Africa CEO Report: Building a better business
To mark the inaugural Africa CEO Forum to be held by Groupe Jeune Afrique in Geneva on 20-21 November, The Africa Report spoke to a range of chief executives active in Africa today. Analysing their day-to-day concerns, they highlight a range of issues: finding the right people to drive their businesses, coping with the bottlenecks that come with working with government, and managing expansion into new markets.
These issues will be tackled directly at the forum when a collection of experts and practitioners grapple with the challenges facing African businesses.
People are the lifeblood of enterprises. There is a dearth of talent and fierce competition to attract and retain it. For Rockson Dogbegah, chairman and founder of Ghanaian construction company Berock Ventures, the only way to maintain the levels of quality he needs is to “have regular staff orientation. Quality is important to us. We are in the civil engineering business, so the slightest imprecision will cost you.”
Charles Anusim, the chief executive of Serene Greenfields, an energy sector logistics firm in Nigeria, believes the only way to ensure staff have the skills he requires is by catching them early enough. “You have to groom them from scratch. Look at way the Chinese have been winning medals at these last Olympics. They take them when they are very young and train them for a long time – the results are there.”
300 CEOs from all over Africa will join bankers, investors and decision makers at the Geneva forum
Guillaume Imbert of Africa-focused recruitment agency Adexen explains that “there is a war for talent right now,” driven by oil companies, banks and tele-com companies that are prepared to pay any price.
While the traditional method of keeping staff is to pay higher salaries, the CEO with an eye on the bottom line will look for other ways to retain skilled employees. One way, according to Imbert, is to provide career development paths.
“Tell a junior that he will be assessed every six months,” he says. “Give staff the appropriate training, so that they can see a clear progression in their responsibilities. A forklift truck driver may not become the finance director, but he could well end up managing a depot.” Imbert says that Anglophone Africa has moved ahead in human resource skills compared to Francophone Africa due to its exposure to the practices of the UK and US.
These include decentralising human resources to the coalface, which allows for a more precise understanding of what skills are required on the ground and the career paths that could emerge.
Renault’s senior vice-president Jean-Christophe Kugler agrees with the diagnosis. “In our South African operation, we have employees who have post-graduate degrees, and we still have to give them maths lessons.” He also points out the dearth of middle management on the continent. “We have enough top management. And there are plenty of entry-level candidates. We are really short of people who can lead teams.” Renault is trying to address that problem in its Moroccan plants, where it has partnered with government to create a training school for employees at the Tanger-Med factory.
The best thing CEOs can do is pass on their knowledge to the next generation. “We cannot emphasise enough the need for hand-ups as opposed to handouts in Africa,” says Ashish Thakkar, the CEO of Mara Group, who runs a mentoring foundation.
“East Africa, for example, is a very entrepreneurial region, but very few businesses survive to celebrate their fifth birthday. Mentoring provides an avenue for CEOs to share their expertise and help young businesses dodge, learn from and cope with the pitfalls in business.”
Though the private sector is growing fast, government remains a much more preponderant force. Though it is perhaps not as onerous as the permit system of India’s ‘Licence Raj,’ there are many regulatory hurdles and opportunities for shakedowns. SIFCA in Côte d’Ivoire employs 28,000 workers in the agribusiness sector. CEO Jean-Louis Billon makes his complaints clear: “We are overtaxed, we put up with poor infrastructure and then we have to be competitive on price in the global market!”
As an infrastructure builder, Dogbegah’s experience is one of frustration, especially at late payments: “This often leads us to have serious cashflow problems. The problem is that [the government] often does not provide enough for the project in the budget.
60% of African CEOs are very confident about the global economic situation in the next three years, says a report by Price- waterhouse- Coopers, making Africa the most optimistic region
“And when you try to add interest to the late payment, it refuses to pay, even though this is stipulated in the contract.”
Though companies could sue, tenders often require a contractor to list their legal disputes and many shy away from being seen as overly litigious.
In an attempt to solve these problems, Dogbegah is trying to bring all the construction associations into one industrial lobby group to pressure government to be more engaged: “Local capacity is not encouraged in Ghana. There is a lack of deliberate policy, no agenda, unlike in other places such as South Africa.”
Patricia Ithau, managing director of L’Oreal East Africa, says: “Increasingly as industries you have to start lobbying the government to improve efficiency.” For a consumer goods company like L’Oreal, trademark protection is a critical issue. “Africa is full of entrepreneurs. The entrepreneur’s idea is ‘I see a gap, I fill it,’ even if that gap is not necessarily legal,” says Ithau. She says that governments need to create punitive laws and enforce them.
This dialogue between the private sector and government can lead to better industrial policy. When the government of Morocco wanted to support the auto sector, it studied 500 auto parts in detail before winnowing down the list to just 50 parts that could be manufactured locally. It then removed barriers from all elements of the production process, in a bid to make manufacturing competitive.
The private sector contributed to the initiative, according to MacKinsey partner Arend van Wamelen: “Business also needs to take the same detailed approach, getting the specifics right, rather than just making broad demands. It makes you a much more helpful partner.”
Expanding internationally brings prestige and new markets, but opportunity comes with serious risks. Managers must address those risks if international businesses are not to drag down the parent company. “There are those who expand because it makes them feel important”, says Anusim “But we only ever make the decision to expand when there is a real and quantifiable demand for our services. And even then we won’t do it until we have the right people in place on the ground.”
Dogbegah is considering expansion from his Ghana base into Liberia and Sierra Leone. “Each has its own particular problems,” he says. Feeling out a market is a key concern. “Companies are spending a lot more money on due diligence of local partners,” says Steven de Backer of South African law firm Webber Wentzel.
“Foreign legislation such as the new anti-corruption laws in the EU and the Foreign Corrupt Practices Act in the US can make companies liable all the way down their supply chain.”
Research on the relevant tax laws in the jurisdiction is also essential. The Democratic Republic of Congo, for example, has an aggressive tax authority. “It is very formalistic – you have to have the right piece of paper in place,” explains De Backer. Africa’s 54 jurisdictions can have surprises too, such as Tanzania’s ‘force of attraction’ tax laws. “We have an Asian client who sold a Tanzanian customer a piece of equipment in Asia – and because they sent a technician to help fix the machine, the Tanzanian authorities now claim the sale falls under their tax laws”.
Webber Wentzel notes the rise in requests for more sophisticated tax avoidance schemes from companies operating in Africa. De Backer says: “There is a balance to be found between openness and overtaxing. Countries like Mozambique, Ghana and Kenya seem to have struck it right”●