Harnessing the African Story

The African economic story is a tune we keep hearing via a wide spectrum of media and at different forums across the globe. I suppose the questions that linger in the minds of many Africans and other interested parties are “Is it true that Africa, really, is the next frontier?” and “If, yes. How can I be a part of the so-called African Renaissance?” Sceptics have shot down Agenda 2063 set by the African Union and have reduced it to nothing short of a pipe dream. They mostly argue that it does not go deep enough into the nitty-gritty of how exactly the implementation will be carried out. My question then is as follows: Isn’t that, precisely, where we ought to start? The Agenda sets out a plan and vision of how the new Africa ought to look like, and that is the first place to start.

To answer the questions on the minds of many Africans, an associate of mine gave two analogies using nature and how its forces behave. He firstly argues that “nature abhors a vacuum”, that is, all the wealth in developed nations seeking good returns will find its way into economies that promise healthy returns; assuming policies permit. As far as returns go, some African countries are growing at above average returns; and have started to attract the attention of the global investment community.

Moreover, my associate goes a step further in attempting to answer the question pertaining to how one would then position themselves to be at the epicentre of the African Renaissance. While it is true that a rising tide lifts all ships, being at the heart of it all is a completely different animal; you will need a stronger force than that. A tornado will lift whatever lies in its path. That being said, the virtue of being an African or simply doing business in Africa will not suffice. In order to be lifted high within the tornado, you have to put yourself in its path.



Restoration Hardware

Our Population

Africa boasts the youngest population in the world. According to the World Bank, close to 50% of the African population estimated at 1.2 billion is under the age of 20 compared to the developed world where the figure is around 20%. That in itself is a huge opportunity, meaning we have a healthy population pyramid compared to some developed parts of the world where the population pyramids are inverted and top-heavy; thus putting enormous pressure on those economies. Countries such as Japan and parts of Scandinavia are synonymous with top-heavy and inverted population pyramids. We, on the other hand, are fertile with a future labour force like no other. If the laws of economics are anything to go by; technology, capital and labour are the key determinants of long-term economic growth. The first two factors are relatively fluid. That is, in the longer-term, technology and capital will flow into economies with more labour. We saw this in the rise of China, India and the US in its heyday. Of course this is a very simplistic view as other factors such politics and policies come into play. The understanding is that policies and politics are self-correcting in the long-term.

Our Economy

It is estimated that the Gross Domestic Product (GDP) of Africa stands at 2.2 trillion USD. This is very low compared to other continents such Asia, North America, Europe and South America at 28 trillion, 22 trillion, 20 trillion and 4 trillion USD; respectively. Bringing it down to per capita figures, Africa still ranks last compared to other continents. It is further estimated that African intra-exports stand at around 18% of total exports, compared to intra-Europe, intra-North America and intra-East Asia at 56%, 48% and 29%, respectively. However, it is worth noting that intra-regional trade has been on the decline across the board due to globalisation.

The Conundrum

How then, do African entrepreneurs or business people such as I navigate the maze and ultimately put themselves in the path of this highly anticipated tornado, that is, the African Renaissance? Doing business in Africa brings with it a dichotomy that some business communities on other continents are faced with to a lesser extent. We have economies that exhibit promising prospects as far the head count and domestic economic size go and the-not-so-endowed economies. Take Nigeria and Lesotho for instance; both countries are African but the other is bigger in terms of population and GDP. Does that then render an entrepreneur in Lesotho doomed because of a meagre population of 2 million and GDP of 2 billion USD?

The Game Plan

Let us start with an entrepreneur based in Nigeria. This is an easier field to comprehend because the number of people and the size of the economy mean that one can scale and grow faster without having to look outside their borders. That is to say that one would have to focus on breadth rather than depth. The advantage here is you would be pushing for volumes and economies of scale; you trade margins for volumes. That on its own tilts the product offering towards more of commoditised goods and services. Mr Dangote comes to mind. His company trades in commoditised products such as cement, sugar, salt, flour, steel etc. The obvious step that follows is to then expand to neighbouring countries to leverage off your existing internal infrastructure such as distribution.

Now we turn our attention to the entrepreneur in Lesotho. This scenario would be challenging if you were to implement the strategy outlined above; that is, you would not get to hit the same revenues as the guy in Nigeria for obvious reasons. If you were to focus on the domestic market you would be capped to a 2 billion USD versus a 400 billion USD economy. The end game here would be to trade volumes for margins. You would need to focus more on niche products and services that could be sold at premium prices. An example that comes to mind is Switzerland. The country is known for the high value goods and services it exports to the rest of the world. Chocolate, premium coffee and luxury high end time pieces first come to mind when one thinks of Switzerland. An example of a product that we hope to see being viewed by the rest of the world as a premium product is Linford Vodka, which is produced by one of our portfolio companies at Grand Duke Investments (Grand Duke). Lesotho is known for its water and Linford Vodka is a beneficiation play on Lesotho water. However, the product would then need to be marketed to the rest of the world, mainly the developed world as a niche product. We have to look beyond the borders of Lesotho for a stable market. Another example is the Lesotho Trout that is exported to Japan and South Africa by a local fishery as a premium product.

Our analysis here does not preclude technology as a viable avenue for entrepreneurs. The beauty about technology is its borderless nature.
 Another portfolio company at Grand Duke is IFOUNDiT, which offers BrandbookTM :a loyalty smart device application that is neither store nor country-specific. The play here is to have a scalable technological solution for businesses and brands that would want to understand African purchasing habits at a deeper level. The application now operates seamlessly in South Africa and Lesotho, with plans to expand to other African countries.

The opportunities for doing business in Africa are plenty and success would depend purely on positioning. Dealing in commoditised products requires huge volumes for lower margins, while dealing in niche products requires fewer volumes for high margins. Smaller economy entrepreneurs will almost invariably have to look outside their borders while bigger economy entrepreneurs will be looking within their borders. Commoditised products are best monetised when meeting local demand and not having to compete with other more efficient global players. Technology always has a way of turning the business rules of engagement upside down. Borderless business models in technology may not depend on domestic GDP and population metrics as scalability can be achieved in a short space of time with minimal resources. Niche products are usually linked to depth and understanding of what makes the product premium and factors such as geographical location, climate and labour specialisation in high value products can render the name of a country a trademark in itself if the strategy is executed well.

Young African entrepreneurs are gleaming with hope and our outlook on the future is not unfounded. The African Renaissance is well within our reach and like debris that will be lifted high up in the eye of a tornado; we work endlessly to position ourselves in its path.

Mohau is a Managing Director at Grand Duke Investments Ltd. Grand Duke Investments Ltd is a specialised finance firm that deals with project financing and deal structuring with a strong focus on Venture Capital and Transaction Advisory. Before founding Grand Duke Investments he worked as a Proprietary Trader for a US-Based trading firm where he traded shares on the NYSE, NASDAQ and other exchanges. He holds a BComm Honours degree in Investment Management from the University of Pretoria. He has passed Level 2 of the Chartered Financial Analyst programme. 

Fostering Entrepreneurship in Africa Through Legislation: The Importance of a Regulatory Framework

While entrepreneurship in developed economies has long been understood to play a major role in a country’s wealth creation and ultimately, economic growth, it is only recently that Sub Saharan African countries have started catching the trend. From tax incentives, legislative measures, state support to corporate-led initiatives, there has been a growing interest in entrepreneurship and the role it can play in boosting African economies, especially in the context of their strong informal sectors. What remains to be seen however, is how this interest can be transformed in concrete measures. Below, we look at a few avenues to explore in that regard.

 

 

Ghana Business Journal

Rules and Regulations: Theory…

With the usual slow pace that characterises the policy-making process in Africa as far as business is concerned, there is little hope to see countries on the continent achieve such proclaimed goals as attracting investment, diversifying their economies and reducing unemployment in the short-term without first removing some simple and yet rarely thought of bottlenecks. Indeed, a country can only attract legitimate investment if it is able to provide at first an attractive business environment to potential investors both local and foreign. Such an environment, in turn, can only be ensured by a regulatory framework set up through clear and sensible legislation and working institutions. To put it simply then, a regulatory framework provides a country with a formal, stable and well-regulated environment, which in turn is conducive to business, essential guarantees for attracting investment in a country.

Achieving this objective starts with acknowledging the importance and benefits of a formal business environment, i.e. an environment that is subject to rules and regulations (hence the term regulatory framework) and in which, all stakeholders operate according to said rules and regulations. The benefits of a regulatory framework are immense:

• Firstly, it forces all stakeholders (i.e. individuals, businesses, financial institutions) wishing to participate in the economy to abide by the same set of rules or risk being sanctioned by the authorities,
• Secondly, it reduces the risk for foreign business entities to commit illegal acts without fear of penalty;
• Thirdly, rules and regulations allow for an increase in the tax base and easier taxation. With an increase in the tax base comes more revenue for the state; such revenues would then be re-injected into the economy for the well-being of the population.

Acknowledging the importance of a regulatory framework is however, only the beginning; defining the rules governing such a framework is essential to making the latter work. According to Tebogo Skwambane, Managing Partner at the Monitor Group Johannesburg, speaking at Omidyar Network’s Entrepreneurship in Africa Summit in Accra, Ghana, in  2010, “To maximise the contribution that entrepreneurs can make to the continent, it is critical that policymakers craft policies that are suitable for their national or regional context. This requires not only better understanding the strengths and weaknesses of the entrepreneurial environment...but also requires more focused, tailored and locally meaningful strategy formulation by policymakers”. This, in other words, means that, boosting the impact of entrepreneurship in African countries requires the adoption of appropriate (read: entrepreneur-friendly) policies and regulations based on clearly defined needs.

Practice

The issue of entrepreneurship-friendly business legislation is of paramount importance in a region where the informal sector represents 55% of Sub Saharan Africa’s GDP and employs 80% of the labour force. With informal employment representing 66% of the total non-agricultural employment in SSA in the period 2004-2010, legislation that specifically aims at formalising business activities for increased efficiency is therefore highly in need.

Business legislation can be broadly seen as the range of laws enacted by a state to regulate (and ultimately simplify) the conduct of business within its borders. All such laws affect the business environment one way or another and only flexible and comprehensible laws can foster entrepreneurship in a country.

While this may seem obvious, it is a pity to note that few political leaders in African countries share this sentiment. Only when all options have been exhausted while looking for the much-needed “investment” does business-friendly legislation become an important item on the agenda.

It is true that some of the most common concerns that can explain the time it takes to enact legislation include, amongst others:

• the lack of integration between regions/economic communities, best expressed in the diversity of laws and systems amongst countries, and
• the fear that tax legislation might be exploited and lead to tax avoidance and evasion (especially in light of the recent Panama papers dossier).

While such concerns may be legitimate, it is worth considering the impact the lack of innovative legislation can have on economies that purport to be “open to business”. Indeed, while economic liberalism is the option chosen by many countries after the decades of failed imported economic systems, liberalism is characterised by a high degree of flexibility and openness at various levels, particularly legislative. This openness and flexibility, in turn, is what fosters entrepreneurship. Ensuring this openness thus ensures that entrepreneurship grows within countries and in turn contributes to the growth of economies. Which innovative solutions can then be proposed to achieve that goal?

Taxation Regimes Conducive to Entrepreneurship

With corporate income taxes as high as 35% in some countries (e.g. Chad, Congo, Equatorial Guinea and many others), it is no wonder African tax regimes give the impression to be designed to prevent business initiatives from succeeding. Despite this, it is still possible to spur entrepreneurship with a workaround: a system in which the taxation of companies is no longer based on a one-size-fits-all approach but rather on specific criteria. The rationale is to avoid taxing all companies regardless of their type or stage of evolution, thereby avoiding penalising the most vulnerable amongst them (especially SMEs). A suggestion for an entrepreneurship-friendly tax regime would be one in which the liability for Corporate Income Tax would depend on the annual profit rather than the annual turnover. Furthermore, the liability for VAT could be scaled depending on the annual turnover instead of being applicable to all corporate entities regardless of size, age, turnover, etc. South Africa provides a good example: only companies with an annual turnover of more than 1 million Rands are obliged to collect and pay VAT (and accordingly claim tax deductions); companies with an annual turnover of less than 1 million Rands (about 82 000 USD) are exempt from, but can register for VAT voluntarily.

The Regulation of Labour: Inclusiveness and Structure

Labour laws have a direct impact on the human resources of a country. The amendment of labour laws, irrespective of governments’ intention, usually generates a lot of attention from all stakeholders involved in a country’s economy. As a result, such laws should be amended following broad-based consultation with all essential parties involved in the national economy: businesses, trade unions, professional associations, the government, etc. One of the additional goals of amending laws for the purposes of creating wealth with the help of business would be for example the creation of structures tasked with defending the interests of both workers and employers, attracting a foreign skilled labour force, resolving disputes related to competition/intellectual property, etc. Such structures could include for example consumer tribunals, competition tribunals, business unions, etc.

Building Forward-looking Economies with Access to Credit and Mobile-based Financial Transactions

It is a well-known fact that most financial transactions in the informal sector on the continent are done in cash. This leaves a great amount of money out of the financial system, an amount which could play a significant role in the formal economy. The popularity of services such as M-Pesa in East Africa (and to a smaller extent, MTN Mobile Money in West Africa) is a testimony of the number of people out of the formal banking system. Encouraging financial institutions, especially banks, to replicate such services in the business world and offering them to SMEs would not only enable the latter to trade seamlessly, with greater flexibility and with more transparency, but it could also enable informal businesses (and their owners) to have access to previously inaccessible potential or existing international clients. This would result in more growth for a business and indirectly for the economy. Access to credit on the other hand, can spur business creation as cash-strapped entrepreneurs would have the opportunity to access much-needed capital to start their ventures but also, since dealing with a financial institution, entrepreneurs would be more careful and serious with the loans awarded to them. As an example, the Micro-credit to the most disadvantaged people programme instituted in Benin in 2007 has enabled to date over a million women and youth to obtain micro-loans (to the value of about 100 USD repayable at an interest rate of between 5 and 8%) and start their businesses.

Institutional Support

Legislative initiatives to spur entrepreneurship should ideally focus on three main pillars: business creation, business growth, and business sustainability. Indeed, seeing the light of day, growing and ensuring their own sustainability is one of the goals of many SMEs and many initiatives can be taken in that regard, particularly with regards to institutional support. The institutional support required to provide such assistance to businesses simply requires the creation of a number of organs with specific responsibilities. Ideally, such institutions should include, among others:

• a companies tribunal which would be responsible for resolving disputes involving businesses,
• a body responsible for business registration, deregistration, conversion, etc.,
• a body responsible for intellectual property (IP) rights, the promotion of education and awareness of corporate and IP law, etc.

In addition, business development and support services should be provided by non-governmental entities such as incubators, accelerators, crowdfunding platforms, and business networks. As primary actors in the business sector, such entities are much more aware of the needs of entrepreneurs and their newly-formed ventures and therefore better equipped to assist the latter on their path to growth and success.

 

 

Born in Benin, Armand E.G. Goutondji is a personal development coach and the founder of the #WinningStateOfMind personal development courses. As a speaker, he draws from his various experiences visiting, living and working in many countries around the globe to inspire people through his articles, seminars and courses on entrepreneurship, financial empowerment, communication and talent growth. Armand E.G. Goutondji is also a professional translator and a SATI (South African Translators’ Institute)-accredited conference interpreter and he currently manages his own translation firm. For more information about Armand, visit www.armandgoutondji.com.

The Auditing Industry in South Africa: Africa Month Series

By: Siyanda Pali

 

There was a festive mode in Brazil. It was the 3rd of September 1989, a period in which the nation was in a bid to qualify for the FIFA World Cup in a match against Chile. However, in spite of being in a football-mad country like Brazil during a FIFA World Cup qualifier, the passengers aboard Varig Flight 254, a Boeing 737-200 at Maraba Airport, had little knowledge of the events which would transpire on that day.

Even before the plane had taken flight, the pilots engaged in a series of erroneous actions. The initial error, caused by the Captain, was to look at the flight plan and misconstrue the magnetic heading needed to arrive at Belem as 0270 degrees. This, however, couldn't have been further from the truth. Due to the airline's procedure of an implied decimal point to the right of last digit, the correct magnetic heading was actually 027.0 degrees, or simply put, 27.0 degrees.

It is highly probable that because this was the Captain's 7th flight for the day, an element of fatigue or carelessness had led to him neglecting this seemingly menial but pertinent task. The Captain entered 270 degrees into his HSI, due west, followed by the distance to Belem, 187nm, into his flight computer.

The second in a series of blunders was carried out by the First Officer. It is standard procedure for the First Officer to read the magnetic heading directly from the flight plan. Instead, upon returning from inspecting the exterior of the aircraft, he simply copied the magnetic heading of 270 degrees from the Captain's HSI into his own.

Shortly after take-off, the aircraft made a large inevitable swivel to the left, 270 degrees, towards the Amazon jungle instead of Belem. Despite this, for some reason, the pilots were unaware that they were headed into no-man's land. 

 

 

                                                                     Image: Imgur.com

Approaching what the pilots perceived to be Belem, the pilots make an attempt to contact the Belem tower, to no avail, because of a poor VHF signal. The aircraft was out of range. They did manage, however, to send communication via another aircraft. After attaining confirmation that they could begin descent for landing, the crew were puzzled about the fact that no familiar landmarks were in sight. The combination of a sunset and haze would have drastically decreased visibility. Unfortunately, because Belem did not have radar technology, the controller had no idea the aircraft was, in actual fact, several hundred kilometres away, over the Amazon jungle.

 The aircraft's flight computer began alerting the crew that their destination of 187nm at 270 degrees magnetic had eluded them. The pilots' endeavour to correct the situation included a 180 degree turn, a 121.9 meter descent, slowing to 200 knots and visually attempting to locate Belem. They sincerely believed they were headed in the right direction. However, despite this, they did not make use of any navigational aids. Instead, they followed a river which they had inaccurately pinpointed for over 30 minutes, another blunder.

At this point, there is a very high probability that the crew is operating under a confirmation bias, falsely accepting any new information to confirm their hypothesis. The First Officer then sees the incorrect magnetic heading. However, by tuning into Goiania (675 nm away) and Barra do Herons beacons instead of what he believed to be the Maraba and Carajas beacons, and because of a fixation to accurately locate their position, failed to see the incorrect Morse code identifiers, committing a 5th and 6th error. The tragic result of the above was a crash landing which caused 13 fatalities and 54 survivors.

The aircraft was forced to land after running out of fuel, 959 km's off course. The aircraft was mechanically stable. The main or initial error, caused by the Captain, was to incorrectly enter a heading into the aircraft's flight computer. One misplaced decimal point was the start of a series of errors on the day. Although the pilots had erred initially, it was the latent error which enabled the initial error to occur. The counter-intuitive design of Varig's flight plan had the potential to cause confusion for pilots. The First Officer's failure to cross-check further complicated matters. His disregard of standard procedures unfortunately contributed in the outcome on the day.

Following the accident, Varig altered its flight plan layout, correcting this latent error. Furthermore, Varig equipped their aircraft with Omega Navigation Systems.

Varig flight 254 is an example of what can go wrong in an industry or profession in which disregard for high quality professional standards or ethics is ignored. This is the case today in the Auditing profession. There are numerous cases globally in which signed off audits have left much to be desired upon completion. One of the most sensational of these was work done by KPMG for Tennessee-based oil and gas company Miller Resources in 2011. KPMG was hired as an External Auditor, and gave the company a positive, 'unqualified' report. However, an investigation into the companies assets by the Securities and Exchange Commission revealed that their Alaskan oil wells bought for less than $5 million US, were valued at $480 million US, a more than 100 fold over-valuation. The SEC fined KPMG $6.2 million US in 2017 for what it deemed as a fraudulent estimate.

In 2016, Deloitte's Audit unit received a 2 year ban by the Saudi Arabian regulator from doing any audit work in Saudi Arabia for authorised persons or any securities issuer. The ban was handed to the firm in relation to work done for a former client, Mohammad Al Mojil Group (MMG), between 2008 and 2011. Three of MMG's executives were given prison sentences ranging between 3 to 5 years each. The executives were also given a decade-long ban from working in any Saudi Arabian Stock Exchange-listed company. Deloitte was also slapped with an approximate $73 000 US fine, this due to an inaccurate impression regarding the value of MMG upon its IPO in 2008.

In 2017, the Ukrainian Central Bank banned the local unit of PwC from auditing banks. “The audit report issued by PricewaterhouseCoopers Audit LLC failed to highlight the credit risk exposure faced by PrivatBank, which led to the bank being declared insolvent and nationalised, with substantial recapitalisation costs borne by the state,” said a Central Bank statement. This meant that PwC was only eligible to apply for the right to audit Ukrainian banks after 3 years.
 

In South Africa, the World Economic Forum had ranked the nation in 1st place for 7 years in a row for it's Financial Reporting and Regulation of its bourse, the Johannesburg Stock Exchange. However, the Auditing profession over the last few years has experienced a massive loss of confidence due to some notable accounting scandals which have rocked the country, which saw it slide from 1st place in the world to 30th in the rankings. A September 2017 report by KPMG revealed that they had found the work they had done at SARS as well as Gupta-owned companies unsatisfactory, playing a role in enabling the massive state capture of certain institutions. KPMG continued to haemorrhage clients. The likes of African Rainbow, Sygnia, Interwaste, Sasfin as well as most notably, the Auditor General of South Africa ended their relationship with the auditor. Following sub-par work which KPMG had done on VBS Mutual Bank, Board Chairman Professor Wiseman Nkuhlu has stated that there would be staff background checks every two years, as well as the review of work done over the past 18 months by the firm, in a bid to restore confidence.

In 2017, the Independent Regulatory Board of Auditors (IRBA) produced a report entitled "Strengthening auditor independence to enhance public investor protection through mandatory audit firm rotation (MAFR)." Mandatory Audit firm rotation is scheduled to start in South Africa for financial years commencing on or after 1 April 2023.  As cited in Minister Nhlanhla Nene's Budget Speech in 2014, the Office of the Accountant General would put plans to solidify the regulatory environment and resulted in the broadening of the IRBA mandate of it strategic pillars: Being a comprehensive regulator, Independence, Leadership in Africa and Transformation.

Audit failures such as those of Enron in the United States of America as well as those in South Africa have magnified the importance of the independence of auditors and regulators. One may ask, however, what the history and cost of corporate failures in South Africa is? The IRBA reveals that in 1991, Masterbond, audited by EY, lost R600m, with mainly pensioners being affected. In 2001, Saambou, audited by PwC/EY, lost R4 billion. Saambou was bought out by African Bank. In 2005/06, RandGold, audited by PwC, was embroiled in what was a colossal accounting and fraud scandal. In 2007, Fidentia, audited by Maddock Inc, lost R500m, resulting in the collapse of the Living Hands Trust, which supported 47000 widows and orphans. Most recently, African Bank, audited by Deloitte, had R7 billion of market capitalisation disappear, costing the PIC R4 billion in one day. Steinhoff International Holdings NV, in 2017, was also embroiled in a fraud scandal of galactic proportions which wiped out approximately R194 billion of market capitalisation in a matter of days. Deloittle, however, did not ratify their financial results.

One of the issues raised in fascinating research done by the IRBA is the tenure of some auditors with their clients in South Africa. The Distell Group Limited has been audited by PwC for 71 years. Tongaat Hullet Limited has been audited by Deloitte for 78 years. Woolworths has had EY audit its books for 84 years, AECI has been audited by KPMG for 91 years. Naspers has been audited by PwC for 101 years, with audit fees charged for 2015 at R135 million. Deloitte has had the longest tenure with a client, 114 years, with Murray and Roberts. With such long tenures enjoyed by firms, is it likely that auditor independence is still being exercised? Are there no biases which eventually impact the quality of work being done?

The IRBA's research also found that in their review of Audit Firm Inspections in 2015, significant deficiencies in 68% of firms inspected were observed, raising question marks about the independence of auditors. The basis for the inspections was in terms of Section 47 of the Auditing Profession Act. It also notes," While a variety of deficiencies were identified, one of the root causes of these findings was the failure to maintain independence as an underlying principle for high audit quality".

IRBA



As is evident from data above, IRBA CEO Bernard Agulhas states in The Accountant (September 2017) that, "What is clear is that the shareholders are beginning to make their voice heard at AGMs regarding the necessity for firm rotation to end excessively long relationships. Where audit committees may feel a 20-year, 50-year or longer relationship might not impair auditor independence, shareholders are saying otherwise.”

The greatest opposition for reappointment of auditors came from Lonmin, indicating a 40.3% increase from the previous 'No' vote in their last AGM. Agulhas further notes, "The most recent annual general meetings to be subject to this increased shareholder opposition were Telkom and PPC Ltd, which reflected 23% and 14% increases in the 'No' vote. While such an increase may seem insignificant in some instances, it indicates to us that even minority shareholders are finding their voice,"

The IRBA's research reveals that in terms of market concentration, more than 90% of JSE-listed companies have audits which were signed off by a member of the Big Four. PwC, KPMG, EY and Deloitte made up 96% market share, charging JSE-listed companies R3.6 billion in audit fees in 2015. Other firms totalled 4% market share, earning R226 million out of a possible R3.8 billion in audit fees for the 2015 year.

With regards to transformation, the IRBA succinctly states," Transformation must move beyond numbers and must move to truly empower black accountants and black-owned audit firms, which includes providing equal opportunities to access the auditing market. The harsh reality is that out of the 4283 registered auditors in South Africa (2015), 74.8% are white and 10.5% are black". It further states that the focus should not only be about increasing the number of black trainee accountants, but should also give black accountants and auditors long-term prospects in the profession equivalent to those of their counterparts. This, it adds, requires a cultural shift and a more inclusive approach which will provide black accountants with a positive experience at the firms and will result in higher retention. As one of the parting shots in this section, it indents, "The IRBA has conducted research into the firm experience of trainees and managers which suggests that the opportunity and access is not equitable for black auditors. Also, as long as there is no transformation amongst the governance structures which appoint auditors, the status quo will remain."

The auditing profession and industry is one of great importance in any country. Accurate financial reporting allows not only national, but also international investors to make informed decisions about companies which one enters into a transaction with. South African institutions, in tandem with the Independent Regulatory Board of Auditors, need to continue in their efforts to ensure that the industry is one in which fairness and high quality audits are realised, one which is inclusive and inspires confidence, not only amongst third parties, but also for key stakeholders such as market participants and professionals.