PwC South Africa
Most African business leaders are more optimistic about the strength of the global economy and their organisations’ ability to grow revenues in the next 12 months than they were a year ago.
Although CEOs’ confidence in their own company’s revenue prospects has rebounded, they are anxious, too: policy uncertainty, tax policy, cyber threats and over-regulation are keeping them awake at night.
These are some of the key findings from the 8th edition of PwC’s Africa Business Agenda 2021 report launched today.
Sixty-eight percent of CEOs in Africa say they believe the global economy will improve during the next 12 months. This marks a significant rebound from our annual global CEO survey in 2020, when only 20% of CEOs in Africa expected improved growth.
CEOs’ optimism about a rebound in the global economy, however, does not translate into improved expectations about the short-term prospects of their own businesses. So, while CEOs in many countries contemplate vaccine rollouts and look forward to the resumption of some form of ‘business as usual’, those in Africa are a lot more guarded. This is reflected in our survey findings where 30% of Africa CEOs are very confident about their company’s growth prospects in the next 12 months, compared to 36% of global CEOs. There is, however, a notable improvement in optimism over the medium term with 42% of CEOs in Africa saying they are very confident about their revenue growth prospects over the next three years.
Commenting on the survey findings, Dion Shango, CEO for PwC Africa, says:
“In Africa, economic and policy uncertainty, among other issues, have cast some doubt upon business leaders’ hopes for their own companies’ immediate growth prospects. Although there is a drop in optimism over the short-term, African business leaders do see some opportunities on the continent – but overall, they are playing it safe.
“The reasons for this gap in confidence vary from African countries still being at an earlier stage of the pandemic life cycle to uncertainty about governments’ COVID-19 response and policy direction in its aftermath.
“Despite the current uncertainty, many African business leaders have found that the COVID-19 pandemic has also unleashed extraordinary energy, creativity and resourcefulness within their organisations. We can expect to see a continuation of accelerated digitalisation brought to the fore by the pandemic, which promises productivity, data-driven insights and other business benefits, but at the same time increases the threat of cyberattacks and the spread of misinformation.”
The Africa Business Agenda draws on the results of PwC’s 24th Annual Global CEO Survey of 1,779 interviews in 100 countries, including 50 CEOs from 14 African countries.
As business leaders adapt to the current circumstances and prepare for the anticipated rebound, a critical question will be: which management approaches should businesses retain from the rapid response mode most of them embraced during 2020?
Fast, high-quality decision-making — a hallmark of many companies’ pandemic responses — will be on the top of most leaders’ ‘keep’ lists. Priorities include ensuring top management is focused on the big issues that matter most, engaging with people up and down the organisation, revisiting critical decisions frequently, and pushing to understand unintended consequences.
Main risks to doing business in Africa
Despite their confidence, CEOs are acutely aware of threats in the external environment. But unlike their global peers — 52% of whom recognise pandemics and other health crises as the number one threat this year — CEOs in Africa are more concerned about the perennial challenges of policy uncertainty (Africa: 60%; Global: 38%) and tax uncertainty (Africa: 56%; Global: 31%) , over-regulation (Africa: 48%; Global: 42%) and the fast-evolving reality of cyber threats (Africa: 54%; Global: 47%) . In fact, pandemics and other health crises are the only threat African CEOs are less worried about than their global peers (Africa: 48%; Global: 52%).
Shirley Machaba, CEO for PwC Southern Africa, comments:
“Overall, the sheer magnitude of concern about most threats has increased since our 2020 survey, despite CEOs’ rise in confidence. Among CEOs in Africa, navigating these perils is a permanent state of being, which conflicts with their inherent optimism. Navigating this tension is a perennial leadership challenge that currently seems to be particularly acute”.
Driving business growth
CEOs in Africa are taking a cautious approach by focusing on things they have more control over to drive profitability: pursuing organic growth (Africa: 64%; Global: 73%), seeking operational efficiencies (Africa: 78%; Global: 77%) and forming a new strategic alliance or joint venture (Africa: 38%; Global: 35%).
The COVID-19 pandemic has accelerated changes that many businesses were already starting to make in areas such as digital transformation and talent management. Just over half of CEOs in Africa (52% compared to 49% of global CEOs) plan to significantly increase (≥10%) their long-term investments in digital transformation. This is followed by initiatives to realise cost efficiencies (Africa: 48%; Global: 32%), leadership and talent development (Africa: 46%; Global: 24%), and cybersecurity and data privacy (Africa: 32%; Global: 31%).
Africa’s CEOs have to contend with the current issues of moving goods across the continent and getting funds out of the African countries in which they have invested. It’s, therefore, no surprise that three-quarters (74%) of CEOs in Africa are either somewhat concerned or extremely concerned (Global: 62%) about supply chain disruption.
It is also notable that many CEOs in Africa are not looking beyond their borders for growth. While 26% of CEOs cited the US and 16% cited China as important for their companies’ growth prospects in the next year, almost a quarter (22%) of African CEOs either don’t know or don’t believe any other country will be important to their growth prospects.
Dangers of online and digital environment
As much as it offers unprecedented opportunities to transform businesses and create value, the digital and online environment has fast become a major source of anxiety among business leaders across the world.
Now among the top three concerns in Africa, 54% of CEOs on the continent (Global: 47%) say they are extremely concerned about cybersecurity, up significantly from 38% last year. This response is likely influenced by the increase in high-visibility cyberattacks during 2020 and the normalisation of remote working in response to the COVID-19 pandemic, which has exposed many systems to attack.
The pandemic has highlighted the importance of people to organisational success. In this year’s survey, 42% of CEOs in Africa (Global: 34%) say they plan to increase headcount, up from 30% in the previous survey and a return to the long-term average. Over the next three years, 60% expect to increase headcount and 56% have explicitly factored the availability of key skills into their strategic risk management activities.
In contrast, those planning to reduce headcount in the next 12 months have increased to 34%, the largest percentage seen in the past eight years. This follows on the heels of the 46% of African CEOs who report that they have already reduced headcount in the past year.
Business’ role in society
When asked to prioritise the societal outcomes that business should help deliver, 68% of CEOs in Africa put the creation of a skilled, educated and adaptable workforce at the top of the list (Global: 61%). This was followed by workforce health and well-being and the provision of adequate physical and digital infrastructure.
African CEOs (72%) continue to be concerned about the availability of key skills, and a third of these express extreme concern.
A growing number of CEOs are seeking to boost their organisation’s competitiveness through digital investments in the workforce. In Africa, 24% aim to focus on productivity through technology and automation (Global: 36%), third more CEO than said the same in 2016. But productivity through automation threatens to leave some behind. One-in-five CEOs globally is extremely concerned about economic inequality as a threat to their growth prospects and that proportion climbs to 36% among African CEOs.
Tax policy uncertainty has made a notable rise on the list of threats (Africa: 32%; Global 56%). African CEOs also believe tax policy changes could have a far-reaching impact on their business, with 44% (Global: 38%) saying it could lead to them reconsidering their current cost structures. In addition, 38% of African CEOs (Global: 36%) say that changes to tax policy could increase their companies’ total tax obligations.
The climate change challenge
More surprising than the unexpected rise of pandemics on the threat lists of CEOs was the decline of climate change as a priority among CEOs globally and in Africa specifically. Last year, 30% of CEOs in Africa recognised climate change as an extreme concern. This year, this was down to 22% with African CEOs ranking climate change 22nd on a list of 31 potential threats about which they were extremely concerned. Furthermore, only 32% think reducing climate change and environmental damage should be priorities for businesses to help deliver in their home country and just 20% believe it should be a priority for their government. It is also concerning that 64% of African CEOs have not yet factored climate change into their strategic risk management activities.
“For CEOs running businesses in Africa, having the conviction that they can overcome the challenges they face and believing that things will get better, has sustained them through past and present difficulties, and will no doubt give them strength in the future.
Caution and optimism have gotten them this far, and despite the uncertainties, we believe now is the time for business leaders in Africa to drive growth from new possibilities, to take action, transform and move forward by adopting a leadership agenda to take on tomorrow.”