Mention the acronym “ROI” and the concept of “return on investment” comes to mind. “ROI” - but in this case “Resilience, Optimism and Innovation” - also encapsulates responses of CEOs in Tanzania (“TZ CEOs”), 68 in number, to PwC’s 27th annual Global CEO survey carried out late last year which polled 4,702 CEOs in 105 countries (the survey results for which were shared at a global level in February 2024 and for Tanzania in March 2024).
Why resilience and optimism? Well, despite TZ CEOs seeing inflation and macroeconomic volatility as the most significant short term threats to economic growth, they nevertheless are very upbeat about Tanzania’s growth prospects, and even more so than a year ago, with 81% (prior year: 68%) expressing confidence in the local economy's growth in 2024. This optimism surpassed that of their global counterparts, who exhibited a more divided stance on their local economic prospects.
This optimism is mirrored in various recent growth projections for Tanzania, for example the Bank of Tanzania’s Monetary Policy Statement (February 2024) projects growth of 5.5% for 2024, and the Africa Development Bank’s (“ADB”) Africa’s Macroeconomic Performance and Outlook (January 2024) projects average growth of 6.1% over 2024 and 2025. The ADB report also projects that East Africa will be the fastest growing region in Africa (2024: 5.1%, 2025: 5.7%) - and so, given the deepening regional integration, this will also feed into greater local growth.
Against this background, it is perhaps no surprise that half the TZ CEOs expressed significant confidence in their company's revenue growth prospects for both the short term (next 12 months) and the medium term (next 3 years). Interestingly, countries within the East African Community (“EAC”) and Southern African Development Community (“SADC”) continue to be seen by TZ CEOs as very important for immediate revenue growth prospects, with Kenya continuing to top the list but Zambia and DRC gaining increasing prominence.
As for resilience, apart from inflation and macroeconomic volatility, other threats that are top of mind in the short term are cyber risks and geopolitical conflict. Of note is that TZ CEOs are displaying a growing awareness of cyber risks as a short-term threat, with 24% acknowledging high exposure compared to 18% in the previous year.
The need for resilience in the context of regulation also comes through with TZ CEOs citing the regulatory environment as the primary obstacle significantly inhibiting changes in how their companies deliver value, followed by infrastructural limitations and financial constraints. This theme of regulatory challenge is echoed in a number of recent reports. For example, the IMF Country Report for December 2023 states that “business reforms including streamlining bureaucratic procedures, simplifying the business regulatory regime, and enhancing regulatory transparency are crucial to promote private sector development” and notes that delays in implementing such reforms would risk sub-par medium term growth.
Climate change, and its implications for resilience, is particularly important for Tanzania’s economy. The majority of TZ CEOs are in the progress of implementing climate actions, and also expressed that buy-in from management or the board had minimal impact on their decarbonisation journey (indicative of a readiness at the executive level to support and drive decarbonisation initiatives). However barriers in decarbonising that were cited included bottom line impact as well as the lack of demand from external stakeholders.
When evaluating the long-term economic viability of their businesses, TZ CEOs are evenly split with half seeing their companies remaining economically viable for more than 10 years, while the other half (50%) anticipate viability for less than a decade. Innovation is seen as key to resilience. In this context, generative artificial intelligence (”AI”) is seen as a notable change driver, with 62% believing that generative AI will improve the quality of their products or services in the short term and 71% anticipating that it will significantly transform how their companies create, deliver, and capture value in the medium term.
And back to the acronym - but this time in the context of RoI (return on investment) - half of the TZ CEOs surveyed predict an increase in profitability and a 5% or more rise in revenue in the next 12 months attributed to the adoption of generative AI. So, if anything is clear, it is that innovation will be the foundation for resilience.
By David Tarimo, Country Senior Partner - PwC Tanzania
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