Dion Shango, CEO of PwC Southern Africa, says: “CEOs’ optimism in South Africa is more tempered
37 per cent compared to 45 per cent of CEOs globally are slightly more confident about their own company’s prospects for revenue growth over the next three years
- 22per cent of SA’s CEOs are ‘very confident’ of their own company’s growth in the next 12 months;
- 37per cent of CEOs in SA are ‘very confident’ about their own company’s prospects for growth over the next three years;
- US reinforce its lead on China as a target market for growth in 2018.
- Over half of CEOs globally expect their headcount to increase.
Worldwide the majority of CEOs are optimistic about the economic environment amid geopolitical uncertainty, corporate misconduct and the impact of artificial intelligence on the future job market. This is according to one of the key findings of PwC’s (www.PwC.com) 21st survey of 1,293 CEOs around the world.
Fifty-seven per cent of global business leaders say they believe global economic growth will improve in the next 12 months. This percentage is almost twice the level of last year (29per cent) and the largest ever increase since PwC began asking about global growth in 2012.
CEOs in South Africa are less confident than their global counterparts regarding their growth prospects in 2018. Only 22per cent of CEOs in South Africa are “very confident” of their company’s own growth in the next 12 months – 20 points below the global average (42per cent). However, South African CEOs – 37per cent, compared to 45per cent globally are slightly more confident about their own company’s prospects for revenue growth over the next three years. In addition, 37per cent of South African CEOs also expect global economic growth to improve in the next 12 months – 20 points below the global average.
Commenting on the survey results, Dion Shango, CEO of PwC Southern Africa, says: “CEOs’ optimism in South Africa is more tempered than that of the developed economies, especially regarding their own organisations’ prospects for revenue growth. The state of the economy, unemployment and political uncertainty, among other issues, are casting a shadow over business expectations.” Looking at the results by country, it’s a mixed bag.
CEOs’ outlook improved in several key markets, including in Australia (up 4per cent to 46per cent) and China (up 4per cent to 40per cent), where the share of CEOs saying they are “very confident” in their own organisation’s 12-month growth prospects rose.
In the US, CEOs’ confidence has recovered. After the US general election last year, the early focus on regulation and tax reform by the new administration has seen confidence in business growth prospects for the year ahead rising significantly – from 39per cent in 2017 to 52per cent in 2018. North America is the only region where a majority of CEOs are “very confident” about their own 12-month prospects.
In the UK, with Brexit negotiations only recently reaching a significant milestone, business leaders’ drop in short-term confidence is unsurprising (2018: 34per cent vs. 2017: 41per cent).
The global survey results, based on interviews with almost 1,300 CEOs from 85 countries, were released at the World Economic Forum annual meeting in Davos yesterday. In South Africa 41 CEOs from a broad spectrum of listed and privately-owned companies participated in our online survey.
Top countries for growth
CEO confidence in the US market extends overseas, with non-US based CEOs once again voting it the top market for growth in the next 12 months. This year, the US reinforces its lead on China (46per cent US verse 33per cent China, with the US lead over China up 2per cent compared with 2017).
Germany (20per cent) remains in third place, followed by the UK (15per cent) in fourth place, while India bumps Japan as the fifth most attractive market in 2018.
South African CEOs named the US (32per cent), the UK (27per cent), and China (24per cent) as the three most important countries for their organisation’s overall growth prospects over the next 12 months.
Threats to growth: CEOs fear wider societal threats they can’t control
CEOs across the world are increasingly concerned about broader societal threats – such as geopolitical uncertainty, terrorism, the rise of populism, and climate change – in addition to direct business risks such as cyber threats and the speed of technological change.
South African CEOs’ concerns around a broad range of business, societal and economic threats have risen. CEOs are “extremely concerned” about social instability (South Africa: 98per cent ; Global: 73per cent ); over-regulation (South Africa: 93per cent ; Global: 83per cent ); unemployment (South Africa: 93per cent ; Global: 50per cent ); uncertain economic growth (South Africa: 93per cent ; Global 74per cent ); exchange rate volatility (South Africa: 90per cent ; Global: 70per cent ); and populism (South Africa: 88per cent ; Global: 77per cent ).
Of business threats, 37per cent of South Africa CEOs (compared to 38per cent globally) said they were “extremely concerned” about the availability of key skills, 41per cent (compared to 40per cent globally) cited cyber threats, and 32per cent (compared to 38per cent globally) stated the speed of technological change as concerns.
It is notable that 22per cent of South African CEOs (compared to 14per cent globally) stated that they are “extremely concerned” about potential ethical scandals. This comes in the wake of a growing number of firms that have suffered reputational damage in the past year because of ethical lapses.
In addition, 39per cent of South African CEOs (Global: 32per cent ) believe that changes in core technologies of production or service provision, such as artificial intelligence, will be very disruptive for their business over the next five years. A fifth of South African CEOs (20per cent), compared to 23per cent globally, think that changes in industry regulation will also be very disruptive to businesses over the next five years.
A year after the Paris Agreement was signed by 190 nations, which saw countries commit to voluntary action on climate change and low carbon investment, CEOs’ concern about the threat of climate change and environmental damage to growth prospects has now doubled to 31per cent of global CEOs (South Africa: 24per cent ).
Driving corporate growth
This year, 80 per cent of South African CEOs (compared to 79 per cent globally), plan to expand by way of organic growth in the next 12 months. In addition, 56 per cent of CEOs (compared to 47 per cent globally) plan to enter into a new strategic alliance or joint venture, and only 44 per cent (compared to 42 per cent globally) propose a new M&A. Fifty-nine per cent of local CEOs (compared to 62 per cent globally) plan to implement a cost-reduction initiative.
Jobs and digital skills
It is notable that 37per cent of South African CEOs –compared to 58per cent in 2016 – plan to increase their headcount in 2018, while 54per cent of global CEOs plan to increase their headcount. In addition, only 18per cent of CEOs globally, compared to 22per cent of CEOs in South Africa, expect to reduce their headcount. Two-thirds of South African CEOs say this is mainly due to automation and other technologies.
On digital skills specifically, over a quarter (28 per cent) of CEOs are extremely concerned about their availability within the country they are based, rising to 49 per cent being “extremely concerned” in South Africa, 51 per cent in China and 59 per cent in Brazil.
Investments in modern working environments, learning and development programmes and partnering with other providers are the top strategies being pursued by CEOs to help them attract and develop the digital talent they need.
Impact of technology on employment and skills
While recent research by PwC found that workers were optimistic about technology improving their job prospects, CEOs admit that helping employees retrain, and increasing transparency on how automation and artificial intelligence (AI) could impact jobs is becoming a more important issue for them.
Two-thirds of CEOs globally, compared to 67 per cent in South Africa, believe they have a responsibility to retrain employees whose roles are replaced by technology. In order to prepare for the digital age the majority of CEOs (91 per cent) compared to 90 per cent of CEOs in South Africa, strongly agree that they need to strengthen soft skills such as teamwork and communication alongside digital skills.
More than two-thirds of South African CEOs say they are taking action on a number of fronts – ranging from the way they work, to engaging external service providers and improving remuneration and training for their staff.
Trust and leadership: CEOs divided over whether future economic growth will benefit the many or the few
Echoing the theme of the World Economic Forum this year, CEOs acknowledge that we live in a fractured world. They are divided over whether future economic growth will benefit the many or the few. They see the world moving towards new, multifaceted metrics to measure future prosperity.
Shango comments: “CEOs across every region and country recognise that the world is moving away from measuring prosperity primarily through financial measures (e.g. GDP) and towards a more integrated approach that ‘measures prosperity through multifaceted metrics (e.g. quality-of-life indices).” Defining those metrics and capturing the data to accurately measure them will be a priority item on the business agenda in the coming years.
Examining the key challenges to trust for businesses, 60per cent of CEOs globally admit that delivering results in shorter periods of time (South Africa: 71per cent) is a challenge. There has also been a significant shift with the majority reporting higher levels of pressure to hold individual leaders to account (Global: 51per cent; South Africa: 83per cent), including for misconduct. Over a third report more pressure from employees and customers to take political and social stances (Global: 38per cent; South Africa: 78 per cent).
PricewaterhouseCoopers LLP (PwC)