Notwithstanding
the current economic and socio-political uncertainty, numerous companies in
Africa are still positive about the growth potential of the continent. PwC
research across the continent shows that 91% of CEOs are confident about their
own companies’ growth prospects in the medium term.
“This
is the highest level of confidence since we started our research on CEOs in Africa
in 2012,” Hein Boegman CEO for PwC Africa says. Boegman was speaking on the
challenges and opportunities facing Africa’s CEOs at a press briefing held by
PwC at the World Economic Forum on Africa 2017 in Durban.
One
of the reasons why Africa CEOs are positive is that they tend to look to the upside
and seize on the opportunities uncertainty brings. Facing a climate of muted
growth at best, CEOs recognise that while they focus on organic growth and cost
reductions, they also need to prioritise investment in strategic alliances and
joint ventures to expand their markets and grow their customer bases.
Despite
the level of optimism for growth, CEOs are concerned about uncertain economic
growth and the impact this will have on their business. “The returns for doing
business on the continent are high, but so are the risks. Africa’s CEOs are
operating in difficult times – infrastructure on the continent remains a
challenge, finding and retaining the right talent for their businesses, dealing
with many of the hurdles that come with working with governments, and managing
growth plans across the continent,” Boegman comments. Given the major changes
we are currently seeing in the world – such as the recent US elections and the
UK’s vote to leave the EU – a key feature of the current environment is just
how difficult it is to read. A single event can trigger a need for wholesale
strategic changes.
A
case in point is the recent political and policy uncertainty in South Africa,
and more particularly the recent downgrade in the country’s sovereign debt to
junk status. Exchange rate volatility, an increasing tax burden, social
instability resulting from inequality, and corruption remain problems in many
countries.
“It
is no longer enough for business leaders to steer their organisations through a
complicated and challenging environment – they will need to adapt swiftly to
change,” says Dion Shango, CEO for PwC Southern Africa.
“CEOs
will need to focus on their business strategies and processes and will be expected
to play a part in the broader community. CEOs will also need to consider the
changing expectations and demands of current and future stakeholders.
“For
CEOs, their customers, government and competitors have a big influence on business
strategy. Understanding their needs and
working towards addressing them can help build trust, maintain reputation and
lend a licence to operate.”
Anne
Eriksson, Regional Senior Partner for PwC in East Africa, says “regulatory
policy can also restrain growth, and in some cases, necessitate cost reduction
by the businesses affected.” On the other hand, changes in regulation can also
prompt strategic developments in business. Eriksson points out that regulatory
change in Kenya has helped the country’s financial services sector to pay more
attention to its customers.
A
number of multinational companies have also committed to building capacity and improving
transparency and regulatory frameworks through engagement with government.
“Where there has been progress, economies have benefitted and the result is
more inward investment, innovation and organic growth.”
Notwithstanding
the slowdown, Africa is also experiencing a number of advances economically and
socially. There are significant trends that could offer new opportunities and
benefits for businesses, governments and the population.
In
the past year, global megatrends such as demographic change, increase in urbanisation,
shifts in global economic power and technological innovation are favourable to
development on the continent.
Across
all sectors, the pace of innovation in Africa is driving greater collaboration
and convergence. A number of multinational companies have committed to building
capacity and improving transparency and regulatory frameworks through
engagement with governments.
Where
there has been progress, markets have benefitted and the result is more inward
investment, innovation and growth. But in order to grow and expand to its potential,
Africa will need to face the political and economic repercussions of climate
change, as well as safety and political instability in some areas.
“The business leader of today must deliver seamless strategy and operational excellence. Africa’s CEOs will need to overcome a number of challenges to truly transform their organisations. In the process, business needs to recognise and manage its responsibilities and dependencies,” Boegman concludes.
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