According to a recent report by accounting firm PwC, the outlook for economic growth among the chief executives surveyed has greatly improved since last year. The level of optimism is much lower with regards to their own business prospects. There exists, therefore, a definite opportunity for accountants to cement their role as trusted strategic advisers by identifying profitable business development and growth opportunities. In this way, they can help organisations to confidently venture forward.
In its latest survey, The Anxious Optimist in the Corner Office, PwC interviewed nearly 1300 chief executives across 85 countries, revealing an increase in optimism about global economic growth from 29percent in 2017 to 57percent in 2018. This aligns with the International Monetary Fund World Economic Outlook having predicted that global growth will reach 3.9percent this year, up from 3.7percent in 2017.
On home ground, South Africa shares this optimism, with close to 2percent in predicted economic growth for 2018. This can be attributed to President Cyril Ramaphosa’s ascent to the position which has ushered in a new sense of hopefulness in business.
In January this year, Ramaphosa said that the ANC’s vision is of an economy that encourages and welcomes investment offers, policy certainty and the removal of barriers that inhibit growth and social inclusion. It is clear from his dialogue that he favours foreign direct investment and domestic investment as the main drivers of improving economic growth in the country. As a result, he is prioritising improving business and investment confidence.
Other positive influencers on local optimism include ratings agency Moody’s having upgraded its credit outlook for the country from “negative” to “stable” and affirming South Africa’s investment-grade credit rating.
In addition, the South African Reserve Bank’s recent announcement that it would be lowering interest rates by 25basis points will also stimulate confidence and demand.
However, the optimism found in the PwC survey differs from territory to territory, with North America, Asia-Pacific and Latin America showing a high level of optimism, while Central and Eastern Europe, Africa and the Middle East are less optimistic. It also differs from sector to sector, with health and technology expecting highest levels of growth.
The survey determined that most chief executives are concerned that globalisation had not been helpful in bridging the gap between the rich and the poor. However, growth in gross domestic product is not the only determinant of economic development.
Other social metrics such as literacy rates, life expectancy and income distribution are probably better indicators of human wellbeing.
Increase in real output and income influence improving living standards of people in the medium to long term. This illustrates Ramaphosa’s long-term commitment to the growth and development of the country rather than just focusing on short-term, quick targeted solutions.
Furthermore, his commitment to economic development can be observed through his continued assurance of implementation of the National Development Plan.
More than 50percent (54percent to be precise) of the chief executives polled said they expected an increase, which is positive for levels of employment.
The research further revealed threats that keep chief executives up at night include over-regulation, terrorism, geopolitical uncertainty, cyber-threats, availability of key skills, speed of technology changes, tax burden, populism and climate change.
Echoing the theme of the World Economic Forum in 2018 which was “Creating a Shared Future in a Fractured World”, chief executives acknowledged that we live in a fractured world with different belief systems and rule of law.
They are also divided over whether future economic growth will benefit many or few.
For example, 82percent of the wealth created in 2017 went to the top 1percent of the world’s population.
In South Africa, despite a massive drive by the government to promote radical economic transformation, statistical data illustrates little has been achieved as far as improving some of these socio-economic indicators.
Furthermore, policy uncertainty, which is delaying much needed structural reforms, may be the reason for lower optimism amongst chief executives in the short term.
Income inequality demonstrates the pressing need for a new model of economic growth that is not centred solely on measures of gross domestic product. However, the chief executives foresee the world moving towards measuring prosperity using new multifaceted metrics which include quality of life.
To start a virtuous cycle of investment, growth, employment and economic inclusion in South Africa, economic reform, improved productivity and good governance is critically important.
Bongani Coka is the chief executive of the SA Institute of Professional Accountants.
The views expressed here are not necessarily those of Independent Media.