The Citizen (Dar es Salaam)
15 May 2011
Dar Es Salaam — Economic uncertainty is affecting confidence of companies, according to most chief executive officers (CEOs) in the country.
Some 65 per cent of CEOs who were interviewed by the PriceWaterHouseCoopers (PWC) in a survey conducted late last year noted that the uncertainty was one of the factors that drive their strategies for change. This rate is higher than Africa’s and global levels, according to the draft report of the survey, which entailed 201 interviews with CEOs in sub-Saharan Africa in late 2010, of whom 20 were in Tanzania.
The purpose of the annual CEO Survey was to appreciate factors that influence business leaders’ perception for growth – and to take the pulse of the African (and global) business environment.The report, titled ‘The Africa Business Agenda’ which is based on results from the survey, will be published later this month.
The document seen by The Citizen indicates, however, that while they were worried about economic uncertainty, the majority of the CEOs (70 per cent) were confident of revenue prospects over the next 12 months. The number is higher than the average in Africa.On the other hand, 55 per cent were very confident over the next three years but this number is lower than the Africa average.
Other factors, which the CEOs mentioned as eroding their confidence, include customer demands (29 per cent) and industry dynamics (18 per cent) as well as competition (12 per cent) and risks (6 per cent).On the other hand, no Tanzanian CEO mentioned shareholders and regulations as factors that affect their activities.While economic uncertainty worries Tanzanian CEOs, their counterparts elsewhere are more worried about the rest of the factors.
As only 29 per cent of Tanzania chief executives say customer demand is what drives their strategy change, this factor is viewed with concern by more than 60 per cent of CEOs globally. In Africa more than 55 per cent of the CEOs also mentioned this factor as important in deciding the appropriate changes.
Furthermore, whereas only 12 per cent of local CEOs look at competition as a problem, nearly 45 per cent of their Africa and global counterparts cited competition as another major factor they consider when making decisions.However, while many CEOs in Tanzania have indicated that they were concerned about economic uncertainty, the survey established that they were less committed to mitigation.
This, the survey established, is due to economic policy threats in areas of uncertainty, exchange rate and inflation. In all these areas, at least 85 per cent CEOs from Tanzania scored higher than their Africa and global counterparts.On what threats they are planning to mitigate, 50 per cent of interviewed local CEOs mentioned uncertainty while 25 singled out interest rate and 30 per cent say they plan to tackle inflation.
On how consumer behaviour is changing in Tanzania or the reason why they think it is such a threat, only 20 per cent said shifts in consumer behaviour was a threat they plan to mitigate.Some 29 others said that customer demand has influenced strategy while 86 per cent said consumers will play a more active role in product and service development.But all of them said they would implement strategy change in response to long-term shift in consumer focus towards price, value and mobile media.
On the other hand, it seems that long-term growth concerns contribute to a focus on cost cuts and innovation among CEOs in the country.The survey established that local CEOs continue to think about cost cuts as part of their restructuring activities. Some 90 per cent of them said that they invest in strategic IT (information technology) primarily to reduce costs and become more efficient, while 75 per cent believe that their innovations will lead to operational efficiencies.Some 85 per cent of interviewed CEOs said they implemented cost reduction strategies last year while 80 per cent said they were planning to this year.
In the survey, local CEOs also said that lack of key skills was a threat to growth, but only 55 per cent said that creating a skilled workforce is a government priority area.Even so, 80 per cent plan to work with governments and education systems to improve skills in the talent pool and 95 per cent were committed to creating and fostering a skilled workforce to improve national competitiveness.
On climate change only 15 per cent of the CEOs think that climate change is a government priority area though 65 per cent said that by addressing the risk of climate change, they would improve national competitiveness.Some 55 per cent of the CEOs agreed that climate change is given consideration in their strategic planning and risk management, the highest response rate anywhere in Africa.
On whether improving infrastructure is the sole responsibility of government, only 15 per cent cite inadequacy of infrastructure as a threat they plan to mitigate over the next 12 months. At the same time, some 75 per cent noted that inadequacy of basic infrastructure is a potential threat to growth, while 55 per cent believe that their commitment to improving infrastructure will benefit national competitiveness and 50 per cent said that improving infrastructure is a government priority area.
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