Graft tops list of political concerns for East Africa’s finance bosses

Kenya: Corruption and its impact on doing business is the top political concern for chief financial officers in the East African region, a new survey has shown.

The 2014 Deloitte East Africa CFO Survey found that after corruption, 52 per cent of finance bosses rated effectiveness of Government spending priorities and policy dialogue as their second and third political concerns, respectively.

Respondents seemed noticeably unconcerned about the quality of education systems and the threat of nationalisation, with only 5 per cent and 4 per cent, respectively, ranking these among their top three political concerns.

Defensive strategies

Despite the buoyant economic mood in the region, East African finance chiefs are exhibiting a bias towards defensive business strategies.

The survey, which is in its second year, found 88 per cent of respondents are focused on improving operational efficiencies, with 79 per cent intent on growing their customer base.

“What may seem like conservatism at first glance could merely be a symptom of East Africa’s corporate leaders wanting to maintain efficiency in the face of rapid growth and greater foreign competition,” the report reads in part.

Despite their generally positive mood, CFOs in East Africa are cautious on where to deploy cash. Half of the finance bosses favour retaining it for liquidity, while 65 per cent are intent on using it to improve current operations.

Investing in new capacity was ranked by 47 per cent of respondents among their top three priorities, while payments to shareholders were deemed least preferable, a sentiment expressed by CFOs across the globe.

“Only 24 per cent of East African CFOs ranked investing in Africa among the top three most important uses of cash, supporting anecdotal evidence that companies in this part of the continent prefer to expand within their region.”

Strategic defensiveness is even more prevalent in Southern Africa, where 71 per cent of CFOs are focused on improving current operations.

Expansion plans

East African CFOs are increasingly bullish about expanding into the East African region and the rest of Africa, with one in three saying they had recently ventured into other parts of the continent, and 57 per cent indicating they would do so in the near future.

Half of all East African CFOs expect the region’s economy to expand between 5.1 per cent and 9 per cent this year, with a further 11 per cent predicting growth of 10 per cent or more. This is contrary to market analysts and economists who generally expect growth of around 5 per cent.

The finance bosses took issue with the cost of money, with seven out of 10 describing the cost of capital in their region as either fairly expensive or very expensive. That compares to just four out of 10 of South African CFOs who regard the cost of capital in Africa’s second-largest economy as either fairly or very expensive.

Respondents were polled over the course of seven weeks between May and June 2014, with the average number of years in their current roles being 7.6 for East African CFOs.