Published on 26 Jul 2023

BPO industry lobbies for support to establish Ethiopia as an outsourcing hub

Low-cost tech pool is a competitive advantage, but frequent internet shutdowns hobble the industry

Looking to replicate the success of the Indian business process outsourcing (BPO) industry, more than ten Ethiopian firms have come together to establish the Ethiopian Outsourcing Association (EOA). The industry body aims to actively lobby for strategic policy shifts and promote Ethiopia as a global outsourcing destination. The IT outsourcing industry of Ethiopia is small in comparison to that of many of its African peers, but it can benefit from a large pool of low-cost tech-savvy workforce. As of 2021, it was estimated to be worth US$34m and employed over 3,350 people. The average monthly call centre salary in Ethiopia is merely US$175, compared to US$546 in Tunisia, and US$465 in South Africa. Furthermore, the national time zone is far better suited to service clients in European than call centres located in, say, India. But periodic internet shutdowns have severely compromised its attractiveness as place to set up an outsourcing business. In April, for example, authorities blocked access to mobile internet as violent protests erupted in several parts of the Amhara region against the federal government’s decision to disband regional special forces. This followed a shutdown access to social media platforms including Facebook, TikTok, and Telegram in response to rising tension between the federal government and leadership of the Ethiopian Orthodox Church. Some 6 million residents of the Tigray region have been virtually cut off from the digital world since a civil war broke out in early 2020. Authorities are yet to restore full internet access across the region.

There are some other notable challenges that must be addressed before Ethiopia can realise its full potential as an outsourcing hub. The first, most critical one, is language. Few Ethiopians can speak English, French, Italian or any of the world's more widely spoken business languages very fluently. That is because it is because it is the only African state never to have been colonised by the West.

The other more notable hurdle is reliable internet connectivity and high bandwidth costs. For decades, the Ethiopian state maintained a monopoly over the nation's telecom and internet networks. However, since taking office in 2018, Prime Minister Abiy Ahmed has pushed to liberalise the sector. In October of last year, Kenya's Safaricom launched its mobile network in Ethiopia, becoming the first private operator alongside state-owned Ethio Telecom. Safaricom's entry has already prompted Ethio Telecom to improve its services and pricing. In June, Ethiopia issued a tender for a second new telecommunications license.

The EOA includes firms such as R&D Group, MMCY Tech, and Africom, collectively providing a diverse range of services from customer service outsourcing to software development. Their clientele spans various locations and include notable names like McDonald's, Gilead, and Heineken. The Association aims to consolidate the industry's voice for more effective government engagement. It is lobbying the government for more supportive policies, such as the duty-free import of materials and tax exemptions like what India offers its outsourcing industry. Earlier, it succeeded in unifying the multiple licensing regime. Previously, firms had to register themselves based on their specific domain of work, such as cybersecurity or software development. Africa's global business services industry generated US$15.1bn in revenue in 2021, with projections indicating a rise to US$19.8bn in 2023.