Demonetization and the Outlook

My take on Demonetization of Currency Notes announced on 8th of November in India :

Approx. US$250 Bln is official money circulation in economy by RBI. This appears as a liability in RBI’s books. 85% of the circulated amounts are in denominations of 500 and 1000 (US$ 212 Bln) .If we consider 40% of the transactions to be in informal economy, the amount comes to about US $85 Bln.

What happens next?

Those with legitimate income – No issues – they can deposit the money in the banks or exchange through banks. We shall see deposit in banks to the extent of 250 * 0.85 * 0.6 = US$125 Bln by March, 2017

Those with un-accounted cash / black money – Informal economy – 250*0.85*0.4 = US$ 85 Bln

a. It will either expire as the holder shall not deposit with banks due to fear of getting caught by revenue authorities

b. Declare the unaccounted cash, pay taxes on it (up to 60 – 80%)

Advantages for RBI, Government, Economy –

a. Out of the US$85m in the informal economy, say 50% comes through official channel (house hold deposits), still about US $40-45 Bln value of notes would expire after March 2017 resulting in either reducing the liability of the RBI or increasing tax collections by the government due to tax penalties on declared unaccounted cash.

b. Fiscal deficits would be largely set-off due to the above gains. This would allow the government to significantly increase their planned expenditures in future.

c. Another significant benefit would be discontinuance of existing fake notes.

Economic Outlook

Short term (next 6 months)

a. Hassles for individuals in depositing old notes and exchanging /withdrawing new notes through ATMs/Banks,

b. Real estate sector takes the biggest hit in the short term and illicit money would no longer be available to buy the assets, prices should drop and hence the buyers would watch the market and wait for the opportune time to buy properties.

c. As the illicit money would not find its place and with limitations in the money supply, the consumer spending would be lower in the short term and hence we shall witness a lower economic and GDP growth, lower inflation in the next 3-6 months.

Medium term (after 6 months)

a. The demand for real estate sector and properties might increase due to drop in property prices and lower interest rate for the individuals/corporates

b. The money circulation in the economy would increase due to increased banking, payment platforms, e-wallets which would increase the banking and online transactions ( money multiplier effect) and hence income for banks allowing them to reduce the interest rates

c. Due to higher consumptions/demands and lower interest rates, GDP and Inflation would increase.

d. INR against USD might appreciate due to inflation drop (though short term) interest rate drop, improved domestic sentiment, lower deficits etc

e. Gold Market – Gold demand and hence prices might increase in future as the hoarders would like to invest in gold which is considered as a better bet

f. Equity Markets – Equity Valuations should improve due to increase in present value of future cash flow impacted by lower interest or discounting rate.

g. Government would definitely demonetize and discontinue 2000 note in future. Currently it has been issued to handle liquidity and logistical challenges.

 

Benami Transactions : Consequence and Compliance

After the currency demonetization drive to curb black money, the next focused initiative of the government is tracking benami transactions and punishing the tax evaders.

Benami Transactions –

The benami transaction is any transaction in which property is transferred to one person for a consideration paid by another person with a purpose of evading taxes. The real beneficiary is not the one in whose name the property is purchased but just a mask of the real beneficiary.

What isn’t a Benami transaction?

1. Property held under the name of spouse or child, for which the amount is being paid through a known source of income.

2. A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income.

3. Property held by someone in a fiduciary capacity; that is, transaction involving a trustee and a beneficiary.

This means, by law, if you buy a property in name of your parents, too, can be declared as benami.

What falls under benami transaction?

Assets of any kind — movable (vehicles), immovable (land, building), gold or financial securities (shares, fixed deposits, bonds)

Statutory Provisions:

The NDA government has amended the earlier Benami Transactions (Prohibition) Bill, 2011 to make it stricter to be known as The Benami Transactions (Prohibition) Amendment Act, 2016 which has been implemented since 1st November, 2016

Consequences for Violation:

1.  Those found guilty of having violated the provisions of the proposed law face rigorous imprisonment for a term not less than one year, but which may go up to seven years, along with a fine which may extend to 25 per cent of the fair market value of the property.

2.  If any person who is required to furnish information under this Act knowingly furnishes false information, he/she will face rigorous imprisonment of not less than six months, but which may extend to five years, along with a fine of 10 per cent of the fair market value of the property.

Suggestions on tax planning and compliance:

1.  In case the properties are being registered in the name of spouse, children by the individual with source of funds –

2.   while filing tax returns, any rental incomes/ capital gains etc should be better clubbed under your tax return u/s 264 (Clubbing of Incomes). The impact (additional tax) would be to the extent of standard deduction not claimable, when the income is clubbed

3. While registering similar transactions in the name of your parent/parents, be a joint owner

 

Our Society : Shared Values, Ethics and Integrity ?

Most of the successful corporates have their stated shared values and beliefs. Shared values define – who they are, how they work, what sort of behaviour is acceptable or non-acceptable, who should be rewarded or punished. Regular practice of these values over time becomes the culture of the company and implicit rules by which they live their values. These shared values are continuously talked and practiced to keep the focus and understanding of the rules alive by the top management.

Do we have defined shared values and beliefs for our society and the nation? Do we value honesty and integrity or we value wealth creation by any means? Do we practice values in the society? One of the biggest failure of leadership post-independence with absolute power and resources was to define, practice and institutionalise values at national level (like head of the family is credited or discredited for building a good or bad culture and values in the family).

Corruption and dishonesty is a deep rooted chronic disease in our society today. Many of us in the society are corrupt as our wrongdoings have been accepted and even encouraged. If not, then why an inspector in tax department, an officer in transport, PWD, Municipality or other Government departments with wealth beyond their normal means get respect in the society and quoted as example? Are we not setting wrong values for our next generation who are the only hopes for a better and corruption-free Country?

 

 

5 Questions posed by CFO South Africa

http://cfo.co.za/profiles/blogs/promotion-for-olam-cfo-bikash-prasad-an-interiew

What will your new role look like?
 Olam is present in Africa since 1989 and the continent continues to be strong pillar for Olam’s business with invested capital of over US$ 2.5 billion. Being an agri-player and devoting ourselves to becoming a large part of ensuring food security solutions to governments in Africa, we are heavily invested in upstream, midstream and downstream opportunities in Africa. We have various investments in Africa like farming (coffee, rice, palm, rubber), flour milling, sugar milling, edible oil refineries, forestry concessions, cotton ginning, cashew processing, cocoa processing, coffee processing, fertilisers, sesame hulling, tomato Paste processing, biscuits and candies factories, logistics and storage assets, rice and dairy Products and packaged foods business. Olam has been recognised as the biggest company in agri and food in Africa.

We believe Africa is poised to become the food producer for the world. Having the lowest yield currently compared to other producers globally (only 25% of total potential yield on average as compared to 90% in East Asia), there is an opportunity to maximise yields and production through up skilling agronomics, improved fertilisers application, technological innovation, financing, infrastructure and public-private partnerships.

With our current massive investments on this continent and future growth plans, it puts significant responsibilities, challenges, as well as offers opportunities for me.

The new role will involve ‘Building One Africa Finance Team’ and:

  • Capital raising and capital allocation.
  • Optimise the balance sheet and improve returns to shareholders.
  • Participating in all the key strategic choices and decision-making.
  • Becoming growth champion for Africa and leading mergers and acquisitions, joint ventures and public-private partnerships.
  • Manpower planning and capability building – leading and directing a diverse, multicultural and multilingual finance team of over 250 members consisting of expatriates and nationals in 24 countries across Africa. The challenge is to drive localisation, develop pipeline of talents and create cutting edge capabilities within the team to handle the our integrated value-chain operations.
  • Protecting and creating value through managing risks proactively in ever volatile economic environment in the emerging markets be it commodity prices, currency or credits. Understanding of global and African macro- economic indicators is key to manage these risks effectively.
  • Creating standardised systems and scalable processes across Africa to enhance controls and support the business requirements. We believe these systems will contribute significantly to the quality of our data and analysis which will allow us to constantly maximise our efficiency and add value to the company.
  • Driving corporate governance of highest order.
  • Value-added business partnerships and impactful engagement with stakeholders

2. What do you consider your greatest achievement in your previous role?

  • Restructuring businesses, exiting tail profit centres and re-investing across value chain to be able to handle the volatility that happens in the commodity markets like our business.
  • Improving operating efficiencies by reducing overheads, recalibrating pace of investments, focusing on working capital and fixed capital productivity. All these initiatives resulted in huge profits growth across my region.
  • Localisation – One of my achievements was to get deeply entrenched in the countries and economies in which we operated and one of the best ways to do this was to maximise on the local talent in these countries and thereby overcome barriers such as language, culture on the softer side and manage the legal, regulatory, political and business environment more skilfully to ensure our success. To do this I actively nationalised my finance team and have created an African Talent Pool to which we are constantly adding through our various in country initiatives and our Africa Finance Trainees program. These trainees have now become managers and have also been afforded the opportunity to work in different countries in our region. This not only expands their skill set, but also brings in fresh new ideas, experience and set of skills in to our finance team.
  • Setting up a macro-economic research desk to improve processes and take actions/decisions proactively.
  • I was requested to present in various trade and commodity finance conferences and CFO Conferences.

3. What do you hope to achieve in 2016?

  • Review the existing finance organisation for Africa, identify the weak links and make necessary changes at expatriates and national level. Continue with the next batch of Africa Finance Trainee Program to create pipeline of talents. Standardise performance management and capability processes across Africa.
  • Review the businesses in geographies and assess the need for restructuring, rebalancing the portfolio considering the risks, capital employed and potential returns.
  • Complete implementation of SAP across Africa before the close of 2016.
  • Standardise financial close processes and monthly/quarterly reporting to internal/external stakeholders across 24 countries and over 40 legal entities.
  • Fully leverage on macro- economic research cell to manage risks better in view of latest global volatility impacting adversely the businesses.
  • Improve internal controls and processes through standardised schedule of authority and policies.
  • Finance transformation and ”Building One Africa Finance” which are collaborative, shares the best practices with cutting edge capabilities.

4. Which issue dominated the agenda of the CFO now more than ever?
 The last 12 months have seen extremely volatile economic environment globally and Africa is no different. The crash of crude oil price, turmoil in Chinese economy, strengthening of US economy, challenges faced by Greece and other EU countries and the dollar to euro exchange rate have been few of the drivers causing the volatility globally.

The local currencies have lost their values in most of the African countries (ranging from 30% to over 100% except the francophone countries where the local currencies are pegged to Euro) and prices of commodities have seen the lowest levels. This has impacted most of the businesses in Africa and dominated the changed agenda and focus areas for the CFOs. The issues are now:

  • Currency management.
  • Price risk management, counterparty and credit risk management.
  • Increase in inflation and hence the cost of borrowings.
  • Cost reduction to improve the operating efficiencies.
  • Challenges on compliance as the revenue authorities are looking at new ways of raising finance from corporates.
  • Industries are looking for consolidation and hence prompting M&A and JVs.

5. What can CFOs learn from each other?
 There are lots of areas of mutual interest where CFOs can collaborate, share their experience, learn from each other and protect or create value for their respective organisations. Potential areas of collaborations are:

  • IT systems for transactions processing and reporting – experience sharing on implementations, benefits, precautions.
  • Business analysis and reporting.
  • Key processes/controls on debtors, stocks, creditors and fixed assets.
  • Meeting authorities/policy makers on common areas impacting the businesses.
  • Benchmarking on compensations for key finance managers, performance management processes and team management processes.
  • Risk tracking, measurement and mitigating with specific focus on currency management.
  • Sharing macro- economic trends and outlook with impact on businesses.
  • Transfer pricing methodologies and documentation.
  • Trade finance and structured products.

Passion for Africa : An interview with CFO South Africa

http://today.moneyweb.co.za/cfo-article?id=560249#.WEQfimxMo2w

A conversation with Bikash Prasad always includes exclamations like “I am passionate about Africa” and “we are very bullish about the continent”.  The finance wizard, nominated for the 2015 CFO Awards, readily dishes up facts and figures about Africa’s economic opportunities. “Olam’s investment in Africa in the last five years is over a billion dollars. It is humongous.”

When Bikash took over the CFO role for agri-business Olam International in Southern and East Africa three years ago, things were tough. He restructured the existing operations in the region, closed down tail profit centres and managed to reduce overheads and risk exposure.  The capital released as a result was reallocated to expand the value chains through organic and inorganic investments to balance the product portfolios in the region. Bikash also modernised IT and localised the finance teams in African countries, getting rid of superfluous expats. Being active in the agri-sector, Bikash believes Africa is the world’s food provider of the future with “young people, urbanisation, the rich mineral resources and better governance” the key to the continent’s potential.

Having joined Olam in 2006 in Cameroon before moving to Ghana as finance head for West Africa three years later, Bikash knows what he is talking about. He moved to Durban in 2012 to head up South and East Africa and since July he is CFO for Africa. Bikash is a longtime supporter of CFO South Africa, so we were extremely happy to speak him at length about his role at Olam, his approach to change management and the ups and downs of investing in African countries.

What were the challenges when you moved down to South Africa for Olam International?

“When I took over the regional CFO role for South and East Africa three years ago, the region was going through extremely tough times due to high dependence on cotton with prices at rock bottom. We had lost people at senior finance level, had extremely high operating leverage and an expat-dependent structure. Our systems were still catching up to support our new business models and not many businesses were very attractive.”

“After understanding this, I immediately started the strategy recalibration exercise along with the business heads and came up with a restructuring plan that involved exiting tail and non-performing profit centres, reducing overheads and reducing risk exposure. As difficult as these decisions were, we are already seeing the benefits of our strategy for the overall growth in value of the company. After implementing the changes, all the regional clusters have been turned around.”

Changes are often met with resistance. What were the toughest decisions you had to take?

“I had to convince the team to let go of 20 expats, 200 local staff and 5,000 temporary workers. It was a difficult period, but it helped in bringing down the overheads by 35%. The second tough decision was to start a localisation drive. We were very expat driven in pockets, but I find it very important for continuity and stability to have national talents.”

How have you gone about changing your finance team?

“I have actively tried to nationalise my finance teams and have created an African talent pool which we are constantly adding to through our various initiatives, like our Africa finance trainees programme. These trainees have now become managers and have also been afforded the opportunity to work in different countries in our region. This expands their skill set, but also brings in fresh new ideas, experience and sets of skills into our finance teams.”

“Over the last two years I have consolidated my finance team and geared it towards a more regional focus, allowing for cross sharing of skills and experience which has positively impacted all our businesses and the region as a whole. I have completely standardised reporting, systems and processes across the countries. I insist on market visits for all the finance team members, so they can develop better business understanding.”

What improvements can still be made?

“We aim to stay ahead of the game and have already started to build an Africa-wide tax function, where we are implementing processes and controls which may not currently be on individual countries’ tax agendas but which we believe will eventually top the list in the next five to ten years. We are also in constant conversation with the Big Four accounting firms to understand the key trends on the continent and which tax regimes are the most well-structured and efficient, so that we are geared towards the changing tax environments in each of the economies in which we operate.”

What is the role of technology in your finance team?

“It is very important, especially with our current value chain expansion. We have successfully implemented SAP in South Africa, Cameroon, Ghana, Senegal and Mozambique and are laying it out in the rest of the region. We believe these systems, which are linked to our BI platforms, will contribute significantly to the quality of our data and analysis which will allow us to constantly maximise our efficiency and add value to the company and its decisions.”

What is your recipe for success?

“I believe in standardising processes and reporting, because it makes reviews easier and more effective. I like working with teams, but also have a very good technical understanding myself. Before I go to sleep each night I spend 45 minutes reading about things like accounting and best practices. I interact a lot internally and externally. All of that improves my understanding and learning.”

You handle M&A, joint ventures and green field projects for Olam, making you almost a chief strategy officer. What are the prospects in Africa?

“Africa is a strong pillar for Olam’s business with invested capital of multi billions. Africa has 60% of available cropland in the world and higher GDP growth compared to developed economies. The rising middle class presents an opportunity for customer facing industries, which is why Olam has invested in packaged foods. I think the high percentage of young people, urbanisation, the rich mineral resources and the attempts towards better governance are holding the key for Africa.”

“Africa is poised to become the food producer for the world. Having the lowest yield currently compared to other producers globally – only 25% of total potential yield on average as compared to 90% in East Asia – there is an opportunity to maximise yields and production through upskilling agronomics, improved fertiliser application, technological innovation and PPP. Corporate farming firms will increasingly support small holders, thereby reducing poverty and improving farm productivity, which is very low today. As Olam we do this for many crops, including coffee, rice, rubber and edible nuts.”

“Our biggest successes are probably flour milling, packaged foods business and plantations. We bring the best technology in the world and get the best teams. Our sourcing capability and risk management are unparalleled.”

How do you keep up-to-date with opportunities and pitfalls in Africa?

“We operate in 24 countries in Africa and we work very closely with tax authorities and governments. We try to understand what their priorities are. I also subscribe to various publications and speak with various stakeholders across Africa on a regular basis, such as bankers, business managers and finance managers. I also attend and actively participate in various trade and finance conferences, CFO conferences across the continent and internationally, where topics related to our business are discussed.”

How have you organised your African finance function?

“We have four clusters: Eastern, Central, Mozambique and South Africa. They have cluster CFOs and the senior leadership comprises of 25 people. We now have a healthy mix of nationals and expats. Our routine accounting and reporting has been outsourced to Olam Global Business Services in Chennai, India. This allows my team to focus on value-adding roles and to become a trusted business partner.”

What misunderstandings do South African CFOs have about investing in other African countries?

“If you talk to CFOs, the perception is that infrastructure is very bad, but it is actually quite good compared to many other places in the world. There is also the often-repeated fear of huge amounts of corruption, security issues and political insecurity. Many of these fears are exaggerated. Corruption risks, for example, are entirely different per country. In countries like Ethiopia it is not bad at all and in other countries you can actually help governments fight corruption. In Ghana, for example, Olam has come with suggestions to curb illegal trade.”

Which three African countries would Bikash invest in?

“I would choose Gabon, Ivory Coast and Ghana. The new government in Gabon is very pro-investment. They are looking to diversify from oil, gas and timber. They are really promoting investments. As Olam we have established a special economic zone with them with all sorts of tax holidays. The opportunities are mind blowing. Ivory Coast might look scary from the outside, because of the recent political unrest, but inside the country there is a good climate for investors. Ghana also remains a good destination. While there are some economic challenges in the last few years, it is a great country with very friendly people and a pro-business climate.”

Five ways Africa can become a global force in farming

http://www.agri4africa.com/index.php?dirname=docs_02newsletters/00010newsletter.php&lookupArticleId=186

Africa, which holds 60% of the world’s uncultivated arable land and has access to plenty of water resources, has the potential to not only feed its own population, but also to contribute to global food security.

However, despite the potential the continent has for agriculture, Africa remains a net food importer. With the African population expected to double to 2bn by 2050 and the urban population growing rapidly, it is becoming more and more vital for Africa to increase its agricultural production and feed itself.

But why is Africa a net food importer?

Bikash Prasad, CFO for southern and eastern Africa at Olam International, told an audience at the Africa Trade Finance Week in Cape Town last week that a major reason sub-Saharan Africa has to rely on food imports is because the region has the lowest actual crop yield (as a percentage of potential yield) in the world.

He highlighted that sub-Saharan Africa’s actual crop yield is estimated at 25% of potential yield, compared to East Asia which has an actual crop yield at almost 90% of potential yield. Prasad estimates that if Africa could double its actual crop yield to 50%, the continent would be able to not only feed itself, but also become a net food exporter.

“Today Africa is producing 700m metric tons of food at 25% yield. If the yield goes to 50%, Africa will start producing 1.4tr metric tons of food and it will become a food exporter,” he said.

For this reason, Prasad argues that increasing agricultural yield is key to Africa reaching its agricultural potential, and suggests five ways the continent can do this.

1. Learn from the best

Prasad suggests that farmers and African economies should learn from the best yield producing practices seen both globally and in Africa. For example, the United Nations statistics division for the Food and Agriculture Organisation (FAOSTAT) released data in 2013 that showed Belgium was the highest yield producer of wheat in the world, producing an average of 8.46 metric tons per hectare.

The highest yield producer of wheat in Africa is Zambia, producing 6.13 metric tons per hectare, compared to the Africa average of 1.97 metric tons per hectare and the world average of 2.79 metric tons per hectare.

Therefore, Prasad argues that African economies and farmers looking to increase their actual crop yield need to learn from the successes of these economies, and implement their best practices.

2. Increase fertiliser use

To improve food production, Africa will have to increase the amount of fertiliser used considerably, stated Prasad. According to FAO statistics, sub-Saharan Africa’s fertiliser application rates in 2008 were 7kgs per hectare, compared to 165kgs per hectare in Western Europe, and the world average of 109kgs per hectare.

3. Increase use of yield-enhancing technologies

Statistics also show that Africa is behind in the use of yield-enhancing technologies such as crop irrigation and agricultural machinery such as tractors.

To illustrate this, Prasad highlighted statistics from the World Development Report 2007 which showed that between 2001 and 2003, 18.4% of the world’s crop land was irrigated, compared to 3.6% in sub-Saharan Africa. Furthermore, during the same period, sub-Saharan Africa was recorded as having 13 tractors per 100km² of arable land, compared to the Europe Economic and Monetary Union having 1,002 tractors per 100km².

4. Improvements needed in infrastructure and energy

Compared to other developing regions, sub-Saharan Africa’s infrastructure coverage and costs indicate that the region lags behind and is cost inefficient. For example, according to World Bank 2008 statistics, the cost of internet dial-up services, international phone calls, power tariffs and road freight tariffs are considerably more expensive in sub-Saharan Africa than in other developing regions.

5. R&D and innovative financing

Prasad added that African economies need to improve their expenditure of agricultural research and development (R&D), such as improved seed varieties. As a lack of access to finance is a major constraint for many smallholder farmers in Africa, he emphasised the need for the promotion of effective and innovative financing in agriculture.

If the right amounts of water, fertiliser, finance and labour are brought together in Africa, Prasad argues that the region has the highest growth potential of any agricultural sector in the world.

Role of CFO : “Forecasting and budgeting are more crucial than ever”

http://cfo.co.za/profiles/blogs/bikash-prasad-cfo-olam-international-forecasting-and-budgeting-ar

How do you perceive the role of the CFO has changed in the last five to ten years?
The role of CFOs has changed from a bean counter to strategic business partner, from accounting to decision-support and strategic planning.

Due to emergence of various international financing tools, increased focus on cost control for survival due to cut-throat competition, FP&A for informed decision-making, risk management processes in the most volatile times, stricter corporate governance requirements, investment decisions and M&A due to existence of both opportunities and threats have completely changed the profile of CFOs in and expectations of organizations from them.

How do you see the role of the CFO evolving in the next five to ten years?
The role of CFO has already started evolving from accounting to business support. In coming years, CFOs would play even a bigger role right from designing strategies for the businesses to its full implementations. CFOs may be called as CVOs (Chief Value Officer), being the custodian for preserving and creating values for the organization.  We may also see a time when there would be no month close exercise but online availability of financials all the times through advanced applications and implementations of IT systems.

Would you say that accurate forecasting and budgeting is still feasible for a financial department in today’s tumultuous financial markets?
In the current volatile times with the squeeze on resources (working capital, fixed capital, risk capital etc), forecasting and budgeting would be more crucial than ever. The limited resources will have to be deployed with proper budgeting and allocations amongst various BUs to get maximum returns and productivity. Cash is king in credit crunch scenarios and hence cash flow forecasting would be vital to plan and properly utilize the financial resources.

We deal with volatility in credits, currency and price using the Value at Risk model by putting risk limits in terms of both quantum and tenor. Use of derivatives and hedging techniques are must to handle these volatilities.

Which skill(s) do you think a finance professional should master to be most successful in his work? Please give an example when these skills are an absolute requirement.
I would suggest following skills to become successful in our career –

a)      Domain Knowledge of finance
b)      IT savvy
c)       Full understanding of business models and insights
d)      Stakeholders relationship (internal as well as external) and excellent communication skills
e)      Leadership and People skills
f)       Continuous up gradation of knowledge

Which achievement or project in your business career are you most proud of?
I feel excited about the number of M&A projects handled and closed by me in OLAM, right from identification of targets to project feasibilities to valuation to DD to deal closure and finally post merger integration (PMI). This helped my region to grow exponentially and leave behind the peers.

The other critical achievement was to get my company in Ghana the BEST TAXPAYER AWARD for 2011 by Ghana Revenue Authority through high level of corporate governance, valuable inputs to authorities resulted in increase in their revenues etc.

Please name something – a procedure or process for instance – that was implemented in your company before you were appointed CFO, which you changed after you took the position of CFO.
After I took over as Regional CFO, I revamped the financial closing and business support processes through implementation of new software developed in-house with the help of our central IT division. This ensured standardized reviews (whether a new FC/FM in the organization or a veteran) through defined checklists for financial closing. It further ensured standardized reporting across products and across geographies.

It also had features as group consolidations, web-based applications, central repository, and Excel look and feel with multiple views, process completion attestations, and online business support reports. This was implemented across organization after overcoming the initial resistance to change.

Who is your role model in life and why?
I respect Mahatma Gandhi and Nelsen Mandela for their dedication, focussed approach, outcome orientation, optimism, demonstration of great leadership and people skills, clear communications, politeness but with firmness. If we follow these traits and the approach in our lives, we can achieve what we want to.

What vital piece of advice would you give young ambitious finance professionals?
Take yourself seriously in all the jobs assigned to you, work with integrity and required aggression, develop business understanding, be a good listener with your team and develop mutual trust,keep yourself updated with latest happenings in the finance world.

Contributing to Africa’s agricultural future

http://cfo.co.za/profiles/blogs/bikash-prasad-cfo-south-and-east-africa-at-olam-international

“Africa should be a net food exporter, but it is a net importer at the moment,” says Bikash Prasad, at Olam International, a Singapore-headquartered integrated supply chain managing firm and processor of agricultural products and food ingredients. The Durban-based Prasad has a passion for the continent. “We want to play an important role in the growth of Africa,” he says.

Olam International started in 1989 as a cashew nut producer in Nigeria and still has a strong focus on the continent, says Prasad. “All the corporates are fully aware that there is great potential in Africa, but they are sometimes still reluctant to seize the opportunities,” says Prasad. “At Olam International we believe in Africa and because we were born in Africa with a deep-rooted history and on the ground expertise, we are not scared to invest and grow. Barring a few countries, the continent is stable. We are always vocal about improving food production and agriculture in Africa.”

Prasad recently presented a paper on Agriculture and the food trade deficit at the 8th Annual Africa Trade and Export Finance Conference in Cape Town. He chatted to CFO South Africa about the question why Africa is a net food importer and what can be done about it. Prasad believes that if a CFO is an ambassador for his or her company it is a demonstration of the company’s objective to grow responsibly. For Bikash “it underlines transparency and our desire to engage with all of our stakeholders”.  It also means that the CFOs are fully aware of stakeholder opinion and external issues which can then inform financial decisions, he says.

After starting his career in India (his land of birth) and working with companies like Unilever and Asian Paints, Prasad moved to Nigeria ten years ago to work for Nulec Industries. In 2006 he joined Olam International as Country Finance Controller in Cameroon and he hasn’t looked back since. “In 2009 I moved to Ghana as Cluster Financial Head for West-African countries and, in September 2012, I moved down to Durban and assumed my current position,” Prasad explains. “My most important roles include identifying and supporting opportunities for sustainable growth, corporate governance, developing talent and working with various internal and external stakeholders.”

From its humble beginnings 25 years ago, Olam has grown into a sizable multinational with a presence in 65 countries and a turnover of approximately 20 billion dollars. Temasek, an investment arm of Singapore Government is the largest shareholder for Olam which also has a growing presence outside Africa, including operations in countries like US, Australia, Indonesia, Vietnam, Thailand, China, India, Middle East, Central Asia and Brazil. “We believe Africa can and should be firstly feeding itself and secondly feeding the rest of the world. Almost 60 percent of the cropland that is still available for cultivation is located in Africa.”

But the African potential has remained largely untapped so far,” admits Prasad. “One of the biggest problems is that, compared to Asia, the yield per hectare is only 25 percent of potential yield. If that doubled to 50 percent, Africa could already become a net food exporter. Sub-Saharan Africa has the lowest actual crop yield as a percentage of potential yield anywhere in the world. If the right amounts of water, fertilizer, finance and labour are brought together in Africa, the region has the highest growth potential of any agricultural sector in the world.”

Currently only 3.6 percent of African cropland is irrigated, Prasad explains. “That means most farmers are still wholly dependent on the weather for the crops.” Other indicators that there is massive room for improvement are yield enhancing technologies like agricultural machineries, tar roads, power and the proper utilization and management of fertilizer. “At the same time the local demand in African countries is increasing. The population which is growing at 2.5% per annum will double by 2050 and growing urbanisation at 4.5% means a change in food consumption and demand for imported foods. Rising GDP and income levels also increases the demand,” says Prasad.

Olam not only signals the problems and the potential, but also plays an active role in helping Africa move forward and making sure various countries learn from each other’s experiences. “We are into upstream farming for rice, coffee, edible nuts, palm and rubber and midstream processing for products like cocoa, cashew, wheat, crude oil and so on. We are also active on downstream and distribution operations. We are participating in various parts of the value chain and also see it as our responsibility to spread good agronomical practices.”

For small African farmers, financing is usually a problem. “Most financing is through corporates, traders, farmers’ retained earnings and sometimes micro-finance institutions. We have to find more innovative ways of financing farmers, so they can use the right technologies and inputs,” says Prasad. He sees Public Private Partnership (PPP) as one of the strong catalysts for developments. “Olam has a successful PPP with the government of Gabon. It is really working well, helping to diversify Gabon’s economy and develop the country’s agricultural potential” says Prasad.

Critics sometimes dub the investment in agriculture of multinationals as ‘land grab’, especially when foreign workers are recruited and the revenue is disappearing overseas. “There are countries which don’t have enough people with the right experience to work at the farms, plantations and manufacturing facilities. That means we need to bring in external experts and manpower, which will work and then transfer the relevant skills to nationals,” says Prasad.  He also emphasizes that Olam is very committed to the “local context” as he calls it. “Whether we are operating on concession-based or owned land, it is vital to undertake environmental and social due diligence. We have community as well as legal obligations.”

Olam remains absolutely committed to Africa. “We have invested over USD 1.2 billion dollars in Africa while following our aim for long-term sustainability,” says Prasad. “We also bring innovation and best practices in farming and processing. For example, the 6,000ha rice farm in Nigeria is supported by a central mill which will be fully operational by mid-2014. It will be supplemented initially by approximately 3000 local outgrowers, and gradually scaled-up to include 16,000 farmers.  Many of these outgrowers will be working on the farm (or have family members working on the Olam farm) and are trained by Olam in Good Agricultural Practices which they can then take back to their own fields.   Eventually, the outgrowers will be providing 30-40% of the operation’s rice. Olam is confident that this model can be replicated by other organisations to support domestic drives for greater self-sufficiency and goes to show that large-scale commercial farming can work hand in hand with smallholders. Our coffee plantation in Tanzania is going to start yielding soon. Our flour mill in Ghana is now at full steam and we also have wheat mills in Cameroon and Senegal underway. We are really contributing to Africa’s growth.”

“8 key issues facing Young India and a possible combined solution”

8 key issues or priorities for the government, making news in India recently –

  1. Alarming Pollution level in the capital cities of India
  2. Government’s plan and vision to build Smart Cities in Indi
  3. Make In India
  4. Unsustainable Real Estate prices in major cities making it difficult for the middle class to buy properties in these cities
  5. Level of Unemployment
  6. India’s Economic Growth
  7. VIP Culture for Politicians (massive bungalows in posh locations)
  8. Level of Fiscal Deficit and burden of servicing the interest cost for the government

Possible Solution to address the above issues (not sure if stupid or practical 🙂

“We shift our 30 capital cities (Country and States) to developing/under-developed cities in a phased manner over the next 10 years”. It has been done in the past too for the country (Patna to Calcutta to Delhi) and states so is doable.

There would be two aspects to be looked at –

a) how does it help in addressing the issues :  

  1. The new capital cities could be well developed as planned, modern, clean and hi-tech cities with better infrastructure (as compared to polluted, populated, congested, unplanned cities), improving the government efficiency and image of the country and
  2. It would take the load off the capital cities in Delhi, Mumbai, Chennai, Kolkata, Lucknow, Hyderabad and so on making them less polluted with the reduction in population.
  3. Reducing the load in the existing capital cities would reduce land and real estate prices to affordable and sustainable levels, thereby reducing inflation. Middle class could then afford to buy homes in these cities thereby increasing the quality of their lives.
  4. Developing new capital cities would increase the demand for various manufactured goods required for building infrastructure (achieving Make in India vision), bring foreign investments and FX in multiple manufacturing sectors with positive impact on Rupee strengthening , would create new jobs in abundance (significantly reducing unemployment and poverty) and finally increasing the GDP and economic growth for the country.
  5. Apartments in average localities (as compared to Bungalows in acres in posh places) with necessary facilities can be built in the new capital cities for most of the Politicians – Ministers, MPs, MLAs, reducing the impact of VIP culture. In a low-income democracy. An MP or Minster housing in a 1-Acre Bungalow (valued at 100 Crore) in posh Delhi locations, does not justify a poor or low-income India. They are public representatives and need to live within public vicinity.

b) how would the government fund the infrastructure, real estate development in the new capital cities : 

  1. The government sells up to 50-60% of its properties in these 30 capital cities at the current prices.- Government land, Minister’s / MP’s massive bungalows (current market valuation of 1 bungalow in Delhi is over 100 Crore), Government Offices, Museums / Heritage Properties in posh locations (CP in Delhi, Nariman Point in Mumbai)
  2. It will then generate enough money to build over 250-300 modern and smart cities (my estimate of the properties prices between posh locations in capital cities and developing/under-developed cities is at 20: 1, assume 10 times conservatively). 1,000 acres of Government properties in posh Delhi localities alone is estimated to have a conservative value of over Rs. 1,00,000 Crore. 650 Bungalows in Central Delhi alone for Ministers, Secretaries and other VVIPs could value anywhere between 50,000 -1,00,000 Crore. This is the blocked opportunity capital for the government. Similar properties can in new cities can be built at less than 10% of the cost and hence the balance can be used to build infrastructure, smart cities and to reduce the government’s fiscal deficit. Similar capital cost can be released in all the capital cities.
  3. Since we need to build 30 smart capital cities, the balance funds can be used to significantly reduce the government’s debt which is over 60% of the GDP (65-70 Lacs Crore).

 

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