Africa’s new growth sector in Information Technology

A new IT study states that Africa might be the new growth spot when it comes to Information Technology. The study was done by AT Kearney, which indicated that seven African countries are among the top 50 global outsourcing destinations for IT services, also known as offshoring. Egypt, Ghana, Mauritius, Tunisia, Morocco, South Africa and Senegal are among the preferred destinations.

A well trained but less paid English or French speaking populations … An attractive offer that has continued to magnetize Western companies to outsource their IT services.A study published in April 2010 by an American consultant for Strategic and International Studies, AT Kearney shows that in 2009 seven African countries were among the world’s top 50 destinations in the offshore business.

Although Asia continues to top the list with it usual trio; India, China and Malaysia, the African continent is rising in the rankings. Off-shoring is primarily intended to tap into cheaper iT services and support, contact centers, and back-office support abroad.

Criteria

Data taken into account each year by AT Kearney to establish this classification include three major categories: financial attractiveness, people skills and availability, and business environment.

The 50 countries were evaluated against 43 measurements across those three major categories. And because cost advantage is typically the primary driver behind outsourcing decisions, financial factors constitute 40 percent of the total weight in the index, with the other two, i.e.; people skills and availability, and business environment, taking 30 percent each.

The accumulated total of points reveals the attractiveness of a country. Egypt, which gained seven places, is ranked sixth in terms of international attractiveness, Ghana is ranked number 15 after jumping twelve places, Tunisia, with a nine point gain, is ranked 17th this year, while South Africa takes 39th position. Senegal, a new entrant, jumped 13 places and takes 26th place.

Ghana, Egypt and Senegal, which are among the top The sub-Saharan countries with low labor costs, are attracting more and more contact centers. And to deal with the time difference between them and their western counterparts, contact centers adjust their working hours to correspond with countries such as France, the United Kingdom, the United States, etc.

Labor costs

According to a study by APIX, Senegalese agency for the promotion of investment and capital construction, the average salary in the west African country is 308 euros per phone operator per month, against 433 euros per month in Tunisia and around 458 euros in Morocco.

Senegal, with a 40 percent unemployment rate, is endowed with a far more available work force than its French speaking competitors in North Africa (15% in Tunisia and 20% in Morocco).

As a result of the growing performances of African countries outsourcing towards them are also growing. In Tunisia, contact centers are among the most important sources of employment. In Morocco, the number of contact center employees has increased by 10 in 4 years.

The Dell Casanearshore “call center”, a brand-new facility at “cité de l’offshoring,” alone employs over 1800 people. The U.S. computer manufacturer’s sale and after-sale services for southern Europe are managed from Casablanca.

The offshore market, which accounts for 55 billion dollars, according to Professor Leslie Willcocks from the London School of Economics, is an important financial resource for the African continent.

But the downside is the offshore market’s contribution to the increasing wage gap between northern and southern countries, as it spearheads the race for low labor costs in countries that need to attract more investments to deal with their massive unemployment rates.

There is nowhere to go but up with this new emerging sector. Yes there problems between raising income gaps, but that is not unsual when a country is trying to transition to a more productive and high value added economy, especially when the majority of African nations depend on natural resources for economic growth.

China is experiencing the same problem. Income inequality is what worries the Chinese Communist Party.  The United States as a young emerging nation went through the same process during the 1800’s.

More investment is needed in broadband infrastructure across the continent if Africa doesn’t want to be left behind in the global economy. Below you get an idea of the lack of  internet connectivity across the region.

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