Download CFO`s TO LEAD THE WAY IN CURRENT ECONOMIC CLIMATE

SPEECH – NEW CIGFARO PRESIDENT – “CFO’s TO LEAD
THE WAY IN CURRENT ECONOMIC CLIMATE”
Greeting
Sanibonani, molweni, dumelang, ndaa, goeie more, vanikum,
salaam, namaste. Programme director, past presidents of IMFO,
distinguished guests, members of IMFO, ladies and gentlemen.
All protocol observed.
Introduction
At the outset I would like to thank you for this opportunity to
address you today as the incoming President of CIGFARO. I
sincerely appreciate the trust, confidence and faith that you have
placed in me, more especially as this is my second term as
President. I had the honour and privilege of serving IMFO as
president from 2004 to 2006 which seems like yesterday.
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However, we have come a long way and you will undoubtedly
agree that a lot of great work has been done since then.
My special thanks to the existing Executive who were
instrumental in convincing me to accept this great honour. I hope
to be able add value to CIGFARO, you as its members, as well as
the municipalities you belong to. These are exciting times, but we
have several challenges that we need to focus on in the next two
years. It is said that tough times do not last but tough people do
and if there is unity of purpose we will be able to manage our
challenges more effectively. However, along with the challenges
comes opportunities for growth and to change how we do
business. I hope that together with the Board we are able to
provide effective leadership and guidance on these issues.
Economic Climate
The current economic climate which is characterised by low
growth rates, high inflation, high unemployment, weakening
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currencies, major volatility in financial markets, falling consumer
confidence, and investors deferring investments and the
employment of additional staff, is a major threat to the financial
sustainability and viability of public entities. In times like this it is
clearly not business as usual. Cities are regarded as the engines
of growth in any economy. Globally and in South Africa, cities
contribute about 80% of the national GDP. Accordingly, cities
have a huge role to play in turning around the economy and
building confidence in the economy, attracting new investors, and
creating the right economic climate for the growth of existing
businesses and the opening of new businesses. Whilst there
needs to be increased spends on economic development and job
creation, balanced budgets and sustainable growth are also
required. As our Minister of Finance said in response to a
question on how South Africa can stave off a downgrade in our
sovereign credit rating, and I quote, “If you want an economy to
grow you have to create a stable, predictable environment. We
need to be able to say to investors: ‘You can come here, your
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money is safe’. Both for local and FDI we need to project a
national front and help build confidence.” Unquote. Accordingly,
as CFO’s let us become brand ambassadors to lead the way and
build confidence in our cities and our country as investment
destinations.
The key question is how do we support business to unlock value?
The key to unlocking growth is a spatial framework, transport
plan, and housing plan that promote mixed use and integrated
development. Experiences globally show that local delivery is
more effective than national government delivery in terms of job
creation. We need to make the right choices for ideal growth.
Improved productivity is key. Providing skills development to local
communities to support local employers is also key. Economic
clusters, nodal development and densification are critical in terms
of the value chain together with climate change and resilience.
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Moreover, in the current economic climate, National Treasury
have adopted an approach of fiscal consolidation, and
accordingly, there is increasing pressure to make the rand work
smarter and stretch it further. To do this, finance professionals
and service leaders should not only focus on balancing the
budget, but also on driving real and meaningful change.
The key to doing this are financial resilience and doing more with
less. Financial resilience is critical and we need to ensure we
have the right diagnostic tools to ensure service delivery and
excellent public finance management. The three main focus areas
are:
1. Capacity, skills, development and sustainability – need the
confidence to make and do the right things.
2. Need to work smarter – productivity and use of technology.
3. Strong medium-term planning and integration.
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These issues must be driven over the next two years through
creativity, ingenuity and team work. Accordingly, I urge all finance
leaders to work towards making financial resiliency a reality in
their treasuries. This requires a financial strategy aligned to your
city’s strategy or IDP, long-term financial planning, including
modeling and forecasting techniques, as well staff with the
capacity for strategic analysis and diagnosis. As Shayne
Cavanaugh of GFOA said at this year’s GFOA conference, and I
quote, “Successful long-term financial planning builds interest in
better long-term planning in other areas.” Accordingly, as CFO’s
let us lead the way to better financial planning and improved
financial resilience.
National Treasury at the recent City Budget Forum indicated that
they will not be looking to approve any baseline increases for
national departments. They are actually looking to cut their line
department budgets by 1% to 2%. Accordingly, they are also
suggesting a focus on value-for-money, growth of the economy
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and productivity. As municipalities, we need to look to do the
same in the current economic climate. We need an increased
focus on economic development and job creation, enhanced
productivity in terms of staff, sweat assets, look at budget cuts
and austerity measures, and ensure that our ratepayers get better
bang for their buck. Let’s run our municipalities as our own
businesses.
Urbanisation
Rural-urban migration is a global trend and is one of the biggest
challenges we face today in terms of its impact on service delivery
backlogs. The 2011 Census showed that 63% of the population of
South Africa are living in urban areas. It is projected that this will
increase to 70% by 2030. This problem is compounded by the
fact that the current population growth rate is greater than the
economic growth rate. We need to work on a national approach to
this problem. It is critical that we help develop an integrated urban
development framework to help municipalities better manage
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rural-urban migration. Further, we need to develop a strategy for
rural development. In other words, we need focus on holistic
development. We cannot only focus on the 80% in urban areas,
we also need to focus on the 20% in rural economy.
Financial Sustainability and Viability
However, we also need to ensure that we still get the basics right.
From a financial sustainability and viability perspective, we still
have to:
 Achieve a clean audit report
 Improve our credit ratings
 Produce a balanced budget
 Maintain a collection rate of over 95% to ensure liquidity and
strong cash flow
 Maximize existing funding sources and pursue alternate
sources of funding, such as a local business tax
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 Achieve a balance with economic, social, rehabilitative and
environmental spends
 Pursue the issue of unfunded mandates
 Borrow prudently taking into account the impact on tariff
increases
 Scrutinise costs on an ongoing basis and drive cost cutting
and austerity measures, as well as productivity, return on
investment and value for money
 Focus on the key cost drivers – Top 10 items of expenditure
account for over 90% of the spend.
Spending patterns must be closely monitored and irregular
expenditure reduced, as well as the use of s36 and s116(3) must
be closely monitored. The above must be the key focus areas of
accountants, internal auditors and risk officers in terms of where
they can add value.
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Good financial management is also linked to boosting growth in
cities which helps public authorities and business in terms of
potential public and private investments. Global city growth is
dependent on certain fiscal conditions being in place for private
and other forms of investment. Appropriate services to engage
the local economy and build resilience are also important in
realizing inclusive growth. Holistic approaches to such smart
growth in global cities is intrinsically linked to good financial
management. Public financial management plays a crucial role in
attracting and promoting sustained economic investment into a
local economy from both domestic and international investors. It
also builds municipal financial resilience and sustainable
development, promoting the effective and efficient delivery of
basic services. Good public finance management also provides
leaders, officials and investors with information for better decision
making and it helps provide better targeted services. As Caroline
Al Beyerty stated at the CIPFA Conference in Manchester this
year, and I quote “Good public finance management is also
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conducive to enhanced productivity, economic growth, higher
levels of local revenue, and ensures that local, domestic and
international taxpayers, funders and investors get a better return
on their investment.” Unquote.
Environment
The impact of climate change has a very real long-term impact on
the sustainability and viability of cities. Accordingly, we all need to
commit to the triple bottom line. We need to fund sustainable
infrastructure projects. The cost-benefit analysis of projects must
include the impact on the environment or an environment impact
assessment. Some initiatives that we can consider are:
 Energy Office, as well as an Environmental Planning &
Climate Protection Department must be in place
 Climate Change Strategy must be in place
 Green innovation in housing projects – LED lighting, solar
panels, rainwater harvesting (jojo tanks), more efficient
shower heads, heat pumps, etc
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 Awareness campaigns and reducing water pressure
 All projects must be subject to EIA process and all
procurement must meet environmental standards
 Promoting green buildings through bylaw and standards
enforcement
 Committed to triple bottom line and developing a green
economy
 Explore alternate sources of energy: wind, solar, aqua, etc
 Undertake sustainable infrastructure projects
 Develop a model for funding green projects, such as green
bonds
Ultimately it is about reducing our carbon footprint and leaving a
legacy that the next generation can be proud of in terms of the
sustainability of our planet, our people, and our finances. Cities
have a huge a role to play. As Mark Watts, the Executive Director
of C40 said, and I quote, “Climate change is the biggest issue
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facing us at this time, and cities offer a great platform to bring
about change.” Unquote. With the Habitat III conference coming
up later this month in Ecuador, I believe that it is opportune that
we appreciate the global challenges around climate change and
that we develop strategies to ensure the long-term sustainability
of our cities and entities.
Innovation & Technology
Innovation and technology is the next key issue. We need to
innovate in order to face up to our huge economic and service
delivery challenges, and mitigate risk. We must optimize the use
of technology, especially customer-focused technologies and
innovations. For example there are a number of opportunities in
revenue management, such as e-mail and SMS billing. WIFI is
also important in terms of connectivity and communicating with
our consumers. This will help empower our people in terms of
informing them and making them aware of issues that impact on
them. This will help strengthen our democracy, public participation
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and transparency, and may even help reduce the number of
service delivery protests we have been experiencing.
Technologies and innovations also improve productivity which can
lead to lower staff costs, and better value for money. However,
when doing the cost-benefit analysis of any project, the impact on
the environment must be included.
Accountants and auditors must also be ready to adapt to the
impact of technology on the profession in the years ahead.
Technological change will lead to very different roles across many
professional disciplines. Roles like data scientists and process
analysts are likely to become vital as the existing professions are
transformed by greater use of technology.
Skills Development and Capacity Building
Skills development and capacity building is another key issue.
The recruitment and retention of the next generation of leaders in
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the Treasury is not only the job of Human Resources. The entire
treasury should focus on developing the full potential of future
finance officers, and not rely solely on the human resources
department. Succession planning also plays a crucial role in
creating a sustainable organization. I would like to challenge you
to consider the future and how you will help new employees
become tomorrow's financial leaders. We need to ensure that the
finance, auditing, risk and accounting professions remain
attractive to younger people. Skills such as data interpretation and
analytics for modeling service design are becoming increasingly
important. We must make the next few years an absolute priority
to encourage the future generation and demonstrate our own
sense of energy, resilience and optimism.
Our new board will ensure that we continue with the great work
and vision of CIGFARO in ensuring that capacity building is a key
area that we will focus on.
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Conclusion
Finally, just to recap, the following are some of the key strategic
issues that I would like to see CIGFARO get more involved in
during my term of office:
1. Help public entities survive the current economic climate
through economic growth, improved productivity, better
collection rates, value for money and return on investment
2. Assist in reducing the rate of rural-urban migration
3. Enhance financial sustainability and viability
4. Commit to the triple bottom line – assessment of all projects
in terms of economic, social and environment issues
5. Ensure a balance in expenditure – social, economic,
environmental and rehabilitative
6. Optimise the use of technology and innovation
7. Develop the skills and capacity of finance practitioners in the
public sector
8. Ensure maximization of service delivery and provide cost
effective services.
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I remind that you that tough time do not last, but tough people
do. I am sure that we can unite and work together and add
value improve the quality of life of all our people, especially the
disadvantaged and the marginalized.
I look forward to your continued support and working with you.
We have a lot of work to do and I eagerly look forward to it. I
hope that together we can grow CIGFARO to new heights and
add value to all our members.
On a personal note, I must declare my sincere appreciation to
CIGFARO for the professional development it has provided for me
over my career of 36 years in local government and for providing
me with a wonderful family of fellow professionals to work with.
I would also like to thank my Divine Master, Sri Swami Sivananda,
for all the guidance He has given me over the years and I pray
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that he continues to guide and inspire me to contribute effectively
to betterment of the lives of all of our people.
Together let’s leave a legacy that the next generation can be
proud of. As Albert Einstein once said, and I quote, “Strive not to
be a success, but rather to be of value.” Unquote. Let us work
together and add value to make our beautiful country and the
world a better place for all to live in, in terms of the spirit of ubuntu
and human dignity.
Ngiyabonga. Thank you.
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