Africa - Growing fast as an alternative outsourcing destination

Wednesday, 26 January 2011

Outsourcing companies are exploring every opportunity to increase their profitability; including sending their work to other lower cost destinations. Asia continues to dominate the outsourcing market due to large availability of trained and qualified manpower, good infrastructure, stable governments, etc. However there are some issues it faces due to lack of cultural affinity, time lag, increasing cost, etc. To tide over these issues, it is not surprising that other outsourcing destinations are rising rapidly in the industry -one of these is Africa.

The continent is emerging as an outsourcing destination due to the availability of manpower, concurrent time zone and cultural affinity. Here we talk about some of the countries that have made a foray into the industry. While some have already established themselves among favoured locations, other countries are gradually trying to match up to the standards.

South Africa

South Africa is one of the most preferred outsourcing destinations in Africa. The government hasprioritised the outsourcing industry in the Industrial Policy Action Plan (IPAP). The Department of Trade and Industry (DTI) and The Business Trust have set up an outsourcing association, Business Process enabling South Africa (BPeSA), to develop and grow the capacity and capability of outsourcing businesses in the country. The DTI has also started a new incentive scheme to reduce the operational costs in the country.

In Jan 2011, Eversheds South Africa won a contract to provide legal services to its UK client. The services include mortgage repossession and insurance recovery services

Egypt

Egypt has an advantage over many other destinations with its language capabilities. Some of these languages are French, German, Arabic, English and Spanish. The Ministry for Communication and Information Technology (MCIT) is working to provide state-of-the-art national telecommunication and improve Egypt’s global competitiveness. EDUEgypt, a training initiative, was started by the Ministry of Higher Education and Scientific Research and the MCIT to ascertain the availability of trained manpower for the BPO and ITO industries. The Information Technology Industry Development Agency (ITIDA) was set up by the MCIT to promote the information and communications technology industry with a focus on business process outsourcing (BPO).

Tech Mahindra and Sony Ericsson won the Etisalats Egypt outsourcing contract in 2008. The deal included providing telecom IT outsourcing services

Kenya

Kenya is expecting its outsourcing industry to grow due to the improvement in the telecom and internet connectivity. In 2010, Communications Commission of Kenya (CCK) awarded Airtel Kenya and Telkom Kenya licenses to roll out third generation (3G) networks. The Kenya Business Process Outsourcing (BPO) Society was set up in 2008, which coordinates with the Government to introduce new policies for the country’s outsourcing industry.

In 2010, Kenya based BPO Ken-Tech Data won a Sh22.5 million contract from a US-based company. According to the contract, Ken-Tech will handle all non-core functions of the company for six months.

Ghana

In 2007, the Government established Ghana Association of Software and IT Services Companies (GASSCOM), a trade association for the IT software and services industry. In 2009, the World Bank sponsored a two-year project with the Ministry of Communications to help the country grow as the most preferred outsourcing destination. As per the initiative, Avasant, a US-based business processes outsourcing (BPO) advisory company, will re-brand and market Ghana as a preferred BPO destination.

In 2010, Vodafone Ghana awarded a 10-year outsourcing contract to Eaton Towers, where the company will take over the operations and management of 750 telecommunication towers

Uganda

The Government invested Sh5 billion to promote the outsourcing industry. The Ministry of ICT and National Information Technology Authority-Uganda (NITA-U) developed a road map for the implementation of BPO model for the country. The country also has its own outsourcing association, the Ugandan Outsourcing Association. The government is planning to add 3,000 employees in the Information and Communications Technology (ICT) industry by 2011.

South Africa and Egypt are still the most preferred destinations in Africa. Growth of the other countries – Kenya, Ghana and Uganda – will be slow. While they cannot compete with the established destinations on scale and maturity, they can make efforts to emerge as partners. It is important that these countries undertake political and economic reform measures along with development of new technological infrastructure and introduction of government incentives.

- Sumita Bhattacharjee, Research Analyst

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