Kevin Phillips, CEO of forecasting firm IDU, explores perceptions of change from a South African standpoint, and examines how businesses have learned to adapt and survive in a culture of constant instability.
Living and working at the southern tip of Africa, I’m used to keeping an eye on global events, as you would a weather vane, to pre-empt the impact on local business and finances.
It’s absurd, but the reality is that we are still more influenced by our cousins in the northern hemisphere than we are by those we share a continent with. And rising globalisation is only amplifying this. But watching the fallout from the Brexit referendum and the Trump election, it has been hard not to crack a wry smile. By no means over the seriousness of the events, but rather at the “sky is falling in”, response.
You see, operating in this amount of change and uncertainty is the status quo in Africa. And the unintended consequence is that we’ve become extraordinarily resilient and adaptable. Adept at not only riding out tectonic disruptions, but also turning them into an opportunity.
Take my country, South Africa. At the end of 2015 we saw three finance ministers in office in the space of five days. Conservative estimates say this immediately wiped out around R500bn (£31bn) in value from the South African economy. The Rand, which had been trading fairly steadily for a few months, went into freefall, reaching an eye-watering R24 to the pound. (Although this was heartily toasted by the Barmy Army on tour with the English cricket team at the time!)
The sluggish gains our currency subsequently made were pretty much wiped out by the Brexit referendum in June, and, as if the year hadn't been exciting enough, the threatened politically-motivated prosecution of our finance minister in October. Factor in a yo-yo-ing petrol price, a 6.6% official inflation rate (many would argue the true inflation rate is double that) and a highly uncertain political landscape means change is quite literally a constant, for businesses and consumers.
But before this turns into a Band-Aid tribute act, the point I want to make is that our exposure to unrelenting and erratic change has bred an entrepreneurial optimism. And this is the first lesson UK businesses, trying to make sense of the uncertainty of a post-Brexit world, could take from our experience: look for the opportunities and embrace the hustle like you’ve never done before.
The second lesson is related. When a company undertakes a planning and budgeting process they need to make some fairly significant assumptions: “robots won’t be replacing my people in the next five years”; “the UK will still be part of the European Union”; “smartphones aren’t going to become the biggest supplier of my product”.
Today, this process is meaningless. You can’t begin to plan for the amount of disruption you are facing, never mind predicting the way the weather vane is going to swing.
So, instead ensure your budgeting and business strategy becomes less cumbersome and non-responsive to change. How? Loop in the view from the grass roots of your organisation. Head office might be running around like Chicken Little, but the people on the ground can see the opportunities, and know where to hustle. That is why you employed them, after all.
This prevents companies codifying a panicky, knee-jerk reaction into their business. At best, this would be inappropriate and regrettable when the dust settles, which is often sooner than you think — systems and people are fairly elastic. Or, at worst, this approach becomes self-fulfilling, creating your new reality.
By the way, at time of writing the Rand had recovered to around R16 to the pound, so the Barmy Army may not be smiling as much next trip.
But on a serious note, this is not an odd percentage point we are talking about, this is huge, and is not atypical of the dynamic and challenging environment in which we trade on a daily basis.
Welcome to our world.
About Kevin Phillips
Kevin is the founder and CEO of idu Software. He has degrees in Commerce and Accounting, and started idu with partners James Smith and Wayne Claassen in 1998. Kevin is fast becoming a thought leader in his field, and makes regular comment in the media about current affairs affecting business, as well as accounting, finance, budgeting and software. He is a columnist for Accountancy South Africa and Tech Leader, and has been featured in Sunday Times, Business Day, Enterprise Risk, Succeed and Entrepreneur. He is also a guest speaker on Radio 702, Kaya FM and Summit TV.
Established in 1998, IDU was created by accountants and financial systems specialists to deliver smart software solutions for budgeting and financial reporting across all standard ERP and financial systems. The flagship product, idu-Concept, is specifically designed to overcome issues that get in the way of effective budgeting, forecasting and reporting.