CHIEF FINANCIAL OFFICER’S REPORT
STACKING UP THE NUMBERS OF BEING HUMAN
As the newly appointed chief financial officer at AEEI, it is with due respect to my predecessor, Chantelle Ah Sing, and regard to the turbulent year the business world has lately experienced, that I submit my first report.
Having had a non-executive role at AEEI, I am no stranger to the Company’s investment into its human capital.
OPERATING IN A DIFFICULT MACROECONOMIC ENVIRONMENT
2020 has been a defining moment in business. With the COVID-19 pandemic triggering a national emergency, we are going through the most radical transformation the world has ever seen. The outbreak of the COVID-19 pandemic has led to a sudden shift in the dynamics of workforce behaviour. While businesses are hitting back at the impact of coronavirus with resilience, operating any business in this climate can be stressful. However, we are all navigating this new normal together, and as we lock arms (virtually) and try to find new ways of working and surviving, the result has been inspiring.
“The secret of change is to focus all of your energy, not on fighting the old, but on building the new.” Socrates
South Africa’s already ailing economy has been particularly hard hit by the COVID-19 pandemic. In order to overcome this, collaboration between government, business and people will be essential to our economic revival.
Pre-COVID-19, economists had hinted at the country being in a technical recession, which has been exacerbated over the past few months. Currently, South Africa finds itself in a perilous and subdued macroeconomic environment due to years of State Capture, a weak Rand, an inflexible labour market, and a lack of investment into infrastructure and education, which has led to a shortage of the necessary skills that will carry the country forward into the Fourth Industrial Revolution (4IR). This is underpinned by a lack of local and international business confidence in the country and its policies, which have seen our investment rating severely impaired in recent times.
Gross Domestic Product is expected to contract by 7% for the 2020 year. Business confidence is at an all-time low and CEOs of major businesses are expecting an 18- to 36-month recovery period for the economy to return to levels seen in 2019. The rate of unemployment in South Africa stood at 29% pre-COVID-19, and with the lockdown extending beyond five months, this percentage is expected to increase to unprecedented levels, not seen over the past 20 years.
Before the government applied a level 5 lockdown restrictions, the South African Revenue Service (SARS) had already warned stakeholders that they would not reach their 2020/2021 revenue collection target for the fiscal year. Revenue collections declined even further, and relief packages set out by the government have presented more challenges, with a R280bn shortfall expected, even though the South African Reserve Bank has cut the repo rate to provide businesses and consumers relief during these trying times.
AEEI’s sustainability and model will have to be resilient, adaptable, and flexible to the “new normal”. AEEI, as a diversified investment holding company has in the financial year-ending 31 August 2020, delivered robust results despite the unknown territory we find ourselves in.
COVID-19 – ITS IMPACT NOW AND BEYOND
As a direct result of worldwide lockdowns due to the proliferation and pervasive nature of COVID-19, the business world has been disrupted like never before. This has paved the way for technology to play a dominant role and which has resulted in an accelerated thrust into the 4IR for developed and developing economies.
This is certainly true of South Africa, where remote working has suddenly become the order of the day. With signs of an increase in productivity, many employees preferring to work from home and a reduction/change in cost centres, companies are adapting to operating in a new manner.
However, as aforementioned, not all sectors have been able to adjust, and against the backdrop of an economy that requires a radical overhaul and stimulus, we need to ask the question: Do we (as a country), borrow to improve investments, or make policies more investor friendly to attract foreign direct investment (FDI) into our country?
2020 FINANCIAL OVERVIEW