By Oxford Business Group (OBG)
Executives from around the world shared their views on risk versus reward in emerging markets against a challenging economic backdrop in the first Global CEO Survey carried out by Oxford Business Group (OBG).
OBG began producing its CEO Surveys in 2016 as a way of giving licence-holders a handle on business sentiment in the economies it covers, termed the Yellow Slice markets, in reference to its corporate colour. Since then, they have become a highly popular and integral part of the global research and advisory firm’s portfolio of research tools.
To gauge business sentiment, OBG asked around 7000 C-suite international executives from across the industries a wide-ranging series of questions on a face-to-face basis. The results are now available to view in full here.
Unsurprisingly, given the current geopolitical and economic climate, respondents were less positive about the prospects of their respective business environments in 2020 than in previous years. The trend was especially pronounced in markets covered by OBG in Latin America, most likely due to political uncertainty, where less than half (45%) of CEOs felt upbeat about the coming year, down from 82% in 2018.
Expectations were also lower in Asia, where just 56% of executives described their outlook as positive or very positive, down from 76% in 2018, perhaps prompted in part by a fall in demand from China and the uncertainty created by its trade war with the US.
Yet despite the challenging business environment, executives remained bullish about the likelihood of their companies expanding in the coming months. Just under two-thirds (62%) of interviewees said they thought their firm was likely or very likely to make a significant investment in the coming year, matching the percentage in 2018 and up from 59% in 2016.
It is worth noting that the survey was of course conducted before the outbreak of covid-19 which is currently rattling global markets and sentiment alike.
While raising capital is a key part of the investment process for many business leaders, the lending environment has become increasingly constrained of late across many of the Yellow Slice economies. The findings in OBG’s survey reflected this trend, with 44% of respondents describing the ease of access to credit in their market as difficult or very difficult – similar to the average percentage in 2018, but up significantly from 2016, when it stood at just 28%.
However, responses varied greatly between markets. Africa was perceived to have the most challenging lending environment, with a weighty 60% of business leaders located in the region citing access to credit as difficult or very difficult, significantly higher than in Latin America (39%) and the Middle East (27%).
Results were also mixed in answer to a question about business leaders’ local tax climate. Overall, the percentage of respondents who viewed their tax environment as competitive has remained steady since 2018 at 49%, although in 2016 it stood at a much higher 70%. Significantly, business leaders in the Middle East were the most positive about the competitiveness of their tax frameworks, despite the historic introduction of 5% VAT in the Gulf Cooperation Council countries from 2018 onwards.
In keeping with the findings published in OBG’s surveys to date, respondents identified leadership as the skill most in demand within their sector. However, regional divides were also evident, with interviewees in Latin America and the Middle East ranking research and development second in terms of competencies needed in the workplace, while those in Asia and Africa opted for engineering.
Introducing OBG’s first Global CEO Survey, Oliver Cornock, Editor-in-Chief, acknowledged that in an era of globalisation, the slowdown in global growth, sparked by a combination of heightened geopolitical tensions, commodity price volatility and the US-China trade war, had inevitably weighed on Yellow Slice economies, as well as more developed markets.
“Unsurprisingly, therefore, our respondents were more negative about the prospects of their respective business environments than in previous years, with the percentage of CEOs with positive or very positive outlooks falling by 18%,” he noted. “However, with moribund growth in many established markets, the Yellow Slice countries in Asia, Latin America, Africa and the Middle East, when viewed as a bloc, with their strong economic fundamentals, youthful populations and positive average GDP figures, present a compelling picture.”