SA’s CEOs are confident, but two things keep them up at night

South African CEOs are confident about business, but they worry primarily about two things: supply chains and tax.

Business confidence is back to pre-pandemic levels and the majority (88%) say they expect aggressive growth, which the plan to facilitate by making acquisitions in the next three years to transform their businesses.

The KPMG South Africa’s 2021 CEO Outlook survey was done in partnership with Business Leadership South Africa (BLSA). It is an extension of the 2021 global survey. The local survey included 50 CEOs from 10 industries.

With the local economy expected to grow by a modest to 2% in 2022 and the prospect of a stronger global economy, CEOs are planning to invest in expansion and business transformation. According to the survey, 62% of senior executives identify inorganic methods, such as joint ventures, mergers and acquisitions and strategic alliances as their main strategies to support their growth.

The logistics and tax nightmares

However, two key risks have become top priorities since 2020:  supply chain risk with a 10% increase year on year, and tax risks, with 75% of CEOs believing that the pressure on public finances has increased the urgency for multilateral cooperation on the global tax system.

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“Despite these risks, there is a clear road to renewal-theme emerging this year. South African CEOs are optimistic about growth while they are also placing a specific emphasis on leading with purpose and digitally transforming their businesses while upskilling an agile workforce,” says Ignatius Sehoole, CEO of KPMG South Africa.

More than half (55%) of the CEOs indicated that organisational purpose will have a profound impact on business, driving performance, shareholder returns and strengthening employee engagement.

“However, while we drive growth, we also face a tough task to lead companies in a time of continued uncertainty where the nature of markets and forecasts can change. Therefore, the main threats to business identified in the survey include supply chain, operational concerns and cyber security, followed by climate change, regulatory and emerging/disruptive technology risks,” says Busi Mavuso, CEO at BLSA.

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Digital agility and workplace flexibility makes CEOs confident

Although there are risks, CEOs are embracing the need to push the boundaries of their businesses by moving faster with digital transformation strategies and making investments a priority, with 74% indicating that technological disruption is more of an opportunity than a threat. (This survey was done before Facebook and WhatsApp went offline on Monday.)

However, 58% said they are well prepared for future cyber-attacks, but (54% are moving to a cloud-first mindset and aiming to partner with a third-party cloud technology partner in the next three years, while 70% are placing more capital investment into buying new technologies in pursuit of their growth objectives.

Another insight is that 58% of CEOs are investing in digital training, development and upskilling because they believe it is the key success factor to ensure that employees are engaged, motivated and productive in the hybrid work model.

CEOs confident, leading with purpose

Stakeholder expectations of businesses have risen with organisations’ and their leaders’ actions under increasing scrutiny’, with pressure to show trust, transparency and purpose. Therefore, while there is a commitment to look after employee first, CEOs are also planning to embed environmental, social and corporate governance (ESG) into their strategies.

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Sehoole says 80% of CEOs recognise that large corporations have the resources to help governments find solutions to pressing global challenges and therefore this becomes a business-critical consideration.

The survey indicated a major shift to the S in ESG, with 81% of CEOs saying they have moved their focus to social and 71% committing to personally drive this agenda. However, the results also indicate that 30% are planning to invest 10% or more of revenue into the E of ESG, but 68% indicate that government stimulus is required to turbocharge climate investments from the business community.

“It is certain that today’s connected CEOs are those who can deliver on a trusted purpose by responding to increased societal expectations, while driving sustainable business performance through digital innovation. Neither can be done in a vacuum, as three-quarters (75%) of global CEOs say their digital and ESG investments are inextricably linked,” says Sehoole. 

Mavuso says she found the overall positive tone of South African CEOs and the major strides in key areas to grow their own businesses as well as the local economy refreshing. “They are not only ready to shift to new ways of working and empowering their employees, such as focusing on culture and policies for a better work/life balance (70%) but are also addressing key risks and leveraging digital and ESG opportunities to move business forward.”