Kathy Gibson reports – African CEOs are more optimistic than they were last year, although there are still many challenges that need to be overcome.

This is the main takeaway of the Africa’s findings of PwC’s 24th annual Global CEO survey, according to Dion Shango, CEO of PwC Africa.

A massive 68% of African CEOs believe growth will improve in 2021, he says. Their optimism extends to their own company’s performance with 30% very confident about their organisations’ prospects for revenue growth over the next year, which is a significant rebound from 2020.

They are also more aware of the anger of cyber-crime – and this is now right at the top of the board agenda, Shango says.

He points out that many organisations have been caught off-guard by attacks, not really knowing how to deal with them.

The cyber threat was an extreme concern for 54% of Africa CEOs, up from 38% in 2020.

Climate change is still a concern, although it has slipped to 22% of African CEOs from 30% last year.

Overall, global economic growth looks positive, according to African CEOs, with 68% thinking it will improve, 8% saying it will stay the same, and 24% thinking it will decline.

This is despite the fact that we are still in the grip of the pandemic, although African CEOs are slightly less optimistic than their global counterparts, where 76% believe the economy will improve.

Lullu Krugel, group economist at PwC, says it is heartening to see how much the outlook has improved. “But bear in mind,  there is a diversity of concerns across the continent. For instance, Nigeria and South Africa experienced a bigger impact because of the integration of those economies.

“The improvement will also depend on where the economies were before Covid. Where they were reasonably diversified, the recovery should be quicker.”

She also sounds a warning to African businesses about seizing opportunities.

“If you speak to business leaders in the rest of the world, everyone is looking for growth opportunities and where they are going to invest. With the slightly more pessimistic outlook of African leaders, we must be careful this doesn’t stop us from spotting the growth opportunities.

“So as African business we must be careful not to miss out of opportunities, or reading ourselves for opportunities from the rest of the world.”

Shango adds that the new optimism comes off a global recession in 2020, so the scale and quantum of optimism in 12 months is encouraging. Africa needs to rise on that optimism to accelerate our own recover.

CEOs are more optimist about their own organisations’ growth prospects, with 30% believing their revenue will grow in the next 12 months, and 42% anticipating growth over the next three years.

As regards industry, global CEOs in the technology (45%), healthcare (44%) and telecommunications (43%) sectors are most confident about their short-term growth.

They are followed by asset and wealth management (42%), pharmaceutical and life sciences (41%), metal and mining (39%), retail (37%), energy 37 and automotive (37%).

The industries that are least optimistic are forest, paper and packaging, hospitality and leisure, ad transportation and logistics.

Prospects for employment is concerning: while 42% of African CEOs expect to increase their headcount over the next 12 months, compared to 24% that expect it to stay the same, 34% anticipate a decline.

With South Africa’s unemployment rate now nudging up to 36%, the possibility that 34% of companies will reduce their headcount is not positive news.

Indeed, the percentage of companies expecting to reduce staff is the highest in the survey’s history.

African CEOs are prioritising performance management, the health and wellbeing of their workforces, and workforce engagement.

A massive 44% of CEO believe their approach to performance management will have the greatest impact on organizational competitiveness, followed by workforce wellbeing at 36%, workforce engagement at 36%, focus on skills and adaptability (34%) and workplace culture (34%).

When it comes to growth, and where CEOs see the greatest opportunities, operation efficiency is top of the list (78%), followed by organic growth (64%) and launch of new products or services (50%).

Further down the list are strategic alliances (38%), collaboration with startups (26%), new markets (22%) and selling a business (12%).

There are a number of threats that may hinder the expected growth, topped by policy uncertainty (60%), which is the threat of most concern to African CEOs.

This is followed by tax policy uncertainty (56% – up seven places from last year), cyber threats (54% – up six places from 2020), over-regulation (48%), pandemics and health crises (48%), increasing tax obligations (46%), inadequate basic infrastructure (44%), social instability (44%), unemployment (44%) and uncertain economic growth (42%).

Digital spending is top of CEO’s agenda when it comes to new investments, with 52% of them planning to use digital transformation over the next three years to adapt after the Covid crisis.

Meanwhile, 48% of then plan to start initiatives to realise cost efficiencies, leadership and talent development (46%), cyber security and data privacy (32%), R&D and product innovation (32%), organic growth programmes (24%), sustainability and ESG initiative (22%), capital investments (18%), advertising and brand building (16%) and supply chain restructuring (14%).

Due the pandemic, CEOs will increase their focus on risk, including reassessing their own organisation’s tolerance for risk.

Among the areas they will focus on are reassessing risk tolerance (36%), preparing for systemic risk and low probability, high impact events (34%), digitising their risk management function (30%), collaborating with supply chain partners to collectively manage risk (16%), taking on aspects of risk mitigation traditionally managed by government and multinationals (10%).

Just 51% of African CEOs have factored climate change into the strategic risk management, says Shirley Machaba, CEO of PwC Southern Africa.

The risks they have factored in are pandemics and other health crises (64%), cyber threats (64%) ,uncertain economic growth (62%), exchange rate volatility (58%), key skills availability (56%), changing consumer behaviour (56%), increasing tax obligation (56%), speed of technological change (52%), supply chain disruption (50%).

This is despite the fact that Africa faces a major threat form climate change, according to the INFORM Risk Index, Machaba points out.

With tax and tax policy uncertainty still a major concern for 56% of African CEOs, most are worried about the possibility of increased tax obligations (82%), adds Krugel.

This might lead them to reconsider their organisations’ cost structure (74%), impact their organisations’ decision-making and planning (66%), reconsidering their workforce strategy (56%) or reconsidering their global footprint (22%).