African private businesses are optimistic about their prospects for growth over the next year and are investing in digital systems to support that growth, advisory and professional services multinational PwC Africa said on Tuesday.

PwC’s inaugural ‘Africa Private Business Survey’, which surveyed 200 unlisted, privately owned retail, manufacturing and industrial companies with a yearly turnover of more than R150-million between February and April, showed that 81% of businesses rated their profitability over the past three years as having been good or fairly good – directly comparable to private businesses surveyed in Europe (84%) and Middle East (63.6%).

However, African businesses stood out markedly from their European and Middle Eastern counterparts with regard to whether they were optimistic they would grow their revenue over the next year, with 83% of African businesses indicating that they expect to grow their revenue compared to 54% in Europe and 49.5% in the Middle East.

“Private businesses are aware of the long-term relevance of digitalisation and this helps to explain their optimism for future growth,” said PwC Africa private business leader Gert Allen.

When asked how relevant digitalisation and digital capabilities are to the long-term viability of the business, 81% of African companies said it was very relevant, which was in line with Europe and the Middle East.

The survey found that 25% of companies were set to invest more than 5% of their total expected investment into new digital technologies, mostly from their in-house resources or bank financing, with some considering private equity or venture capital.

While the emphasis falls on different digital technologies depending on the market, African businesses highlighted process automation, the Internet of Things and product and service enhancement using digital technologies as their key focus areas.

“The differences in emphasis between Europe, the Middle East and Africa are partly owing to more developed markets having already invested in some digital technologies, but 55% of African businesses surveyed are willing to invest between 3% and more than 5% of their total investment in new and emerging technologies to support their future growth and competitiveness,” he said.

However, the impact of the lack of suitable skilled personnel on losses of turnover or unrealised turnover potential was also rated as significant, with 64% of businesses indicating an impact on turnover of 5% and more.

This is similar to the results from the Middle East (87%), but much higher than the proportion in European Union countries (49%) and Central and Eastern European countries (62%).

Additionally, the expectations of the roles skilled staff have to fulfil in private businesses include information technology future-proof skills, developing digital business or service models and designing a digital strategy.

Responding businesses highlighted potential internal barriers to digitalisation efforts as including cultural factors, albeit limited to older generations, and lack of relevant knowledge, as well as costs. Further improving education to develop digital skills among the youth was seen as crucial to supporting African private business growth, said Allen.

“Accessing the right talent to realise the full benefits of digital technologies is important for businesses. About 64% of African businesses indicated that they had the right skills in-house, but an overlapping 54% noted that they aimed to access these skills through service providers.

“Significantly, 18% of responding businesses said they would collaborate with start-up companies to access the skills,” said Allen.

PwC Africa associate director and member of the survey team Bernice de Witt highlighted that the survey revealed an appetite for digital change, including family-owned businesses.

“There is a logical fit to working together with technology start-ups, and we see this reflected in Europe and the Middle East,” confirmed Allen.

Meanwhile, PwC’s survey found that the composition of 80% of boards had also changed to become more diverse to make them suitable for advising or supervising companies undergoing digital change.

This shows that companies want to have people on their boards who understand the importance of and benefits that can be realised from digital technologies.

“The survey results indicate two things: Africa sees an opportunity to catch up in terms of digital technologies, but also businesses recognise the need to invest in these technologies to compete against rivals from within and beyond the continent.”