Executives of leading private companies in East Africa are optimistic about increased profits this year, based on the region’s positive economic outlook.

A report released this week by audit company PricewaterhouseCoopers (PwC) shows that CEOs in Rwanda are the most optimistic about higher earnings. At least 87 per cent of those interviewed said 2014 will be a good year for business in the country.

The feeling was the same with CEOs in Kenya, Uganda and Tanzania, with 83 per cent, 67 per cent and 70 per cent respectively expressing confidence.

Around the continent, high optimism was also recorded in Ghana — 94 per cent, South Africa — 90 per cent, and Zimbabwe — 90 per cent.

A general fall in inflation to single digits in most of the EAC countries has resulted in improved purchasing power, giving business executives new hope that the trading environment could get better.

East African countries maintained single-digit inflation rates for the better part of 2013. 

READ: EAC countries held single-digit inflation in 2013

In Uganda, a general decline in commodity prices coupled with low demand for goods and services helped to hold annual the inflation rate at 5.5 per cent in 2013, the lowest in two years.

Kenya closed the year with an inflation rate of 7.2 per cent a decline from 8.29 per cent reported in September.

Tanzania kept its inflation rate at an average of 6.20 per cent for the second half of last year, while Rwanda closed the year with the lowest inflation rate at 4.58 per cent down from 5.1 per cent recorded in October.

Burundi, however, recorded the highest inflation rate in East Africa, averaging 9.7 per cent, by the end of last year.

In Kenya, prices of basic foods are expected to increase in the early months of 2014, as the effects of last year’s poor rains begin to be felt.

According to an African Development Bank prediction, East Africa is expected to register strong growth averaging 5.8 per cent, up from 5.5 per cent recorded last year.

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According to PWC Africa senior partner Suresh Kana, there are several factors favouring economic growth in Africa.

“First is that Africa has a young population that will drive demand for goods and services, ensuring the continent reaps demographic dividends,” said Mr Kana.

He added that there is a power shift to the East and South, propelled by the South-South trade and that among the BRIC countries (Brazil, Russia, India and China).

“The continent is also experiencing accelerated urbanisation, and research shows that by 2050 about 440 new cities will emerge across Africa. The cities will need infrastructure like roads, railways, energy facilities and social amenities, among others, hence the interest in Africa will continue increasing,” said Mr Kana.

However, despite the optimism there are risks that CEOs in East Africa and other parts of the continent are concerned about.

Mr Kana said most CEOs are concerned about inadequate specialised skills, which they say have curtailed expansion of businesses in parts of the continent.

The CEOs also felt that governments were not doing enough to improve the continent’s infrastructure, citing it as a threat to growth.

Poor infrastructure, the CEOs said, had impeded diversification of economies, limiting the continent to extractive and natural resource industries as its primary economic drivers.

“You can have all these good products and services but if the infrastructure is poor one cannot achieve much,” Mr Kana added.