A Brief Region and Country Guide of Africa
Why has Africa as a region been getting more and more attention as a sourcing destination for the IT industry workforce in recent years?
One part of the reason is the eroding cost advantage of Asia and Eastern Europe as compared with America and Western Europe. With costs increasing as high as 10% per year, some managers in countries like India now commanding higher salaries than the global averages, according to Financial Times.
In this article we’ll review how Africa became an outsourcing destination and explore four countries that are regional overseas tech delivery hub champions showing the way to the rest of the countries on the continent.
Africa within the New Economy Business Context
Africa has always been in the similar time zone and relatively close to Europe in terms of logistics. When several countries on the continent were connected to global broadband in 2009, the continents moved even closer together.
Government and business investments into the nascent information economy followed, with several tech clusters across Africa growing rapidly ever since.
Exact investment figures are hard to find, and they get outdated fast, but according to the World Bank by 2015 a lot of the countries had at least one tech hub, with their numbers growing by 15% per year since.
To be fair, not all of the Continent’s 54 nations have only seen success stories when it comes to the development of their IT infrastructure. But the overall trend has been encouraging.
Regional African IT Champions
As a continent it is easier to understand Africa as consisting of four distinct regions: North Africa bordering the Mediterranean, West Africa facing the Atlantic, East Africa closer to the Indian Ocean, and South Africa on the tip of the continent not too far from the Antarctica – at least when you look at it on the globe. Conveniently, there is a country in each of those regions that is leading the rest in terms of technology ecosystems.
Let’s take a closer look at Egypt in North Africa, Nigeria in West Africa, Kenya in East Africa, and the country of South Africa representing the South African region.
Africa is a place of great diversity of languages, cultures, religions, traditions, etc. For our purposes, we’ll explore the most emblematic countries individually to get the sense of the continent.
Egypt as a Guide to North African IT Ecosystem
Geographically, North Africa is closest to Europe and the region has been linked to Europe culturally and economically for thousands of years.
The second most populous and with the third greatest economy on the Continent, Egypt is a tech leader in the North African region. Egypt’s population is predominantly Arab and Muslim, but the capital city, Cairo, is fairly cosmopolitan, as Egypt is a popular international travel destination for European and international travelers. Cairo is the country’s economic powerhouse and the main hub of its tech ecosystem.
From 2007 when Microsoft had opened its first innovation center in Cairo’s Smart Village, the industry has been growing rapidly due to government and private investments. This has been especially the case for export-focused services.
The government’s IT Industry Development Agency estimates that Egypt’s outsourcing companies in 2020 employed 220 000 professionals providing services to companies in 100+ countries around the world in 20 different languages.
While the country’s official language is Arabic, software developers and the business community in Egypt are typically fluent in English with some also speaking French, German and Italian, which are also taught in schools.
Egypt’s IT outsourcing industry enjoys government support and incentives, yet so far a bigger part of the industry is still basic contact center and lower value-added work.
In our blog post “The IT outsourcing industry in Egypt” we present this exciting and promising country in more detail.
Nigeria as the Mobile Startup Hotspot of West Africa
The largest economy and most populous country on the continent, Nigeria’s economy has long been dominated by the oil industry. This is now changing with the country becoming one of fastest-growing tech hotspots and the IT industry already generating 10% of the economic activity.
Lagos, the economic capital of Nigeria, has one of the best urban infrastructures on the continent, but is also one of the fastest-growing cities, with all of the growing pains. Nigerian IT companies got their start by addressing the inefficiencies in the distribution of goods and services and filling the gaps where the business environment and services were failing to catch up, like patchy electric grid and problems with access to credit.
While IBM, Ericsson and Google have been present in the country, it’s vibrancy is due to 55 IT hubs (2020, Center for Global Development report) buzzing with startups and small businesses solving real-world problems with technology. Because a lot of the computing in Nigeria is mobile-first or mobile-only, local entrepreneurs have developed a specialty for applications that rely on mobile broadband. Government and business understood the importance of mobile connectivity, with the country now leading the Continent in network coverage and download speed.
English is the official language in Nigeria, which makes things easier, but being closer to the bottom of the Doing Business table we recommend having a local partner at the beginning.
Overall, the country’s English as a first language and mobile expertise advantage are paired with relatively high rental costs and infrastructure concerns.
Kenya, the Silicon Savannah of East Africa
Exploring Africa in the 19th century a German explorer by the name of Johann Ludwig Krapf saw the mountain peak the name of which he recorded as “Kĩ-Nyaa”. The Republic of Kenya, named after Mount Kenya, reflects that fact.
Fast forward to the future, Kenyan-built technology traces roots to the global spotlight in 2007 with M-Pesa, an SMS-based money transfer and lending service. It’s not unusual to pay with a smartphone in 2020, but thirteen years before paying with a Nokia feature phone was seen as revolutionary.
In a cash-based society with fewer than 4 million bank accounts at the time, the mobile money service quickly grew to 17 million customers and eventually inspired the government’s Kenya Vision 2030 that resulted in the Silicon Savannah tech park located between the capital Nairobi and the port city Mombasa.
Growing at over 10% annually since 2016, the ICT industry in Kenya has fueled not only the country’s digital transformation but also has spilled over into reforms, making Kenya one of the most business-friendly countries in Africa and on par with such European countries as Romania and Italy.
While Kenya’s main reason to pursue communication technologies, e-commerce, and digital services are to transform its own economy, these strong expertise areas can be tapped by other companies. Brand name presence include Asus, Cisco, and Google, while the outsourcing companies on Clutch, a global listing service, cite business process outsourcing services in fintech, telecom and customer support.
South Africa, the Tech Education Leader
Culturally, South Africa is probably the most European country on the continent. Founded by European (mainly English and Dutch) repatriates a century ago, the country today still feels European in many respects.
Historically the economic powerhouse of the African continent, South Africa is the second-largest economy in Africa, holding many leadership positions in high value-added sectors, including IT. The country is the African leader in English proficiency and is home to 6 of the top 10 African universities for IT studies, offering some of the best-trained professionals in Africa.
With over 12 thousand Github users, the country’s open source community is the largest on the continent. Of the large companies, Microsoft, Parallels and ABBYY develop software in South Africa. The IT industry mostly consists of approximately 20 000 smaller companies and employs about 440 000 technology professionals.
Due to the higher cost of living, the salary levels of the software developers are on average higher than in other African countries, but this is compensated by the higher level of training and a culture of professionalism.
Overall, Africa is a strong contender as an overseas delivery hub due to the rapid development of infrastructure and expertise IT businesses need.
Africa Outsourcing Takeaways
Overall, Africa is a good supplier of IT services to Europe due to the rapid development of infrastructure and IT expertise.
Outsourcing Africa: Advantages
- European language proficiency in the business environment
- Most countries in or near the Central European Time zone
- Flight time of only a few hours
- Lower labour and living costs
- Close cultural similarities
Depending on the software development technology needs, preferences, and budget different African countries can each offer something unique of value.
Egypt is a strong candidate for relatively lower-level software development where limited English proficiency isn’t a challenge. Geographically, it is the largest pool of lower cost talent within a relatively short flight distance.
Nigeria also offers a large pool of talent, but its infrastructure challenges need to be taken seriously. However, some of the most innovative mobile developers with battle-tested mobile-only expertise can be found here.
Kenya’s IT industry is a national priority and enjoys a wide range of support. Although the IT talent market is not very large, telecoms expertise here is high.
South Africa’s strong technical schools graduate a large number of experienced programmers who speak very good English and are culturally European. The infrastructure is practically European-level, although concerns remain. Be aware of a high crime level in the country, very long flight times and much higher labor rates.
All in all, African countries offer huge opportunities for IT outsourcing. Talk to us if you have any questions about this.