Johannesburg - The majority of business executives were looking beyond Nigeria’s current economic challenges and believe it will overtake South Africa as their firm’s largest market by value in the next five years.
This is according to a study released on Thursday by global business intelligence firm, The Economist Corporate Network (ECN).
ECN’s network director for Africa, Herman Warren, said while business executives believed Nigeria would be the most valuable market for their companies in 2022, South Africa would still play an integral part.
“South Africa is likely to remain a key market for their firms for at least the next five years. This may reflect South Africa’s importance for many companies as a springboard into the rest of the region,” said Warren.
The African Business Outlook Survey sampled 150 executives to gauge how their businesses are performing in Africa and their expectations for the year/s ahead.
Around 59 percent of respondents’ firms are headquartered in Africa. For those firms which did not have headquarters in the continent, around 36 percent had headquarters either in Europe or North America. More than 91 percent of respondents were based in cities in one of three countries: South Africa, Nigeria and Kenya.
Around 51 percent of respondents’ firms generated annual revenue less than $100 million (R1.3 billion), while 38 percent generated annual revenue of more than $500 million.
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Approximately 59 percent of respondents reported that their firms generated more than 40 percent of global revenue in Africa-based markets.
Alexander Forbes managing director of emerging markets, Luendran Pillay, said the company had grown outside South Africa, but that growth was flat in the country. “South Africa is likely to remain the most important country in terms of providing stable earnings for our firm. However, there are only two markets that move the needle: Ethiopia and Nigeria,” said Pillay.
The report further found that 63 percent of respondents in the survey indicated that their firms achieved similar or higher margins from Africa-based operations in 2016 when compared with other regions of the world. Respondents roundly expected their firm’s operating margin to improve in 2017. Only 2 percent of respondents indicated that they expected an operational loss in the year, while 75 percent of responses indicate firms’ growth expectations in the region are realistic.
However, 40 percent of executives indicated that their firms were not investing at the correct rate to capture the available growth opportunities
Standard Bank’s head of corporate and investment banking, Victor Williams, said Africa continued to generate revenues for companies.