HR in Africa: The Emerging Challenge

By Anna Chabbat, Mercer

The global recession of the past year has touched Africa just as it has affected the other resource-rich geographies of the east and west. A logical question is whether the emerging era of private enterprise growth and prosperity in Africa will be significantly slowed by the downturn. But the more appropriate question is how can companies benefit from the economic changes in this complex environment?

If there are answers, they may well lie with the determination of organizations in Africa to adopt the right human-capital strategies to ensure they have the right employees with the right skills in the right places at the right time. This global formula is essential to any geography, but the opportunity in Africa is unique, for the continent is a study in extremes: the richness of its culture, its natural resources and its commodities is offset by the poverty and political turmoil that complicate the drive toward stable business growth.

And yet, organizations in Africa—from the northern lands of Morocco, Algeria and Egypt to the Sub-Saharan countries from Nigeria to Kenya and South Africa—have had some advantages. North Africa countries, for example, experienced strong economic growth in 2008, and despite a significant drop-off in GDP as a result of the global downturn, there remains significant demand for its commodities, such as oil, and strong domestic demand for its resources, even to the point of some varying levels of inflation. And much of Africa’s banking system, to the extent that it has been a closed rather than globally open system, has been somewhat insulated from the toxic-assets and credit-crunch phenomena that swept across the globe from the U.S. in 2008.

Even so, Africa has felt the impact of the global downturn. Demand for African exports has fallen, commodity prices have declined, with weakening remittance flows and a decrease in foreign direct investment (FDI), as foreign investors are more risk-averse than they had been before the recession. Capital flows are declining somewhat as government budgets are reduced, oil prices have fallen and private companies have posted losses or lower profits. In the Sub-Saharan countries, the absence of well-functioning social safety nets could exacerbate the impact of the downturn on the population.

Various Economic Realities

Indeed, as one would expect of any widely diverse and geographically immense society, the countries of Africa have been variously affected by the downturn, depending on whether they are oil exporters or importers; financially developed or not well-integrated markets; low or middle-income; and depending on how financially linked their banking systems are to the US or the EU. Amidst this complexity, the countries of Africa have been engaged in large investment projects to pursue economic diversification and human-capital development, through investments in oil and gas, infrastructure, along with petrochemicals, tourism, financial services, and education.

The HR implications of all this are clear, especially as the signs of economic recovery are now increasingly evident around the world. Organizations in Africa—be they local, regional or branches of multinational companies—must position themselves for a coming era of intense competition and growth, and that means they must have the right talent in place and in their talent pipelines. HR teams in Africa are faced with massive recruitment needs on one hand, skill shortages on the other, requiring them to import skilled expatriate workers from abroad as well as compete for skilled local workers and local workers who may be returning to their African homelands with skills acquired from their work abroad.

To a degree, these returning expatriates are driving the market for talent in Africa, and the difficulty in recruiting and retaining them lies in their expectations of the sort of fringe benefits—company cars, mobile phones, housing allowances—normally experienced by expatriates in other geographies. Less interested in such staple benefits as medical and retirement plans, these skilled former expatriates pose a challenge for African-based companies in terms of offering competitive compensation and benefit packages.

HR Skills for Africa

Thus, successful HR leadership in Africa depends a great deal upon superior networking skills—a solid, on-the-ground knowledge of where to find the right talent in small markets where talent is scarce. Hand in hand with these networking skills, HR must be able to persuade management to implement appropriate recruitment and retention plans for specific countries. For HR teams of multinational organizations, this means having political and diplomatic skills along with the ability to find niche talent in desired locations.

A good example of the challenges faced by HR teams in Africa may be gleaned from the recent proliferation of telecommunication providers in certain African regions. Until a few years ago, some western African countries were served by only one telecommunications organization. But the global boom in wireless brought huge private investment from global telecom giants, who required sizable on-the-ground workforces to get their businesses started in Africa. This led them to aggressively recruit workers from the one existing telecom in the region, which had invested an enormous amount in training and retaining their skilled employees. While this trend has slowed somewhat in 2009, due to the drop-off in foreign investment in Africa, it is indicative of the intense competition for scarce talent that prevails—and will only grow more intense as the economy improves.

There are also social and cultural disconnects in Africa which require strong strategic and communication skills on the part of HR teams for multinational companies. They must educate their corporate leadership as to why, for example, the salaries required to attract management talent to very poor or emerging countries such as Angola or Congo is often on a par with salaries in Europe or the US. This is due to the rarity and consequent high pricing of the imported food and special housing that are commensurate with an expatriate executive’s lifestyle.

The prevalence of expatriate talent in Africa is an obvious challenge for HR teams there, and one of the key trends that may mitigate a reliance on expensive expatriate workers is the increasing mobility of workers within and between African countries. In the North African countries especially, these “local-plus” employees are increasingly a solution to the importation of skilled rank-and-file workers from Europe or China. As more skilled workers are developed locally in Africa, their mobility is enhanced by the porousness of African borders, which facilitates their availability from country to country.

Ultimately, the challenge of human-capital strategy in Africa can only be met by solid, on-the-ground HR leadership that understands the uniqueness and rapidly shifting social and economic realities of this dynamic continent—a continent that will continue to pour its natural and cultural riches into the wider world. As the effects of the global economic downturn recede, Africa’s rise as an engine of prosperity for its people, its organizations and foreign investors is certain to be one of the great geopolitical stories of the 21st century, and Africa’s HR leadership will play a hugely important role.

About the author
Anna Chabbat is Africa and the Middle East Compensation and Benefits Forum Project Leader, Africa Market Leader.