No Match Found
In 2018, Egypt did not feature highly when we asked our CEOs to name the three most important foreign territories for their company’s growth over the next 12 months. In contrast, this year, 15% of Middle East CEOs named Egypt as their leading foreign market for potential growth in 2019, with only Saudi Arabia (28%) ranking higher.
Greater stability has put Egypt back on the radar for CEOs in the region. Its rise this year also highlights the country’s economic weight, with a population of more than 100m, and offers persuasive evidence that the government’s market reform programme is starting to register with regional investors. Egypt’s inflation rate remains high at more than 20%, yet the message from our survey is clear:
CEOs are cautiously optimistic about the country’s potential.
This was the first year that operational efficiency was included as a choice in the survey and it clearly made an impact. More than two-thirds (68%) of regional CEOs put “operational efficiencies” at the top of their list of planned activities to drive profitability in the next 12 months, just ahead of organic growth (62%). Both figures are slightly lower but broadly in line with the global results (77% and 71% respectively).
Some of the crude cost-cutting in the region in 2015-2017 had cut into muscle, and with improving economic conditions last year, some pressure came off. We are now seeing a far more strategic, fundamental look at efficiency within businesses, where they are looking to leverage technology to sustain a lower cost base.
There is one marked regional difference regarding how Middle East CEOs plan to tackle the challenge of streamlining their companies. More than double the proportion (43% vs 19%) of Middle East CEOs said they expected their headcount to decrease over the next 12 months, compared with the global survey. Some of our Middle East CEOs lead companies that are set to accelerate or embark on automation programmes, reducing employee numbers as a result. In addition, the higher proportion of CEOs expecting their payroll to shrink may reflect their short-term wariness about the economic outlook.
Middle East CEOs are markedly less pessimistic than their global counterparts about the potential impact of government red tape on performance. Around two-thirds (63%) of Middle East CEOs said “over-regulation” posed a threat to their organisation’s growth prospects, compared with 73% globally.
In one area – taxation – the anxieties of Middle East CEOs seem to have been partially eased. Last year, 85% of our CEOs expressed concern about an increasing tax burden over the coming 12 months, with the focus on the introduction of VAT in Saudi Arabia and the UAE. This year the proportion has dropped to 55%, suggesting that companies may have managed the transition better than they anticipated.