SMPs face numerous challenges across the continent, many caused by global geopolitical and economic factors that are beyond their direct control. And yet these challenges can create business opportunities for accountancy practitioners as they help their clients navigate increasingly complex regulatory environments.
AB spoke with practitioners from Ghana, Zambia and Namibia to gauge the temperature of this important sector. The conversations revolved around three main themes: compliance, costs and competition – for talent as well as for clients.
Compliance, both for the firms themselves and their clients, has been rising up the agenda in recent years. However, different jurisdictions are taking different approaches to the need for good corporate governance, and how far down into the SME sector such reforms should be applied.
‘As small practitioners, we are able to get closer to our clients’
As Edingtone Tafirenyika FCCA, a sole practitioner in Windhoek, Namibia, says: ‘In Namibia, the regulator treats small practices and the Big Four firms as the same, but small practitioners can be one fine away from failure, so it is important to adhere to the regulatory standards and abide by the ethics of the profession.’
While the compliance burden on firms is heavy, there is a silver lining. Clients also need help in ensuring they remain compliant with business regulations. The current economic uncertainty – in part a reflection of global geopolitical instability, in part down to the long tail of Covid-19 – is also leading to a real focus on compliance.
From the client perspective, Isaac Nyame FCCA, a partner in Ikern & Associates, a firm based in Ghana, says: ‘In Ghana, prices are rising, exchange rates are rocketing and poverty is increasing, but we are able to stay in business because there is a need for compliance – audits still need to be carried out.
‘As small practitioners, we are able to get closer to our clients so they treat us as a trusted adviser who can help them out of this economic situation. However, clients are asking for a reduction in fees.’
‘Financial management without the right technology is impossible these days’
While the fee issue is a concern, it is not all bad news. Some countries in Africa are experiencing a mini-boom and GDP in Africa as a whole has risen significantly in the last year. As Yande Mwenye FCCA, managing partner in Crowe, based in Lusaka, Zambia, says: ‘For Zambia, things have been looking up recently. Following a change in government in 2021 there has been a renewed confidence and optimism.
‘As a result, we are seeing much more work, and there has been a massive increase in SMEs, entrepreneurship and innovation. There is also a focus on capacity building in financial literacy, resulting in an upswing in compliance.
‘Investor confidence is also improving, but they still want to see that their investments are protected.’
For all three SMPs, the opportunities they face come at a cost – in terms of investment in people and technology. They recognise that the larger global firms have the resources and deep pockets to provide such investment, and to do so in a consistent manner and at international scale.
As Tafirenyika says: ‘Resources are a challenge, and if you don’t have the resources, it can be difficult to be compliant. And financial management without the right technology is impossible these days.’
Mwenye acknowledges that being part of Crowe International is ‘a good thing’. But she adds: ‘We are still regulated locally, therefore practitioner and firm registration is mandatory. We get referrals, but many our clients, around 70%, have to be acquired locally.’
‘There are a lot of costs that have to be absorbed’
Clients also expect to be able to access services that are becoming increasingly important, such as reporting requirements following the introduction of ESG reporting standards. These are services that SMPs are expected to be able to provide.
‘There are a lot of costs that have to be absorbed – we need to train our people in new areas such as in ESG services and new standards,’ says Mwenye. ‘These need to be accessible, but also at a low cost. And we also need to invest in new software. It is difficult to recoup these costs through fees – other professions have minimum rates that they can charge for their services, but that is not the case in the accountancy profession, which results in our fees being driven down.’
‘In some ways, we need to educate our clients,’ says Tafirenyika. ‘We need to explain our work, such as audit plans, to the client. If we don’t, we will end up having to charge less.’
That said, Tafirenyika recognises that SMPs need to be able to offer good value to their clients. ‘If not, they will go elsewhere,’ he says. And SMPs also need to recognise that clients believe there is an inherent risk in choosing a small firm to carry out services such as the annual audit.
‘If you don’t think outside the box, you can’t survive alone’
But the SMPs clearly believe there are opportunities to be had. For instance, Tafirenyika has carried out some joint venture work with Big Four firms who have the confidence in his firm (he is ex-Big Four himself), and they have recommended his firm to carry out work for some of their smaller clients.
As he says: ‘You don’t need to sit in your comfort zone – you can get out and present yourself to the Big Four.’
Tafirenyika also suggests that smaller firms can come together to win work. ‘If you don’t think outside the box, you can’t survive alone,’ he says.
So perhaps there is an additional ‘C’ to add to costs, compliance and competition, as ‘collaboration’ appears to be important for all SMPs. Coming together to share best practice to the benefit of the profession could ease the uncertainty facing many small practitioners and, in doing so, help tackle the many challenges they currently face.