Crowe Horwath
TM
African Footprint
Technical Newsletter of Sub-Saharan Africa
Issue 2 - January 2012
About Mali
Inside This Issue:
Mali is one of the largest countries in the heart of West Africa. It is traversed
by the upper and middle Niger basin in the South, and penetrates into the
heart of the Sahel in the North.
About Mali
1
As the costs go higher and
higher….THE RIPPLE EFFECT
in Kenya
2
Message from Bernard
Delomenie
3
Setting the Path for Financial
Reporting in South Africa
4
Mauritius Commits to
International Standards
4
Travel and Tourism:
Sub-Saharan Africa's
Growth Potential
5
The South African
Auditing Environment
6
This huge country measures some 1500 km from North to South. Its Eastern
and Western borders are 1800 km apart.
This vastness did not prevent this beautiful country from being landlocked
with no access to the sea and the Atlantic coast lies 700 km and 1000 km to
the west and south of its borders.
Its borders with Mauritania and Algeria (which were drawn up according to
the needs of the occupying administration in its colonial period), are perfectly
rectilinear. The Algerian border with Mali is 200 km across the Sahara. The
hazards of history and geography have hardly modified its borders with Niger.
Burkina-Faso, Côte d'Ivoire, Guinea and Senegal.
Mali has a land size of 1.240.000 km2 and has a melting pot of cultures as a
result of the convergence of people of the desert, savanna and the last
remaining forest. In the south-west, Mali's most hilly region forms a natural
border with Guinea and includes the kaarta and bambouk plateaus (which
are rich gold-bearing areas) and the Kenieba mountains. In the south near
Sikasso, the Kénédougou crystalline massif rises to between 600 and 800
metres, prolonging the banfora escarpment in Burkina-Faso. The hard stone
Dogon or Bandiaga plateau runs from Koutiala to Douentza sloping southwestwards. The rest of the country is made up of plains and low-lying plateau
including the Taoudenie tectonic Sahara basin, the Macina basin, the
Gourma and the Azaouad plains situated to the south and north of the Niger
bend.
Not long ago, Mali was the bread basket of the AOF (French West Africa).
After a series of droughts from 1969 to 1974 and from 1982 to 1984 this
began preventing Mali from exporting its surplus cereal.
Audit Tax Advisory
Feedback from our
Readers!
Should you wish a specific topic to
be covered in our next issue,
please let us know by emailing
your request to our editor
kent.karro@crowehorwath.co.za
Crowe Horwath
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Agriculture and herding are by far the most predominant
economic sector producing 45% of GDP and employing
70% of the working population.
The agricultural system has changed. Industries are
developing, machines are being introduced into
agriculture, and the herding system is also changing.
The development of the mining sector is playing an
important role in the prosperity of the country and
political stability provides security for business and the
profession of chartered accountancy is well organised
and regulated.
The Malian tax code is legislated, the investment code is
well developed and development is also recorded in the
small and medium sector companies.
French is the official language.
Aliou Konate
Inter Africaine d’Audit et d’Expertise (IAE-SARL)
Mali
As the costs go higher and
higher….THE RIPPLE EFFECT in
Kenya
There has been an
upward trend in the
general price levels of
commodities in Kenya,
with the inflation rate
rising from 2.6% in the
beginning of 2011 to
19.72% as the year
drew to a close.
High international oil
prices, inadequate
rainfall that inevitably
affects the agricultural produce and thus the prices,
rising global food prices and the political environment as
the country moves closer to the 2012 elections, all slow
the economic growth rate. This leads to a high cost of
living prompting demands for higher wages, which push
production costs up, forcing firms to increase prices,
which in turn raises the cost of living and the cycle goes
on and on…. this is the ripple effect.
such as maize flour, milk, and fuel costs went up by a
staggering 68%.
Professional firms have not been left behind as the cost
of doing business has increased and billing rates have to
be amended and contracts renegotiated in the coming
year.
Measures to curb this dilemma include increasing the
CBR (Central Bank of Kenya rate) from 7.5% to 16%.
This has helped to tighten bank liquidity which has
enabled the Shilling to recover by nearly 16% to average
around the KShs 89.75 mark.
In 2012, we hope there will be merry news for Kenyans
that will see the price of commodities and fuel go down…
Ketry Kubasu
Audit Assistant
Crowe Horwath EA
Kenya
Such a situation can continue to escalate out of
proportion unless radical measures are instituted to
break the cycle otherwise the currency will continue to
weaken. A few weeks ago in Kenya this was the
situation when the Kenya shilling reached an all time low
of KShs 108 to the US dollar as the price of commodities
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Crowe Horwath
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Message from Bernard Delomenie
Welcome to the second edition of “AFRICAN FOOTPRINT”.
According to the World Bank, the African continent, and especially sub-Saharan
countries, weathered the current global crisis better than any other past economic
turmoil, partly thanks to improved economic policies. As a result, Africa is one of the
fastest-growing and developing regions in the world. In 2010, foreign direct
investment flows to Africa surpassed those received by India, with international
capital inflows rising to 4.6 percent of GDP, and remittances reaching an
estimated US$ 21.5 billion.
Africa is no-longer the sleeping continent described by Coutts Otolo in his recent article
for Connections (the Crowe Horwath International monthly member newsletter). As he rightly pointed out, Africa is on the
move. Indeed things are changing fast, despite the local crisis and political uncertainties highlighted by international
media.
This evolution is corroborated by our own figures: from a Crowe Horwath International perspective, sub-Saharan Africa is
the region that has registered the highest growth in 2010 worldwide.
From our previous offices in Southern Africa, Nigeria and Tanzania, we have expanded our presence across the
Continent to Kenya, Ghana, Angola, Cote d'Ivoire, Mali and Madagascar over only the last 12 months. More
developments are in the pipeline, in the Francophone markets and the Central-Eastern part of Africa.
Consolidating our presence in the Continent is a key element to building our credibility in Africa. We have much more to
do, but we have made much progress in a short period of time. However footprint is only the first step of our development
strategy in Africa.
Quality of service delivery follows: our International Audit and Assurance and Tax Directors David Chitty and John Stewart
are now involved in Africa and have started discussions with our member firms about strategy, audit process
implementation and training programs.
Visibility comes next. If we want to attract new Firms, more clients and multinational assignments, we must increase our
visibility both inside and outside the Crowe Horwath International network.
My main source of satisfaction is that our African member firms have started to act together for the development of Crowe
Horwath International in Africa through a series of joint initiatives, such as regular conference calls, a capability brochure
and this regional newsletter.
Furthermore, the first African meeting, which will take place in Arusha (Tanzania) in January 2012 will be a great occasion
for nearly all our African firms as well as member firms from both traditional and new investors in Africa (UK, China, India,
USA, etc.) to meet and hopefully identify new business opportunities.
Bernard Delomenie
Regional Director
Europe, Middle East & Africa
Crowe Horwath International
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Crowe Horwath
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Setting the Path for Financial
Reporting in South Africa
Mauritius Commits to International
Standards
As a result of the adoption of a new Companies Act in
South Africa in May 2011, the footprint of financial
reporting by companies has been cast in stone,
enhancing the credibility of financial reporting, whilst
simultaneously achieving a balance between a
company's public interest exposure and the burden
placed on Small and Medium-sized Enterprises (SMEs).
Mauritius has subscribed to the GDDS (General Data
Dissemination System) of the International Monetary
Fund (IMF) since 2000 and the Government of Mauritius
decided to subscribe to the SDDS (Special Data
Dissemination Standard) and to graduate and join the
league of 68 countries which meet high standards in
terms of data coverage by the end of December 2011.
South Africa first embraced International Financial
Reporting Standards (IFRS) in 2005 and was one of the
first countries in the world to approve the use of
International Financial Reporting Standards for Small
and Medium-Sized Enterprises (IFRS for SMEs). The
experience gained has paved the way for South Africa to
assist other countries, particularly in Africa, as they
begin their journey on the road of transition to IFRS.
Subscription to the SDDS is voluntary but it carries a
commitment by a subscribing member country to
observe the standard and to provide certain information
to the IMF about its practices in disseminating economic
and financial data.
The international gold standard of reporting, IFRS, is
mandated for all companies expected to have a broad
range of users, (e.g. companies listed on a Securities
Exchange,) who would be relying on its financial
statements, for amongst other reasons, investment and
analytical purposes.
SMEs are companies that by their nature have no public
accountability. Accordingly, SMEs have been granted
relief from the complexities and intricacies of IFRS and
are required to produce their financial statements on the
less onerous IFRS for SMEs. A SME is not precluded of
going for gold and utilising the higher level of IFRS if it
so desires.
At the lower end of the market, owner-managed
companies with little public interest that choose to have
their financial statements independently compiled by an
accounting professional are required to use IFRS for
SMEs. Owner-managed companies with little public
interest that compile their own financial statements,
have no legislated reporting requirement for the
preparation of their financial statements.
International investors should have peace of mind that
their interests are being protected in that companies in
South Africa are utilising international financial reporting
standards for the preparation of financial statements.
The global crisis revealed gaps in international financial
statistics that authorities like the IMF are working to fill.
Statistics that are timely, internally consistent, and
comparable across countries are critical to monitoring
financial stability. It is pivotal that the data collection
recognises its international dimensions and seeks
appropriate participation from regulators worldwide.
Transparency remains one of the central pillars of
effective regulation, supporting accountability and
sustaining confidence in the legal environment. The
Financial Services Commission (FSC) as the Regulator
for non-banking financial institutions and global business
in Mauritius is in continuous collaboration with its
stakeholders to provide and disseminate quality statistics
to investors.
Enhancing data transparency is and will remain a vital
aspect for financial stability. The FSC is committed to
implementing international norms and standards not just
in the various sectors it regulates but also in the quality
of statistics.
The FSC is also committed to adhering to international
best practices in regard to transparency and disclosure
of information.
Suresh Sewraz
Crowe Horwath (Mur) Co
Mauritius
Horwath IFRS Consulting is a specialist IFRS consulting
company. We have expertise in IFRS and IFRS for
SMEs: first time adoption and implementation; review of
financial statements; training; drafting of financial
statements; and consultations and technical opinions. In
addition we offer IFRS e-learning opportunities as well
as other services.
Edwin Selbst
Horwath IFRS Consulting (Pty) Ltd
(subsidiary of Horwath Leveton Boner)
Johannesburg
South Africa
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Crowe Horwath
TM
Travel and Tourism: Sub-Saharan Africa's Growth Potential
Sub-Saharan Africa is the geographic term used when referring to those countries on the African continent situated south
of the Sahara. The region is comprised of forty-four countries divided into four sub-regions, namely West Africa, Central
Africa, East Africa, and Southern Africa.
According to the International Monetary Fund's (IMF) World Economic Outlook Database, September 2011, Sub-Saharan
Africa's gross domestic product has grown from an estimated US$ 322,812 billion in the year 2000 to an estimated
US$ 1,049,349 billion in 2010 reflecting a compound average annual growth rate of approximately 12,5 percent.
Although the region's average annual GDP growth rate is likely to moderate to an estimated 8,7 percent between 2010
and 2015, the IMF projects regional GDP will amount to some US$ 1,590,720 billion in 2015. Interestingly, of the top ten
fastest growing economies in the world between 2011 and 2015 forecast by the IMF, seven of these economies are
situated within the Sub-Saharan Africa region.
In terms of Sub-Saharan Africa's travel and tourism economy, international tourist arrivals have increased from
approximately 16,2 million recorded in 2000 to an estimated 30,1 million recorded in 2010 representing a compound
average annual growth rate of approximately 6,4 percent, outpacing the 3,4 percent world aggregate annual growth rate
registered during this period. According to the World Tourism Organisation, this trend is expected to continue over the
next two decades.
As the political and economic environments in many of the region's member countries improve, the need to diversify the
country's economy has become a focal point for many governments. A recent Africa Attractiveness study published by
Ernst & Young indicates that mining and metals; oil and gas exploration; the exploitation of natural resources; hotels and
tourism; and consumer products are the top five sectors with the highest potential for growth in Africa in the short term.
Travel and tourism is recognised as an indispensable source of foreign exchange earnings for many countries. The SubSaharan Africa's travel and tourism economy is estimated to have contributed approximately US$ 85 billion directly and
indirectly to the region's GDP in 2010 (this equates to approximately 8,1 percent of the region's total GDP) and almost
6 percent to regional employment.
Encouraged by the economic and political outlook and the anticipated growth in international tourist arrivals, coupled with
the region's population growth and rapid urbanisation of Africa's emerging middle class, Sub-Saharan Africa is
particularly attractive to many international hotel management companies. Anecdotal evidence suggests there are
currently some 81 hotel development projects either in planning or construction phase in Sub-Saharan Africa. The most
significant number of hotel projects are located in Nigeria (23 hotels / 4 811 rooms) followed by South Africa
(8 hotels / 1 009 rooms), Ghana (7 hotels / 1 346 rooms), and Equatorial Guinea (4 hotels / 661 rooms).
Michelè de Witt
Horwath HTL (South Africa)
Cape Town
South Africa
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Crowe Horwath
TM
The South African Auditing
Environment
The World Economic Forum survey has, for the second
year in a row, ranked South Africa 1st for the strength of
its audit and reporting standards regarding company
financial performance.
In South Africa, audit firms, as well as the partners in the
firms, are subject to review by the Independent
Regulatory Board for Auditors (IRBA) to ensure that they
are compliant with International Auditing Standards and
International Financial Reporting Standards. Audit firms
wishing to obtain approval to audit the financial
statements of public interest entities, which include
companies that are listed on the Johannesburg
Securities Exchange, are required to have the internal
controls of the firm as well as any other audit firms in
their network reviewed by the IRBA. This is to ensure
that the firm complies with the International Standard on
Quality Control 1, “ISQC 1”. Firms that do not meet the
requirements of this standard can lose their approved
status, and will not be allowed to audit listed companies
until they have met the standard.
The firms in South Africa were recently subject to such a
review by the IRBA and were happy with the results of
their review. All the audit partners reviewed as well as the
firms themselves passed their review. The regulatory
process requires that this review is performed once in a
three year cycle for those firms auditing public interest
entities.
The cost of complying with the requirements to perform
public interest audits is extremely high and firms have to
decide in what sector of the market they prefer to position
themselves. This is not a decision to be taken lightly.
Although the cost of compliance to maintain this level of
quality in our network is not cheap, the cost of returning
to the required level should the network take the decision
not to comply with the required standard can be
prohibitive. The cost for the amount of time required, the
cultivation of a culture in the network which is mindful of
audit quality and the acquisition of the necessary skills
required to implement these changes, would be
substantial.
The benefits once this level is reached are however far
reaching both for the firm and its clients. The firm enjoys
a favourable reputation in the market and it operates in a
niche sector with high entrance costs for competitors.
Audit staff are able to operate at higher levels of
expertise quickly due to clearly documented working
papers which aid in training and the sharing of audit and
accounting expertise. Less time is spent on the
correction of errors, and partners are more confident that
the necessary audit work to support their opinion has
been performed, and this reduces the risk of incorrect
audit opinions being issued. Clients can feel totally at
ease with the results of the audit.
Horwath Technical Centre specialises in ensuring
compliance with International Assurance Standards,
performing quality reviews and monitoring review in terms
of ISQC 1 and any aspects that can affect audit quality.
Martin Lange
Horwath Technical Centre SA (Pty) Ltd
(subsidiary of Horwath Leveton Boner
& Horwath Zeller Karro)
Johannesburg and Cape Town
South Africa
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Crowe Horwath
Our African Network
TM
Contact Information
Mauritius
Crowe Horwath (Mur) Co
Tele: +230 208 8684
Email: contactus@crowehorwath.mu
Algeria
Hamza & Associés
Tele: +213 21 508188
Email: h.tarek@hamza-dz.com
Morocco
Horwath Maroc Audit
Tele: +212 37 77 46 70
Email: benkirane@horwath.ma
Angola
Horwath Angola - Auditores e Consultores, Lda
Tele: +244 925 289207
Email: carlos.florencio@horwath.pt
Nigeria
Horwath Dafinone
Tele: +234 1 545 1863
Email: duvie@dafinone.com
Cote d’Ivoire
Uniconseil
Tele: +225 203 03600
Email: oeccaci@aviso.ci
Senegal
FIDECA
Tele: +221 33 821 6387
Email: fideca@arc.sn
Egypt
Crowe Dr A M Hegazy & Co
Tele: +202 376 00516
Email: mahegaz@link.net
South Africa
- Cape Town
Horwath Zeller Karro
Tele: +27 21 481 7000
Email: hzk@crowehorwath.co.za
Ghana
SCG Audit
Tele: +233 21 251497
Email: george.katako@scgghana.com
Horwath HTL (South Africa)
Tele: +27 21 527 2100
Email: capetown@horwathhtl.co.za
Kenya
Crowe Horwath EA
Tele: +254 20 2329542
Email: coutts.otolo@crowehorwathea.co.ke
- Johannesburg
Horwath Leveton Boner
Tele: +27 11 217 8000
Email: info@crowehorwath.co.za
Madagascar
Cabinet Genevieve Rabenjamina
Tele: +261 202 221121
Email: cce@moov.mg
Tanzania
Horwath Tanzania
Tele: +255 22 2115251
Email: chris.msuya@horwath-tz.com
Mali
Inter Africaine d’Audit et d’Expertise (IAE-SARL)
Tele: +223 20 286675
Email: iaecpt@orangemali.net
Tunisia
Horwath ACF
Tele: +216 71 236000
email: noureddine.benarbia@crowehorwath.com.tn
Crowe Horwath EA, Crowe Horwath (Mur) Co, HWT Auditores e Consultores, Horwath Zeller Karro, SCG Audit, Horwath Leveton Boner, Horwath HR Consulting, Horwath Maroc Audit, Horwath Dafinone, FIDECA and Horwath Tanzania are
separate and independent members of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and independent legal entity and is not responsible or liable for any acts or omissions of
Crowe Horwath or any other member of Crowe Horwath and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member.
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