Africa’s CEOs forecast low revenue growth

Monday February 10 2020

Chief executives of firms operating in Africa are concerned about weaker than expected growth in revenues this year. GRAPH | NATION MEDIA GROUP

Chief executives of firms operating in Africa are concerned about weaker than expected growth in revenues this year. GRAPH | NATION MEDIA GROUP 

JAMES ANYANZWA
By JAMES ANYANZWA
More by this Author

Chief executives of firms operating in Africa are concerned about weaker than expected growth in revenues this year, largely due to policy uncertainty, over-regulation, exchange rate volatility and turbulence in the global financial markets.

A global survey on chief executives released by consultancy firm PricewaterhouseCoopers last week shows that over 50 per cent of top company executives in Africa see policy uncertainty and uncertain global economic growth as key threats to their continental operations, followed by geopolitical uncertainty, social instability and exchange rate volatility.

The annual survey seeks to understand the environment in which companies operate globally. Other issues facing CEOs in Africa are inadequate basic infrastructure, cyber threats, tax uncertainty and protectionism.

Some 53 per cent of African CEOs say global growth will decline this year, while 23 per cent expect growth to remain the same: 20 per cent say global growth will improve

“As CEOs look ahead to 2020, we see a record level of pessimism,” says the report. “In every region, CEOs report increased pessimism. And in almost every region, significantly diminished confidence in their own organisation’s 12-month revenue growth prospects. CEOs are more sanguine about the prospects for the coming three years; however confidence levels are still at a low not seen since 2009.”

Chief executives of firms operating in Africa
Chief executives of firms operating in Africa are concerned about weaker than expected growth in revenues this year. GRAPH | NATION MEDIA GROUP

Advertisement

The report notes that although over-regulation remains the top threat, concern is also rising over uncertain economic growth, trade conflicts, climate change and cyber threats.

“The unknowns on all of these fronts cloud CEOs outlook on the road ahead. The CEOs have shifted from record optimism to record pessimism over the past two years.”

According to the African Development Bank, the continent’s slower than expected growth in 2020 is partly due to the moderate expansion of the continent’s “big five” economies — Algeria, Egypt, Morocco, Nigeria, and South Africa — whose joint growth was an average rate of 3.1 per cent in 2019, lower than the average of four per cent for the rest of the continent.

Global rating agency Moody’s Investors Service notes that the global economy has remained sluggish, with negative business sentiment and trade uncertainty clouding growth prospects.

According to the agency, African governments debt is high and GDP growth will remain below potential and insufficient to boost per capita income levels or increase economic resilience.

According to the World Bank, the global economy is expected to recover to 2.5 per cent in 2020 — up from the post-crisis low of 2.4 per cent last year.

However, downside risks predominate, including the possibility of a re-escalation of global trade tensions, sharp downturns in major economies, and financial disruptions in emerging market and developing economies (EMDEs).

“The materialisation of these risks would test the ability of policymakers to respond effectively to negative events,” the Bank said in its Global Economic Prospects report for 2020 released last month.

“Against the backdrop of a fragile outlook, the policy challenges confronting the global economy are compounded by subdued productivity growth and high levels of debt,” the report said.

Advertisement