Employee shareholding, where employees own shares in their company, can foster stronger commitment and participation. While this practice is gaining some traction in Africa, it remains underutilized. What challenges and opportunities exist for expanding employee shareholding across the continent ?
Employee shareholding is increasingly recognized as a driver of economic transformation worldwide. In Africa, though still marginal, its potential should not be overlooked. A study involving 64 large companies, half of which have employee shareholding programs, shows an average employee ownership rate of 2.9 %. Although this is a small percentage, it significantly impacts a company’s added value. However, there is a paradoxical finding: while shareholding enhances company value, it hurts productivity. This raises questions about how best to tailor the model to Africa’s specific economic conditions for maximum effectiveness.
Africa, with its developing financial markets, sees sectors like telecommunications, finance, and manufacturing taking the lead in employee shareholding initiatives. Large publicly traded companies are at the forefront, allowing employees to benefit directly from corporate growth. This boosts motivation and aligns the interests of both employers and employees.
However, despite these successes, small and medium enterprises (SMEs)-which form a large part of Africa’s economic landscape-struggle to adopt employee shareholding. The obstacles include high implementation costs, vague regulatory frameworks, and a lack of employee education about the benefits of such programs. Yet, when implemented effectively, employee shareholding fosters loyalty and creates a deeper sense of belonging among workers.
Employee shareholding holds great potential for promoting inclusive and sustainable economic growth in Africa. However, several challenges must be overcome. One of the main hurdles is the often unclear regulatory environment and a general lack of awareness among employees. The study on large companies shows that while employee shareholding boosts added value, it negatively impacts productivity. This could be due to mismanagement of these programs or inadequate employee training on how to handle their shares.
Additionally, widespread distrust of financial markets, fueled by political instability and infrastructure challenges in many African nations, hampers broader adoption. Yet, if these barriers are addressed, employee shareholding could offer significant advantages, including greater corporate stability, improved alignment between management and staff, and increased purchasing power for workers.
To successfully promote employee shareholding, several key actions are required. Firstly, African governments could introduce tax incentives to encourage companies to adopt this practice. These could include tax relief on profits distributed to employee shareholders or financial assistance for businesses launching shareholding programs. Additionally, establishing clear, locally adapted regulations will ensure the proper management of employee-held shares.
On the corporate side, companies should invest in financial education and awareness programs for employees. By providing training on stock management and financial literacy, businesses can help workers better understand how to manage their shares effectively. Some African companies in sectors like finance and telecommunications have already seen increased engagement through such training initiatives.
Though employee shareholding is still in its early stages across Africa, the outlook is promising. Large companies that have adopted this practice are already experiencing better employee retention and value creation. By adapting global models of employee shareholding to the specific needs and realities of African countries, this approach could contribute significantly to more inclusive economic growth.
For employee shareholding to become a true engine of development, a localized approach is essential. Africa is a diverse continent, with each country possessing unique economic, political, and cultural characteristics. Employee shareholding programs must be tailored to these differences. With the right tax incentives, enhanced financial education, and political support, employee shareholding could play a transformative role in the economic future of Africa.
