CEOs hopeful on 2017 prospects

Thandisizwe Mgundlwa

CAPE TOWN – SOUTH African chief executive officers (CEOs) and their global counterparts are optimistic about their companies’ growth prospects during 2017 amidst new risks and uncertainty.PricewaterhouseCoopers (PwC) in its 20th Global CEO Survey released this week revealed that 38 percent of business executives are very confident about their company’s growth prospects in the next 12 months, while 29 percent believe global economic growth will pick up in 2017..

“Just over one-third (33 percent) of South African CEOs are very confident of their company’s own growth in the next 12 months, 4 points down on last year, and 5 points below this year’s global average (38 percent).”

In addition, only 19 percent expect global economic growth to improve in the next 12 months, 10 points below the global average.

Dion Shango, CEO of PwCs Southern Africa, commented on the survey results that: “Despite significant challenges in 2016, CEO confidence are on the rise – albeit slowly and still has some way to go from the levels that we saw back in 2007. Across the globe, there are signs of optimism despite mixed views on how the global economy will respond to the recent US presidential election result as well as the outcome of the UK Brexit vote.”

The global survey results, based on interviews with 1,379 CEOs from 79 countries, were released at the World Economic Forum annual meeting in Davos, Switzerland, on Monday.

In South Africa, 36 CEOs from a broad spectrum of listed and privately-owned companies participated in the survey.

“It is positive to note that local CEOs expect to increase their headcount in the next 12 months. CEOs are promoting talent diversity and inclusiveness; they have implemented strategies to reflect the skills and employment structures needed for the future,” Shango comments.

Moreover, the annual survey explores what CEOs in 2017 think about three imperatives: a people and technology strategy that is fit for the digital age, preserving trust in a world of increasingly virtual interactions, and making globalisation work for everyone by engaging even more with society and collaborating to find solutions.

“The challenge to all three imperatives is leadership. How leaders engage with employees and stakeholders has never been more important. A company’s strategy must be built upon a long-term vision of growth, access, equality, innovation, and the human endeavour,” adds Shango.

Conversely, PwC’s first global survey (1997) showed emerging markets – including China and India as a sure bet for success. Interestingly, the changeability of markets, worsened by current volatility, caused company’s executives to turn to a greater mix of countries. According to the report, South African CEOs named China (36 percent), the UK (31 percent), the US (25 percent) and India (22 percent), as the most important countries for their organisation’s overall growth prospects.

New York (8 percent), Tokyo (8 percent) and London (19 percent) were also identified as the most important cities to an organisation’s overall growth prospects over the next 12 months. In addition, 91 percent of South African business leaders are very confident of their companies’ growth over the next three years.

The report noted that their levels of concern about exchange rate volatility (92 percent), uncertain economic growth (92 percent), overregulation (89 percent), social instability (89 percent), and geopolitical uncertainty (83 percent) remain very high.

Regarding business threats, 89 percent (compared to 77 percent globally) of South African CEOs cited the availability of key skills, 69 percent (compared to 49 percent globally) cited volatile energy costs, 67 percent (compared to 61 percent globally) cited cyber threats, and 64 percent (compared to 70 percent globally) stated the speed of technological change as concerns.

This year, 83 percent of South African CEOs (compared to 79 percent globally) plan to expand by way of organic growth in the next 12 months. Sixty-nine percent of local CEOs (compared to 62 percent globally) plan to implement a cost-reduction initiative. In addition, 61 percent of CEOs (compared to 48 percent globally) plan to enter into a new strategic alliance or joint venture, and 53 percent (compared to only 41 percent globally) propose a new M&A.”

Twenty years ago, trust was not high on the business agenda for CEOs. This year, 58 percent of CEOs globally worry that a lack of trust in business will harm their company’s growth, up from 37 percent in 2013.

After several high-profile technology and security issues for big companies, CEOs identified cyber security, data privacy breaches and IT disruptions as the top three technology threats to stakeholder trust. More than half of South African CEOs (58 percent) cited risks from the use of social media, 53 percent cited breaches of data privacy and ethics, and 50 percent cited cyber security breaches as concerns.

Meanwhile, “Concern about skills has more than doubled in 20 years (from 31 percent concerned in 1998 to 77 percent in 2017) and human capital is a top three business priority, with diversity and inclusiveness and workforce mobility among the strategies being used to address future skill needs. Skills availability is a concern for over three quarters (77 percent) of business leaders, and is highest for CEOs in Africa (80 percent), and Asia Pacific (82 percent).

“Looking forward, CEOs will require a different set of skills. The events of the past year have shown us just how interconnected the interests of shareholders and other stakeholders really are.

“Those businesses that articulate their purpose, anticipate risks and adhere to the value they profess will thrive. Businesses that ignore the power of the people will jeopardise the growth they seek,” Shango concluded.

January 2017
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