The world is at a crossroads. We are staring at an economic climate that is amongst the most challenging in our lifetime, and one that, from forecasts and projections, seems poised to remain so for the near future.
A publication by the Economist, ‘The World Ahead 2023’, mentions three shocks that strained the global economy in 2022 which are expected to continue in 2023. The first is varied geopolitical risks across almost every continent, involving both developed and developing countries. The second is energy and commodities, specifically, increasing energy demand, the pressing need for alternative sources of fossils and renewables, climatic impact, and fluctuation of commodity prices. The third is macroeconomic stability with 2023 forecasts already revised down for 95% of advanced economies and nearly 70% of emerging markets according to the World Bank Global Economic Prospects, which also forecasts the increased likelihood of a global recession in 2023.
Closer home in Africa, businesses are navigating challenges posed by these global shocks and internal factors, such as rising rates of inflation, higher borrowing costs, a volatile forex environment and adverse weather conditions. It is undoubtedly a precarious environment considering that the COVID-19 pandemic had aggravated the continent’s already strained economies. While Africa has continuously demonstrated resilience, there still lies a complex set of challenges on its path to economic recovery and growth.
Kenya echoes the global and continental situation. Last year, the country witnessed decelerated economic growth owing to amongst other factors, poor harvests and high commodity prices occasioned by the ongoing drought. Of concern for a long time, has been the country’s heavy debt burden which the new administration is seeking to address by ramping up tax collection to support its budget deficit. And with the recent proposal by the National Treasury to increase excise stamp fees for alcohol, juice, cosmetic products and even cigarettes, businesses, and Kenyans in general, are in for a bumpy ride. This macro environment points to an economically challenging future, and a, exacerbated business environment.
So, what next for businesses that are looking to survive and prosper?
From my perspective, innovation, collaboration, and reinvention will present opportunities and much needed positivity for businesses in 2023 and beyond. Why? Because the world needs continuous renewal. Is it achievable? Absolutely.
The post-COVID era is showing efforts to reignite growth across the globe and spur a new wave of innovation as companies and governments accelerate the embedding of sustainable business practices at the core of their business models. With digital transformation at the heart, businesses – big and small – are realising that it is not just about keeping up with evolving trends and best practices, but also staying ahead of the curve in meeting consumer needs. Thanks to technology, consumers are now more discerning, wanting to fully experience the brands they love, underpinned by ‘good’ business.
I am a firm believer of the adage that necessity is the mother of invention. The new normal has inspired us to look at things differently; with aspects previously unthinkable now being practical solutions. For example, few would have anticipated the accelerated normalisation of fully remote working and life in general.
To be today and future-fit, businesses will have to creatively tackle the challenge of maximising shareholder value, have a win-win exchange of value with employees, while also adapting to changing customer demands and expectations, new technology trends and regulatory changes that impact their operations. All the while, ensuring that ethics remain at the heart of this evolution.
To tie this all together and for collective prosperity, multi-stakeholder collaboration, especially between the business community and policy makers, will be critical. This approach was aptly alluded to by the anonymous African proverb, “if you want to go fast, go alone; if you want to go far, go together”. I firmly believe that it is the only way for businesses to not only survive but thrive, this year and into the future.
Ken is the Head of Trade at BAT East African Markets and a seasoned business leader based in Nairobi
