Lullu Krugel, PwC South Africa Chief Economist and Shirley Machaba, PwC South Africa CEO
South African companies can turn short-term crises in 2024 into opportunities for creating business value and societal impact
Periods of predicament can create a window of opportunity for impactful change and leaders — both in the public and private sector — should not miss the chance to seize it.
PwC’s 27th Annual Global CEO Survey found that global business leaders are more positive about economic growth in the next 12 months compared to their outlook a year ago. However, despite this positive sentiment, it appears as though many countries around the world are being confronted with a worsening set of societal challenges at the start of 2024.
Alongside country-specific structural challenges — which, in the case of South Africa, includes electricity load-shedding, high levels of unemployment and a scourge of crime — the world is also facing short-term crises. These challenges are more transient in nature and less enduring than the long-term Megatrends shaping society.
The short-term challenges are certainly not the same everywhere. However, they can be grouped into five categories, namely: economics, conflict, resources, health and institutions. Based specifically on these categories, we have identified crises across five areas of South African society, namely:
- Macroeconomic volatility
- Conflict-hit international supply chains
- Access to scarce resources
- Access to healthcare
- Struggling public institutions
Lullu Krugel, PwC South Africa Chief Economist, says:
“These country-specific challenges are expected to dissipate somewhat over the medium to long-term. In the meantime, there is scope for South African organisations to turn these crises into opportunities during 2024 to create value for their stakeholders and society in general. Periods of predicament can create a window of opportunity for impactful change and leaders — both in the public and private sector — should not miss the chance to seize it.”
For companies (both locally and abroad) surrounded by economic uncertainty, creating financial value for their broad set of stakeholders — owners, shareholders, staff, communities, etc. — is a real challenge. South African companies are under strain from international macroeconomic volatility and domestic headwinds, including electricity load-shedding. This is hitting their bottom line: local company profits and dividends declined 17.8% y-o-y and 33.2% y-o-y, respectively, in 2023Q3. The negative trend could continue in 2024. This, in turn, requires business leaders to act.
Global geopolitical tensions are disrupting international supply chains, and PwC’s Global Risk Survey 2023 identified supply chain disruption as the main external factor seen contributing towards company risk. South African companies are also facing domestic challenges to rail and port services, with logistics under duress from shipment delays. Supply chain localisation — relying instead on closer-top-home sources of labour, goods and services, innovation, technology and capital — could reduce dependency on foreign sources and enhance business resilience. However, localisation is about more than just goods, and also includes workforce, research and development, technology and capital considerations.
Resource scarcity, caused in part by supply chain disruption, is exacerbating socio-inequality gaps. South African companies are regularly struggling with resource shortages and factory capacity under-utilisation due to raw material shortages has been elevated over the past several years. To save costs, remain profitable, and create value for stakeholders, companies need to do more with less. As a possible solution, a business model based on circular economy principles can help companies to use resources more efficiently through recycling, remanufacturing, reuse, maintenance and redesign.
While technology can be used for good in the circular economy, technological change is amongst the factors (alongside geopolitical and political power shifts, climate change and corruption) that are threatening to overwhelm public institutions in many countries. In South Africa, the public sector is unable to deliver the quantity and quality of services that it previously could. As a result, the use of public services declined across the board between 2019 and 2023. Local companies can make a meaningful impact on their communities by partnering with the government to help address socio-economic challenges. The suggested public-private collaboration model is an equal partnership with shared funding and control over the assets.
With fiscal resources constrained, healthcare systems globally are facing significant hurdles, and access to healthcare is under pressure. The number of South Africans without access to universal health coverage is estimated to have increased by more than a million between 2017 and 2023. Some 56% of South African respondents to the Edelman Trust Barometer 2023 survey believe that employers are not doing enough to support access to healthcare. Options for employers to support workers’ access to health services include employee wellness initiatives, support programmes, and relevant training.
Shirley Machaba, PwC South Africa CEO, says:
“Crises create an environment that can help kickstart profound and sustained change, whether at a company level or for society as a whole. PwC believes that, in order to respond effectively to such an opportunity for change, organisations need to put purpose at the heart of their risk and overall strategy. Being purpose-led means a company is guided by a clear and meaningful mission beyond just financial success. Rather, the organisation is driven by a commitment to making a positive impact on the so-called triple bottom line: profit, people, and the planet.”
Key elements of this report include:
- Economics: Value preservation and creation can make companies more resilient and competitive during economic downturns.
- Conflict: Localisation of sourcing could reduce dependence on supply chains hit by foreign conflicts and domestic inefficiencies.
- Resources: A circular economy approach creates benefits for many stakeholders impacted by costly resource scarcity.
- Health: Wellness initiatives, support programs and health education can improve employees’ access to healthcare.
- Institutions: A public-private collaboration model improves public service delivery through joint funding and operational control.
- How PwC assists our clients in responding to opportunities for change by placing purpose at the heart of their risk and overall strategy.
Download the full report below: