Challenges facing CFOs in driving profit across Africa

While it is understood that Africa is not a homogeneous entity, and that each country has its own dynamics, there are overarching challenges and developments facing the continent.

As chief financial officer (CFO) for a multinational organisation that operates in Africa, it is important to understand the diverse cultures, languages and expectations of the different regional markets.

The CFO’s mission remains to drive sustainable and profitable business growth, regardless of markets or country dynamics. While regulations, language and culture may be different in the continent’s diverse market of 54 countries, the CFOs doing or planning to do businesses in Africa all face similar challenges, including having effective working capital, an efficient workforce and good customer relations.

Other challenges facing CFOs in driving profitable business in Africa include political and fiscal risks, the state of the private sector and the high costs associated with doing business. But despite these challenges, Africa has the potential to enable businesses to thrive.

Behaviour patterns

It is evident that research, development and innovation hold the key to unlocking Africa’s potential and enabling CFOs drive successful businesses that are profitable and sustainable. The question is, how should CFOs engage in these markets?

It is imperative to understand the values, needs and behaviour patterns of local consumer markets before attempting to address specific business challenges.

Engaging reputable and legitimate local business partners will help accelerate the process and ensure the business and shareholders’ interests are protected at all times.

The mode of doing business in Africa has changed, and so has the role of the CFO. Cash payments may still be preferable in some market environments, but more and more countries are adopting innovative financial approaches for business transactions, paying suppliers and financial reporting.

Other markets, such as China and Asia, have embraced innovation as a method of improving existing processes to drive better business value that fuels their economies; I believe that the African financial environment is also ready to embrace innovation to drive profitable businesses.

According to a study published in 2013, for many CFOs to realise profitable growth, the finance function will need to be reinvented. Finance teams will need to find ways to redirect resources from low-value manual activities to high-value analytical activities

Survey results show that finance organisations expect broad, external pressures to pose the greatest challenge to their organisations over the next years. These pressures include economic uncertainty, a combination of intense competition and increasing inflation (which together are creating increasing pressure on margins), and greater risk exposure. As a result, strategic planning, budgeting, forecasting and analytical support, in addition to traditional cost management, will play a critical role in shaping the future CFO.

Driving profit

Doing business and driving profit across borders requires new thinking that is flexible.

The only way for CFOs to be in control is by monitoring and analysing market data to help them understand financial activities and find ways to create profitable business transactions.

The use of innovative technologies, such as data analytics and cloud computing, can transform traditional models into more innovative solutions, such as shared cloud infrastructure across borders regardless of time or location. With such models, CFOs are able to drive business value for organisations because of the effectiveness of shared resources, no upfront infrastructure costs and profits are guaranteed.

The challenges facing today’s CFO’s present a totally new financial environment that requires intelligence and flexibility in managing costs while innovatively remaining profitable. This means taking up a strategic leadership role that is accountable and willing to adapt to market conditions.

The writer is CFO at SAP Africa.

bizbeat@standardmedia.co.ke