South Africa’s brain drain and an ineffective election process are the reasons behind JSE-listed companies appointing older executives rather than looking for “new blood” following a host of C-suite resignations over the past year.
This is the analysis of Amrop managing director Andrew Woodburn, whose comments come in light of several JSE-listed companies’ CEOs resigning and being replaced over the past few months.
Last week, it was announced that Tiger Brands CEO Noel Doyle would be stepping down after over 20 years at the company.
Other CEOs who announced they are stepping down include Pick n Pay’s Pieter Boone, Discovery Health’s Ryan Noach, EOH’s Stephen van Coller, and Nampak’s Erik Smuts.
Woodburn said this is not only a trend in South Africa but can also be seen in the US.
More than 1,400 chief executives in the US have left their positions so far this year through September, according to a report by executive coaching firm Challenger, Gray & Christmas.
This is an almost 50% increase from the same period last year and the highest on record since the firm began tracking in 2002, Fortune reported.
Woodburn explained that this is likely because many of these individuals wanted to resign in 2020 or 2021 but were tasked with keeping their companies afloat during the Covid-19 pandemic.
Therefore, now that the markets have largely returned to normal, these executives are resigning.
However, Woodburn said this is particularly prevalent in South Africa, as many executives exited the Covid-19 pandemic and entered another challenging operating environment.
“And as things begin to settle back into the market environment, it is tough, let’s call it almost recessionary, if not recessionary. And in 2019, they had just endured nine-plus years of Zuma,” he said.
“These individuals, I believe, are at a maximum stretch of stress, difficulty, results and market conditions.”
“And in fact, they had wanted to exit around 2020, but they stayed on at the behest of the boards and shareholders.”
Because of this, Woodburn believes South Africa has not seen even 50% of the CEO and C-suite resignations yet, which he suspects will happen between mid-year 2023 and post-election 2024.
Another trend Woodburn pointed out is that many of the CEOs who have resigned will be replaced by older executives with years of experience.
For example, Pick n Pay’s Pieter Boone has been replaced by 70-year-old Sean Summers, who has been in the industry for decades and headed Pick n Pay from 1999 to early 2007.
Woodburn said the reasons for this are two-fold – ineffective election procedures and South Africa’s brain drain.
“I believe proper succession processes in these businesses have been delegated down to a list at the NomCo [Nomination Committee] level,” he said.
“And when push comes to shove, the list doesn’t deliver.”
South Africa is also seeing “the brain drain version two” in action as the country’s socio-political criteria have seen many mid-level and junior executives leave.
“And so the pool to select your next CEO is slimming down. And, therefore, the board is inclined to look to a trusted long-hauler who might not sign up indefinitely, but they feel can really do the heavy lifting, in particular post-election 2024.”