance


Figure 3. Cash flow priorities Zimbabwe (Top three cash flow priorities, aggregate %)

0,00,20,40,60,81,00 90

86%

54%

50%

50%

31%

Improving current operations

Repay debt

Retain for liquidity

Invest in new capacity (Capex)

Invest in innovation & new products (R&D)

Cash flow prioritiesImproving current operations is a key focus area for Zimbabwean CFOs, with 86% naming this among their top three cash flow priorities. On the positive side, 54% of CFOs said investing in new capacity was among their top three cash flow priorities, followed by repaying debt and retaining cash for liquidity. In line with the views of CFOs polled elsewhere in Africa, payments to shareholders were among the least popular use of cash.

Key Finding

Improving current operations is a key focus areas for Zimbabwean CFOs


Figure 4. Top 5 Industry concerns (Top three industry concerns, aggregate %)

0

54%

47%

46%

39%

39%

Threat of nationalisation/governmentintervention in industry

Financial health of primary customers

Competitiveness of the local market

Industry regulation and environment

Sustainability factors relevant to industry

Industry concerns

Relative to the US dollar, what fluctuations do you expect from your local currency in the following years?

The financial health of primary customers was identified as the top industry concern, totaling 54%. This is a reflection of the poor state of Zimbabwe’s economy. Retail sales in Zimbabwe slumped 30% in February, compared to the previous month, while 15 factories in the metals and engineering industries closed in the period, according to the country’s government. As is the case elsewhere in Africa, regulation is becoming is increasingly becoming a challenge for businesses operating in Zimbabwe. Regulation was identified by 39% of respondents as one of the top five industry concerns. Unlike the rest of Africa, CFOs in Zimbabwe did not rate retention of talent as a top concern.

Key Finding

The financial health of primary customers are the foremost concern for CFOs


Significant risk Manageable risk Insignificant risk

Political landscape in your country

Credit monitoring and managementprocesses for customers

Margin deterioration due to lack of pricing flexibility

Threat of nationalisation/government intervention in industry

Ability to protect market share

62% 30% 8%

16%24%60%

50% 42% 8%

50% 15% 35%

16%36%48%

42%

36%

35%

32%

23%

15%

12%

12%

8% 50% 42%

30% 58%

23% 65%

50% 35%

35% 42%

44% 24%

35% 30%

60% 4%

20% 38%Weak demand for existing products

Margin deterioration due to input cost pressures

Fragile state of the global economic recovery (EU deflation, Chinese bubble, etc.)

Product substitutes

Impact of continuing electricity price increases

Ability to comply with legislation, regulation or charters

Global unrest

Currency volatility

Labour unrest

The political landscape was named by the majority of Zimbabwean CFOs as the biggest risk to business performance. CFOs felt that additional clarity was required around the indigenisation programme, which is an area of national focus at this time, and its implementation. Their main concern was centred around the consistency of policy application as this has a direct impact on FDI.

Credit monitoring and management processes for customers was the next major risk factor identified by Zimbabwe CFOs, followed by margin deterioration due to pricing inflexibility, the threat of nationalisation and protecting market share.

Risk factors

Figure 5. Risk factors

Key Finding

Aligned to the market sentiment, the main risk faced by CFOs is the political risk in Zimbabwe


As is the case throughout Southern Africa, the core strategy of Zimbabwean businesses at present is defensive in nature. Reducing operating costs, increasing operational efficiencies, the sale of non-core assets and improving investor confidence are the main strategies for a business leadership that is facing ongoing economic challenges. Typically, expansive strategies like venturing into new markets in the rest of Africa, research and development and investing in smart technologies are comparatively low on the list of strategic objectives.

Businessstrategy


Figure 6. Business strategies

Currently following Likely to adopt in 2014

0 20 40 60 80 100

83% 17%

83% 17%

79% 21%

73% 27%

68% 32%

Reduce operating costs/rationalise operations

Improve operational efficiency and process optimisation

Sell non-core assets

Improve investor confidence

Consolidation of operations

As is the case throughout Southern Africa, the core strategy of Zimbabwean businesses at present is defensive in nature

Key Finding

Much like other Southern African countries, Zimbabwean CFOs have prioritised defensive strategies for their businesses


CFO stresses in Zimbabwe are much like those observed elsewhere in Africa and the rest of the world. Concerns about company performance, the preponderance of low-value administrative work, rising competitor activities, excessive workload and demands of external stakeholders are seen as the top job stresses among the country’s CFO community. Insufficient pay was again considered among the least stressful aspects of being a CFO.

Top job stresses

Figure 7. Top five Job stresses

0,00,20,40,60,81,00

65%

46%

43%

43%

43%

Pressures from poor company performance

Increased competitor activities

Too much administrative/low-value work

Excessive workload, roles/responsibilities

Demands of external stakeholders, analysts, etc.

Key Finding

Poor company performance ranks as the biggest concern for CFOs

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. The more than 200 000 professionals of Deloitte are committed to becoming the standard of excellence.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

© 2014 Deloitte & Touche. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

Designed and produced by Creative Services at Deloitte, Johannesburg. (808469/ver)

zimbabwe cforeport 2014 - deloitte us€¦ · • the role of the cfo this has provided us with...

Documents