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Author, Gordon Stanley, Consultant at Leathwaite.

The African financial services sector is in a state of constant change and this is becoming more pronounced with the increasing stream of mergers and acquisitions, in-bound and out-bound investment and regulatory activity that is impacting the region.

African banks are facing a quandary – they are desperate to build an employment base that is orientated around local and regional hiring, yet the incumbent workforce does not possess a sufficient level of skills and experience to successfully negotiate the challenges the industry is facing.

Therefore, what short-term steps need to be put in place to enable banks to ride the current wave of change, whilst also facilitating a long-term succession plan?

This report will provide a perspective from a global executive search and management consultancy, which has assisted companies in successfully navigating similar economic conditions within other emerging economies, such as South America.

Before addressing the issue of talent, it is important to highlight the key themes that are most prevalent within the region:

Mergers and Acquisitions

  • M&A activity within Africa is at an all-time high (mirroring a global trend), as highlighted by Sneha Shah, Managing Director for Thomson Reuters Africa, who reported that 2015 M&A activity was 12% more than the same period in 2014.
  • In addition, South Africa accounted for the most overseas acquisitions with 65% activity, while Mauritian and Nigerian companies accounted for 13% and 11%, respectively.1

GDP and economic growth pressures

  • 2015 was another tough year for the global economy generally, and relatively speaking for Sub-Saharan Africa (SSA) specifically. After a decade of GDP growth averaging close to 6%, the International Monetary Fund’s (IMF) estimated growth for the region in 2015 is 3.4% (down from 5% in 2014).2
  • However, although growth in the region has slowed, SSA remains the second fastest growing region in the world, after Emerging Asia.

Growth in high net worth customers

  • The number of African individuals who possess 30 million US dollars in assets is set to more than double over the next decade, according to The Wealth Report 2015.
  • The report also highlighted that the number of ultra-high-net-worth individuals is set to surge 59% over the next 10 years in Africa, greater than the 34% projected global growth.3

Retail banking growth

  • The growing middle class, coupled with an investment in infrastructure, will fuel demand for bank accounts outside of the traditional high net worth customer base.
  • As such, retail banking in SSA is projected to grow at a compound annual rate of 15% between 2015 and 2020, bringing the sector’s contribution to the continent’s collective GDP to 19% from an estimated 11% in 2009 (Sources: African Development Bank & Ecobank).

Cross-border expansion

  • Banks are reaching a saturation point within their home countries, which is forcing them to investigate the acquisition of stakes in banks external to their original country.
  • Recent examples of this trend include the Togo-based Ecobank, South Africa’s First National and FirstRand Banks, plus also Morocco’s Attijariwafa Bank, all of which are pursuing aggressive alternative growth strategies.

Increasing regulation

  • While many countries are discussing the implementation of Basel III, most regulatory and supervisory authorities in Africa are still using the Basel I framework. While most African countries plan to implement Basel II principles, until now only Mauritius and South Africa have done so.
  • As Africa integrates further with the global financial markets, the need to implement Basel II and III frameworks will become paramount.

Reliance upon the EU, China and other overseas economies

  • Even though Africa’s GDP is strong in comparison to the world as a whole, Africa continues to face a number of challenges due the “triple threat” of falling commodity prices, China’s economic slowdown and the rising cost of external debt.
  • China’s importance to Africa is a key consideration – especially for South Africa, Angola, Congo and Zambia. However, even though China is Africa’s second largest export market, Africa exports about 50% more to the EU than it does to China.4
  • Accordingly, perhaps the most important factor bearing upon Africa’s economic future is what is going to happen to the euro-zone.
  • However, oil price shocks to the global economy in 2015 and through 2016 are indicative of an end to the commodity super cycle and the beginning of the “low for long” scenario.
  • The decline in commodity prices severely affected some African countries that, like many low-income countries, are highly dependent on fiscal revenues from exporting commodities.
  • In light of the price slump, currencies in these countries are weakening, inflation is rising, equity markets have dropped, and bond spreads have increased.

Several talent-related themes emerge as being key to building an infrastructure that will enable companies to maximise their impact within the current climate.

Augmenting pace of technical innovation

  • “Technology is fundamentally changing how banks operate and engage with their customers, and as their business models adapt and evolve, so too must the makeup of their workforce – but this isn’t happening at any great speed yet,” highlights Steven Lewis, Global Banking Analyst at EY, in a special report on the future of banking.5
  • The report also highlights that; “Banks need to foster a culture of entrepreneurialism and technological innovation if they are to prosper in the current environment. This means leaving behind much of the stereotypical banking characteristics to allow for a generation of young, technology-focused professionals to enter the workforce.”
  • The Global Client Director of Amazon Web Services, summarised this succinctly when he said that; “the rate of change that we are experiencing today is the slowest we’ll ever know.”
  • The speed of change is only going to increase. Therefore, the FS industry must become more agile in preparation for this change.

Improving cyber security

  • Conservative estimates state that cybercrime costs the global economy in excess of $450 billion per annum.
  • Currently Europe and North America are the biggest targets, but as the African financial services industry grows in importance and integrates more fully with the global economy, targeting will increase.
  • However, a recent study by McAfee highlighted that Africa has an overall “low confidence” rating with regards to its ability to track cybercrime within their borders, leaving the region highly vulnerable to threats.6

Challenger Banks, Fintech and disruptive technologies

  • Blockchain and other emerging technologies are disrupting the traditional nature of the financial services industry.
  • It would be recommended that Africa takes note of how Europe and North America have been caught off-guard by the disruption that these technologies are bringing to the industry and prepare now for the impact it will have within Africa before long.
  • With many industry analysts citing that “disruption is the new norm”, now is the time to build an infrastructure that is prepared for, and readily embraces, change and disruption.

Embrace Diversity

  • “A stronger, better banking world will be made up of a collection of the best individuals from diverse backgrounds. Diversity in the workforce is the best way to produce the highest-performing teams, so it is not just the right thing to do, but also commercially shrewd”, EY’s Transforming Talent report added.
  • However, this process begins with a true understanding of what diversity is and its purpose within a workplace. The purpose of diversity is not to enable your organisation to meet a quota. Its purpose is to provide your organisation with a richer and more diverse pool of talent that will equip you with the thinking and skills to better cope with a rapidly evolving economy.
  • Diversity and inclusion programmes are now firmly positioned within a significant majority of the leading global FS organisations as they now appreciate the strategic benefits that a diverse workforce can deliver to their organisation.

Succession planning for the millennial generation

  • If companies within the African financial services arena wish to reduce their reliance on overseas talent, now is the time to commit to creating infrastructure positions that focus on leadership development, learning, training and mentorship.
  • Such positions are a core component of a sustainable organisation, and in a global climate where talent is already scarce, they are becoming even more of a priority.
  • To complement this, a key objective should also be to implement a programme that will accurately identify those who have leadership potential.

Competition for talent

  • Millennials’ will make up 72% of the global workforce by 2025, therefore it will become essential for organisations to invest in their brand if they are to become the employer of choice to these tech-savvy and highly-mobile candidates.
  • In addition, it is important that firms understand that they are competing for talent within a global market, both from x-border and x-industry. Therefore, it needs to become common-practice that they market their organisation to the broadest candidate base possible.

Summary and further information

In summary, the African FS sector has already entered a rapidly evolving phase of its lifecycle, and this pace of change is only set to increase.
As such, companies need to equip themselves with a combination of seasoned FS professionals who have successfully navigated businesses through emerging economies and who will deliver the short-term strategic aims of the firm, whilst simultaneously creating roles that will focus on long-term succession planning.
In addition, an essential strategy of future companies will be to build ‘agility’ into the human capital resources of their organisation, which provides them with the ability to take advantage of opportunities or respond to changes within their landscape as soon as they arise.

How can Leathwaite assist?

With a global network of offices that are constantly communicating with the retail banking market, Leathwaite is perfectly placed to advise clients on the future demand cycle for talent. For a discussion on how the talent landscape is changing within this sector, please call Gordon Stanley on +44 207 151 5151 / gordon.stanley@www.leathwaite.com.