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Economy - Development | Labour

Africa becomes a service outsourcing location

Call centre services in Gauteng, South Africa:
«Improvements in the policy environment and infrastructure quality.»

© afrol News / GEDA
afrol News, 16 March
- More and more Western companies discover Africa as a cheap and reliable location for the outsourcing of their services; typically IT, business processes and call centres. While India and China still are the dominant "offshore" locations for such services, wage costs there are rapidly rising, opening up possibilities for African skilled labour.

A secret for insiders until now, it is now "official" that seven African countries are amongst the world's most competitive locations for outsourcing company services abroad. These seven countries - Egypt, Mauritius, Tunisia, Ghana, South Africa, Morocco and Senegal - figure on the latest annual survey by the Washington-based global management consulting firm AT Kearney, which has ranked the world's top-50 "offshore locations".

Kearney's Global Services Location Index still ranks India as the top location, closely followed by China. But both countries are registering rapid wage increases. These "declines in cost advantage" are however "offset by further improvements in talent supply and business environment," meaning that India and China will remain dominant on the outsourcing market for years to come.

One of the most interesting developments of the index is the steady rise of African nations in the ranking and the ever-increasing number of African states entering the top-50 list, pushing out countries from Eastern Europe and Latin America. While labour costs are getting too high in those regions, African states improve their education, skills, infrastructure and business climate.

"Contrary to the perceived challenges" in the two regions growing fastest, "Middle Eastern and African countries are increasing their visibility as remote services locations," the Kearney report notes. The Middle East is the only region other than Africa that makes its presence more and more felt on the annual ranking.

Egypt, Jordan and the United Arab Emirates maintain roughly the same positions in the top 20 as last year's ranking, "reflecting the increasing number of US, European and Asian companies choosing these locations as centres for regional or global support activities," the report notes. Egypt is ranked number 13 on the index, being the highest placed African country.

The Kearney index also notes a novelty this year, as French speaking countries seem to get deeper involved in the outsourcing of their company services. "The rise of Mauritius, Tunisia, Morocco and Senegal reflects growing interest in locations with the ability to serve francophone markets," the report notes. "Stronger business environments in Mauritius and Tunisia contend with lower costs and larger populations in Morocco and Senegal."

Meanwhile, Ghana maintains its position as a low-cost English language location in Africa, while South Africa, Israel and Turkey all see their rankings improve, "largely as a result of improvements in the policy environment and infrastructure quality," according to the analysis.

The most striking about the results of this year's index was "how the relative cost advantage of the leading offshore destinations declined almost universally, while their scores for people skills and business environment rose significantly," said Paul Laudicina of AT Kearney. "These findings reinforce the message that corporations making global location decisions should focus less on short- term cost considerations, and more on long-term projections of talent supply and operating conditions."

The ranking is encouraging news for Africa, indicating that the continent has real possibilities of following the successful development paths of India and China. However, to become a strong "offshore" location, many factors are needed: regional peace and security, political stability, a good business climate, great investments in educating citizen and stable and cheap IT and electricity supply. Low labour costs are not enough, as the report clearly shows.

One of the countries to take this most seriously is South Africa, where several provinces actively market their locations for outsourced services worldwide. In Gauteng province, which includes Johannesburg, the local Economic Development Agency (GEDA) is trying to position the province "to become one of the world’s leading players in call centre provision." The South African call centre industry is already twice the size of Ireland's and employs around 100,000 skilled workers.

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