Africa’s finance leaders navigate COVID-19 effects

There have been widespread fears that COVID-19 could devastate Africa. In early May, the World Health Organization (WHO) estimated that up to 190,000 people on the continent could die within the first year of the pandemic if the disease is not effectively controlled.

African governments have implemented lockdowns, and the virus so far has not yet spread exponentially on the continent as it has elsewhere. Nevertheless, WHO also warned that Africa’s lower rate of transmission could mean it suffers a prolonged outbreak of the pandemic that lasts for several years.

In a recent videoconference, members of the Association of International Certified Professional Accountants’ Africa Regional Advisory Panel of finance leaders shared their perspectives on how the pandemic is currently affecting their individual markets.

The main themes to emerge were:

The return to normality is slow

Different countries are at different stages of easing their lockdowns. In Nigeria, for example, SMEs are starting to reopen although hotels remain closed. Banks are operating with a limited number of branches. Concerns around health still permeate the atmosphere and fear of infection is preventing some people from returning to work. Similarly, in Ghana, businesses remain very cautious and have many employees working from home. People are continuing to practise social distancing and using masks and sanitisers as precautionary measures. For the time being, South Africa is in strict alert level 4 lockdown, with plans to transition to level 3 on 1 June. Companies there are planning for a return to the office by the end of June, but this requires them to create safe workspaces for staff and possibly to invest in personal protective equipment.

Cost management is a priority

The global economic downturn is prompting businesses to look closely at costs. A finance leader for an international oil business said the company was reviewing its expenditure on contractors and expatriate staff. Other cost-saving measures being looked at by businesses include hiring freezes, the halting of pension contributions, forcing staff to take leave during lockdown, and permanent job cuts. Some businesses are already benefitting from reduced travel costs, while others have adjusted their business models in light of COVID-19. For example, some South African companies that usually make clothing are now manufacturing face masks instead.

Businesses are planning ahead

All markets — including African markets — face the risk of a second wave of COVID-19 infections that would be possibly even deadlier than the first. A Ghanaian finance leader in professional services said his firm was conscious of this risk and was therefore taking care to shield vulnerable people, including pregnant women and those with underlying health conditions. His firm is also preparing for ongoing uncertainty. It has set up its own crisis response team, which is examining different areas of the business — including human resources, supply chain management, and technology — to see how it can more effectively serve its clients. In addition, it has a client engagement team that is responsible for connecting with clients and hearing their concerns.

It’s time to fast-track digital transformation

Businesses in Africa understood the imperative for digital transformation prior to COVID-19. Nevertheless, many were caught off-guard by the pandemic and did not necessarily have the tools and resources to adapt swiftly when it struck. To enhance their resilience, they will want to look at how they can digitise their manual processes when more normal conditions return. Also, certain organisations are likely to emerge from the crisis with leaner business models. They will therefore need technological tools to deliver new products and services, compete with rivals, and respond with agility to any further outbreaks of infection.

What’s next?

So far, Africa has experienced a relatively low number of COVID-19 cases compared with other regions, with 84,183 cases reported and 2,739 deaths as of 18 May, a United Nations policy brief says. The UN noted that it is still too early to know the full impact of the pandemic on the continent. The same policy brief also highlights that African communities and governments are already feeling the indirect consequences of COVID-19. These include food insecurity, a lack of medical supplies, loss of income and livelihood, and a looming debt crisis. As a result, African finance leaders potentially face significant COVID-related challenges.

For more news and reporting on the coronavirus and how management accountants can handle challenges related to the outbreak, visit FM’s coronavirus resources page.

— Andrew Harding, FCMA, CGMA, is chief executive–Management Accounting, and Sara Bux, Ph.D., is associate director–Southern Africa, both at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Oliver Rowe, an FM magazine senior editor, at Oliver.Rowe@aicpa-cima.com.