Why CEOs Are Confident Despite New Risks

PWC’s survey has shown that CEOs’ confidence levels for their growth prospects and outlook for the economy is back on the rise amidst new risks and uncertainty.

The global survey results was based on interviews with 1,379 CEOs from 79 countries, and it was released at the World Economic Forum annual meeting in Davos. In South Africa, 36 CEOs from a broad spectrum of listed and privately-owned companies participated in the survey.

According to the company’s 20th annual survey of CEOs worldwide, 38% (2016:35%) are very confident about their company’s growth prospects in the next 12 months while 29% (2016:27%) believe global economic growth will pick up in 2017.

Findings reveal that just over one-third (33%) 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%). Furthermore, only 19% expect global economic growth to improve in the next 12 months, 10 points below the global average.

Commenting on the survey results, CEO of PwC Southern Africa, Dion Shango said: “Despite significant challenges in 2016, CEO confidence is 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.”

“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.

PwC’s annual 20th Global CEO 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.

Where CEOs will look for growth

PwC’s first global survey (1997) showed emerging markets – including China and India as a sure bet for success. But the changeability of markets, exacerbated by current volatility, has caused CEOs to turn to a greater mix of countries. This year’s survey shows the US, Germany and the UK have become bigger priorities, while enthusiasm for investing in Brazil, India, Russia and Argentina has lessened from three years ago.

South African CEOs named China (36%), the UK (31%), the US (25%) and India (22%) as the most important countries for their organisation’s overall growth prospects.

New York (8%), Tokyo (8%) and London (19%) were also identified as the most important cities to an organisation’s overall growth prospects over the next 12 months.

Threats

While 91% of South African CEOs are very confident of their company growth over the next three years, their levels of concern about exchange rate volatility (92%), uncertain economic growth (92%), overregulation (89%), social instability (89%), and geopolitical uncertainty (83%) remain very high.

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

Driving corporate growth

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

While concluding, Shango said: “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.”

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