Deloitte SA Blog


What are the concerns and strategic focus of the JSE Top 100?

Dissecting Disclosures

Deloitte has released the second edition of Dissecting Disclosures: Benchmarking the JSE top 100, which analyses the Johannesburg Stock Exchange’s (“JSE”) top 100 companies. On embarking on this research, we wanted to use disclosures in annual reports and integrated reports to understand the profile, concerns and strategic focus areas of these listed companies. Interestingly, this research has uncovered key insights relating to three areas, namely, transformation, Africa expansion and the risks of operating in South Africa.

The Risks of Operating in South Africa

The external risks disclosed in annual reports by the JSE top 100 talk to the issues plaguing South Africa’s economic expansion and global competitiveness. The JSE top 100 has very clearly spelt out the challenges faced in operating in South Africa.

A large number of risks were disclosed by the JSE top 100 relating to the significant uncertainty, changes and complexities in our regulation across several industries. Financial services, resources and healthcare are inundated by a significant amount of change. This correlates with the World Economic Forum’s (WEF) competitiveness survey in which South Africa was ranked 120th out of 144 countries for the perceived heavy burden of legislation. The uncertainty around these changes makes South Africa less competitive in a world in which many developed economies are focused on reducing red tape to improve their own competitiveness.

Is our government’s commitment to reducing red tape limited to bureaucracy, or could the legislative burden also be addressed?

Transformation in the JSE

Transformation was identified by several companies as a key strategic risk. Thirty-two percent (32%) of boards are black, and 18% are female. In terms of race, the JSE top 100 appears to be meeting the minimum requirements of the various transformation charters established, but there are few examples where companies exceed those targets.

Boards remain dominated by white males and gender transformation remains a challenge. With increasing focus abroad and in South Africa on gender, the JSE top 100 has some way to go in attracting and retaining top female talent.

South Africa’s Africa strategy

Africa is high on the agenda of several companies. With South Africa’s economic growth forecast at 2% for 2014 (World Bank), the move into Africa in pursuit of higher growth, while challenged at home by regulation and various other external risks appears to be a theme in the JSE top 100. Nearly half the JSE top 100 identified Africa explicitly as a strategic focus area. However, when measuring its contribution to revenues, only 1% was derived from operations in Africa outside of South Africa.

When analysing the expansion focus by South African companies into the rest of Africa, sub-Saharan Africa is clearly favoured, with Nigeria and Zambia being the most commonly referred to countries for expansion, followed by Ghana, Mozambique and Namibia.

The outgoing Governor of the South African Reserve Bank, Ms Gill Marcus, noted last year that South Africa’s growth could be strengthened if South Africa became more closely entwined with Africa’s growth trajectory. This can only be achieved with increased exposure to the rest of our continent and it is comforting to see the focus in strategy, but disappointing to see the actual exposure.

For more insights, or to read the full report, click here.




CFO Survey 2012

Rather than stabilising since our 2011 CFO Survey, the global economy has become even more unsettled. In the wake of a sovereign debt crisis, the European economy is showing distinct signs of sagging, a fact which has overshadowed the H1 2012 CFO Survey conducted during January and February 2012. Reflecting this slowdown in the Eurozone – China’s largest trading region – the Chinese economy is also flagging with manufacturing production slipping for five months.

So serious is the situation in Europe that most analysts are predicting that a recession is only a matter of time. This grim outlook is echoed by many, including the International Monetary Fund (IMF) and the European Commission whose interim report released in February 2012 saw forecasts revised downwards and a mild recession now expected this year.

Despite the economic uncertainty and the pervasive negative mood, South African companies report that they are performing well – a fact borne out by strong dividend flows from listed companies and a Johannesburg Stock Exchange (JSE) that saw record levels being established during the first quarter of 2012, piercing through the 34000 mark for the first time.

At the time of our last CFO Survey in mid-2011 CFOs were cautiously optimistic, taking only a modest approach to growth, while keeping a careful eye on costs and margins. Given the subsequent deterioration in market conditions, this was probably the most appropriate strategy to have followed. This time, we are not so sure. CFOs have become far more conservative and we believe that the market warrants a more assertive approach. By building towards a platform for growth now, businesses would be in a better position to profit from the growth when it materialises.

Mining companies have emerged as the most concerned of all, coming under pressure from rising costs while unable to set prices and having to contend with currency uncertainty. By contrast, the financial services industry is showing positive signs, albeit with customary caution.

As with previous CFO Surveys, we have maintained a set of core questions which we report on. In addition, we have probed for the
attitude and approach to certain topical issues. We have noted a great appetite to expand operations into Africa and this is further explored in this survey. Significantly, almost two-thirds of the CFO respondents believe that Africa is a better investment proposition now than it was six months ago.

The additional regulatory burden that has been evident in the wake of the 2008 financial crisis continues to frustrate CFOs. The extra load risks stifling growth both at the company and at the macro level.

Rather than stabilising since our 2011 CFO Survey, the global economy has become even more unsettled.

The South African CFO Survey has continued to grow in stature and awareness and we are proud to announce that we will now conduct the CFO Survey on a half-yearly basis instead of annually. This will enable us to plot the CFO environment more dynamically and identify trends with greater nuance. We have experienced a further 24% increase in respondents this year after rising by a third in 2011. The CFO sample was selected from 479 of South Africa’s top organisations nationally, spanning listed and unlisted entities in the private sector as well as major state owned enterprises.

A healthy spread of players across all industries participated in the survey, and we noted a fair representation across the size spectrum, from those with a turnover of less than R1 billion to those with revenue in excess of R20 billion. In addition, respondents showed an even spread of experience with an uptick in CFOs with 12 or more years in the position.

Companies are entering 2012 in a defensive mode and we are concerned that, by remaining in a holding pattern, companies will miss out when an upturn arrives. While CFOs are in survival mode, companies are in fact performing well. Being too defensive now puts potential future growth at risk.

We urge CFOs and their respective organisations to take a more forward-looking approach to managing their businesses and prepare now for a growth phase that will certainly arrive. This is not to say that they must throw caution to the wind, but we believe that companies should be investing now, a trend that has been hard to discern. We would encourage CFOs to be more adventurous and optimistic regarding their potential.

In business, as in life, it is a case of “adapt or die”. Companies need to change as the environment and circumstances change. Those which remain as they are, will find that they are no longer relevant and will potentially see declining performance and eventual disappearance.

Download the full report  CFO Survey 2012

If you have any questions relating to this article, or require a more detailed discussion, contact Rodger George (Director of Strategy and Innovation, Consumer Business – Deloitte South Africa) at

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