Nearly three quarters (73%) of CEOs believe global economic growth will decline over the next 12 months, according to PwC’s 26th Annual Global CEO Survey, which polled 4 410 CEOs in 105 countries and territories in October and November 2022.
The bleak CEO outlook is the most pessimistic that CEOs have been regarding global economic growth since we began asking this question 12 years ago and is a significant departure from the optimistic outlooks of 2021 and 2022, when more than two-thirds (76% and 77%, respectively) thought economic growth would improve.
In sub-Saharan Africa, CEO survey respondents expressed many similar sentiments to their counterparts globally. Additionally, local and regional factors impact their businesses and their outlook for the future, such as load-shedding in certain Southern African countries, currency depreciations and inflation, and specific skills requirements and growth opportunities.
Over the coming weeks, PwC Africa will publish a series of territory perspectives, together comprising the Africa Business Agenda report, analysing these local and regional factors in more depth. These perspectives will draw on the results of PwC’s 26th Annual Global CEO Survey and specifically the survey results from Sub-Saharan Africa.
Dion Shango, PwC Africa territory senior partner, says: “We look forward to releasing the Africa Business Agenda series, a relevant and useful resource for senior-level decision makers at a time of great change on the continent.
“Since the Africa Business Agenda was first released in 2010, we have shared valuable insights about Africa’s business operating environments from the perspective of Africa’s CEOs, also drawing on the analysis and experience of our own PwC Africa experts.
“For now, I am pleased to present our latest Annual Global CEO Survey, which encompasses fresh insights from more than 4,000 global CEOs on how they are winning today’s race, while running tomorrow’s,” Shango adds.
Nearly 40% of CEOs think their organisations will not be economically viable in a decade
In addition to a challenging environment, nearly 40% of CEOs think their organisations will not be economically viable in a decade if they continue on their current path.
The pattern is consistent across a range of sectors, including telecommunications (46%), manufacturing (43%), healthcare (42%) and technology (41%). CEO confidence in their own company’s growth prospects also declined dramatically since last year (-26%), the biggest drop since the 2008-2009 financial crisis when a 58% decline was recorded.
Globally, business confidence around economic growth varies starkly, with G7 economies, including France (70% versus 63%), Germany (94% versus 82%) and the United Kingdom (84% versus 71%) — all weighed down by an ongoing energy crisis — being more pessimistic about their domestic growth prospects than they are about global growth.
CEOs are also seeing multiple direct challenges to profitability within their own industries over the next ten years. More than half (56%) believe changing customer demand/preferences will impact profitability, followed by changes in regulation (53%), labour/skills shortages (52%), and technology disruptions (49%).
Inflation, macroeconomic volatility and geopolitical conflict top CEOs’ concerns
While cyber and health risks were the top concerns a year ago, the impact of the economic downturn is top of mind for CEOs this year, with inflation (40%) and macroeconomic volatility (31%) leading the risks weighing on CEOs in the short term — the next 12 months — and over the next five years.
Close behind, 25% of CEOs also feel financially exposed to geopolitical conflict risks, whereas cyber risks (20%) and climate change (14%) have fallen in relative terms.
The war in Ukraine and growing concern about geopolitical flashpoints in other parts of the world have caused CEOs to rethink aspects of their business models, with almost half of respondents that are exposed to geopolitical conflict integrating a wider range of disruptions into scenario planning and corporate operating models either by increasing investments in cybersecurity or data privacy (48%), adjusting supply chains (46%), re-evaluating market presence or expanding into new markets (46%), or diversifying their product/service offering (41%).
CEOs are cutting costs but not headcount or compensation
In response to the current economic climate, CEOs are looking to cut costs and spur revenue growth. Fifty-two percent of CEOs report reducing operating costs, while 51% report raising prices and 48% diversifying product and service offerings.
However, more than half (60%) say they do not plan to reduce the size of their workforce in the next 12 months. A vast majority (80%) indicate they do not plan to reduce staff remuneration in order to retain talent and mitigate workforce attrition rates.
Bob Moritz, PwC global chairman, says: “A volatile economy, decades-high inflation, and geopolitical conflict have contributed to a level of CEO pessimism not seen in over a decade.
CEOs globally are consequently re-evaluating their operating models and cutting costs, yet despite these pressures, they are continuing to put their people front and centre as they look to retain talent in the wake of the ‘Great Resignation”.
The world continues to change at a relentless pace, and the risks facing organisations, people — and the planet — will only continue to rise. If organisations are not only to thrive but survive the next few years they must carefully balance the dual imperative of mitigating short-term risks and operational demands with long-term outcomes — as businesses that don’t transform, won’t be viable.”
Managing climate risk a growing priority for businesses
While climate risk did not feature as prominently as a short-term risk over the next 12 months relative to other global risks, CEOs still see climate risk impacting their cost profiles (50%), supply chains (42%) and physical assets (24%) from a moderate to very large extent.
Recognising the impact climate change will have on business and society over the long term, a majority of CEOs have already implemented — or are in the process of implementing — initiatives to reduce their companies’ emissions (65%), in addition to innovating new, climate-friendly products and processes (61%), or developing data-driven, enterprise-level strategy for reducing emissions and mitigating climate risks (58%).
Despite an increasing number of countries now having some form of carbon pricing, a majority of respondents (54%) still do not plan to apply an internal price on carbon in decision-making, and over a third (36%) don’t plan to implement initiatives to protect their company’s physical assets and/or workforce from the impact of climate risk.
The continued importance of trust and transformation in generating long-term value
CEOs noted the need to collaborate with a wide range of stakeholders to build trust and deliver sustained outcomes if they are to generate long-term societal value. The survey found that when organisations partner with non-business entities, it is to address sustainable development (54%), diversity, equity, and inclusion (49%), and education (49%).
If organisations are to remain viable in the near and long term, they must also invest in their people and technological transformation agendas to empower their workforces. Technologically, 76% of organisations say they are investing in automating processes and systems, implementing systems to upskill workforces in priority areas (72%), and deploying technology such as the cloud, AI and other advanced technology (69%).
However, many CEOs question whether critical preconditions for organisational empowerment and entrepreneurship — such as alignment to company values and leaders’ encouragement of dissent and debate — are present in their companies to tackle the increasingly complex risks organisations face. For example, only 23% of CEOs say leaders in their company often/usually make strategic decisions for their function without consulting the CEO.
Further, only 46% of CEOs say leaders in their company tolerate small-scale failures often/usually. However, more optimistically, nearly nine in ten (85%) of respondents say the behaviours of employees are often or usually aligned with their companies’ values and direction.
Torn between the demands of short-termism and long-term transformation, CEOs say they are primarily consumed with driving current operating performance (53%), rather than evolving the business and its strategy to meet future demands (47%). If they could redesign their schedules, CEOs say they would spend more time on the latter (57%).
Moritz concludes: “The risks facing organisations and society today cannot be addressed alone and in isolation. CEOs must therefore continue to collaborate with a wide range of public and private sector stakeholders to effectively mitigate those risks, build trust and generate long-term value — for their businesses, society and the planet.”