Africa will undoubtedly continue to be a dynamic region of interest for multinational corporations (MNCs) looking for the next growth frontier. Specific countries within the sub-Saharan Africa region are experiencing an economic growth rate higher than that of the global average. This is accompanied by trends of high urbanisation, a rising middle class, and a vision to transform from commodity-based economies to industrialised ones.
However, this economic growth has not been matched by a supply of the right technical and managerial talent. MNCs that address talent challenges using innovative and cost-effective talent development approaches will be best prepared to capitalise on the region’s growing market opportunities. MNCs will need to adopt talent strategies that focus on:
Understanding where to source willing expats and providing the incentives to motivate them to return to their home country.
Partnering with regional universities, corporations or other stakeholders to pool talent for development programmes and achieve scale.
Encouraging talent mobility across the region to foster pan-African talent development.
Demonstrating a strong commitment to the local community.
Developing an integrated talent strategy adjusted to local market needs that addresses leadership and career development, talent management and diversity.
Although Africa at a regional level offers an attractive opportunity for businesses, the opportunities exist in specific locations and sectors, and the lack of the availability of talent remains a major bottleneck to capture them.
Africa’s status as the growth frontier
Africa is one of the most swiftly developing regions in the world. From 2004-2014, six of the ten fastest-growing global economies were in Africa. Africa’s economy continues to grow faster than the world average. When comparing Africa’s growth against global averages to evaluate market entry opportunities for MNCs, it would be misleading for MNCs to look at the continent collectively. There is wide disparity in the economic outlook of the 54 independent and diverse economies that comprise the region.
For instance, in South Africa, the largest economy by GDP, where policy uncertainty is making the adjustment to weaker terms of trade more difficult, GDP is projected to remain flat in 2016, with only a modest recovery next year as the commodity and drought shocks dissipate and power supply improves. Nigeria temporarily overtook the crown as the biggest African economy from South Africa in 2015. There, economic activity is now projected to contract 1.7% in 2016, reflecting temporary disruptions to oil production, foreign currency shortages resulting from lower oil receipts, lower power generation, and weak investor confidence. Similarly, Angola, another leading African economy, is adjusting to a sharp drop in oil export receipts. It is not expected to grow this year and will experience only feeble growth next year.
By contrast, several of the region’s non-resource exporters, including Côte d’Ivoire, Ethiopia, Kenya, and Senegal, are expected to continue to expand at a very robust pace of more than 5% this year, benefiting from low oil prices and enjoying healthy private consumption and investment growth rates. Thus, while the Middle East and North African projected economic growth is in line with global growth, sub-Saharan African economies are expected to outperform global growth, with 4% projected for 2017 and 5% by 2021.
Simultaneously, the cost of doing business in Africa has been falling, and the continent’s middle class has begun to grow rapidly. Africa’s population is expected to double by 2050 from 13% to 23% of world population, with South Africa being the least populous in the region and Nigeria the most. The growing population continues to transition from rural to urban areas, with urban population enjoying a CAGR of 3.94%. Africa’s urbanised population, currently at 40% of the population (up from 36% in 2010), is set to grow to 50% by 2035. This provides a consolidated and concentrated market, which is easier to access and target.
Cities, poorly designed in the past, are now being redesigned and new ones are built (e.g. in Senegal). This phenomenon of urbanisation has led multinational companies to target cities in their expansion strategies rather than countries. By 2050, Africa will have the youngest population and largest working population. The middle class has been growing, with rising disposable income. This strong growth in the middle class in sub-Saharan Africa has led to the growth of consumerism and increasing importance of brand association with the identity of African people.
The growing economies, such as Ethiopia and Nigeria, are pursuing a path toward industrialisation to be less dependent on commodity exports.
Nigeria is becoming a hub for the manufacturing of vehicle components for brands such as Toyota and Ford. It is currently also looking at developing its vehicle manufacturing industry, as is Ghana. However, there is a dearth of technical and managerial skills in the region to enable this journey, and thus the role of the manufacturing sector is still too small.
The talent paradox for Africa
The promising potential in Africa has attracted several global MNCs, such as Kellogg, Procter & Gamble (P&G), Coca-Cola, Unilever, and Kimberley-Clarke. Their entry has been made possible by leveraging local partners for their distribution and supply chain footprint, such as Kellogg’s partnership with Multipro (Tolaram Group) in Africa. Similarly, global food retailers such as Walmart and Carrefour have also entered Africa. Singaporean companies have focused on Africa’s progress and a number of them have already entered Africa a few decades ago, such as Indorama, Olam, PIL, Tolaram and Wilmar.
Yet, it also presents an important challenge for these companies, as the rapid growth of African economies has created a gap between demand and supply of talent at different levels. A “talent paradox” has emerged in recent years: high unemployment rates point to a surplus of labour, yet companies report great difficulty finding and keeping the skills most important for their growth. This shortage of talent has already become a common reality for both multinational and local organisations and is only expected to widen over the next 10 to 15 years as economies continue to grow and more companies move into the region. The FMCG sector is a major talent pool for future leaders, with Unilever regarded as the best by some executives.
However, the mere presence of MNCs does not solve the challenge. Based on a survey of some of the leading companies in Africa, 39% of respondents find it difficult to fill jobs in Africa. In the report, one human resources (HR) director in telecommunications commented, “Scarcity of talent is very much on the mind of all corporations.” This need for the right amount and right type of talent was validated during company visits in the Wharton EMBA class trip to South Africa. This was a consistent message across all sectors: agriculture, consulting, media, consumer goods, and technology.
Understanding the talent gap
Africa suffers from a brain drain with many skilled African workers and economic migrants relocating to other continents. The Organisation for Economic Co-operation and Development (OECD) discovered that out of the 40 countries with the most acute brain drain problems, 21 are African. The purpose of migration has been in search of greener pastures as they believe that Africa does not have the opportunities for them to achieve their higher aspirations. This migration has reached a scale of such proportions that Europe has offered African countries tremendous amounts of money to keep their population in Africa.
Although only about 10% of highly-educated immigrants in OECD countries are Africans; this number is still significant. African countries have relatively small numbers of highly-educated people, including doctors, nurses, teachers, and engineers.
In South Africa, the most developed in the region, the skilled labour population is still primarily from the white population, and that too is fleeing due to the enforcement of the Black Economic Empowerment (BEE) policy. A trend branded as “White Flight”. As a personal experience, while interacting with local staff such as cashiers in a retail shop, concierges at hotels, and Uber drivers, I received a common inquiry on multiple occasions on how they could exit the country and move to the US.
Efforts to integrate regionally, such as the Tripartite Free Trade Area (TFTA), aim to help African countries overcome some of the economic and development challenges currently faced, such as weak productive structures, slow progress on reforms, and widespread conflict and political instability. However, the markets in each of the 54 countries have unique challenges, including political instability, lower commodity prices, corruption, electricity shortages, wide variance in levels of economic and social development, and wide variance in strengths in currencies. As a result, they don’t offer an efficient market structure that can enable an adequate scale for companies to develop local products and foster local talent development in the process.
The security situation makes it difficult for foreign talent to come in. The frustrations felt by Western-based expats at adjusting to the living condition challenges make it difficult for MNCs to convince the right resources to move to Africa. These include high security issues, due to both crime as well as the presence of extremists like Boko Haram and Al-Shabaab, corruption, and an extractive operating culture with policies and practices designed to capture the wealth and resources for the benefit of a small, politically powerful elite.
The scarcity of skilled talent can be attributed not only to the region’s rapid economic growth, but to a variety of additional factors, including underinvestment in education, an insufficient number of business schools in sub-Saharan Africa and the slow emergence of companies in the region that can be considered “talent academies” – large corporations that invest in growing and developing their entry – and mid-level talent. On the public education side, education policies are co-governed between federal and provincial governments that often result in conflicts of power between the two government authorities and thus ineffective execution.
South Africa as a gateway to Africa – talent perspective
Unsurprisingly, a significant majority of Africa’s top 50 companies operate out of South Africa. MNCs have traditionally viewed South Africa as the talent hub to support strategies for Africa. However, the leading companies in South Africa are experiencing human capital challenges that limit the country’s ability to become a true talent gateway into Africa.
It is not surprising that business leaders in Kenya and Nigeria are significantly more optimistic than executives in South Africa, where the gap between the importance of the diaspora and their perceived willingness to return is particularly wide. The top trends for 2016 that were identified by executives from leading South African companies are listed in order of importance below:
Trend 1 – Ineffective organisational design: Globally, many companies have already moved away from functional structures, with only 39% of all companies and 24% of large companies being primarily organised by function today. South African figures largely mirror these, again with 39% of all companies and 31% of large companies primarily organised functionally. Only 15% of executives believe that their companies are very ready to effectively redesign themselves. Most respondents feel that they are weakest in creating project-based or cross-functional teams, with 45% of South African respondents rating themselves as weak in this regard. Given the need to understand the diverse needs of each country’s market and the low productivity numbers, an inability to establish cross-functional team structures makes it difficult to foster fast learning and collaboration to address the various surprises associated with operating in the region.
Trend 2 – Lack of enabling culture: Only 31% of South African leaders report culture as a potential competitive advantage. This runs the risk of relegating culture to a tool only for “employee engagement” and values alignment, rather than a precision lever, if managed well, to drive strategy.
Trend 3 – Low employee engagement: Fifty-eight percent of South Africans rate themselves as weak in providing programmes for a young, old and multi-generational workforce. Interestingly, 72% of South African respondents report being weak at supporting new family models in the workforce, compared to 48% of global respondents. This is clearly a focus for South African organisations in the coming years, given the rapidly changing demographic profiles of the labour force.
Trend 4 – Weak leadership bench strength: When averaging the Deloitte findings across South African companies, it becomes clear that most organisations’ leadership strategies, pipelines and programmes are not up to the task of producing a pool of leadership in sufficient quantities and quality to meet demand.
“Triple A” strategy to address the talent challenge
Africa’s growing youth population is both a blessing and a curse, if not leveraged strategically. The traditional sectors of mining and agriculture are not “sexy enough” for the youth that wants to move to the cities and be involved in “cooler” sectors powered by digitisation. However, the traditional and less “cooler” sectors need to be developed to support, for instance, the need for improved infrastructure, energy, and food deficit.
Thus, there is a requirement for investment in local human capital that is focused primarily on vocational skills development to help advance the manufacturing and services sectors, with secondary focus on leadership training to ensure the right visionaries who can channel the new skilled assets. Many Western companies, therefore, have made similar investments in local talent development. Large Western MNCs such as Coca-Cola, Diageo and Heineken all have implemented in-house leadership programmes to develop management and technical skills in the region.
However, it may not be easy for regional MNC operations to implement such programmes, given the challenges of scale and cost effectiveness. Therefore, MNCs need to adopt an AAA strategy focused on a variety of aggregation, adaptation, and arbitrage approaches, discussed below, that cater specific to their business profiles and target markets.
Academia partnerships: Interaction with training institutes, research centres and universities should be encouraged to foster innovation and technological advancement, while improving the host country human capital and development. Like localised practices developed by Asian economies, MNCs need to establish strong relationships with tertiary institutions through activities such as internships, research collaboration, technical licensing and industry participation in university committees. For instance, the future of mining innovation in Africa requires more than just incremental cost reduction initiatives, but rather disruptive techniques on the back of digitisation, automation and mobilisation. In Nigeria, Schneider Electric trains electricians in partnership with the National Power Training Institute of Nigeria. Such partnerships should also include executive leadership programmes, often structured as online programmes.
Strategic use of global professional services: Although professional services may not be the major sources of employment in the region, a significant amount of money is spent by private and public sectors to global professional services firms. While the rationale for sourcing to external firms is justified given the advanced expertise of such firms, public and private procurers of such services should incentivise global firms to develop local talent as part of such engagement. For instance, McKinsey & Company has launched a two-year Young Leadership Programme in Kenya to develop local talent early; the most successful students receive an offer to join McKinsey at the end of the programme.
Pan-African development: Transferability of talent among African markets has become increasingly important to many MNCs, as they have learned to view individual countries as separate markets. Some companies have already established an arbitrage model that develops talent in countries where more talent is available, such as Kenya, and then employ this talent in other African markets where finding skilled locals is more difficult. Several HR directors have commented, “there is an emerging trend toward pan-African leaders” who can work across cultures. Similarly, Colgate is rotating people across the continent to help invest not necessarily in training, but in exposure to business diversity. Other organisations, such as Olam, have focused on decentralised governance by allowing each country office to operate with autonomy so that they can take risks as appropriate for the location. However, this requires MNCs to develop a risk appetite to reap longer-term benefits.
Attraction for expats: As a knee-jerk remedy to the talent shortage, many companies look to attract the expat diaspora who have left the region in pursuit of work or further education. According to a 2013 report by the United Nations, one out of every nine Africans with a university education lived in an OECD country in 2010/2011. Perhaps not surprisingly, executives who have left their home country for professional or academic reasons, are seen as an important source of potential talent for all the growing African economies. As a result, members of the diaspora are gradually returning from abroad to take advantage of career progression opportunities in the region, which may not be available in developed countries
Business networks: Establishing business networks of non-competing MNCs to allow knowledge transfer and sharing of talent resources can help MNCs reduce the cost of coordination in a peer-to-peer network structure. For instance, Olam’s leadership has regarded such interactions as one of the keys to its growth and market leadership in the region.
Conclusion
Africa will undoubtedly continue to be a dynamic region with great opportunities for those who charter these times wisely. MNCs that address the talent challenge using innovative and cost-effective talent development approaches will be best prepared to capitalise on the region’s growing market opportunities. MNCs will need to adopt talent strategies that focus on:
Understanding where to source willing expats and providing the incentives to motivate them to return to their home country.
Partnering with regional universities, corporations or other stakeholders to pool talent for development programs and achieve scale.
Encouraging talent mobility across the region to foster pan-African talent development.
Demonstrating a strong commitment to the local community.
Developing an integrated talent strategy adjusted to local market needs that addresses leadership and career development, talent management and diversity.
Author: Shujaat Ahmad is a manager in Deloitte Consulting LLP’s strategy and operations practice, based out of San Francisco. The views presented here are the author’s personal perspective based on personal research, without any linkage or endorsement from any professional organization and/or employer.
This report was presented to the NTU-SBF Centre for African Studies for publication. The Centre is a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation.
