The CFO must be a voice of reason in the boardroom, says Frencel Gillion, CFO of KTH

14 March 2017

“What makes me able to do this job is a strong understanding of the business, its operations and risk, as well as fundamentally accepting the need to grow the business,” says Frencel Gillion, CFO of Kagiso Tiso Holdings (KTH). “I think a CFO should have a strong grasp of the numbers but also be able to intuit what is happening within the business and be able to communicate this to the stakeholders through the financials. It’s not just about regurgitating numbers.”

Tell us about your current role and responsibilities. Is your role focussed more on finance or strategy?

“As CFO, I am also an executive director of the company, so my role is two-fold. I provide oversight of the traditional financial area, financial reporting, risk, budgeting, treasury and so on, and I’ve got a strong team to assist me in doing this. I’m also involved in strategy setting and execution. In our context, this means two things: I’m on the board of a few of our investee companies, including one of our biggest and most significant investments, Kagiso Media, and I also spearhead the capital raising at our holding company or centre as we call it – a key requirement of ours is to raise capital to grow our business.”

“We are an investment holding company so we’ve got a complicated structure with investments in the media and ICT, financial services, industrial, healthcare and services sectors. We have debt at centre and also at some of our underlying investments. For the last two or three years we’ve mainly looked to raise leverage at centre and to de-leverage our individual assets. That’s what I’ve been extensively working on through our bond programme.”

You’ve been with the company for six years. What keeps you loyal?

“I was here when the company was created. It was created through the merger of two black investment champions, Kagiso Trust Investments (KTI) and Tiso Group, so it grew out of the traditional BEE landscape. The idea was to move away from passive BEE investments to building a eading investment holding company that’s focussed on selected pillar assets where we have significant influence or control. The other aspect was to broaden our investment focus beyond South Africa and to become a pan-African investment champion. I was part of the management team that worked with our advisors, shareholders and our Board to execute the merger and thereafter develop the strategy for this new business. I got the opportunity to work with some of the brightest black professionals in South Africa, as well as with leading and influential black business leaders on our Board throughout my career at KTH. I gained so much experience from it and it was a great learning curve for me. We’ve done deals worth R5 billion in acquisitions, disposals and fund raising over the last five years. It’s been a case of buying into a vision and being part of it from the start.”

Tell me about your team. What are its strengths, what are its shortcomings and what are you doing to address these?

“We are a small team of seven professionals, which includes four CAs, including myself. We have a highly experienced financial controller and a strong head of tax as senior members of the team. It’s an experienced team and one which, over time, has become more of a business partner to the investment business. I’d say this is one of the major strengths of the team. So, in terms of executing transactions, the team has become part of the implementation process, among other support functions.”

“The team is also very strong in terms of IFRS financial reporting. We implemented a system from IBM in 2013 called Cognos Controller and Cognos Disclosure Management (CDM), which has revolutionised our consolidation and reporting since we had, at that stage, more than 90 companies in our group. We report twice a year to our stakeholders. The head of tax has also helped with efficient tax structuring.”

“One of the challenges is that we are a lean team – we have a Net Asset Value of approximately R9 billion but are small in total professional staff complement. So, something that has proved difficult is finding growth areas for people, particularly getting them more involved in operations, from funding to understanding due diligence. I wouldn’t call it a weakness, more a desire for people to grow and strengthen their skill set. In that regard we value formal training courses. We also tend to use our investee companies as potential growth opportunities for our staff.”

What is your leadership style like?

“I believe it’s important to have the right people on the team, because you’re only as good as your team. I’m not scared of appointing people brighter than me on my team. It’s a fundamental point. So, I believe in principled leadership, where you are not scared of discussing areas where things are not going as well, but also to acknowledge areas of achievement. I’m results oriented, I don’t micromanage, I give direction and set out what we need to achieve and ask how I can support those outcomes. I manage for results. And I believe in backing people; giving them confidence.”

What are your thoughts on mentoring and coaching?

“I believe mentorship can take a number of different forms. It might be that I’m working on a project or transaction and involving the Group Financial Manager for example, during one of our annual road shows to bond investors, giving him exposure to the opportunity and to build on his skill set and level of experience.”

“In my career, I’ve been hands-on involved in skills development and some of those people have become leaders in their own right. I believe that people must take responsibility for their own careers. I believe in giving exposure on merit, and I disagree with entitlement mind sets. I read voraciously and I encourage others in my team to do the same. I read mostly about finance and investment, as well as leadership. I’ve just read Ariana Huffington’s book, ‘Thrive’, and am currently reading Angela Duckworth’s book ‘Grit: the power of passion and perseverance’.”

What achievement in your current position are you most proud of?

“Implementing the Cognos Controller was a big achievement, one which revolutionised our reporting, though I should probably give my team more credit for this. I’m proud of what we achieved when we merged – going through mergers is quite challenging. We had to reconstitute the teams and some difficult conversations needed to take place. I’ve currently got a team that is efficient, functional and cohesive, as well as able to deliver. Being the leader of such a team; a team that is capable, stable and efficient, is an achievemen

“On a personal level, I helped set up a R2 billion bond programme, which got listed on the JSE and lead the raising of R1,65 billion in bonds which helped finance KTH’s acquisitions.”

What does the company’s risk register look like? What are the key concerns and what strategies are in place around these?

“We’ve got a comprehensive risk register and we work with KPMG to implement this. Our risks are enterprise wide, as our core business is our investments. It concerns our portfolio and what’s happening in our portfolio; and things like liquidity and human capital are key for us. We are a business that relies on people. I report to our audit committee three times a year. As an investment business, capital resourcing is another big issue, along with portfolio performance. If I have to single out, it’s probably balance sheet management and people retention.”

What external factor has the biggest impact on the company’s financial performance?

“We operate in three markets, 90% of our portfolio is in South Africa, but we are also invested in Nigeria and Ghana, where our assets are financial assets. That being the case, we are impacted by financial market conditions and macro-economic conditions. The direction of interest rates also affects us. In the last while, growth prospects in SA haven’t been good, although Nigeria and Ghana have also been difficult.”

What is the toughest business decision you've had to make in your career?

“I was the Chief Investment Officer at my previous company and acknowledging bad investments was always a challenge. There are always consequences associated with decisions you make but it’s important to embrace these constructively and to find a mechanism that will allow for learning and growth. Also, people issues are never easy. Sometimes you have to let go of people, which can be tough.”

In your opinion, what makes a great CFO?

“My sense is that, what makes me able to do this job is a strong understanding of the business, its operations and risk, as well as fundamentally accepting the need to grow the business. I think a CFO should have a strong grasp of the numbers but should be able to intuit what is happening within the business and be able to communicate this to the stakeholders through the financials. It’s not just about regurgitating numbers, it’s about explaining the fundamentals of the business. The CFO must also be a partner to the CEO and a voice of reason in the boardroom – something which takes courage.”

Was it always your plan to be a CFO? How did you come to pursue a career in finance? Did you ever consider a different career path?

“I wanted to be a CA since Grade 8. I loved accounting. One of my favourite teachers was the accounting teacher. Early in my career, I had an interest in investment banking. This role came about because of my past in investment banking. I was asked to join the team.”

Do you have any regrets?

“No. I come from a very humble background, I grew up in Hawston near Hermanus. My parents were not educated people. The CA career has been life-changing for me. It has allowed me to grow as a professional and as a human being and to see the world.”

What keeps you busy outside of work?

“I have two boys, aged 13 and 17, and an adopted daughter of 19. I like to spend time with them. My wife is an artist and brings a different perspective. I play a bit of golf, and also enjoy a nice red wine.”