The world in 2050: high-growth economies

Every couple of years, PwC releases its long-term forecast for the global economy. The most recent edition, The World in 2050 has some significant predictions for countries in the Middle East and Africa.

While China is forecast to maintain its dominant position as the world’s largest economy, there is major movement predicted for Saudi Arabia, Nigeria, Egypt, South Africa and Turkey over the next three decades.

By 2050, Saudi Arabia is predicted to move from the 15th largest economy to the 13th largest (measured in gross domestic product by purchasing power parity, or PPP). Turkey will move from 14th to 11th by 2050. Egypt is predicted to make a significant jump, from 21st to 15th, while South Africa could move up two spots, from 29th to 27th.

But it’s Nigeria that shows the most capacity for growth.

“Nigeria has the potential to be the fastest growing large African economy and could move up the GDP rankings from 22nd place to 14th by 2050,” the report’s authors write.

Yet the report cautions: “Nigeria will only realise this potential if it can diversify its economy away from oil and strengthen its institutions and infrastructure.”

Countries in the Gulf Cooperation Council have already begun this diversification, aware that the halcyon days of oil production will not last forever. The Vision 2021 plan in the United Arab Emirates, as well as Vision 2030 for Saudi Arabia, are already changing the nature of both economies — a demonstration of new strategies for a changing world.

Dynamic and flexible operating strategies

Such change requires the ability to adapt and transform, on the part of governments and business. PwC makes a number of recommendations on how companies can position themselves for success in these markets, but the following struck me as critical:

• The need for agile operating models
• Technology that can be localised specific, regional needs
• The need to innovate

The need for agile operating models

‘finance agility’ is one of the key themes of the modern finance leader, revisited frequently in this publication. The reason is simple: research has shown that finance agility and positive revenue growth are intricately linked.

Oracle’s research with the American Institute of CPAs (AICPA), Agile Finance Revealed: The New Operating Model for Modern Finance, uncovered three main characteristics that identify an agile finance organisation:

• Greater efficiency through automation
• Better information to predict the future
• More influence to drive business outcomes

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In one of the most important outcomes of the research, we found that businesses with agile finance teams were significantly more likely to achieve positive revenue growth: 89 per cent of organisations with agile finance teams reported positive growth, versus 63 per cent of those with non-agile finance teams.

In developing nations like Nigeria, an agile operating model offers an even greater advantage. As PwC notes, volatility is characteristic of fast-growing economies; periods of rapid growth can be followed by periods of equally rapid decline, and changes in political regimes can impact the economy in unpredictable ways.

Companies that are operationally agile are much more able to respond to such volatility and change course accordingly. They can ride out the short-term uncertainties and ensure that their investments pay off in the long term.

It should be noted that the cloud is a key enabler of agile operations. Our research found that 45 per cent of agile finance teams have standardised their finance processes on cloud ERP, versus only 17 per cent of laggards.

Global business requires localised technology

For many companies looking to expand into new markets, it’s the tactical details related to localisation that get in the way. Saudi Arabia and the UAE, for example, have implement value-added tax (VAT) this year — and while many other countries have similar taxes, each one comes with its own nuances and regulatory requirements.

A truly global cloud can help such compliance issues become much less burdensome. Oracle Cloud applications, for example, are updated several times per year with the most current tax, payments, and accounting engines to meet a broad range of global business needs. Established cloud providers also offer more languages, currencies and country-specific rules than smaller cloud providers.

Then there’s the question of data sovereignty. Increasingly, many countries require customer data to be kept within the country in which the customer resides. Companies doing business in multiple countries must verify that their data exists only at permitted locations.

Just how easy that is depends on who your cloud provider is. With dozens of data centres in countries around the world, Oracle is helping our customers to comply with data sovereignty rules.

Innovating for success

Emerging technologies such as artificial intelligence/machine learning, blockchain, the Internet of Things, and others are poised to revolutionise the way that companies do business—automating the vast majority of routine tasks, so that highly skilled employees can focus on collaboration, analysis and decision support.

These technologies, and the high levels of automation that come with them, are only available in the cloud. On-premises systems simply cannot be changed or updated quickly enough to support the continuous onslaught of new capabilities.

Cloud software is updated several times a year by the provider, delivering new innovations rapidly, so organisations of all sizes can make data-driven decisions and respond quickly to volatile markets — such as those in developing nations and fast-growing economies.

Companies with a future-ready cloud, provided by a trusted innovation partner, will be well positioned to take advantage of whatever innovation comes next.

As you look toward the future of your business and develop long-term strategies, think about how the world will be different 10, 20 or 30 years from now. The highest growth might happen in countries where you haven’t yet thought of doing business.

High growth often entails high risk; yet with the right business models, technology, and trusted partners, you can ride out the ups and downs and reap a healthy return on your investment.

Arun Khehar is senior vice president for applications, ECEMEA, at Oracle