Global business leaders are more positive about economic growth over the next 12 months compared to their outlook a year ago, the latest PwC Global CEO survey has found.
PwC South Africa’s Economic Outlook Report for 2024, released on Monday, shows that while CEO’s surveyed for the global research expressed a more positive outlook, many countries around the world are facing a worsening set of social challenges at the start of the year.
“Alongside country-specific structural challenges – which, in the case of South Africa, includes load-shedding, high levels of unemployment and a scourge of crime – the world is also facing short-term crises,” PwC said.
“These challenges are more transient in nature and less enduring than the long-term megatrends shaping society.”
These short-term challenges are not the same everywhere but can be grouped into five categories: economics, conflict, resources, health and institutions.
Based specifically on these categories, PwC identified crises across five areas of South African society, namely: macroeconomic volatility, conflict-hit international supply chains, access to scarce resources, access to healthcare and struggling public institutions.
PwC South Africa chief economist, Lullu Krugel, said these country-specific challenges are expected to dissipate somewhat over the medium to long-term.
“In the meantime, there is scope for South African organisations to turn these crises into opportunities during 2024 to create value for their stakeholders and society in general.
“Periods of predicament can create a window of opportunity for impactful change, and leaders – both in the public and private sector – should not miss the chance to seize it.”
For companies, both locally and abroad, that are surrounded by economic uncertainty, creating financial value for stakeholders, such as owners, shareholders, staff, and communities, is a real challenge.
“South African companies are under strain from international macroeconomic volatility and domestic headwinds, including load-shedding. This is hitting their bottom line,” PwC said.
According to the report, local company profits and dividends declined 17.8% year-on-year (y-o-y) and 33.2% y-o-y, respectively, in the third quarter of 2023, a trend that could continue in 2024.
“Global geopolitical tensions are disrupting international supply chains, and PwC’s Global Risk Survey 2023 identified supply chain disruption as the main external factor seen contributing towards company risk. South African companies are also facing domestic challenges to rail and port services, with logistics under duress from shipment delays,” PwC said.
“Supply chain localisation (also called near-shoring) – relying instead on closer-to-home sources of labour, goods and services, innovation, technology and capital – could reduce dependency on foreign sources and enhance business resilience.
“However, localisation is about more than just goods, and also includes workforce, research and development, technology and capital considerations.”
Resource scarcity, caused in part by supply chain disruption, is exacerbating socio-inequality gaps as companies regularly struggle with resource shortages and factory capacity.”
“To save costs, remain profitable, and create value for stakeholders, companies need to do more with less. As a possible solution, a business model based on circular economy principles can help companies to use resources more efficiently through recycling, remanufacturing, reuse, maintenance and redesign,” PwC said.
With fiscal resources constrained, healthcare systems globally are facing significant hurdles, and access to healthcare is under pressure.
PwC said the number of South Africans without access to universal health coverage is estimated to have increased by more than a million between 2017 and 2023. Some 56% of South African respondents to the Edelman Trust Barometer 2023 survey believe that employers are not doing enough to support access to healthcare.
PwC South Africa CEO, Shirley Machaba, said crises create an environment that can help kickstart “profound and sustained change, whether at a company level or for society as a whole.”
“PwC believes that, in order to respond effectively to such an opportunity for change, organisations need to put purpose at the heart of their risk and overall strategy.
“Being purpose-led means a company is guided by a clear and meaningful mission beyond just financial success,” Machaba said.
“Rather, the organisation is driven by a commitment to positively impacting the so-called triple bottom line: profit, people and planet.”
