If there is one constant in the IT services world, it’s that the human landscape is always evolving. Talent availability and desires shift. Market conditions and companies’ willingness to leverage global talent changes over time.
Which is why it’s so critical for IT services firms to be aware of the ebbs and flows of global talent dynamics, especially if they are looking to scale and stay competitive. Being in the know can not only enable firms access lower cost and specialized talent to service customers, it can help them diversify and manage overall business risk.
As an investor in IT services businesses, we’re always trying to stay one step ahead of the curve when it comes to talent markets.
When we founded Tercera in 2021, we recognized Latin America had already become a key nearshore resource for North American firms and invested accordingly. Six of our seven portfolio companies now have a presence or talent in Latin America (namely Costa Rica, Mexico, Colombia, Argentina, and Chile), and our one seed investment, Hakkoda, was built from the ground up with its primary delivery center in Costa Rica.
Now, we’ve begun to shift our attention to Africa.
Why Africa?
Africa may not be the first market that comes to mind when looking for talent, but it has quietly grown into a business-friendly destination for both forward-looking investors and technology providers.
Investment in African startups really took off in 2021, on the heels of COVID and Stripe’s well documented acquisition of Nigerian fintech provider, Paystack. While the market has cooled since then, investment in entrepreneurs across Africa looks to be picking back up again with African tech startups bringing in $780 million in the first half of 2024.
Software companies have also continued to invest in the region, building out development and research centers across Africa. In 2018, Google launched its first Africa AI research center in Accra, Ghana, and more recently opened up a product dev center in Kenya. Cape Town, South Africa was actually the birthplace of AWS cloud computing, and a number of the Tercera 30 ISVs have or are expanding their presence in the region. Names Oracle, Salesforce, SAP, Adobe, and Workday (just to name a few).
While India, Latin America and Eastern Europe continue to be key geographies for technology firms looking to build talent, it has become hard to ignore the growth of tech talent and startup ecosystems across Africa. Especially in countries like Nigeria, Egypt, Kenya and South Africa, which are anecdotally referred to as “big Four” or “gateways to Africa” due to their stronger economies and relative ease of doing business.
Source: Africa: The Big Deal
That is partly because Africa is home to the youngest population in the world — a population that is not only increasing but growing up as digital natives. According to the United Nations, in 1950 Africans made up 8 percent of the world’s people. By 2050, they will account for one-quarter of the world’s population and more than a third of the world’s young people. Africa’s growth, and the continued aging of workforces in more mature economies, will have a significant impact on employers in coming years.
Africa’s rapid population growth, coupled with a deepening unemployment crisis across the continent, also means that there is an ever-growing pool of motivated, potential talent ready to learn and engage with employers. There has been an explosion of third-party training programs and tech-focused boot camps, helping to supplement university education and build out the technical and business skills that companies are looking for. One firm, ALX, has trained more than 100,000 people on tech skills like Salesforce, data and AI and they are not alone. In fact, there’s almost an overabundance of these programs at the moment, with the number of trained resources exceeding the number of available jobs. However, these programs will pay dividends in the long term.
Finally, the continent is well-suited for collaboration with European time zones and closer to North American time zones than India and Southeast Asia. And culturally, many countries on the continent are well aligned with Western markets and have strong English proficiency.
GSI’s growing interest in Africa
Many of the larger Global Systems Integrators (GSIs) have already established their presence in Africa.
Out of a representative pool of 25 top GSIs, 17 had a presence on the continent – names like Accenture, Deloitte, PwC, Atos, Genpact, EY and Infosys (to name a few). Ten of them had offices in multiple countries within Africa. As highlighted by the heatmap below, the African markets with the highest concentration of GSIs are South Africa, Morocco, Egypt, Kenya, Nigeria and Tunisia.
A number of Tercera’s portfolio companies are also starting to engage African talent in a variety of ways. For example, Valiantys, a global Atlassian partner that was originally founded in Toulouse France, has set up a delivery center in Senegal (a country with many French speakers), establishing strong relationships with local universities and developing a comprehensive Atlassian training program. Black Diamond, a global OneStream consultancy, has a team of consultants in South Africa, while others are just beginning to take the first steps towards understanding which talent markets in Africa are best suited to their organizational cultures.
Tercera’s thesis and talent insights on Africa
In order to more thoroughly understand the market, Tercera has initiated a research effort to better understand which markets (1) make the most sense for our portfolio companies to engage top tech talent and (2) have homegrown firms that match our thesis to support next generation services firms.
Over the last three months we’ve conducted dozens of meetings with local founders and investors, university leaders, VC-backed start-ups, support organizations and organizations focused on talent build.
We’ve also spent time in the field. This Spring, we visited West Africa, spending time with leaders in Nigeria, Ghana, and Senegal, and this Fall are spending time in East Africa with visits to Kenya, South Africa, Egypt, and Rwanda. Together, these conversations have given us a more nuanced perspective into the talent across the continent, as well as cultural, economic and business insights into the region.
We’ll be publishing our insights over a series of blogs this year, with a more comprehensive ebook in early 2025 but below are a few early insights from these conversations.
An engaged, purpose-driven workforce
Many countries on the continent have a strong cultural match with North American and European teams, with young talent hungry for opportunity. A sense of mission and competitive local salaries (especially if pegged to the US dollar or Euro), will go a long way in attracting and retaining talent.
Like other developing markets, there are cultural nuances that need to be factored in to build cohesive international teams. These include basics like being aware of regional holidays and customs, and having respect for values that are deep seeded within the workforce, such as the need to financially care for sometimes large extended families. Global services firms looking to play here may need to invest in cultural awareness programs to build cohesive international teams that work together effectively as one.
A younger workforce requires more ground-up training
A population that skews younger means that much of the tech talent across the continent is more junior, on average, than their colleagues in Eastern Europe, Southeast Asia and Latin America. Certain technical and soft skills are more scarce (mainly due to a lack of training resources and work experience). This is changing with the rise of workforce training programs, but something to be considered.
The most successful services companies in Africa have been those who have strong talent sourcing processes and have invested in robust training programs (whether internally built or externally purchased) to build talent from the ground up. Identifying an experienced, local leader who can guide these programs, and this workforce, is also critical.
A desire to seek growth abroad
We’ve had firsthand interactions with a highly motivated workforce that is always looking for opportunities to move and excel. However, based on our conversations with founders, once these skilled individuals have been trained to an internationally competitive level, it’s a constant quest to keep them engaged within the local market.
The “brain drain” challenge is widely talked about across the continent, most potently exemplified by “japa” in Nigeria – a word that means “escape” in Yoruba. If given the chance, many employees would move abroad to pursue new growth opportunities. This, unfortunately, has led to a somewhat scarce pool of mid-level and senior talent in some regions, which underscores the need for internal development programs and creating an environment that is conducive to growth and retention of these most experienced individuals.
An opportunity in the making
If you can’t tell, we are bullish on Africa. Yes, it’s early days and like any developing region there are factors that services firms need to consider if they’re looking to build or acquire talent here. Democratic structures are still being tested (and proven) and infrastructure is less developed overall (although there’s been lots of private and foreign investment here). But some of the largest technology and services firms in the world have led the way, demonstrating the incredible opportunity Africa presents for those firms ready to make the leap.
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