Recent years have witnessed robust economic growth in Sub-Saharan Africa. With a fast-growing middle class and a large workforce of young talent, the region has become an attractive environment for innovative businesses and investors from around the globe. However, the pandemic overturned much of the region’s hard work of the past decade, further exacerbating many of the underlying struggles across Sub-Saharan Africa.
Organizations are facing not only the business impact of political and economic disruptions, but also on talent requirements. In turn, this is presenting a challenge in making the right compensation decisions. There are three primary challenges impacting organizations’ ability to have an effective and relevant compensation strategy.
The startup scene has been critical to the acceleration of economic development in the region – attracting investors, creating jobs, and serving the unique and unmet needs of African markets. Most of these organizations are small and medium-sized enterprises, often family owned, that are gutsy and fast-growing, but expectedly lack the financial resources, insight and experience to effectively manage their greatest asset – human capital.
Many of these young organizations have yet to recognize the importance of employee experience in workforce management, a gap that has made it difficult for them to address the impact of the pandemic particularly on talent and compensation.
Young organizations also often lack access to valuable market data and insights, which could otherwise support informed decision-making around talent and compensation strategies. These blind spots prevent them from creating appropriate responses to prevalent workforce issues in the region, including high employee turnover rates, mass migration, high inflation and unstable salary increase rates.
Despite the pandemic derailing slow but steady economic progress, the region was able to rebound in 2021 and this growth is expected to continue into 2022 (see Figure 1). However, the persisting geo-political challenges within the region continue to create a fragile environment for socio-economic development. The pace of post-pandemic recovery in each market within the region will be highly divergent due to various internal and external market forces.
GDP growth in West Africa was 3.3% in 2021 with a 2022 forecast of 4.06%. GDP growth in Central Africa was 2.6% in 2021 with a 2022 forecast of 3.56%. GDP growth in Southern Africa was 3.36% in 2021 with a 2022 forecast of 3.73%.
Willis Towers Watson’s recent Salary Budget Planning report indicates that the real salary increase outlook (i.e. the salary increase after deduction of inflation rate) for 2022 will be generally modest at around 2% (see Figure 2). However, the survey results suggest that some organizations in high-inflation markets plan to take special actions with regard to compensation, such as providing a higher annual salary increase or paying in hard currency. Nonetheless, the majority is likely to retain current practices, such as paying in local currency for all employees.
3.1% for Ivory Coast, 9.1% for Nigeria, 9.6% for Angola, 6.2% for Kenya, 4.3% for Tanzania, 6.3% for Mozambique, 4.3% for Mauritius and 5.8% for South Africa. 2022 inflation forecast is 5% for Algeria, 1.4% for Morocco, 6.1% for Tunisia, 8.6% for Ghana, 2.9% for Ivory Coast, 12.4% for Nigeria, 13.9% for Angola, 6.1% for Kenya, 4.7% for Tanzania, 6.5% for Mozambique, 3.8% for Mauritius and 4.5% for South Africa.
Economic uncertainties can limit an organization’s growth aspirations for their business and workforce, thereby making them focus more on survival rather than invest in a long-term strategy. Amidst the increasing “brain drain” across the region, employers are challenged to get compensation right while simultaneously maximizing return on investment and keeping pace with rapid shifts in the global talent market.
As is the case globally, organizations in this region also face great difficulty with attracting and retaining critical talent. Despite highly competitive pay, employers are unable to find the right skills among local talent pools. Around 39% of the region’s workforce is under the age of 25, yet qualified talent within this population is extremely limited.
Lack of accessibility to quality education in most parts of Sub-Saharan Africa is a major contributing factor to this. The region's literacy rate is 66.8% compared to the world average of 86.3%. As of 2021, the gross tertiary education enrollment ratio in the region is 9.4%, which is significantly lower compared to the global average of 38%.
Another contributing factor is the mass exodus of young, skilled workers in recent years. Young professionals have left at a fast rate to pursue better opportunities in other regions, and this accelerated further during the pandemic. Research shows that the youngest and most educated African adults are most likely to leave their home countries – with reasons that are not just about pay, but also pertaining to career stability and personal wellbeing.
Despite the daunting challenges at hand, Sub-Saharan Africa’s economic landscape remains promising, and its billion-strong human capital is a gem waiting to be polished. Having access to credible and reliable compensation data and market insights can empower organizations to expertly navigate the region’s diverse HR environment, and thereby identify the most appropriate solutions to talent and compensation challenges.
The July edition of Willis Towers Watson’s 2021 Salary Budget Planning Report – Global features a special section on high inflation countries and the impact of high inflation on pay, including:
