Dr Charlie airs the BPO potential of East Africa, Part 2

And back to the exploits of “Dr Charlie”, alias the Last King of Sourcing, Charlie Aird, who completes his diaries from his recent sabbatical to East Africa, where he got some time to visit Uganda.  Over to you Charlie…

Country Spotlight: Uganda

Uganda attained independence from British colonial rule in 1962, and after a decade of stability, had political and economic challenges from the 1970s through the mid 1980s.  In the late 1980s, Uganda was one of the first Sub-Saharan African countries to liberalize their economy and initiate pro-market policies and has a stable macroeconomic environment today.  GDP growth has averaged over 7% per year during the 2000s, and is above the Sub-Saharan Africa average.

Uganda has an agrarian economy, and is still working on providing basic needs to its population, for example, a 2009/2010 national survey showed that only 12% of households used electricity for lighting.  Development differs widely across different regions of the country.  Education development results have been mixed, for example, reading and mathematics are lower in Uganda than in Kenya or Tanzania, but gender equality is near parity in net primary or secondary enrollment rates.

The Ugandan government identified Information Technology Enabled Services – Business Process Outsourcing as one of the key sectors to enhance economic growth and reduce youth unemployment in the country.  They have established a BPO incubator named the National Information Technology Authority – Uganda (NITA-U) which focuses on delivery of public BPO services.  NITA-U is expected to:

• Co-ordinate, supervize and monitor the utilization of IT in the public and private sectors
• Identify and advise Government on all matters of IT development, utilization and deployment
• Set, monitor, and regulate standards for IT planning, acquisition, implementation, delivery, support, organization, sustenance, disposal, risks management, data protection, security and contingency planning
• Regulate and enforce standards for IT hardware and software equipment procurement in all Government ministries, departments and agencies
• Provide first-level technical support and advice for critical Government IT Systems

NITA-U has worked with Makerere University to train 500 youths in MPO skills, and plans are underway to train 3,000 in the next year to ensure a critical mass of BPO trained skills in Uganda.  To ensure this volume of specially educated youths continues, NITA-U is working with the Ministry of Education, Universities and other institutions to incorporate BPO training in their curriculums.

To develop the shared services skills in the country, NITA-U has created a 250 seat BPO call center in Kampala and is in process of facilitating setting up more, including Lake Victoria Information Communication Technology & Bio Tech Park.

MNCs who are interested in developing their presence in East Africa and are willing to invest in the area can find employees with BPO training and high level English skills.  Unemployment is still a problem even among the educated youths in Kampala, and there are many opportunities to fill positions by educated workers with excellent English skills

At this time, Uganda is not attractive for investment from global outsourcers, due to the lack of tax incentives and limited infrastructure.  The government is aware of the current state gap, and to create an enabling environment for the BPO sector in Uganda, NITA-U is currently undertaking the following:

• Developing guidelines for the provision of Government incentives to BPO operators
• Developing the required BPO standards and accreditations
• Finalized the national BPO strategy and roadmap for Uganda
• Developing IT infrastructure to support BPO operations in Uganda, by:
  • Commercializing the NBI (National Backbone Infrastructure) to deliver subsidized internet bandwidth
  • Developing and connecting alternative link via Mutukula to NBI to avoid single link via Kenya
  • Developing the last mile connections of NBI to districts

As the NITA-U makes progress in their goals, Uganda may become a great opportunity for investment.  This opportunity may be a few years out

Critical success factors for continued growth in East Africa

When India or Costa Rica decided to try to attract foreign direct investment in the BPO industry, the governments offered incentives to outsourcers to invest in their countries, for example, an eight year tax holiday where profits were not taxed, removed duties on anything imported to the country and excise taxes on energy and telecommunications, and only required a minimum level of investment to receive these benefits.  When Costa Rica set up a tax free zone, companies like P&G and Chiquita invested heavily in shared services delivery centers.

For Uganda to kick-start the growth in shared services and outsourcing, the government needs to set tax incentives that are similar to those set up for manufacturing and agro-processing industries, and include specific incentives for BPO, including the creation of Free Trade Zones and subsidies for operational costs and staff training.  These incentives will attract the large outsourcers, whose investment will also encourage shared services centers.  In addition, Uganda needs to invest heavily in education and training.  A model to consider is India’s NIIT, a for-profit organization that has trained people for the past 20 years in computing in urban and very rural locations.  NIIT helped establish a base of trained workers, from which India’s outsourcing industry grew.

For Kenya to continue their growth, they need to continue to invest in training and infrastructure to help current operations attract higher level processes and achieve higher level of profitability.  Public schools require significant investment to be a springboard for a career in BPO.  Costa Rica’s commitment to high quality, free public education has provided them with a base of very educated youth from which to build their shared services and outsourcing success.  Costa Rica devotes at least 6% of its GDP on education and training, and targets 8.5% in future years. Greater investment by entrepreneurs or the Kenyan government on education and training could reap significant rewards in providing a pool of skilled workers. The government must to continue to support the outsourcers who have established a foothold in the industry and consider developing more robust incentives to attract larger outsourcing service providers and MNCs.

With increased government incentives for MNCs and education and training for the local population, the shared services and outsourcing industry could be a great opportunity for East Africa and for MNC investment in the near future.

This article is authored by Dr. Charles L. Aird,  and assisted by Meagan O’Brien.

Dr Charles Aird is Global Practice Leader for PricewaterhouseCoopers’ Shared Services and Outsourcing Advisory.  You can view his bio here.

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