Mervyn King is the chairman of the King Committee on Corporate Governance. Picture: Simphiwe Mbokazi

Johannesburg - Gone are the days when the job of chief financial officers was just about balancing the books, they now are confronted with managing unforeseen political shocks, including the Brexit vote and last week’s landslide victory by Donald Trump. Those were top priorities of accountants all round.

The impact of Trump’s ascension to the highest office in the US came under the spotlight at the two-day 46th annual International Association of Financial Executives Institute World Congress for chief financial officers held in Cape Town last week.

Daniel Silke, a political economy analyst and futurist, told the congress, which was attended by 263 delegates from 20 countries, of his worry about the future of trade relations between South Africa following Trump’s election victory, which will see him become the 45th US president.

Silke was worried Trump might pull the rug from under Africa’s feet by making the African Growth and Opportunity Act (Agoa) onerous, adding that we could possibly have a situation where South African imports could have higher tariffs.

Agoa, which extends tangible incentives for sub-Saharan African countries to promote diversification of exports, was extended for a further 10 years by the US Congress last year.

However, Silke’s fears were dismissed by Sidwell Medupi, the Department of Trade and Industry (dti) spokesman who, when asked to comment on Silke’s fears, said the Agoa policy was here to stay.

He said Agoa had been endorsed by the US Congress and was not a decision by a president. The Congress was also a reflection on corporate governance and ethics in both domestic and global corporations.

Mervyn King, the chairman of the King Committee on Corporate Governance and chairman of the International Integrated Reporting Council, said that companies and organisations had to strive for good governance.

King IV, which was released last month, has tightened the requirements on remuneration for companies. It is also focused on disclosure and voting on remuneration among others.

For most companies, remuneration is a thorny issue that often features prominently in annual general meetings.

“As soon as stakeholders lose trust in a company and believe there is a lack of integrity, the company loses value in intangible assets.

“They (intangible assets) have in the 21st century become more valuable to a company than the tangible assets, which are recorded as part of net assets of a company,” King said.

Negative impact

King said if a company had a negative impact on the environment, it destroyed value. For example, a fabric dyeing business using toxic chemicals needs a laboratory to detoxify the chemicals.

However, if the business was to close its laboratory it might have more profit, but the environment would be destroyed.

“It is not just profit for shareholders at any costs, it is about creating value,” King said.

Southern African Institute for Business Accountants president, Dovhani Thakhathi, told delegates that the litmus test for any chief financial officer was their ability to influence the corporate strategy of the companies they run, and not to cut corners.

Thakhathi said chief financial officers needed to get a grip on the environment in which they operated and find growth opportunities. He said they needed to find creative solutions to grow a business amid a subdued economic environment.

“Chief financial officers have to be able to advise companies not to wait for crises which resulted in many companies going down the drain. (They) need to suggest best practices on the boards,” he said.

Thakhathi said that it mattered that chief financial officers could influence their boards and staff on a day-to-day basis. Most importantly they also needed to understand that they served their organisations.

“They should be able to have an influence, and what they say should be understood by their boards and staff members. For example, they should avoid saying that there is no money in the company, but be able to come up with the solutions to ensure the company has a direction,” he said.

“Chief financial officers must serve people through the company or department they work for. It is not about numbers,” he said.

Parliament’s chief financial officer, Manenzhe Manenzhe, who was at the event, said accountants were working in an environment where resources were limited. “Chief financial officers are the most hated people in the organisations they serve, because they have a duty to say no.

“There is a danger of promising things that we cannot live up to. When needs are high and resources are low the one person who has to remind others is the chief financial officer,” Manenzhe said.

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