CEOs of the world’s largest businesses are increasingly optimistic about the outlook for their own business and, despite the Covid-19 Delta-variant slowing down the return to normal, their confidence in the global and local economies over the next three years has returned to levels not seen since the start of the pandemic, audit, tax and advisory firm KPMG South Africa's 2021 'CEO Outlook' survey shows.

The survey, conducted in partnership with business organisation Business Leadership South Africa (BLSA), draws on the perspectives of 50 CEOs across ten industries and highlights that 70% of leaders are confident about the local economy's growth prospects over the next three years.

“Higher economic growth will only be achieved, however, if a specific growth mandate is pursued. The local economy is forecast to grow by a modest 2% in 2022 and, with the prospect of a stronger global economy, CEOs are looking to invest in expansion and business transformation,” KPMG said in an October 5 statement.

“The survey reveals that 62% of senior executives are identifying inorganic methods, such as joint ventures, mergers and acquisitions and strategic alliances as their organisations' main strategy to support their growth.

"A majority, or 88%, of local leaders stated that they expect aggressive growth and are looking to make acquisitions in the next three years to facilitate this and transform their businesses. This is closely aligned to the global average of 87%.”

However, since 2020, two key risks have moved up the agenda, including supply chain risk, with a 10% increase year-on-year, and tax risks, where 75% of CEOs believe that the pressure on public finances has increased the urgency for multilateral cooperation on the global tax system.

“Despite the risks, there is a clear 'road to renewal' theme emerging this year and, no doubt, South African CEOs are both optimistic about growth and are placing a specific emphasis on leading with purpose and digitally transforming their businesses while upskilling an agile workforce,” said KPMG South Africa CEO Ignatius Sehoole.

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

“However, while we drive growth, we also face a tough task, namely leading companies in a time of continued uncertainty where markets and forecasts are dynamic in nature. The main threats to business identified in the survey, not surprisingly, include supply chain, operational concerns and cybersecurity, followed by climate change, regulatory and emerging or disruptive technology risks,” highlighted BLSA CEO Busi Mavuso.

DIGITAL AGILITY
Despite the risks, research shows that CEOs are embracing the need to push the boundaries of their business, with quicker shifts in digital transformation strategies and investments being a priority. Seventy-four per cent have indicated that technological disruption is more of an opportunity than a threat.

Further, not only are 58% well prepared for future cyberattacks, but 54% are shifting toward a cloud-first mindset and aiming to partner with a third-party cloud technology partner in the next three years.

Similarly, 70% are placing more capital investment into buying new technologies in pursuit of their growth objectives, the survey showed.

“We are seeing a major shift in digital agility, where CEOs are strengthening their organisations’ digital advantage by building a more flexible workforce and, no doubt, this shift will positively impact not only the business, but certainly the workforce of the future,” said Sehoole.

“The top key success factor, according to 58% of CEOs, to ensuring employees are engaged, motivated and productive in the hybrid work model is investing in digital training, development and upskilling them to be future-ready. Therefore, technology agility and development remains key,” he said.

Additionally, stakeholder expectations of businesses have risen, and the actions of organisations and their leaders are under increasing scrutiny with pressure to demonstrate trust, transparency and purpose. Therefore, while employee-first commitment emerges, CEOs are also looking to embed environmental, social and governance (ESG) metrics more strongly into their strategies.

“Eighty per cent recognise that large corporations have the resources to help governments find solutions to pressing global challenges and this, therefore, becomes a business-critical consideration,” Sehoole highlighted.

There is a major shift to the social aspect of ESG, with 81% of CEOs saying they have shifted their focus into this space and 71% committing to personally driving this agenda. However, results indicate that 30% are planning to invest 10% or more of revenue into the environmental aspects of ESG, but 68% indicate that government stimulus is required to accelerate climate investments being made by the business community.

“Modern, connected CEOs are those that 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 of global CEOs say that their digital and ESG investments are inextricably linked,” Sehoole said.

“The overall positive tone of South African CEOs and the major strides in key areas to grow both their own businesses, as well as the local economy, is refreshing.

"They are not only ready to shift to new ways of working and empowering their employees, such as 70% of businesses focusing on culture and policies for a better work-life balance, but are addressing key risks and leveraging digital and ESG opportunities to move business forward,” Mavuso highlighted.

“CEOs acknowledge the need to be connected, namely people-first and purpose-led, as well as embracing the challenges of building a resilient organisation. We have seen, in the survey, that delivering on their purpose and strategic goals remains a key mandate over the next three years, with workforce management being integral to sustainability.

"Annual bonuses are linked to ESG performance, with a core focus on stabilising business and creating a diverse workforce for businesses of the future,” Sehoole stated.