South Africa’s booming outsourcing market is fast becoming the preferred option in locations such as the UK, USA and Europe.
India has long been the number one name in business processing outsourcing, but that’s beginning to change. Evolving market demand and regulatory requirements have seen many companies turning their attention instead to South Africa. A thriving economy, and a highly skilled workforce together with a low cost of labor make the perfect environment for those companies that want to optimize costs without sacrificing quality.
Businesses are voting with their feet. South Africa has surged to the top of outsourcing destinations across multiple industries. For those looking to make the move, here’s how South Africa stacks up against India.
Cost
India earned its reputation as an outsourcing powerhouse thanks to the extremely low cost of labor and despite some growth in the economy, that remains the case. However, the pure cost of labor can be a blunt instrument.
South Africa boasts between 60% and 70% of the costs of major Western economies in Europe, the UK, or the USA, which means it still represents a substantial discount on domestic operations as long as they are of sufficient scale. When you factor in government incentives, the overall costs can be similar to India.
When calculating costs, businesses have also come to consider the impact on their customer relationships and reputations. Customers have been vocal about their dislike of outsourced call centers. A survey from Microsoft revealed that 90% of customers research a business’ customer service reputation and 60% would switch firms due to poor customer service.
Banks such as Lloyds and Santander are among those to have relocated away from India due to customer dissatisfaction.
Economy and infrastructure
South Africa’s economy is growing steadily helped by a highly diverse and educated workforce and a pro-growth government. According to Deloitte, the economy is predicted to grow by 1.6 in 2025, 1.8% in 2026, and 2.5% in 2027 and inflation is expected to remain under control.
South Africa has also navigated its way out of COVID-19 better than most. While lockdowns imposed disruption on economies around the world, South Africa transitioned successfully to a remote working model which enabled key services to continue.
India’s economy by contrast has been slowing sharply over the past few years plagued by weak manufacturing results.
South Africa, meanwhile, boasts excellent IT infrastructure with high-speed broadband being rolled out across the metropolitan areas. In India, though, it’s still a work in progress. Although internet adoption is on the rise, coverage can be patchy and more than half of internet users are battling speed issues.
Education
South Africa benefits from a rapidly improving education system. Graduate numbers are rising and they cover a diverse range of skills. This has enabled the BPO sector to diversify and spread its wings beyond traditional outsourcing industries and into other areas such as IT, marketing, and financial services.
It served to supercharge the country’s customer service offering with call centers becoming staffed by highly educated staff who could empathize and engage with customers on a much deeper level. They could also offer a wider range of expertise giving customers access to better levels of customer support.
For example, having highly qualified IT staff means you can offer in-depth technical support operations covering highly complex queries. As such South Africa has become a preferred destination not just for existing outsourced operations but also for previously unexplored markets.
Regulatory environment
The South African government is liberalizing its economy and sees the thriving BPO market as being crucial for future growth. Regulation is favourable with lucrative incentives for those companies who invest within South Africa and create new jobs. The scale of those incentives will rise along with the number of jobs created.
Businesses can benefit from a host of non-repayable grants and tax breaks. For example, The Global Business Services Incentive Scheme (GBS) was set up to help generate more employment in South Africa through the offshore services industries. It aims to increase export revenues from offshore services and create new jobs, particularly for people between the ages of 18 and 35.
South Africa’s overall regulatory climate and culture are also similar to most European locations. Its data protection regulations are similar to those in Europe which minimizes the friction of moving data across international jurisdictions. Even so, there is some regulatory friction in how employees are counted. Employment law can be strict and moveable.
If you’re looking to outsource to South Africa, therefore, it pays to gain a complete understanding of the regulations and keep track of any developments. This can be easier said than done and foreign companies are at particular risk of unintentional non-compliance.
Working with local support organizations can help smooth the process. For example, EORs take on the work and legal liability of South African employees which minimizes your risk exposure as an outsourcing company.
Market Opportunity
South Africa represents a large and lucrative market with a growing economy and thriving middle class. Furthermore, it has historically been regarded as a gateway to the even more lucrative wider African market.
For Western companies, it represents an attractive first point of call. The market and culture share many similarities with the West, but it also has good connections across the wider continent. Even for the biggest corporations and the world’s most recognized brands finding success in a new market can be challenging.
South Africa has a comprehensive support network of companies and other organizations that can help companies launch new products or with overseas expansion.
For example, Employers or Records (EORs), Professional Employers Organizations (PEOs), or Agents of Records (AOR) provide convenient, low-risk ways to employ South African staff or to work with South African freelancers. They offer lower-cost alternatives to establishing subsidiaries or overseas branches.
India also has a large and attractive market. However, getting a toe hold can be difficult. Along with its size India is highly fragmented with each state being its ecosystem with its challenges. It’s much more difficult for a foreign company to access the entire Indian marketplace.
Time zones
South Africa operates under the Central African Time Zone (CAT) which is only one or two hours ahead of major European countries. Good communications and high-speed internet make online collaboration quick and easy within working hours. It’s ideal for real-time communications and avoids delays in service delivery.
The time difference between South Africa and the US is larger, but that can be a benefit as it’s become a useful location for customer support operations ensuring out-of-office hours coverage without the need to employ domestic staff on night shift contracts. It’s a great way to provide articulate and highly skilled customer service representatives who can provide customers with the 24/7 support availability they have come to expect.
Languages
One of the biggest gripes with Indian call centers was the lack of English or the fact that agents often spoke with heavy accents that were difficult to understand. Such was the level of frustration that major companies such as BT chose to reverse outsourcing decisions and relocate back to the UK. The idea of local, English-speaking agents became a major selling point and marketing opportunity.
In South Africa, English is commonly spoken. Most people are fluent in English and speak with a neutral easily recognisable accent. It’s a good way to give English-speaking consumers
what they want – without having to shoulder the additional cost of establishing a domestically based call center.
The numbers speak for themselves. Customer experience levels are 18% higher in South Africa than in India. If businesses have been relocating away from India due to customer demand, South Africa represents an ideal alternative – one that enables fast and easy communication between all parties, while still offering the prospect of savings.
Conclusion
In a head-to-head between the two there is only one winner. India still has a thriving and welcoming BPO market, but it struggles to match the diversity, breadth, and quality of South Africa. Where India implies an offset between the cost of doing business and the quality of the result, South Africa has established itself as offering the best of all worlds – a chance to optimize your costs while ensuring higher levels of quality and service results. Taken alongside government incentives and the chance to access new markets, South Africa is moving ahead as the outsourcing destination of preference for companies across the world.
