Africa: the next outsourcing destination?
July 5, 2005 8:49 AM Subscribe
Why doesn't Africa get more outsourcing work?
It seems like many African countries would be ideal for companies looking for cheaper locations for factories, call centers, etc. Cheap labor, plenty of land, often even English speaking natives. One downside I could see is the tendency toward corrupt local officials, but I imagine that's often the case in Southeast Asian countries as well. Other than that, is there a particular reason more corporations aren't turning to Africa for their outsourcing needs?
It seems like many African countries would be ideal for companies looking for cheaper locations for factories, call centers, etc. Cheap labor, plenty of land, often even English speaking natives. One downside I could see is the tendency toward corrupt local officials, but I imagine that's often the case in Southeast Asian countries as well. Other than that, is there a particular reason more corporations aren't turning to Africa for their outsourcing needs?
Poor infrastructure. Try to get a phone connected, or consistent phone service, or even electric service. As you mention, corrupt officials and poor law enforcement, and less British-based law, at least in Francophone Africa. Inhospitable climate for European administrators, more tropical disease, with less of the mystique (or opportunities for glamourous sex tourism) of the "Orient", so harder to recruit people to go there and run your out-sourced factory or call center.
posted by orthogonality at 9:08 AM on July 5, 2005
posted by orthogonality at 9:08 AM on July 5, 2005
Ultimately, African dictatorships come and go and often commandeer whatever property is left, after the rest gets destroyed in civil war after war.
Civil wars and bad government make a risky environment for a business looking to put down capital for equipment for manufacturing industries. It's hard to move a factory out of a country that's going up in flames. (Cuba is one historical example, where the Mafia and more legitimate oligarchies lost casinos and farms to Castro's nationalization plan.)
Service-based industries are less risky because they require less investment in tangible goods, but services require trained staff, which requires a stable country that can provide education, healthcare, roads, utilities — infrastructural stuff that makes business possible and profitable.
SE Asia can do most of this, because despite local corruption, the system on the whole is functional.
posted by Rothko at 9:09 AM on July 5, 2005
Civil wars and bad government make a risky environment for a business looking to put down capital for equipment for manufacturing industries. It's hard to move a factory out of a country that's going up in flames. (Cuba is one historical example, where the Mafia and more legitimate oligarchies lost casinos and farms to Castro's nationalization plan.)
Service-based industries are less risky because they require less investment in tangible goods, but services require trained staff, which requires a stable country that can provide education, healthcare, roads, utilities — infrastructural stuff that makes business possible and profitable.
SE Asia can do most of this, because despite local corruption, the system on the whole is functional.
posted by Rothko at 9:09 AM on July 5, 2005
Response by poster: What about in more stable countries, though, such as South Africa? Or is SA significantly more expensive than the rest of the continent?
posted by me3dia at 9:10 AM on July 5, 2005
posted by me3dia at 9:10 AM on July 5, 2005
Infrastructure, literacy rates, English language (for most American outsourcing, yes, I am aware that some Africans speak English), corruption...
What about in more stable countries, though, such as South Africa?
Think about it, this is a continent where South Africa, Egypt and Libya are looked on as the models of stability.
posted by Pollomacho at 9:53 AM on July 5, 2005
What about in more stable countries, though, such as South Africa?
Think about it, this is a continent where South Africa, Egypt and Libya are looked on as the models of stability.
posted by Pollomacho at 9:53 AM on July 5, 2005
The short answer is that people are looking to Africa for outsourcing.
When I was in Ghana in 2002, I saw numerous advertisments for jobs in call centers.
Infrastructure is definately an issue, as are tarrifs and taxes. When you hear people talking about "fair trade" they are alluding not just to paying a fair price for a cup of coffee, but also to the fact that many of the poorest countries have trade restrictions imposed through the World Bank and the IMF that seriously impair their ability to compete in the world's markets. I'm not sure to what extent, but these tarrifs may apply to products built by international companies in Africa, and may account for the slow introduction of outsourcing there. It's worth looking into, but you'd probably have to go offline into some actual academic work.
And, orthogonality, I hate to say it, but sex tourism is doing just fine in Africa.
posted by carmen at 10:02 AM on July 5, 2005
When I was in Ghana in 2002, I saw numerous advertisments for jobs in call centers.
Infrastructure is definately an issue, as are tarrifs and taxes. When you hear people talking about "fair trade" they are alluding not just to paying a fair price for a cup of coffee, but also to the fact that many of the poorest countries have trade restrictions imposed through the World Bank and the IMF that seriously impair their ability to compete in the world's markets. I'm not sure to what extent, but these tarrifs may apply to products built by international companies in Africa, and may account for the slow introduction of outsourcing there. It's worth looking into, but you'd probably have to go offline into some actual academic work.
And, orthogonality, I hate to say it, but sex tourism is doing just fine in Africa.
posted by carmen at 10:02 AM on July 5, 2005
...and even without British-based law, Senegal, Tunisia and Morocco seem to attact French businesses.
posted by elgilito at 10:14 AM on July 5, 2005
posted by elgilito at 10:14 AM on July 5, 2005
but sex tourism is doing just fine in Africa.
which, seriously, makes one wonder how fucking suicidal that people are
posted by matteo at 10:25 AM on July 5, 2005
which, seriously, makes one wonder how fucking suicidal that people are
posted by matteo at 10:25 AM on July 5, 2005
elgilito, that's unsurprising, those countries have legal systems based on the French Napoleonic code...
posted by atrazine at 10:55 AM on July 5, 2005
posted by atrazine at 10:55 AM on July 5, 2005
I attended this years Africa Business Conference at the Harvard Business School, and one of the more interesting panels was about outsourcing. The speakers ran outsourcing centers in Ghana, and their experience was that more investment in infrastructure etc is needed. But in areas where this investment has been made (Accra, for example), progress is being made in attracting customers for this sort of service.
posted by darsh at 11:17 AM on July 5, 2005
posted by darsh at 11:17 AM on July 5, 2005
elgilito, that's unsurprising, those countries have legal systems based on the French Napoleonic code...
Yes I know, this is why I added this in answer to this comment...
posted by elgilito at 12:12 PM on July 5, 2005
Yes I know, this is why I added this in answer to this comment...
posted by elgilito at 12:12 PM on July 5, 2005
The main outsourcing destinations are China and India. China gets the bulk of the manufacturing outsourcing, because the government wants China to get rich and their labor is cheap. It also rolls out the welcome mat to corporations' factories (India, as a democracy, still has strong socialism and is more business-hostile in terms of not being willing to roll over in front of environmental degradation). India gets the bulk of the services outsourcing because their education system is strong and they speak English.
posted by evariste at 10:05 PM on July 5, 2005
posted by evariste at 10:05 PM on July 5, 2005
There was an article in the NYTimes last year about how police ticket processing has been outsourced to a company in Ghana. After searching, it seems to be mirrored here.
posted by mikeh at 8:01 AM on July 6, 2005
posted by mikeh at 8:01 AM on July 6, 2005
This thread is closed to new comments.
posted by mendel at 9:08 AM on July 5, 2005