Employee benefits for Africa

09 June 2021 Gareth Stokes

The Covid-19 pandemic upended economies and social life at a time when many Sub-Sharan Africa (SSA) economies were struggling to grow. Midway through 2021, multinational firms are fast coming to grips with the fact that developed and emerging countries are at different points in the post-pandemic recovery process. Some countries are already emerging from their third wave of infection, with large percentages of their populations vaccinated against the disease. Others, especially in Africa, face monumental healthcare infrastructure and resourcing challenges as their vaccine rollouts stutter. A presentation by Alexander Forbes and Mercer considered how multinational firms might approach the employee benefits debate under Africa’s present day economic realities.

Isaah Mhlanga, Chief Economist at Alexander Forbes, said that Africa was lagging significantly insofar the administering of vaccines, with an estimated 2% of citizens vaccinated compared to 10% globally and up to 30% in the European Union (EU) and North Americas. “Vaccine coverage [and the ongoing management of the pandemic] will affect how African economies grow going forward; health policies around Covid-19 are fast becoming economic policies that impact on overall economies,” he said. Analysts are still offering various theories to explain why Africa has had an apparently less severe experience with pandemic. Observations include that the open borders that exist in, for example, the EU, do not exist in Africa; that higher percentages of African country populations are in rural areas; and that testing and reporting has not been as comprehensive. 

Commodities central to Africa’s economic prospects

“There are not many African countries that export electronic goods, machinery or manufactured products with the result that commodities play a big role in the continent’s economic trajectory,” said Mhlanga. The surge in a basket of commodity prices has proven a tailwind for African economies in 2020 and 2021; but there are already concerns that the boom will be short lived. The World Bank has forecast flat or slow growth for most commodities between 2022 and 2025 with possible contractions in the price of iron ore and precious metals such as gold and silver. South Africa is celebrating this commodity price action with a lower-than-feared decline in tax revenue collections in 2020 and some bonus GDP points through 2021. But 2022 could be a different story. 

Mhlanga  took a few minutes to consider the impact of pandemic-related economic declines on global remittances. “The SSA region experienced the second worst contraction [in global remittances] after Europe and Central Asia,” he said. This of considerable concern on a continent where many citizens rely on these flows to make ends meet. A country such as South Sudan received almost a third of its GDP in remittances in 2019 while Nigeria received a staggering US$23.8 billion in inward remittances in the same year. These remittances dried up in 2020 due to a combination of government-imposed travel restrictions and job losses, both in response to the pandemic. To make matters worse, the multi-year trend of reducing Foreign Direct Investment (FDI) into Africa, accelerated last year. 

Ongoing debt accumulation poses risks

Alexander Forbes summarised the impact of Covid-19 on SSA under four headings, namely trade, foreign aid, FDI and remittances. Mhlanga  pointed out that only handful of countries achieved better trade numbers during pandemic; that Western countries had reduced aid to Africa as they redirected funding to internal causes; that many African countries saw a significant decline in FDI; and that inward foreign exchange remittances into the continent contracted almost universally. “The impact of Covid-19 on Africa is huge, and the slow vaccination progress will prolong the post-pandemic economic recovery,” he concluded. He warned that the ongoing debt accumulation in African countries posed significant risk due to slow economic growth and looming US interest rate hikes… There is also a strong possibility that emerging markets’ ‘temper tantrum’ shock of 2013 could play out again in coming years! 

Dealing with the digital divide

Craig Bentley, Executive: Multinational Consulting at Alexander Forbes singled out Covid-19 and technology as the major drivers of business strategy and employee benefits trends in the coming years. “We see a trend in terms of how multinationals are dealing with these challenges in interaction with their employees, with clear evidence that employee benefits are becoming a significant focus,” he said, before reflecting on Africa-specific risks.  The 2021 Global Risk Report, completed by the World Economic Forum in consultation with Marsh McLennan, has added digital inequality to the risk matrix, alongside infectious diseases and the progressive increase in digital technology. There is a real concern that digital inequality will lead to economic stagnation across much of Africa, with just over 14% of African homes having access to internet, compared to a 57% world average. 

Africa will have to address its shortcomings in access to digital technology alongside countless other challenges, most notably job losses, poor education outcomes, rising poverty and, of course, the disruption caused by pandemic to healthcare infrastructure. A recent survey showed that more than 90% of countries experienced disruptions in health services from both a demand and supply side. “The role of multi-nationals in creating employment and protecting and covering employees in Africa is coming to the fore; they are doing more than ever in the employee benefits space,” said Bentley. 

Inclusive and consistent employee benefits, globally

He observed that multi-nationals have reconsidered their benefits strategy through pandemic, in that they used to let country operations run autonomously; but are now more committed to ensuring benefits consistency across their global footprints. Their focus: How do we ensure that all of our employees are covered across all of our operations? Most firms are now focused on ensuring that their employees are covered and that employee benefits are inclusive and clearly communicated throughout the group. “We have seen a renegotiation of corporate employee benefits to ensure consistency around exclusions as well as the inclusion of cover for wellness and mental conditions,” concluded Bentley. “The trend is towards aligned and standardised benefits in every country of operation”. 

Writer’s thoughts:
The goal of delivering consistent employee benefits packages across multinational groups can place local operations under significant financial pressure. But the trend could also place pressure on small and emerging enterprises (SMEs) to do more for their employees. Have you noticed a tendency among your SME clients to benchmark against multinationals insofar employee benefits structuring, or are they finding it increasingly difficult to keep up? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts


Added by cynical simon, 09 Jun 2021
It has been the woes of SME clients since always and is increasing.
Report Abuse

Comment on this post

Email Address*
Security Check *
Quick Polls


How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?


Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now