African governments say they are working to improve the ease of doing business, but the general environment remains largely unconducive for private companies according to PwC’s Africa Business Agenda 2019 report released this week.
The seventh edition survey by the audit firm reports that companies in Africa are projecting a gloomy growth in revenues in the immediate future as a result of policy uncertainty and excessive regulations.
The survey shows that only 27 per cent of chief executive officers in Africa are confident of their companies’ prospects of revenue growth over the next 12 months, a one per cent increase from last year.
Volatile external factors are forcing companies to implement tough internal measures, such as improving operational efficiencies and pursuing organic growth, to raise their revenues and remain afloat in competitive markets.
Despite Africa being taunted as the last frontier of global economic growth, considering that six out of the world’s 10 fastest growing economies are on the continent, business leaders are cautious in their projections.
Only 40 per cent of the CEOs believe the global economy will improve, compared with 42 per cent globally.
The report also cites governance issues and problems created by an uncertain operating environment as a constant challenge for businesses.
The situation is made worse by lack of key skills, increasing tax burdens, volatile exchange rates in some countries and growing threats of cyber risks and populism.
East African countries have significantly improved on the World Bank’s ease of doing business ranking. Rwanda is at position 29 globally in the 2019 ranking, Kenya at 61, Uganda 127 and Tanzania 144.
The report surveyed 171 CEOs in 19 countries, majority of whom are running businesses with revenues in excess of $100 million.
Launching the report in Nairobi on Tuesday, Peter Ngahu, PwC regional senior partner for East Africa, said: “In Africa, economic and policy uncertainty, skills gaps and regulatory issues are among the most pressing issues that CEOs are having to grapple with. African business leaders do see opportunities on the continent, but overall they are playing it safe.”
Companies are contending with obstacles that governments have in recent years committed to address to improve the ease of doing business.
Kenya is ranked the second best destination for large companies looking for growth prospects in 2019, after the US and ahead of China.
Tanzania and Uganda are also among top African countries companies are exploring for growth.
The majority of CEOs have adopted a wait-and-see approach to artificial intelligence (AI), robotics, internet of things (IoT), network-based logic, augmented and virtual reality and quantum computing among others compared to their global counterparts.
Some 46 per cent of CEOs have no plans to introduce AI initiatives in the next three years, compared with 35 per cent globally. Only 16 per cent of companies have introduced AI initiatives, compared with 33 per cent globally.
Some 87 per cent of CEOs are concerned about the availability of key skills, with 45 per cent being “extremely concerned” by the current situation. Of the CEOs who were extremely concerned, 65 per cent said skills shortage is preventing them from innovating effectively, while 59 per cent said their quality standards and customer experience are being undermined, and 54 per cent said they are missing growth targets because of inadequate skills.