Pick the low hanging fruits
Ernst & Young epitomises a living example of sustainable business operations and development.
This is imbued with offering professional services for businesses while at the same time cocreating an environment for foreign investment, creating employment opportunities and growing the economy.
The company is driven by values of diversity and inclusivity, which have seen this company punching above its weight.
Ernst & Young is one of the oldest international organisations in Namibia and has been operating in Namibia since 1956.
Like wine, the firm is getting better with age. At the helm is Gerhard Fourie; a seasoned Chartered Accountant since the 80s, an intelligent and a well-respected businessman.
Internationally, Ernst & Young offers a wide range of products and services but in Namibia, the products offered are in two levels based on the local capacity directed by the local critical mass.
To this end, the company provides audit and specialised services.
Audits fall under what is known as ‘channel one’ and only account for 50% of their income while the other 50% comes from what we call ‘channel two’ services, which are also called ‘non-audit services’.
It is a requirement by law that companies must be audited at least once a year. This way, the firm gets business for offering these services.
Specialised services include advisory services, consultancy, complex accounting processing, consulting around accounting disclosure and taxation services.
“In the past, accounting disclosures were often not well thought through and when they finally came, they had disastrous consequences. It has since become a pre-requisite for International Financial Reporting Standards (IFRS),” says Fourie.
According to him, the company has a very strong local team responsible for forensic investigations and dispute resolutions. Often when there are disputes, he says, they have to go through the process of gathering information and mediation through the process between the two parties.
In addition, Ernst & Young does a lot of advisory services; services under this armpit include risk advisory, performance improvement and IT audits.
In the old terminology, risk advisory was referred to as internal audit but it became more complex as time went on. After the 2009 credit crunch, especially, Fourie says that a number of organisations realised that they had not been managing their risks effectively. Since then, there has been a lot of risk advisory work they have been doing.
Ernst & Young carries out IT audits and as organisations are becoming more and more dependent on technology; their (Ernst & Young) particular focus is to audit the reliability and the integrity of the IT installation.
At this juncture, they come in as independent assurance assessors to review the authenticity and integrity of software installation.
Performance improvement is part of what Ernst & Young is involved in. This is aimed at areas where there is a general need, especially in the public sector as well as large organisations when organisational performance is not where it should be.
Tax is one area Ernst & Young is very dominant on and this can be broken down into:
“We have broken it into two: Tax advisory or consultancy and business tax compliance, which is more on the regulatory compliance around submission of returns, both direct and indirect”, explains Fourie.
The company also does what is known as ‘transaction advisory services’, which according to Fourie, applies to situations where a business wants to expand. For that specific project, they are often appointed as financial advisors to put that project together before going to the bank to get the needed billions.
Fourie says that mergers and acquisitions also fall under the transaction advisory services. Before any acquisition, it is important that the client know what the value of business is and for that, they have to do a valuation. Lastly, Ernst & Young does due diligences to make sure what you see is what you get - there is no hidden danger beneath.
The company has a wide range of clients. Government and the private sector are part of its clientele and they have a lion’s share of the SME sector as well.
Their corporate clients are both global and local corporate clients, which Ernst & Young services locally such as Langer Heinrich Uranium Mine.
Fourie admits that they are rigid on policies and procedures that help them ensure consistency and compliance around how they conduct business across the globe. These changes weigh heavily on the big four; KPMG, Ernst & Young, Delloite & Touche and PWC.
Consequently, these policies and procedures compel them to do work in a certain way, which makes their services more costly than the local service providers. In addition, the profiles of the individuals they have to employ and pay, cost them even more.
On a positive note, Ernst & Young and other stakeholders plays a significant role in attracting the much needed foreign investment. This is done by giving the assurance and comfort that the market will have services at the level and specific standard they are used to in their own specific countries.
“We then partner with other stakeholders and create that enabling environment whereby foreign investors can come in and invest. While they (investors) can procure services they are used to in the process, they don’t need to go through processes to determine local competency. I would say we do a significant contribution in that space,” asserts Fourie.
According to Fourie, they market themselves by telling their clients that they are an exceptionally well integrated organisation, with a combination of 143 countries, 9 050 partners and 157 195 employees. From a research and development point of view they have access to global data bases and so forth, where local firms do not have that capacity to meet such demands.
Fourie explains that being part of this network, he can work anywhere in the world and theoretically; he is not country-bound. He adds that the insight, which comes into local decision-making, being part of a global group is challenging in that they have to ‘Namibianise’ these decisions.
“Often, international consultants fail in that. They try to sell European solutions to Africa, forgetting that they need to take the local landscape into that context. We offer the best of both worlds by providing Namibian solutions drawn on global insights,” quips Fourie.
He, however, is disturbed and frustrated by the Namibians’ way of thinking around African business. This is, in particular, a reference to the whole of the African renaissance, which Namibia is not doing enough to attract global players to want to set up the African footprint using Namibia as their African Head Office.
“Namibia is the best African country to live in. Looking at the infrastructural development, it is comparable to that of South Africa and we have political stability. If you are a corporate entity, wanting to establish your footprint in Africa, you would rather have your headquarters in Namibia. The story of Namibia is the best kept secret.”
“In theory, why can’t Namibia be the Sweden of Africa? My concern is that the political and the business community are not acknowledging this opportunity, yet it’s a window that is not going to stay open forever. We should identify those groups looking for the African footprint,” warns Fourie.
He acknowledges that Namibia is a great country to live in, but he feels the country’s development is falling behind South Africa because Government is not playing at the level at which it should in terms of strategic investments into infrastructure development.
Fourie points out that Namibia has two low hanging fruits at present; the Kudu Gas Power Station and the development of the Namibian ports. He cautions that Namibia risks running into major a catastrophe one of these days, as power security is a must for investors in the mining industry - for example, those that need to recoup their investment in a time frame.
If developed, he feels, the Kudu gas station would unlock a lot of potential for Namibia as it would export power to neighbouring countries while making money in the process out of its natural resources.
The development of the Namibian ports, on the other hand, would contribute to the turning of our Ports into a preferred port to serve the landlocked countries around, including Gauteng for import and export. Once again, the visibility of Government, according to him, is not visible enough.
Ernst & Young has two offices in Windhoek and Walvis Bay. The company has 80 employees within the borders, with diverse backgrounds such as lawyers, accountants and ex-police amongst others.
The company has a rare and unique way of getting their clients; the clientele has two levels - global as well as local. The global clients are a logical consequence of global corporates serviced by Ernst & Young Global.
To grow the local market, is where the creativity of a genius ever heard of is manifested.
The initiative of engaging with a client as a priority client, obtaining some appointments and thereafter, to look well after them and never to lose them.
Fourie says it is a must to know what keeps your clients awake at night, “We look at sectors where future growth will come from, especially mining. Our people are skilled to deal with deep insight conversations,” he emphasizes.
For SMEs, reputation, branding, relationships and relevant service offerings is all that it is about.
According to Fourie, there are major activities in the oil and gas industry and there is a lot of investment into this sector.
“There must be value in your conversations. To have value, you must have insight, relevance skills and experience in that industry,” urges Fourie. PF