The Africa Business Agenda

The Africa Business Agenda September 2014 4th edition CEOs and PwC leaders in Africa share their insights about doing business in some of the world’s most exciting and challenging markets. www.pwc.com /theagenda Contents Introduction 2 Africa: The place to be 3 Africa growth drivers 10 Key challenges to unlocking growth in Africa 11 Government and the growth agenda 13 The digital revolution 19 Industry highlights 21 A guide for investors 24 Building international JVs & partnerships and financing growth in Africa 34 Developing local talent 42 Innovating in Africa 47 Conclusion 52 Leaving a legacy: CEOs in their own words 53 Methodology 54 PwC in Africa 56 Introduction Africa: The place to be Suresh Kana Investors worldwide recognise Africa’s stay ahead of the game. This means Territory Senior Partner for vast growth potential, in particular its anticipating change, actively seeking PwC’s East, West and South demographic edge. Africa is the world’s to recruit and retain the best talent Market regions in Africa youngest continent and is expected to and investing in our business to better have the biggest labour force by 2040. serve our clients in Africa. Recently, Now in its fourth year, PwC’s Africa we established an integrated PwC Business Agenda supports this positive Africa business, made up of firms in view and highlights the increasing level the predominantly English-speaking of investor interest on the continent. regions of Southern, West and East When we embarked on The Agenda in Africa, which is led and managed by 2011 as an extension of PwC’s annual a single leadership team. This year, Global CEO series, we were entering PwC Africa announced an alliance with unexplored terrain. But the response PwC in the UK, to meet an increased to the first and subsequent editions demand for professional services as has been overwhelmingly positive and trade activity between the two regions The Agenda has now become an annual grows. What this means for clients is publication. that PwC is well positioned to serve them better across Africa, with the full At PwC we began our own business benefit of PwC’s global reach. journey in Africa several years ago and have continuously upped the ante to Everything and Figure 1: Africa’s demographic dividend anything can work in Africa. Organisations need the willpower and the staying power Population in 2019 and need to realise 1 257.9 million that Africa works in a different way from the rest of the world – and you have to be prepared to work that way. Africa is all about Population in 1999 768.9 million choices. Mark Levy is joint CEO of Blue Label Telecoms in South Africa. Sources: IMF, World Economic Outlook database PwC 3 The Agenda enables us to provide Figure 2: Real GDP growth (%) you with an in-depth analysis and insights into how opportunities and 8 challenges differ across the African continent. Africa has become one of the world’s most favoured investment 7 destinations, with six of the world’s ten fastest-growing economies based 6 in sub-Saharan Africa. Five years ago, many of Africa’s economies were 5 under significant pressure in the wake of the global financial crisis. Today, 4 Africa has undergone far-reaching transformation. 3 Robust growth is set to accelerate in Africa in 2014, with the International 2 Monetary Fund (IMF) projecting GDP growth to accelerate to 4.4% from 1 3.9% in 2013. Telecommunications, consumer-facing industries, financial services, resources, agribusiness and 0 infrastructure are some of the sectors that will drive growth and attract -1 international trade and investment. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The IMF has projected a record USD80 billion inflow of investment from both advanced and emerging economies into Africa World Africa in 2014. No doubt, policymakers, regulators and governments will Sources: IMF, World Economic Outlook database have much to contend with – there are a number of short- and long- term challenges, as well as many opportunities. The greatest potential for Africa lies in its people. There is Figure 3: Megatrends impacting society and business increasing consensus among business leaders that growth can only take place Q: What’s the next big thing that you think will impact your business, industry or society if there is more collaboration between over the next five years? (top three trends CEOs named) governments and the private sector. Considering the findings of our CEO interviews over the past four years, 69% 67% 63% we are more convinced than ever that Technological Urbanisation Demographic despite the numerous challenges, such as inadequate infrastructure advances shifts and policy uncertainty, the African 41 31 19 story is a positive one. Multinationals 5 that already have a presence on the 14 continent are extremely positive about 21 23 the prospects for future growth. 23 22 The pace of change in the world is speeding up with a series of global 1st 2nd 3rd megatrends transforming business and society. African CEOs see Base: All African respondents (260) technological advances, urbanisation and demographic shifts as the three defining trends that will transform their businesses over the next five years. They are aware of the implications of these changes for their businesses, as well as for the outlook for Africa. Many have recognised the need for change or are making changes in their businesses. 4 The Africa Business Agenda 2014 Figure 4: Africa’s growing middle class I think the next big thing 34% 35% that will impact business is technology. We are able to do things a thousand times faster than we could five years ago. And I think 30% this exponential growth in 1000 technology will continue. 27% 27% With that comes the 26% increasing gap between 800 skills and employment. 25% What we find is that the unemployment problem in 600 a lot of economies is due to Millions 579.4 a skills mismatch. There 400 are jobs, but there are no 303.9 401.1 498.6 20% skills to fill those jobs. At Transnet, we 200 have embarked on a comprehensive programme 115.3 157.5 204.4 326.7 to train young people in 21.0 25.2 48.8 46.1 0 0 1980 1990 2000 2010 different vocations using modern technology. We’ve Lower class Middle class Upper class trained more new artisans, Middle class % of population technicians and engineers than we need, so that we Middle class defined as those earning $2-20/day can release them back into Strong growth in the past two decades Africa is a complex and diverse the economy with skills to has helped to reduce poverty and continent. There are so few look for jobs. increase the size of Africa’s middle generalisations that hold true when class. By 2060, Africa’s middle class doing business across the continent. Brian Molefe is the Group is expected to reach 1.1 billion, which At PwC, it is through our observation Chief Executive of Transnet will then be 42% of the population, and engagement with clients that SOC Ltd, the largest freight according to the African Development we are able to call on our unique transport company in Bank1. This growth is creating all range of skills, as well as provide South Africa. sorts of opportunities, particularly practical insight that is useful to those for companies in the sectors in which doing business in Africa. Similarly, richer consumers typically spend their The Agenda also provides practical money, such as recreation, services and insights, analysis and personal healthcare. perspectives. I hope you find it useful and look forward to your feedback and suggestions. 1 ‘The Middle of the Pyramid: Dynamics of the Middle Class in Africa’, African Development Bank, http://www.afdb.org/fileadmin/uploads/afdb/ Documents/Publications/The%20Middle%20of%20the%20Pyramid_The%20Middle%20of%20the%20Pyramid.pdf PwC 5 The Africa Business Agenda Edouard Messou Figure 5: CEOs are more confident about medium-term revenue growth Territory Senior Partner for than short-term returns PwC’s Francophone Africa Market region Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? CEOs are increasingly recognising the long-term untapped potential of Africa and, more particularly, of sub- Africa 4 12 44 40 Saharan Africa (SSA). Huge natural resources, fast-growing populations, Global 3 12 46 39 rising middle classes: the underlying drivers are strong and well-known. % With the IMF projecting strong GDP growth in 2014, Africa is expected to Not confident at all Not very confident maintain the performance levels it has Somewhat confident Very confident been achieving since the turn of the millennium. These favourable prospects, especially Q: How confident are you about your company’s prospects for revenue growth over the in the context of the global economic next three years? crisis, have put the spotlight on Africa. We could not record the number of reports, press articles and top executive interviews over the past months alone talking about Africa. Africa is the next frontier for most company executives Africa 2 8 39 51 Africa 4 12 44 40 and investors, who have ambitious plans for the continent. Indeed, 90% of Global 1 7 46 46 African CEOs interviewed for this issue Global 3 12 46 39 of The Africa Business Agenda told us % that they were confident of mid-term % prospects for their businesses, with just more than half (51%) saying they are Not confident at all Not very confident ‘very confident’. Somewhat confident Very confident Interestingly, CEOs are slightly more anxious about short-term prospects Base: Africa – 260, Global – 1 334 for their companies and industries.

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