This article first appeared in edition 07 of Accountancy Futures journal (August 2013).
There can be little doubt that small and medium-sized practices (SMPs) are an increasingly significant force in Africa’s economic future in their support for the needs of small and medium- sized enterprises (SMEs).
SMEs’ resources and needs are significantly different from those of their larger business counterparts, and they are very much dependent on SMPs to meet these needs. Not surprisingly, SMPs themselves tend to have very different needs and a smaller resource base as compared to larger accountancy practices. The International Federation of Accountants’ (IFAC) SMP committee was set up a decade ago to address these needs by providing support to the growing SMP community globally.
With demand growing for accountancy, advisory and tax services from the continent’s burgeoning small business sector, together with new investors who need additional levels of assurance, today’s SMPs in Africa have great opportunities.
In Malawi in recent years, we have seen the number of SMPs double. Employing the majority of accountants working in practice, these SMPs provide a broad range of professional services, such as traditional audit, accounting and tax services. But they also provide value-adding business advice to their SME clients.
SMEs are critically important to the health and stability of the global economy, accounting for the majority of private sector gross domestic product, employment and growth. But they face challenges as well. According to the IFAC SMP Quick Poll: 2012 Round-up, challenges in Africa include the burden of regulation, economic uncertainty and difficulties accessing finance.
However, SMPs face their own challenges. In the same survey, African SMPs cite keeping up with new regulations and standards, attracting and retaining clients, and a pressure to lower fees as the top three issues. And the biggest concern for the future was reported to be the reputation of the profession, followed by the difficult global financial climate and increased regulation. Technology and communications can also prove difficult to access, although investment on the ground is helping.
world of opportunity
But as SMPs overcome these challenges, they can see a world of opportunity ahead of them, with the services they can offer growing and evolving. The IFAC poll shows that, while audit and assurance remain the fastest-growing services offered by SMPs, advisory and consulting services come a close second. For instance, offering sustainability services to SMEs is proving a rich seam for firms.
SMPs can support their SME clients when they do business internationally, too. Joining an international network of accountancy firms can enhance this, and they can benefit from referrals from clients based in other countries.
I sense a growing optimism among SMPs in Africa. According to the IFAC report, last year 42% of SMPs in Africa and the Middle East reported that their performance was better than the year before, while only 22% said it had been worse. Some 44% believed that 2013 will prove to be better than 2012, and only 14% thought that it would be worse.
In June 2013 I attended IFAC’s annual SMP Forum in Uganda, of which ACCA was the gold sponsor, representing its investment in supporting IFAC’s commitment to SMPs. The Forum was hosted by the Institute of Certified Public Accountants of Uganda (ICPAU) and the Pan African Federation of Accountants (PAFA), and attracted more than 180 participants from 30 countries. Inevitably, many of the participants were from the African continent.
on the agenda
The two main issues addressed at panel sessions reflected their importance on IFAC’s SMP agenda. The first was the role SMPs play in providing SMEs with essential technical and advisory services, in addition to traditional accountancy provision such as auditing and taxation services. One of the panellists, Japheth Katto FCCA, CEO of Uganda’s Capital Markets Authority, ACCA Council member and IFAC board member, emphasised that SMPs can be the hub of SME networks delivering important services to the sector.
The second panel session addressed the issue of enhancing SMP value through assurance and practice management. Brendan Murtagh FCCA, a former ACCA president and a member of IFAC’s International Auditing and Assurance Standards Board, argued that there is evidence that the market demand from SMEs is moving away from audit towards providing other services including reviews and other assurance engagements. Both panel sessions therefore suggest that there is a clear pattern in the move from traditional accountancy services and a widening of what SMPs should be offering their clients.
These panel sessions were followed by the Forum participants dividing into two groups to share their views on the earlier panel discussion. The input of participants, in the main reflecting the needs of SMPs in Africa, will be considered further by the committee in its policy and subsequent development of products and services such as IFAC’s audit and practice management guides.
Dorothy Ngwira FCCA is managing partner at Graham Carr, the Malawi member firm of international accountancy network Nexia International, and a member of the SMP committee of the International Federation of Accountants.