Booming demand...
Malcolm Ray
Published: 07-FEB-07

South Africa ranks highly in the global economy as an investment destination. While the traditional image of South Africa has been that of a risky place with low—to—medium growth potential, the tide is fast shifting.

Not only does domestic business see the potential of a new wave of growth on the back of a sound macro-economic framework and growing consumer demand, the country’s stability and advanced infrastructure has led to several multinationals flooding the market to capitalise on South Africa’s geographic location at the tip of the continent as a strategic hub for expansion into African countries.

But despite the country’s relative political stability, sound fiscal and monetary management and liberal regulatory regime, the scale of the talent challenge in a fast-changing environment is huge.

So although the market system in South Africa is opening up, both domestic and multinational companies cannot count on the skill sets and uncertainty of the government’s black empowerment policies.

In plain language, the challenge to South Africa is competencies that drive results.

In a country growing at a rate of 4,9 percent, there is nowhere near enough senior level managerial and technical talent to satisfy the demands of all companies hoping to grow in South Africa. For executive search firms interviewed in this survey, the experience of companies is the same: they have begun to feel the effects of the country’s shifting demographics, in a rapidly shrinking pool of top talent, and rapidly rising turnover among top talent.


Interviews with several large multinational search firms show consistently that the problem lies in a demand for skills across all sectors and professional categories of management.

Search firm DAV engineering team leader, Andrea van Olst, speaks with good authority when she says economic growth has stretched the country’s talent pool in sophisticated sectors that are growing the fastest.

“On the engineering side the gap is in the 20-to-30 year old segment of middle management, with the result that the retirement age is being pushed further and further and juniors are filing to fill these posts. You’re looking at an average age of about 46, which is high,” she says.

Leon Potgieter, CEO of The Oval Office, a South African executive search firm, concurs. His experience has been that demand has picked up in functional skills categories in the technical environment. “These are high-level skills in the engineering field.”

But the main bottleneck, Potgieter says, is the lack of experience to lead business organisations.

“We often find in our searches that people have the core skills but lack the experience and managerial expertise,” he says. “We’re talking about people with years of managerial experience at the upper end. That’s the hard nut to crack.”

According to executive search firm Heidrick and Struggles senior partner, Derrick Boshard, the past two years have witnessed an acute rise in the demand for executive skills.

He says the country has a dearth of senior-level talent who possess both Western business skills and a more intimate understanding of the cultural complexities of operating in South Africa and the continent.

“On the one hand, we lack people with a multinational mindset. Now you overlay that with the cultural complexity of diverse leadership styles in South Africa and we are far off the mark. We still have a long way to go in managing diversity in globally competitive companies.”

The matter looks set to get worse before it gets better.

The problem faced by professionals is their lack of experience in leadership positions and global scale best practice, says Boshard.

South African corporates, insulated during apartheid and protected from global competition, have been ill-equipped to evolve a talent pool capable of leading the country’s global charge beyond the 1994 democratic elections.

“Everyone, not just the South Africans, were caught off guard,” says Boshard. “It’s an age of discontinuity where emerging giants like China, India and Russia rose suddenly.”

In South Africa, the government’s response to the escalating demand for black talent was to fast-track change through Black Economic Empowerment and affirmative action. This has proved counter-productive, however. In terms of empowerment policy, businesses must voluntarily employ a quota of black managers and executives, in addition to counterbalancing the ownership structure.

Boshard says that rather than earn their stripes in the corporate hierarchy, black professionals nowadays are ‘fast-tracked through the system’, without the experience to get the job done. “These are black professionals in their twenties and thirties, from whom business must develop the next generation of leaders, and as such are the first generation to grow up under post-apartheid South Africa’s reforms,” Boshard says.

Transient workforce

This has sparked fierce competition among companies for the shallow talent pool of black individuals who possess the right competencies to lead organisations.

According to Van Olst, the rate of ‘churn’ has been on the rise as more and more executives job-hop.

The consequence of all this is what Potgieter calls a “transient workforce” where young professionals are literally “bought”.

“There’s a culture of instant gratification among young professionals who find it easy in an economy desperate for skills to move from organisation to organisation without a commitment to the achievement of a vision. In fact, we are finding that people leave before they can fail at the top and this leaves a recycled vacuum at the top.”

Or, as Van Olst aptly puts it, the combination of a skills deficit and affirmative action has bred a generation of “serial job-hoppers”.

Which, according to Potgieter, comes as no surprise, bearing in mind that “the greatest mobility is among young black executives chasing money and opportunities”.

“In the past year, we found that 80 percent of white executives we approached were more reticent about moving from their current position, fearing the unknown in an era of empowerment.”

What’s especially worrying for Potgieter is that there’s an unrealistic expectation by government that “you can somehow replace 20 years of managerial experience with five years, even less in some cases. So while there’s an ideologically driven policy of affirmative action and empowerment, implementation is very difficult.”

Indeed, as first-and-second tier managers in South Africa, these young professionals are facing unknown territory in their roles and tasks. In order to succeed in global markets, they need to get results from their teams. They need to manage large and complex projects, sometimes without prior experience. In larger organisations, they may need to function in a matrixed environment — in order to optimise resources in fast-changing markets. Individuals at this level are in very short supply, and are being promoted before they have mastered all aspects of their roles.

Boshard recalls a recent conversation with a young black executive whilst serving on one of the country’s Sector Education Training Authorities: “I asked him what he does when he has a target to meet and how he executes his objectives. He said he has a meeting, and another meeting if necessary. There was no answer on a practical level, as if, somehow, when you have a meeting, things happen, without understanding the process of planning, organising, mobilising and executing — how you get an organisation of employees aligned to specific results.”

Too little, too late?

In Boshard’s view, all talk of leadership in South Africa is esoteric. The focus, he says, should be on the right talent to manage organisations and get people to work. “That’s just not happening and the country’s education system is nowhere near adequate to fill the talent gap.”

Fact is, the talent shortage, partly a legacy of apartheid and the brain drain of the post-1994 empowerment regime, is exacerbated by a weak education system that does not foster creativity, risk-taking and entrepreneurialism.

The South African government is well aware of the centrality of a skilled cadre of learners to the economy’s future, and has prioritised certain growth sectors in its industrial policy framework.

Under its Accelerated and Shared Growth Initiative for SA (Asgisa) programme, government plans to spend R372bn on infrastructure over the next three years, so there’s certainly no shortage of capital. To address the knowledge worker shortage, the government believes that its Joint Initiative for Priority Skills Acquisition (Jipsa) programme, with its focus on developing and recruiting priority artisan and technical skills and, in the short term, developing a graduate employment strategy and recruiting retired specialists and expert mentors, is a huge step in the right direction.

To address the knowledge worker shortage, the government has discarded the old training systems and introduced a levy scheme and an entire bureaucratic apparatus to give effect to the skills development imperative. This includes tax breaks on businesses as an incentive to introduce work-based and experiential learnerships, and the creation of the Human Resources Development Fund. The fund is being used to provide grants and subsidies to promote the provision of adequately skilled human resources for the ICT sector. The establishment of the Houwteq Centre, which focuses on skills development for ICT, supports this. The Department of Education has responded by creating SchoolNet, a strategic partnership that coordinates the linking of schools to the Internet.

Three important taskforces have been introduced to address the deployment of ICT as an enabler of social and economic development. They include the Presidential International Task Force on Information Society and Development (to focus mainly on global ICT markets, the National IT Task Force (which will deal with the ‘brain drain’ and the deployment of ICT initiatives locally) and the IT Council (to handle local and provisional government IT functions).

Commendable as these interventions are, the key bottleneck, however, is not the entry-level professionals; rather, it is professionals who have the leadership capability and experience to run large companies.

Skills—growth mismatch

But it will take time to meet rising demand for new skill sets. These sets are profound and far-reaching, according to Boshard. He cites the country’s construction industry as an example of the extent of the problem.

“For years the industry was allowed to flounder, with hardly any investments in tertiary institutions and corporates in human resource development. Now suddenly that’s a growth area and the government and industry have been caught off-guard. There’s hardly the number of artisans and engineers the industry needs, resulting in the most recent absurd situation where government has imported 2000 welders from Taiwan to build the new Sasol plant.”

According to a recent study conducted by the Landelahni Recruitment Group, the construction industry is not well placed to meet the challenges of rapid infrastructure development in South Africa. “The delivery thrust is likely to exceed current capacity,” says CEO Sandra Burmeister, who adds that, with the country’s huge infrastructure demand, especially ahead of the 2010 Soccer World Cup, the industry is going to have to come up with some innovative solutions.

After two decades of stagnation during the apartheid period, the construction industry in South Africa has caught up with the global infrastructure boom. Following the industry’s recession during the 1980s and ‘90s, it now faces a short supply of engineers and artisans, both locally and globally.

Of far greater concern, argues Burmeister, is the lack of successful skills development initiatives in the sector. According to the Engineering Council of SA records, between 1998 and 2004, 50 570 people enrolled at South African universities for engineering courses and 8 900 graduated. This a graduation rate of 17,5 percent across all engineering disciplines. The graduation rate for engineers is even lower at universities of technology. Between 1998 and 2004 there were 139 820 enrolments and 14 250 graduates — a rate of 10 percent across all disciplines.

Artisanal training in construction-specific disciplines displays the same trends. “This means that the industry consists predominantly of professionals who are aging out of the system. Add to this the fact that the average age of artisans is 53, and we get a measure of the magnitude of the skills challenge,” says Burmeister.

Generational challenge

If anything, the industry typifies the core competencies valued by global multinational corporations, and in South Africa these competencies are of equal importance in getting results.

A significant part of the problem, to come back to an earlier point, is an onerous backlog of young black graduates without the appropriate educational profile and bank of experience to manage firms.

Boshard explains, “What we see in many instances is an inability to execute — understanding the processes of how to get organisations aligned to their objectives. It’s no longer the tried and tested question of people progressing over many years to the point where you get the experience to do that. Visionary leadership, the ability to see future outcomes and drive your organisation towards it — these are competencies that are harder to find. Getting employees to follow through on commitments and focus on getting results rather than just following instructions — that’s where we lack tremendously.”

Clearly, the talent gap is structural and generational — what Boshard argues is a classic representation of a country where “the hunger for economic growth has perhaps been exceeded by the passion for ideology”.

“Somehow we have not grasped the lesson of our history, which is partly about the economic sea change globally and in South Africa, partly the global boom in resources, partly a lack of understanding of how black empowerment and affirmative action negatively affects our talent pool, and partly a challenge of vision and planning that must go towards realising the future.”

Above all, South Africa has failed to see an investment in talent as the most vital commodity in the world, the success of which may determine the final result of a generational challenge. -Business in Africa Magazine

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