Despite its current economic challenges, Nigeria will be the number one market on the continent for business across sectors by 2021, overtaking South Africa, which currently holds the top spot, a survey by the Economist Corporate Network has predicted.
The study entitled, “Dampened growth, resilient optimism: the 2016 African Business Outlook Survey” stated, “Nigeria’s importance as a primary market is expected to increase over the next five years, while South Africa’s expected to decline.”
According to the report, despite Africa’s slowing economic growth, soft commodity prices and the negative impact of monetary policy tightening in the US, investors still prefer the continent. Director of The Economist Corporate Network in Africa, Herman Warren, said in a statement that executives indicated that their firms were looking through the current economic slowdown.
“There was a clear view that the region’s contribution to their firms’ revenue is set to increase over the next six years, and Nigeria, for example, will be the top market for business across sectors by 2021. Currently, South Africa holds the top spot,” added Warren. The study pointed out that Africa attracted a number of international investors largely due to its rising narrative.
“Africa remains one of the fastest growing economic zones in the world. In 2016, the region’s Gross Domestic Product (GDP) is forecast to grow 2.4 per cent,” the report stated.
It also shed light on how global firms’ African operations performed financially in the last year, executives’ expectations for commercial performance over the next five years, where their firms are investing, which markets excite them the most and the challenges they’re facing operating in the region. The study found that 37 per cent of respondents said African operating margins were higher or significantly higher than their firm’s global averages.
The report, which gathered insight from over 120 senior executives responsible for Africa- based commercial operations, also found that over 50 per cent of respondents said their firms will invest more in their Southern, East and West Africa-based operations.
It noted that 21 per cent of respondents were expecting Africa-based revenue to comprise between 11 per cent and 40 per cent of sales by 2021. “Around 31 per cent of executives reported profits sourced from the region were largely in line with their firms’ global averages.
Thirty-seven per cent, however, indicated that Africa- based profit margins were higher than those generated by their firms’ operations in other regions,” the study said. However, it revealed that executives cited a number of operational challenges that they contend with in the region. These include corruption, lack of appropriate skills, bureaucracy, regulatory hurdles, infrastructure deficits and personal safety.