Boards in South Africa must have more representation from younger generations

11 February 2019 Consultancy.co.za

Contributing to a current debate on executive remuneration and board structures across South Africa, global professional services firm PwC has released a new report that reveals that most boards in South Africa currently consist primarily of non-executive, independent directors. 

The appointment of non-executive directors is becoming an increasingly popular strategy for firms across South Africa, particularly those listed on the Johannesburg Stock Exchange (JSE). PwC reports that there are nearly 150 more independent directors among the JSE this year than there were last year.

The trend is visible across a number of sectors, the most prominent being the financials and financial services sector, followed at a distance by the basic materials sector and the industrials sector. The real estate and consumer discretionary sector follow, while a number of other sectors make the list with lower proportions.

Median board tenure

Most firms appear to be favouring independent directors due to the multifaceted expertise and flexibility that they lend to operations, which is exemplified by the fact that most state-owned enterprises have fixed board members. The utilities sector, for instance, doesn’t feature in the list of top sectors in terms of independent directors.

On the other hand, while most firms are looking for the flexibility offered by independent directors, firms are also increasing the average tenure for Chairpersons. Compared to the six-year median for 2017, most JSE firms are now appointing Chairpersons for an average of seven years.

The median tenure has been increasing steadily since 2014, when it stood at 4 years. However, the median tenure for non-executive directors stands much lower at 5 years for last year, but represents an increase nonetheless from the 2017 median of four years.

Proportion of non-executive directors

The fact that non-executive directors are the more popular appointments is demonstrated in the proportions of these models across various sectors in the country. More than half of the board directors across the largest sectors in the country operate in an independent or non-executive capacity. 

In the telecommunications sector – which is increasingly central in the South African economy, 77% of the board consists of non-executive directors, a figure that stands at 67% for the overall technology sector. 70% of the directors in real estate also operate in a non-executive capacity.

Other sectors with substantial participation from non-executive directors include industrials, healthcare, financials, energy, consumer staples and basic materials, among others. According to PwC, however, the age of these directors [plays as much of a factor as their employment model.

Median age of board members

The median ages of the chairpersons as well as the board members across all of these major sectors lies above 50. As the South African market moves towards a more innovative approach to growth, a younger perspective at the reins of an organisation might prove useful, according to the firm.

“There is a strong case for including millennials on boards of South African companies, as there is a feeling that they have their fingers on the pulse when it comes to emerging trends and risks,” says the report.

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Government emphasis is making South Africa's BPS sector globally competitive

04 April 2019 Consultancy.co.za

South Africa’s renewed focus on generating greater foreign investment is increasingly reliant on the Business Process Services (BPS) segment, among others, according to Managing Director for Operations at Accenture Africa Kabelo Makwane. The country is emerging as a highly attractive market for BPS investments.

The President Cyril Ramaphosa has been repeatedly asserting the value of foreign investment for restoring stability in the South African economy following a sustained period of sluggish economic growth. Among his areas of focus within this goal is making South Africa a BPS centre globally.

His focus on BPS was reinforced when he mentioned it in his State of the Nation Address, which, according to Makwane, was the first time a president in South Africa had explicitly mentioned the segment in such an address. Makwane believes that the emphasis on improving local services is likely to be significantly beneficial for the economy.

Within the BPS segment, Accenture's Kabelo Makwane has observed significant efforts to generate skills that can compete with the traditional BPS centres across the globe, which include the likes of India and the Philippines. These regions have large pools of English-speaking professionals, which contributes to their popularities.

Government emphasis is making South Africa's BPS sector globally competitive

Efforts within South Africa, meanwhile, have led to the emergence of a number of substantial BPS markets in financial centres such as Gauteng and Kwazulu-Natal, which has driven a staggering annual growth rate of 22% in the South African BPS sector in the last four years.

According to Makwane, alongside the English proficiency levels across South Africa’s labour forces, the country’s attractiveness as a BPS market is contributed to by its correspondence in time zones with European markets, and the low value of the Rand in the global exchange, which makes labour in the country cost-effective. Technology is the key, according to Makwane, to realise the market’s BPS potential.

“By effectively applying technology and digitalisation in the outsourcing arrangement to automate processes, access analytics capabilities to drive decisioning through data insights, or leverage applied intelligence (AI) – the latest evolution in BPS – to effectively augment professional capabilities, the local sector will more effectively bridge the skills divide that exists between the local workforce and workers in incumbent global BPS destinations of choice,” he said.

“Large global enterprises in the automotive, logistics, courier and ICT sectors, for example, all face similar challenges when entering new geographies. They, therefore, require BPS providers that can set up critical front- and back-office functions at pace and scale. Any BPS provider that offers these capabilities will hold a distinct competitive advantage,” he added.