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African private businesses investing in digital tech to drive growth

GERT ALLEN
Companies want to have people on their boards who understand the benefits that can be realised from digital technologies

GERT ALLEN Companies want to have people on their boards who understand the benefits that can be realised from digital technologies

13th September 2019

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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African private businesses are optimistic about their prospects for growth over the next year and are investing in digital systems to support that growth, advisory and professional services multinational PwC Africa says.

The inaugural ‘Africa Private Business Survey’ surveyed 200 unlisted, privately owned retail, manufacturing and industrial companies with a yearly turnover of more than R150-million between February and April. It shows that 81% of businesses rated their profitability over the past three years as having been good or fairly good – directly comparable with private businesses surveyed in Europe (84%) and Middle East (63.6%).

However, African businesses stood out markedly from their European and Middle Eastern counterparts with regard to whether they were optimistic about growing their revenue over the next year, with 83% of African businesses indicating that they expected to grow their revenue, compared with 54% in Europe and 49.5% in the Middle East.

“Private businesses are aware of the long-term relevance of digitalisation and this helps to explain their optimism for future growth,” says PwC Africa private business leader Gert Allen.

When asked how relevant digitalisation and digital capabilities were to the long-term viability of the business, 81% of African companies said they were very relevant, which was in line with Europe and the Middle East.

The survey found that 25% of companies were set to invest more than 5% of their total expected investment into new digital technologies, mostly from their in-house resources or bank financing, with some considering private equity or venture capital.

While the emphasis falls on different digital technologies depending on the market, African businesses highlight process automation, the Internet of Things and product and service enhancement using digital technologies as their key focus areas.

“The differences in emphasis between Europe, the Middle East and Africa are partly due to more developed markets having already invested in some digital technologies, but 55% of African businesses surveyed are willing to invest between 3% and more than 5% of their total investment in new and emerging technologies to support their future growth and competitiveness,” he says.

However, the impact of the lack of suitable skilled personnel on turnover or turnover potential is also significant, with 64% of businesses indicating an impact on turnover of 5% and more.

This is similar to the results from the Middle East (87%) and Central and Eastern European countries (62%), but much higher than the results from European Union countries (49%).

Additionally, the expectations of the roles skilled staff have to fulfil in private businesses include providing information technology futureproof skills, developing digital business or service models and designing a digital strategy.

Businesses highlight potential internal barriers to digitalisation efforts as including cultural factors, albeit limited to older generations, and a lack of relevant knowledge, as well as costs. Further improving education to develop digital skills among the youth was seen as crucial to supporting African private business growth, says Allen.

“Accessing the right talent to realise the full benefits of digital technologies is important for businesses. About 64% of African businesses indicated that they had the right skills in-house, but an overlapping 54% noted that they aimed to access these skills through service providers.

“Significantly, 18% of responding businesses said they would collaborate with startup companies to access the skills,” says Allen.

PwC Africa associate director and member of the survey team Bernice de Witt highlighted that the survey revealed an appetite for digital change, including family-owned businesses.

“There is a logical fit to working together with technology startups, and we see this reflected in Europe and the Middle East,” confirms Allen.

Meanwhile, PwC’s survey found that the composition of 80% of boards has also changed to become more diverse to make them suitable for advising or supervising companies undergoing digital change.

This shows that companies want to have people on their boards who understand the importance of digital technologies and the benefits that can be realised from them.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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