The state of South Africa’s economy, its high unemployment rate, further looming ratings downgrades and political and policy uncertainty are among the top concerns casting shadows over business expectations in the next 12 months, PwC’s yearly CEO survey reveals.

Only 37% of the South African CEOs surveyed believed global economic growth would improve in the next 12 months – 20 percentage points below the global average but well above the 19% reported in 2016.

The responses, obtained in the fourth quarter of 2017, followed a period in which South Africa had endured “another year of slow growth”, underpinned by stagnant growth, high unemployment, ratings downgrades ad policy uncertainty, said PwC Southern Africa CEO Dion Shango on Wednesday.

Globally, the majority of CEOs are optimistic about the improving economic environment, with all regions improving for the first time since the financial crisis on the back of a recovery in the commodity cycle and investment-led recovery in the US and Europe.

PwC’s twenty-first survey of 1 293 CEOs showed that 57% of global business leaders believed global economic growth would improve over the next year – almost twice the level of last year (29%) and the largest-ever increase since PwC started asking about global growth in 2012.

“2018 will turn out to be one of the best years for global growth since 2010. Most regions are doing well,” Shango told journalists during the launch of the South African edition of the report.

However, the results are a “mixed bag”, as CEOs in South Africa are less confident than their global counterparts regarding their short-term growth prospects for this year.

“CEOs’ optimism in South Africa is more tempered than that of the developed economies, especially regarding their own organisations’ prospects for revenue growth,” Shango said.

The survey showed that 22% of local CEOs are “very confident” of their own company’s growth in the next 12 months – 20 percentage points below the global average of 42% and a drop from the 33% recorded in the prior year to the lowest level since the start of the survey.

However, South African CEOs are more optimistic over the medium term, with 91% more confident about their own company’s prospects for revenue growth over the next three years, compared with the global average of 88%.

For South African CEOs, the most pressing macroeconomic threat to growth spans a range of business, societal and economic threats that have risen, including social instability (98%), overregulation (93%), unemployment (93%), uncertain economic growth (93%), increasing tax burden (90%) and exchange rate volatility (90%).

Of business threats, 37% of South Africa CEOs said they were “extremely concerned” about the availability of key skills, 41% cited cyberthreats and 32% stated the speed of technological change as concerns.

Ethics also emerged during the survey, with 22% of South African CEOs, compared with 14% globally, saying that they were “extremely concerned” about potential ethical scandals.

“This comes in the wake of a growing number of firms that have suffered reputational damage in the past year because of ethical lapses,” said Shango.

Meanwhile, 80% of South African CEOs aim to expand by way of organic growth in the next 12 months; 59% plan to implement a cost-reduction initiative; 56% plan to enter into a new strategic alliance or joint venture; and 44% expect to undertake new mergers and acquisitions.

“It is notable that 37% of South African CEOs – compared with 58% in 2016 – plan to increase their headcount in 2018, while 54% of global CEOs plan to increase their headcount,” he added.

Further, 32% of South African CEOs named the US as the most important country for the overall growth prospects for their organisations, followed by the UK (27%) and China (24%).