Friday 18 June 2021
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CFO’s worried about keeping business afloat

By Staff Reporter

Deloitte Namibia just released the results of a survey conducted with the country’s top Chief Financial Officers.

The survey highlights real issues faced by CFO’s who forge a daily struggle to keep businesses afloat. Some of the concerns highlighted are the weakening demand and pressure on earnings and the pressure that the consumer is under.

The survey brings to the fore government initiatives and policymaking, as well as looks at how organisations are structured inwards in order to unlock value.

“Namibia’s policymakers face challenges from all angles and it will be interesting to witness and be part of the initiatives they implement to address some of these challenges.

The Namibian Government will eventually have to deal with bubbling issues and develop policies that earnestly address high youth unemployment, growing inequality levels and transformation.

All this needs to be done with the Government being at its highest levels of indebtedness since independence, reforming policies to encourage investment and increasing Namibia’s attractiveness to foreign capital and increased deployment of capital by Namibian firms,” the report says in its foreword.

“We hope the survey delivers useful insights and information to our valued clients and readers. As an integrated African firm, we are committed to providing CFO’s with information and support that will give them the edge when it comes to making informed decisions and addressing thorny issues in their daily work lives.”

At the height of the economy’s downturn, economic outlook for Namibia, based on the survey’s results is ‘neutral to cautionary’, since there is at present a level of low optimism amongst CFO’s in the country.

“The general expectation for revenue and margins, it was found, is that since 2018 was largely flat with minimal growth, CFO’s are more optimistic on growth prospects from 2019 onwards.

Some of the key findings of the Namibia CFO survey are that “CFO’s seem to be worried about growth and what could be done to stimulate it. The survey also showed that CFO’s are concerned about their organisations’ customers and/or clients.

The consumer has come under increasing pressure in the recessionary economy, with disposable incomes either not increasing or declining and having to deal with higher household levels of indebtedness. CFO’s from the retail, wholesale and distribution sector make up 21% of the survey participants and their businesses would also have been impacted by the declining disposable income of consumers from Angola who have been impacted by the slump in oil prices between 2014-2017.”

The economic conditions seem to have influenced how organisations are deploying capital, what strategic initiatives they are focusing on and what they have prioritised on their agendas.

Appetite for inorganic growth through mergers and acquisitions seems to be thin, which is both a factor of organisations not seeing worthwhile opportunities, but also financing these investments seems to be a hindrance due to the high cost of finance and/or the unavailability of finance.

Organisations are thus shifting focus, maximising and extracting all possible value both at the top line, by maximising revenues through increased focus on the customer and at the bottom line by reducing costs and/or are keeping them under control.

To do this, organisations seem to be looking at the entire value chain, optimising operations including processes to unlock value through efficiencies and cost savings.

CFO’s seem further concerned about the effectiveness of some of the initiatives and policies introduced by Government to stimulate growth. CFO’s also highlighted certain structural issues such as the size of markets, skills available in labour markets and the volatility of the Rand-pegged Namibian Dollar (N$).

Talent also seems to be a concern.  According to the CFO’s surveyed there seems to be a mismatch between the skills that are coming into the labour market and the skills demanded by employers. Employers also seem to face challenges in retaining top talent.

Total revenue of N$58.8 billion was collected in the 2017/2018 financial year, which exceeded the original budget by 4.3% and the revised budget by 3.7%.

Total revenue is projected to slow to 30.2% of GDP in FY2018/2019 and to average 29.7% of GDP over the medium term.

The weak outlook for revenue is primarily stemming from the continued decline of revenue from the Southern Africa Customs Union as a result of the subdued economic growth in the customs union in general, but particularly the South African economy.

Revenue from indirect taxes is expected to be lower due to the decline in the domestic economy, according to the report.

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