Change Leadership in Developing Countries
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Change Leadership in Developing Countries

Franca Ovadje

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eBook - ePub

Change Leadership in Developing Countries

Franca Ovadje

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About This Book

Selected as an Outstanding Academic Title by Choice Magazine in 2014!

In Change Leadership for Developing Countries, Franca Ovadje offers readers a comprehensive and integrative model for the design, implementation and evaluation of organizational change. This unique book embodies an African perspective, discussing the specific needs and issues associated with leading change within the institutional, economic, social, and cultural contexts of developing economies. Based on extensive research, as well as the first-hand experiences ofmanagers who have led change initiatives in Africa, this book envisions a change leadership model based on conscious decision-making, rather than taking a prescriptive approach. With examples and case studies drawn from African organizations, this book is a vital tool for students and managers who are based in, or interact with, emerging economies.

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Information

Publisher
Routledge
Year
2014
ISBN
9781136688355
Edition
1

1

ORGANIZATIONAL CHANGE IN THE AFRICAN CONTEXT

The African Socio-economic and Cultural Context

Introduction

Africa economies have seen steady growth rates in over a decade and there are good prospects for future growth. Foreign Direct Investments (FDIs) to Africa has grown and the sources of these investments are changing with China becoming a big investor in Africa.
Multinational Corporations are looking at their African subsidiaries to deliver much needed profits. McKinsey estimates Africa’s growth opportunity to be worth $2.6 trillion annual revenues by 2020.1 To take advantage of these opportunities, organizations in Africa must adapt to changes in the economy; they need to implement changes in their organizations. Some African organizations are doing just that and they are growing and becoming international. GTBank, for example, which was set up in 1990 in Nigeria, has subsidiaries in five African countries. Zenith Bank, United Bank for Africa, Oando plc, and Sahara Energy have all gone international. Equity Bank in Kenya also has subsidiaries in Southern Sudan and Rwanda among others. MTN, a South African telecommunications firm, has operations in 21 African countries and the Middle East. The increasingly competitive environment makes change an imperative.
If Africa’s growth is to be sustained, organizations in Africa must take advantage of the increased opportunities in the continent while responding to the challenges in the environment. To do this successfully, they require change models that can effectively guide them through change.
Not much research has been done on organizational change in Africa. In fact, there is a paucity of research on Africa in general. Organizational change models which exist and are taught in African business schools were developed in Western countries. It is becoming increasingly clear that these models may not be universally applicable (Hempel and Martinson 2009). Western countries are different in many respects from other parts of the world, especially developing countries.
Hempel and Martinson (2009) show, in their Chinese study, that context is important for organizational change. Context influences the choice of the objective of the change, the content of the change, and the change process. They argue that even when the same change initiative is implemented in another context, the enacted change may be different from that which was contemplated at the beginning. For example, in certain contexts some change objectives may be more important than those considered important in say the headquarters of a Multinational Corporation (MNC). The subsidiary may be more interested in maintaining its reputation than in the efficiency gains which are the change objective. Thus, implementing a change initiative according to a template developed by the headquarters of an MNC across subsidiaries may not lead to successful change in all subsidiaries. Local contexts may dictate different leadership styles, pace, communication mechanisms, etc.
If context is so important that it influences several aspects of an organizational change initiative, it is important to identify the distinctive contextual characteristics of developing (African) economies compared to Western contexts (especially USA) where extant change models were developed. Context provides the external and internal drivers of change. In a developing country context for example, capital markets are not a significant driver of organizational change. This is because capital markets are relatively underdeveloped in these economies. Share prices may not drive management actions as much as they do in developed economies (Foster and Kaplan 2001). In the absence of a strong capital market pull, other factors are likely to drive change in the African context. According to Hemper and Martinson (2009), the socio-economic and cultural environment are contextual variables likely to influence organizational change.

The Socio-economic Context of Africa

Wanasika et al. (2010: 234) argued that ‘many cultural and historical similarities exist among [Africa] countries that allow us to treat them as a single entity’. They add that African countries share a common historical experience that includes ethnic and tribal loyalties, colonial dominance and exploitation of rich natural resources, etc. Africa is therefore not only an economic region but also a cultural and social region.
Africa is home to 1 billion people. Almost all the 54 countries (including South Sudan) were colonized. In the 1960s, many of them gained independence. In the 1960s and 1970s, African countries showed positive growth rates (Table 1.1) though these were lower than growth rates in developed (high income) countries.
In the 1980s and 1990s, many developing countries adopted more market oriented economic policies including Structural Adjustment Programmes as a condition to access World Bank or International Monetary Fund loans. However, in many countries, economic performance was disappointing (Easterly 2001). Growth rates were negative during this period. Since 2001, per capita income growth in Africa has exceeded that of the developed countries.
TABLE 1.1 Annual Per Capita Income Growth 1961–2005 (% per year)
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Source: Bigsten and Durevall 2008:17
Today, Africa is bubbling. According to the McKinsey Report on the progress and potential of African economies,2 real GDP rose 4.9 per cent per year from 2000 to 2008, more than twice its pace in the 1980s and 1990s. While the prospects for the global economic growth have been adjusted downward (from 4.1 per cent to 3.6 per cent in 2013),3 the economic outlook for Africa remains very good. In fact, it is one of the fastest growing regions in the world.4 Real GDP growth is expected to be 5.3 per cent in 2012 and in 2013 (Table 1.2). Even the non-oil exporting countries are showing a lot of resilience.
Future prospects in Africa are driven by ‘both external trends in the global economy and internal changes in the continent’s societies and economies’.5 Hostilities in many African countries have ceased. Many African economies have attained a level of macroeconomic stability and implemented a number of economic reforms. This has created an enabling environment for growth. African governments have ‘lowered inflation, trimmed their foreign debt’, privatized state-owned enterprises and strengthened regulatory and legal systems.6 Nigeria privatized more than 116 enterprises between 1991 and 2006,7 28 governments in Sub-Saharan Africa (of the 46 they studied) implemented at least one regulatory reform between June 2011 and June 2012 and Rwanda has implemented 26 regulatory reforms since 2005.8
TABLE 1.2 Sub-Saharan Africa: Real GDP Growth (% change)
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Source: Regional Economic Outlook Sub-Saharan Africa. World Bank & Financial Surveys. IMF
One consequence of these changes is the emergence of a vibrant private sector. The fastest growing sectors between 2002 and 2007 were tourism, banking and telecommunications.9 Another consequence of the reforms by African governments was the creation of an attractive environment for Foreign Direct Investments (FDI). FDI into Africa increased from $9 billion in 2000 to $62 billion in 2008 – relative to GDP almost as large as the flow into China. These inflows were not only into the more traditional sectors (oil and gas and mining) but into banking, tourism, textiles, construction, telecommunications, and other sectors.10
According to the McKinsey Report, the continent has more than 1,400 publicly listed companies (though its capital markets are underdeveloped). It boasts more than 100 companies with revenue greater than $1 billion. Telecom firms have signed up more than 316 million new mobile phone subscribers on the continent since 2000 – more than the total US population. Banking and retail are flourishing as household incomes climb.
Social and demographic trends are propelling and sustaining the economic growth rates of the continent. Two important demographic trends are: the rise of the middle class and increased urbanization. AfDB estimates that 34 per cent of the African population is middle class (about 313 million people).11 This number is expected to rise. The middle class has disposable income to spend and therefore can drive further economic growth.
According to the McKinsey Report (2010), in 1980, 28 per cent of Africans lived in cities. In 2008, 40 per cent of Africans were urban dwellers. Thus, more people left the villages (and farming) to seek jobs in the cities. As more of them became employed, they got access to disposable income most of which was spent on food and housing, fuelling the growth of these sectors of the economy.

Challenges

The growth in African economies has not been without challenges. Poverty levels remain high. Poverty headcount ration at $2 a day in Sub-Saharan Africa was 69.2 per cent of the population in 2008. In 2010, 48.5 per cent of the population in 2010 lived on $1.25 a day. Increased urbanization has come with huge infrastructural challenges. Governments will have to provide access to water, electricity and other services to the teeming urban population.
Education remains a challenge. Literacy rate was 72 per cent in 2010. The quality of education especially in some African countries is still poor. There is a large and growing labour force but a challenge for business organizations is the lack of skilled personnel. A number of organizations (mainly large organizations) have training and development programmes for new hires in order to fill the gaps and prepare the new hires to perform. Many small and medium firms (the large majority of business organizations in Africa) are not able to do this. Access to quality hires remains a major challenge for organizations.
The extended family is the social security of many Africans. It is common for a clan or village to sponsor the education of a child with the hope that with his improved income he will sponsor other people in the village.
To summarize: African governments have introduced regulatory and other changes in the environment. For example, they privatized state-owned enterprises and enabled the emergence of a dynamic private sector. There have been some social and demographic changes in the African context which makes it more attractive for investment and accounts for Africa’s sustained growth in the last several years. One of these changes is the emergence of the middle class (about 85 million households in 2008). The others are increased urbanization and the growing labour force.
However, some challenges remain. Poverty levels remain high in the continent. While the population of those of working age is growing, many lack the requisite skills to perform in organizations.

The Impact of the Socio-economic Context on Or...

Table of contents