How Skills Levies Could Help Unlock Africa's Workforce Potential

In an era where Africa's economies are racing to industrialise and digitise, one challenge persists: a mismatch between workforce skills and market demand. Despite significant investments in education, youth unemployment remains a ticking time bomb across Sub-Saharan Africa SSA. The answer lies not just in more schooling or government grants but in better skills training - and an often-overlooked funding mechanism, the skills levy, could be the key to unlocking Africa's workforce potential.

A new research report, Skills Levies in Africa: A Way Forward , sheds light on how earmarked skills levies - a dedicated tax on employers used to fund workforce training - have transformed technical and vocational education and training TVET systems in countries like South Africa, Botswana, and Mauritius. Yet, across SSA, skills levies remain underutilised, mismanaged, or misunderstood. It's time for policymakers to rethink how these funds can catalyse skills development, boost employability, and drive economic growth.

Globally, over 75 countries have implemented skills levies, with SSA accounting for more than one-third of these schemes. The rationale is simple: employers contribute a percentage of their payroll to a training fund, which is then used to develop the skills pipeline for national industries. When designed, and managed effectively, these funds provide a sustainable, employer-driven mechanism to align skills training with labour market needs.

In South Africa, the Skills Development Levy generates nearly 790m annually, fuelling training programs through Sector Education and Training Authorities. In Mauritius, employers can reclaim up to 75 of their training costs, ensuring industry-relevant skills development. Meanwhile, Botswana's Human Resource Development Fund, though accumulating surpluses, has enabled structured employer-led training. These examples highlight the potential for levy-funded TVET to enhance productivity, innovation, and job readiness.

Yet, while some nations thrive, others struggle to collect, allocate, and utilise levy funds effectively. In Malawi, compliance remains a challenge, with only one-third of potential levy revenue collected. Tanzania, despite imposing one of Africa's highest levy rates 3.5 of payroll, diverts a significant portion to the finance ministry instead of vocational training. In Morocco, transparency issues limit employer engagement in the levy system, despite its long history.