Mark Stewart: Gold, diamond excitement in mining sector

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Alec Hogg was joined by BDO South Africa’s chief executive, Mark Stewart at the Mining Indaba in Cape Town. Although the firm is well known as a player in the auditing and accounting services sector it is moving into the services area as indicated by its strong presence at the Mining Indaba this year.

It’s interesting to see you here, Mark because BDO’s well known as an accounting/auditing firm, but you are moving more into the services area, so I guess mining is part of it.

Yes Alec, I think we’re just following on from what’s happening globally.  Our natural resources sector is one of our more advanced sectors.  With South Africa having the mineral resources that it has, it makes obvious sense for us to develop this.  We’re very aware of our limitations with regard to the size of client we can expect out of the mining sector, so we’re concentrating on services other than audit, which we can offer to the mining sector.

You have your global resources team here, from BDO.  Where do these guys come from?

Mainly from Australia, Canada, and the U.K and some of our African partners are here with us.

How are they finding it so far?  Are they doing much business?

They’re not here out of desperation, but they are finding it difficult in their own markets and they’re all looking for other markets to expand into and so far, although it’s only been going a day and a bit; they seem to be very positive about it.

What would make them feel a little more upbeat?

Many of them attended the conference in Australia and the Indaba, last year, where they seemed to think that the sentiment was more negative.  What they’re telling me is that it’s a bit more positive this year, which is obviously great for us.

Any particular areas that are coming to mind?  Would it be precious metals or more, the base metals?

Gold and diamonds are creating a bit of excitement.  The other metals are struggling worldwide but certainly, gold and diamonds are what excites our global partners.

BDO is an interesting company because you’re not one of the Big Four but you also manage to compete quite effectively, and you’re global as well.  Do you look at a different type of client?

Alec, it’s not necessarily a different type of client, but rather, a different service to the client that is typically serviced by the Big Four.  We would like to get into more services that we haven’t done in the past, but we are very aware of our limitations.  Clearly, we are at the top of the mid-tier pile, but there’s a vast gap between numbers four and five.  We’re just chipping away at that with the other services, rather than the audit.

What particular services in the mining sector would you be offering the people who come here from all over the world, to the Indaba?

Well, there are risk services and forensic services, which is very popular in Africa.  We find that our U.S. and U.K. firms provide those services into Africa.  Then there are the consulting services, whether that’s risk assessments or frameworks for risk, etcetera.

Forensic: that sounds a little dodgy.

Unfortunately, we find that throughout Africa, although it’s not only in Africa.  If one looks at Russia, there are many opportunities for forensic-type work. I guess that’s just the industry.

What is that Mark, when you say ‘forensic’?  Just unpack it.

It’s really doing an investigation on behalf of a client as to where their losses are being incurred, where there are known losses, and where there may be perceived losses.  In some cases, it turns out that it needs to turn into some court support if it gets to the courts.  It is really, a case of assisting your client with work, which they could probably do, but would prefer to outsource to skilled people.

We’ve seen a lot of that in South Africa: the forensic services, both for Government and for private sector, gaining momentum, as corruption seems to become more endemic in this society.  Is that part of the issue here?  It’s a boom area, but for society, it’s not such a good thing.

Alec, you’re right but I like to take a different spin on it in that I think, from a forensic point of view, people are becoming involved in more forensic studies, precisely because they want to stamp it out.  We know that it happens all the time, but I think that if one takes a proactive approach to it, we can probably put some barriers in place prior to the event, taking place.  It really is a risk management process as well as a forensic process.

As far as risks are concerned, no doubt the risk of doing business in Africa is one that you would highlight amongst your services as well.

Yes, it is.  We use a range of work.  We use different skills, from engineering-type people through to project managers and it’s not typically what we would find at an audit firm.  We’re here to upskill for that.  We’re fortunate that our partners in Southern Africa (being mainly, the Mauritian, Zimbabwean, Zambian, Angolan, and Mozambican partners) have access to these types of people.  It makes our job much easier when we’re able to pull in the skills from around the subcontinent.

You mentioned audit as an area that isn’t really, currently booming.  Most people outside of auditing would be surprised at that because you have to have your accounts audited.  Why is it under pressure?

Alec, I think it’s because it’s become a commodity and we find that it’s really, a price-based commodity rather than a relationship-based one.  We find that we’ve never done as many proposals as we’re currently doing.  We win some.  We lose some.  However, the interesting thing that we’ve noticed is that the Big Four, which traditionally, have had their own market, have started coming down into the mid-tier space.  Not only are we competing with the mid-tier competitors, but we’re also coming head-to-head with some of the Big Four from time to time.

It’s a tough business to be in, but Chartered Accountants from South Africa have an enviable reputation around the world.  Are we still producing good people in this field?

Absolutely.  From an auditing point of view, I think we’re still regarded as the #1 country in the world. One then has to question the relevance of that in the South African context.  Should we be #1?  We are so far down the list in so many other areas of our work.

Do you adjust your management of the company, accordingly?

We’re very heavily regulated, so we don’t have much choice but to comply and we do our very best to ensure that our standards are maintained, and that we work together with our Regulator, to ensure that they can be assured of the quality that we’re producing.   It’s challenging, though and particularly so, for new people coming into the industry.  We would really like to see a growth in the number of black professionals.  There are times when I believe that the regulation is probably prohibiting this from happening on a large scale.

Mark Stewart is the chief executive of BDO South Africa.

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