South African chief executives have a bleak outlook for the South African economy in 2020, according to a new PwC survey of almost 1,600 CEOs from 83 countries globally.
CEOs are showing record levels of pessimism in the global economy, with 53% predicting a decline in the rate of economic growth in 2020, PwC’s report showed.
This is up from 29% in 2019 and just 5% in 2018 – the highest level of pessimism since it started asking this question in 2012. By contrast the number of global bosses projecting a rise in the rate of economic growth dropped from 42% in 2019 to only 22% in 2020.
Chief executives in South Africa are also pessimistic about the rate of global economic growth with 44% (compared to 35% in 2019) believing that it will decline over the next 12 months.
However, they are most pessimistic about their own prospects for the year.
Local bosses are more pessimistic than their global counterparts regarding their growth prospects in 2020, PwC said, with only 14% being ‘very confident’ about their 12-month revenue prospects – compared to 18% in 2019. This is 13 points below the global average (27%).
Despite a significant decline in optimism, South African CEOs – 78%, compared to 56% globally – are more confident about their own company’s prospects for revenue growth over the next three years, pointing to the hope of some light at the end of the tunnel.
South African CEOs’ biggest worries
When asked to rate the things that have them most concerned about operating in South Africa, the vast majority of executives highlighted uncertain economic growth, policy uncertainty and social instability as their main worries.
Over-regulation by government and unemployment were also highlighted by the majority of CEOs.
Also affecting CEOs, though to a lesser extent, is rising populism, the lack of availability of key skills, geopolitical uncertainty abroad (US China trade war, Brexit) and volatile energy costs.
South Africa’s economic woes have heightened stress among CEOs over the last year, as has policy uncertainty and fears of over-regulation in the market.
Worries over social instability and unemployment have decreased year on year.
South Africa’s employment challenge
While the shortage of key skills remains a top threat for CEOs and they agree that retraining/upskilling is the best way to close the skills gap, they are not making much headway in tackling the problem with only 18% of CEOs globally, and 6% of South African CEOs saying they have made ‘significant progress’ in establishing an upskilling programme.
This sentiment is echoed by workers.
The Fourth Industrial Revolution has ushered in new business models and new ways of working that require critical new technical, digital and soft skills. Those skills are in very short supply.
In a separate survey by PwC, 77% of 22,000 workers around the world say they would like to learn new skills or retrain but only 33% feel they have been given the opportunity to develop digital skills outside their normal duties.
“Workers need to be convinced that companies are engaging in upskilling efforts to improve their employability, not just to improve the bottom line,” the group said.
According to PwC, echoing data from the Insead Business School, automation, AI and future technologies are increasingly becoming a major concern for businesses, who now face the challenge of attaining and retaining top skills in these areas.
For South Africa, where these skills are not readily available, this has become an even bigger cause for concern.
PwC’s data showed that over the next decade or two (to 2030 and beyond), automation risks replacing the jobs of 44% of low education positions at companies, and as many as 11% of high education spots.
This is happening against a backdrop of decreasing talent availability and rising skilled labour mobility (particularly in Africa and the Asia Pacific). In short, there is greater demand for high-level skills, but not enough supply to meet it.
South African businesses lag behind other nations in upskilling their employees to meet this challenge, with local CEOs citing two massive drawbacks, where they face the biggest climb.
The first is in finding an effective learning and development function to do the upskilling. The second is in retaining the employees who have been upskilled.
Skill retention was identified by Insead as South Africa’s weakest point in being a globally competitive country.