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.

A proven model, underutilised

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.

Missed opportunities and systemic challenges

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.

For many African governments, the issue isn’t just about raising funds—it’s about trust, transparency, and governance. Employers often resist levies when they perceive them as just another tax rather than a direct investment in skills development. Without employer buy-in, the system fails to incentivise workforce training, perpetuating the very skills shortages that hinder economic growth.

When effectively managed, skills levies are not a cost but an investment. The World Bank estimates that countries that align skills development with labour market demands can increase productivity by up to 40%. For SSA nations battling youth unemployment, informal labour markets, and stagnant wages, ensuring that levy funds are strategically allocated could be the difference between economic stagnation and transformation.

The future of skills development in Africa

SSA stands at a crossroads. Will policymakers continue to let levy funds sit idle, be misallocated, or be underutilised? Or will they seize this opportunity to revolutionise workforce training and economic development?

The evidence is clear: when skills levies work, economies grow. Governments must take urgent action to reform, optimise, and expand levy-driven training systems. Employers must be given a stronger role in shaping workforce development. And young people must see a clear pathway from training to employment.

If Africa is to compete in the global economy, skills development cannot be an afterthought—it must be at the center of national policy agendas. The time to act is now.

This article is based on a British Council research study, Skills levies in Africa: a way forward, that examined skills levies in the African countries participating in their Going Global Partnerships (GGP) programme – Botswana, Ghana, Malawi, Mauritius, Morocco, Mozambique, South Africa, Sudan and Tanzania.