Kathy Gibson reports from the World Economic Forum on Africa in Durban – Despite a raft of challenges, CEOs in Africa are positive about the continent’s prospects for the future.
This is the word from Hein Boegman, CEO of PwC Africa, who launched research showing that 91% of African 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 says that possibly the biggest threat facing business in Africa is that fact that millions of young people leave school each year with no chance of getting a job.
“The single biggest things that keeps me awake at night is the millions of people entering the job market every year without any chance of finding a job,” he says.
“The economy needs to grow, and to grow inclusively, and there needs to be a different lens on who benefits.
“If we don’t create a larger workforce, that has a stake in the economy, the country will always be on the risky side.”
However, the research indicates that CEOs are fairly bullish about the future, although they are battling with a number of specific challenges.
“What came through is the level of optimism in Africa,” Boegman says. “Companies are displaying a high level of resilience in a tough environment.”
In South Africa, for instance, there is evidence that business and labour, and to some extent government, have pulled together to prevent what could have been a slide, he adds.
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 says.
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.
“The ability for labour, business and government to sit around the table and discuss issues was a major move forward,” Boegman says. “Now there is a situation of that same resilience that tried to stop the downgrade remains a powerful force to help dissipate the effects of it.
“I think, on average, the effects have not been as bad as anticipated. I would argue that the resilience that has been shown by the country at large – shows that there is ore to South Africa than a single negative indicator.”
He adds that PwC remains positive and continues to invest in South Africa.
For CEOs thoughout Africa, its no longer enough fo them 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. They 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,” says Shanga. “Understanding their needs and working towards addressing them can help build trust, maintain reputation and lend a licence to operate.”
CEOs see risks on both a macro-economic and operational level, he adds.
In terms of macro-economics, their top concerns are around uncertain economic growth, exchange rate volatility and social instability.
On the operational front, the top concern is the availability of key skills. “It is interesting that now there are many more people unemployed, there are specific skills that are difficult to find,” Shanga says.
The other main concerns are around volatile energy costs and cyber-security.
Anne Eriksson, regional senior partner for PwC in East Africa, says that 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, the study found that 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 says.