Talents needed to deliver the growth story

Companies must learn to manage effectively for better economic rewards in Africa

Over the last decade, Africa has transformed into a prime business destination. Economic growth, strong foreign direct investment and the increasing ease of doing business have raised the attractiveness of the continent among other emerging economies.

But this also calls for more leaders. Economic transformation requires highly skilled, innovative and entrepreneurial talent to drive trade and investment and to profit from emerging industries, such as banking, consumer-facing industries, natural resources and information and communication technologies. Availability of talent in Africa, however, is not commensurate with the actual requirements.

Africa is among the fastest-growing economies in the world. It possesses abundant natural resources and commercial opportunities that can attract investment and offer huge returns. Today, one-fifth of the continent has a GDP growth rate of more than 6 percent and about half of the continent is growing at above 5 percent. Compared to any other region, Africa has the highest rate of return on investment at 9.3 percent (according to 2011 estimates).

In 2012, FDI in Africa had risen to $52.5 billion according to the United Nations Conference on Trade and Development. It reported the highest growth rate among developing economies and clocked a 5 percent increase in FDI inflows.

At the same time, the cost of starting a business in Africa has fallen by more than 65 percent over the past seven years, while deterrents to running a business halved to levels lower than those in other BRICS nations.

Despite these positive aspects, many companies have failed to take advantage of the available opportunities in Africa as they are unable to find leaders at all levels who can turn plans into actions with impact.

The war for talent is raging on the continent and it will only get worse as precious capacity and capabilities are exhausted. On the surface, labor supply looks adequate, as the working-age population (ages 15 to 64) is growing exponentially. More than 500 million people are classed as working age today and this number is expected to double to more than 1 billion by 2040. In short, Africa will shortly have the largest and youngest work force in the world.

The problem is not in numbers but in skills, particularly at the managerial level. Employers complain that good talent is scarce, expensive, under-experienced and disloyal. One reason for this is education. While levels are improving - approximately 500,000-750,000 students graduate from African universities every year and this number is rising in tandem with economic development - they lag behind other emerging economies such as India and China.

By 2020, just 8 percent of Africa's population is expected to attain tertiary degrees, 40 percent secondary education and 52 percent primary or lower education. India is already at this level. So is China with 6 percent of its population already having tertiary degrees and 66 percent having completed secondary education.

With demand for talent rising and supplies getting severely constrained, there are five important aspects that companies need to factor in.

The first is the acute shortage of talent and the benefits of looking internally for talent. The second is to take note of over-priced talent and how to make the best use of the compensation spends. The third aspect deals with major skill gaps and the lack of work experience and how companies need to get out of the classrooms and into the field. Yet another important aspect is the management gap or in other words the changing mindsets and developing new leaders.

The fifth and final aspect is how companies should consider retaining and letting people go.

The war for talent is not yet lost in Africa. Attractive growth prospects in Africa require more skilled, motivated leaders at all levels of an organization than are currently available.

Companies should strive to identify the hidden talent already within their ranks; they should consider apprenticeship-based models of skill building and challenge the formal training they deliver and procure. This includes leadership as well as functional skill building.

Impactful leadership development that can lead to lasting behavioral changes will be critical to fostering resilient middle managers and inspiring senior leaders. Finally, fact-based performance management, if done well, will help increase the cost-effectiveness of compensation and help leaders to act decisively on under-performance. Together, these approaches can help organizations deliver the talent they require to win in Africa.

The author is an associate partner in global consultancy firm McKinsey's Johannesburg office and co-leads McKinsey's Organisation Practice in Africa.

(China Daily Africa Weekly 05/23/2014 page8)