Skip to main content
Costly outsourcing

Costly outsourcing

The rising political tide in the developed world these days is the growing influence of ultra-nationalism. At the core of this political ideology is a staunch opposition to the wave of economic migration from third world countries, at times bordering extreme xenophobic tendencies. True to form, the largely skilled yet cheap labor force coming from developing countries represent a formidable force competing for better paying jobs in the developed world. Although at a completely different level, growing influence of foreign expats in the labor markets of developing countries is also trend that is slowly creeping in. Traces of that are already visible in the Ethiopian labor market, writes Dawit Endeshaw and Tibebeselassie Tigabu.

The Early decades of the 1950s were a time for Ethiopia where the then regime of Emperor Haile Selassie I was working to take the country out of a trauma of war caused by the five-year occupation of the Fascist Italian government.

It was also a period where modern institutions such as Ethiopian Airlines, Ethiopian Shipping Lines as well as Ethiopian Air Force were just established by the assistance and support obtained from foreigners. In the early days, there institutions were dominated by managers and experts from similar countries which extended their technical support.

Not only government institutions but also private companies were mostly dominated by managers and top executives from abroad.

Fast forward to present day, the locals have already taken over most of these institutions; their management as well as the entire corporate ladder of these institutions is now filled by Ethiopian workers. Especially, with the coming of the Derg regime the pattern has shifted significantly.

Yet, following the reform measures taken by the incumbent Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF), the whole economic as well as political setting of the country has begun to change slowly. One fundamental change in this regard is the renewed interest of foreign companies in Ethiopia and the investment opportunities here. Private companies have started to flock into Ethiopia in return giving the country a chance to attract further foreign direct investment from the Western and Eastern hemispheres alike.

In the global context, it was a dawn of a new era where liberalism came out as victorious after the fall of communism and the socialist camp.

In the mean time, globalization has started changed the way of the world economy from a traditional economic system whereby national markets were considered as isolated entities to that of one global village. Subsequently, the rise of globalization has forced companies to think the world as one giant market. Having this, they began to establish their business in different countries.

As one feature of globalization, labor movement has also become a fact of life in many countries across the world. Movement of expatriate from South to North, specifically to Europe and North America, was somehow a dominant feature.

Yet again, with the emergence of different aid and development agencies, which have reversed the labor migration, a number of expatriates were believed to have travelled to the south to land lucrative jobs there.

The movement of labor, especially through illegal means to these developed countries, has now reached a very critical stage where it shaping the political landscape in these countries. Many Western countries are now closing their border claiming the rise of extreme elements destabilizing their stability and immigrants taking jobs.

Now with the growing influence of China in the continent, African countries in general are hosting Chinese citizens employed by FDI companies from China.

Ethiopia as part of the continent is facing the similar pattern.

Within the past ten years, the country has seen an exodus of private companies from China, Turkey, India and Western countries. These companies along with their investment are also expected to bring highly skilled experts and managers.

Not only that, Ethiopia, Addis Ababa in particularly, is the third biggest diplomatic hub in the world, next to Geneva and New York.

Studies indicate that there are around 30,000 registered expats working and living in Ethiopia. From this, close to 10,500 holds diplomatic visas.

With the growing number of expatriates, there is a claim from concerned bodies that these expatriates are taking over jobs that could be done by locals.

“We have already filed a complaint to Ministry of Labor and Social Affairs that the expatriates are actually taking jobs,” Measho Berihu, communications director of Confederation of Ethiopian Trade Unions (CETU), said.

The Confederation is established to lobby and pressure employers on behalf of workers across the country in case of the violation of workers’ rights.

The ministry on its part envisioned to “see an Ethiopia that created enough productive employment, settled decent work situation and secured developmental social welfare for citizens.”

In this respect, to create conducive conditions for the provision of efficient and equitable employment services; determine conditions for the issuance of work permit to foreigners, issue such permits and incorporation with the relevance bodies, supervise compliance there with; regulate the provision of foreigners employment service to Ethiopians are some of the mandates under the provision of the ministry.

Moreover, Ethiopian Investment Commission is also mandated to give a work permit upon obtaining an investment license.

Evidences from different sectors proved us that expatriates are taking jobs from a janitor to a security guard, from a low level accountant to a manager, he said.

So far, no response has been obtained from the ministry, Measho said. However, taking over jobs, which could have been filled, is just one aspect of the problem, commentators say. Time and again, authenticity of the sought after technical expertise which earned them name expats was also found to be in short supply.

Most of these foreigners, especially those who were said to be taking jobs that could be accomplished by local capacity enter into the country as an engineer or with other high-level technical qualifications.

“The funny part is the fact on the ground is usually different,” Measho said.

“We came to understand that these engineers are not engineers in the first place,” he explained. We caught them red handed working as security guard, drivers and the like.

“An overwhelming fact in the labor market in Ethiopia is the rapid growth of local labor supply. The labor force is growing much more rapidly than the population as a whole because of the young dominated demographic profile. There are many more under 15-years olds joining the work force each year than there are old people living the labor force,” according to national employment policy & strategy document of Ethiopia which was released in 2009.

These problems are becoming very serious especially in the construction sector. The sector along with experts working on electricity areas holds 81pc of the overall expat community in Ethiopia, followed by the manufacturing sector.

An executive in a multinational beverage company, who prefers to remain anonymous, also attests to the above conditions. “Currently, the locals are ones working as outsiders in my organization,” he told The Reporter.

In fact, he argues that his company has used different techniques to reduce the number of locals by almost 300 in the past five years alone.

“We even have accountants in our company,” said the union leader whose name have been withheld upon request.

These accountants paid with a foreign currency and employed at a much better salary than locals actually do similar jobs, he said.

In fact, the foreign currency burden coming from expat employment is one aspect that is explored by a cement industry expert recently. Gemechu Waktola, managing director of i-Capital (Africa) Institute, in his recent study about the cement industry expressed concerns regarding the level of expatriate employment in the cement factories.

According to Gemechu, level of dependency the local cement factories project on imported skill is something that is worrisome. In fact, he says: “almost all cement manufacturing plants are run and maintained by expats” a trend which is very alarming. What is even worse is the cost of foreign expertise to cement industry and country as whole. According to Ministry of Labor and Social Affairs, there are close to 1,000 expats working in the local cement industry each on average earning USD 4,500 (95,000 birr) monthly salary, Gemechu argued.

And hence, the local cement factories on average pay USD 60 million (1.3 billion birr) to foreign experts, annually, he explained further. “In the past five years (2011-2016) the local cement industry is paid 300 million dollars (3.6 billion birr) to expats. This is ten times more than what the cement industry earns from cement export,” he said.

The first legal framework in Ethiopia dealing with foreign expatriates dates back to 1960’s. Order number 26/1962, prohibits foreign nationals from working in Ethiopia without having the work permit from the appropriate organ of the government.

“No foreign nationals may be employed in Ethiopia in any private industrial, commercial, agricultural, or other employment activity unless he is in possession of a valid Work Permit issued by the Public Employment Administration,’’ reads the order.

The existing labor proclamation number 377/2003 also deals with the issue of expatriate employment service.

However, this law is being criticized for lack of clarity in terms of the scope of application on expatriate employment of foreign nationals.

The labor proclamation short of being clear in reflecting the policy interest of the expatriate employment seems to have been left to the Ministry to fill in the gap through a directive, reads a study finding commissioned by the Ministry in 2011.

The directive which came out 2010, in spite of all the expectation, also fails short of clearly setting the boundary surrounding expatriate employment in Ethiopia.    

For one, the directive under the proclamation is said to have failed to clearly define an expatriate worker or manager, which is important in defining the scope of application of the provisions of the law, according to the study.

Furthermore, the finding of the study also reveals that the current expatriate employment service level is affected by implementation gaps. The root causes for the implementation gaps include lack of communication and transparency of the service provision, lack of clarity on the legal framework and the like.

The Ministry is just handling the issue arbitrarily, said a legal expert close to the issue.

This has given rise to a situation where foreign companies are manipulating these gaps, he explains.

The ministry is also said to be failing in terms of monitoring the situation.

Though Ethiopia’s labor policy is protective of the locals by principle, it is regressive in practice, comments Mehari Redae (PhD), associate professor of Law and Governance at Addis Ababa University and a researcher in labor market issues.

The expatriate employment in terms of filling competency gaps, serving the purpose of transfer of technology, skill and knowledge, could not be the last resort but could be a strategic option at least in the short-run and be means to an end in the long run, according to the study.

But, if not managed and regulated properly, it may contribute to unemployment, deskilling of local talents/skills, security problems, capital repatriation, brain drains of local human capital, to mention the major ones, reads the study.