As a profession, corporate treasurers do their best to manage the risks that their underlying companies are exposed to, such as liquidity risk, moves in currencies, interest rates or commodity prices. They are able to do this because the way they position their companies, in anticipation of these underlying market variables, is within the realms of their control, despite the movements in these underlying variables being out of their control. The ability to influence and have agency over these decisions provides a level of relative comfort and stability in steering a company during volatile times.
But how do you manage risk and create a level of comfort in an environment when so much of what is affecting our companies and our personal lives feels as if it is out of our control and without the ability to influence – a state where things happen “to” you, rather than “by” you? And it is exactly this lack, or perceived lack, of agency in influencing these factors that can create a feeling of despair.
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Our stubbornly persistent electricity crisis, our troubling foreign affairs stance and the continued deterioration of our infrastructure, due to theft and lack of maintenance, are just some of the very pressing issues that affect our businesses and households.
Add to these the recent greylisting by the Financial Action Task Force, controversial proposed legislation such as the National Health Insurance Bill, and high levels of corruption. Taken together, along with the slow pace of decision-making and implementation of the policies needed to remedy these problems and you have grounds for despondency.
Let’s also remember that we are not operating in a particularly benign global environment. The US Federal Reserve, along with most other central banks, have hiked rates sharply in reaction to stubbornly high inflation, putting pressure on emerging market currencies, which has led the way for many emerging markets to hike rates as well, in dealing with their own inflationary and currency pressures.
Meanwhile, China’s post-lockdown recovery has proven to be a disappointment and there is a risk of some of the world’s leading economies experiencing a recession next year.
Taken together, these factors can be quite overwhelming. In such an environment, many businesses, just like many households, will look to take proactive action and protect themselves where they can – install backup power, hedge market risk appropriately, or take advantage of new opportunities that present themselves (for example in the solar and battery industry). Some businesses may even thrive in these circumstances. But many will remain despondent at the sheer magnitude and frequency of the negative news that affects South Africa, either by the actions or inaction of the government, or exogenous global dynamics, for which we feel we may have no influence.
Let us embrace our unique position to drive the South African outlook we would like to see and unlock our country’s immense potential.
Agents of change for the better
As individuals, and as businesses and managers of complex risk portfolios, we cannot divorce ourselves from what is going on around us and we must try to be agents of change for the better.
How can we get involved in a way where we feel we can be positive agents of change?
The first thing is to acknowledge that as the private sector, there is a lot we can do. As treasurers and business leaders, we influence industry bodies (like ACTSA) and through our client networks to initiate ideas and then help carry them out. Corporate treasurers are also close to the strategic centre of our businesses, so we can also add our voices and actions through other industry bodies. The likes of Business Unity SA (BUSA), the Banking Association of SA (BASA), South African Chamber of Commerce and Industry (SACCI), to name a few.
These bodies serve as important channels for private sector engagement, allowing business to voice concerns, provide input on policy matters, and collaborate with the government to address challenges and promote economic growth.
We are seeing some positive steps. The meeting in early June of business leaders with President Cyril Ramaphosa, cabinet ministers and other key government officials, is a constructive step towards tackling our crises, creating jobs and growing the economy.
Workgroups, reporting regularly to the President, have been created, namely: the National Energy Crisis Committee (NECOM), National Logistics Crisis Committee (NLCC), and a proposed Joint Initiative to Fight Crime and Corruption (JICC) – overseen by a Joint Strategic Operations Committee (JSOC). The plan involves regular reports to the President to monitor progress and remove blockages.
There are also further signs of government and state-owned enterprises being open to work with the private sector.
Transnet recently announced it will appoint an “infrastructure manager” by October to facilitate private companies to run trains on its infrastructure. This is just one sign of the potential of constructive engagement in helping to improve infrastructure and service delivery for all South Africans.
There’s also been progress on the electricity front, with the licensing requirement for private investment in generation being removed resulting in significant private sector power generation expected in the coming years. Some 4.1GW are due to come back online by December this year (Koeberg and Kusile), while the private sector is expected to add 4GW to the grid by end-2024.
A recent survey showed that some 66GW of wind and solar projects (coupled with battery storage) are at different stages of development. This is a good example of the unleashing of the private sector in a way that not only increases South Africa’s power capacity but helps reduce the reliance on fossil fuels.
All of this shows what can be done, but are also a reminder of what can be done by the private and public sectors working together. It is also our responsibility, as influential members of our companies and industries, to create a positive feedback loop of communication with our colleagues and clients, whilst remaining realistic and practical. This will help to create awareness of these initiatives so that people in our companies also feel connected to a level of agency in action to problems that may feel outside our ambit of control.
As Corporate treasurers, we are at the forefront of managing risks and shaping our companies’ financial strategies. By recognizing our sphere of influence, actively engaging with industry bodies, collaborating with the public sector, and fostering internal communication, we can beat the sense of despondency and become agents of change for the better.