ABOUT a week ago, the news that “Deloitte leaves Zimbabwe” made headlines, much to the surprise of many including those in the accounting and professional services fraternity.
Perhaps one may be factually correct to argue that in fact it was the exact opposite, and the headline should have probably read “Deloitte Zimbabwe leaves the Deloitte network”. Be that as it may, the news still carried weight in both print and online media, becoming the subject for discussion by all stakeholders affected directly or indirectly by such a move.
Having worked in a rival big 4 in the early stages of my career, I understand this would certainly be the discussion topic with clients at the “watering hole” on a Friday afternoon as folks try to digest the issues beyond what meets the eye or ear of the ordinary person in Chiendambuya, understandably so.
In a statement shared with alumni, the current managing partner of the Borrowdale Office Park-headquartered firm, Charity Mtwazi, clearly indicated that “the current partners of Deloitte Zimbabwe will take over the Zimbabwe practice and will exit Deloitte Africa and Deloitte by October 31 2024”. This indicates that the decision to exit was made by Zimbabwe and not the other way round.
It is important to note that Deloitte Zimbabwe was under Deloitte Africa, which is a network of about 11 countries mainly in southern Africa and parts of East Africa. The CEO of the network, Ruwayda Redfearn, currently sits in South Africa, which is the dominant practice and arguably with more influence within the network. While independent member firms may retain a degree of autonomy in decision-making for their local offices, under this structure key decisions mostly involve the network’s (Deloitte Africa) leadership and often times comes with its nuances and bureaucracies. One could only assume this may have been the case based on the Zimbabwe managing partner’s words in her statement wherein she noted that “...the market conditions in Zimbabwe call for flexibility and agility, both from professional services firms and their clients”.
While Zimbabwe is a unique country in many ways, the economic and market conditions in recent years have uniquely presented challenges to professional services firms. Accounting firms in Zimbabwe primarily have a business model premised on the audit practice, which contributes more in terms of revenue generation and client base.
When audits are conducted, they must be in line and in accordance with international standards on auditing and companies alike should prepare and report financial statements in line with international financial reporting standards.
These compel and inform the basis of independent auditors’ opinions on financial statements of audited entities. Complying with international financial reporting standards becomes a nightmare for Zimbabwean companies due to issues around hyperinflation, exchange rate fluctuations and inconsistencies, functional currency, unending and often confusing statutory instruments.
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This equally presents challenges to auditors and often times take extended periods engaging in consultations with particular departments within the international networks. These mandatory consultations lead to delays that may result in a fragile relationship between the firms and clients.
It may be easy for an executive or professional based in Zimbabwe to understand all the ever-changing economic dynamics but it remains a mammoth task for non-residents. I have repeatedly said, the world over its only in Zimbabwe where accountants must put into practice some of the textbook rules and standards. The kind which are usually stated in exams in normal countries “….ignore chapter ABC, not applicable”.
Another school of thought is the risk averse nature of accounting firms. Given recent events where big 4 firms including KPMG, PWC came under fire in South Africa for one alleged scandal or the other, professional services firms are seen to be taking a more cautious approach in order to safeguard their reputations.
Deloitte South Africa had its fair share of problems in recent years regarding some of its clients at the time, for example, Steinhoff or Tongaat Hulett and had to part with millions of rands in fines.
Whether or not these firms may be at fault is debatable, but reputation and public opinion matters more. With a plethora of problems in South Africa, the network would be reluctant to take any risk from its member firms, hence a possible tough stance and closer attention on countries like Zimbabwe through strict controls, including decisions on on-boarding certain clients which may be perceived as high-risk during risk assessment.
These seemingly trivial nuances may take away the “agility and flexibility” rendering Deloitte uncompetitive compared to its peers. It is a public secret that Zimbabwe’s risk profile is highly owing to issues around alleged corruption, exchange rates, hyperinflation, currency risk, regulatory risk and sanctions.
One would agree that there might be a possible “Sarajevo”, but the decision to pull out of the network by the Deloitte Zimbabwean practice was not an overnight event. Hard as it may have been for the dedicated partners and staff; this is something that may have been cooking for a while.
When a big brand like Deloitte exits a country, it is something that all interested stakeholders should pay attention to and it should give a chance for reflection to all well-meaning Zimbabweans including the authorities.
It is unpalatable news that the “green dot” brand is no longer in Zimbabwe and the vote of no confidence to the nation that this gives in general. The current situation may have various implications to current staff, alumni, aspiring trainees, but the potential loss of business is one factor that must be more concerning.
Accounting firms also rely on client referrals, where audit committees of multinational companies prefer having entities under the umbrella of their holding companies having similar audit firms.
This may mean loss of business to the remaining Zimbabwe practice (“NewCo”). Another selling point is the name which comes with a good reputation and perceived high standards and Integrity.
Certain companies in the country may be reluctant to continue having their auditors as the (“NewCo”) and may decide to part ways and go for tender.
While all this transpires and events unfold, I have no doubt that the Deloitte partners who will continue with the new practice, will keep the ship afloat. These are well respected individuals with vast years of experience in running professional services. The current CEO has indicated that this decision followed serious deliberations and the “NewCo” will continue to serve clients that remain with the business. They will make it happen!
- Tadiwa Mubvumbi is a UK-based chartered accountant and investment banking professional. His views are personal and merely opinions not associated with any of his affiliated organisations. The views and opinions are based on information publicly available.
