SAICA hosts corporate reporting webcast to propel SMEs for future growth
The South African Institute of Chartered Accountants (SAICA) hosted a corporate reporting webcast for Small and Medium-sized Enterprises (SMEs) on Monday, 22 April 2024, focusing on the 2024 economic outlook, financial reporting, assurance, Companies Amendment Bill, and sustainability.
The webcast was facilitated by Fifi Peters, moderator, and senior anchor at CNBC Africa. It brought together industry leaders, SAICA members and the broader society to reflect on some of the changes in the corporate reporting landscape and their impact on SMEs.
2024 economic outlook
In zooming on some of the issues facing the local economy, Frank Blackmore, Lead Economist at KPMG, said load shedding has a large impact on SMEs as it restricts growth prospects. “SMEs are quite close to the bone in terms of their cash. They sometimes don’t have the finance available to invest in alternative energy sources which makes them more susceptible to fluctuations,” said Blackmore.
Blackmore further said logistics and infrastructure challenges with roads, rails and ports restrict growth potential and increase business costs for SMEs.
He said 2024 should be a better year, saying a reduction in interest rates and the fall of inflation through the second half of the year is expected for both the local and global economy. “That would create a more conducive environment for businesses, particularly on borrowing and spending at lower interest rates and higher growth for SMEs as economic activity accelerates,” added Blackmore.
Financial reporting for SMEs
With the South African environment having various frameworks that can be used by entities when preparing financial statements, Raymond Chamboko, Director at W Consulting and Eben Bakker, Director at Enslins Bethlehem Incorporated had a question-and-answer session to unpack when companies can use the full IFRS, IFRS for SMEs and determine the accounting principles by themselves.
“If a company is a listed entity, it must use the full suite of IFRS. The smaller companies that prepare financials in-house can use the accounting principles that they determine by themselves. Most of the entities that operate in the SME space do not have that option. The consideration is that they have very little or no public accountability. When the SME operate on a little bit higher level or if they get external parties to prepare the financial statements, they need to use either IFRS or IFRS for SMEs,” said Bekker.
On the issue of disclosure of related parties’ transactions in the financial statements, Bakker said you do not need to disclose all related parties, but only entities that you do business with to show the context in which you do business and the volume of business.
“The value of the sales between the entities or the value of the loans between the entities can be disclosed in aggregate per category. If there is a holding company or parent company involved that needs to be disclosed and if you own any subsidiaries, you need to disclose those as well in your financial statements,” said Bekker.
For companies that are winding up their operations due to challenging economic issues, Bakker said there are some considerations to take into account, but those companies are still required to apply the standards that apply to companies that are still trading.
“The liabilities would still need to be shown at the value that the company is obliged to pay to the financiers of the company or the creditors of the company,” added Bekker.
Assurance for SMEs
In his presentation, Jason O’Shaughnessy, VP Business Development and Alliance at Circit, said technology continues to improve the audit assurance process between the SME and the auditor.
“We are trying to provide a more secure way of sending information back and forth, where you can do everything through a single dashboard. Everything from sharing documents, to signing documents online and storing documents online. We have seen this time and time again, these digital tools make life easier for the auditor, they minimise delays in delivering that audit, the improvement in the time they take to do that audit is a lot better and they make the audits a lot more efficient,” said O’Shaughnessy.
Companies Amendment Bill
Walter Bhengu, Project Director: Legislation and Governance at SAICA highlighted the five key amendments that relate to SMEs in the Companies Amendment Bill which is awaiting the president’s signature.
The five key amendments are on the filing of annual financial statements, access to information, requirement for appointment of auditors, new reports at shareholders meetings, and Social and Ethics Committee (SEC) report.
Bhengu described the Public Interest (PI) score, which has not been reviewed or amended since 2011, as the elephant in the room, saying it has a direct impact on corporate reporting, the Companies Act, the Companies Amendment Bill and SMEs.
“Whatever amendment you do to the companies act, must not add a compliance burden on SMEs, it must not go against the principle of “ease of doing business”. We will continue to push to ensure that the Department of Trade and Industry reviews the Public Interest (PI) score periodically based on the economic factors that are being faced by the country. In that way, we ensure that SMEs focus on the business of growing the economy as opposed to focusing on the compliance hurdles that they need to jump,” said Bhengu.
ESG reporting for SMEs
Speaking on the importance of the Environmental Social and Governance (ESG) reporting, Lloyd Macfarlane, CEO at Veriport Ltd said sustainability is bringing through visibility of data that was previously not tracked in companies.
“With ESG reporting, there is an opportunity for brand and reputation enhancement. There is a supply chain opportunity if you are differentiating your business from your competitors. Evidence is coming through how sustainability management can reduce risk and position the business as more compliant for regulatory and supply chain compliance,” said Macfarlane.
Macfarlane said SMEs that are suppliers to large companies are now facing the pressure to report on their ESG metrics.
“There is an increasing demand from multinational companies, listed companies in different regions to bring those suppliers on a climate change journey, which is now mandated for big companies too,” added Macfarlane.
Financial options available for SMEs
In explaining the financing options available for SMEs, Alan Shannon, Executive: Small Business and Private Clients at Nedbank said the core of selecting the right financial option is figuring out whether the purpose behind the funding is of a short-, medium- or long-term nature.
“From an SME aspect, we know that access to finance is one of their biggest pain points along with access to markets. The best possible advice we could give to SMEs is to build credible financial records. As an organisation, we do not typically require those records to be audited, but if they are drawn, compiled and have the credibility of an independent accountant and signed off, that is going to put you in a good position,” said Shannon.
You can watch the corporate reporting webcast here.
About SAICA
The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is recognised as the world’s leading accounting institute and is home to the leading CA designation in the world. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.
Chartered Accountants are highly valued for their versatile skill set and creative lateral thinking, that's why all of the top 100 Global Brands employ Chartered Accountants.
SAICA is a member of Chartered Accountants Worldwide (CAW), a global family that connects over 1,8 million fellow Chartered Accountants and students in more than 190 countries. Together, we support, develop, and promote the role of Chartered Accountants as trusted business leaders, difference-makers, and advisers.
SAICA Media Contacts
Kgauhelo Dioka,
***@saica.co.za
Project Manager: Communications
SAICA Brand Division
Renette Human,
***@saica.co.za
Project Director: Communications
SAICA Brand Division