How to win in Africa
By David Storey, Ernst & Young
While conditions in Africa are highly conducive toward growth, too little attention has been paid to the human resources required to drive this growth. More specifically, it is important to understand how workforces across sub-Saharan Africa (SSA) are positioned to support, participate in and benefit from rapid economic development.
This is not to suggest that SSA is a blank canvas on which Western human capital practices can be imposed. Unlocking human capital potential in SSA presents unique challenges best addressed by:
•► Viewing Africa as a continent of diverse countries with different challenges and opportunities, and not as a homogenous entity
► • Strengthening and customizing workforce planning and talent strategies, and
partnering, to accelerate technical, vocational and tertiary education delivery
► • Complying with minimum employment standards, and partnering with stakeholders in
shaping the labor-relations environment
► • Designing systems that acknowledge the significance of learning and development as
a value driver for employees, and structuring incentive solutions that are tangible and immediate
• Promoting employee engagement that avoids the trap of generalizations and stereotypes, in order to resonate more with local cultural values and attributes
Gold isn’t where you find it, but how you mine it
Those looking to enter or expand their businesses in SSA are taking care to understand local labor markets, and formulating strategies and plans to mitigate the risks they encounter. Finding the right talent is one of the most important challenges currently facing businesses in SSA, given:
• Low literacy rates in many countries—about 40% of the SSA working age population in 2010 was literate
►• Low primary school completion rates (less than 60% across the region)1
► • Relatively low secondary and tertiary education enrolment rates
(average regional gross and net enrolment rates of 40% in 2010 and 29% in 2009)
► • A tertiary education enrolment ratio of only 6%,2 although this number is growing
Despite increased urbanization in the past decade, agriculture remains a key employment sector across the continent. In Tanzania, for example, while the agriculture sector’s share of employment is declining, it is still pegged at 70%. In Cameroon, agriculture’s share has increased in recent years.3 Workforce experience of modern wage employment remains critically low. In Cameroon, the formal private sector represents less than 4% of the labor force,4 while for Ghana, this figure is 5.9%.5
The potential pool of talent to fill management positions and skill intensive roles in these markets is small. Business can mitigate these risks by deploying expatriates. This, however, brings its own challenges and is unsustainable.
The African Management Initiative6 estimates there are 11 million people in management roles in Africa, and that many lack the skills they need to perform effectively. This is exacerbated by high mobility rates among top African talent, many of whom do not trust their employers to manage their careers. The problem is compounded by an acute shortage of recognized business schools and training providers.
The war for local talent throughout SSA has only just begun, and is expected to intensify quickly. To address this, business needs to:
► • Strengthen and customize their leadership, talent and workforce planning capabilities
► • Engage host governments on strategies to increase the quality
of technical, vocational and tertiary education
► • Define standards for effective leadership and talent-
management processes, and reframe approaches to the development of expatriate and indigenous leaders
Employment: not a lawless frontier
The preconception that doing business in SSA means relaxed employment standards is misguided, despite the following labor market dynamics:
Trade unions have seen a decline in membership, except in the public sector. The size of the informal sector constitutes a long-term threat to the formation of trade unions and collective bargaining.
► • Casualization, outsourcing, self-employment and family labor
also shrink the recruitment base of trade unions, as do emerging forms of worker organization such as community organizations, NGOs, and unregistered unions.
► • Mature labour relations practices are absent in many African
countries, although a number have introduced minimum standards and ratified International Labour Organisation (ILO) conventions.
► • Governments often have limited capacity to enforce labor standards and legislation.
However, trade unions, having played a key role in the struggle for democracy in many African countries, remain fundamental to the political and economic landscape. While state capacity to enforce minimum standards may be weak, they are important business stakeholders and customers in the context of privatization, public- private partnerships and outsourcing trends. To disregard the state is to disregard an important source of business. In addition, foreign-owned businesses are easy targets for enforcement campaigns; non-compliance carries reputational risk. Corporate behavior that is experienced by governments as disrespectful may invite a backlash that generates harmful publicity beyond the African continent.
Successfully navigating this environment requires businesses to do more than comply with minimum standards and recognize unions. They must engage with all stakeholders with the genuine intention of co-creating a shared future.
A fistful of dollars alone won’t get you far
In the same vein, there is danger in assuming that performance and reward programs with a Western bias can be transposed into Africa. Figuring out which aspects of the total reward offering can be standardized continent-wide at scale, and which must be finely tuned to local needs, requires on-the-ground understanding. A willingness to acknowledge how unconscious Western bias shapes the employee value proposition is important.
While adequate pay is the basis for attracting talent, long-term winners will be employers who offer meaningful learning and development opportunities, and sustained career growth, given Africa’s underinvestment in education. African employees are not simply looking for jobs – they want to build careers. Stretch assignments and international secondment opportunities are key, as is effective management of skills transfer from expatriates
to local successors (particularly since immigration officials are demanding tangible evidence of this).
The significance of learning and development extends to performance management systems. Systems that place undue emphasis on differentiating individual performance and pay can be ‘counterproductive. Instead, the focus should be on building a nurturing environment, investing in skills and capabilities, and providing regular feedback.
Other features of pay and benefits in Africa are:
‘Cost-to-company’ or ‘total-guaranteed-package’ approaches to remuneration. Most common in South Africa, these approaches are not prevalent in many African countries, where this is often misinterpreted as basic salary (excluding benefits).
The range of benefits is wide and not always monetized in the valuation of packages. Private medical aid as a compulsory benefit is not broadly practised, partly because of limited access to private health care.
Job evaluation systems to determine the relative worth of jobs not being a common feature of pay programs. While huge importance is attached to job titles and status, setting competitive pay levels for both local and expatriate staff is often more an art than a science. Access to reliable market data on salaries and benefits is often limited.
Given prevailing socioeconomic conditions, long-term reward structures are a challenge and potentially emotive. For similar reasons, line of sight and clear formulae are desirable in variable pay scheme designs.
Share-based incentives are not common. Partly because of the small number of locally listed stocks (for Africa-based holding companies), and unwieldy foreign exchange and taxation schemes (for holding companies outside Africa), where they exist, they tend to be cash-settled phantom schemes.
Considered and creative pay-and-reward solutions. These are required for Africa, and should be mindful of local customs and practice, and cognisant of how socioeconomic conditions shape workplace expectations.
Harnessing a unifying culture— the silver bullet for African competitiveness?
If Africa is not a blank canvas on which to impose Western practices and ideologies, is the opposite true? Can African traditions and cultural values, properly understood and harnessed, translate into a competitive advantage? Proponents of this view invariably reference the concept of ubuntu—representing respect, solidarity, conformity, compassion, dignity and humaneness, inter- dependence and hospitality.7 Such proponents would argue that organizations in SSA that foster a workplace culture that gives expression to these values will achieve higher levels of employee engagement, and therefore improved performance. This is flawed logic, for the following reasons:
•► It assumes that ubuntu is a pan-African phenomenon, and that all Africans are the same.
► • It fails to take into account the significant role that status differentials play in shaping workplace behavior.
► • There is a risk that those in authority manipulate the ubuntu values of respect and conformity, often provoking employee resistance.
► • Generational differences may well trump traditional cultural differences, as do personality, education, class and a number of other factors that shape human behavior.
Social identities are dynamic and prone to rapid change in the globalization era. Not denying the importance of recognizing and respecting cultural diversity, there is no substitute for receptiveness to inter-personal feedback, good observation skills, effective questions, and other attributes associated with emotional intelligence (EQ). Evidence shows that managers with above average EQ stand a better chance of enhancing workplace performance by fostering employee engagement – anywhere in the world.
Global research by Gallup8 has consistently demonstrated that engaged employees are more productive, more profitable, more customer-focused, work more safely and are less likely to resign. Measures that increase levels of employee engagement are universally applicable, with some customization for local circumstances, such as cultural variations. If the local culture in an African country is characterized by ubuntu-type attributes, employee engagement interventions that embody those values are likely to resonate.
Build a better working Africa
Don’t fall into the missionary trap of preaching the merits of Western business practice in Africa, or of stereotyping a continent of over one billion people. Do help to build a better working world in Africa by understanding its nuances and complexities, and by adopting partnership-based approaches to developing sustainable and productive human capital practices.