SA CEOs less confident about global economy

South African CEOs are less confident about global economy than their global counterparts

Confidence levels of South African chief executives over the global economy are below that of their global peers, the PricewaterhouseCoopers (PwC’s) 20th annual survey of worldwide CEOs has revealed.

The survey results were released at the World Economic Forum (WEF) in Davos, Switzerland on Monday. The survey is based on interviews with 1 379 CEOs from 79 countries and 36 CEOs in South Africa were interviewed. The findings were shared at a press briefing in Johannesburg on Tuesday.

It showed that only a third of South African CEOs are confident about the growth prospects of their companies for the next year. This is four points down from the previous year and five points below the global average of 38%.

READ MORE: Business confidence declines

Only 19% of CEOs expect global economic growth to improve in the next year, which is 10 points below the global average of 29%.

“CEOs remain cautious about the global economy,” said Dion Shango, CEO of PwC Southern Africa, who was speaking at a briefing. This is mainly linked to the uncertainty about growth of the global economy.

About 83% of CEOs are confident about their revenue growth in the next year.

The fact that this is above 80% shows that CEOs are confident revenue will grow and won’t fall or regress in any way, said Shango. In the medium term, CEOs are more optimistic and 97% are confident in revenue growth.

South African CEOs have identified countries like China, UK, US and India and the cities of New York, Tokyo and London as important for future growth prospects. Locally, Johannesburg and Cape Town have been identified for their growth opportunities.

African markets are down on the agenda as a result of the impact of low commodity prices, explained Shango. Western markets are now up on the list.

“The UK and US are surprising, considering what those economies have been through,” he added.

READ MORE: Business confidence dips as blackouts loom

“These traditional houses are important drivers for the economy and will remain important for the next 12 months.”

Shango said that there is a trend of consumer spending power in these economies.

“Looking at China which was an industry driven economy, the strategy of the Chinese government is to change to a consumer driven economy.”

About 92% of South African CEOs are concerned about exchange rate volatility.

Following Nenegate in December 2015, the rand depreciated by 50%.

“Some of the losses were clawed back in 2016,” explained Shango. The rand value improved by 13% from R15,51/$ on 31 December 2015 to R13,72/$ on 31 December 2016.

Besides political uncertainty which drove this volatility, Shango added that the issue of unemployment, the stagnant economy impacting investor views on the country, the risk of a sovereign downgrade to junk status, and the interest rate decisions of traditional markets like the US impacts the view the market takes on the rand.

READ MORE: Business confidence down as consumer credit health deteriorates

Unemployment also remains a threat, especially as the rate has gone up, said Shango. However, the work between business, labour and government appears to have contributed to confidence levels.

The availability of key skills within business remain a threat as well, according to 89% of CEOs. CEOs are looking for employees with skills which are not necessarily “teachable” or “replicatable” – the top three being emotional intelligence, adaptability and problem solving.

“That’s the type of individual you want to work in the organisation,” he said.

Globally, concerns about skills has more than doubled in 20 years at 77%. As a result, CEOs are concentrating on developing human capital. For South Africa, 19% of CEOs are rethinking human resource or human capital strategies, said Shango.

Volatile energy costs are also a threat for 69% of CEOs, however this is down from 77% reported in 2015.

“This probably points to the increases Eskom is applying for at Nersa. This is fairly high and puts pressure on consumers and the cost of doing business in the country,” he said.

Changing consumer behaviour is a further concern as more consumers are under pressure with prices going up.

“Consumers are finding it tough to make ends meet and this is on the minds of CEOs.”

More CEOs are planning to increase innovation and embrace technology, they believe it is critical for survival, said Shango.

However, with the increased automation brought on with technology, CEOs believe to an extent it will contribute to a headcount reduction. About 14% of CEOs expect to decrease the headcount in the next 12 months – this is on par with the global average of 16%.

–News24 Wire