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East Africa CEOs optimistic about economic growth over the next 12-months: PwC Global CEO Survey



East African CEOs are optimistic about the region’s economic growth prospects, with around 60% of business leaders expecting an improvement in this year in contrast to their global counterparts who believethat there will be a decline in economic growth in their countries. This is according to PwC’s 26th Annual Global CEO survey, which indicates that the global economy will decline in 2023.

The survey polled 4,410 CEOs in 105 countries between October and November 2022,138 CEOs from East Africa participated. 

Surprisingly, 60% of East African region CEOs are optimistic about the prospects of economic growth, and they expect their country’s GDP to grow in the next 12 months. This optimism may be driven by the strong economic growth recorded in the region in 2021 which was underpinned by sustained public spending on flagship infrastructure projects.

In addition to the optimistic economic growth outlook, East Africa CEOs are very confident of their respective company’s prospects for revenue growth both in the next 12 months (55%) and the next three years (62%).This optimism mirrors the outlook in the African Development Bank’s (AfDB) January 2023 Macroeconomic Performance and Outlook report. It estimated that growth in East Africa will moderate to 4.2% in 2022 from 5.1% in 2021, and then rise to 5.0% in 2023 and 5.4% in 2024.

“The optimism presented by CEOs in the region is testament of the efforts being made to recover and mitigate expected and unexpected headwinds, alongside confidence in opportunities for growth into the future,” says Peter Ngahu, Regional Senior Partner, PwC Eastern Africa.

CEOs in East Africa are most concerned about their exposure to rising inflation, macroeconomic volatility, climate change and cyber risk in the next 12 months and 5 years. Inflation is a key concern for these CEOs, as 49% of them indicated that they believe their companies will be highly exposed to this global challenge in the next 12 months. Although the region experienced strong economic growth in 2021, inflation remained at the highest level in the region’s recent history. in the region’s recent history. According to the Africa Development Bank’s East Africa Economic outlook 2022, the region’s inflation was averaging 40.6% in 2021 and was the highest amongst all African regions. Therefore, it is no surprise that inflation ranked highest in the exposure to key threats category noted by the CEOs both in the short and medium term.

Planned mitigating actions

Macroeconomic volatility: To overcome economic challenges and volatility, 37% of the CEOs surveyed indicated that they are partnering with government at national or local level to create new sources of value. A further 48% indicated that they were partnering with entrepreneurs / start ups to a moderate, large or very large extent. The World Economic Forum highlighted Kenya as one of the only four African countries that currently receive 92% of all the continent’s investment in technology, the other three being Nigeria, Egypt and South Africa. Over a third (39%) of the CEOs polled indicated that they are collaborating with competitors.

Workforce management: Over a third of the CEOs believe that employee resignation/ resignation rate will not change in their companies in the next 12 months. In addition, as plans to mitigate against potential economical volatilities, 71% are not looking to reduce their workforce whilst 51% are not planning to implement hiring freezes in the same period. These CEOs place an emphasis on keeping their workforce as the foundation to building their businesses, as such 82% are not even planning on reducing compensation for their employees.

Climate change and sustainability: In the next 12 months, the majority of CEOs see climate risk impacting their cost profiles and supply

chains more than their physical assets. More than half of the CEOs surveyed have indicated that they either plan to or are in the process of developing a data driven, enterprise level strategy for reducing emissions and mitigating climate risk. The same proportion of CEOs also stated that they have planned to or are in the process of implementing initiatives to protect their company’s physical assets and/or workforce from the physical impact of climate change. While CEOs don’t expect their supply chains to be impacted, 66% said that they plan to or are in the process of creating innovative, climate friendly products or processes. Only 18% of the CEOs surveyed indicated that they had completed initiatives to reduce their company’s emissions, indicating that while the plans exist there are still barriers to progression and completion.

“Our survey shows that the CEOs who have more exposure to climate change are more likely to take action to address it. But combating climate change requires a coordinated, long-term plan to address the risk fully. The public and private sectors must work together to achieve this,” noted Peter Ngahu.

Edward Kerich, Partner PwC Kenya and Environmental, Social and Governance Leader in East Africa, noted from the PwC global ESG survey, ESG is no longer a nicety; it’s a necessity. Customers demand it; investors require it; regulators are making it law. Still, most companies, while stating ambitious goals, have been slow to act. Transformation is costly and burdensome, and economic stresses are slowing efforts. But where many companies see challenges, some see opportunities.

Cyber and technology: Almost a third of the respondents said that their company will be highly and extremely exposed to cyber risks in the next five years. Cyber security breaches have increased across the East African Community due in large part to the rapid adoption of technology. Majority of the CEOs indicated that they will be investing in automating processes and systems, upskilling the workforce in priority areas and deploying technology in the next 12 months.

Potential disruptors to profitability in their industries over the next 10 years.

Although more than half of the surveyed CEOs believe that their companies will remain economically viable even more than 10 years from now, they do take note of potential disruptors that might affect that trajectory. The CEOs surveyed rank Technological disruptors highest (68%) with the potential to disrupt the industry in which they operate. This is followed by Changes in regulations (64%) and Changing customer demands/ preferences (64%).

“The risks facing organisations and society today cannot be addressed alone and in a vacuum. CEOs must continue to collaborate with a wide range of public and private sector stakeholders to effectively mitigate those risks, build trust and generate long term value – for their businesses, society and the planet,” concludes Mr. Ngahu.

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