Mazars, a Global Audit, Accounting and Consulting Group

Interview with Michelle Olckers, Managing Partner of Mazars

How is Mazars going to achieve long-term sustainable growth in South Africa’s less than buoyant current economic climate?

Mazars South Africa is placed in the mid-tier within the accounting profession. We don’t compete with the big four in South Africa, instead we focus on entrepreneurial business. We see a huge future for our profession in not just offering the well-known services – traditionally accounting, tax and audit – but to concentrate more on what is much more needed now, namely on the advisory side. These services include forensics, corporate finance, IT and internal audit as well as restructuring and recovery services, to name a few. At Mazars we look closely at individuals who own businesses to find out how we can assist with developing them. Businesses go through various phases during which the owner has needs and requires advice continuously. Strategically we see ourselves positioned throughout that client business life-cycle to offer trusted advisory services. When entrepreneurs start up they don’t know what to expect or what the pitfalls are going to be. But we have that experience and are able to provide the necessary advisory services. We see a lot of entrepreneurs who try and start businesses and find they don’t know which direction to go in and we can offer support there.

Mazars has a long history of professional excellence in South Africa. How do you believe the market will continue to perform for the company?

Our focus has always been on the sector of the market which is growing, so even though the economic climate is presently not the greatest, as you mentioned, there’s always a need for new and sustainable start-ups. We traditionally came from an environment where we started with businesses in the lowest phase of their growth and due to the fact that we can add value throughout the maturation process we are confident that we can continue to do that in a market that’s changing.

Mazars recently announced mergers with two offices from the PKF network in South Africa and the latest additions to the Mazars group are from Bloemfontein and Pretoria. Can you elaborate on the growth strategy being pursued and specifically how this will facilitate enhanced and extended service capabilities for the clients you serve?

The footprint of Mazars within South Africa is twelve offices, which is quite a large number for a mid-tier firm. Strategically this is a big advantage for us. The Pretoria office has now actually merged with our Johannesburg office to form a Gauteng region – they’re moving into a brand new building in Johannesburg next month. It was important for us to bulk up our offering and it’s a very exciting opportunity for us to show our presence within the Gauteng region. Within South Africa, Cape Town is our largest office. However, it would make more sense to take advantage of the possibilities in Johannesburg and this merger is our stepping stone to achieving this. Bloemfontein is close to the mining industry and a part of the country that has a lot of potential in terms of growth, making it another area where it is important for us to be established.

Mazars South Africa is placed in the mid-tier within the accounting profession. We don’t compete with the big four in South Africa, instead we focus on entrepreneurial business.

What are some of the main taxation and regulatory challenges that are likely to snare a foreign investor here in the Western Cape?

We see a lot of foreign investment in the property sector here, a booming industry. Although it has been slow in terms of growth over the past few years, I don’t think investors can go wrong. What’s important to them is that they get the right advice in terms of how they structure their property investment, because there are some pitfalls around the tax laws and what you can and can’t do.

There are areas where you can invest in IDZ zones that will give you a better advantage from a tax perspective, and investors need to be protected from being drawn into “opportunities” that aren’t actually offering the same tax incentives that they’d initially been made aware of. I’m talking primarily about commercial property here. But look at a place Century City in Cape Town where we are located, for example, a huge developing area that is both commercial and residential. So there are opportunities in residential, too, but I believe that foreign investors are looking more at the commercial side of the Western Cape.

Mazars has also expanded its footprint though major strategic mergers in China and Germany and you have deepened your presence in Australia, Italy, Mozambique, Cyprus and the Philippines. What is your long-term vision for developing and deepening your global capabilities? Which markets are you investing in and what further international opportunities is your organization pursuing?

One of the most important things we’ve done over the past year has been to strongly expand our presence in Germany, an important market and Europe’s first economic power. The mid-market, namely the Mittelstand, in this country is enormous and this is just the type of business we focus on. The huge growth and development here has enabled us to spring board into other parts of the continent, an opportunity we recognized and seized. We have also expanded our footprint in China. Mazars doesn’t just want to be dots on a map and to expand our offering in terms of being able to say we have offices in a large number of countries. That’s not our intention. Our strategy has always been to have a presence in places where our clients need us to be. We can see that this is helping us to serve them internationally, with a lot of them operating out of China now. Africa is also important for us from a South African perspective because we know China is very interested in Africa and how they can invest here. So we are now using opportunities out of our many offices across China, including Shanghai, Hong Kong and Beijing to see which companies they are aware of and involved in in Africa, and how we can assist them.

Given the global economic environment there is currently a pressing need for governments to do everything possible to find and direct investment. South Africa has pursued several tax incentives and allowances geared toward attracting investment and promoting employment creation, such as the employment tax incentive and the learnership allowance. Can you outline these policies and explain what they were intended to achieve?

We realize that we have a high unemployment rate and that we need to be looking at how we can get more people into the working environment. The best way to achieve that is through traineeship within organizations. Mazars, for instance, has benefited from the learnership scheme where we invite young graduates to come into our business and be given the chance to expand their knowledge through a practical environment. We view ourselves as a learning organization so we tap into that to ensure that we can generate individuals into the economy who will have the potential to enter into any business and be able to add a lot of value in an economy that needs those skills. Learnerships enable organizations to develop people and not just keep them but pass them on into the economy, too. That’s what we do. The other employment tax incentives are at a much lower level. They are aimed at workers who do not have any education, with tax breaks enabling them to come into a business environment and live on basic pay while having the opportunity to learn. These schemes are a very important chance to reduce unemployment.

Do you agree as a matter of policy that small and medium-sized enterprises should not be regarded primarily as a tax source but ultimately as economic incubators for South Africa as a whole?

Absolutely! There are so many inhibiting factors for small businesses in South Africa. The government has come up with certain measures regarding the laws on taxes that are designed to try and encourage small businesses, but they don’t realize that there’s still a huge amount of red tape around. So I don’t think they should be seen as a huge source of tax just yet, the tax burden should be greatly reduced and we should focus on getting them to a size where they can actually add value to the economy. Let them develop, let them grow! We often try to assist businesses and although they have great ideas that could potentially add value to the economy, they can’t survive. Because of the bureaucracy and regulations they encounter together with the heavy taxation they struggle and don’t end up succeeding. This is very sad.

Is the Western Cape more proactive in tackling these issues compared to other provinces? Is it a totally different environment in terms of onerousness and burdens?

No, not particularly. I do believe we are fortunate in that our local government has recognized that this is something they can get involved in to try and assist. They are doing this not just for the Western Cape, but for the greater South Africa. We get involved a lot with entrepreneurs through the universities. One such project at UCT is a strategic project in its fourth year initiated by business science graduates centered on creating a business which is sustainable. What we see is very smart, young, individuals with great ideas who want to start their own enterprises. We help them to come up with a way to realize their plans. Unfortunately they then finish university hoping to start their own business but very soon realize the pitfalls of the red tape that is there. Sadly, again, they don’t all succeed. For me, it is a great contribution if we can make a difference in terms of young, intelligent people who have got great ideas with the potential to think big and not just stay small, an entrepreneur forever, but expand and significantly add value to our economy. Most importantly, we can even reverse the trend with these strong minds and great intellect leaving the country to go to the US or Europe where they can realize their ideas without inhibiting factors. This is not what we want to happen.

Finally, the Minister of Finance, Pravin Gordhan, is currently facing an unenviable set of circumstances. He has a decreasing tax revenue, declining economic growth, low FDI into South Africa, a mining industry that’s in crisis and a non-performing public sector. With municipal elections coming up this year, isn’t the obvious solution for the country to increase revenue by simply cutting expenditure?

Obviously we have had a whole lot of political factors that have affected this country’s economy. Along with all the other issues, the government is looking to generate revenue wherever they can. The challenge is to pick the right areas. The focus is on tax at the moment, but job creation is also imperative and investment in education needs to be increased at the same time in order to create revenue. That’s the dilemma. Education and job creation on the back of low revenue and finding ways to stimulate the business environment is ambitious, but it can be done. The business community in South Africa has taken a definite stance now and is saying that what is going on here is not in our best interest economically and how can we help? If the government were to concentrate on that big business and how we can really add value to help create revenue generation that would be a better strategy than homing in on tax collection.

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