Capital budgeting techniques employed by state owned enterprises in Africa

De Jager, Gabriel
Journal Title
Journal ISSN
Volume Title
This study researches the capital budgeting techniques employed by decisionmakers in state-owned enterprises (SOEs) in Africa. A literature review revealed that limited previous research was performed on the specific topic, although capital budgeting techniques of private companies were extensively researched. Based on these shortcomings, a knowledge gap was identified. The research performed will seek to address this gap to some extent, by collecting and discussing primary data from African SOEs. The results revealed that a substantial number of African SOEs make use of DCF techniques such as NPV (44 percent) and IRR (33 percent) in investment evaluation. Project implementation was highlighted as being the most important (67 percent) and also the most complex (56 percent) step in the capital budgeting process of African SOEs. The majority of respondents (89 percent) indicated that they do consider the assessment of risk in capital project budgeting and that scenario analyses is preferred by 78 percent of respondents. Qualitative (non-financial) factors are always a consideration in the capital budgeting process of African SOEs with environmental factors and service delivery being rated the highest. It was observed that employment creation was almost never a consideration in 44 percent of responses. The most important take-away from the study is that decision makers in African SOEs do make use of sophisticated capital budgeting techniques. It is however of concern that non-DCF techniques are used, especially in smaller organisations. For future research, it is recommended that a larger sample number of African SOEs are included. Also consider including the state-owned institutions that provide funding for capital investment in Africa.
Thesis (M.M. (Finance & Investment)--University of the Witwatersrand, Faculty of Commerce, Law and Management, Wits Business School, 2017.
De Jager, Gabriel (2017) Capital budgeting techniques employed by state owned enterprises in Africa, University of the Witwatersrand, Johannesburg, <>