Economic Update

Published 22 Jul 2010

South Africa is facing a shortage of skilled professionals and is having trouble hanging on to those it has, twin problems that could hamper future economic growth and push up wages.

That was the message conveyed in two reports issued in September that reinforced concerns from both the private sector and the state that South Africa had to halt its brain drain and increase its pool of skilled managers and workers.

In a global study conducted by the executive search firm Heidrick & Struggles, South Africa ranked last out of 30 countries in terms of attracting skilled people, and placed 24th on the ladder for nurturing and developing talent, putting it ahead of Egypt, Turkey, Nigeria, Iran, Indonesia and Saudi Arabia.

The study, released on September 9, said South Africa needs to increase economic growth beyond the 6% per year range to create enough new jobs to absorb the huge numbers of its unemployed and often unskilled people and to encourage skilled professionals to stay.

“To deal with unemployment you need to drive the country into aggressive growth and you can’t do that without talent,” Derick Boshard, managing partner at Heidrick & Struggles in Johannesburg, told local press on September 10. “Being ranked last in the survey when it comes to attracting talent from the local talent pool is a very serious problem, especially when countries higher up the ladder are continuing to suck our own talent out of the country.”

The poor education system was one of the reasons behind South Africa’s failure to produce skilled professionals, according to Boshard,

“The quality of education in South Africa is not good at the moment and will decline in the next five years,” he said. “Less than 2% of learners achieve higher grade mathematics – that is inadequate for this country.”

The study confirmed his analysis, placing South Africa at 16th out of 30 in terms of compulsory education, and fourth from the bottom for its universities and business schools.

A study of South Africa by financial services firm Deloitte conveyed a similar message, reporting that South African companies are having to raise the salaries of executives well above last year’s 5% growth in gross domestic product in order to retain managers.

The report, also released on September 9 and entitled The SA Guide to Executive Remuneration and Reward, stated that basic executive wages had increased by an average of 7.6% in the past year. The forecast range was 6 to 7%.

The study also reported that turnover of executives at South African firms was 10.5% for the period between the beginning of August 2006 and the end of July this year.

“Once again, market forces dictated that adjustments and premiums were required to attract and retain top talent,” said Louise Marx, Deloitte manager for human capital. “Predictions for 2007-2008 are that executive guaranteed package increases will range between 7 and 8%.”

Moreover, 57% of the companies that took part in the study said they had experienced difficulties in recruiting qualified black or “affirmative action” executives, with 31% saying they had lost such professionals due to headhunting from other organisations.

The sectors that had the greatest difficulty filling executive vacancies were the finance and manufacturing industries, though 23% of all firms covered in the survey said they had experienced problems in recruiting executives in the last year.

South African companies are looking to address the problem, with 34 of the country’s leading firms taking part in a recruitment drive in London in mid-October aimed at wooing expatriates back home.

However, the recruitment drive may face a few obstacles. According to the Deloitte report, 33% of the executives who had emigrated in the past year did so to avail themselves of better employment opportunities overseas, while 25% had left South Africa due to concerns over crime and violence.