South Africa Economic Outlook - August 2024
Building societal trust can significantly improve South Africa’s productivity and the prosperity of its people
Johannesburg, 28 August 2024 — PwC South Africa Strategy& is pleased to share its eighth South Africa Economic Outlook report for 2024. This edition looks at the role that trust plays in society and economic development, and how South African companies can go about building trust with their stakeholders towards a more productive economy.
PwC’s Megatrends publications have warned that increasing inequality and other major global factors make it more difficult for people to find common ground, which plays a key role in helping to establish trust in a society. South Africa has a host of societal ingredients associated with low levels of interpersonal trust, including a history of segregation, high levels of wealth and income inequality and elevated levels of crime, among other factors.
There is a strong positive relationship between trust and measurements of prosperity like, for example, real GDP per capita. Furthermore, at a company level, the correlation between customer trust and profitability is surprisingly strong at a global level.
“Social capital plays a pivotal role in economic development, serving as the bedrock upon which prosperous societies are built. Societal trust is a deep determinant of economic progress: it fosters cooperation, reduces transaction costs, and encourages investment and innovation. When individuals trust one another, they engage in mutually beneficial exchanges, leading to economic growth and development. Trust lubricates the wheels of commerce, enabling efficient market functioning and facilitating collaboration among diverse stakeholders.”
The Edelman Trust Barometer 2024 classifies South Africa as a country of “distrust”, with our score of 49 falling just below the ‘neutral’ band (50-59) of scores. On a positive note, the country’s score improved from 47 in 2023 largely as a result of a notable increase in the surveyed trust in government.
Six out of 10 (62%) South Africans trust the business sector to do the right thing, according to the Edelman Trust Barometer 2024. This ranks the country 15th out of the 28 territories assessed by Edelman. Furthermore, eight out of 10 (79%) employed South Africans trust their employer to do what is right.
“Our people have seen the hard work done by the country’s business sector to help rebuild the economy during some of our biggest recent challenges, including COVID-19 and electricity load-shedding. This has boosted their trust in the private sector.”
At an industry level, PwC’s Voice of the Consumer Survey 2024 found that local consumers have the highest trust in airlines. This is quite understandable: in South Africa, airlines are perceived as operationally reliable, offering value for money, having strong safety records, and providing a high level of service quality. Companies in the hospitality and leisure industry were placed in a very close second position.
PwC’s consumer survey asked South Africans what factors most influence their trust in companies. The protection of customer data was the top feature with a combined 92% of consumers indicating that this is very or extremely important to them. PwC’s Global Digital Trust Insights Survey 2024 also found that the loss of customer data is among the top concerns faced by South African firms related to potential cyber attacks.
“The collection and use of first-person data for personalisation has become crucial for South African companies to maintain a competitive advantage in the marketplace. But data is considered to be a raw material. Like oil, data must be refined to become valuable. And similar to oil, data can also leak and, in turn, cause significant damage to individuals and organisations if it is not appropriately secured. Breaking a client’s trust could have severe consequences as a breach of data could lead to financial, reputational and regulatory harm to any organisation.”
Strategy&’s Productivity Potential Index (PPI) gives insights into the productivity that economies like ours could potentially gain by improving trust levels. In the index, trust is represented by data on the share of people agreeing with the statement “most people can be trusted” in their country. According to the World Value Survey, only one in four (23.3%) South Africans believe that most people in the country can be trusted. This is only about a third as strong as the top performing countries globally.
Increased interpersonal trust can have an outsized positive impact on South Africa’s economic productivity. According to our modelling, South Africa’s productivity could increase by 8.3% if its trust levels rise to those seen in Olympics and Paralympics host France. Furthermore, South Africa’s productivity could increase by up to 27.1% if we reach a societal trust level comparable to that of Norway—the top-performing country on this indicator. While Norway is a world away from South Africa, the country's values—openness, equality, and equal rights—overlap with many of the ambitions that we as South Africans have for our own country.
Fixing the trust deficit is a far greater challenge now than it was just a few decades ago, given the growth—both locally and abroad—of economic disparity. An important first step for private businesses is recognising the trust gap. It is precisely because of this that private organisations can play an outsized role in addressing these challenges in South Africa and elsewhere. Local business is increasingly expected to do so by consumers, employees, and other stakeholders, in support of an economic system in which value creation and increased growth improve the lives of individuals and the health of societies.
Businesses then need to invest in the creation of trust by walking the talk on environmental, social and governance (ESG), as well as diversity, equity, and inclusion (DEI) issues. To do so, companies need to measure and communicate these factors. Demonstrating an organisation’s commitment to responsible practices, transparently quantifying, and effectively communicating impacts fosters trust with stakeholders.
Quantifying impacts of economic, environmental, and broader societal matters lends credibility and reinforces an organisation's value proposition to its diverse stakeholder base. A pivotal benefit is the ability to enhance engagement with key stakeholders through transparent communication of positive impacts. By showcasing tangible positive contributions, organisations can cultivate trust, credibility, and goodwill among investors, employees, communities, and the broader public.
Today, impact assessments transcend necessity—they become an indispensable tool for responsible, thriving, and resilient organisations. It is essential for South African companies to understand, measure, and communicate their overall impact on the economy, environment, and society as a whole because it promotes trust and loyalty among stakeholders.
Specific uses of impact assessments include: formulating business strategy; measuring economic impact; managing the impact of large-scale infrastructure projects; assessing the impact of policy changes; evaluating how corporate restructuring influences stakeholders; determining societal impact when introducing innovations; community development; and for climate change strategies.
Key content in this report includes:
- Trust and prosperity: Social capital as an integral part of commerce and economic development.
- Status quo: Six out of 10 South Africans trust the business sector to do the right thing..
- Trustworthiness at an industry level: Protection of customer data is a top confidence builder with clients.
- Productivity simulation: The economic potential that increased social capital can unlock.
- Practical steps: Impact assessments help companies boost transparency and build trust with stakeholders.
- How we can help: A range of applications that PwC clients can use impact assessments for.
