The emerging outsourcing sector, still in its infancy, is rapidly recognised as a critical component of the country's economic growth strategy. Federal authorities see potential in this sector for job creation, foreign exchange generation, and integration into the global market, positioning Ethiopia alongside African outsourcing powerhouses such as South Africa and Kenya.

According to Solomon Soka, a state minister for the Ministry of Labour & Skills, Ethiopia's prospects of becoming a globally competitive outsourcing destination can be within reach. He attributed educational reforms the federal government initiated a few years ago to a substantial pool of human resources.

But, Ethiopia faces a paradox. While a large number of STEM graduates — around 300,000 each year — enter the labour market, the number of high school dropouts and unemployed graduates is on the rise. The State Minister pins his hope on the ongoing initiatives to build an ecosystem focused on digital entrepreneurship and skills training, in partnership with organisations like the United Nations Development Program (UNDP) and domestic institutions.

According to the Ministry of Labour & Skills, more than 345,000 employees were sent abroad, and 3.7 million jobs were created in the last fiscal year. The Ministry aspires to increase these numbers to 4.2 million jobs and 700,000 outsourced employees.

“We’re working with multiple partners to realise this,” Solomon told Fortune.

By transferring non-core business operations to external organisations, companies can focus on their primary activities, a model that is gaining traction with services ranging from software development and customer support to cloud platform management, human resources, and back-office operations. Approximately 15,000 professionals are engaged in the outsourcing sector, including remote workers on platforms such as Upwork, generating about 50 million dollars annually, a little over 3,300 dollars on average. However, projections suggest that with conducive policies, this figure could soar to over 12 billion dollars a year by 2030.

Mulay Woldu, head of the tax policy department at the Ministry of Finance, noted that ongoing policy reforms are creating a favourable environment for companies. These include revised tax policies and incentives for sector-based exports, such as duty-free imports of capital goods and a five-year tax relief for start-ups.

“I would ask what has been done since then,” he said.

Despite these optimistic projections, the outsourcing sector faces several limitations in reaching its full potential. For many years, the outsourcing firms have been working on their own. Recently, the Ethiopian Outsourcing Association (EOA), formed two years ago, has been working with a dozen members to position the country as a major outsourcing destination. The Association has teamed up with the ministries of Labour & Skills and Innovation & Technology to explore growth drivers and address problems, illustrating the urgency with which these issues must be addressed.

“The time is now,” said Wondwossen Zewdie, president of the Association.

Last week, state ministers, digital directors, and private sector representatives gathered at the Inter Luxury Hotel on Marshal Tito Road (in the Casanchis neighbourhood) to explore growth drivers and address challenges.

A major concern raised was the development, or lack thereof, of a skilled workforce. While Ethiopia produces a large number of STEM graduates, many lack the essential soft skills required by the global industry, such as communications, teamwork, and problem-solving. Proficiency in the English language, a critical skill for engaging with international clients, remains a severe drawback. Much of the sector’s success depends on recently launched initiatives to train five million coders.

Melaku Beshah, vice president of the Association, hopes that even if only a fifth of these trainees enter the outsourcing sector, it could create one million jobs and echoed the official but highly optimistic projection of generating an estimated 12 billion in annual earnings.

“It is doable,” he told Fortune.

However, several infrastructural constraints remain. Issues such as unreliable power supply, inadequate internet connectivity, and the high cost of access to devices and cloud infrastructure continue to be barriers to growth. The lack of suitable infrastructure, facilities, and amenities further complicates the sector's expansion.

MMCY Tech, an outsourcing company with 16 years of experience, has grown its workforce from 100 to 1,500 employees in the past four years, capitalising on new opportunities. According to its Chief Technical Officer (CTO), Tadios Tefera, telecom liberalisation has benefited the sector, noting the entry of Safaricom Ethiopia as a noteworthy factor. Competition from Safaricom’s entry has pushed the state-owned Ethio telecom’s performance, transforming it from one of the most expensive providers to an affordable service. Nevertheless, service quality continues to lag.