59% of South African CEOs expect the country’s economy to shrink over the next 12 months due to prevailing economic conditions and policy uncertainty.
This is according to data from PwC’s Africa Business Agenda: South African Perspective 2023 report released last month.
The financial advisory firm surveyed CEOs from South Africa and their counterparts in Africa and other parts of the world.
CEOs are broadly cautious about global and local economic growth, as the majority think their local economies will shrink in line with the global economy.
26% of South African CEOs think the country’s economy will grow, while 59% think that the economy will shrink in the next 12 months.
PwC said this indicates a prevailing sense of pessimism among CEOs regarding the local economy.
The firm has previously pointed out that South Africa’s economy has numerous structural constraints that limit growth, particularly load-shedding and deterioration of logistical infrastructure.
These constraints limit potential economic growth in the country, and given the relationship between economic growth and employment, unemployment will rise.
The accounting firm’s baseline growth rate for South Africa is 1.3% per annum over the long term.
This is barely above South Africa’s population growth rate of 1% per annum, meaning incomes will remain stagnant in the long term.
With high inflation, South Africans will be getting poorer in real terms.
This is compounded by policy uncertainty from the South African government, with the North-West University’s Policy Uncertainty Index reaching 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.
However, local CEOs are more positive about South Africa’s prospects for economic growth versus the global economy, as fewer of them think the global economy will grow in the next year.