CFOs eye growth, albeit cautiously: Deloitte
South African CFOs indicate that they are looking to further growth in their strategies going forward, according to the 2011 Deloitte CFO Survey, yet they remain cautious in the midst of an uncertain economic environment.
The survey was the third in an annual series of reports, which sought to gauge the business environment in which CFOs have had to operate.
Over the three-year period, they have captured one of the most difficult South African business environments for CFOs. This includes the recession of 2009, the disruptions of the 2010 FIFA World Cup and the current nervous global markets.
The report said CFOs believed that modest economic growth was likely, but they were more circumspect regarding their own company outlook. Only 12% of CFOs expected company performance to be significantly better beyond 2013, even though 48% thought that the economy would be operating at a much higher level at that stage.
From having followed highly defensive strategies in 2009, CFOs were now opting for a balance of defensive growth business strategies over the coming year according to the survey. Not fully confident that the worst was over, CFOs were watching cash flows carefully. The primary business risk was considered to be margin deterioration due to input cost pressures, with 83% of CFOs citing it as a risk.
The survey also found that at the micro-economic level, concerns centred on industry regulation (46%), competitiveness (39%) and skills shortage (50%). Larger companies (with a market cap in excess of R20bn) found industry regulation consuming. The financial sector was overwhelmingly absorbed by the intensification of regulation which was threatening to stymie industry and could aggravate the rising cost of doing business.
For the mining industry, regulation was also a huge concern according to the report. This risk was supported by continuous discussion conducted mainly through the press on the subject of nationalisation with key stakeholders adopting seemingly different standpoints.
Expansion into Africa was seen as a key source of growth with 73% of companies indicating a move northwards, and most of them planning to do so imminently, according to the report. With its large youthful population and forecast above-average growth rates, Africa was seen as the last frontier, particularly in the consumer sectors as well as infrastructure development.
The 2011 Deloitte CFO survey is based on research conducted on an anonymous and confidential basis, from mid-June to early July, from a sample of CFOs selected from 447 of SA's top organisations nationally, spanning listed and unlisted entities in the private sector as well as major state-owned enterprises.
