Ernst & Young (EY) has just released its latest EY Growth Barometer 2018 report, where an estimated 2 766 middle market executives across 21 countries were asked about their confidence in business growth for their specific sector.
In terms of the South African outlook, it differed greatly from the rest of the globe, with one in three executives noting that they expected growth in excess of 10 percent.
This is also in stark contrast to the International Monetary Fund’s (IMF) GDP report which projected a growth of roughly 1.5 percent for the country’s economy.
Much of this optimism as Azim Omar, Africa growth markets leader at EY, explains it, has to do with renewed confidence in the country’s leadership, or rather the recent change in leadership.
“Business confidence has soared since Cyril Ramaphosa was elected in February as the country’s president,” notes Omar.
“Economic growth forecasts are stronger this year, where last year there was a risk that we were heading for a recession,” he continues.
Delving deeper into the report’s statistics, the past 12 months has seen the percentage of middle market companies expecting a growth of between six and 10 percent growth jump from 32 percent last year to 58 percent in 2018.
Added to this a further 30 percent of companies were optimistic of growth exceeding the 10 percent mark. This also resulted in only 12 percent of companies anticipating a decline, according to the Growth Barometer.
Along with the change in South Africa’s leadership, the opportunities presented by overseas expansion is proving to be another significant contributor to company expectations.
Of the BRICS (Brazil, Russia, India, China and South Africa) nations for example, only China has more executives for whom expansion into foreign territories is a strategic growth plan. SA’s number in this regard is sitting at 27 percent, which is slightly higher than the global average of 23 percent.
As for the technologies that will be driving this growth, intelligent automation and machine learning have been highlighted as key enablers for myriad industries.
The outlook on AI has changed rapidly over the space of a year, with 75 percent of South African middle market CEOs responding that they are already or are planning to implement AI solutions for the business within the next two years.
Compare that to the 64 percent that said they would not in 2017, and there’s clearly been a paradigm shift in the attitude towards AI technologies.
This changing mindset is one EY is fully aware of. “Successful and profitable responses to convergence favour the fast. Agile companies who can adjust their offering or business model to align with a shifting consumer environment are the ones who will thrive,” adds Omar.
As such technology is viewed as the great enabler of South Africa middle market companies, particularly as it pertains to increasing productivity. EY’s Growth Barometer for example found that 27 percent of named it as the key factor in improving productivity.
That said, cash flow still remains a significant concern for many, especially as a hurdle to operational growth. If technology can prove disruptive enough to tackle that specific challenge, then outlook as far as growth is concerned could rise even higher.
Embracing the youth
Along with technology, businesses are abundantly aware of the need to address the skills shortages in their workforce.
More specifically it is the up-skilling of its employees in very specific ways.
At 15 percent, a lack of skilled talent is viewed as the third greatest challenge to company growth.
Turning to our youth is the proposed answer in addressing this issue, according to EY’s findings. 35 percent of respondents note that attracting younger, digitally native talent is what is required for creating the ideal culture in their respective workplaces.
This, however, still presents a challenge says Omar, with an abundantly young workforce that can address the necessary needs still requiring the correct training and skills development in order to do so.
“The reality in South Africa of our youthful population — with 47 percent of the country’s 56.5 million people under 25 — may exacerbate the country’s skills challenge and explain why demographic shifts are cited as the most disruptive force facing businesses,” concludes Omar.
To read the full EY Growth Barometer 2018 report, head here.
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