Local CEOs confident of business growth despite recession forecast

Despite an anticipated recession South African CEOs are already mitigating against expected risks with hopes of shaping business growth over the next few years.

This is according to KPMG’s 2022 CEO Outlook Survey, which examined 1 325 CEOs around the world on their three-year perspective on business, inflationary pressures, and geopolitical tensions. The research was released locally in Sandton on Monday.

“A promising 72% of local executives have already taken steps to boost productivity in preparation for [the] anticipated recession, indicating CEOs are cautiously focused on future opportunities during such uncertainty,” says KPMG South Africa CEO Ignatius Sehoole.

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However, in the short term, the survey shows that 82% of local CEOs, compared to 75% globally, have already implemented or plan to implement a hiring freeze in the next six months to cushion operations against the anticipated recession.

On the other hand, 88% of local CEOs, compared to 80% globally, have indicated that they are considering downsizing their employee base in the next six months.

The survey revealed that CEOs are prioritising technology, talent and ESG (environmental, social and governance) initiatives to grow their businesses.

It says 84% of local executives are focusing on digital investments, with 58% allocating more capital investment towards buying new technology.

Risks

The report notes that ahead of supply chain and regulatory risks, disruptive technology has emerged as the top risk and greatest threat to organisational growth over the next three years with many CEOs citing it as a priority.

It indicates that 82% of local CEOs said they are prepared for cyber attacks, compared to 56% globally.

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Another priority for CEOs is the attraction and retention of talent in their businesses.

“CEOs in South Africa are changing how they support and attract talent, and their efforts are buoyed by a focus on their people and experimenting with ways of working,” reads the report.

It notes that 70% of local executives expect to increase the headcount over the long term to address growth objectives, compared to 76% of global executives.

Sehoole says a widely shared view from local executives is their preference for their workforces to return to the office on a full-time basis in three years.

ESG

The report says CEOs recognise the importance of ESG initiatives to their business, with an emphasis on improving financial performance and driving growth, stating that 54% local CEOs agree with meeting environmental, social and governance requirements, compared to 69% globally.

Sehoole says the biggest challenge facing local CEOs in delivering on their ESG strategies over the next three years is identifying and measuring agreed metrics, compared to pressing business or economic matters stemming from ESG for global CEOs.

“While we know there is a lack of an accepted global framework for measuring and disclosing ESG performance, the KPMG survey revealed that 65% of stakeholders [institutional investors and employees] are demanding greater ESG transparency and reporting, and 60% of CEOs noted that 10% of their revenue would be allocated to invest in programmes to enable organisations to be more sustainable,” he adds.

Local optimism?

Sehoole says the confidence in the resiliency of the global economy over the next six months is encouraging to see, with 64% of local CEOs being optimistic in comparison to 73% of global executives.

Responding to the survey’s findings, Business Leadership SA CEO Busi Mavuso says South Africa will be entering the anticipated recessionary period on “an extremely weak footing”. She adds that this is due to high levels of poverty and unemployment which make the country vulnerable to the effects of a global slowdown in economic activity.

She says in this context, the country desperately needs the global economy to recover quickly and resume growth to lift our economy along with other emerging markets.

Mavuso notes that South Africa’s private sector is up to world-class standards when it comes to business technology.

“Where SA is lacking however, is in integrating fourth industrial revolution [4IR] technologies into our education system. 4IR encapsulates the rapid changes to technology, industries and societal patterns and processes due to increasing interconnectivity and smart automation,” she says.

Read: Skills crisis is holding back investment and growth: Mavuso

Mavuso adds that the skills shortage in the country will remain chronic for some time to come, while local companies continue to buckle under “too many restrictions and overly bureaucratic procedures” when it comes to hiring skilled personnel from outside of the country.

“Grappling with many structural constraints including insufficient energy supply and inefficient transport and ports systems, SA will struggle to keep up with the global growth anticipated in this survey until the reforms to address the problems are successfully implemented,” she says.

“It is only through economic growth that we can sustainably address our deep social challenges.”

Nondumiso Lehutso is a Moneyweb intern.