Africa - not fit for sourcing business?

Africa - not fit for sourcing business?

Summary: My Irregular colleague Jason Busch - who is an acknowledged thought leader on sourcing stepped on a landmine (metaphorically speaking) in writing off Africa as a continent with which to do business:In my view, we would all do well to invest our tourism dollars in a continent as beautiful as Africa, not to mention our charity donations for medical care, safe drinking water and nutrition programs -- among other causes -- in the region.

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TOPICS: China
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My Irregular colleague Jason Busch - who is an acknowledged thought leader on sourcing stepped on a landmine (metaphorically speaking) in writing off Africa as a continent with which to do business:

In my view, we would all do well to invest our tourism dollars in a continent as beautiful as Africa, not to mention our charity donations for medical care, safe drinking water and nutrition programs -- among other causes -- in the region. But Africa is about as far away from becoming a leading low cost supplier as it gets, unless, of course, you take the colonization and mercantile approach that China has adopted in the area (which, fortunately, is something that Western companies and countries can no longer get away with).

Ouch!  I know Jason well enough to believe that he wouldn't make such statements in such glib fashion. Unfortunately, like many others, he demonstrated a sizeable glob of misunderstanding about the region characterizing it as a corrupt, disease ridden charity case. Fortunately, Thomas Otter - another Irregular and of South African upbringing - came to the continent's defense in detailed and robust fashion. 

Among other things, Thomas noted:

Let’s take the automotive industry as an example. South Africa plays a major role as a supplier to the automotive industry.11% of the world’s catalytic convertors are made there. (see more about Fiat here)

The world’s largest Titanium mine is due to come online in Mozambique, a country until recently ravaged by war. The mozal Aluminium refinery in Mozambique is one of the lowest cost producers in the world. Expect to see more refining moving to Africa.

Former parts of the French colonial empire are developing their call centre businesses too. Between 2001 and 2004, 55 French language call centres have been set up in Morocco, employing 6,500 people and generating total revenue of euro 85 million (US$105 million).

I could go on but you get the picture. In the run of comments to Jason's post, James Farrar took on the tricky topic of corruption:

We should remember that corruption is a two way street and it is my experience that foreign investors contribute to the problem on the supply side because they come to the market with a defeatist attitude and pre-subscribe to a view that corruption is an inevitable cost of doing business. We must not perpetuate this myth further. Foreign investors have huge influence and need not be in actuality or play victims. It takes competent management skill and determination to operate in these markets but it is eminently feasible.

Going forward, Africa will be one  of the principle markets for the so-called $100 Laptop. It is expected that the lack of traditional 'copper' telecommunications will mean that mobile applications will take on far greater importance. And as the world runs out of low cost sourcing locations, investors' eyes are bound to look at Africa and ask whether it is possible to create the infrastructure to support viable sourcing industries. Given the cost base in many parts of the continent, it should be a no brainer.

Jason has promised a response for the coming week but in doing so I'd suggest he thinks again about the problems he identifies. They may be on a grand scale, in certain locations some problems may be insurmountable. At least for the time being. But Africa is far from being a basket case.

When I hear Simon Griffiths, another Irregular colleague in South Africa celebrating the biggest software and services deal he's ever done for SYSPRO - then I know there is more than hope. There is the potential for a bright future.  People of goodwill need only look the problems square in the face and instead of shrugging, look for solutions. They are there to be found if we have eyes to see and the willingness to lend a helping hand.

Topic: China

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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