> PwC South Africa:
Optimism of South African CEOs is on the Wane Amid Economic Uncertainty By Shirley Machaba CEO for PwC Southern Africa
As we enter a new decade, CEOs are showing record levels of pessimism in the global economy, with 53 percent predicting a decline in the rate of economic growth in 2020.
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his is up from 29 percent in 2019, and just five percent in 2018. These are some of the key findings of PwC’s 23rd annual survey of almost 1,600 CEOs from 83 countries, launched at the World Economic Forum Meeting in Davos. No matter the vantage point, the path ahead is filled with uncertainty. Since 2012, when CEOs were first canvassed about the prospects for growth in the coming year, the share of CEOs predicting a decline has never reached 50 percent. The number of CEOs who believe global economic growth will improve in 2020 dropped by a record share from 42 percent to 22 percent. CEOs in South Africa are also pessimistic about the rate of global economic growth, with 44 percent (compared to 35 percent in 2019) believing that it will decline over the next 12 months. This survey focuses on CEO insights in growth, technology, regulation and climate change. CEOs’ CONFIDENCE DECLINES Globally, CEOs are less positive about their own companies’ growth prospects, with only 27 percent saying they are “very confident” — the lowest level since 2009, and down from 35 percent last year. CEOs in South Africa are more pessimistic than their global counterparts. Only 14 percent are “very confident”, compared to 18 percent in 2019 – 13 points below the global average (27 percent). Despite a decline in optimism, South African CEOs – 78 percent compared to 56 percent globally – are more confident about their own company’s prospects for revenue growth over the next three years. While confidence levels are generally down across the world, there is a wide variation from country to country, with India and China showing the highest levels of confidence among major economies at 45 percent and 40 percent respectively. The US sits at 36 percent, Canada at 27 percent, the
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"CEOs in South Africa are also pessimistic about the rate of global economic growth, with 44 percent believing that it will decline over the next 12 months." UK 26 percent, Germany 20 percent, France 18 percent. Japan has the least optimistic CEOs with just 11 percent “very confident” of growth. CONSTRAINTS TO GROWTH The overall uncertainty has moved to the fore in the survey’s ranking of threats to growth prospects. Although over-regulation remained the top perceived threat, CEO concerns over uncertain economic growth rose from number 12 on the list of fears to number three — just behind trade conflicts. In 2019, uncertain economic growth didn’t even make the top 10 list of threats in North America, western Europe and CEE; it barely registered at number 10 in Asia-Pacific. In South Africa, CEOs’ concerns around a broad range of business, societal and economic threats have risen. Chief among them: uncertain economic growth (South Africa: 75 percent; global: 33 percent); policy uncertainty (South Africa: 67 percent; global: 33 percent); social instability (South Africa: 67 percent; global: 18 percent); over-regulation (South Africa: 53 percent; global: 36 percent) and populism (South Africa:44 percent; global: 27 percent). Of business threats, 42 percent of South African CEOs (compared to 32 percent globally) said they were “extremely concerned” about the availability of key skills, unemployment (South Africa: 50 percent; global: 28 percent); 22 percent (compared to 56 percent globally) cited cyberthreats, and 36 percent (15 percent globally) identified volatile energy costs as top concerns. Due to ongoing trade conflicts, China has shifted its growth strategy to alternative territories. Forty-five percent of China CEOs now looking to Australia as a top-three key growth market (nine percent two years ago). CFI.co | Capital Finance International
The top three countries that South African CEOs consider most important for growth are Namibia (19 percent), Australia, Botswana, and the UK (14 percent); and Kenya (11 percent). POLICING CYBERSPACE Technologies that leverage big data, such as AI, robotics, and the Internet of Things (IoT), are driving the Fourth Industrial Revolution. Globally and nationally, regulators and policymakers are contemplating legislation around social media and data privacy. The spotlight has been placed on data privacy — largely driven by the EU’s General Data Protection Regulation (GDPR). This year CEOs were asked to think about the future — 2022 and beyond — and whether they thought governments would intervene in regulating the technology sector. Globally, 78 percent of CEOs (71 percent in South Africa) believe that governments will regulate content on internet and social media to break up dominant tech companies. And 51 percent of global CEOs (South Africa: 50 percent) predict that governments will compel the private sector to financially compensate individuals for personal data. Most CEOs (global: 83 percent; South Africa: 75 percent) stated that the increasing complexity of cyberthreats is shaping their businesses, followed by growing public concern over data privacy (global: 61 percent; South Africa: 48 percent), and vulnerabilities in supply chains and business partners (global: 61 percent; South Africa: 48 percent). Many countries will no longer tolerate selfregulation. CEOs will need to collaborate with governments to shape appropriate solutions that deploy technology and safely leverage data. THE UPSKILLING CHALLENGE The Fourth Industrial Revolution has seen the formation of new business models and new ways of working that require critical technical, digital and soft skills. All over the world these skills are short in supply.