Outsourcing to South Africa can offer excellent value for money. Here’s how to make it pay for both your business and your customers.
South Africa’s vibrant and growing economy offers multiple exciting business opportunities to companies of all sizes. For some, it’s a way to reduce operating costs; for others, an opportunity to access new talent. Either way, the value you get from this exercise will depend on how you approach it and the infrastructure you put in place. Every business is different and must adopt its own strategy. However, there are some dos and don’ts that you should bear in mind.
Do analyse the full cost
When it comes to outsourcing, many companies instinctively look for the lowest-cost options, such as India or the Philippines. Both have highly developed business process outsourcing operations with all the support that comes with it. However, as many companies have found out before, what you save in one area can cost you in another.
UK companies such as BT and Aviva have had to reverse decisions to outsource key operations in the face of negative publicity. Complaints about poor customer service and delays in getting queries resolved prompted both companies to promise calls would be answered from the UK.
Outsourcing to third countries comes with a host of risks, including:
•Language barriers due to heavy foreign accents.
•Reduced trust.
•Delays in query resolution.
•Lower levels of customer engagement and retention.
Each of these factors can cost businesses money in a number of ways, through lost customers and lower revenue per customer. Reducing barriers such as language and enabling a more personalised experience helps to keep customers loyal and creates all sorts of unexpected selling opportunities.
In South Africa, English is spoken fluently with a clear and easy-to-understand accent. Just as importantly, perhaps, South Africa’s culture is a much better match for the UK, with plenty of common references that help build a deeper and more profitable relationship with customers.
The overall cost of doing business can also be affected by local regulations, taxes or government incentives. South Africa has made great efforts to attract overseas investment through the business process outsourcing sector with national and regional incentives. These provide tax relief and grants for any business looking to create jobs within South Africa. The level of relief or grants varies depending on the number of jobs created and the level of the jobs.
Regional incentive schemes can be found in cities and areas with traditionally high levels of unemployment in a bid to broaden investment beyond the traditional commercial hubs.
These incentives can alter the ROI calculation considerably. While wages in South Africa are considerably higher than in locations such as India, once these incentives are taken into consideration, the final cost may not be much higher.
For this, you benefit from higher quality, fewer customer complaints, better customer retention and higher revenues per customer. These can further reduce the true cost of doing business, which makes South Africa – even from a pure cost perspective – competitive against any other location in the
world.
Do locate your talent
Talent is everything when it comes to building a team, whether it’s a domestic or outsourced one. Many traditional BPO companies offer relatively little choice about the type of skills you can source. They simply provide you with access to their existing workers who will have received basic training in your company’s products or services. This can lead to a lack of personalisation and limited service provision.
Instead, you should choose outsourcing partners that provide more flexibility in talent sourcing. South Africa has a rich and diverse talent pool with professionals across all industries. Graduate numbers are on the rise, which means you’ll have your pick of talent to choose from, if you can find it.
Choosing a local partner organisation, such as an Employer of Record, Agent of Record or Professional Employers Organisation, can help you find talent and build a multidisciplinary team with the full range of skills you need.
Don’t restrict yourself to traditional BPO roles.
Business process outsourcing has traditionally been associated with relatively basic roles such as customer service or administration. However, the age of digital transformation and remote working has opened up the BPO sector to just about any job.
South Africa’s convenient location, with a time zone only a couple of hours different from the UK, enables real-time collaboration between outsourced and domestic teams. Businesses are outsourcing professions such as software development, marketing, or legal support, which might normally have been managed by specialists at home.
This move gives businesses the chance to optimise their workforces and access top talent that might not have previously been available at a price they can afford.
Don’t forget the rules.
For all the connectivity of the digital workplace, outsourcing to South Africa means working in another country with its own set of laws, regulations and accepted practices. If you don’t do your homework and familiarise yourself with the regulatory landscape, you may encounter unintended compliance problems.
Generally speaking, South Africa’s governance and economic structure are similar to the West. However, there are specific rules around employment rights, worker status and equal opportunities which you will have to understand. South Africa tends to have better protections for workers and stronger provisions for affirmative action and equal opportunities in the workplace.
Foreign companies can also fall foul of worker classification problems and reporting expectations. Tax authorities have their own best practice expectations for financial and regulatory reporting. It’s all too easy for a foreign company to make small but very costly errors.
When hiring staff in South Africa, you need to make sure they are all classified correctly. The government, as with other territories, has been keen to clamp down on practices it perceives as disguised employment – namely, presenting defacto employees as if they were freelance contractors. If they feel workers are misclassified, they can impose heavy fines, with criminal prosecution being a possibility for more severe cases.
When building a team, therefore, you need to consider not just the type of skills they have but how
they should be employed. For example, if you begin by hiring freelancers on a one-off basis, think about how the working relationship evolves. If they start to work more regularly with you, the border between freelancer and full-time can become blurred.
Hiring an Agent of Record can be a good way to keep a growing team of freelancers in line. These can provide advice on worker classification, tax and payment of invoices. If you decide to hire full-time employees, an Employer of Record can provide all the support you need. As well as handling all the administrative tasks of the employment, an EOR provides legal protection by assuming the status of legal employer for tax purposes. That makes the EOR fully liable for all compliance tasks and gives you full protection.
Outsourcing to South Africa, therefore, can be an extremely lucrative and cost-effective exercise. It offers a combination of value for money and reliable quality. It avoids many of the pitfalls companies have experienced with traditional outsourcing operations.
