South African CEOs expect growth, but not a lot of it

South African CEOs expect growth, but not a lot of it

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KPMG CEO Outlook finds that corporate leaders remain cautiously optimistic.

CAPE TOWN – Despite the many challenges in the local economy, CEOs in South Africa remain optimistic about the country’s growth prospects. According to the  2016 KPMG CEO Outlook 68% of local CEOs surveyed were either ‘confident’ or ‘very confident’ about South Africa showing growth in the next 12 months and 90% were either ‘confident’ or ‘very confident’ about growth prospects over the next three years.

Not a single CEO noted being ‘not at all confident’ about growth over either time period.

Local CEOs were also extremely upbeat about the growth prospects of their own companies, with 90% being either ‘confident’ or ‘very confident’ about growth in the next 12 months.

However, the survey findings did suggest that CEOs are not as optimistic about the rates of growth that they can expect. Despite the current sluggishness in the local economy, 46% of South African CEOs said that they believed the country is at peak growth in the current cycle.

“CEOs operating in South Africa are well aware of their many challenges and they are reasonably bullish about the future of the country,” said KPMG CEO in Southern Africa, Trevor Hoole. “Although they are confident that their industry and businesses will grow over the next year, their growth expectations are modest. That said, they are grappling with a multitude of issues simultaneously.”

Risks

What concerns local CEOs most are risks associated with cyber security and increased regulation. This however is not a localised concern, as this matches exactly with the greatest concerns highlighted by CEOs globally.

What is particularly concerning, however, is that despite 32% of South African CEOs identifying cyber security as a major risk, only 10% believe their companies are fully prepared for a cyber event. In addition, only 12% noted that ‘minimising cyber security risk’ is one of their top three strategic priorities over the next three years.

This is in contrast to the regulatory environment, which 32% of CEOs identified as a major risk. Here, 24% of South African CEOs have made responding to regulatory change one of their companies’ top three strategic priorities, which made it the number one priority across all CEOs surveyed.

Investment markets

Another interesting finding from the survey is that South African CEOs are more optimistic about the growth potential in Brazil than anywhere else in the world. This is despite the country being in a deep recession.

When asked in which regions they see the greatest potential for growth over the next three years, 42% of local CEOs identified Brazil as a good prospect, while 38% selected India. China ranked third, identified by 28% of CEOs.

Sub-Saharan Africa was identified for its potential by only 22% of CEOs, which ranked it below the United States and Western Europe. Twenty-six percent of South African CEOs saw potential for growth in the US and 24% in Western Europe.

Brexit

Perhaps surprisingly, South African CEOs believe that Brexit will be more positive than negative for their companies. Forty-two percent noted that it will have a ‘somewhat’ or ‘significantly positive’ impact on their companies’ revenue growth, compared to 30% who felt it would be ‘somewhat’ or ‘significantly negative’.

In addition, 38% said that it would have a ‘somewhat’ or ‘significantly positive’ impact on their business expansion plans across Europe. Only 26% suggested that it would be ‘somewhat’ or ‘significantly negative’ in this regard.

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