Skills and knowledge

Skills shortages are one of the biggest barriers to private sector growth in every country. In developing countries in particular, vital technical, functional and managerial skills are in short supply, driving up the costs of recruitment and retention and increasing reliance on imported expertise. So how can countries best build a sustainable skills base?

The first crucial step is to understand the existing skills landscape, and the current demand and supply. What skills are needed and where? And who can provide them? Some would argue that the burden should fall on the private sector, but this is not without risk: investment in training is no guarantee of staff retention, especially when demand is much higher than supply, leading to high staff turnover and rising remuneration.

On the other hand, relying on the public sector to develop skills is no panacea, especially where there is no consultation with enterprises to understand what skills they are seeking. Funding is typically channelled through existing state-backed institutions, such as universities, which leads to an overemphasis on academic qualifications, rather than necessarily entrepreneurial and managerial skills. This was one of the issues identified by OPM in the Census of Existing Skills in the Financial Sector in Rwanda.

Instead, a balance must be struck between public sector investment and private sector demand. A commitment from the government to support skills training need not mean that the state becomes the provider: a more appropriate way forward is often for some kind of public-private partnership, with government funding enabling private sector delivery. The result is that training is more in line with the needs of employers - and the country as a whole benefits from public sector investment in training.

Building the skills of customers

One skills shortage that is often overlooked is the skills of the end customers. Quite simply, if they do not know how to use a product or service, there will be no market for it. That’s why investment in building financial capability, for instance, is an essential part of financial sector development.