Nigeria has officially overtaken South Africa as the continent’s largest economy, reaching $510 billion in 2013, said Nigeria’s chief statistician on Sunday, using new calculations that take into account changes in production and consumption. Now, the next challenge for the country is to train and build a workforce that can keep the economy growing.
The growth in GDP “shows significant changes to the structure of Nigeria’s economy,” which was once dominated by farming and oil production, wrote Shilan Shah, Africa economist at Capital Economics, in a note on Monday. The service sector, which includes telecoms, retail and banking, now accounts for 50 percent of Nigerian GDP, up from just 30 percent based on 1990 calculations. The agriculture sector has fallen from 34 percent to 22 percent and the lucrative oil sector fell from 32 percent to 15 percent. That shift puts the country on a clear path to the future, but the way forward won’t be easy.
Besides tackling corruption and implementing more structural reform, there's Nigeria’s labor challenge, which is crucial to its fate, wrote David Storey, an Ernst & Young researcher, in the preface of a recent report on the region.
“Sub-Saharan Africa is not a blank canvas upon which human capital practices can be imposed at will... There is still work to be done in preparing African workforces to support, participate in, and benefit from rapid economic development.”
That represents a shift for multinationals, which traditionally imported workers into the country but are now focused on training local talent. Nigeria’s transition to a more fully developed industrial and service economy requires companies to invest for the long haul, which makes these temporary foreign recruits less valuable. Plus, the high salaries attracted by expatriates “became a source of tension within companies,” according to the EY report, which is based on a survey of professionals working in various sectors throughout the region.
Currently, expats are most likely to take on executive roles, and 30 percent earn three times as much as their local counterparts. But looking ahead, the research points to a very different picture as more than 40 percent of multinational companies rank skills-transfer of “high importance.”
According to their survey results, more than 53 percent of respondents say they anticipate hiring fewer expatriates, especially in technical or operational fields. “It appears as though organizations in sub-Saharan Africa are set to reduce their dependence on expatriate skills,” the report said.
“I think there are a few companies that have managed to hire locals for key positions,” said Anna Rosenberg, Sub-Saharan Africa analyst at Frontier Strategy Group, an advisory firm for companies that operate in emerging markets.
She recently returned from a research trip to Kenya, Uganda and Ethiopia, where she met with leaders of local and international companies. “The majority of them were locals with international experience, not expats,” said Rosenberg, adding that there are many large companies such as General Electric and Stanbic Bank that have mostly African executives.
It’s also becoming more common for operations based in Africa to seek a middle way between local and foreign talent, which can be found in hiring from the African diaspora, millions of people who have emigrated abroad for their education and careers.
“What’s needed is really a combination of a great academic background, together with world-class experience,” said Alex Mugan, marketing director for recruiter Global Career Company Ltd.
“You can get this from expatriates of course, but then the regional understanding you get from a national of the country is missing,” he said, claiming that local education standards cannot always deliver the right caliber of candidates.
But this might become less of an issue in the future.
Indian telecom giant Airtel, which operates all over Africa, has collaborated with the MBA program at Lagos Business School in Nigeria to help develop local students. “At Airtel, we place a high premium on education and we will continue to invest in the development of the human capital in Nigeria,” said Segun Ogunsanya, CEO of Airtel Nigeria in December, speaking at a dinner for the school’s 17th graduating class. Ogunsanya himself holds a degree in electronics engineering from the University of Ife, in Southern Nigeria, and had previously worked for The Coca-Cola Company.
Larger tech companies such as Microsoft, Google and Huawei are all investing in similar programs to support Africa-based training and education, according to Amadou Sy, a global economic analyst and Africa expert at the Brookings Institute.
And besides the obvious benefits of a good public image and helping local communities, these programs are simply smart business.
“Business in Africa is a long-term proposition and it is a very good investment for companies to invest in training local staff,” he said, adding that companies would gain status as good corporate citizens while having a better-trained workforce.
“It is a win-win situation.”