Optimism and awareness of the potential of digitalisation in Africa, despite diverse challenges
Time to act for African private business leaders
The release of our African Private Business Survey comes at a pivotal time for businesses on the continent.
Overall, Africa’s economic performance is expected to improve this year and next. The World Bank predicts the continent will grow by 2.8% in 2019, from an estimated 2.3% in 2018 despite some countries continuing to face challenges with infrastructure and financial systems, for example and global headwinds, which may be slowing overall growth, according to The World Bank. There is also some uncertainty in the economic outlook for Africa, thanks in part to global headwinds. Overall, Africa’s economic performance is expected to improve this year and next, with the World Bank predicting the continent growing by 2.8% in 2019, from an estimated 2.3% in 2018.
PwC surveyed 200 private business leaders in nine sub-Saharan countries to find out their views on the future. The findings of our survey were encouraging – the private businesses we surveyed are optimistic about their prospects. Eighty-three percent of these respondents expect their revenues to grow, while only 7% expect declines.
Digitalisation is key
But optimism may not be enough. Business leaders should act. A key is digitalisation and the time to embrace it is now.
Many of the survey respondents agree – 81% told us that they see digitalisation as highly relevant for the long-term viability of their business, compared to 65% in EU countries. Our survey results show that African respondents also rate the relevance of some of the most significant digital technologies, like blockchain, Artificial Intelligence (AI), 3D printing and augmented reality (AR) more highly than do respondents in the EU countries we surveyed. And more than half of respondents say their organisations already have a digital strategy.
How can African private businesses make digital transformation happen?
The time is now to move from strategy to implementation. There are several actions that private businesses can take to prepare their organisations. The stakes are significant: While there is untapped commercial potential in Africa, owners and managers who don’t act risk being unprepared for whatever future lies ahead.
The majority of African private business leaders surveyed believe their supervisory boards are suitably composed to support their digital strategies. In general, as a best practice, we encourage private businesses to take a second look at whether they have the right people in place to address the next level of digital change. One possible question to ask: is there a member of the next generation (so-called “next gen”) in the family on the board, one who is digitally native? Indeed, if there are next gens in the line of succession with digital expertise, now may be a good time to bring them on board, and also ensure the longevity of the company.
Staffing: the right skills
A majority of the African private businesses surveyed (nearly 80%) say a lack of suitably skilled staff undercuts the ability to provide products and services, thereby causing a loss of revenue or unrealised revenue potential. More than half of survey respondents are seeking to make up for deficits in their in-house talent by obtaining external advice.
Private business leaders should clearly distinguish between short-term and long-term hiring needs. It may be worth thinking afresh about how to satisfy short-term transformation needs. An option for quickly finding technical expertise may be to collaborate with start-ups to fill the gaps, much like many publicly-listed companies do. Interestingly, our survey found that a far greater percentage of companies appear to employ this strategy in Africa than do private businesses in Europe. While 48% of respondents across Africa say they will collaborate with start-ups to get access to digital skills, just 30% of respondents in the European Union said the same.
Financing: funding the transformation
One quarter of the African private businesses we surveyed are planning to allocate more than 5% of their overall investments to digitalisation. Internal cash flow is the most popular source of funding for digital transformation efforts, followed by bank lending, in both Africa and across EMEA as a whole. Despite the vital role private businesses play in Africa, many could face financing shortfalls in the future that would inhibit their ability to make needed investments in innovation. One encouraging sign: Nearly a quarter of those surveyed say they would consider private equity or venture capital. Turning to private equity can provide funding, as well as management support and expertise.
Whichever strategies are employed, using digitalisation to drive growth is especially important now as competition grows and business models change, in Africa and all around the world. African private businesses have the opportunity to build on their awareness of the opportunities digitalisation offers and take the next steps towards achieving a true digital transformation. The time to act is now.
About the Survey:
Between February and April 2019, PwC conducted interviews with key decision makers from 2,993 private businesses with a turnover of at least €10m in 53 countries in Europe, the Middle East and Africa. Of these, 200 private businesses from nine sub-Saharan African countries were surveyed, the results of which form the basis of this report. Further insights on the European Union, Central & Eastern Europe and the Middle East are summarised in separate reports. The findings were analysed and evaluated by digital, strategy and private business experts at PwC.