Southern African employers have turned to their salary budgets to address significant challenges across multiple markets.
Economic uncertainty, a fierce competition for talent and changing expectations from the workforce have hit Southern African organizations and pushed employers in the region to re-adjust their salary budgets. For example, overall actual salary budget increases in Africa rose 7.4% this year (including salary freezes) and 7.8% (excluding freezes), according to our most recent Salary Budget Planning Survey Report.
Looking more specifically, Angola is at the upper end of salary budget increases at 9.6%, while Mozambique fell at the other end of the spectrum with an average 5.6% actual salary budget increase. In line with the rest of the globe, forecasted salary budget increases for 2024 are lower than 2023.
2024 average salary budget increases are projected at 6.2% in Southern Africa (including salary freezes) and 6.4% (excluding freezes). Angola takes the top spot, forecasting an 8.2% salary budget increase, while Mauritius is reporting just 4.4%.
In Southern Africa, the survey results reflect higher 2023 salary increases than were projected during the 2022 compensation planning cycle. Additionally, increases for the current cycle are either higher than projected than or did not change since 2022. Comparatively few organizations reported that 2023 salary increase budgets were lower than projected. Average actual salary increases hit 7.4% in 2023 in Southern Africa, and projections show that compensation and HR professionals expect pay increases to remain high (6.2%) next year.
Factors at play
Among organizations that reported higher 2023 actual salary budgets vs. their original projections, three factors stood out as the primary influences affecting salary budgets.
Inflation in Southern Africa has been on the rise in recent years. Inflation averaged 10.9% across the region, and 7.8% is expected in Southern Africa in 2024. Additionally, given current economic challenges in the region, Southern African organizations are anticipating a recession and/or weaker financial results. Finally, the rising cost of supplies, including the rising cost of fuel and ongoing climate changes, is concerning for Southern African employers.
Labor market and retention concerns
As with so many other regions, the Southern African labor market is incredibly tight. An aging population, intracontinental poaching, skills shortages, immigration and the so-called brain drain are coalescing to push employers to offer higher salaries to attract and retain the critical talent and skills needed.
Employees' expectations around organizations' value proposition have changed, particularly when it comes to compensation. Skills, experience and salaries of employees in similar roles are all factoring into what employees want and expect from their employers. Additionally, there is growing awareness and discussion of the gender pay gap in Southern Africa, leading to increased expectations among female employees for pay that is equal to their male counterparts.
Designing rewards that work
As employers in Southern Africa look for ways to effectively spend their compensation while staying within budget, it will be important to remember who they need for future success and, based on those needs, make decisions about how that talent will be paid.
For example, organizations that plan to increase their headcounts in the next year are looking for mostly production and manual labor first, with middle management and professional roles following. Additionally, recruitment efforts will weigh heavily toward engineering and IT roles, including a high demand for skilled engineers and IT professionals who will support digital transformation, the growth of the technology sector and the need for innovation.
The best way to balance and justify the way you spend your compensation budget will be to make decisions based on the most reliable, relevant and timely data available on the market. Otherwise, those factors that are currently plaguing employers will continue to undermine attraction, retention and motivation efforts, causing organizations to fall short of expectations.
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