Two out of five South African CEOs believe their company will no longer be economically viable a decade from now.
This is from PwC’s 26th Annual Global CEO Survey, which was revealed in PwC’s South Africa Economic Outlook released in April.
According to the global financial services firm, South African CEOs face a confluence of global megatrends and local structural economic issues.
The country has a challenging business environment, with businesses battling load-shedding, deteriorating infrastructure, and a demanding regulatory environment.
However, pessimism is not confined to South Africa, as two out of five international CEOs believe their businesses will also be unviable in the next decade.
Global megatrends such as climate change, social instability, technological disruption, geopolitical tensions, and demographic shifts drive this pessimism.
What is unique about South Africa is that global headwinds are compounded by local problems such as policy uncertainty, poor economic growth, and high unemployment.
PwC emphasised two of the country’s local problems in its Outlook.
North-West University’s Policy Uncertainty Index reached a record level of 71.7 in the first quarter of 2023, up from 53.2 at the end of 2022.
This is the highest recording on the index since its inception in 2015.
South Africa has had eight macroeconomic policy frameworks in the last 25 years.
It also has two different frameworks currently in operation – the National Development Plan from 2012 and the Economic Recovery Plan from 2020.
There is no clear plan on critical issues, such as the turnaround plans at Eskom and Transnet and how to increase youth employment.
The private sector needs a consistent, clear, and thought-through policy to invest – particularly over the long term.
Due to South Africa’s poor economic growth, PwC anticipates the country’s unemployment rate increasing from 32.7% at the end of 2022 to 35.5% in 2030.
This is the baseline scenario. The downside scenario has the economy growing at a mere 0.9% per annum for the next decade. In this case, unemployment will rise to 37.2% in 2030.
Even in the upside scenario, PwC sees unemployment rising above 34% at the decade’s end.
South Africa facing a poly-crisis
The combination of global megatrends and local issues has resulted in South Africa tackling a poly-crisis of high inflation, high unemployment, elevated load-shedding, and a lack of investment. All of which result in lacklustre economic growth.
The factors contributing to South Africa’s poly-crisis will also exacerbate the intensity of the strike action, which, in turn, will exaggerate existing economic challenges. This can create a negative spiral which is hard to get out of.
South Africa will face growing social unrest if it fails to address these challenges.
According to Municipal IQ, the volume of protests in South Africa surged at the beginning of 2023.