KPMG Francophone Africa: Auditing, Advising and Tax Services

Interview with Jean-Luc Ruelle, Senior Partner at KPMG Côte d’Ivoire

Let’s talk about the economic growth in West and Central Africa, where you have a presence in 14 countries. What can you tell us about this, especially since KPMG has benefited from this growth?

Nowadays, it is clear that in a certain sustainable way, the growth rates which Africa and French-speaking African countries have achieved are high. That of Côte d’Ivoire was close to 10% in 2012, 8-9 % last year and was without doubt between 8-9% in 2014. It will be a similar situation in 2015. Naturally, all the economic operators benefit from this growth in some way. Côte d’Ivoire is a more specific case because it has a growth which has been boosted as there was stagnation in relation to several activities. Therefore, there is a slight mechanical adjustment concerning investments.

Therefore, this means that in other countries, the growth is not as high but even so it still remains significant. A growth of 5-6 % is a reasonable expectation for Africa as a whole over the next 5 to 6 years. For Côte d’Ivoire, there is an election in 2015 so instead we speak of 2020. Therefore we are all persuaded by economic operators that this growth will be maintained up until 2020. Now there is still a particular aspect which is also interesting to talk about – very often our markets don’t have a sufficient critical mass. As far as jobs are concerned, when you set up business in French speaking Africa, you don’t do so in Côte d’Ivoire, you establish yourself in Western or Central Africa because you use your means to cover a greater surface area which obliges you to take a route which has the advantage of sharing the risks. This has a known disadvantage: we always have a simple system but there’s always a problem whether it be a coup or Ebola. However, I think this is a model we should follow, lots of investors come to French-speaking African countries looking for economic growth, they must take a regional approach which allows them to mutualise, but mutualising is both positive and negative. When everything goes well it’s perfect, but from time to time, they must take the good with the bad of the countries they are in as they will encounter problems.

What can you tell me about your sector (auditing, advising and tax) in the region and in Côte d’Ivoire? What are the specifics of this sector? Notably an important and interesting point is the buyers of funds who are involved in other markets.

Despite being a well-known and established job, I think auditors can find a particular interest in other markets like our own. As the markets are difficult and training is not evident ; what is the auditor to do? He cannot certify or validate the data. So, if you work with one of the Big Four today in our market, it can buy you a guarantee for the data which we give to you whether you are a banker, shareholder, or whether you are potentially the client. This is very important. This job must not be neglected as it is traditionally what we do so it has great importance. Now, today we do it, but in a different way. When I say we are part of the Big Four, we have activities other than auditing. There is advising, legal and tax assistance.

Thus, as I explained to you, I very rapidly detected interest in the market for advising activities. To give advice you must adapt resources. So we (KPMG Francophone Africa) couldn’t do it from scratch by just recruiting corporate talent, it was necessary to find them, but to equally ensure that they were moulded and trained in the correct methodology. So, for the international plan, it was certainly necessary to have strong support from KPMG France. A large interest for advising but it was necessary to have the means.

Advising involves many things. But advising executed or carried out by an auditor always turns to figures. There is evaluating the business, the transactions, the services and re-development, the PPP (public-private partnerships), the support for the public or private partnership process ; all of this is a job in itself, and then there are all the external parts and internal controls. These are the things which go hand in hand with the job of an auditor. Really the jobs where there are lots of things to be done are the ones I just mentioned. So, in my opinion, we have an effective competitive advantage with buyers.

Why? Because buyers, as you know, are similarly as problematic as with investment funds which we will perhaps see later. They have the means, the desire to spread out their resources on well-defined projects which correspond to the needs of certain countries, which is more often than not health. However, they do not manage locally in this structured country which is capable of actioning and managing their funds. So we do what they do in other countries such as Guinea and Congo. As you noted they are countries which are less structured than countries such as Côte d’Ivoire and Senegal. These are countries which have some way to go in terms of creating a plan for a structured administrative organisation.

In relation to buyers, this is a very important component which is extremely rewarding as we are doing something which brings more effective and perceptible value. When checking the reliability of accounts via an auditor or statutory auditors, you are doing a very useful job. In this case, to say that we bring real value to one’s client is not as evident. It’s a necessary evil that clients are subjected to during an advisory task and it turns notably towards the buyers. KPMG does very important things in the English speaking field. We hold annual events where buyers come, which last year took place in Kinshasa and this year, last month, was in Abidjan. We explain what we have achieved and in particular what we do. When auditors speak to you about buyers, often they are happy just talking to you about auditing buyers’ accounts, about auditing projects, but this is purely auditing. We do something different. We are involved in fiduciary management and putting in place projects for buyers’ accounts.

You spoke about funds, are you a funds manager?

Yes.

How is that different? You are a funds manager for the buyers of funds – can you give us a concrete example of this?

So for the buyers of funds it is simple. In general, either you are contracted with the buyers of funds themselves, or you are contracted with the State which subsidises the funds. As I said, you are, of course, sub-contracted. That is defined by those concerned and those who have the expenses to know the best way of putting into practice the fund buyer’s project. So we have constraints which means that in teams of the future, there will be health specialists, doctors etc., so we are forced to propose how we proceed. Then, we create structures, which will last the length of the project to ensure the execution and management of the project is carried out, following the administrative and financial plan etc., and we meet at the end.

It’s not that auditing isn’t useful, but it’s the things I previously mentioned that organisations like ours offer which brings real value to countries.

Let’s talk about the competitive advantages of KPMG in Francophone Sub-Saharan Africa and the characteristics of KPMG’s development.

We are in markets which, in general, are under development. They are markets which do not have the same profit development as Western markets, you know the digital divide, the commercial sector, etc. So we cannot apply the same rules we apply in Europe and the United States or elsewhere.

In general, I think that KPMG is consistently close to the market. We can observe this in France, for example, where KPMG has set up in nearly165 towns and where it has really become submerged in the economic fabric, particularly in the smallest towns where the KPMG offices are found. We have even noted that it was necessary for our projects to be on the market. Naturally that has advantages and disadvantages. The disadvantages are that during this time, it was necessary to support activities and aspects which are now outdated. We find ourselves once again set up and established on the market. This means that when an external client, who has no knowledge of our market, approaches us, he is able to check the local legal and tax rules incorporated in the plan. We have administrative constraints – we can offer comprehensive support to our client which wouldn’t have previously been the case. Why? Because each country is managed by locals. In Senegal, it’s the Senegalese, in Gabon it’s the Gabonese, in the Congo, it’s the Congolese, etc. All follow the KPMG mould and format.

Following discussions with Jean-Luc Decornoy, we all agree that with this type of activity it is important to have the client’s trust. It’s true that the client should have confidence in a logo or hallmark, but it is especially important to have the client’s confidence in the people who represent the company. There is an attitude which is difficult to overcome. To invest in Cameroon, which is a quite complex country, if you are unable to work with a professional Cameroonian, it would be difficult to learn all the complexities of the market. Therefore, it is necessary that the person in charge of your office is a Cameroonian who is well established in his/her environment, and equally that he/she has been adequately trained by KPMG. Like you said, we are present in 14 countries but sometimes with up to 2 or 3 offices per country. For example, in the Democratic Republic of Congo we have set up in three towns: Kinshasa, Bambesa and Gombe. There is a closeness of the people with their environment and they all must be fully trained by KPMG.

How do you see the development of your sector?

In fact that is a very good question. We are in markets which, in general, are under development. They are markets which do not have the same profit development as Western markets, you know the digital divide, the commercial sector, etc. So we cannot apply the same rules we apply in Europe and the United States or elsewhere. The best proof is what I previously mentioned – becoming established in France. Using KPMG servers from France which arrived with the French service line, didn’t work – it didn’t correspond to the needs of our market. So in fact, our market has specific needs. You need to be able to decipher the needs of the market.

In lots of magazine about Africa, it says about developing infrastructure. Without infrastructure there is no economic development. So, in order to develop the infrastructure, what is involved? It involves very high investment costs. The State’s solution to these problems, of course, is having public and private partners. Therefore today, knowing this and in order to support the politics, I’m not saying the PPP, we want to be able to support the State with its political development of the infrastructure and potentially encourage or support this by attracting partners who could be either from the private or public sectors. All of this is evident.

In the same way, today our Western, American and other markets see the African market as having a growth. So there are 200 or 300 investment aimed at Africa which are in search of targets. The problem with targets is that you must identify them and when you have identified them and they do not conform. So this work of identifying and adapting them, allows the funds to be bought and incorporated in order to structure certain entities and to structure the economic fabric.

These are things we can do and which we know how to do. They are just examples. What I wanted to say in relation to this is something simple – we must be vigilant to the expectations of the market. What does the market need? Well, what we should give to the market is FUSAC and traders and so on. For the English speaking part it isn’t too bad, it’s not really an issue. The issue rather is financing the infrastructure, to build up funds which potentially allow us to go onto the Regional Stock Exchange of Ghana, Côte d’Ivoire and Central Africa, to modify the way the company works and to give them resources and the means to grow – with that we have also brought value.

What are the big challenges you must face?

The big challenge is a human challenge – to find good human resources. Knowing there are few schools which provide classes in traditional auditing, means the market absorbs the graduates in this field, so we have a real problem. Then there is another aspect which is valuable not just for Côte d’Ivoire: to have an Auditor General for French speaking Sub-Saharan Africa, and for other African countries. I’m just talking about what I know- it’s the reason for the decline of higher level education today, it’s completely damaged. Côte d’Ivoire started to re-vamp its education system 2-3 years ago, and it really is an essential investment. Previously it was difficult to find quality resources.

When recruiting for our jobs, it’s similar to the army. We recruit the basic work force. We recruit assistants who can become auditors in 8-9 years if they are very efficient and reliable. Everyone starts from square one. This means we recruit people who have a good university education and who have potential. These people don’t just arrive on the market, we have to search for them in the diaspora or in various expositions such as the telecom exposition in Paris and so. Anyone is welcome to go. There we participate in a model which we call the “global carrier” which supplies all of Africa and I think the Middle East in the diaspora framework. So it is these people who work on people’s profiles and sift through hundreds of thousands of CVs. It’s not bad – we have a very pro-active approach for recruitment resources. We must recruit and it is our assistants who recruit them.

If you want to recruit an advisory we look to recruit specialists in transaction services which are quite difficult to find. This is the result of the damaged higher education system. We must compete with our competitors.

Afterwards, a third well known problem is the recruiting ground which the Big Four is made up of. If an international company wants to recruit, they head-hunt one of the Big Four’s staff for administrative or financial posts, which means it can be slightly complicated to manage. We found a solution, for example, for managing the recruitment of assistants. We created a KPMG academy two years ago which comes into operation this year. You can train there for 18 months, whatever your chosen degree, we detect potential. These people will have guaranteed employment and we are protected when hiring our workforce. It is very good because not only does it allow us to take in people with higher degrees who don’t have a job, but it gives back. It is symbolic in fact because those people who have certain degrees realise their subject is not a curse – they can re-do it and be given a second chance. This is a project which is sometimes called “the second chance project”.

It’s in our interest. After the economic decline, the large international operators, banks, insurers, telephone companies, oil companies came to us. Why did they come to us? Because our people are well trained – the training aspect is very important: 80 hours in year 1, 40 hours after that, so it is quite serious. Our people are well trained, they are used to working to international standards. If you are extremely attentive you employ someone who has spent three years with KPMG. We are really just a target for people who want to hire someone quickly. In Europe, it is not as serious as this is done frequently anyway.

What are the big challenges you must face?

There is specifically one priority: to expand. Now we manage office by office and we are going to put in place an integral management of human resources.

What is the global environment of your business?

That’s interesting because if we take a French operator, the French operator would arrive in French Speaking Sub-Saharan Africa. He/she will be surprised to see the similarities which exist between Francophone Sub-Saharan Africa and France. They will be understood very well since the work ethic here is the same as in France. The tax documents are issued using the general French tax codes. The regional legal system is very similar to that in France. The language is the same as are the cultural references. So an operator who comes here, sees there is a high growth and looks at the environment and sees that things are easy. This is where it becomes complicated as he/she cannot just knock on any door. If he/she wants guaranteed success, they cannot just go to any accountant. By contacting the KPMG international academy in particular, you will have plenty of people who know the market and the subtle aspects of the environment and who are capable of helping you in the right way. Because, as I explained, unfortunately it is a reality that, as there are many similarities, people are under the impression that they can do it on their own. People get kind of euphoric – not always international investors but often French SMEs looking for economic growth. It’s as if they become intoxicated, but afterwards there is always a hangover. Therefore, you must be careful as it seems to be the same situation here, but it is so different. You must be helped and well advised. And that is what we know how to do and what we can do.