By Mwakilishi
Construction of the standard gauge railway near Tsavo. Enhanced infrastructure spending is set to boost productivity...
Kenya is among the top-three sources of revenues for multinational businesses in sub-Saharan Africa (SSA) according to a survey by The Economist Intelligence Unit (EIU) of the UK.
The 2016 Business Outlook Survey shows the other two top markets are South Africa and Nigeria.
The three markets are expected to remain at the topfor at least the next six years, respondents in the survey said.
“Executives indicated that their top three markets in 2015 — South Africa, Nigeria and Kenya — would remain their key markets for at least the next six years,” said the EIU report. The surveyinvolved interviews with 120 Africa-based business managers.
The placing of Kenya in the top group by executives is also in line with the forecast by investment bankers at CitiGlobal Markets that Kenya will have the highest economic growth this year among the top-four largest Africaeconomies, namely South Africa, Nigeria and Angola.
Citi forecasts that Kenya’s GDP will grow by more than five per cent this year while the other three economiesgrow by less than four per cent.
Realistic targets
The executives believe that SSA present opportunities for growth, having already proved that profit margins from the region are either the same as or higher than theglobal average. The problem, however, is that the level of investment made is too low to achieve the targeted expectations.
“Well over 50 per cent of respondents reported that their firms’ expectations of growth were realistic. However, around 47 per cent cited their firms’ level of investment to be too low to achieve targeted growth expectations,” said the EIU.
Going into the future in SSA, the companies see revenues and profitability rising.
“It is clear from the executives’ input that Africa-based operations are expected toplay an increasingly important role in the revenue, profitability and investment mix of their firms in the years ahead,” said the EIU.
Despite the rosy growth projections — in line with the ‘Africa Rising’ narrative —company managers cite several challenges to business in the region.
“They [firm managers] are also realistic about the challenges they face, which, in many ways, are more severe than at the time of our 2015 survey. In particular, they cited is sues such as bureaucracy, corruption, difficult regulatory environments and infrastructure deficits,” said the EIU.
The EIU noted that the region faces headwinds in the form of soft commodity prices, the fallout from monetary tightening in the US, infrastructure deficits, terrorist threats as well as political unrest.
But even with the headwinds, the region comes only second to Asia in terms of the projected GDP growth this year.
The EIU forecasts that Africa will grow by 3.2 per cent as compared to Asia’s 4.2 per cent. Nigeria is poised to be the leading market by 2021, ahead of South Africa.
- Business Daily
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