Africa is profitable, but half of firms say still considering leaving: why this contradiction?

This even though 69% indicated that profit margins were the same or higher than their firms’ global averages

IN February Barclays announced that it was to exit the African market, in a move analysts said was forced by economic slow downs and the extra risks of corruption on the continent, although the lender downplayed those concerns.

Despite sub-Saharan Africa remaining one of the world’s fastest-growing regions and all the “Africa rising” headlines speaking to Africa’s exponential growth and opportunities, Barclays isn’t alone in wanting to reduce Africa activity and to focus on other regions of the world. 

Around one-half of firms who have Africa-based commercial operations would consider relocating or reducing headcount across the region, this according to a new report from the Economist Corporate Network - “Dampened growth, resilient optimism”

A contradiction

It is a contradiction, because at the same time respondents on the whole reported that business in the region was worth doing. The majority (69%) indicated that profit margins were the same or higher than their firms’ global averages and well over 50% of respondents reported that their firms’ expectations of growth were realistic.

The report, based on a survey of 120 executives with responsibility for their Africa-based operations, found that there were several motivations for why operations were looking to be scaled down or moved - a challenging number of factors that Africa-based executives were no longer willing to navigate in order to try to grow and maintain their firms’ operations. 

Safety concerns featured across the region. However, safety was cited most prevalently as an area of concern in two regions: North and West Africa. 

Civil unrest and acts of terrorism that played out in a number of North African and West African countries may have influenced executives’ assessment. 

Not surprisingly, as was the case for Barclays bank, commercial outlook was cited as an area that may lead to relocation and/or reductions in head count. Respondents who commented on North, Central and Southern Africa registered the biggest concern regarding their firms’ commercial viability.

Lack of talent was cited as a noticeable concern by respondents for their operations in Central, East and West Africa. Talent availability featured as a significant concern across all regions with the exception of North Africa. 

Lack of appropriate infrastructure was cited as one of the significant impediments to business viability in Central, East and West Africa

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