Why most CEOs are cautious about hiring new staff

NAIROBI, KENYA; Job seekers across the East African region will have to wait a little bit longer as companies are embracing cautious approach in hiring new staff.

At 53 per cent, majority of company bosses across the East African region are waiting to achieve certain growth targets before hiring new skills as opposed to 47 percent who are hiring new skills regardless of future growth targets.

According to KPMG’s 2018 East Africa CEO outlook, a large majority of East African company heads anticipate moderate increases in both revenue and headcount over the next three years.

Three-quarters anticipate top-line revenue growth for their organisation of two percent or less, while the same proportion expect headcount to increase by less than five percent.

“The majority of East African CEOs anticipate moderate increases in both revenue and headcount over the next 3 years. This is consistent across all five countries and presents a slightly more cautious outlook on growth rates than that of global CEOs.,” indicates KPMG in 2018 East Africa CEO Outlook.

“This conservative approach may however affect an organisation’s ability to not only adapt to change, but to lead this change in the future,” report says.

When asked about the most important strategies to drive growth over the next three years, East African CEOs are looking primarily at strategic alliances with third parties (27 percent) and organic growth (25 percent).

Four in 10 Kenyan CEOs in the survey see strategic alliances as most Important while three in 10 Ugandan CEOs in the survey see merger and acquisition and organic growth as most important.

Tanzanian CEOs in the survey have similar priorities: four in 10 see organic growth as most important. Rwandan CEOs in the survey are employing a range of strategies, although none identifies strategic alliances as most important.

On the other hand, Ethiopian CEOs in the survey give equal priority to organic growth, strategic alliances, and outsourcing.

16 percent of global CEOs cite pure merger and acquisition (M&A) as their most important growth strategy against 18 percent in East Africa.

However, joint ventures - a form of M&A are also gathering momentum, with 16 percent of East African CEOs citing them as source of growth, compared to 13 percent of global CEOs.

60 percent of the respondents in Kenya mentioned that they are unlikely to make any acquisition in the next three years.

This is likely due to a lack of strong balance sheets given the tough trading environment experienced in 2017.

The year was characterised by political uncertainties in the aftermath of the national Kenyan general elections, and a private sector that was crowded out by the government’s election spending.