The New Form of Brain Drain: The Role of HR and Leadership and the Impact of FDIs in the African Labor Market

The rapid growth and change in the pattern of Foreign Direct Investment (FDI), particularly since the 1980s, has significantly impacted the labor market in Africa. With increasing economic hardship and political instability in the continent, coupled with rising export of FDIs and cultural diversity in developed foreign countries, the immigration of top talents to developed countries, typically called “brain-drain”, will continue to be a norm for a long time in Africa.

Over the years, FDI in Africa has been patterned around greenfield projects, mergers, acquisitions, franchising, and licensing. In many cases, there is simply no local capability to build what the country wants so foreign partnership is imminent. FDI raises concern about the causes, consequences, and effects of foreign ownership on local economy and whilst some people believe FDI is a variant form of colonialism and imperialism in developing countries, others view FDI as something without which the host economy cannot survive. However, the majority show ambivalent attitudes towards FDI.?

In Ghana, which is the third-largest recipient of FDI in West Africa, accounting for approximately 20% of the region's stock, there has been a substantial annual inflow of over USD 1 billion from FDI. This investment is particularly focused on oil and gas facilities, gold mining, agriculture (especially cocoa production), and the export of fruits, as reported by UN Trade and Development (UNCTAD) 's World Investment Report 2023.

With the increasing market dominance of foreign firms and the poor leadership and organizational culture of local firms, I believe another form of brain drain may be rising, migrating Africa’s top local talent to foreign companies. This form of brain drain will be caused by Africans and, in Africa. You do not need a flight ticket, a residence, or a work permit. It will be the migration of top local talents into foreign firms caused by the decay of local culture and poor leadership systems in local companies. Though this has a more subtle effect in that people are still directly contributing to national development, in the long run, there is an unbalanced investment between local and foreign firms.?

While foreign firms may offer higher salaries and better work cultures, it is important for local businesses to invest in a thriving work culture and leadership system to attract and retain top talent locally and internationally. We must be well-placed to attract both local and foreign best talents. Since humans are the most important asset in business, the diversity of our labor market is critical to the success of the national economy and financial market stability.

Local business leaders must invest in a flexible work culture and global business mindset to attract top talent. As Africans, we must break out of our contentment with small family-run businesses and aim for growth and excellence.

Call to Action for HR and Business Leaders.

1. ? ? Build the kind of culture that attracts the best kind of people: it’s not all about money, you may not be able to “afford” to pay as much as international firms but a good culture is the cheapest way to do so. Thinking of business scalability provokes a systems-based approach and not just ticking operational tasks. The fastest way is indeed fast but it’s never the farthest. Take time to dig deep and prepare for massive expansion as you invest in your people, culture, and workplace.

2. ? ? Develop policies that empower people, not “use people”. People should be judged outside the school they attended, the country they lived or the gender they have. It is purely based on human dignity to find the “uniqueness” in every individual who you could find a fit. Your talent policy will lead to you whom your business needs and not just whom you want or whom you can afford at the time.

3. ? ??Invest in diversity. Diversity of culture, ethnic background, gender, etc.

You can only do this when you are open to being “challenged” on critical matters. Diversity brings a priceless advantage of creativity and resilience. You can use diversity to also internationalize to other regions.

African-owned multinationals firms like Ecobank, Access, mPharma, etc are good case studies of the effect of talent diversity on business outcomes, attracting diverse talents from other continents,? know a Ghanaian-owned company that has been able to attract diverse talents from Europe and Other parts of Africa because of the impact of diversity which is seen every day.

4. ? ? Learn to build for the world, not just Africa.

I will continue to preach the gospel of maximally utilizing all the untapped potential we have in Africa because I believe we have not been fair to the world. We have more to give but we often think in our own space. Building for the world means building a globally relevant workplace culture and systems.

In the next episode, I will discuss more on the following;

1. What specific strategies can be implemented by local companies to compete with multinational firms in attracting and retaining top talent??
2. How can African countries ensure that they benefit more from the presence of multinational corporations and the talents they attract, to address the new form of brain drain?
3. What are the potential long-term consequences of the new form of brain drain on the African labor market and economic development?
4. What steps can be taken to cultivate a work culture and leadership system in local businesses that is competitive with multinational firms to retain top local talent and even attract foreign talent?

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