Two out of five South African CEOs don’t believe their businesses will be economically viable in a decade, making the building of business resilience imperative, including against possible impacts of greylisting, according to a PwC’s latest annual Global CEO Survey.
Resilience needed to be built against long-term socio-economic headwinds in South Africa, and against five key long-term global megatrends: climate change on food production; technological disruption hurting job creation; a growing youth population; supply chain disruptions due to fracturing and domestic social instability.
“The confluence of crises facing local business leaders is nothing short of remarkable. Some of the emergencies are manifestations of once-in-a-generation risks: the Russian invasion of Ukraine, double-digit inflation in developed economies, and the ripple effects of the pandemic and the ‘great resignation’.
“Other factors, like significant cyberattacks and extreme weather events, once seemed rare but are now worryingly familiar,” the report said.
PwC South Africa chief economist Lullu Krugel warned that, “Megatrends and other challenges such as continuing load shedding and deteriorating transport infrastructure are reducing South Africa’s long-term economic growth potential and could result in the unemployment rate rising above 37% by 2030.”
She said, “Countries like ours were likely to increasingly struggle with high youth unemployment and underemployment. If economies are unsuccessful in addressing these crucial issues, they will face increasing social instability.”
On social instability, the report cited Municipal IQ data that said the volume of protests in the country surged at the start of 2023, with increased load shedding as the main trigger.
But megatrend-induced protests were not isolated to South Africa and were rising globally.
Other risks facing companies were legislative and regulatory changes, such the country’s greylisting in February, 2023 by the international Financial Action Task Force.
Globally, PwC had seen impacts on businesses from greylisting including planned foreign investments suspended or deferred, tougher checks on transactions by foreign financial institutions, transactional, administration, compliance, and auditing costs due to enhanced levels of monitoring and a negative impact on the stock market.
“Compared to previously greylisted countries, South Africa has a more globally integrated financial system, with a more open economy and greater foreign investor participation. This makes it hard to estimate the potential impact,” PwC said.
International Monetary Fund research showed that in 89 emerging and developing countries greylisted between 2000 and 2017, there was a drop in capital flows equal to 7.6% of GDP over nine months. (In South Africa this equates to some R350 billion).
Krugel said while most business leaders were confident in their organisations’ ability to respond to various risks or unexpected disruptions. “Despite this, our Global Crisis and Resilience Survey 2023 indicates too many companies lack the foundational elements of business resilience they need to be successful.”
She said key to fixing this risk was for business leaders to revamp their approach to risk and put aside the notion that it is possible to understand or address every threat.
Christie Viljoen, PwC South Africa senior economist, said: “For private companies in South Africa, responding to the greylisting will require context-specific solutions and resilience-building activities.
“This will depend on the broader impact of the greylisting on their plans around aspects such as strategic expansions, capital-raising, and any general increased costs of doing business,” Viljoen said.
BUSINESS REPORT