NAIROBI 21 October 2021 — CEOs of the world’s largest businesses are increasingly optimistic about the outlook for their own businesses and despite the Delta variant slowing down the ‘return to normal, their confidence in the global economy has returned to levels not seen since the start of the pandemic.
The KPMG 2021 CEO Outlook, which surveyed more than 1,300 global CEOs including CEOs from East Africa with a focus on their strategies and outlook over a 3-year horizon.
While 60 percent of leaders are confident about the global economy’s growth prospects over the next 3 years (up from 42 percent in the January/February pulse survey), 68% of East Africa’s CEOs are confident about their respective countries’ growth prospects.
This optimism is supported by ongoing economic recovery and increased business activity supported by vaccination efforts across the East Africa region.
On the back of prospects of a stronger global economy, CEOs are investing in expansion and business transformation, with 69 percent of senior executives identifying inorganic methods (e.g. joint ventures, M&A, and strategic alliances) as their organization’s main strategy for growth.
It is no wonder then that a majority (87 percent) of global leaders are looking to make acquisitions in the next 3 years to help grow and transform their businesses.
Sustainability has featured prominently in this year’s survey, with 30 percent of CEOs planning to invest more than 10 percent of their revenues toward sustainability measures and programs over the next 3 years.
The survey further indicates that seven out of ten East Africa’s CEOs intend to lock in sustainability and climate change gains achieved during the COVID-19 crisis.
This finding aligns neatly with the COP26 agenda especially around tackling climate change.
Bill Thomas, Global Chairman & CEO, KPMG, said: “Despite the continued uncertainty around the pandemic, CEOs are increasingly confident that the global economy is coming back strong.
This confidence has put leadership in an aggressive growth stance. While inorganic growth strategies are a priority, CEOs are also looking to expand organically and continue to assess the future of work to ensure they can attract top talent.
“If there is a positive to come out of the past 18 months, it is that CEOs are increasingly putting ESG at the heart of their recovery and long-term growth strategies.
The unfolding climate and societal crises have made it clear that we need to change our ways and work together. I’m encouraged about what the future holds because business leaders are acknowledging that they need to be the drivers of positive change, supporting measures to tackle environmental dangers, as well as societal challenges — from gender and race to equity and social mobility.”
On his part, Benson Ndungu, Senior Partner and CEO, KPMG East Africa noted that “East African CEOs have expressed remarkable optimism. CEOs are confident in the growth prospects of their companies, their local economies and the global economy at large.
These CEOs are looking to expand their businesses through hiring more people, scaling up their digital capabilities and engaging in M&A activity”
The road to renewal
For the first time since the pandemic, CEOs are optimistic. Not unsurprisingly, the findings from the East Africa survey generally mirror those of Global CEO survey.
Even though East Africa CEOs are optimistic about growth globally, across their own countries, within their sectors and companies, certain risks, and uncertainties remain.
That the pandemic has affected companies across the globe, including East Africa is not in doubt. However, over the last 12 months, 52 percent of Global CEOs have seen the start of the bounce-back, compared to 44 percent of CEOs across East Africa.
This suggests that East Africa is lagging in the rebound. In Ethiopia however, the uplift over the last 12 months has been recorded by 60 percent of CEOs, with Rwanda being more cautious about recovery prospects, with 29 percent of Rwanda’s CEOs seeing recovery.
Trusted purpose- Putting people first to drive societal return
With increased stakeholder pressure to build business back better, East Africa CEOs are embedding ESG into their business strategy.
82 percent of East Africa CEOs see themselves increasingly being held personally responsible for driving progress in addressing social issues.
CEOs also agree that the public is looking at businesses to address societal challenges such as gender inequality and climate change as the public’s confidence and trust in governments wane.
Connecting ESG strategy with sustainability, climate change and financial returns
Four out of ten East Africa CEOs see their organization’s ESG programs improving their financial performance compared to global CEOs at 36 percent.
These findings indicate that a lot of work needs to be done around companies articulating a compelling ESG story and rigour in ESG reporting to meet the expectations of diverse stakeholders, especially as CEOs see ESG as a determinant of their remuneration.
The pandemic has also amplified the focus on climate change and sustainability. Consequently, 36 percent of East Africa CEOs say they will invest 10 percent of their revenues in programs that enhance their organizations’ sustainability.
84 percent of the CEOs overwhelmingly agree that world leaders at COP26 must inject the necessary urgency in the climate change agenda.
East Africa CEOs are strengthening their organization’s digital capability by building a more flexible future of work and operating as part of digital ecosystems.
East Africa CEOs recognize that majority of their employees work two or more days remotely and are enabling them to work flexibly.
These CEOs are equipping their employees with skills and digital tools that allow for hybrid work and foster collaboration.
76 percent of East Africa CEOs are also actively disrupting the sectors in which they operate and have an aggressive digital investment strategy intended to put them at forefront (68 percent) of an increasingly competitive landscape.
East Africa CEOs also view digital partnerships as critical in their digital transformation efforts. In enhancing their digital capabilities, CEOs are cognisant that a strong cyber security strategy is critical to create trust with their key stakeholders.
Unprecedented international tax reforms a significant focus for CEOs
Three out of four CEOs believe that the pressure put on public finances by the pandemic response has increased the urgency for multilateral cooperation on the global tax system.
At the same time, 77 percent of global executives and 48 percent of East Africa’s CEOs agree that the proposed global minimum tax regime is of “significant concern” to their organization’s goals on growth.
The survey found that 74 percent of CEOs recognize the strong link between the public’s trust in their businesses and how their tax approach aligns with their organizational values.
As businesses aim to build back better, a majority (69 percent) of CEOs are feeling increased pressure to report their tax contributions publicly as part of their broader ESG commitments.