Firms in EAC pause layoffs amid economic optimism among CEOs
Tuesday March 28 2023
Workers at Rivatex East Africa Limited in Eldoret town, Kenya. A new 2023 survey by PricewaterhouseCoopers shows that some 138 EAC company chiefs are positive about the economic outlook for the region and the general performance of their companies. PHOTO | FILE | NMG
East African Community (EAC) companies have suspended workforce restructuring, including possible cost cutting through sackings, to await signs of economic turnaround.
For the next 12 months, firms are turning their attention to fresh hiring lifted by increased optimism over the economic and financial outlook for the region and businesses.
The revelations are contained in a new survey released last week by consultancy firm PricewaterhouseCoopers (PwC) that shows that some 138 company chiefs in the EAC states are positive about the economic outlook for the region and the general performance of their companies in the short-term and medium-term.
According to the survey, 71 percent of the CEOs are not looking to reduce their workforce (either through lay-offs or redundancies) while 51 percent are not planning to freeze hiring in the next 12 months.
Over 60,000 workers in Uganda’s formal sector lost their jobs and the workforce reduced to 653,066 as of June 30,2022. PHOTO | NMG
In addition, 82 percent of the CEOs are not planning on reducing perks and other forms of compensation for employees while over a third of the company bosses believe the rate of employee resignation will not change in the period.
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“These CEOs place an emphasis on keeping their workforce as the foundation to building their businesses,” says the survey.
“In addition to the optimistic economic growth outlook, CEOs are very confident of their respective company’s prospects for revenue growth both in the next 12 months (55 percent) and the next three years (62 percent),” it said.
East Africa CEOs indicated they will prioritize upskilling of their workforce (78 percent) in the next 12 months as well as investing in automating processes and systems (75 percent) and deploying technology (64 percent).
“The CEOs will be allocating the bulk of the investments to reinventing their businesses for the future,” the survey said.
PwC’s 26th annual Global CEO Survey polled 4,410 CEOs in 105 countries in October and November 2022, 138 of whom were based in East Africa.
The regional CEOs’ confidence is underpinned by the rosy economic forecast by the African Development Bank (AfDB) and the mitigation actions companies have put in place to cushion against prevailing economic headwinds. AfDB in a report this January predicted East Africa’s average economic growth to recover to pre Covid-19 levels of above five percent in 2023 and 2024, repositioning EA as the top performer on the continent.
Climate impact
The outlook, however, takes into account the vulnerability of the region to the impact of climate change effects such as drought and flooding.
The projected average growth rates for East African countries in 2023-2024 are Rwanda (7.9 percent), Ethiopia (6.0 percent), Uganda (5.9 percent), Tanzania (5.6 percent), Kenya (5.4 percent), Burundi (4.4 percent) and South Sudan at 2.2 percent.
According to the survey, about 66 percent of the regional CEOs are making an effort to reduce operating costs for the next 12 months while a further 52 percent are looking at diversifying their product or service offerings. On the other hand, 44 percent of the company bosses are finding alternative suppliers.
But the CEOs recognize threats to growth, with inflation ranking highest followed by macroeconomic volatility, climate change and cyber risk.
High food prices is one of the main drivers of rising inflation in Tanzania. PHOTO | NMG
EA’s average inflation for 2022 stood at 25.3 percent, impacted by large price increases in Sudan as well as Ethiopia and was the highest amongst all African regions.
While production is relatively diversified, countries in the region are largely net importers and bear the brunt of high international prices in addition to recurrent climate shocks such as drought.
“Hence, the rate of economic growth sets the absolute ceiling within which growth in employment and growth in labour productivity can take place,” says the International Labour Organization (ILO).
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According to the Survey PwC, 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 five years.
In the next 12 months, the majority of CEOs see climate risk impacting their cost profiles and supply chains more than their physical assets.
The CEOs ranked technological disruptors highest (68 percent) with the potential to disrupt the industry in which they operate, followed by changes in regulations (64 percent) and changing customer demands/ preferences (64 percent).