South African bosses have no plans to hire more workers this year – here’s what they are looking to do instead

A year after Covid-19 was declared a pandemic in South Africa, chief executive officers (CEOs) are optimistic about global economic recovery, and the health of their own businesses – but despite this, a large number of local execs say they are not planning on hiring more staff.

Findings from the latest survey conducted by professional services firm PwC show that 57% of local business leaders predict that economic growth will improve in 2021.

However, in view of South Africa’s rising inequality and employment challenges, PwC said it is concerning that 51% of South African CEOs report they have reduced staff in the last 12 months and that 40% plan to do so in the year ahead.

The proportion of South African CEOs expecting to reduce staff has exceeded those expecting to increase it for the first time – and by a margin of 25 percentage points. This is how local CEOs see their workforces changing in 2021:

  • Increase headcount: 17%
  • Workforce stays the same: 43%
  • Decrease headcount: 40%

“This is unprecedented in the history of the survey. The survey findings are based on the economic outlook at the time – namely, a level 3 lockdown period, issues arising from the rollout of vaccinations, as well as load shedding,” PwC said.

“Only 16% — compared to 42% in 2020 – of local businesses expect to increase their headcount over the next 12 months. 43% of organisations (compared to 35% globally) expect their headcount to remain the same.”

PwC said that the focus for employers is a shift to upskilling workers – a position which could have arisen because of a shortage of technical skills in the country, says Michelle Baron-Williamson, chief transformation officer at Managed Integrity Evaluation.

“One of the biggest opportunities is for companies to focus on developing skills in-house, and in turn, creating and growing workplace skills programmes that have the benefit of not only adding to the general technology skills pool in the country, but that can be tailored to the specific requirements of the organisation,” she said.

On the other hand, one of the big challenges that this skills shortage presents to organisations is the risk of hiring candidates who do not have the correct technical skills, said Baron-Williamson.

“Candidates could either misrepresent their skills in a demand-heavy market, or the companies themselves might not have the expertise required to effectively evaluate the competence of these candidates,” she said.

“Hiring strategies will need to change to keep up with the type of technology skills that are in demand, especially if HR professionals have very little knowledge about these areas of specialization themselves.”

Some optimism

The survey, which includes responses from 37 chief executives in South Africa, shows that 41% of local chief executives are very confident about their organisation’s prospects for revenue growth over the next year.

This is a reversion to the long-term mean – and a significant rebound from PwC’s 2020 survey, which was completed before the pandemic began.

“After a year of economic and political uncertainty coupled with human tragedy, it is encouraging to note an upswing in sentiment among CEOs about global economic growth,” said Dion Shango, chief executive of PwC Africa.

“Although we are not out of the woods, CEOs see a path forward – for the global economy and for their own organisations.”

As business leaders prepare for a rebound in the economy, Shango said that a critical question will be: which management approaches should business retain from the rapid response mode most of them adopted during 2020?

“Fast, high-quality decision-making is likely to continue to be top of most companies’ ‘keep’ lists.

“Other priorities include ensuring top management remain focused on the big issues that matter most, engaging with all staff, revisiting critical decisions frequently, and responding early to unintended consequences.”

Push for growth 

PwC said that previous surveys show that when the operating environment gets more difficult, CEOs focus on areas in which they can have a direct impact while limiting risk.

Operational efficiencies (89%) and organic growth (70%) top the list of CEOs’ actions planned to drive growth.

In addition, 41% of South African CEOs (compared to 38% globally) also intend pursuing  mergers and acquisitions, while 35% of CEOs both in South Africa and globally are looking for a new strategic alliance or joint venture.

Threats 

Pandemics and health crises top the list of threats to growth prospects, overtaking the fear of over-regulation, which has been the perennial number one concern for chief executives globally since 2014.

Among South African CEOs concerns about the impact of unemployment on their companies’ growth prospects have risen four places (South Africa: 73%; Global: 21%) to become the top threat to business growth.

Other top threats to growth for South African CEOs are:

  • Inadequate basic infrastructure
  • Uncertain economic growth
  • Volatile energy costs

“South African CEOs are significantly more concerned about threats than their global peers,” PwC said.

“So, while pandemics and other health crises are recognised as the leading threat globally, with 52% of CEOs stating they are extremely concerned, in South Africa this threat only rates third – even though 65% of are extremely concerned about it.”

Rising digitisation is increasing the risks posed by cyber threats. This, coupled with the significant increase in cybersecurity incidents in 2020, including ransomware attacks, has resulted in cyber threats leaping up the list to become the number two concern, with the level of concern jumping from 33% to 47% globally, and from 22% to 49% in South Africa.

Cyber threats are a concern particularly for CEOs in North America and Western Europe, where they are considered a greater threat than the pandemic.

In 2020, tax policy uncertainty ranked outside the top ten concerns for CEOs, with only 19% of CEOs concerned.

This year, it has increased rapidly in importance, leaping up to seventh place (31%), with CEOs undoubtedly watching government debts accumulate and realising that business taxes will likely need to rise.

In South Africa, 32% of business leaders “strongly agree” that tax policy changes to address rising government debt levels will increase their respective organisation’s tax obligations.


Read: Government’s plan to save South Africa – including changes for visas, businesses, and reducing load shedding

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South African bosses have no plans to hire more workers this year – here’s what they are looking to do instead