Government and the Global CEO report calls for a new contract between business and the state

Business is facing a world of volatility and uncertainty, which affects short-and long-term confidence and businesses’ willingness to invest and create jobs. Uncertainty over economic growth continues to be the main concern of CEOs with the majority of them saying they had some concern regarding economic conditions, according to the findings of a new report released by professional services firm PwC.

Drawing on the results of the Annual Global CEO Survey of 1,330 business leaders released in Davos , and adding to it with valuable insights from 42 government representatives and state-backed CEOs, PwC’s Public Research Centre has published its latest report entitled ‘Government & the Global CEO: A new contract between business and the state’.

The study discloses that business is facing a world of volatility and uncertainty, affecting both short and long term confidence.

The results of this year’s study show that economic and policy threats are more prevalent for all regions in comparison to business threats. In the emerging markets, difficulties are more around the lack of available skills as well as over-regulation. In Africa and Latin America, 50% or more of the CEOs surveyed are concerned about a lack of infrastructure (including for some the basics of energy, water and sanitation).

Stanley Subramoney, Strategy Leader of PwC Africa, says: “The message for Governments and other public sector organisations is clear: they must help deal with uncertainty, build resilience and engage with business. It’s time for a new contract between business and the state, with a shift in the mindset both of public sector and business leaders from co-existence to mutual collaboration.”

Overall, uncertain and volatile economic growth and fiscal deficits top the list of economic and policy threats. In South Africa corruption and uncertain or volatile growth are the most pressing concerns cited by CEOs. Unease about the exchange rate volatility has grown from 53% to 70% over the past year, and is now more of a concern for South African CEOs than their global peers. On the other hand, while two-thirds of local CEOs are worried about over-regulations, this is marginally less than the global average.

The key threats to business in South Africa are considered by CEOs to be the availability of key skills. Energy and raw material costs are also considered a prominent threat, and can be expected to remain the case as long as the cost of oil and electricity continues to increase.

What do CEOs want from Government?

Much has changed since the financial crises.  While the world has moved very quickly, governments have struggled to keep pace.  Not only have citizen expectations risen exponentially with rapid development in new technology, but the funds for investing in public services have dried up.  Governments and public services must adjust to the new reality of “doing more for less” (or “doing less for less”) adds Subramoney.

 

“In my view partnering, co-venturing, co-creation and co-design are the new ‘must have’ capabilities. Agility, innovation, inclusiveness and transparency are the characteristics and behaviours needed by the State of tomorrow.”

However, CEOs must not assume that Government has to do everything. CEOs must also expect to play a role, particularly through increased investment in creating and fostering a skilled workforce, as well as maintain the health of their workforce.

CEOs in the private sector are focusing on three actions to cope with uncertainty and create more resilient organisations: targeting pockets of opportunity, concentrating on the customer, and improving operational effectiveness. “The pressures of less money and an environment of uncertainty and volatility also point to a need for greater resilience in the public sector. We believe many of the actions disclosed by the study are equally relevant to public sector leaders and could enable them to build more operational flexibility and connectedness within and outside their organisation.”

As a result of growing government involvement in public sector activities, either through ownership or regulation, CEOs are changing their views on the role and influence of Government in the key areas that affect their business. Says Subramoney: “Like it or not, the public and private sectors are more co-dependent than ever on key issues such as skills and the health of the workforce. But there is a need to shift mindsets from co-existence to a real spirit of partnership with government, business and civil society. We need a new contract amongst them.  The rise of the digital age and the explosion of social media mean that power is gradually shifting to citizens.  Citizens are calling for leadership of public services which energises and creates meaning, context and connection for them.  They expect quicker delivery, demand individualisation and personalisation of services in todays hi touch society that values the personal experience.”

“In my view the governments of the future will need to act quite differently, more like a living organism, adapting to change and evolving to address society’s needs as they develop”, concludes Subramoney.