Confidence is low amongst executives in South Africa, says PwC

12 February 2018 Authored by Consultancy.co.za

Global professional services firm PwC has released its latest Global CEO Survey, and the findings for South Africa reflect an atmosphere lacking confidence and optimism. The number of CEOs who are very confident of their company’s growth over the next year stands at just over 20%.

It has been another challenging year for the South African economy, as it continues to struggle against a dip in the price of commodities and precious metals. Oil prices plummeted in 2015 to below $35 per barrel, and the problem was further accentuated by a dip in the price of precious metals; denting the revenues of the locally crucial mining industry.

As a result, executives in South Africa have had to re-examine their position and devise new, real-time strategies. Over the past year, a number of surveys have been conducted in the country to gain insight into the state of mind across businesses in South Africa, and the results have been fairly mixed.SA CEOs slightly less confident about short-term prospects

In last year’s CEO survey from Big Four accounting and advisory firm PwC, executives in the country appeared to be exceptionally confident about growth in the near future. A study conducted by Big Four rival EY late last year similarly revealed a confident environment, particularly amongst middle market firms.

On the other hand, Grant Thornton released a report last year substantiating that executives in South Africa are currently the second most pessimistic in the world, behind only those in Japan. The latest edition of PwC’s CEO survey reflects similar sentiments to some extent.

22% of South African executives stated that they were ‘very confident’ about their company’s growth over the next year, which is not only the lowest figure since 2009, but also falls 20% short of the growth expectation across the globe, which stands at 42%.

Reality Check

The prospects aren’t all bad. 49% of the 41 CEOs surveyed expressed that they were ‘somewhat confident’ about their firm’s growth over the next year. Overall confidence has declined considerably since last year, when 50% were somewhat confident, and 33% were very confident about growth in the near future.

The report attributes this pessimism to a number of factors, including the scandals that have rocked the business community in recent months, costing high-profile firms a sizeable chunk of business. 22% of the executives cited ethical scandals as a major cause of concern. The biggest causes of concern, however, came in the form of social instability (98%) in light of a regime change, and over-regulation (93%), which is only going to increase in months to come.

The number of CEOs expecting revenue growth over the next year has fallen from 85% last year to 71% this year. Correspondingly, the number of executives looking to bring more employees on board has also plummeted, from 58% expecting and increase in headcount last year to 37% this year, which is also the lowest point in more than six years.

SA CEOs looking to international markets

As domestic economic conditions falter, an increasing number of executives are turning their attention abroad for business. 32% of the CEOs consider the USA the most important foreign market over the next year, followed by the UK at 27% and China in third with 24% – down from first last year at 36%.  

However, PwC executives warn that the findings might not be an entirely accurate reflection of the climate in South Africa, primarily due to the fact that the surveys were conducted prior to the appointment of Cyril Rampaphosa, and the restoration of consumer confidence following a record high in the value of the rand. 

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