JOMO KENYATTA UNIVERSITY OF AGRICULTURE & TECHNOLOGY AND THE KENYA INSTITUTE OF MANAGEMENT

EXECUTIVE MBA PROGRAMME

ASSIGNMENT: HCEB

3120 PROJECT MANAGEMENT

Lecturer: Paul Sang

MBUNZA PATRICK MULI

HD334-033- 0781/2010

Decision making case-Sharing experiences

An individual Assignment in Partial Fulfillment of the Requirements for the Award of the Degree of Executive Master of Business Administration, Jomo Kenyatta University of Agriculture & Technology (JKUAT)

1. Introduction On 1st of June 2010 Mr. Scott had just been appointed as the Group Finance Director for Panafrican group of companies. Scott who previously worked in North and South America for the last 20 years had just been appointed because the Chairman for the group was getting concerned with the inability of the management teams to provide timely performance reports for the various companies. He was therefore required to make improvements on the financial reporting structure to streamline the sorry state of affairs. The previous Group Finance Director had not seen the need for streamlining the finance functions within the group; the work expectations were overwhelming him. The directors were also getting concerned that it was no longer possible to determine the direction the company was taking. Board meeting had become forums for accusations and counter accusations. The Chairman of the board who is also one of the major shareholders decided that something had be done soon, and that there was need for an experienced and well trained Finance Director. 2. General company background The Panafrican Group of Companies has its headquarter in Nairobi at the Karen leafy suburbs next to Karen road. The Panafrican Group of companies operates in six countries across Africa where it is recognized leaders in heavy construction equipment, mining equipment, services and support. The company specializes in the distribution of road construction, mining equipments, maintenance services and parts for the equipment in East Africa and West Africa. The Groups milestones have been as follows: y In 1997 the launch of the first group company, Panafrican Equipment Kenya Limited in Nairobi. y In 1999, with the growth of the mining industry in Tanzania, Panafrican Mining Services (Tanzania) Ltd. was formed to support the Geita Gold Mine, which is owned by AngloGold Ashanti of South Africa. y y In 2000, Panafrican Equipment (Uganda) Ltd began operations. In 2005, Panafrican Equipment (Tanzania) Ltd. started operations in Dar es Salaam to cater to the growing construction market.

In 2008, Panafrican Mining Services established operations at the Buzwagi Mine in Tanzania, African Barrick Gold owned mine.

y y y

In 2009, Panafrican launched operations in Ghana. In 2010, Panafrican Equipment Nigeria was launched. In 2010 Panafrican also started marketing in Sierra Leone.

The group has segmented the business into two significant businesses i.e. mining business and equipment business. The mining business deals with maintenance and support services for mining companies. It provides equipment and parts and takes the sole responsibility of ensuring that they are in good working conditions, minimizing down time and provide service parts and component parts that will be required from time. On the other hand the equipment business deals with supply of equipment to construction contractors, sugar companies, energy companies and manufacturing companies that extract raw materials.

The products range from bulldozers, graders, excavators, wheel loaders and rollers. The brands traded are Komatsu from Japan, Sakai from Singapore, Pirtek from South Africa and Berco from Italy.

3. Specific area of interest Mr. Scott had just been appointed to direct the financial affairs of the Group. He was expected to guide the various financial managers within the group by improving the timelines for financial reporting, develop and implement a strategic planning structure and improve on treasury management. The financial managers had been working independently and due to the rapid expansion of the company no effort had been put to coordinate the activities of the functions. The appointment of Scott was geared towards harmonizing the finance functions within the group by ensuring consistent processes, procedures, similar financial reporting and planning templates to facilitate consolidation of results and adopt one functional currency for reporting. This would then make comparison between business units easier. Before this expected change, each business unit had been using their own currency for financial reporting and as company

grew geographically its monitoring and financial analysis became difficult due to the use of different currencies. The financial There was a major communication breakdown due to instability of internet services within the various regions, the financial systems in use had not been harmonized and had been implemented by different consultants, and the functions were not the same and had become the excuse for the delay in submission of reports. The recruitment process had been left to external consultants due to the need to bring staff on board faster to support the growth. Their skill sets and experience had not been matched with responsibilities. Scott has over 20 years of financial and operational experience in external consulting and senior financial positions, with significant experience and expertise in accounting, finance, taxation, mergers and acquisitions, corporate development and commercial matters.

His experience spans many industries, but most relevant was his role as the senior vice president, finance for AMEC Inc., leading the finance function of the North and South American business of AMEC plc, an international construction, engineering, earth and environmental and construction management firm, with revenues of $2.5 billion. Prior to this, he was treasurer and head of mergers and acquisitions for Wajax Ltd, a multinational distribution business involved in mobile equipment, diesel engines and industrial components ,having revenues of $1.0 billion. Scott is a Chartered Accountant and Chartered Business Valuator and received his Bachelor of Business Administration from Simon Fraser University in British Columbia. The main responsibilities of the finance function are: y y y y Financial reporting Strategic planning Management reporting Treasury management

These are key roles within an organization and impact all other functions within the company. The role of the departments is to support the rest of department by providing reports on financial performance and providing the necessary funds needed for the smooth running of the company.

The other key people within the Panafrican Group are: Kevin, the Group Managing Director, Andre, the director for corporate development, Gavin, operations Director for East Africa, Rafael, Group sales director and Chris, the head of mining and General Managers for each operating business unit. They were happy with the appointment and were hoping that the change will bring the desired results.

4. The decision issue The decision at hand was to decide the best way to organize the department in order to facilitate the smooth running of day to day operations, to streamline the coordination of financial reporting by improving the structure, harmonizing the financial systems and improving communications. The reorganization was aimed improving the timeliness, the integrity, the relevance and the reliability of financial reporting by adopting similar templates, integrating the various reports into one comprehensive reports that would serve the needs of the various stakeholders i.e. the shareholders, the board, the management and operational department. By so doing this will speed up the process and provide enough time for the analysis and review of all financial information.

5. Alternatives Scott had two alternatives to resolve the weaknesses that presented themselves: 1) To implement a training program for the finance teams in the regions to build capacity and ensure the finance managers had the requisite skills to perform their responsibilities effectively. 2) To centralize all the financial reporting and planning and other administrative functions in Nairobi

6. Conclusion

Scott had been give a 6 months deadline to regularize the situation and ensure that the monthly financial reporting was up to date and that by the 10th of every month the financial reports for the preceding month would be ready for presentation to the board with every supporting schedule and a variance analysis reports reviewed by all the operational staff and each General manager for each specific business units. The delay in submission of reports had fallen behind by two months and the directors were beginning to lose visibility of the financial performance.

7. The decision After a thorough investigation on the issues at hand Scott settled for centralization of the finance functions in Nairobi. He reasoned that it would take more time to train the employees to improve effectiveness, and that given the different levels of the competence of finance managers across the regions and the ever unending communication breakdown due to inefficient and ineffective service providers for internet, expecting improvement on these areas was beyond his control. He chose to centralize the operations in Nairobi because it has better internet services providers, being the connection Hub for Africa it would be easily accessible by staff from the other countries. In addition he thought that centralization would give him more control on what was happening in the various business units. He also reasoned that with Kenya having a better trained manpower than most other countries of Africa he would be able to get the necessary staff required for work that would present itself due to centralization of financial reporting functions of the group.