Saturday, February 2,2019
- It’s a reality thousands of chief executives are confronted daily and have to think on their feet and adapt accordingly.
- PwC’s 22nd Annual Global CEO Surveyed 1, 378 chief executives in more than 90 territories regarding the global business climate in 2019.
- Considering that, here are three threats to doing business in Africa CEOs are ‘extremely concerned’ about in 2019.
Despite being the youngest continent filled with endless opportunities, energetic and increasingly tech-savvy population, doing business in Africa is never a walk in the park.
It’s a reality thousands of chief executives are confronted daily and have to think on their feet and adapt accordingly.
When it comes to global economic growth, quite a lot, as it turns out PwC has been surveying the world’s chief executives since 1997 and this year was not any different.
PwC’s 22nd Annual Global CEO Surveyed 1, 378 chief executives in more than 90 territories regarding the global business climate in 2019. The survey was conducted between September and October 2018.
This year’s survey drilled down on CEOs insights in top-of-mind areas such as growth, Data and Analytics, and Artificial Intelligence.
Amid the wave of populist and protectionist sentiments sweeping across continents, CEOs have turned their focus inward as they adapt to newly erected barriers between markets – both trade and labour.
They are less bothered by the broad, existential threats that rose in the ranking last year – for example, terrorism and climate change – and they are ‘extremely concerned’ about the ease of doing business in the markets they operate.
Considering that, here are three threats to doing business in Africa CEOs are ‘extremely concerned’ about in 2019.
Policy Uncertainty – 49%
Policy uncertainty has become as destructive and inhibiting to developing political economies seeking entrance into the new, information-driven international political economy as uncivil contests between the state and society had been in the aftermath of decolonisation.
One such clear example of how policy uncertainty can spell disaster for businesses and the public alike is Kenya.
On Wednesday, Transport, Infrastructure, Housing and Urban Cabinet Secretary James Macharia announced that the much-awaited pilot programme of car-free days and the Bus rapid transit (BRT) would be suspended indefinitely barely days after asking the public and businesses to make adequate plans as they await the car-free days D day.
The move by the government was meant to decongest the city. So bad Kenya’s traffic jam that Kenyans spend 40 days in a year just sitting in traffic translating to hundreds of hours lost in manpower.
Time wasted in traffic jams represents a cost of $578,000 (Sh58.4 million) a day and $210 million (Sh2.1 billion) a year in lost productivity, according to the government.
The move would also have gone a long way in tackling pollution, promote non-motorized transport and encourage physical exercise.
Keeping that in mind, Kenya’s plan to roll out car-free days and the Bus rapid transit (BRT) was but welcome.
In 2018, the government had tried unsuccessfully to roll out the programme currently already in use in various cities across the world.
For instance, In Kigali, Rwanda, it was introduced in mid-2016 and takes place on the first Sunday of every month.
The government stated that the suspension this time around was informed by the need to enable them to vet hawkers and traders, clearly showing lack of better planning and proper public participation.
Sadly, Kenya is not isolated nor unique in this case, several African countries are bedevilled by ‘policy uncertainty’ and by the looks of things it looks like it’s not going anywhere soon.
Availability of key skills – 45%
Thanks to a theoretical and exam-oriented school curriculum many African countries end up churning graduates annually who are not equipped to adapt to a fast-changing work environment.
Companies in the region are forced to source for skilled personnel millions of miles away to do ‘simple tasks’ which Africans could have easily done if only they were better trained and equipped.
The root of unemployment is not only a lack of jobs; a key underlying issue is also the inadequately educated workforce.
This challenge is likely to be amplified even further in the coming years due to the Fourth Industrial Revolution characterized by fast-paced technological progress combined with other socio-economic and demographic changes, which will further transform labour markets.
The World Economic Forum forecasts a net loss of over 5 million jobs in 15 major developed and emerging economies to Artificial Intelligence worldwide by 2020.
Aarti Shah, former head of government relations at Thomson Reuters and a fintech expert, says carpentry and all manner of informal jobs in Kenya as we know it today will soon be phased out and done by robots.
“I don’t believe policymakers are radical enough in their thinking of how fintech can change the game and how to take advantage of the so many opportunities coming our way through fintech. But also, if we are not careful, by 2034, it will be cheaper for robots to manufacture furniture in the US than it will be on Ngong Road by Kenyans,” Shah said during a recent policy breakfast meeting organised by Strathmore Business School and Business Advocacy Fund (BAF) to discuss ‘Blockchain technology and its impact on Kenya’s Economy’.
Over-regulation – 43%
The irony of doing business in Africa which many companies bear the brunt of it is that sometimes it is easier for one to import a product from as far as China than to import the same from an African country due to mountains of regulations and red bottlenecks.
Case in point is Kenya’s-Tanzania endless trade squabbles. The two countries enjoy a frosty relationship mainly caused by their different market policies, which has been threatening the full realization of the East Africa Community.
Despite a trade truce signed between Foreign Affairs Cabinet Secretary, Amina Mohamed and her Tanzanian counterpart Augustine Mahinga on 23rd July to lift trade restrictions between the two countries, it was not followed to the letter.
Kenya agreed to lift restrictions it had imposed on wheat flour and cooking gas imports from Tanzania, which in return committed to allowing milk and cigarettes from Kenya.
However, after the truce, Kenyan products still experienced various barriers which forced Kenya’s trade permanent secretary Dr Chris Kiptoo to travel to Namanga to try and iron out the trade spat.
Until the spat, Tanzania had been Kenya’s second largest market in the region after Uganda, providing a sales outlet for a range of products ranging from palm oil, soap, medical drugs, cooking fats, iron sheets, sugar confectionery, and margarine.
As a result of the trade restrictions, Kenya’s exports to Tanzania dropped by 34 per cent in the first five months of 2017, to Sh4.35 billion ($42 million) raising concerns over negative impacts of the long-running trade standoff.