The general outlook of CEOs active on the continent has swung from “Afro-pessimism” to a “real Africa realism” and a desire to translate Africa’s abundant market opportunities into viable businesses, professional services firm PwC Africa territory senior partner Suresh Kana has told a media briefing.

Unpacking PwC’s ‘The Africa Business Agenda 2014’ report, released on Thursday, he revealed that CEOs in Africa were generally confident of growth on the continent and were now focusing on identifying “the next big thing” for the continent’s burgeoning consumer markets.

“With this dose of ‘Africa realism’, CEOs are now looking closely at how to make their strategies work, how to attract the right talent and building a culture of innovation. Central to this is building the trust agenda with governments,” he commented.

The report compiled results from 260 CEOs in Africa – including the likes of Transnet CEO Brian Molefe – and contained insights from business and public sector leaders from 18 countries, revealing that most CEOs in Africa felt confident about their approach to managing risk, despite some volatility and uncertainty.

“It is interesting to note, however, that CEOs are slightly more anxious about their prospects for growth over the short-term. Although 84% remained confident overall, only 40% said they were ‘very confident’.

“CEOs acknowledge that a lot more needs to be done in terms of transforming the continent’s potential for exponential growth into tangible business opportunities and are looking on multiple fronts for growth opportunities – for many, the search for growth will not be an easy task,” Kana asserted.

Africa-based heads of companies added that technical advancement had emerged as the continent’s most significant “megatrend”, driving investment into research and development (R&D) and resulting in higher levels of innovation.

Describing technology as a “game changer” on the continent, Kana noted that firms were now more than ever looking to identify “the right technology at the right time” by investing heavily in R&D.

“We are also seeing more use of technological innovation and products, with no less than 91% of African CEOs either recognising the need to change their investments or in the process of doing so,” said Kana.

Urbanisation and changing demographics on the continent also drove the business strategies of CEOs, who believed the accelerating migration of people from rural areas into cities was changing consumer behaviour and driving demand for improved hard and soft infrastructure.

“We think that some 400 new cities will be created in Africa by 2050,” he said.

Meanwhile, investors still viewed Africa as offering vast investment potential, but had become cognisant of the fact that the challenge now lay in translating the available opportunities into profitable businesses.

Further, the report revealed that confidence was on the rise among Africa’s CEOs, who were, in fact, more confident about their own companies’ growth than they were about their industries’ prospects.

While less than half were “very confident” about their company’s growth prospects in the short term, less than a third were “very confident” about industry growth.

Going forward, African CEOs indicated that they would be more actively looking for partners, while keeping an eye on costs.

Almost half planned to initiate a new strategic alliance or joint venture in the next 12 months, and nearly a third were anticipating an acquisition.

CEOs also wanted to increase their level of collaboration with government, which they hoped would now look to improve infrastructure, ensure financial sector stability and create a skilled workforce.

“CEOs, however, aren’t saying they’re sitting in isolation and expecting government to do all this on their own, they want more partnerships with the State. Tomorrow’s public body will need to act differently – African governments of the future will need to embrace a lot of public–private sector partnerships,” Kana outlined.

Tellingly, 45% of African CEOs believed their governments had, thus far, been ineffective in improving the country’s basic infrastructure, such as electricity, water supply, transport and housing. 

The report further showed that, for CEOs in Africa, government responses to overregulation, exchange rate volatility, the fiscal deficit and debt burdens, as well as inadequate infrastructure were key areas of concern.

Other areas of concern were the increasing tax burden, slow or negative growth in developed economies and the lack of stability in capital markets.

“But the report does show that 45% of CEOs say governments have effectively achieved the outcome of ensuring financial sector stability and access to affordable capital,” he noted.

Meanwhile, for 83% of CEOs in Africa, bribery and corruption was a significant and frustrating threat to business growth, which Kana dubbed “a tax on the poor”.

“An effective risk management approach requires organisations to think differently and the main challenge is good communication. By setting the tone from the top, boards and management can prioritise risk management and grow stronger, more resilient organisations,” he maintained.

While 83% of CEOs remained acutely aware of the lack of key skills on the continent, most expected to maintain or increase their company’s headcount over the next 12 months.

In addition, the competitive market for “top talent” influenced compensation, with many companies under significant pressure to match or exceed pay conditions among peer companies to recruit or retain top talent.

The survey of African CEOs was conducted between November last year and August this year, with most interviews being conducted face-to-face.