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rganisation und Personalmanagement 15.1.2014 Group 8
Managing human resources in Sub-Saharan Africa I
Sub-Saharan Africa
Sub-Saharan Africa (SSA) is a part of African continent, which lies in the south of the Sahara desert.According to 19 Paragraph 3706 [1] 49 countries belong to SSA. The Sub-Saharan part may be described by diversity of cultures, religions and languages. The region is mostly populated by aboriginal inhabitants (910.4 millionaccording 2012 World Bank data [2]). The population leads an agrarian lifestyle and prefers to live in large families. SSA remains a young continent due to high fertility rate. But at the same time mortality is also considerable, which may be seen as a result of different deceases [3].
In terms of natural resources the SSA also holds leading positions in the world: 10% of global oil deposits, 40% of gold, 80 to 90% of chromium and platinum metal group deposits are located here[4]. But despite that richness the average level of income in SSA remains one of the lowest in the world with daily labor reward per capita of $2.00. Economic underdevelopment was mostly caused by various armed conflicts, genocide (Ruanda), and late dawn of colonial era [5]. Economic growth could be observed from 2000th when a real GDP rose from 2.0 to 4.9% a year up to 2008. This growth was achieved through wise micro and macro policies conducted by governments in different sectors of economy. The average GDP growth in SSA in a period from 2010 to 2012 was above 5%, which is the world’s 2nd highest growth rate after Asian market. At the same time the world’s average growth is 4% [6]. According to Global Limited partners survey 2013 conducted by EMPEA, SSA region is one of the most attractive market for private equity investments in emerging markets. According to their data investment return may be 16% and higher. 54% of global limited partner investors are ready to invest capital into SSA, which makes the region #1in investment attractiveness rank [7]. The main partners of region are China and India. Chinese imports have grown from $64 million to $13 billion from 1990 to 2008. In the same time cooperation with US and Europe has fallen from 73 to 49% [8]. Over the last decades the governments of SSA have been conducting the policies of Millennium Development Goals, aimed at reduction of poverty. But even those high revenues ($1.290 trillion, 2012, World Bank data) were insufficient to reach those goals.
As of now the biggest economies of SSA are Nigeria and Republic of South Africa with 56% of the common GDP [3]. SSA offers following opportunities: lower costs for labor and production, unexploited market opportunities, rich natural resources, high ROI and above-average economic growth.
Austrian companies with operations in SSA
Anton Paar GmbH
Anton Paar GmbH produces high-quality measuring and analysis instruments for research and industry. The company is the world leader in several areas of scientific instrumentation, for example rheology, viscometry, refractometry, polarimetry and more. The products are very robust and have the highest precision.
Anton Paar GmbH was established in 1922.Anton Paar was a machinist who started a one-man machine repair shop. He was specialized in repairing machines for bakeries and butchers. In 1932 MargaretePlatzer (the youngest daughter of AntonPaar) followed in her father´s footsteps as the first Styrian female master locksmith in this business. Together with Prof.Dr. Otto Kratky they produced the company´s first scientific, analytical instrument, the Kratky Small Angle X-ray Camera.
In 1986 Friedrich Santner became first the head of the Marketing and Sales department and later the Managing Director of the German subsidiary. Under his management several new subsidiaries have been founded. In 2003 the Anton Paar GmbH became a non-profit organization, called the „Santner Foundation“. The „Santner Foundation“ was the new owner of Anton Paar GmbH and it is a charitable foundation for scientific work and research of public utility in the field of natural science and technology. The foundation promoted the prevention of addictions and rehabilitation of drug abuse and drug addicts.
Anton Paar has overall 21 sales subsidiaries in Europe, America and Asia and over 1900 employees worldwide. The headquarters of Anton Paar GmbH is in Graz, Austria. The company has 70 distribution partners in more than 110 countries around the world. The company is a limited liability company and the CEO of the company is still Dr. Friedrich Santner. Anton Paar has announced the opening of three new subsidiaries. Since January 1, 2013 the offices were opened in Poland, South Africa and Brazil. Anton Paar Southern Africa Ltd has taken over the sales and service activities in many countries south of Sahara. The subsidiary in Africa is a joint venture with Swiss Lab. The Anton Paar Southern Africa Ltd is located in Midrand, Johannesburg.
The Anton Paar Southern Africa Ltd has been active in Sub-Saharan Africa since 2013. Before that they were active in Africavia a distributor for more than 15 years. While choosing a new location for the business the market opportunity was very important for the company. Anton Paar Southern Africa Ltd had to contend with the following problems in Africa:high level staff turnover, low productivity of labor, Internet availability and stability of Internet connection.
The low productivity of labor is a big problem for the company. For this problem the subsidiary has two solutions: they use monetary mechanismssuch as higher salaries, company cars, and high quality working surroundings to achieve a higher productivity of labor. To raise productivity in Africa the company also uses the method of a complete training program.
Another big problem in Africa is high level staff turnover. The reasons of a staff turnover are diverse. The economic situation of the country can be one big reason for a high level staff turnover. Also employee satisfaction leads to a staff turnover. The company uses different ways to resolve this problem. For example they invest in staff (training or develop workforce), open up career opportunities, build trust with their employees, offer monetary incentives and health care, support teamwork and more.
Internet availability and also the stability of internet connection in Africa are problems of Anton Paar. The reasons for this are poor infrastructure and a low connection quality in Africa. Internet is also very expensive. The high cost led many companies to block sites such as Facebook and Twitter on the corporate network or to lock the internet availability completely for the employees.
The ratio of human resources to the total costs compared to Austria is medium. The organisational units of Anton Paar Southern Africa Ltd are managed by mostly staff of local origin, probably because this is easier to organize. Anton Paar Southern Africa Ltd reported communication barriers on the internal level. They reported no problems with cultural differences in Africa, so possible differences do not influence the work of the enterprise.They have no local competitors in Sub-Saharan region.
Kapsch AG
Kapsch AG was founded by Johann Kapsch in 1892. The company works in the field of telecommunications and transport telematics. They produce for example Tolling Systems, IT-Data Networks, Train Radio Systems and IT-System-Integrations. Since 1989 the company has expanded their operations to other countries: first Hungary, Czech Republic, Poland, Slovakia, Ukraine, Russia, Slovenia and Croatia, then Asia, Australia, South America and South Africa.
In 2002 The Kapsch Group was organized into three business areas: KapschBusinessCom AG, KapschCarrierCom AG, and KapschTrafficCom AG.In 2009 KapschTrafficCom AG won major contracts in South Africa. The company’s headquarters is in Vienna, Austria, and the key people at the moment are Georg Kapsch (CEO), Kari Kapsch (COO), and Franz Semmernegg (CFO). Their company turnover was 928 million in the years of 2012-2013 and they had over 5000 employees worldwide. [11]
Kapsch AG has been active in Africa for 5-10 years. According to Internet sources they founded subsidiaries in South Africa in 2000 [12]. While choosing a new location in Africa their major incentives were unexploited market opportunities, and the company still has no local competitors in the area. They reported that the market penetration was related to public tender: the acquisition of goods and services on behalf of a public authority, such as a government agency.
The company reported following problems that they have faced during their time in Africa: high level staff turnover, low productivity of labor, skills, and BBEEE. We can assume that by skills they meant those of the local employees, since the education level in SSA is problematic and different from that in European countries. As mentioned earlier, in many countries in Africa there are no clearly defined educational standards and no formal training programs for professionals, which is why companies like Kapsch have problems with the level of skills of local employees.
Broad-Based Black Economic Empowerment (BBEEE) is a variety of economic policies in South Africa to support the legal equality of all South Africans. The goal of BBEEE is to make it easier for employees of all nationalities and skin-colors to land jobs in even management, controlling and in the private sector. The legislation in South Africa requires all business owners in South Africa to be familiar with BBEEE and to respect its requirements. If companies choose not to respect BBEEE, they might have serious either legal or status related consequences.[13] This might be problematic for international companies that have to learn the requirements of a foreign legislation and act accordingly. If the education level of the applicants is low as it is, and the BBEEE policies require a company to hire a candidate to support equality and not according to the skills of the applicant, the consequences to the company’s productivity might be severe.
To achieve higher productivity of laborKapsch AG uses mostly monetary incentive mechanisms. Both short and complete training programs are used to raise productivity of labor in Africa. The ratio of human resources to total costs compared to Austria is low. Their organisational units in Africa are managed by mostly staff of local origin, and the company reported no communicational barriers or cultural differences. This reveals an upside of their operations in Africa.
Plasser&Theurer
Plasser&Theurer was founded in 1953. The company manufactures rail track maintenance and track laying machines, and they are the world leader in their branch of trade. They are a private company owned by Josef Theurer, Elisabeth Max-Theurer, Dorothea Theurer and Hans-JörgHollei. The company currently has evenue of €217.5 million, about 3000 employees, and they are active in 100 countries. The headquarters is in Linz, Austria. [14,15] Plasser&Theurer has been active in Africa for more than 15 years. Their major incentives to expand their operations to Africa were unexploited market opportunities, and they reported one local competitor in SSA. According to the representative of the company the market penetration was related to the lack of or insufficient infrastructure, and high costs and risks.
The company’s major problems while working in Africa have been diseases such as AIDS and malaria, and low productivity of labor. The health risks in Africa can cause both financial and productivity related problems to the company as well as insurance problems. They have used both monetary (higher salaries et cetera) and social (better insurance coverage and more) mechanisms in order to achieve higher productivity. Both short trainings and complete training programs have also been used for the same purpose.
The ratio of human resources to total costs compared to Austria they reported to be medium. Their organisational units are managed by staff mostly of local origin, and they reported no communication barriers or cultural differences. According to our research thetwo most major challenges faced by companies in SSA were high level staff turnover and low productivity of labor. Reasons for these can be found in the economic situation of the African country, employee satisfaction, poor local infrastructure, and the lack of clearly defined educational standards and formal training programs.
All companies we contacted reported that they have staff of mostly local origin. Only Anton Paar reported communication barriers on the internal level. The other two companies claimed that they have had no communication barriers.
11. www.kapsch.net14.01.14
12. http://en.wikipedia.org/wiki/Kapsch 14.01.14
13. http://www.cbbl-lawyers.de/suedafrika/bbbee-in-suedafrika/meta,45,48214.01.14
14. http://www.plassertheurer.com/de/unternehmen/fakten.html14.01.14
15. http://en.wikipedia.org/wiki/Plasser_%26_Theurer14.01.14