The Key Benefits and Challenges of Outsourcing to Africa

by Lauren Soucy
Outsourcing to Africa

Asian countries like India and China have traditionally fulfilled the demand for global outsourcing, followed by countries in Latin America, Eastern Europe, and the Middle East. 

However, African countries are also evolving into hotspots for outsourcing services. 

Regional clusters in Africa are fast becoming preferred destinations for technology, business, and knowledge management outsourcing. 

Wondering why there’s an uptick in the companies outsourcing to Africa?

Stick around to find out.

In this article, we’ll discuss the six key benefits of outsourcing to Africa, along with the top African countries to outsource to. We’ll also go over the major challenges of outsourcing to Africa. 

Let’s get started.

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6 Key Benefits of Outsourcing to Africa

Here are the six important advantages of outsourcing to African countries:

1. Young and Skilled Talent Pool

Africa’s young population is key to its sustainable economic growth. With over 70% of the population under the age of 30, Africa is teeming with youthful enthusiasm. 

Additionally, the African education system has seen tremendous growth in the last decade. The World Economic Forum included 38 African countries in its list of 140 countries with the best education systems based on skills development. Countries like Seychelles, Tunisia, Mauritius, South Africa, and Algeria rank high.

With a large share of this skilled young population joining the workforce, Africa is evolving into a competitive labor market. 

However, the abundance of skilled labor has led to a consistent unemployment crisis in the continent. 

The African Development Bank reports that for the 10 million to 12 million youth who enter the workforce in Africa each year, only 3 million formal jobs are created annually. 

This large population of youth, coupled with an increasing unemployment crisis within the continent, creates a pool of skilled employees for international companies looking to outsource. 

2. Multilingual Workforce

Multiple languages are spoken throughout the culturally-rich African continent. 

A large number of Africans speak English, French, and Portuguese. Here’s a breakdown of the various international languages spoken in the continent:

  • English: Official language of over 20 African countries, including Ghana, Botswana, and Nigeria. Over 130 million Africans speak the language. 
  • French: Over 115 million Africans speak French as their native or secondary language. 
  • Spanish: One of three official languages in Equatorial Guinea, where nearly 68 percent of the population speaks it.
  • Portuguese: Official language of six African countries. Angola is home to around 18 million speakers, and Mozambique has roughly 13 million. 

Other popular languages in Africa include Dutch, German, and Italian. 

Multilingual human resources can be a great asset for businesses outsourcing to Africa. This is especially true for American and European companies looking to outsource sales and call center services.

3. Technological Advancement

The infrastructure in the African continent is growing steadily, boosting its importance as a leading offshore outsourcing destination. 

African countries like Madagascar enjoy fast-growing telecom networks and fast-speed internet. The public and private sectors have consistently worked on fiber-optic technology to reduce internet prices across the continent. 

This development has also led to an inevitable increase in smartphone infrastructure. According to the World Economic Forum, unique mobile subscribers in Africa will reach 615 million, and smartphone adoption will likely be over 64% by 2025.

In addition to the IT infrastructure, the government has also developed various technology parks and innovation hubs to pique the interest of the outsourcing industry. Some of these hubs include:

  • Co-creation Hub (Nigeria)
  • Silicon Cape Initiative (South Africa)
  • iHub (Kenya) 

Get a detailed look at offshoring to Africa.

4. Proximity to European Countries

Since Africa and Europe lie along similar latitudes, countries in these continents share overlapping or similar time zones. 

For example, South Africa and the United Kingdom (U.K.) have a negligible time difference of two hours. Senegal and France also have a two-hour time difference. 

Similar time zones between companies and their outsourcing partners can create a productive work environment as both teams are usually working simultaneously. This reduces delays in key communication and can rapidly increase response time. 

Lesser communication gaps are always a blessing in the outsourcing world as these factors can ease team collaboration and improve efficiency. 

5. The Opportunity for Impact Sourcing

Impact sourcing is an ethical business outsourcing tactic that recruits employees from economically disadvantaged countries and provides them with the necessary training to help lift them out of poverty.

Developed organizations looking to outsource ethically can do so by outsourcing to Africa.

African countries offer a huge opportunity for companies to not only tap into a growing skills base but also have a meaningful impact on a community. After all, employing professionals from emerging economies can have a knock-on effect that impacts their families and communities. 

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For these reasons, impact sourcing is strongly advocated by world organizations, including World Bank, United Nations Economic Commission for Africa (UNECA), and the Organization for Economic Co-operation and Development (OECD).

6. Cost Savings

Africa’s competitive rates let you access cost-effective human capital for any outsourcing service across all its countries. 

Here’s a breakdown of how much it would cost to hire a professional in Cape Town, South Africa, vs. New York in the United States (U.S.) and London in the United Kingdom (U.K.)

ProfessionAverage Monthly Salary in Cape Town (in USD)Average Monthly Salary in New York (in USD)Average Monthly Salary in London (in USD)
Software engineer2,421 USD 9,103 USD5,846 USD
Marketing manager2,386 USD8,878 USD5, 339 USD
Financial auditor1,049 USD5,599 USD3,872 USD
Chartered accountant3,847 USD5,403 USD5,706 USD
Call center agent415 USD2,986 USD2,260 USD

Source: Glassdoor.com

Note: These figures are approximate values. Actual salaries can vary based on key factors like education, work experience, job type, and more.  

The low labor costs in Africa can be because of the low cost of living. For example, the city of Addis Ababa has the highest cost of living in Africa, with a score of 58.92. This is significantly less than other developed economies in Europe and North America. 

Now that we’ve outlined the reasons for outsourcing to Africa, let’s look at the top African countries for outsourcing.

Top 5 African Countries to Outsource to

Here’s a list of the top five countries that have evolved into outsourcing hotspots in Africa:

1. South Africa

South Africa is a key international business hub located in Sub Saharan Africa that has gained recognition for its bustling BPO industry. 

South African BPOs in top cities like Johannesburg, Cape Town, and Durban can leverage the large English-speaking population. They can also take advantage of the country’s convenient time zone that’s only two hours ahead of the U.K.

In addition to these advantages, the South African government has also implemented the Global Business Services Incentive program. This program provides financial incentives to international companies that create jobs in the South African market through outsourcing. Eligible companies can receive a five-year grant for operational expenses.

Customer service and accounting are the top services outsourced to Southern Africa.

2. Egypt

Egypt is often referred to as an “African tech hub.” The Egyptian government has consistently emphasized digitization through its Digital Egypt strategy

In alignment with the country’s digital goals for 2030, this strategy is working to improve:

  • Digital transformation
  • Digital skills and jobs
  • Digital innovation

Another indicator of the growing technology ecosystem in the country is that venture capital investments in Egypt are expected to cross one billion USD in 2022

These factors have led to Egypt becoming a preferred outsourcing destination amongst American companies like Vodafone and Intel.

Commonly outsourced services to Egypt include Information Technology (IT) outsourcing and Business Process Outsourcing (BPO services). 

3. Ghana

This coastal country in West Africa incentivizes outsourcing.  

Some of the key tax incentives offered to international businesses outsourcing to Ghana include:

  • Exemptions from paying income tax on profits for the first 10 years.
  • A tax credit for employers hiring local graduates as a part of their workforce.
  • Relief from double taxation for foreign investors and employees.   

Additionally, Ghana is on the Prime Meridian and operates at the same business hours as the U.K. and the rest of Europe. English is also a first language in the country, making it suitable for American and European outsourcing. 

Popularly outsourced services to Ghana include BPO, telecommunication, and knowledge management

4. Nigeria

Nigeria is Africa’s largest economy by GDP (Gross Domestic Product), with a valuation of 514 billion USD. This African nation also boasts of a well-established Information and Communication Technology (ICT) sector.  

These trends have prompted the growth of IT outsourcing and the BPO market in the country. Nigeria’s share in Africa’s BPO sector is expected to grow to $19.8 billion by 2023.

In addition to this market growth, Nigeria’s outsourcing market has received government support with the drafting of a National Outsourcing Strategy.

Customer service and software development are the top outsourced services to Nigeria.

5. Mauritius

A 2019 World Bank report on ease of doing business ranked Mauritius at 13 on the list of 190 countries. 

This is largely due to the country’s favorable tax laws for outsourcing companies. The favorable taxation includes:

  • A corporate tax rate of just 15%.
  • A personal income tax rate of 15%.
  • Tax exemption on dividends and capital gains.
  • Over 35 international double taxation treaties. 

Further, the country’s bilingual workforce makes it an international outsourcing hotspot. The skilled population in Mauritius is well-versed in both English and French. 

Popularly outsourced services to Mauritius include BPO, back office work, and IT services. 

Other notable outsourcing hotspots in Africa include countries like Morocco, Kenya, Madagascar, and Ethiopia. 

While outsourcing to Africa can help companies and entrepreneurs focus on their core business functions, it does come with some limitations. Let’s now explore the key disadvantages of outsourcing to Africa.

3 Major Drawbacks of Outsourcing to Africa

Here are the limitations to be aware of before outsourcing to Africa:

1. Different Time Zones

While Africa has a negligible time difference with Europe, its time difference with the U.S. is prominent. 

Here’s a breakdown of the time difference between the four time zones in Africa and the U.S.:

  • North Africa Time: five hours ahead of the U.S.
  • West Africa Time: six hours ahead of the U.S.
  • Central African Time: seven hours ahead of the U.S.
  • East Africa Time: eight hours ahead of the U.S.

African countries also have large time differences from key economies like New Zealand and Australia. 

This time difference can make it difficult for teams to find the appropriate time to communicate with their outsourcing company. The resulting communication gaps can negatively impact your business.

However, Africa’s time difference with the U.S. is still far less compared to top outsourcing destinations like India and the Philippines in South Asia.

2. Cultural Differences

Africa is a culturally-rich continent and each of its 54 countries has its cultural practices. Working with service providers from an African country can cause confusion unless you take the time to understand and plan for these differences carefully. 

For example, Ethiopia is one of the few countries in the world that still uses its own calendar system. Working with an outsourced team from this country can get complicated if you don’t account for their 13-month annual calendar. 

3. Team Management Challenges

Regardless of where you choose to outsource your business functions, you are bound to face challenges with accountability and ensuring work efficiency

An outsourcing company will bill you by the hour, which is why it’s important to ensure they’re productive during their billable work hours. However, keeping track of the quality of the outsourced work and your team’s productivity can be more challenging when compared to in-house employees. 

Tools like Skype, Slack, Jira, etc., can help with better team communication. However, to boost team productivity, consider using a time tracking software like Time Doctor.   

What’s Time Doctor?

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Time Doctor is a powerful time tracking and employee productivity management tool used by small and large companies to enhance their team’s work efficiency. 

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Final Thoughts

Outsourcing to Africa can help small businesses and multinationals cost-effectively scale their business. 

However, like with any other business decision, you must carefully consider all the pros and challenges of outsourcing to Africa. 

Use the information covered in this article to start exploring outsourcing opportunities for your company in Africa.

 
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