Africa and the Future of Outsourcing

Currently, India dominates the outsourcing world, followed closely by Indonesia and China. A bulk of India’s outsourcing is in the Information Technology (IT) service which had a 14.8% increase from 2011 to 2012 and stood at double the figures from 2007. The IT sector and other outsourcing industries made over $101 billion in 2012. Indonesia, ranking second highest on the list of top outsource destinations, is a leading exporter of textiles and apparel. China, on the other hand, dominates the manufacturing sector, starting from the easy creation of a toothbrush to the more complicated and skilled manufacture of the iPhone.

Following the economic trends that all developing countries exhibited on the journey to becoming “developed”, we should expect to see a rise in the cost of wages and a gradual move towards more skilled labour in places like India and China. This is a predictable and inevitable trend which is driven by growing amounts of wealth and education in the nation. Because of this, China will no longer have the cheapest rates around for labour and companies looking to outsource will have to find other destinations that are more attractive.

With recent economic crisis and unemployment rising, western countries have been scrutinized by their citizens for their reliance on outsourcing. However, even with backlash and complaints from skilled laborers within the developed countries (U.S, U.K, France) who claim that the international community is stealing their jobs, capitalism and large profit margins will always be the deciding factor for companies. Provided costs stay cheap abroad, nationalism won’t be enough to get employers to keep all jobs on home soil. Unfortunately for these skilled labors on home soil, regardless of expected rise in cost of wages in current outsource destinations, offshore outsourcing will continue to be a trend. The truth is, the vast majority of jobs lost by the developed world to its developing counterparts will not be coming back, but rather these jobs will rotate among the various developing countries. Where one country fails to keep it’s cost low or produce at a satisfying rate, neighboring countries will pick up the slack and the outsourcing companies won’t think twice about shifting focus.

When labor costs in key Asian countries do rise- and that time is not so far away- we will see a shift in regards to outsourcing. The number one contender for cheap labour will be the countries of the African continent, replacing India, Indonesia and China’s position. Currently the poorest continent, Africa is also the fastest growing continent in the world after recently outpacing its Asian counterparts. Within the next 50 years, we are sure to see companies looking to African countries and we will bear witness to increasing numbers of outsource jobs in these locations.

Here is some background: Africa is home to a vast majority of the worlds resources and is truly starting to control its destiny. With Africa’s one billion plus population, it is easy to foresee the strong position the continent will hold for the long-term. The 90s was the best economic period for the majority of African countries; this increased stability was brought about in part by the introduction of democracy and peace. At the time, most of the economies focused on economic and financial policies to help improve their domestic economy. In 2005, the entire continent grew an average of 5% which marked a huge milestone for a continent that participates in less than 6% of the global trade. It was clear that African states were finally waking from their previously detrimental slumber.

Today, African countries have already begun making a name for themselves in the world of outsourcing. Kenya, for instance, supports local industries in an effort to promote itself as major offshore location for western countries. This particular East African country leads in Information Technology. Recently, it has made large strides and is securely positioning itself as a leading global player in this field. In addition to Kenya... continue reading