In the past 40 years, advanced computers and communications have transformed one part of the world after another – first, the US and Europe, then Japan, Korea, and
Taiwan, and most recently, India, China, and Eastern Europe. Is Africa next?
Despite civil wars, malnutrition, and the anguish of the HIV/AIDS epidemic, something remarkable is happening in black Africa: The stealthy rise of a high-technology sector. If not quite representing an African “Silicon Valley,” these shoots of high-tech industry nonetheless can and must be nurtured if Africa is to thrive. Consider what is happening on several floors of a single high-rise office building in Accra, Ghana’s capital. There some 1,500 Africans process American health-insurance claims – working around the clock, in three shifts.
The Africans speak English, type at least 50 words a minute on a computer, take data from paper claim forms supplied by US health insurers via satellite in electronic form, put it into new digital forms, and ship them back to the US. So connected are these Africans that their forms can be reviewed – as they fill them in – by an American supervisor 8,000 miles away.
Ghana is best known for producing cocoa and gold, but today Affiliated Computer Services (ACS), a Texas company that runs the outsourcing operation, is the country’s largest private employer. African “key punchers” earn $4 to $5 a day – four times the legal minimum wage – and receive health insurance, meals, and subsidized transport. A small number of African engineers and professionals earn much more, and receive periodic training in advanced technologies.
ACS’s employees are but the first Africans to benefit from the hottest trend in the global economy: Outsourcing, or the shift of service jobs from high-wage to low-wage countries. To be sure, the number of jobs moving to Africa is tiny compared to those going to Asia, Latin America, and Eastern Europe. But the big news is that Africa is finally competing in the economic contest that is reshaping the world economy. African governments also must be willing to start small: expend a lot of effort to attract pilot projects in the hope of larger employment in the future.
Still, Africa remains burdened by severe disadvantages, not the least of which is a terrible image. “Big corporations don’t even have Africa on the map when they consider outsourcing locations,” says Sambou Makalou, a native of Mali who tries to persuade US employers to shift service jobs to Africa. “There are real opportunities for outsourcing to Africa,” he says, “but there are barriers, too.” African governments also must be willing to start small: expend a lot of effort to attract pilot projects in the hope of larger employment in the future. With sensible reforms, many barriers can be removed or at least eased. Start with the following:
Better Governance: African governments often boast when they simply stop the corrosive effects of corruption and irrational business regulation. But little attention is given to the high cost of telecommunications, unreliable electrical-power systems, and the poor transport infrastructure.
Greater Competitiveness: African leaders have been slow to realize that they must woo foreign corporations with special services, training programs for workers, and even subsidized offices. Asian countries attract many jobs by creating “industrial parks,” with more reliable services, including ultra-reliable communications networks, offered at competitive prices. By restructuring their secondary schools and universities to train graduates with skills demanded by multinational corporations, Asian countries also create more competitive workforces.
To be sure, Africa is a far better place to do business than five years ago. The spread of mobile telephony has revolutionized ordinary life in a continent with the world’s lowest penetration of fixed-line telephones. Satellite links have vastly improved Internet access, and a new undersea cable that runs along the coast of Africa (SAT-3) promises to improve and reduce the cost of all types of communications.
The problem is that, although Africa’s economic appeal is increasing, India and China are improving more quickly, widening the gap. Africans can start winning only if they move faster. The problem is that, although Africa’s economic appeal is increasing, India and China are improving more quickly, widening the gap. African cities are increasingly finding their way onto the short lists of corporate location experts, only to lose out to Asian cities. Africans can start winning only if they move faster.
Surprisingly, wage competitiveness is a problem. Although Africa is the world’s poorest region on average, wages in the formal economy generally exceed those paid in China and India, where government keeps basic food, housing, and transport costs relatively low through subsidies and controls. In urban Africa, costs – for food and transport in particular – are relatively high, which forces wages up. The supply of African professionals and skilled workers, meanwhile, is tight; shortages also drive up wages. Indeed, an Indian software programmer typically earns less than a comparable African programmer. Even wages for routine data-entry tasks in Africa are usually no less than those paid in south Asia.
The odds that Africa one day will receive a fair share of outsourcing jobs are improving. But there is a risk that the region will fall further behind. When ACS decided to expand recently, it opened a new operation in India rather than in Ghana or another African country. The message was sobering. Even as hundreds of similar outsourcing centers spring up in Asia, Eastern Europe, and Latin America, the Accra center remains a rarity in Africa. That is a shame, but it need not be Africa’s fate.