Addressing the localisation dilemma in Africa_Guy Lundy
1. Addressing the localisation
dilemma in Africa
Executive Search | HayGroup | Futurestep
What have some multinational companies learnt on their journey of African expansion?
2. During the first decade of the 2000s, economies across the African continent benefitted
significantly from a commodities boom, coupled with increasing political and macroeconomic
stability. During this period the continent’s ever-rising number of consumers attracted more
and more attention from multinational companies looking for new sources of growth.
While the commodities boom has ended and oil prices have collapsed more recently, bringing
renewed hardship to oil-dependent countries like Angola and Nigeria, the momentum has been
established and multinational companies continue to spread their wings across the continent.
To start with, most companies relied almost entirely on putting expatriate executives on the
ground to run their companies, but in the last few years there has been increasing pressure to
localise the executives in most countries. However, Africa still has some way to go to overcome
the negative legacy of colonisation and apartheid, which left the continent with a dearth of
skilled and educated leaders.
In many markets, particularly smaller ones, locals with the global experience and leadership
skills required by multinationals can be very difficult to find. There are companies that appear
to have got it right though. We set out to find out what some of them have learnt on their
journey of African expansion, by speaking to leaders from 19 multinational businesses.
Compliance and responsibility
In many countries the pressure to localise executives comes directly from government. In
most African countries government is a significant employer and driver of the economy, and
government officials can make life easy or difficult for multinationals. There can be invisible
barriers to doing business. Louise Cooke, CEO of Parmalat in sub-Saharan Africa says, “In
Africa you can fall foul of a system you didn’t know you were in.” This is felt particularly acutely
in regulated industries like insurance, oil, gambling and telecommunications.
Executives operating in Africa must therefore have a good appreciation of the political and
economic realities of the countries in which they operate and the ability to nurture positive
relationships with government, which in many cases is best achieved by local executives.
Countries like South Africa, Namibia and Zimbabwe have specific policies aimed at compelling
companies to hire locally-born black executives. Others like Zambia and Angola will not grant
more than a certain ratio of visas for expats per number of locals employed by a company. This
applies just as much to expats from other African countries as it does to those from elsewhere
in the world.
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At the same time multinational companies themselves are increasingly aware of the need to
employ local execs as part of good corporate citizenship. As Mark Bowman, former MD of
SABMiller Africa, points out, “Multinationals are helping to change the way business is done in
Africa. We bring international norms and best practices, we don’t pay bribes, and we have a
model to develop and look after our people.”
In tough times like those being experienced at the time of writing, however, high profile
multinational companies are sometimes seen as part of the problem and become a target, such as
in the case of MTN being fined several billion dollars in Nigeria for what was arguably a relatively
minor transgression. In order to continue experiencing success in Africa, companies need to be
seen as a local force for good, and this includes increasing the percentage of local executives.
Education versus experience
The skills most in short supply are generally in technical and quite specific areas, such as
mechanical and process engineering, actuarial, retail planning and operations, and informatics and
data analytics. Other more general areas such as financial risk and industrial relations are more
readily available, but because of the significant growth in multinationals seeking the same skills
they also prove hard to bring on board.
In bigger economies such as South Africa, Nigeria and Kenya, skills may be more widespread due
to the fact that many professionals have studied and worked abroad, or have been developed by
other multinationals in country.
However, in all markets the bigger problem is a lack of core leadership skills, which is a function
of experience rather than education. In most cases executives are the first generation to work in
multinational leadership, so they have not had anyone who has gone before them to learn from.
In addition, because of the combined lack of experienced leaders in the markets and the need
to advance local executives, people can be promoted too quickly, which sets them up for failure.
Without exposure to what global best practice looks like, one is unaware of how big the gap is.
This is particularly noticeable in functions like health & safety and supply chain management.
Overcoming this deficiency demands significant investment in training and leadership
development, which comes at a cost. Many companies have regional head offices in South Africa,
Dubai or Nairobi, where they will send executives for a period of time to instil the company way.
Management advancement programmes are also common, either in central company training
facilities like those of Standard Bank or Old Mutual in South Africa, or through international
business schools like INSEAD and Harvard. Old Mutual puts together Masterclasses, led by long-
standing managers who are nearing retirement.
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Reducing the reliance on expats
Buying an existing business in a new market often necessitates moving in a significant number of
expats at senior levels with deep institutional knowledge to install the company’s own systems
and processes, while identifying local managers with potential to spend a few years moving
around the business elsewhere in the world and developing into possible leaders who can come
back to run the business later.
The majority of businesses operating across Africa are actively working to reduce their reliance
on expats, though. Much of this drive is due to the cost associated with the benefits provided to
expats, such as housing, children’s schooling, cars, drivers, flights home and more, which in most
African countries is extremely expensive. On average it can cost companies as much as four times
more to have an expat on the ground in Africa than to hire a local executive.
Many companies are moving away from long-term expatriate appointments and replacing
them with short-term assignments, where expats can share their knowledge and develop local
leadership without the associated long-term costs. Some companies, such as Philip Morris
International, also make every effort to ensure that an expat has a successor lined up to take over
before they can be moved to another assignment elsewhere in the world, which helps to put the
onus on the expat to ensure that he or she is transferring skills.
At the same time, most companies find it unhealthy to have only locals running their companies
in country. This is particularly the case when it comes to the Managing Director and the Finance
Director, where it is considered prudent to have an expat with close ties to the global or regional
head office in at least one of these roles. In many African cultures there is a reluctance to be the
bearer of bad news, but in tough times when the numbers aren’t looking good it is important that
reporting is accurate and forecasts are realistic. Some multinational companies have experienced
damaging write-downs due to inaccurate numbers.
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Bringing the diaspora home
One way to hire locally born executives with the requisite global experience is to seek out the
diaspora based around the world. Most of the companies we spoke to indicated that they have
had limited success with international career fairs and exhibitions, and the ideal is to partner with
an executive search firm with true global reach and local African presence.
One limitation to hiring executives from the diaspora is that many of them have been abroad for
many years and are often more foreign than local. They have little in the way of local networks
or insights, they will often demand a premium to move back and they sometimes come with a
spouse and children who are reluctant to move to a far less comfortable environment than what
they are used to.
Returning home often means returning to a much smaller market than the executive is used to
operating in, and it is often necessary to send them back in a more senior role than they have
previously filled.
Some companies make it easier for execs from the diaspora to return home by allowing them to
come back as expats and localise over a period of time. It is important in this case to make the
process clear from the start so that they don’t become disillusioned when they finally lose their
expat privileges.
Building an attractive EVP
Because of the disproportionate demand for local executives versus their availability, companies
operating in a “sexy” industry find it easier to attract senior leaders. Retail, for example, is not
considered a sexy industry on a continent that has not known formal retail until very recently, and
retailers often find it difficult to compete with brewers or technology companies when it comes
to attracting the best skills. Similarly, companies with well-recognised global brands find it easier
than less well-known companies.
One way to overcome this challenge is to develop an attractive Employee Value Proposition (EVP)
that appeals to the ambitions of African executives. This process is assisted if recruitment and
executive development is handled as a partnership between central HR leadership and local HR
practitioners who understand the local needs.
Old Mutual’s Sipho Gumbi talks about the need to “build an EVP that goes beyond just pay.”
The benefits of being part of a global organisation must be highlighted, including the provision
of international leadership development programmes and opportunities for international
assignments. Thus, Massmart is able to promote its relationship with majority shareholder
Walmart as a way of getting exposure to the sophisticated American market.
The downside of a focus on international opportunities can be that senior people join the
company specifically as a way to get out of the country, which defeats the object. As a result
of this experience, a number of companies have now instituted policies that specify that an
employee must have worked for the company locally for a minimum of two or three years before
they become eligible for an international posting.
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Challenging but worth the effort
The market potential in Africa is enormous, with populations expected to double in the next
twenty years, but the talent pool is undeniably small. As multinationals continue to recognise
the opportunities presented by Africa’s growth and development, the competition for scarce
skills will keep putting pressure on the cost and availability of senior local executives in most
African countries.
Those multinational companies that are neither overly risk averse nor naively optimistic about
Africa, but take a realistic approach to the challenges posed by the need to localise skills in a
challenging environment, will benefit in time. It is essential to take both a long-term view of
Africa, and to ensure that the commitment to building local capacity is considered a strategic
imperative by the Board and global leadership. For those companies willing to put in the work to
become an employer of choice for African executives, the future rewards will be worth the effort.
Author
Guy Lundy is a Senior Client Partner in the Johannesburg office of Korn Ferry.
He leads the Consumer sector for Korn Ferry’s Executive Search business
across Southern Africa. He can be contacted at Guy.Lundy@kornferry.com.
| Addressing the localisation dilemma in Africa |
