Auditing landscape, client base, and potential in Zambia
The Business Year (TBY) talks to Jason Kazilimani, Jr., Senior Partner & CEO at KPMG Zambia, on the auditing landscape, client base, and potential in Zambia.
What is the competitive landscape like for the auditing firms here in Zambia? Where does ZPMG fit into it?
JASON KAZILIMANI, JR In Zambia, we have all of the big four firms operating—KPMG, Deloitte, PWC, and Ernst & Young (EY). We also have a fifth one, Grant Thornton. Then we have a number of other mid-sized firms and a host of smaller, local ones with no international connections, and a few self proprietors. It is quite competitive at the moment. If I look at what has happened over the last two or three years, virtually all of the big four firms have rebranded, recapitalized, or restructured their operations. A visible sign of this is that virtually all of them have moved out of the central business district (CBD), as we did in 2011, when the firm was reconstituted. When you look at the movements amongst the firms, there has been a lot of inward investment from the international networks. Some of the other firms have brought in specialist partners to develop certain service lines, and we have done the same, for example, to grow our advisory business. We brought in an infrastructure specialist from the UK at the senior management level. We have added some forensic specialists and have built up our IT advisory unit. We are doing quite a bit to make sure that we get a good share of the cake that is here. In fact, I would like to get an unfair share of the market! The competition is vibrant and it is a positive climate with healthy competition.
What was the impetus for all of the big four to rebrand at about the same time?
I would say it dovetailed with the growth in Zambia’s economy. Zambia has been recognized as one of the fastest growing economies in the world, and it is definitely amongst the top five in Africa. There has been a lot of FDI coming in, and even up to now we get inquiries all the time about people wanting to come to Africa. There must be something here. That really has been the impetus. The growth in Zambia’s economy has made the rest of the world wake up. These four firms have realized that Zambia is the place to be, and if they do not develop their practice now and make the investment, it may be too late in five years time.
With so much inward investment, what differentiates KPMG?
In past years, we were known mostly as an audit and tax compliance firm; however, we are building up our resources in the advising space, the management consulting space, transactions restructuring, and we have a fully-fledged forensic unit, because there is a great deal of opportunity here for that kind of specialization. We place a lot of emphasis on the quality of our work. When I look at our strategic objectives, it is people first, then quality, profitability, and growth. As a result, the market perspective changes and you get awards such as Auditor of the Year or Consultant of the Year. It is all about market perception, and that perception has changed for the better. Furthermore, we are a young, vibrant firm. Even our recruitment policies are not necessarily recruiting based on qualifications—we want to see drive, passion, and zeal. When I am evaluating a candidate for recruitment, I want to know if this person is going to be better than me. If not, I will not even bother. I want to bring in someone who is sharper than me, who is going to do better than me. That is how to increase the quality of our existing talent.
Can you tell us about your client base?
Our existing client base is across all sectors. For example, in financial services there are a number of banks. We service the likes of Standard Bank, which is a subsidiary of Standard Bank of South Africa, Bank ABC, a regional bank in southern Africa, Citibank, which is worldwide, Access Bank, which came out of Nigeria, and Indo-Zambia Bank. Locally, there is the Madison Group of companies that has Madison General Insurance, Madison Life, Madison Asset Management, and Madison Financial Services, which has just listed on the Lusaka Stock Exchange. In retail, there is Pick n Pay, a major South African chain, and fashion company Foschini. In oil there is Total, in manufacturing, Ndola Lime, in agriculture, Cargill Cotton, and quite a number of others. It is quite a broad range. In real estate, Real Estate Investment Zambia PLC, which owns a number of prime properties, is a client, as is Knight Frank in the real estate business. It is quite a varied client base. When I look at the proportion of international versus local clients, it is probably about 50-50. About 50% is work referred from other KPMG offices, and then 50% is probably local. When I look at the revenues, about 60% of revenues are from local clients and 40% from referred work.
Where do you see the most opportunities in the economy?
First of all, mining. Whether I like it or not, mining looks to be our main foreign exchange earner for years to come. It might not be the highest contributor to GDP, because agriculture is actually the largest contributor to GDP, but mining is what brings in export earnings and what has more of a ripple effect in terms of the entire economy. The price of copper will affect the exchange rate. Mining will always be up there. There are other areas, like tourism. That really has a great deal of untapped potential because much of Zambia is still virgin bush. A number of tourist spots have not been exploited yet. People know Victoria Falls, but no one knows that we have white sand beaches around the lakes near Samfya, for example. There are many other natural sights in other parts of the country, way off the beaten track. Tourism would be a good investment destination for FDI. Another one would be water. Hydroelectricity generation is just waiting to be tapped. Zambia has something like 40% of the water in southern Africa. We have a lot of rivers, waterfalls, and a number of our rivers run at a gradient. There are a number of power projects underway right now. Provided all these power stations come onboard between now and 2018, the power deficit should be wiped out and Zambia should become a net exporter of power. Also, there is an opportunity for a number of independent power plants. Infrastructure and power represents a major opportunity for businesspeople, but it is obviously long term in nature. Another is road and rail infrastructure. In railways, we recently helped Northwest Rail organize financing to build a railway from Solwezi all the way through to Angola. The agreement has been signed and financial closure is expected sometime soon. All these are great opportunities, and it goes back to helping Zambia become a land-linked country. We have also had a query from someone who wants to build a railway from the Northwest province right down through Namibia to the coast. Infrastructure is a great opportunity. Then again, agriculture will always be there. Over 50% of Zambia’s land is arable, but only about 14% is actually under cultivation. So much of Zambia is green, but untilled. Agriculture is a major opportunity. If you look at when Zimbabwe had its problems and a number of its farmers crossed the river from Zimbabwe to Zambia, the tobacco production went up well over 50% over a period of two or three years. That shows there is a tremendous amount of untapped potential in agriculture.