BUSINESS BAROMETER

Fewer firms in Africa plan to expand beyond borders this year - survey

Skills gaps and regulatory issues as among the most pressing issues firms have to grapple with this year.

In Summary
  • PWC says CEOs in the region appear less certain about their expansion plans outside their home market.
  • Only 13 per cent of business leaders consider expanding to Kenya compared to 14 per cent last year, a survey by PWC shows.
PWC building located along the Waiyaki way. Photo/File
PWC building located along the Waiyaki way. Photo/File

Less blue chip firms in Africa plan to open new outlets beyond their borders this year compared to last year, according to a survey by audit and tax consultancy firm PriceWaterhouse Coopers.

The turn-off according to the Africa Business Agenda Report is mainly due to low revenue prospects.

The survey which analysed comments from 171 chief executive officers in Africa whose companies have a turnover of $100 million and above, shows 13 per cent of those business leaders consider expanding to Kenya compared to 14 per cent last year.  

Speaking at the launch in Nairobi yesterday, PWC’s regional senior partner Peter Ngahu said CEOs in the region are less certain about their expansion plans outside their home market.

 

He attributed the low expansion prospects by industry leaders to low revenue projections this year. According to the study, CEO’s confidence index about their firms’ prospects for revenue growth over the 12 months dropped from 38 per cent in 2016 to 27 per cent this year.

"This situation is not just about Kenya. Most business leaders in Africa have cut expansion prospects across markets. Growth prospects for traditional market like China, US and UK have suffered too,’’ Ngahu said.

Expansion prospects for other East Africa countries also dropped with that of Uganda shrinking to seven per cent from nine per cent last year while that of Tanzania sunk to seven from 10 per cent last year.

Ngahu added that it is clear that most CEOs are looking beyond traditional global market leaders, with prospects for countries like France rising to 10 per cent from six per cent last year.

According to the survey, CEOs pointed at economic policy uncertainty, skills gaps and regulatory issues as among the most pressing issues firms have to grapple with this year. This is however likely to ease in medium term as economic growth goes back to growth trajectory.  

Faced with tough realities, business leaders are turning inward to drive revenue growth, with 80 per cent of those sampled planning to execute operational efficiencies to cut costs why 76 per cent are expecting organic growth.

At least 58 per cent of CEO are counting on launch of new products and services to drive growth, 41 per cent  are expecting to rely on joint ventures , new markets (36 per cent) and 11 per cent plans to sell businesses.

 

Furthermore, big firms in the region are planning to freeze on employment with most CEOs saying they would rather retrain their existing staff to cope with changes in the job environment. At least 47 per cent will focus on retraining to close a potential skills gap up from 46 per cent last year.