Things are bloody awful out there, whimper world’s bosses
CEOs have lost confidence that things will get better in 2019, which sadly might be a self-fulfilling prophecy
Global CEOs have curbed their confidence on economic prospects, and the message in the latest annual PwC Global CEO Survey is one of caution.
In 2018, when the most overused expression among economists was “synchronised global growth”, the PwC CEO Survey recorded optimism. The latest report, by contrast, shows a record jump in pessimism, with 29% of CEOs believing that global economic growth will decline in the next 12 months; this is almost six times the level of 5% in 2018.
The reasons aren’t difficult to discern – ongoing trade tension between the US and China; the slowdown in Chinese economic growth; President Trump’s recent tax cuts not being used for productive purposes; and the trend of rising interest rates.
The views of SA’s CEOs are even more acute than those of their global counterparts, with 35% (7% in 2017) believing global economic growth will decline over the next 12 months. Only 30% of CEOs in SA (global 42%) believe that global economic growth will improve moderately in 2019. And while 35% of global CEOs are very confident in their own organisations’ growth prospects over the next 12 months, in SA that figure is only 18%.
Pessimism among SA CEOs relates primarily to economic and political uncertainty, which is a marked turnaround from the euphoria that shaped their views in 2018 after Cyril Ramaphosa’s election as ANC leader and then as state president.
Overall, CEOs’ views on global economic growth are more polarised in 2019, but nevertheless trending downwards. The most pronounced shift was among CEOs in North America, where optimism dropped from 63% in 2018 to 37% now due to the fading of fiscal stimulus and emerging trade tension. The Middle East also saw a big drop from 52% optimism down to 28%, due to increased regional economic and political uncertainty.
As pessimism among global CEOs prevails, the PwC survey has drilled down to identify which factors are causing the greatest concern to business leaders. Whereas in recent years the most common perceived threats to growth were terrorism, climate change and an increasing tax burden, these have been replaced by trade conflicts, policy uncertainty and protectionism.
There is quite a difference between SA CEOs and their global counterparts when it comes to perceived threats. While global CEOs are concerned about over-regulation and availability of key skills, local CEOs see social, political and economic threats as their biggest problems.
Amid such a muted mood, CEOs are looking inward, pursuing internally focused strategies such as improving efficiencies, product innovation and organic growth. In a tough and uncertain operating environment, they are understandably focusing on factors which they can control.
PwC specifically canvassed opinions on trends in data & analytics and artificial intelligence (AI). The amount of data generated within large corporations has risen exponentially in recent years, but effective analysis and actionable use thereof is being stymied.
Despite huge volumes of data being available, it is not always fit for purpose. For example, data on customer and client preferences and needs is deemed to be 95% important – and yet data received in this regard is only 15% adequate. This information gap is due to data siloing, lack of analytical talent, an unwillingness by clients and customers to share data, poor data reliability and an inability to verify external data.
While most CEOs agree strongly that AI will have a significant effect on their business, many are adopting a wait-and-see approach and have taken limited steps in this regard. In a country with SA’s sky-high unemployment rate, the emergence of AI is a very sensitive issue, requiring greater government involvement to manage the effect of this revolution.
Inevitably, given the influence global CEOs exert on the worldwide economy, any actions they take, based on their views of the future, could regrettably be a self-fulfilling prophecy.
Chris Gilmour is an investment analyst.