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CEOs more upbeat but feel SA needs new model of economic growth - expert

May 07 2018 16:33
Carin Smith

Cape Town - Economic reform, improved productivity and good governance are critically important to start a "virtuous cycle" of investment, growth, employment and economic inclusion in South Africa, according to Bongani Coka, chief executive of the South African Institute of Professional Accountants.

Commenting on the latest global CEO report by accounting firm PwC, he said: "Income inequality demonstrates the pressing need for a new model of economic growth that is not centred solely on measures of gross domestic product.

"The CEOs foresee the world moving towards measuring prosperity using new multifaceted metrics which include quality of life."
 
He said policy uncertainty, which is delaying much-needed structural reforms, may be the reason for lower short-term optimism reflected among local CEOs surveyed.

"Despite a massive drive by the South African government to promote radical economic transformation, statistical data illustrates little has been achieved as far as improving some socio-economic indicators," Coka said on Monday.

The PwC report indicates that local CEOs do seem more optimistic about the business landscape.

Reasons for this optimism include the election of President Cyril Ramaphosa, which has brought a new sense of hope to the business sector.

"In January this year, he stated that the ANC’s vision is an economy that encourages and welcomes investment offers, policy certainty and the removal of barriers that inhibit growth and social inclusion," said Coka.

According to Coka, other positive influences on local CEO optimism include ratings agency Moody’s upgrade of its credit outlook for the country from “negative” to “stable” and affirming SA's investment-grade credit rating.

In addition, the South African Reserve Bank’s recent lowering of interest rates by 25 basis points will stimulate confidence and demand, according to local CEOs surveyed.

"An increase in real output and income influences improving living standards of people in the medium to long term. This illustrates President Ramaphosa's long-term commitment to the growth and development of the country rather than just focusing on short-term, quick targeted solutions," said Coka.

Global survey

PwC interviewed almost 1 300 CEOs in 85 countries. The survey found an increase in optimism about global economic growth. This is in line with the International Monetary Fund's World Economic Outlook predicting that global growth will reach 3.9% this year, up from 3.7% in 2017.

The PwC survey found CEOs in North America, Asia-Pacific and Latin America showed a high level of optimism, while those in Africa, Central and Eastern Europe and the Middle East are less optimistic. CEOs in the health and technology sector are expecting the highest levels of growth.

The survey also found that most CEOs are concerned that globalisation has not been helpful in bridging the gap between the rich and the poor.

The PwC research found the threats that keep CEOs up at night include over-regulation, terrorism, geopolitical uncertainty, cyber threats, the availability of key skills, the speed of technology changes, the tax burden, populism and climate change.

"CEOs acknowledged that we live in a fractured world with different belief systems and rules of law. They are also divided over whether future economic growth will benefit many or few," said Coka.

"For example, 82% of the wealth created in 2017 went to the top 1% of the world’s population."

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pwc  |  business confidence  |  sa economy
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