Where and how are Kenya CEOs investing in growth?

Investment decisions are a top-ranked agenda item among Kenya CEOs, according to analysis from PwC’s 14th annual CEO survey.

CEOs in Kenya are more confident than their peers in Africa or globally of revenue prospects over the next 12 months and three years. They have also been more focused on strategy change over the last two years, with 97% of them reporting strategy change over the time period.

Has this strategic focus paid off? How and where are CEOs investing in growth? These are some of the questions that PwC is asking panellists and guests on 19 May at an exclusive forum for the CEOs. The discussion will also feature in The Africa Business Agenda, a publication that PwC will release at the end of June summarising results from 201 CEO interviews and multiple panel discussions across Africa.

Among investment decisions, the survey indicates that 48% of CEOs in Kenya are much more focused on increasing their share in existing markets. Over 90% of CEOs in Kenya report that their current operating markets are in Africa, with 48% citing Western Europe. 87% of Kenya CEOs rank the market where they are based—Kenya—as offering high or medium potential for growth.

A smaller portion of Kenya CEOs—23%—ranks new geographic markets as an investment opportunity. All of these new geographic markets where CEOs anticipate growth are emerging markets, led by Africa and Asia.

Kuria Muchiru, Country Senior Partner, PwC Kenya, says:

“We are interested in why CEOs in Kenya are so focused on their existing markets. They clearly see investment opportunities and growth potential in Africa—particularly Kenya. What are the key success factors for growing a business in Africa—and in Kenya? Do they translate well in other emerging markets like Asia?”

CEOs in Kenya say that their revenues are primarily derived from consumers and businesses, with 81% of CEOs reporting that they derive more than a third of revenues from consumers and 58% saying their revenues come from businesses. Among this customer base, CEOs say that they anticipate that more will come from emerging markets and that customers will focus increasingly on price and value going forward.

Kuria says:

“CEOs say that consumers and businesses are driving their revenues, and these customers are overwhelmingly located in emerging markets—particularly Africa. How can CEOs invest strategically to reach consumers and businesses in Africa, as they become more price and value-sensitive?”

CEOs are also focusing on diversifying their restructuring activities. Over the last 12 months, 94% of them report implementing a cost reduction initiative while 54% say that they intend to do so over the next 12 months. More CEOs are planning to enter a new strategic alliance or joint venture, complete a cross-border merger or acquisition or outsource a business process or function over the next 12 months.

Kuria comments:

“High confidence may be a force behind a strategic shift away from cost reductions and toward alliances and M&A. It seems as though restructuring activities are balancing out somewhat—with a more equal focus on a variety of activities. We want to know more about this, and I look forward to exploring these and other issues with our panellists and guests next week.”

The 14th PwC Global CEO survey is based on 1201 interviews conducted from September to November 2010 with CEOs in 69 countries. 37% of CEOs polled lead companies with over $1bn annual revenues.

As part of the global CEO Survey, PwC conducted interviews with 201 CEOs in Sub-Saharan Africa, including 31 CEO interviews in Kenya. Results and insights derived from CEO interviews in Africa will be published by PwC in a report titled The Africa Business Agenda: Opportunities aligned in June 2011.